I was reading were builders were using FHA 3% loans rather then subprime 100%LTV. They were doing some kind of 3% cash kickback to make it look like the buyer had the downpayment.
Ah, Steven "Vertical" Kim. He's been calling for the homebuilders to "go vertical" in 07H2. During the runup into the end of February his notes were always good for a nice pop in the group. I covered all my shorts the other day, and I have been hoping for him and his to take the group up again so I can reenter.
"The threat from the subprime issue on home builders is obviously large, but somewhat indirect," wrote Citigroup analyst Stephen Kim in a research note this weekend. "It is also widely discussed and prone to hyperbole."
As for Kim, he may have had some influence last Fall when he was claiming the bottom was in and investors needed to buy in order to take advantage of the rebound that was sure to happen in the Spring, but he has now so thoroughly discredited himself that I doubt any intelligent money manager takes him seriously.
He's an embarrassment to his profession and Citigroup.
Oppenheim has been far more honest in his analysis. Recall that he was the analyst who in December caused a rally in the sector when he cited increased foot traffic as a sign that the market "may be recovering". Well, that traffic, such as it was, did not result in sales, and Oppenheim revised his analysis.
Oppenheim and Kim provide a clear study in contrasting integrity and character.
It's worth reading a detailed account of the dot.com era to see how universally and dramatically wrong analysts were on internet companies, especially on the bullish side.
Any analyst or commentator that was bearish on internet stocks was routinely derided and frequently fired.
This didn't change until after the NASDAQ imploded in March of 2000. Then it was OK to be a little bearish.
Wouldn't the same argument apply to existing homes? I assume the analyst does not comment on existing home sales since there are no "Existing Home Builder" stocks.
I me with TOL management recently. They were not trying to sell a story as much as explain, to their credit...but it was very clear that aside from some signs of strength in New York and some LA suburbs, there's alot more hope than visibility (and gratefully much less hype).
Wouldn't the same argument apply to existing homes? I assume the analyst does not comment on existing home sales since there are no "Existing Home Builder" stocks.
Exactly. The analysts who care about that are the mortgage sector analysts, mortgage companies being something like the equivalent of "existing home builder" stocks.
So what you have to do is figure out how many new home purchases were move-ups, how many were first-time homebuyers, how many were specu-vestors, and how underpriced new construction might have been there for a while relative to existing homes, in order to figure out whether we're looking at a migration (from new home purchases to existing home purchases) or fallout (some percentage of potential new home buyers just don't buy a home at all).
I'm beginning to be convinced, from several sources and data points, that in some sense this is a reversion to a mean, the mean being the historical average of new homes purchased by first-time homebuyers and actual investors (not flippers). Historically, they're not generally new home buyers, except where "affordable developments" create new starter homes, or in condo or townhouse blocks. The typical "starter" home has been an existing home. To that extent, we may see migration to (cheaper) existing homes. But that implies that existing home sellers are as motivated as new home sellers, and I don't think they are. We're seeing some evidence that builders have been undercutting resellers on price. If that can't keep the sales up, then presumably those buyers just fall out until resellers get desperate.
Until the REO flood hits, if and when it does, at which point please cancel all predictions. Nobody harshes your buzz, if you're an existing home seller, like a lender out there with a boatload of REO.
I suspect that whatever "investor" appetite remains will go to REO, and whatever FTB aspirations remain will get ground against the rock of guideline tightening.
So we can dismiss Kim in July, but will Marketwatch, even by July 2012? Yet while it is "impossible to dismiss this inventory risk, [But Kim's very job is to contain the damage --the size of the perceived risk and this is his best shot, Marketwatch providing the venue.] there are several factors that will soften the blow," Kim added.
First, he doesn't expect a further surge in cancellations to prevent home-builders' order trends from turning positive in the second half of 2007.
This liability, "prone to hyperbole", that rightly discounts non-empirical emotional outbursts
"The threat from the subprime issue on home builders is obviously large, but somewhat indirect," wrote Citigroup analyst Stephen Kim in a research note this weekend. "It is also widely discussed and prone to hyperbole."
is not backed by hard facts or anything one might call a careful study. [Consider "somewhat indirect".]
And so the piece self-destructs...and for some of us, the writer self-molests and we learn to choose others when our reading time is limited.
There is a very interesting regional story in the data. All the strength in starts was in the West and South while the NE and MW continued to implode. Starts in the west were up 26.4% for the month, but still down 30.9% yr/yr. In the South starts were up 18.0% and down 20.3% yr/yr. However in the MW, starts were down 14.4% for the month and down 50.6% yr/yr while in the NE starts were down 29.7% for the month and 27.4% yr/yr (down more for month than year there is interesting). All regions are not equal.
It would be interesting to know the inventory levels in the South and West. Locations liks LV, AZ, Inland Empire, Central Valley . They would be areas that builders have allready spent considerable sums on lot prep and prebuilding activity. Someone posted on Mish this weekend about large empty subdivisions out in the Inland Empire area. No MSM converage about these or unsold condo and townhome developments in old downtown areas that remain vacant. Cancellation rates have created a data void within the builder inventory numbers but sooner or later the full impact of this existing inventory will see the light of day.
bfatz,
Great link. I've been looking for the consolidated data based on reset. Is it possible to get the direct link from Credit Suisse? Any accompanying text must be interesting.
Thanks,
The question is what effect will tightening credit have on the current pipeline of sales. Buyers are being left at the closing table with no source of funding. Sellers of existing homes are losing sales and can't move up as well.
