Sales were down y/y again in January in the San Fernando Valley, just as our board of realtor pres was going on the record proclaiming that the slowdown was over and sales would definitely pick up in '07. We had the lowest number of SFR sales since 1993! The realtor associations will declare the bottom again and again for months and years to come, just as I remember them doing in the early '90s. We used to literally laugh during our weekly office meetings in my old RE office as we would listen to the latest forecast from CAR. All of us knew that the things that they were forecasting in no way reprented our day to day reality.
"We used to literally laugh...as we would listen to the latest forecast from CR. All of us knew that the things that they were forecasting in no way reprented our day to day reality."
"All of us knew that the things that they were forecasting in no way represented our day to day reality."
The self-fulfilling prophesy might work, even though the record indicates otherwise, so why not slam it out there anyhow?
Well, because you might lose the respect of your audience who no longer regard you as anything but entertainment. President Bush's "aspirational" remarks about what a fine job Rummy was doing just before the election results, may have had this unfortunate consequence. Sadly, the self-debilitating effect of his "aspirational" explanation does not register with the President...only with his constituents.
I hate to say it, but 07 is looking more and more like a non-recessionary year, and the more I read Roubini and Ritzhole the more they remind me of David Lereah with simply the opposite spin.
Recession is the the eye of the people who are out of work or without enough work...
As a programmer, from my perspective we were in recession in our industry (hi tech) from the summer of 2001 till about the summer of 2004. Unemployment among my peers was well over 10% during much of that time... in some areas it was closer to 20% for a time. In tech it felt like it was getting pretty close to a depression...
On the otherhand, during that same period people in the housing industry did just fine.
Yes, it could be that BR and Nouriel are just the opposite spin doctors that Lereah and the Soft Landers are, but this ignores whose vested interests are at stake and how much wind they can blow and whether or not they are interactive. BR and Nouriel have a pretty small audience, but their views are shaped by their readers. I doubt whether Lereah's view about 'the worst is behind us' is arguable with his compliant audience. It registers as a hope (as deb notes above) --not a forecast that you understood to be the result of some careful study of the facts.
Does anyone on this board have experience with KB Home? In looking at their recent earnings reports, it appears they are practically giving homes away -- they had 9.9% gross margins BEFORE taking impairment and option charges.
And now we have this, news that sales in January were atrocious. All the while the homebuilder executives and their shills in the media and government try to say this is the bottom? With the lone exception of Beazer's CEO Ian McCarthy who has had the singular integrity to state that he sees no evidence whatsoever of a turnaround.
Watching these stocks go up in the face of all this bad news is truly bizarre.
This is a great summary of the impact of REOs on the market as well as a very good review of how we got to where we are in the housing market now. A good primer for people trying to get up the curve and what is going on.
The analysis of REO disposition from last summer's foreclosures is sobering. It explains very clearly why seconds are selling at 6 cents on the dollar.
Sebastian, if you are out there, you would be well served to read this. He directly addresses your "employment is good so nothing bad can happen" mantra. BTW, you utterly confused about employment and its relation to the business cycle.
"SSM.com wasn't sub-prime, they were ALT-A, which made this even more shocking! They may be bought out by a new company called Lown Home Financial, actually. Their site is: lownhome.com (i love their website as it's very inviting and easy on the eyes and senses)."
"As of FEB, 14, 2007 @ precisely 12:00 PM PST, Silver State Mortgage has ceased all national operations. Although this is a difficult time for our loyal broker and builder clients, we are confident that the current opportunities that we are evaluating with other financial institutions will provide a stronger platform for our trusted clients.
The Wholesale Team will remain in place and your Account Executives will be providing information when our new partnership is finalized.
We greatly appreciate your business and look forward to enhancing our business relationships."
Anyone worried that earnings growth is about to slow down sharply may be missing the point: It has already happened...
Earnings usually pick up in the fourth quarter from the third quarter. The last time that didn't happen was in 2000, when the economy was on the cusp of recession.
ac - watch the cash, when you start hearing about companies where cash is tight REGARDLESS of earnings then you know they turned on the fan and headed out to the barn with a big ol' shovel.
Earnings are so easily manipulated & distorted. Cash is as they say - king.
BTW - check out the cashflow statements for the HBs if you have trouble sleeping... I haven't seen one lately with what I would call a 'comfortable' cash balance... And on top of that a few don't even seem to have much bankable equity to borrow against for much longer if they scrutinize & discount the collateral value of their inventory & land by much.
