Which way is up?

From the Wall Street Journal:

When Home Values Don’t Mesh
February 14, 2008; Page A2

Predicting how much worse the U.S. housing market will get is tough. The future is never certain. But when it comes to home prices, getting a clear picture of the recent past turns out to be surprisingly hard as well.

That’s confusing to homeowners, who fret about the value of what for many is their single largest asset. There is a huge psychological difference between a slower climb in the value of one’s house and an outright decline — and, as a result, a difference in the political reaction.

Tracking home prices is harder than tracking the price of stocks, which are traded constantly in public view on exchanges. And it’s harder than tracking the price of toothpaste. That just involves sampling posted prices on grocery-store shelves and Web sites.

The two best — though far from perfect — measures of housing prices are the Office of Federal Housing Enterprise Oversight’s index and the gloomier Standard & Poor’s Case/Shiller index. Both are based on a concept, developed in the 1980s by Karl Case of Wellesley College and Robert Shiller of Yale University, that looks at repeat sales of the same houses.

Ofheo’s index says home prices rose nationally by 1.8% between the third quarters of 2006 and 2007. But the S&P/Case-Shiller national index of home prices was down 4.5% in the same period. The Ofheo index showed a 2.16% increase in house prices in Chicago; the Case-Shiller index showed a decline of 2.48%.

Those discrepancies persist even though both barometers avoid distortions that occur in other widely cited measures — such as the National Association of Realtors’ median home price — that reflect the mix of homes actually sold in a given month as well as the change in prices. Such measures rise in months when a lot of high-end houses are sold and fall at times when a lot of low-end houses are sold.

The big picture here is clear: House prices rose rapidly in the early years of this decade. They have stopped rising in many places. And, in many markets, they are now falling. (Even Ofheo’s index showed a quarterly decline at the end of 2007.) And prices don’t appear to have touched bottom yet. But Charles Calomiris, a Columbia University economist, says, “Too much weight is being attached to the Case-Shiller index. … Housing prices may not be falling as much as some economists say they are.”

Ofheo gets a steady stream of inquiries from ordinary homeowners trying to figure out what’s happening to the price of their houses, and offers an online calculator to make estimates. Ofheo’s quarterly numbers — to be released monthly beginning in March — go into the Federal Reserve’s estimates of household wealth. Case/Shiller is increasingly prominent and is the basis for future contracts that allow investors to bet on the price of houses.

There are a couple of very big differences. The Ofheo index relies on data collected by Fannie Mae and Freddie Mac, which Ofheo regulates, so it excludes loans too big for Fannie and Freddie to guarantee (those exceeding $417,000) or too shaky (the riskiest of the subprime). Case/Shiller includes those, but its data are limited to 20 major markets because it relies on the costly process of going to local property records for data. One of Mr. Calomiris’s complaints is that house prices in these markets may be doing worse than those in other places.

A recent dissection of the two indexes in 10 metropolitan areas by Ofheo economist Andrew Leventis, posted on the agency’s Web site, sheds some light on other differences. Part of the discrepancy is technical, such as different approaches to adjusting data when there’s a long interval between repeat sales of a house.

But puzzles remain. It turns out, for instance, that prices of low- and moderate-priced homes with mortgages that aren’t guaranteed by Fannie and Freddie are falling particularly sharply, buoying the Ofheo index — even though that index includes plenty of other of low- and moderately priced homes in the same neighborhoods.

Of course, by the time the experts get the measures perfected, we’ll be onto a bubble in some other asset market.

This entry was posted in Economics, Housing Bubble, National Real Estate. Bookmark the permalink.

92 Responses to Which way is up?

  1. grim says:

    From Bloomberg:

    UBS Posts Record Loss After $13.7 Billion Writedowns

    UBS AG posted the biggest ever loss by a bank in the fourth quarter after $13.7 billion in writedowns on securities infected by U.S. subprime mortgages.

    Europe’s largest bank by assets had a net loss of 12.5 billion Swiss francs ($11.3 billion), compared with a profit of 3.4 billion francs a year earlier, the Zurich-based company said today, confirming a Jan. 30 estimate.

    UBS fell as much as 7 percent in Swiss trading after Chief Executive Officer Marcel Rohner, on a conference call with journalists, described the results as “unacceptable” and declined to predict whether the bank will return to profit in the first quarter. Rising U.S. subprime-mortgage defaults have led to more than $145 billion in writedowns and loan losses at the world’s biggest financial companies.

    “Further writedowns are likely in at least the first quarter, further impairing confidence and raising the risk of market share losses” at UBS, said Deutsche Bank AG analyst Matt Spick in a note today. He lowered his recommendation on the stock to “hold.”