Many HBs are sitting on Billions of debt. If the buyer pipeline drys up, the result could be interesting.
hyperinflate is already in the works..this housing data, is bull
Well, the Fed is kinda the head banker and hyperinflation would destroy the value of banks holdings. That's a bit like a momma cat eating her own kittens. Do you really think the banks are going to roll over and allow their wealth to be destroyed? Seems like they might lobby a bit with all the money they have.
I don't know if subprime borrowers and other debtors have all that much lobbying power.
I doubt that Kim was hired to be a critical thinker, in fact if he was the kind of person that connects dots I am sure he never would have been hired for this position.
This new American religon called Homeownership has a strong following and similiar to other religious beliefs "faith" plays the most important part.
It makes perfect sense if you think of Accredited Home as a Ponzi finance unit. The question you have to ask is what regulatory and monetary conditions have created such fertile ground for financial instability. I suspect Roach is right in the conclusion of his recent missive, that this liquidity-driven era of excesses and imbalances will ultimately go down in history as the outgrowth of a huge failure for modern-day central banking.
lama, that chart is from the Ivy Zelman report I exerpted a while back. I know of no direct link to it on the web.
I'm not quite sure what to make of the Option ARM part. I think those OAs are, as I said, already "resetting." They just aren't yet "recasting." In any event, I don't know what date was chosen as the "reset" date for the OAs (the date of the first rate change or the date of the first payment change--with neg am you suddenly have non-overlap there). I suspect that what was chosen was the first payment change date.
I wonder what other kind of thinkers there are besides the critical ones...are we recreational thinkers? 'Scuse me while I take time out from my habituated routines that I call "work" and puzzle the snot out of this...
Off topic and I am sorry but if you look at the chart..Sept is and Novemember are Nuclear months for resets...to bad to I have friends I have warned that they are facing reset in sept...sorry to say they will implode with the rest...and november!...forget! the christmas season for lots and lots of familys...from the look of things.
Well, the Fed is kinda the head banker and hyperinflation would destroy the value of banks holdings. That's a bit like a momma cat eating her own kittens. Do you really think the banks are going to roll over and allow their wealth to be destroyed? Seems like they might lobby a bit with all the money they have.
I agree - the Fed will try to (1) save the banking system (2) protect the dollar and (3) fight inflation... probably in that order... even though (3) is the only item 'officially' one of their mandates.
Congress might have other concerns, however.
Up until recently inflation has been pretty much a hollow threat since the Asian FCBs have done all the heavy lifting for the Fed (bought US denominated debt to keep their currency weak - then sell us all the cheap crap we could ever want)... that is getting increasingly difficult .
Having said all that - I'm not terribly impressed or concerned about what the dollar does vis-a-vis the euro. Watch the yen, RMB & Asian Tiger currencies - that's where the action is. When the dollar tanks against them - that's when the fun begins.
Watch the yen, RMB & Asian Tiger currencies - that's where the action is. When the dollar tanks against them - that's when the fun begins.
The Yen (vs. USD) is one currency I watch every day. It may be one of the more important indexes at the moment.
People forget that the 70s inflation almost caused a wave of S&L bankruptcies. I bet that had alot to the with Vockler getting the backing to intentionally cause a serious recession.
Anthony, JS, my term for LEND's problem is just the old-fashioned "negative warehouse spread." That, actually, has happened before; it seems to me a rather amusing commentary on the boom that people have forgotten that the cost of short-term borrowing can exceed the yield on long-term loans, and that in "the old days" you turned your held for sale pipe over as fast as you could, because there wasn't always that great a carry trade in the warehouse. My understanding of the problem as "negative warehouse spread" is that LEND's lenders are telling it to either up the rate on the loans or move them out of the warehouse faster. That is, we may be seeing just a return to normalcy on those warehouse rates.
Or, of course, it could be just some hedgie in the process of buying out some doomed lender. But really it's not much different than all these "margin calls" people have been talking about re warehouse lines.
Farallon loan of $200 million to Accredited does not discuss what the collateral is. These extensions of credit are usually significantly overcollateralized with the best assets.
Looking at the 13% rate, that is equivalent to selling existing loans at a 25% discount assuming the loans yields are at 8.5%.
All Farallon did was essentially create their own tranche of securitized prime assets to yield 13%.
This is truly a hard money desperate loan by LEND.
In the final analysis what existing business model does LEND have that will support earnings and interest going forward.
Breaking news from Reuters (no official link yet except their front page, http://www.reuters.com)
New Century says cut off by Fannie Mae 1:52 p.m. ET
NEW YORK (Reuters) - New Century Financial Corp. , a struggling subprime lender that many analysts consider on the brink of bankruptcy, on Tuesday said it can no longer sell mortgage loans to Fannie Mae or act as the primary servicer of mortgage loans for the mortgage financier.
NEW YORK (Reuters) - New Century Financial Corp. (NEWC.PK: Quote, Profile, Research), a struggling subprime lender that many analysts consider on the brink of bankruptcy, on Tuesday said it can no longer sell mortgage loans to Fannie Mae (FNM.N: Quote, Profile, Research) or act as the primary servicer of mortgage loans for the mortgage financier.
In a filing with the U.S. Securities and Exchange Commission, Irvine, California-based New Century said Fannie Mae terminated "for cause" a mortgage selling and servicing contract with New Century Mortgage Corp., citing alleged breaches of that contract and others. New Century said it received a notice of breach and termination on March 14.