In the ag crisis of the 80s we were watching ag mfgers cash balances like a hawk - they owed us money, a lot of money in some cases. It got so bad in 1986 that people were starting openly to question whether John Deere or even Caterpillar would survive.
Charlie asks.
How many times can Lereah lie before he's indicted?
Lets see.
Here's what Lereah was saying throughout 2006 and into 2007, and what the market was doing.
January 2006
Lereah's forecast: "The market is in the process of normalization."
Actual sales: Fourth-quarter sales fell at an annual rate of 12.6% to 6.94 million annualized.
Lereah's post-mortem: "The level of home sales activity is now at a sustainable level, and is likely to pick up a bit in the months ahead."
April 2006
Lereah's forecast: "Home sales will move up and down somewhat over the remainder of the year but stay at a high plateau."
Actual sales: First-quarter sales fell at an annual rate of 8.6% to 6.79 million.
Lereah's post-mortem: "This is additional evidence that we're experiencing a soft landing."
July 2006
Lereah's forecast: "The market should even out just below present levels."
Actual sales: Second-quarter sales fell at an annual rate of 6% to 6.69 million.
Lereah's post-mortem: "The market is stabilizing."
October 2006
Lereah's forecast: "We expect sales activity to pick up early next year."
Actual sales: Third-quarter sales fell at an annual rate of 22.2% to 6.28 million.
Lereah's post-mortem: "This is likely the trough in sales."
January 2007
Lereah's forecast: "The good news is that the steady improvement in sales will support price appreciation moving forward."
Actual sales: Fourth-quarter sales fell at an annual rate of 2.3% to 6.24 million.
Lereah's post-mortem: "It appears we have established a bottom."
Conclusion
It's unfair, of course, to single out Lereah's forecasts. He wasn't the only economist who was surprised by the extent of the collapse in housing in 2006; some were just as wrong on the other side by predicting the housing bust would bring down the whole economy.
But Lereah was the only one who presented his opinions alongside an economic indicator that's treated as an objective gauge of the housing market. Along with his bully pulpit comes extra scrutiny.
Lereah was traveling on Thursday and unavailable to comment. The senior economist at the NAR, Lawrence Yun, said in an interview the most recent sales trends show almost no movement up or down since August or September.
"In hindsight, we did not anticipate how strong the demand from speculators had been," Yun said of their 2006 forecast. "Now, with the speculators out of the market, and with low mortgage rates and steady job growth, we anticipate an improvement in sales."
It's possible that Lereah may be right, finally. The bottom must come some time, why not now, some 19 months after the bubble peaked?
But it's also possible we could be far from the bottom, as in the housing bust of 1978-1982, when it took 42 months for the market to recover.
If so, it could be a long year for David Lereah. MarketWatch.com
It's tough to pick on Roubini. Who would have believed the FED would intercede the way (& to the extent) they have. I initially believed BB (the straight-talker) when he said he wouldn't intercede to hold up housing. But, he's repeatedly done just that. Keep in mind, as powerful as the FED is, the housing market's turned & can only get worse from here.
Stop worrying about weeks & months & think longer term. Think about all those boomers who have ALL their assets tied up in their homes. Who will they sell to? How will they react as their taxes rise & their neighbors start to pabic sell? Who's left to buy who doesn't already own & can afford to buy at these levels, especially when lending rates are fairly disclosed?
The two I know of (rentor-for-now & me) are in NO hurry, so unless you're a day-trader relax & enjoy the carnival.
Greenspan sees possible crossover to prime mortgage market, but not to worry it's not a problem:
"Greenspan also said "disarray" in the U.S. subprime mortgage market, which serves borrowers with weak credit who typically pay higher interest rates, isn't likely to create greater financial instability in the rest of the economy.
"We do have a problem here; it's probably not over," Greenspan said.
"It may actually infect some parts of the prime mortgage market, but there's no real evidence that this is a significant issue."
"Harry has a secret escape. Back in the hills is an old mine shaft which he found years ago and dug out into a cave.Nobody knows where it is and if the mountain should blow, Harry plans on moving into his tunnel with "some food and two kegs of whiskey."
Remember old Harry, Spirit Lake and Mount St. Helens. No one thought it would be that bad. The thing they did not figure on was a slide uncapping the volcano all at once.
Which is the problem here, the unexpected catrostropic event.
Certainly this has been quite a rush this week with the GDP not feeling so grand, the Mortgage market crashing, and now the supply of foreign money threatened.
And sometimes, a cave, food and whiskey isn't enough.