  2. grim says:

    From the Philly Inquirer:

    Builders at annual show lack optimism, attendance

    The International Builders’ Show opened yesterday without the boundless optimism that characterized the annual convention of home builders from 1998 to 2005, when the real estate market was booming.
    Attendance numbers were down, and the behemoth Orange County Convention Center – jammed last year with a record 104,000 builders from all over the country – seemed strangely quiet.

    “We’re expecting 10 to 15 percent fewer this year,” said Donna Reichle, a spokeswoman for the National Association of Home Builders. “The official numbers aren’t released till Saturday, and we’re pinning our hopes on on-site registration.”

    Filling the four-day show schedule are programs that reflect the gloom besetting the residential-construction industry: “Marketing Against Resales and Foreclosures”; “When Survival Equals Success”; “Securing Investors and Lenders for Land Development in a Downturn.”

  3. grim says:

    From Reuters:

    NY regulator: Bond insurers may be split up

    New York insurance regulator Eric Dinallo, who is heading up efforts to rescue bond insurers, is set to testify that he will consider allowing the companies to split their relatively strong municipal bond guarantee businesses off from the problem parts of their businesses.

  4. njpatient says:

    “It turns out, for instance, that prices of low- and moderate-priced homes with mortgages that aren’t guaranteed by Fannie and Freddie are falling particularly sharply, buoying the Ofheo index”

    (Bears repeating)

  5. grim says:

    From the WSJ:

    Train Pulls Out On New Corner Of Debt Market
    Auction-Rate Securities Failing to Draw Bidders; A Toll on Port Authority
    February 14, 2008; Page C1

    The New York area’s port authority has come face to face with turmoil in the large but obscure corner of the credit markets called auction-rate securities. This week, market disruptions pushed up its weekly interest cost on $100 million worth of debt by nearly $300,000.

    It is a dilemma gripping an array of debt issuers in the $360 billion auction-rate securities market. These securities are issued by municipalities, student-loan authorities, museums and many others, with interest rates that reset through bank-managed auctions every week to 35 days.

    The auction-rate securities are essentially long-term debt, but investors treat them like a liquid, short-term holding because of the auctions. The problem is that investors have balked at the auctions lately, sending interest rates on these securities on a wild ride.

  6. njpatient says:

    “Further writedowns are likely in at least the first quarter”

    That can’t be true! bi said there would be no more writedowns!

  7. grim says:

    From the WSJ:

    Worried Bankers Seek to Shift Risk to Uncle Sam
    February 14, 2008; Page A2

    WASHINGTON — The banking industry, struggling to contain the fallout from the mortgage debacle, is urgently shopping proposals to Congress and the Bush administration that could shift some of the risk for troubled loans to the federal government.

    One proposal, advanced by officials at Credit Suisse Group, would expand the scope of loans guaranteed by the Federal Housing Administration. The proposal would let the FHA guarantee mortgage refinancings by some delinquent borrowers.

    Credit Suisse officials have met with senior officials from the Department of Housing and Urban Development, which runs the FHA, and other policy makers to discuss the proposal.

    The risk: If delinquent borrowers default on their refinanced loans, the federal government would have to absorb the loss.

    The fact that the plan is receiving serious consideration suggests the level of concern in Washington as housing problems worsen and early efforts by the Bush administration fall short.

    Last fall, the government backed a plan by banks to rescue bank-affiliated funds that had invested in mortgage-backed securities, but it fell through. More recently, a hotline set up with Washington’s support for troubled borrowers has helped only a small fraction of those in need.

    Politicians and bankers are now abuzz with talk about broader ideas to prevent the housing market from deteriorating.

    Another plan gathering support seeks to make it easier for banks to write off part of the unpaid balance on loans that exceed a property’s value, people familiar with the matter said. If that happens, homeowners would owe less, and they might be able to refinance their loans and avoid foreclosure.

    The Credit Suisse plan would open the way for nearly 600,000 subprime borrowers, many of whom are delinquent on their mortgages, to refinance into loans backed by the FHA. Some 1.3 million borrowers were either seriously delinquent or in foreclosure at the end of the third quarter, the most recent numbers available from the Mortgage Bankers Association.

  8. grim says:

    From the Record:

    How about 20¢ gas-tax hike?

    New Jersey could fix its debt-crippled budget by raising the gasoline tax and other driving-based fees, not by increasing highway tolls as Governor Corzine has suggested, a Trenton think tank said Wednesday.

    The state could bring in nearly $3 billion annually if it hikes the gas tax, raises driver registration and licensing fees, and applies other taxes to gasoline and automobiles, according to a report issued by New Jersey Policy Perspective, a non-partisan and non-profit organization.