Separately, New Century said it received "cease-and-desist" orders from California, and that some units entered consent agreements with Florida and Washington state regulators. It also said New York's banking department suspended the banking license of its Home123 affiliate for up to 30 days.
New Century, a specialist in lending to people with poor credit, stopped making home loans this month. Its shares fell 23 cents to $1.94 in afternoon trading on the Pink Sheets.
Ron said: "There is a very interesting regional story in the data. All the strength in starts was in the West and South while the NE and MW continued to implode. Starts in the west were up 26.4% for the month, but still down 30.9% yr/yr. In the South starts were up 18.0% and down 20.3% yr/yr. However in the MW, starts were down 14.4% for the month and down 50.6% yr/yr while in the NE starts were down 29.7% for the month and 27.4% yr/yr (down more for month than year there is interesting). All regions are not equal..."
Tell me about it. I keep reading this blog and all the comments, and have yet to see any first-hand evidence of a housing meltdown. I must live in the only good housing market in America.
In previous years there has always been at least two or more homes for sale in my neighborhood at this time of year (coming into peak house-hunting season).
This year...no "For sale" signs, not a one. There are hardly any properties on the market even in neighborhoods adjacent to mine.
Furthermore, I don't personally know anyone who's gotten "upside-down" on their home mortgage, lost their home from upward ARM adjustments they couldn't afford anymore, etc. I've never even heard a story second-hand from a friend of a friend about such situations, either locally or in other parts of the country.
(What I've seen a lot of recently, though, are remodeling and renovation projects. If a carpenter is fired from his home construction job but finds employment in remodeling, how does that fit into the "massive job-loss in residential construction leads to recession" story?)
It's not even like I'm living a cloistered existence, as I live in a median-priced home in a middle-class neighborhood in an ordinary town.
Just a straw-poll: How many of the regular posters here (that are homeowners) are actually in the dire straits so often quoted in the media, or expect to be there soon? If this was a serious nationwide problem there ought to be at least a few, right?
How many have put their homes on the market in anticipation of buying them back at a 20%-50% discount over the next year or two? There ought to be at least a few posters doing that, right, if this housing situation is truly as awful as advertised?
Up until recently inflation has been pretty much a hollow threat
Another thing,
Late in the dot.com cycle when Greenspan began admitting privately that he was concerned about excess speculation in the stock market (circa 1999). But he had to formulate some excuse for raising rates because he'd denied publically that the Fed should take action against speculation (or that there was in fact excess speculation), so instead he developed a crafty reasoning for raising rates involving inflation even though there was no serious inflation threat at the time. But given his private concerns it seemed likely at the time that he was just creating a ruse to for reigning in speculation.
I don't think the recent rate hikes are much different.
IMO it's notable that those previous hikes created a "deflation scare" in their wake. Fortunately the housing bubble came to the rescue.
Seb caves on the depressing data streams and reaches out for anecdotals...you figure this is a good strategy or a lapse in the newly discovered "recreational thinking"?
I'm done depressing. I just want to feel good. Don't bother me with any of that over-rated RT. Let's hear your feelings...
Sebastian: this is a link to the CFC REO site you might find one of your neighbor's in here. Was looking over Calif's listing today and it is a huge would love to find a combo REO listing service.
LoanCity is closed for business. Today March 20, 2007 is the last day we will be funding loans. To our customers, our staff and business partners - we thank you.
Just a straw-poll: How many of the regular posters here (that are homeowners) are actually in the dire straits so often quoted in the media, or expect to be there soon? If this was a serious nationwide problem there ought to be at least a few, right?
Have you ever seen any comparisons of the demographics of internet users, or blog readers as a subset thereof, compared to the population as a whole, honey? The data exists; internet advertisers give their lifeblood to get it. Go read it.
"I agree - the Fed will try to (1) save the banking system (2) protect the dollar and (3) fight inflation... probably in that order... even though (3) is the only item 'officially' one of their mandates."
The only way to do all of these things is to allow a massive recession, along with it's associated asset deflation to happen (GD2?). The Fed survived GD1 just fine and there was no inflation to speak of, the dollar survived, and the banking system survived as well - at least Fed member banks.
Which brings us back to the theory that the Fed not only doesn't fear deflation, but will sometimes even embrace (create?) one if the circumstances are correct. They just have to get the politicos aligned to the concept so that everybody can spin it properly. Bush is a sitting duck and is leaving soon anyway, so this may not be much of an issue. With that I offer the following quote:
"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered." Some attribute this to Thomas Jefferson, Letter 1802 to Secretary of the Treasury, Albert Gallatin.
Just a straw-poll: How many of the regular posters here (that are homeowners) are actually in the dire straits so often quoted in the media, or expect to be there soon? If this was a serious nationwide problem there ought to be at least a few, right?
Honest-to-god truth I actually sold my house due to blogs like these. Or at least they were part of the rationalization I used in selling my place (I wasn't the only owner, so some convincing was required) - I sought out sympathetic viewpoints when I saw the appraisal on my house jump, which convinced me that bad things were coming.
link
Percentage of all delinquent loans in the fourth quarter by state (State data are not seasonally adjusted):
Mississippi \t10.6%
Louisiana \t9.1%
Michigan \t7.9%
Indiana \t7.8%
Georgia \t7.5%
West Virginia \t7.4%
Texas \t 7.4%
Tennessee \t7.3%
Ohio \t 7.3%
Alabama \t7.1%
Of the 10 highest default states, 5 are southern. So who is going to buy these houses when say in Alabama, 7% of homeowners are out of the market and 7% of mortgages homes will be for sale soon.