RE: KB Homes - yes despite rummors that homebuiders make huge profits, that 9.9% before writedowns is pretty good. Gets better only with lots of appreciation (profits while you wait) - made everybody look like geniuses.
How many times can Lereah lie before he's indicted?
You cannot lie about the future because it hasn't happened yet.
Lereah is not stupid. He never says anything that is factually incorrect. He just makes predictions that are untenable. "We appear to be at a bottom" - that statement cannot be a lie, by its very construction.
Unlike the securities industry, people in the RE industry are not legally constrained from making self-serving predictions about the market, and Lereah knows this too.
Think about all those boomers who have ALL their assets tied up in their homes. Who will they sell to?
the same people they continue to sell to, albeit at slightly less than peak. money is still cheap and plentiful. loan products are still versatile enough giving you enough slack to hang yourself.
Good Gawd, Maude, what's with that used-to-be-prudent-bunch-of-midwesterners at MGIC? If this keeps up, I'll be turning in my 20-year-old "Simply Magic!" tote bag.
NEW YORK (MarketWatch) -- Fieldstone Investment Corp. said Friday it agreed to be purchased for $5.53 a share in cash, a premium of $2.93 a share, or 112% over its closing price of $2.60 a share on Thursday. The buyers are Credit-Based Asset Servicing and Securitization LLC (C-BASS); an affiliate of MGIC and Radian Group Inc. The purchase price values the Columbia, Md. real estate investment trust with a portfolio of non-conforming mortgage loans at about $260 million. "We believe the significant premium to the market price that C-BASS is offering to our stockholders is the best opportunity for our stockholders to recognize value in this very challenging time in the non-prime mortgage industry," Fieldstone CEO Michael J. Sonnenfeld said.
Anyone catch that housing starts figure this morning. U-gly (that's a capital "U" there). Here are my thoughts:
Anyone who wants to sugar-coat the housing industry's state of affairs better look at this morning's housing starts report. Construction of new single-family and multifamily properties plunged 14.3% to an annualized rate of 1.408 million units from 1.643 million units in December. The year-over-year drop was even more dramatic -- 38%. Not only was January's starts figure well below the forecast for 1.6 million, it is the WORST TO DATE for the down cycle in housing. It leaves starts at the lowest level since August 1997. Both single family and multi-family starts dropped.
Building permit issuance also dropped -- 2.8% to 1.568 million units from a revised 1.613 million. Permits declined for single-family homes, but increased ever so slightly in the multifamily sector. Speaking of revisions to December data, they were mild on the starts front (+1,000 units), and a bit larger on the permits front (+17,000).
I've been saying it for a long, long time: The housing boom was the biggest in U.S. history in terms of construction activity ... sales ... price gains ... and speculative buying activity. That has left us sitting with near-record levels of homes for sale -- condos, town homes, single-family homes, you name it.
We had "see-through" office buildings in the commercial real estate boom that ultimately went bust in the early 1990s ... and we have "see-through" condo buildings and subdivisions now. It will take quite some time to work through that inventory overhang, and one component of that are sharper cutbacks in new housing construction like we saw this month
Dryfly, You've been on a pretty good run - all the way back to screaming for responsible individual leadership. Keep posting, I'm pretty much worn out.
"The transaction supports C-BASS's strategy of aligning with companies that
have significant investments in mortgage securities, where C-BASS's wholly-
owned subsidiary, Litton Loan Servicing, as servicer, can enhance the
underlying value of these securities. C-BASS and Litton will manage the
performance of Fieldstone's portfolio of over $5.7 billion of serviceable
loans."
I was on a Lehman conf call earlier this week where they speculated there would not be enough servicing capacity to deal with all the foreclosures. You would think Litton would be building capacity for all the loss mitigation business headed its way from MTG and RDN. These MTG guys have really done the bungy jump this month, first they acquire RDN and its Alt-A biz that they had steadfastly sworn off and now this. What have they put in the water in Milwaukee?
Fieldstone deal surprised me. Deal may be defensive since an unchanged C-Bass may not be a viable business in the new world of fewer independent originators.
You know that definition of insanity, doing the same thing over and over and expecting different results:
"WOODLAND HILLS, Calif., Aug. 2, 2004 /PRNewswire/ -- Ownit Mortgage Solutions, Inc. ("Ownit") announced today that they have entered into a strategic alliance with C-BASS for the servicing and default management of their mortgage loans. Ownit also expects to partner with C-BASS in the selling and securitization of its loans."