  9. Pat says:

    It’s a difficult path to accept, giving these banks a bailout with tax dollars.

    Why are we not seeing more analysis of the money made during the last seven years? Why is it all about how much the losses will be?

    Would we even be discussing it if there were more publicity being given to the cost of this:

    A Labyrinthine Path to Justice

    “Investigators are starting with their usual tack: trying to determine whether sky-high valuations and delayed announcements of big losses on mortgage investments were mistakes made by many bankers and lenders or part of a pattern of deceit intended to improve financial results…

    In recent interviews, SEC officials have pointed to a few recent cases as a guide to how they might approach the spate of subprime probes, particularly the issue of how to value complicated securities and whether companies engaged in accounting tricks to move under-performing assets off their books.”

  10. bewm says:

    While I’m all for carbon (gas) taxes, I don’t get how these are “better” than toll hikes. Wouldn’t toll hikes impact out-of-staters more than the common person who doesn’t drive that far to their job?

  11. Pat says:

    Commerzbank subprime woes spoil 2007 record profit
    “We have made mistakes and must learn our lessons,” the 44-year-old manager had said.


  12. Pat says:

    Can we get that guy to do a seminar on responsibility for Congress?

  13. Clotpoll says:

    grim (7)-

    There are two available, time-tested and effective mechanisms to solve problems of insolvency and default: bankruptcy and foreclosure.

    Silly geese.

  14. grim says:

    From the Star Ledger:

    Port Elizabeth tycoons caught in a financial storm

    During nearly four decades running one of the nation’s busiest shipping terminals, Brian Maher made plenty of investments.

    But his biggest gamble may turn out to be the one made on his behalf by Lehman Brothers, the venerable Wall Street investment firm.

    In July, Maher and his brother hired Lehman to oversee $600 million, a portion of what they made on the sale of their family’s business at Port Elizabeth. Now, seven months later, $286 million of the money is tied up in securities that have plunged in value. The Mahers cannot get to their money and, worse, it may be lost forever.

    The Mahers claim in an arbitration filing that Lehman ignored their instructions and put a large portion of the money in risky debt securities just as the market was beginning to crumble.

    “It was my experience that when reputable organizations reach an understanding they honor it,” Brian Maher wrote in an e-mailed response to questions last week. “Lehman not only violated that understanding, but they did so with two-thirds of the money they were to invest. They betrayed the trust we put in them and their reputation as a responsible Wall Street bank.”

  15. thatBIGwindow says:

    Definately not for higher gas taxes. We already have the highest cost of living in the nation. NJ needs to cut spending and corruption..but the voters speak and politicians such as Menendez get elected. Smart state we live in.

  16. grim says:


    1) Cut services, downsize government, layoff government workers, cut spending.

    2) Raise taxes.

    It’s clear that NJ is vehemently against the first option, so why are we all so surprised that number two is on the table?

  17. grim says:

    Well, I suppose there is a third option…

    3) Smoke and mirrors.

    Always the best choice as a politician.

  18. Clotpoll says:

    Pat (9)-

    Spread the sticky sewage tissue-thin with an offset spatula, then have a cadre of lawyers and bean-counters pronounce it edible.

    This is beyond Ponzi. Even the unwitting are among the perpetrators and guarantors.

  19. BC Bob says:


    I believe that’s the first writedown, part of their total, that’s directly related to a monoline insurer.

  20. grim says:

    Monoline breakup means the pool is being drained. Warren will be standing by, with only enough towels for the munis. The rest will be standing naked in the wind.

  21. BC Bob says:


    WB has repeatedly stated that when the tide goes out, we’ll see who is swimming naked.

  22. BC Bob says:


    The whisper # is that there is over $25B of Alt-A in the bullpen.

  23. reinvestor101 says:

    An article from the mainstream press. Of course, what’s suggested is quite plausible. I’ve been arguing this here for months, but have been met with hoots of derision rather than serious consideration. Have some here been unwittedly helping terrorists and communists? I think so and have said so repeatedly. Anyway, please give this a serious read.

    Did terrorists cause the housing mess?
    The link may not seem obvious at first. But if you look at the Sept. 11 plotters’ goals — and at what has happened in the US since the attacks — it’s hardly far-fetched.


  24. x-underwriter says:

    Did terrorists cause the housing mess?

    Utter cluenessness. Nope, it was the stupid and greedy Americans themselves that caused this all on their own. To blame anyone else would be 110% scapegoating.

  25. BC Bob says:


    Great theatre.

    So Bin Laden, in his cave, devised a way to structure loans in tranches, subsequently selling the package to the IB’s? In addition to this, he then went to the Rating Agencies and stuffed their pockets for a seal of approval?