Which brings us back to the theory that the Fed not only doesn't fear deflation, but will sometimes even embrace (create?) one if the circumstances are correct.
I do think they fear deflation because the Fed is a very powerful entity (I call Bernanke "the president of the US economy") and deflation and serious recession would threaten that power and credibility both politically and mechanically (by taking away their ability to steer the economy if interest rates hit the dreaded Zero Bound).
ac, based on past performance (GD1) the Fed not only survived but actually consolidated their power by driving competing banks out of business in droves. Now granted, past performance is no guarantee of future results so this may or may not be exactly like GD1, but the buildup sure looks similar to me. Politically, anything can be spun by the PTB. Do I really need to cite examples of how dumb the sheeple are and what kind of garbage they fall for?
Only a hyperinflation would truly threaten the Fed's power, as those with large cash positions (Fed) can easily consolidate in a deflation. Conversely, hyperinflation virtually assures a regime/banking change and political upheaval: Weimar, Bolivia, Argentina, Nigeria, etc.
I won't try and guess what will make the Fed more powerful or not. But at least judging from their writings they have a healthy obsession with deflation at the least...
bofiz, I don't follow. If the Chinese decide they don't want US bonds, wouldn't that force future UST bond yields higher, to sweeten the pot, so the arabs increase their take? I would think that should add some measure of strength to the dollar, no?
WOW! that is hugh and no mention of it in the MSM!....
Bfatz: I would think that Reuters is pretty mainstream.
bofiz, I don't follow. If the Chinese decide they don't want US bonds, wouldn't that force future UST bond yields higher, to sweeten the pot, so the arabs increase their take? I would think that should add some measure of strength to the dollar, no?
barely: I'm not sure I can follow that logic... Basically, it means that China's got a $Trillion and they're saying "that's enough; from here on out we're diversifying." That would mean less demand for dollars and thus falling dollar. If this causes the dollar to fall far enough, the it would be tough for the FED to raise interest rates enough to offset that. Doing so would unquestionably lead to a recession in the US. The FED is walking a tightrope now: raising rates to save the $ will sink housing and the rest of the economy with it. Lowering rates to save housing will sink the $. My guess is that the FED will just leave rates where they are for as long as they can.
bofiz, I agree about the tightrope, however, when it comes to a decision about selling bonds to finance the US economy (and prop up the dollar) or sink housing, I don't think the FED has much of a choice. At least that's how I see it. Housing will have to find its own balance point, eventually.
that you could easily google and get a biased MSM version of it...so you came to the right place to get the real information, not the Main Stream Media version, which might take you as far as the major American Networks, the half dozen control centers of what is determined to be The News and what is pablum for the Midnight Enquirer. Roughly it is the uncontested authority and producer of information largely delivered to consumers via AP or Reuters. We bloggers are consumers too, but we chew --sometimes even digest. We also provide edited versions which we think are vast improvements...so I'm glad you asked.
In the history of pure fiat money, no issue of that description has ever survived the test of time. The attraction of issuing greater and greater quantities always did it in. This is true from pre-history through Rome, 1340s Europe, 1790s France, 1920s Germany, 1993-1994 Yugoslavia, Argentina, Mexico, present Venezuela, present Zimbabwe, and this is a short list.
The providers of fiat know what it is. They know its uses, they know its finite lifespan. They know it hyper-inflates, becomes unstable and carries society into chaos. That is what they want. They do not want to "defend" the dollar, it is pure fiat, it will die, it can be defended for a time, and then it is over. As such the banking system tied to the dollar and as such all pure fiats (the world-wide paper orgy) will all follow the same route. Oh boy am I the village idiot for saying this eh?
I am just happily taking the other side to a position espoused on this blog. I think you are not allowing yourself to see the larger political picture. You think I am a nut. Cool!
When I searched MSM, I came up with a lot of different companies. None of which seemed to apply.
Yes, this is a great site and slowly I am learning the meaning of the acronyms. Finally, I am beginning to understand the derivative market. Mind boggling!
Glad to hear about the progress wrt the derivative market (nothing to do with calculus...to make sure we are both on the same track)...should be called obscuratives because not only are the trades derived from more tangible assets and features like interest rates, but many features of the individual trades are not made public.
Will all its apparent disadvantages, it seems to work better than the rest.
If they hadn't already invented fiat we'd invent it all over again. It does what its supposed to do - facilitate trade. It only has to keep its value long enough to exchange hands.
I was reading were builders were using FHA 3% loans rather then subprime 100%LTV. They were doing some kind of 3% cash kickback to make it look like the buyer had the downpayment.
Ah, Steven "Vertical" Kim. He's been calling for the homebuilders to "go vertical" in 07H2. During the runup into the end of February his notes were always good for a nice pop in the group. I covered all my shorts the other day, and I have been hoping for him and his to take the group up again so I can reenter.
So far, not much of a bounce, though.
"The threat from the subprime issue on home builders is obviously large, but somewhat indirect," wrote Citigroup analyst Stephen Kim in a research note this weekend. "It is also widely discussed and prone to hyperbole."
In other words "It's only a Flesh wound"
LOL
That MarketWatch description strikes me as slyly poisonous.
"Meet the guy who missed the entire slide. He has some real estate he wants to sell you."
I like that.
As for Kim, he may have had some influence last Fall when he was claiming the bottom was in and investors needed to buy in order to take advantage of the rebound that was sure to happen in the Spring, but he has now so thoroughly discredited himself that I doubt any intelligent money manager takes him seriously.