How many times do you have to burn your hand on the stove before you figure out that it's hot?
C-BASS? Seriously? Did they pick out the name or the acronym first? Well, I suppose it's easier than trying to make an acronym out of Patagonian Toothfish.
I predict that "c-bassing" is going to become the industry's euphemism for "free-basing." Those of us who are old-fashioned enough to merely smoke our dope are going to have to step aside. Amateurs to the back, folks, it's the pros' turn to have fun.
The banging sound you hear is my head on my desk.
What I'm waiting for is the new term we're going to use for the entity formerly known as the warehouse. I mean, if your stuff lives there long enough, you get into this really downer kind of argument with Internal Audit about how it isn't a "warehouse" any more and that's not how the accounting works, bubba. I have mental images of acres of suburban roadside real estate covered with "C-CURE LOAN STORAGE" concrete bunkers.
After a comment on this blog I tried to verify C-Bass's value. IMHO you cannot be 100% sure the numbers at Dec. 31, 2006 are realistic. Management only states they review for "other than temporary" impairment charges.
In this troubled environment there is a good chance their auditors would strongly encourage them to verify values before the March financials are released.
Actually, when the boombox gets turned down for a minute and the real accountants can be heard, it goes like this: the loans in the "warehouse" are "held for sale." When the loan is HFS, it is carried at the price offered by the originally committed investor, more or less.
After a good 90 days or so--or, say, three times that at today's ridiculous standards--it becomes less credible to consider the loan "held for sale." It therefore must go to the category known as "held for investment." In essence, the portfolio has to "buy" the loan out of the warehouse. At the lower of cost or market. Technically, this is described as a transaction that "sucks the big weenie" in a cratering mortgage market.
So if you're reading the financial statements of the big depositories (or the little depositories), you might want to keep your eye on that HFS "pipeline." The "market" used to be what was on the other end of the pipe; these days "the balance sheet" is apparently the end of the line.
Brian said: "....He directly addresses your "employment is good so nothing bad can happen" mantra..."
Hey, Brian. Not precisely my mantra. "Nothing bad can happen in the economy until something bad begins to happen in employment" is a more accurate reflection of my position.
Insurance Guy, The language isn't particularly unusual but it is much more detailed than 2004. Made me wonder if the auditors made them put it in to make it clear they have not audited C-Bass's books.
I'm looking forward to OCrenter and AnalysisGuy digging through that OFHEO data too.
How many times can Lereah lie before he's indicted?
Someone needs to explain to Lereah that a pessimist is an experienced optimist. He might change his tune.
Great Lereah article!
Sales were down y/y again in January in the San Fernando Valley, just as our board of realtor pres was going on the record proclaiming that the slowdown was over and sales would definitely pick up in '07. We had the lowest number of SFR sales since 1993! The realtor associations will declare the bottom again and again for months and years to come, just as I remember them doing in the early '90s. We used to literally laugh during our weekly office meetings in my old RE office as we would listen to the latest forecast from CAR. All of us knew that the things that they were forecasting in no way reprented our day to day reality.
"We used to literally laugh...as we would listen to the latest forecast from CR. All of us knew that the things that they were forecasting in no way reprented our day to day reality."
RFLOL!
I know how you feel!
Thanks for the laugh!
"How many times can Lereah lie before he's indicted?"
HAHAHAHAHAHAHA
The trial lawyers are smacking their lips.....
deb's note rings in my ears:
"All of us knew that the things that they were forecasting in no way represented our day to day reality."
The self-fulfilling prophesy might work, even though the record indicates otherwise, so why not slam it out there anyhow?
Well, because you might lose the respect of your audience who no longer regard you as anything but entertainment. President Bush's "aspirational" remarks about what a fine job Rummy was doing just before the election results, may have had this unfortunate consequence. Sadly, the self-debilitating effect of his "aspirational" explanation does not register with the President...only with his constituents.
I hate to say it, but 07 is looking more and more like a non-recessionary year, and the more I read Roubini and Ritzhole the more they remind me of David Lereah with simply the opposite spin.
Recession is the the eye of the people who are out of work or without enough work...
As a programmer, from my perspective we were in recession in our industry (hi tech) from the summer of 2001 till about the summer of 2004. Unemployment among my peers was well over 10% during much of that time... in some areas it was closer to 20% for a time. In tech it felt like it was getting pretty close to a depression...
On the otherhand, during that same period people in the housing industry did just fine.
I would agree we are not yet witnessing the drumbeat of layoffs in the "old economy" that I remember during the summer and fall of 2000.