    I guess if Georgie, stuck to his original plan, smoking him out of his cave, the housing bubble would have been a mere dream as opposed to a nightmare?

  26. chicagofinance says:

    Clotpoll Says:
    February 14th, 2008 at 7:28 am
    grim (7)- There are two available, time-tested and effective mechanisms to solve problems of insolvency and default: bankruptcy and foreclosure. Silly geese.

    Relative to Congress’ view, to paraphrase Tom Hanks: “…there’s no bankruptcy and foreclosure in real estate…”

  27. chicagofinance says:

    Bost: did you see the Earl Weaver thing I found last night?

  28. Clotpoll says:

    ReTard (23)-

    So, where’s the direct connection between terrorists and the manipulation of rates and housing markets? Didn’t see any in the article.

    Were Greenspan, the Fed governors and Angelo Mozilo discovered to be Al-Qaeda?

    And, most important, why do you famously demand that the Fed return to the same tactics you now seem to be denouncing as “terrorism” as a fix to today’s mess?

    The pretzel logic you espouse is beginning to snap. Why don’t you just go ahead, BK or FK, and spare us the vomit that represents the sum of your mental output?

  29. Frank says:

    Raise taxes!!! Keep people out of NJ.

  30. BC Bob says:

    Chi [27],


  31. Frank says:

    “If transportation costs continue to swell, the exodus of businesses to counties north of New York City and eastern Pennsylvania is likely to quicken, businessmen and transportation experts say, undermining New Jersey’s warehouse and distribution industry, the state’s largest single employer.”

    Why are the warehouses still in NJ? How about moving them to any other state? Keep people and businesses out of NJ!!!


  32. Rich In NNJ says:


    I’d really love to read your response to Clot at #28

    And, most important, why do you famously demand that the Fed return to the same tactics you now seem to be denouncing as “terrorism” as a fix to today’s mess?

    BC Bob (25),

    I spit up a little coffee at your response. That first paragraph cracked me up!

  33. chicagofinance says:

    chicagofinance Says:
    February 13th, 2008 at 9:39 pm
    I think that Gary’s conversation was more like this…..


  34. reinvestor101 says:

    The attack on the trade center was an economic attack more than anything. The terrorists knew that this would force the fed back to a loose money policy after Greenspan had tightened money during the piercing of the stock market bubble. It really can’t be argued that fed policy averted a financial disaster in the aftermath of 9/11 and that the terrorists were the primary cause of that policy.

    It is also clear that real estate began to become a more important component of the economy as much of this money found itself in mortgages and related things. In other words, real estate became a stronger pillar of the economy than it had been in the recent past. To a large extent this was a feature of many western style economies in the aftermath of 9/11.

    As real estate prices rose, resentments also rose and many began to chip away at this pillar by speaking negatively. These negative thoughts ultimately changed perceptions and finally we wind up where we’re at today. This has assisted the terrorists in their goal of destroying us economically.

    Clotpoll Says:
    February 14th, 2008 at 8:21 am
    ReTard (23)-

    So, where’s the direct connection between terrorists and the manipulation of rates and housing markets? Didn’t see any in the article.

    Were Greenspan, the Fed governors and Angelo Mozilo discovered to be Al-Qaeda?

    And, most important, why do you famously demand that the Fed return to the same tactics you now seem to be denouncing as “terrorism” as a fix to today’s mess?

  35. John says:

    What recession? Bad News the recession ended this week. Big companies are in a rush to take paper write offs, they are not real. Lets say I have 100 million of junk on my books that were worth 80 million all along, now my auditors say put it at 80 million, did I lose money in the 4th Q, not really, but it sets you up for lower taxes, puts it in the paper when people don’t seem to care as much and sets you up for a great 09 when you do the look back to 08. That plus the job market has opened up. My brother got his warn notice from a big banke last week. Was bummed for two days and he already has three interviews lined up. My other friend was about to get one from BOA and got four interviews and one job offer in 7 days of looking. My phone is ringing off the hook and I am not looking. The musical chair smoke and mirror technique of companies laying off and hiring on the same day is in full thottle. That and now companies are going to buy lots of new stuff to get the write offs under Bushs plan and the rebate checks being sent out with another 50bp to come on st. patty’s day we are off and running.

    This is not 1991 or 2002 other than FS junk and subprime the economy is pretty good.

    I do think RE is going down, not to do with economy cause people got in over their heads and with 3/27s resetting all over the place, sky high fuel costs and jacked RE taxes it is going to hurt demand. But I fear that long term past these short term issues RE may recover sooner than I hope for.

  36. gary says:


    I’m at work, no access to youtube.. would love to see it. C’mon, fill me in.