He's an embarrassment to his profession and Citigroup.
Oppenheim has been far more honest in his analysis. Recall that he was the analyst who in December caused a rally in the sector when he cited increased foot traffic as a sign that the market "may be recovering". Well, that traffic, such as it was, did not result in sales, and Oppenheim revised his analysis.
Oppenheim and Kim provide a clear study in contrasting integrity and character.
It's worth reading a detailed account of the dot.com era to see how universally and dramatically wrong analysts were on internet companies, especially on the bullish side.
Any analyst or commentator that was bearish on internet stocks was routinely derided and frequently fired.
This didn't change until after the NASDAQ imploded in March of 2000. Then it was OK to be a little bearish.
The distress will cut 15% of new-home demand...
Wouldn't the same argument apply to existing homes? I assume the analyst does not comment on existing home sales since there are no "Existing Home Builder" stocks.
And the dollar at 82.97...intrest rate cut I hould say not....hyperinflate is already in the works..this housing data, is bull.
test
I me with TOL management recently. They were not trying to sell a story as much as explain, to their credit...but it was very clear that aside from some signs of strength in New York and some LA suburbs, there's alot more hope than visibility (and gratefully much less hype).
The distress will cut 15% of new-home demand...
Wouldn't the same argument apply to existing homes? I assume the analyst does not comment on existing home sales since there are no "Existing Home Builder" stocks.
Exactly. The analysts who care about that are the mortgage sector analysts, mortgage companies being something like the equivalent of "existing home builder" stocks.
So what you have to do is figure out how many new home purchases were move-ups, how many were first-time homebuyers, how many were specu-vestors, and how underpriced new construction might have been there for a while relative to existing homes, in order to figure out whether we're looking at a migration (from new home purchases to existing home purchases) or fallout (some percentage of potential new home buyers just don't buy a home at all).
I'm beginning to be convinced, from several sources and data points, that in some sense this is a reversion to a mean, the mean being the historical average of new homes purchased by first-time homebuyers and actual investors (not flippers). Historically, they're not generally new home buyers, except where "affordable developments" create new starter homes, or in condo or townhouse blocks. The typical "starter" home has been an existing home. To that extent, we may see migration to (cheaper) existing homes. But that implies that existing home sellers are as motivated as new home sellers, and I don't think they are. We're seeing some evidence that builders have been undercutting resellers on price. If that can't keep the sales up, then presumably those buyers just fall out until resellers get desperate.
Until the REO flood hits, if and when it does, at which point please cancel all predictions. Nobody harshes your buzz, if you're an existing home seller, like a lender out there with a boatload of REO.
I suspect that whatever "investor" appetite remains will go to REO, and whatever FTB aspirations remain will get ground against the rock of guideline tightening.
So we can dismiss Kim in July, but will Marketwatch, even by July 2012?
Yet while it is "impossible to dismiss this inventory risk, [But Kim's very job is to contain the damage --the size of the perceived risk and this is his best shot, Marketwatch providing the venue.] there are several factors that will soften the blow," Kim added.
First, he doesn't expect a further surge in cancellations to prevent home-builders' order trends from turning positive in the second half of 2007.
This liability, "prone to hyperbole", that rightly discounts non-empirical emotional outbursts
"The threat from the subprime issue on home builders is obviously large, but somewhat indirect," wrote Citigroup analyst Stephen Kim in a research note this weekend. "It is also widely discussed and prone to hyperbole."
is not backed by hard facts or anything one might call a careful study. [Consider "somewhat indirect".]
And so the piece self-destructs...and for some of us, the writer self-molests and we learn to choose others when our reading time is limited.
Stephen Kim = Henry Blodget
There is a very interesting regional story in the data. All the strength in starts was in the West and South while the NE and MW continued to implode. Starts in the west were up 26.4% for the month, but still down 30.9% yr/yr. In the South starts were up 18.0% and down 20.3% yr/yr. However in the MW, starts were down 14.4% for the month and down 50.6% yr/yr while in the NE starts were down 29.7% for the month and 27.4% yr/yr (down more for month than year there is interesting). All regions are not equal.
It would be interesting to know the inventory levels in the South and West. Locations liks LV, AZ, Inland Empire, Central Valley . They would be areas that builders have allready spent considerable sums on lot prep and prebuilding activity. Someone posted on Mish this weekend about large empty subdivisions out in the Inland Empire area. No MSM converage about these or unsold condo and townhome developments in old downtown areas that remain vacant. Cancellation rates have created a data void within the builder inventory numbers but sooner or later the full impact of this existing inventory will see the light of day.
The up and coming Reset Chart
http://www.autodogmatic.com/forum/viewtopic.php?p=1226#1226
How does this make any sense what so ever?
Accredited Home Gets $200 Million Loan From Farallon at 13%
It's ironic that the subprime lender is paying this subprime rate of 13 percent,'' Roth said.That's more than they charge their own borrowers.''
- Bloomberg.com
bfatz,
Great link. I've been looking for the consolidated data based on reset. Is it possible to get the direct link from Credit Suisse? Any accompanying text must be interesting.
Thanks,
The up and coming Reset Chart
that looks like 60 months of reset hell!
The question is what effect will tightening credit have on the current pipeline of sales. Buyers are being left at the closing table with no source of funding. Sellers of existing homes are losing sales and can't move up as well.