It's more more like the occasional thunderclap (Myers-Quibb, Hershey, Chrysler, Ford, Subprime lending).
Yes, it could be that BR and Nouriel are just the opposite spin doctors that Lereah and the Soft Landers are, but this ignores whose vested interests are at stake and how much wind they can blow and whether or not they are interactive. BR and Nouriel have a pretty small audience, but their views are shaped by their readers. I doubt whether Lereah's view about 'the worst is behind us' is arguable with his compliant audience. It registers as a hope (as deb notes above) --not a forecast that you understood to be the result of some careful study of the facts.
Does anyone on this board have experience with KB Home? In looking at their recent earnings reports, it appears they are practically giving homes away -- they had 9.9% gross margins BEFORE taking impairment and option charges.
And now we have this, news that sales in January were atrocious. All the while the homebuilder executives and their shills in the media and government try to say this is the bottom? With the lone exception of Beazer's CEO Ian McCarthy who has had the singular integrity to state that he sees no evidence whatsoever of a turnaround.
Watching these stocks go up in the face of all this bad news is truly bizarre.
I hate to say it, but 07 is looking more and more like a non-recessionary year,
Why on earth would you hate to say that?
This is a great summary of the impact of REOs on the market as well as a very good review of how we got to where we are in the housing market now. A good primer for people trying to get up the curve and what is going on.
The analysis of REO disposition from last summer's foreclosures is sobering. It explains very clearly why seconds are selling at 6 cents on the dollar.
Sebastian, if you are out there, you would be well served to read this. He directly addresses your "employment is good so nothing bad can happen" mantra. BTW, you utterly confused about employment and its relation to the business cycle.
Guest Commentary: Ramsey on Foreclosure Impact | Piggington's Econo-Almanac | San Diego Housing Bubble News and Analysis
Silver State Mortgage - Bankrupt
"SSM.com wasn't sub-prime, they were ALT-A, which made this even more shocking! They may be bought out by a new company called Lown Home Financial, actually. Their site is: lownhome.com (i love their website as it's very inviting and easy on the eyes and senses)."
ssmwholesale.com
"As of FEB, 14, 2007 @ precisely 12:00 PM PST, Silver State Mortgage has ceased all national operations. Although this is a difficult time for our loyal broker and builder clients, we are confident that the current opportunities that we are evaluating with other financial institutions will provide a stronger platform for our trusted clients.
The Wholesale Team will remain in place and your Account Executives will be providing information when our new partnership is finalized.
We greatly appreciate your business and look forward to enhancing our business relationships."
Another one for The Mortgage Lender Implode-O-Meter - tracking the housing finance breakdown, related to Alt-A and subprime mortgages, lending fraud, predatory lending, housing bubble, mortgage banking, foreclosures, debt, consolidation, lawyers, class-action lawsuits to add to the list.
Just saw this in the Wall Street Journal:
Anyone worried that earnings growth is about to slow down sharply may be missing the point: It has already happened...
Earnings usually pick up in the fourth quarter from the third quarter. The last time that didn't happen was in 2000, when the economy was on the cusp of recession.
Slower Growth In Earnings Is Already Here
Builders seem to generally be forthright when you take them away from earnings calls:
Paper Economy - A US Real Estate Bubble Blog: 2007 Goldman Sachs Housing Conference
Brian: Thanks for the link. I liked this quote:
Does anyone have a plan in the event of a hard landing?
Do you?
Word of warning for all those that take their information at face value. More detail on the CCI victims at Coast Bank:
http://www.heraldtribune.com/apps/pbcs.dll/article?AID=/20070215/BUSINESS/702150710
ac - watch the cash, when you start hearing about companies where cash is tight REGARDLESS of earnings then you know they turned on the fan and headed out to the barn with a big ol' shovel.
Earnings are so easily manipulated & distorted. Cash is as they say - king.
BTW - check out the cashflow statements for the HBs if you have trouble sleeping... I haven't seen one lately with what I would call a 'comfortable' cash balance... And on top of that a few don't even seem to have much bankable equity to borrow against for much longer if they scrutinize & discount the collateral value of their inventory & land by much.
In the ag crisis of the 80s we were watching ag mfgers cash balances like a hawk - they owed us money, a lot of money in some cases. It got so bad in 1986 that people were starting openly to question whether John Deere or even Caterpillar would survive.
Watch the cash.
Charlie asks.
How many times can Lereah lie before he's indicted?
Lets see.