  37. Rich In NNJ says:

    Gary (36),

    Wouldn’t work, has to be seen and heard.

  38. Confused In NJ says:

    Terrorists don’t need any help destroying America, the majority of High Government Officials are Lawyers. As Khrushev said, “we will bury you from within”. Now we know how, Lawyers. Try and get any problem solved quickly, or correctly, with a Lawyer.

  39. Clotpoll says:

    ReTard (34)-

    “As real estate prices rose, resentments also rose and many began to chip away at this pillar by speaking negatively. These negative thoughts ultimately changed perceptions and finally we wind up where we’re at today. This has assisted the terrorists in their goal of destroying us economically.”

    Thanks for clearing that up, ReTard. I was beginning to think the whole problem was one of solvency and affordability.

  40. Clotpoll says:

    John (35)-

    Nice to know that you drink in the morning.

  41. Cindy says:

    (36) Gary

    A hint: My post after viewing….

    “Did you touch me?”
    “Yeah, cause you put your finger on me.”

    “You HIT me Earl!”


  42. gary says:

    Thanks Cindy! :)

  43. Clotpoll says:

    Don’t look now:

    Treasury yields all moving up this morning, short-to-long-term, in unison. Who’d have thought bond investors would get a little jittery over the prospects of hyperinflation?

    The Fed zigs, Mr. Market zags. Funny thing, though: we already know who wins this battle.

  44. Rich In NNJ says:

    From MarketWatch:


    NEW YORK (MarketWatch) — Welcome to our daily roundup of subprime- and credit-crunch-related news from MarketWatch.

    (More of that terrorist-helping news you’ve been dying to read!)

  45. Rich In NNJ says:

    No worries, America’s winning this war…

    Mortgage rates move higher; 30-year fixed hits 5.96%

    For just the second time in 2008, fixed mortgage rates moved higher with the average conforming 30-year fixed rate now 5.96%. According to Bankrate.com’s weekly national survey of large lenders reported on Thursday, the average 30-year fixed mortgage has an average of 0.37 discount and origination points.

  46. grim says:

    Interesting piece by Eliot Spitzer in the Washington Post:

    Predatory Lenders’ Partner in Crime

    Several years ago, state attorneys general and others involved in consumer protection began to notice a marked increase in a range of predatory lending practices by mortgage lenders. Some were misrepresenting the terms of loans, making loans without regard to consumers’ ability to repay, making loans with deceptive “teaser” rates that later ballooned astronomically, packing loans with undisclosed charges and fees, or even paying illegal kickbacks. These and other practices, we noticed, were having a devastating effect on home buyers. In addition, the widespread nature of these practices, if left unchecked, threatened our financial markets.

    Even though predatory lending was becoming a national problem, the Bush administration looked the other way and did nothing to protect American homeowners. In fact, the government chose instead to align itself with the banks that were victimizing consumers.

    Predatory lending was widely understood to present a looming national crisis. This threat was so clear that as New York attorney general, I joined with colleagues in the other 49 states in attempting to fill the void left by the federal government. Individually, and together, state attorneys general of both parties brought litigation or entered into settlements with many subprime lenders that were engaged in predatory lending practices. Several state legislatures, including New York’s, enacted laws aimed at curbing such practices.

    What did the Bush administration do in response? Did it reverse course and decide to take action to halt this burgeoning scourge? As Americans are now painfully aware, with hundreds of thousands of homeowners facing foreclosure and our markets reeling, the answer is a resounding no.

    Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.

  47. BC Bob says:


    I wish I was your broker. One day, the banks are imploding, another day the sky is blue. If you change your mind, in this manner, with your trading, you must ring up huge commissions.

  48. John says:

    Word of the Day

    Internal Revenue Service (IRS)

    A United States government agency that is responsible for the collection and enforcement of taxes. The IRS was established in 1862 by President Lincoln and operates under the authority of the United States Department of the Treasury. It is primarily engaged in the collection of individual income taxes and employment taxes, but also handles corporate, gift, excise and estate taxes.

    The IRS is sometimes referred to as the “tax man”.

    The IRS is headquartered in Washington, D.C. It is an expansive organization that services the taxation of all Americans. In 2006, the IRS processed about 133 million personal income tax returns and almost six million corporate income tax returns, bringing in trillions of dollars of tax revenue.

  49. John says:

    BC Bob, Bottom line FS companies were death to touch in Dec and early Jan, starting in late Jan they were a buy. The tide sometimes turns quick. The broker is still saying don’t touch Cit with a ten foot pole, the place is crawling with regulators and auditors trying to value stuff and the 1Q numbers have a time bomb write off. When that time bomb comes I am buying some Citi prefs and bonds. This is how I hate to say it a stock pickers market. The sell it all phase of of late Oct to late Jan has passed.