Many HBs are sitting on Billions of debt. If the buyer pipeline drys up, the result could be interesting.
hyperinflate is already in the works..this housing data, is bull
Well, the Fed is kinda the head banker and hyperinflation would destroy the value of banks holdings. That's a bit like a momma cat eating her own kittens. Do you really think the banks are going to roll over and allow their wealth to be destroyed? Seems like they might lobby a bit with all the money they have.
I don't know if subprime borrowers and other debtors have all that much lobbying power.
after a little more research i found this also:
http://www.billcara.com/CS%20Mar%2012%202007%20Mortgage%20and%20Housing.pdf
calmo:
I doubt that Kim was hired to be a critical thinker, in fact if he was the kind of person that connects dots I am sure he never would have been hired for this position.
This new American religon called Homeownership has a strong following and similiar to other religious beliefs "faith" plays the most important part.
the chart i posted is on page 47...long read, but interesting to say the least.
How does this make any sense what so ever?
It makes perfect sense if you think of Accredited Home as a Ponzi finance unit. The question you have to ask is what regulatory and monetary conditions have created such fertile ground for financial instability. I suspect Roach is right in the conclusion of his recent missive, that this liquidity-driven era of excesses and imbalances will ultimately go down in history as the outgrowth of a huge failure for modern-day central banking.
lama, that chart is from the Ivy Zelman report I exerpted a while back. I know of no direct link to it on the web.
I'm not quite sure what to make of the Option ARM part. I think those OAs are, as I said, already "resetting." They just aren't yet "recasting." In any event, I don't know what date was chosen as the "reset" date for the OAs (the date of the first rate change or the date of the first payment change--with neg am you suddenly have non-overlap there). I suspect that what was chosen was the first payment change date.
I wonder what other kind of thinkers there are besides the critical ones...are we recreational thinkers? 'Scuse me while I take time out from my habituated routines that I call "work" and puzzle the snot out of this...
Off topic and I am sorry but if you look at the chart..Sept is and Novemember are Nuclear months for resets...to bad to I have friends I have warned that they are facing reset in sept...sorry to say they will implode with the rest...and november!...forget! the christmas season for lots and lots of familys...from the look of things.
right here Tanta
400 Bad Request 20Housing.pdf
Well, the Fed is kinda the head banker and hyperinflation would destroy the value of banks holdings. That's a bit like a momma cat eating her own kittens. Do you really think the banks are going to roll over and allow their wealth to be destroyed? Seems like they might lobby a bit with all the money they have.
I agree - the Fed will try to (1) save the banking system (2) protect the dollar and (3) fight inflation... probably in that order... even though (3) is the only item 'officially' one of their mandates.
Congress might have other concerns, however.
Up until recently inflation has been pretty much a hollow threat since the Asian FCBs have done all the heavy lifting for the Fed (bought US denominated debt to keep their currency weak - then sell us all the cheap crap we could ever want)... that is getting increasingly difficult .
Having said all that - I'm not terribly impressed or concerned about what the dollar does vis-a-vis the euro. Watch the yen, RMB & Asian Tiger currencies - that's where the action is. When the dollar tanks against them - that's when the fun begins.
well the top one works...later have to go
http://www.billcara.com/CS%20Mar%2012%202007%20Mortgage%20and%20Housing.pdf
Watch the yen, RMB & Asian Tiger currencies - that's where the action is. When the dollar tanks against them - that's when the fun begins.
The Yen (vs. USD) is one currency I watch every day. It may be one of the more important indexes at the moment.
People forget that the 70s inflation almost caused a wave of S&L bankruptcies. I bet that had alot to the with Vockler getting the backing to intentionally cause a serious recession.
Anthony, JS, my term for LEND's problem is just the old-fashioned "negative warehouse spread." That, actually, has happened before; it seems to me a rather amusing commentary on the boom that people have forgotten that the cost of short-term borrowing can exceed the yield on long-term loans, and that in "the old days" you turned your held for sale pipe over as fast as you could, because there wasn't always that great a carry trade in the warehouse. My understanding of the problem as "negative warehouse spread" is that LEND's lenders are telling it to either up the rate on the loans or move them out of the warehouse faster. That is, we may be seeing just a return to normalcy on those warehouse rates.
Or, of course, it could be just some hedgie in the process of buying out some doomed lender. But really it's not much different than all these "margin calls" people have been talking about re warehouse lines.
People's Choice filing for BK
People's Choice Home Loan Files for Bankruptcy (Update2) - Bloomberg.com
Sorry if someone else already posted this.
Farallon loan of $200 million to Accredited does not discuss what the collateral is. These extensions of credit are usually significantly overcollateralized with the best assets.
Looking at the 13% rate, that is equivalent to selling existing loans at a 25% discount assuming the loans yields are at 8.5%.
All Farallon did was essentially create their own tranche of securitized prime assets to yield 13%.
This is truly a hard money desperate loan by LEND.
In the final analysis what existing business model does LEND have that will support earnings and interest going forward.
"Until the REO flood hits, if and when it does, at which point please cancel all predictions."
Yes indeed.
Breaking news from Reuters (no official link yet except their front page, http://www.reuters.com)
New Century says cut off by Fannie Mae 1:52 p.m. ET
NEW YORK (Reuters) - New Century Financial Corp. , a struggling subprime lender that many analysts consider on the brink of bankruptcy, on Tuesday said it can no longer sell mortgage loans to Fannie Mae or act as the primary servicer of mortgage loans for the mortgage financier.
Oop.. They're fast. The link.