Here's what Lereah was saying throughout 2006 and into 2007, and what the market was doing.
January 2006
Lereah's forecast: "The market is in the process of normalization."
Actual sales: Fourth-quarter sales fell at an annual rate of 12.6% to 6.94 million annualized.
Lereah's post-mortem: "The level of home sales activity is now at a sustainable level, and is likely to pick up a bit in the months ahead."
April 2006
Lereah's forecast: "Home sales will move up and down somewhat over the remainder of the year but stay at a high plateau."
Actual sales: First-quarter sales fell at an annual rate of 8.6% to 6.79 million.
Lereah's post-mortem: "This is additional evidence that we're experiencing a soft landing."
July 2006
Lereah's forecast: "The market should even out just below present levels."
Actual sales: Second-quarter sales fell at an annual rate of 6% to 6.69 million.
Lereah's post-mortem: "The market is stabilizing."
October 2006
Lereah's forecast: "We expect sales activity to pick up early next year."
Actual sales: Third-quarter sales fell at an annual rate of 22.2% to 6.28 million.
Lereah's post-mortem: "This is likely the trough in sales."
January 2007
Lereah's forecast: "The good news is that the steady improvement in sales will support price appreciation moving forward."
Actual sales: Fourth-quarter sales fell at an annual rate of 2.3% to 6.24 million.
Lereah's post-mortem: "It appears we have established a bottom."
Conclusion
It's unfair, of course, to single out Lereah's forecasts. He wasn't the only economist who was surprised by the extent of the collapse in housing in 2006; some were just as wrong on the other side by predicting the housing bust would bring down the whole economy.
But Lereah was the only one who presented his opinions alongside an economic indicator that's treated as an objective gauge of the housing market. Along with his bully pulpit comes extra scrutiny.
Lereah was traveling on Thursday and unavailable to comment. The senior economist at the NAR, Lawrence Yun, said in an interview the most recent sales trends show almost no movement up or down since August or September.
"In hindsight, we did not anticipate how strong the demand from speculators had been," Yun said of their 2006 forecast. "Now, with the speculators out of the market, and with low mortgage rates and steady job growth, we anticipate an improvement in sales."
It's possible that Lereah may be right, finally. The bottom must come some time, why not now, some 19 months after the bubble peaked?
But it's also possible we could be far from the bottom, as in the housing bust of 1978-1982, when it took 42 months for the market to recover.
If so, it could be a long year for David Lereah.
MarketWatch.com
It's tough to pick on Roubini. Who would have believed the FED would intercede the way (& to the extent) they have. I initially believed BB (the straight-talker) when he said he wouldn't intercede to hold up housing. But, he's repeatedly done just that. Keep in mind, as powerful as the FED is, the housing market's turned & can only get worse from here.
Stop worrying about weeks & months & think longer term. Think about all those boomers who have ALL their assets tied up in their homes. Who will they sell to? How will they react as their taxes rise & their neighbors start to pabic sell? Who's left to buy who doesn't already own & can afford to buy at these levels, especially when lending rates are fairly disclosed?
The two I know of (rentor-for-now & me) are in NO hurry, so unless you're a day-trader relax & enjoy the carnival.
bailey,
How has the Fed held up housing?
Greenspan sees possible crossover to prime mortgage market, but not to worry it's not a problem:
"Greenspan also said "disarray" in the U.S. subprime mortgage market, which serves borrowers with weak credit who typically pay higher interest rates, isn't likely to create greater financial instability in the rest of the economy.
"We do have a problem here; it's probably not over," Greenspan said.
"It may actually infect some parts of the prime mortgage market, but there's no real evidence that this is a significant issue."
Denver newspaper, with the latest Colorado news, sports, weather and entertainment : Rocky Mountain News
It's tough to pick on Roubini. Who would have believed the FED would intercede the way (& to the extent) they have.
bailey - did you see this from NR's sidekick:
If US investors start buying foreign securities like they buy foreign cars, watch out
The end game of the 'conundrum' may be a lot closer than it looks and the US investor (not the FCBs) might be the first ones heading for the exit.
Wouldn't that be ironic...
Bet Ben didn't get into that topic with congress... Oh well, maybe they went over it a 'lunch'.
"Harry has a secret escape. Back in the hills is an old mine shaft which he found years ago and dug out into a cave.Nobody knows where it is and if the mountain should blow, Harry plans on moving into his tunnel with "some food and two kegs of whiskey."
Remember old Harry, Spirit Lake and Mount St. Helens. No one thought it would be that bad. The thing they did not figure on was a slide uncapping the volcano all at once.