  50. Sapiens says:

    Clot -(43),

    “Treasury yields all moving up this morning, short-to-long-term, in unison. Who’d have thought bond investors would get a little jittery over the prospects of hyperinflation?”

    They are not pricing inflation expectations, they are seeking shelter from defaults.

    Gov. T-bills and bonds are the next thing to printed cash, and if you have all cash laying around it you run the risk of it being stolen by both class of thieves, as in those out of and in government.

    Look out for T-bill’s yields to go negative. Insane? No if everyone around you is defaulting on their debt.



  51. grim says:

    From MarketWatch:

    Freddie Mac alters rules to aid mortgage insurers

    Government-sponsored-mortgage giant Freddie Mac said Thursday it is temporarily changing its rules to enable private mortgage insurance companies to retain more capital and rebuild their balance sheets, which have been damaged badly by the housing and credit crises.

  52. make money says:

    Monoline breakup means the pool is being drained. Warren will be standing by, with only enough towels for the munis. The rest will be standing naked in the wind.

    Warren likes to say that when the tide goes out he’ll see who’s swimming naked and then get ready cause this naughty old man on viagra WILL take advantage of you and won’t even give you a kiss on Valentine’s day.

  53. HEHEHE says:

    Personally I am keeping money in cash, gold, tips and dba until March.

    If you believe, as I do, that GS is going to announce writedowns when they report earnings in March, that will either signal a bottom or capitulation and the beginning of a lower leg down. They have a decent chunk of Level 3 and they are going to have to price at least a portion of it at some point absent more balance sheet artistry. You know Lehman is going to have to do it too. They are essentially the last couple to the party. I think after that shakeup you’ll have better idea of where things are headed as far as stocks. Until then I think things are going to bounce around like they have been.

    Ps. I am not a financial expert, I am sure anybody who is would scoff at my suggestions, you should too. Do not take my advice.

  54. John says:

    HEHE, the problem with Goldman is not write offs, the problem is they had a one trick pony where a couple of guys from Brooklyn not very high up the totem poles convinced them to bet against subprime last year and now they are the smartest guys in the room. Well Bear now has a billion dollar bet against subprime, some people like Chase are betting there will be money in them their hills and maybe subprime might be just flat as a dead squirel on the LIE for all of 2008. GS has it priced in they will pull a rabbit out of a hat in 2008. Good luck. If they don’t find a rabbit and just do ok the stock will get beaten like a red headed step child.

  55. BC Bob says:

    John [49],

    I’m starting to date JP.

  56. BC Bob says:

    “the problem is they had a one trick pony where a couple of guys from Brooklyn”


    The terrorists?

  57. Stu says:


    Your logic is entirely flawed.

    Some how you go from the 9-11 attacks to the negative press on RE is what is causing the RE downturn.

    You provide absolutely NO evidence of any connection.

    Here, let me provide you an example.

    Yesterday I stained my favorite tie. It is the negative press that is killing real estate.


    You really should seek some professional help.

  58. John says:

    FYI still a bond bull market – market is still priced for at least 100 basis points more in easing to a 2% rate by the end of the third quarter.

    what is with you guys and terrorists, GS bought a small firm a that had a couple of old fashioned brooklyn born traders who bitched and moaned long enough to get their boss to go to the white shoe front office to get them to do some bets against subprime, they reluctently agreed and like the male boss in cashmir mafia last night the white shoe boss took all the credit when the boys from Brooklyn were right, there are no terroists at GS.

  59. njpatient says:

    I think reinvestor101 may be Rudy Giuliani

  60. njpatient says:

    NEW YORK (CNNMoney.com) — Home prices continued their plunge during the last three months of 2007, setting a real estate trade group’s record for the biggest-ever quarterly drop. .

  61. njpatient says:

    The national median price drop of 5.8%, to $206,200 from $219,300, was the steepest ever recorded by the National Association of Realtors (NAR), which has been compiling the report since 1979.

  62. Stu says:

    Seeking Alpha:

    More Bad News on the GSE Front?


    “…if Freddie Mac was forced to scale back the offering because investors are beginning to get queasy about holding GSE-backed paper, then that points to what could be a far more serious problem. A loss of confidence in these well-known institutions at this stage of the game would almost certainly make the upheavals of recent months seem like kids play.”

  63. HEHEHE says:


    I agree, one trick pony, but you know Wall Street and the financial press. GS isn’t another stock/shop, its the mythical land ruled by geniuses that couldn’t possible get burnt like the rest of the masses.