New Century says cut off by Fannie Mae
| Reuters
Text of article.
NEW YORK (Reuters) - New Century Financial Corp. (NEWC.PK: Quote, Profile, Research), a struggling subprime lender that many analysts consider on the brink of bankruptcy, on Tuesday said it can no longer sell mortgage loans to Fannie Mae (FNM.N: Quote, Profile, Research) or act as the primary servicer of mortgage loans for the mortgage financier.
In a filing with the U.S. Securities and Exchange Commission, Irvine, California-based New Century said Fannie Mae terminated "for cause" a mortgage selling and servicing contract with New Century Mortgage Corp., citing alleged breaches of that contract and others. New Century said it received a notice of breach and termination on March 14.
Separately, New Century said it received "cease-and-desist" orders from California, and that some units entered consent agreements with Florida and Washington state regulators. It also said New York's banking department suspended the banking license of its Home123 affiliate for up to 30 days.
New Century, a specialist in lending to people with poor credit, stopped making home loans this month. Its shares fell 23 cents to $1.94 in afternoon trading on the Pink Sheets.
Ron said: "There is a very interesting regional story in the data. All the strength in starts was in the West and South while the NE and MW continued to implode. Starts in the west were up 26.4% for the month, but still down 30.9% yr/yr. In the South starts were up 18.0% and down 20.3% yr/yr. However in the MW, starts were down 14.4% for the month and down 50.6% yr/yr while in the NE starts were down 29.7% for the month and 27.4% yr/yr (down more for month than year there is interesting). All regions are not equal..."
Tell me about it.
I keep reading this blog and all the comments, and have yet to see any first-hand evidence of a housing meltdown. I must live in the only good housing market in America.
In previous years there has always been at least two or more homes for sale in my neighborhood at this time of year (coming into peak house-hunting season).
This year...no "For sale" signs, not a one. There are hardly any properties on the market even in neighborhoods adjacent to mine.
Furthermore, I don't personally know anyone who's gotten "upside-down" on their home mortgage, lost their home from upward ARM adjustments they couldn't afford anymore, etc. I've never even heard a story second-hand from a friend of a friend about such situations, either locally or in other parts of the country.
(What I've seen a lot of recently, though, are remodeling and renovation projects. If a carpenter is fired from his home construction job but finds employment in remodeling, how does that fit into the "massive job-loss in residential construction leads to recession" story?)
It's not even like I'm living a cloistered existence, as I live in a median-priced home in a middle-class neighborhood in an ordinary town.
Just a straw-poll: How many of the regular posters here (that are homeowners) are actually in the dire straits so often quoted in the media, or expect to be there soon? If this was a serious nationwide problem there ought to be at least a few, right?
How many have put their homes on the market in anticipation of buying them back at a 20%-50% discount over the next year or two? There ought to be at least a few posters doing that, right, if this housing situation is truly as awful as advertised?
Sebastia
Up until recently inflation has been pretty much a hollow threat
Another thing,
Late in the dot.com cycle when Greenspan began admitting privately that he was concerned about excess speculation in the stock market (circa 1999). But he had to formulate some excuse for raising rates because he'd denied publically that the Fed should take action against speculation (or that there was in fact excess speculation), so instead he developed a crafty reasoning for raising rates involving inflation even though there was no serious inflation threat at the time. But given his private concerns it seemed likely at the time that he was just creating a ruse to for reigning in speculation.
I don't think the recent rate hikes are much different.
IMO it's notable that those previous hikes created a "deflation scare" in their wake. Fortunately the housing bubble came to the rescue.
Seb caves on the depressing data streams and reaches out for anecdotals...you figure this is a good strategy or a lapse in the newly discovered "recreational thinking"?
I'm done depressing. I just want to feel good. Don't bother me with any of that over-rated RT. Let's hear your feelings...
Sebastian: this is a link to the CFC REO site you might find one of your neighbor's in here. Was looking over Calif's listing today and it is a huge would love to find a combo REO listing service.
Bank of America
Loancity is done
Web Page Under Construction
LoanCity is closed for business. Today March 20, 2007 is the last day we will be funding loans. To our customers, our staff and business partners - we thank you.
Just a straw-poll: How many of the regular posters here (that are homeowners) are actually in the dire straits so often quoted in the media, or expect to be there soon? If this was a serious nationwide problem there ought to be at least a few, right?
Have you ever seen any comparisons of the demographics of internet users, or blog readers as a subset thereof, compared to the population as a whole, honey? The data exists; internet advertisers give their lifeblood to get it. Go read it.
"I agree - the Fed will try to (1) save the banking system (2) protect the dollar and (3) fight inflation... probably in that order... even though (3) is the only item 'officially' one of their mandates."
The only way to do all of these things is to allow a massive recession, along with it's associated asset deflation to happen (GD2?). The Fed survived GD1 just fine and there was no inflation to speak of, the dollar survived, and the banking system survived as well - at least Fed member banks.
Which brings us back to the theory that the Fed not only doesn't fear deflation, but will sometimes even embrace (create?) one if the circumstances are correct. They just have to get the politicos aligned to the concept so that everybody can spin it properly. Bush is a sitting duck and is leaving soon anyway, so this may not be much of an issue. With that I offer the following quote:
"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered." Some attribute this to Thomas Jefferson, Letter 1802 to Secretary of the Treasury, Albert Gallatin.
Woah, LoanCity went down? My memory is that they were exclusively prime and Alt-A, no subprime. Can anyone else confirm that?