Which is the problem here, the unexpected catrostropic event.
Certainly this has been quite a rush this week with the GDP not feeling so grand, the Mortgage market crashing, and now the supply of foreign money threatened.
And sometimes, a cave, food and whiskey isn't enough.
RE: KB Homes - yes despite rummors that homebuiders make huge profits, that 9.9% before writedowns is pretty good. Gets better only with lots of appreciation (profits while you wait) - made everybody look like geniuses.
How many times can Lereah lie before he's indicted?
You cannot lie about the future because it hasn't happened yet.
Lereah is not stupid. He never says anything that is factually incorrect. He just makes predictions that are untenable. "We appear to be at a bottom" - that statement cannot be a lie, by its very construction.
Unlike the securities industry, people in the RE industry are not legally constrained from making self-serving predictions about the market, and Lereah knows this too.
Wow, what gives?
Every day I login, and it is a continuous stream of bad news (I live in NZ, so I'm a little out of sync).
So how long can the street ignore this> Is it just me of has volatility gone up recently on the DOW?
Watch the yen. Watch the yen.
If the yen goes up some more, the carry trade is over. The carry trade is trillions of very hot dollars.
When it ends, a lot of other things are going to end too.
Meanwhile, the auction of what Coast Bank affectionately calls its "collateral" didn't go so well . . .
Bids low at Tringali auction | HeraldTribune.com | Sarasota Florida | Southwest Florida's Information Leader
the same people they continue to sell to, albeit at slightly less than peak. money is still cheap and plentiful. loan products are still versatile enough giving you enough slack to hang yourself.
Good Gawd, Maude, what's with that used-to-be-prudent-bunch-of-midwesterners at MGIC? If this keeps up, I'll be turning in my 20-year-old "Simply Magic!" tote bag.
NEW YORK (MarketWatch) -- Fieldstone Investment Corp. said Friday it agreed to be purchased for $5.53 a share in cash, a premium of $2.93 a share, or 112% over its closing price of $2.60 a share on Thursday. The buyers are Credit-Based Asset Servicing and Securitization LLC (C-BASS); an affiliate of MGIC and Radian Group Inc. The purchase price values the Columbia, Md. real estate investment trust with a portfolio of non-conforming mortgage loans at about $260 million. "We believe the significant premium to the market price that C-BASS is offering to our stockholders is the best opportunity for our stockholders to recognize value in this very challenging time in the non-prime mortgage industry," Fieldstone CEO Michael J. Sonnenfeld said.
Anyone catch that housing starts figure this morning. U-gly (that's a capital "U" there). Here are my thoughts:
Anyone who wants to sugar-coat the housing industry's state of affairs better look at this morning's housing starts report. Construction of new single-family and multifamily properties plunged 14.3% to an annualized rate of 1.408 million units from 1.643 million units in December. The year-over-year drop was even more dramatic -- 38%. Not only was January's starts figure well below the forecast for 1.6 million, it is the WORST TO DATE for the down cycle in housing. It leaves starts at the lowest level since August 1997. Both single family and multi-family starts dropped.
Building permit issuance also dropped -- 2.8% to 1.568 million units from a revised 1.613 million. Permits declined for single-family homes, but increased ever so slightly in the multifamily sector. Speaking of revisions to December data, they were mild on the starts front (+1,000 units), and a bit larger on the permits front (+17,000).
I've been saying it for a long, long time: The housing boom was the biggest in U.S. history in terms of construction activity ... sales ... price gains ... and speculative buying activity. That has left us sitting with near-record levels of homes for sale -- condos, town homes, single-family homes, you name it.
We had "see-through" office buildings in the commercial real estate boom that ultimately went bust in the early 1990s ... and we have "see-through" condo buildings and subdivisions now. It will take quite some time to work through that inventory overhang, and one component of that are sharper cutbacks in new housing construction like we saw this month
Housing starts down 14.3%
Permits down 2.8%
Multi family starts down 20%
Ouch!
Dryfly, You've been on a pretty good run - all the way back to screaming for responsible individual leadership. Keep posting, I'm pretty much worn out.
Tanta,
Here's the rationale for the FICC deal
"The transaction supports C-BASS's strategy of aligning with companies that
have significant investments in mortgage securities, where C-BASS's wholly-
owned subsidiary, Litton Loan Servicing, as servicer, can enhance the
underlying value of these securities. C-BASS and Litton will manage the
performance of Fieldstone's portfolio of over $5.7 billion of serviceable
loans."