    When that little canard gets shown for what it is what will the financial bulls have to hang their hat on? At that point I think you’ll see the type of panic that would signal a buying op. Just my opinion.

  64. House Hunter says:

    a little rant here…what is going on? Sen Craig gets a slap on the wrist letter and they are not sure what to do with the fact that he spent $213,000 of campaign money on his lawyers. Katrina was a disgrace, and still is, the presidential race is all about how much more money we can spend, the current gov’t is throwing money out of airplanes, not sure where the “restraints” on future lending are but I can bet the “short term” FHA crap is here to stay…and people spent 2 billion $ on ring tones last year. Now the Gov’t will most likely buy bad debt after today, so when the stuff really hits the fan, the taxpayer will be dipped into again…I said it before, and I will say it again…it is like the mob with a gun to you head

  65. grim says:

    From MarketWatch:

    Bernanke sees no end to housing market downturn

  66. House Hunter says:

    maybe if housing and college tuition were more affordable, more money would be spent in the economy…let them both return to normal

  67. grim says:

    From the AP:

    Bernanke Says Economic Outlook Is Worse

    Federal Reserve Chairman Ben Bernanke told Congress Thursday that the country’s economic outlook has deteriorated and signaled that the central bank is ready to keep on lowering a key interest rate — as needed — to shore things up.

    In prepared remarks to the Senate Banking Committee, Bernanke said the one-two punch of the housing and credit crises has greatly strained the economy. Hiring has slowed and people are likely to tighten their belts further, as they are pinched by high energy prices and watch the value of their single biggest asset — their homes — weaken, he warned.

    “The outlook for the economy has worsened in recent months, and the downside risks to growth have increased,” Bernanke said. “To date, the largest economic effects of the financial turmoil appear to have been on the housing market, which, as you know, has deteriorated significantly over the past two years or so.” Bernanke also said that the “virtual shutdown” of the market for subprime mortgages — given to people with blemished credit histories or low incomes — and a reluctance by skittish lenders to make “jumbo” home loans exceeding $417,000 have aggravated problems in the housing market.

    Unsold homes have piled up and foreclosures have climbed to record highs.

    “Further cuts in homebuilding and in related activities are likely,” Bernanke cautioned.

    Even though Bernanke’s forecast envisions an improving economic picture later this year, the Fed chief said it was nonetheless “important to recognize that downside risks to growth remain, including the possibilities that the housing market or the labor market may deteriorate to an extent beyond that currently anticipated” or that credit will become even harder to secure.

  68. House Hunter says:

    from the article above ” and watch the value of their single biggest asset — their homes — weaken, he warned.
    I don’t think it was their biggest asset, it was their biggest pipe dream.

  69. x-underwriter says:

    They forgot to mention that more jumbo loans now require full documentation of income. They don’t give them out to people who can’t afford them anymore.

    NEW YORK (CNNMoney.com) — Home prices continued their plunge during the last three months of 2007, setting a real estate trade group’s record for the biggest-ever quarterly drop.


  70. skep-tic says:


    This is a very interesting article. What happens if all of these crap loans get moved onto the gov’t books and the borrowers default anyway (which everyone knows is going to happen).

    Do the GSEs really have a guarantee? Everyone seems to think so, but it has never really been tested. If they assume hundreds of billions worth of bad loans, it has to raise at least some doubt about what would happen if they failed.

  71. Stu says:

    Why doesn’t anyone in the press take any of the financial gurus to task. They are all the same, accept for maybe Volcker. They all wait for the poop to hit the fan and then three months after the poop hits the fan, they tell you that the poop most likely will hit the fan. It’s one thing to read the tea leaves, but an entirely different thing to tell you how the tea tastes.

    Conversely, it never ceases to amaze me how ahead of the curve the collective thoughts on this blog are. Perhaps we should all take REinvestor’s complaints as a complement to our ability to accurately predict what is next to come. It’s a very sad day when American’s are significantly better off financially through reading a Clifton Realtor’s blog than trusting our Federal government and most of our mainstream press.

    Kudos JB.

  72. House Hunter says:

    One more comment and I am done with my rant….how can something be your biggest asset, when you have no money into it? not money down, equity based on the future pulled out etc. Sounds to me like it is your biggest liability at this point

  73. par4156 says:

    Re 16,
    Good post. I think we could reduce services and eliminate some govt jobs. Some State govt departments are cutting costs thru job attrition and promotion freezes. Not good for me as a public employee in one of those departments, but I understand what Corzine is trying to do.

    Take a look here http://www.state.nj.us/nj/deptserv.html
    to see what other services could posibly be cut and contact your state representative or governor to make your oponion known.