I was on a Lehman conf call earlier this week where they speculated there would not be enough servicing capacity to deal with all the foreclosures. You would think Litton would be building capacity for all the loss mitigation business headed its way from MTG and RDN. These MTG guys have really done the bungy jump this month, first they acquire RDN and its Alt-A biz that they had steadfastly sworn off and now this. What have they put in the water in Milwaukee?
The rumored buyer of Silver State is this firm
http://lownhome.com/lh/about_us/about_us.asp
Here is one of the features from its site:
"Streamlined and straightforward products: Weve narrowed the differences between Alt-A and Alt-B to make it easier for you to do more business"
Alt-B? Tanta can you help here? Is this subprime in drag?
Two other tidbits from the web site:
"We put the fun back in funding loans" and "From ho-hum to woo-hoo" (I am not making this up)
What's not to like about a lender who adopts the Vonage theme song? Do you suppose their financials resemble those of Vonage?
Fieldstone deal surprised me. Deal may be defensive since an unchanged C-Bass may not be a viable business in the new world of fewer independent originators.
Yeah, well, it beats putting the "mort" back in mortgage.
Does memory serve me correctly that our friends at C-BASS/Litton were deeply into Ownit? How many times are they going to touch the monkey?
"Alt-B" isn't subprime in drag, it's subprime without drag. If anyone remembers the plot of The Crying Game, you can go there if you want . . .
Tanta,
According to this post, C-Bass had an 8 figure claim in the Ownit bankruptcy:
404 Not Found
Tanta,
You know that definition of insanity, doing the same thing over and over and expecting different results:
"WOODLAND HILLS, Calif., Aug. 2, 2004 /PRNewswire/ -- Ownit Mortgage Solutions, Inc. ("Ownit") announced today that they have entered into a strategic alliance with C-BASS for the servicing and default management of their mortgage loans. Ownit also expects to partner with C-BASS in the selling and securitization of its loans."
How many times do you have to burn your hand on the stove before you figure out that it's hot?
C-BASS? Seriously? Did they pick out the name or the acronym first? Well, I suppose it's easier than trying to make an acronym out of Patagonian Toothfish.
I predict that "c-bassing" is going to become the industry's euphemism for "free-basing." Those of us who are old-fashioned enough to merely smoke our dope are going to have to step aside. Amateurs to the back, folks, it's the pros' turn to have fun.
The banging sound you hear is my head on my desk.
What I'm waiting for is the new term we're going to use for the entity formerly known as the warehouse. I mean, if your stuff lives there long enough, you get into this really downer kind of argument with Internal Audit about how it isn't a "warehouse" any more and that's not how the accounting works, bubba. I have mental images of acres of suburban roadside real estate covered with "C-CURE LOAN STORAGE" concrete bunkers.
Warehouse=deadpool
Warehouse=outhouse
take your pick
After a comment on this blog I tried to verify C-Bass's value. IMHO you cannot be 100% sure the numbers at Dec. 31, 2006 are realistic. Management only states they review for "other than temporary" impairment charges.
In this troubled environment there is a good chance their auditors would strongly encourage them to verify values before the March financials are released.
Actually, when the boombox gets turned down for a minute and the real accountants can be heard, it goes like this: the loans in the "warehouse" are "held for sale." When the loan is HFS, it is carried at the price offered by the originally committed investor, more or less.
After a good 90 days or so--or, say, three times that at today's ridiculous standards--it becomes less credible to consider the loan "held for sale." It therefore must go to the category known as "held for investment." In essence, the portfolio has to "buy" the loan out of the warehouse. At the lower of cost or market. Technically, this is described as a transaction that "sucks the big weenie" in a cratering mortgage market.
So if you're reading the financial statements of the big depositories (or the little depositories), you might want to keep your eye on that HFS "pipeline." The "market" used to be what was on the other end of the pipe; these days "the balance sheet" is apparently the end of the line.
Vicjim,
Is that unusual language in your experience?
Lama?
Brian said: "....He directly addresses your "employment is good so nothing bad can happen" mantra..."
Hey, Brian.
Not precisely my mantra. "Nothing bad can happen in the economy until something bad begins to happen in employment" is a more accurate reflection of my position.
Thank-you for the link, though.
Sebastia
Insurance Guy, The language isn't particularly unusual but it is much more detailed than 2004. Made me wonder if the auditors made them put it in to make it clear they have not audited C-Bass's books.
Cool, Vicjim. I see what you're thinking.