    You can also look at public payrolls here
    to get an understanding of where public salaries are reasonable, too high (or…forbid…too low).

  74. Stu says:


    I was thinking the same thing. I suppose most people’s largest assets are their Social Security accounts and to a lesser degree their retirement accounts. I was thinking cars, but so few people own them outright today and by the time they do, they are worth peanuts in resale value.

    Perhaps what Bergabe was trying to say was that our countries greatest asset is our homes. After all, what little wealth we have is in the banks and it appears that banks went all in to buy our homes.

  75. House Hunter says:

    I agree Stu..what do you think about the ring tone crap? my 11 year old is not allowed to text either, I know mean mom

  76. Stu says:

    HH, I’m so cheap that I spent $2 on the USB adapter for my LG (free) phone and create my own ringtones. As stupid as the concept of ringtones are, I do see the teenage attraction. I mean, what is funnier than to be able to identify a call from your best friend when you hear actual dialog from Brokeback Mountain playing from your phone.

  77. House Hunter says:

    yes agree, but at 11 I am trying to avoid it for as long as possible.

  78. jmacdaddio says:


    You’ve got the right attitude. Cell phones are nothing more than mechanisms for Verizon, ATT, etc. to sell you games and ringtones. The insurance is the biggest ripoff of them all.

    How does this relate to housing? Umm…. every nickel adds up, and when the market is plummeting, cash is king.

  79. x-underwriter says:

    you hear actual dialog from Brokeback Mountain playing from your phone.

    I’d keep that one to myself

  80. Stu says:


    You are right. I should have said something less derogatory.

  81. Stu says:

    How does this relate to housing?

    Well my main ringtone is Dan Zane’s ‘House Party’.

    Does that count?

  82. Al says:

    Hey financial giri’s – can you explain something to me about upcoming goverment rebate, I just do nto get all complications:


    fact, although the rebates will be determined by your 2007 tax filing data, the money actually is officially an “advance credit payment” against your 2008 income. So it has no bearing on your 2007 taxes, whether you owe or get a refund.

    Will I owe taxes on my rebate amount next year? What if this year my situation changes and that means my rebate amount should be less?

    For most filers, says Luscombe, this year’s rebate will appear as a simple gift from the government. The rebate amounts are tax-free.

    But filers will have to reconcile any money they receive this year when they file their 2008 returns.

    The 2008 tax forms should have a line for the new credit. When calculating taxes next year, taxpayers will have to subtract what they got as a rebate check the previous summer.

    SO for average Joe its adding 600$ to total income, and than extra deduction of 600 – right??

    (in general I would like to see FairTax.org come true with everybody getting let’s say 10000$ at the beginning of the year – so there will be no talk about poor being hurt the most.)

    But cometo think of this – for example 17% tax on buying a home – that would hurt!!! – Would we just add it to mortgage?

  83. Al says:

    P.S. I hate filing taxes, and Especially STATE Taxes with Part time multiple state residency……

    How about splitting house dividends 3 ways for tax purposes, and getting audited 3 years later, getting charged 10% interest on 100$ you supposedly “OWE” – those people know very well that you probably will not hire a lawyer to fight over 130$.

  84. lostinny says:

    Al, there is supposed to be some kind of change in the tax law that will give everyone an increase, the equivalent of what they are already getting back. So while a couple may be getting back $1200 now, since they will get an additional $1200 in 09, this is an advance on that money.

  85. Clotpoll says:

    sapiens (50)-

    If it’s the traditional flight to quality, yields would be going down.

    Unh unh. These are restless investors, demanding yield plus protection against inflation.

  86. Clotpoll says:

    skep (70)-

    The GSEs are the septic into which everything is being tamped.

    Think of them as a 21st century RTC.

  87. Stu says:


    You think you have it bad with your taxes, how about this one.

    My wife works in NY, we live in NJ, I worked half the 2007 tax year in New York and the rest in NJ, I have a Schedule D for my gains/losses on investments, and a Schedule E for my multi-family income. Did I mention AMT? Last year, my federal form was 43 pages. This does not include my NY and NJ forms. Good times. Thank the lord for e-filing. I don’t care if it costs $17 per form. It is well worth avoiding the aggravation of mailing copies of the forms to all of the different jurisdictions that I’m taxed by.

  88. Frank says:

    There’s a St. Valentine’s Day Layoff Massacre on Wall St. today.
    Happy Valentine’s to everyone!!!

  89. Mike NJ says:

    Who is doing the axing Frank?

    I heard UBS is getting ready to layoff a bunch of people. Tough quarter over there.

  90. par4156 says:

    re #73 in moderation. Is there a problem with those sites? Is that too much info???

Comments are closed.