Just a straw-poll: How many of the regular posters here (that are homeowners) are actually in the dire straits so often quoted in the media, or expect to be there soon? If this was a serious nationwide problem there ought to be at least a few, right?
Honest-to-god truth I actually sold my house due to blogs like these. Or at least they were part of the rationalization I used in selling my place (I wasn't the only owner, so some convincing was required) - I sought out sympathetic viewpoints when I saw the appraisal on my house jump, which convinced me that bad things were coming.
You can still access Loancity stuff from this page Web Page Under Construction
Word is BOA pulled
Mortgage Grapevine: LOAN CITY CLOSES
Loancity Facts/investor list...
Web Page Under Construction
The South is not so hot:
link
Percentage of all delinquent loans in the fourth quarter by state (State data are not seasonally adjusted):
Mississippi \t10.6%
Louisiana \t9.1%
Michigan \t7.9%
Indiana \t7.8%
Georgia \t7.5%
West Virginia \t7.4%
Texas \t 7.4%
Tennessee \t7.3%
Ohio \t 7.3%
Alabama \t7.1%
Of the 10 highest default states, 5 are southern. So who is going to buy these houses when say in Alabama, 7% of homeowners are out of the market and 7% of mortgages homes will be for sale soon.
Which brings us back to the theory that the Fed not only doesn't fear deflation, but will sometimes even embrace (create?) one if the circumstances are correct.
I do think they fear deflation because the Fed is a very powerful entity (I call Bernanke "the president of the US economy") and deflation and serious recession would threaten that power and credibility both politically and mechanically (by taking away their ability to steer the economy if interest rates hit the dreaded Zero Bound).
Wow! no one talking about the dollar @ 82.74...which as strange as it sounds the number I was dreaming about last night...get it dollar nightmares..
ac, based on past performance (GD1) the Fed not only survived but actually consolidated their power by driving competing banks out of business in droves. Now granted, past performance is no guarantee of future results so this may or may not be exactly like GD1, but the buildup sure looks similar to me. Politically, anything can be spun by the PTB. Do I really need to cite examples of how dumb the sheeple are and what kind of garbage they fall for?
Only a hyperinflation would truly threaten the Fed's power, as those with large cash positions (Fed) can easily consolidate in a deflation. Conversely, hyperinflation virtually assures a regime/banking change and political upheaval: Weimar, Bolivia, Argentina, Nigeria, etc.
Darth,
I won't try and guess what will make the Fed more powerful or not. But at least judging from their writings they have a healthy obsession with deflation at the least...
is the dollar fall today partially due to this?
UPDATE 1-China to stop accumulating foreign reserves - Zhou
| Reuters
bofiz, I don't follow. If the Chinese decide they don't want US bonds, wouldn't that force future UST bond yields higher, to sweeten the pot, so the arabs increase their take? I would think that should add some measure of strength to the dollar, no?
bofiz
WOW! that is hugh and no mention of it in the MSM!....
bofiz
WOW! that is hugh and no mention of it in the MSM!....
Isn't this the same Sebastian who makes money on NEW? That is a different negihborhood, no doubt. I wonder, what color is the sky there?
OT: Wells Fargo to cut 191 (mortgage) jobs in Arizona: Wells Fargo to cut 191 jobs in Arizona - East Bay Business Times:
I wonder, what color is the sky there?
White all rubber rooms have white walls & nice jackets that tie in the back.
What does MSM stand for?
WOW! that is hugh and no mention of it in the MSM!....
Bfatz: I would think that Reuters is pretty mainstream.
bofiz, I don't follow. If the Chinese decide they don't want US bonds, wouldn't that force future UST bond yields higher, to sweeten the pot, so the arabs increase their take? I would think that should add some measure of strength to the dollar, no?
barely: I'm not sure I can follow that logic... Basically, it means that China's got a $Trillion and they're saying "that's enough; from here on out we're diversifying." That would mean less demand for dollars and thus falling dollar. If this causes the dollar to fall far enough, the it would be tough for the FED to raise interest rates enough to offset that. Doing so would unquestionably lead to a recession in the US. The FED is walking a tightrope now: raising rates to save the $ will sink housing and the rest of the economy with it. Lowering rates to save housing will sink the $. My guess is that the FED will just leave rates where they are for as long as they can.
bofiz, I agree about the tightrope, however, when it comes to a decision about selling bonds to finance the US economy (and prop up the dollar) or sink housing, I don't think the FED has much of a choice. At least that's how I see it. Housing will have to find its own balance point, eventually.
It's a good question anony:
What does MSM stand for?
that you could easily google and get a biased MSM version of it...so you came to the right place to get the real information, not the Main Stream Media version, which might take you as far as the major American Networks, the half dozen control centers of what is determined to be The News and what is pablum for the Midnight Enquirer. Roughly it is the uncontested authority and producer of information largely delivered to consumers via AP or Reuters. We bloggers are consumers too, but we chew --sometimes even digest. We also provide edited versions which we think are vast improvements...so I'm glad you asked.
In the history of pure fiat money, no issue of that description has ever survived the test of time. The attraction of issuing greater and greater quantities always did it in. This is true from pre-history through Rome, 1340s Europe, 1790s France, 1920s Germany, 1993-1994 Yugoslavia, Argentina, Mexico, present Venezuela, present Zimbabwe, and this is a short list.
The providers of fiat know what it is. They know its uses, they know its finite lifespan. They know it hyper-inflates, becomes unstable and carries society into chaos. That is what they want. They do not want to "defend" the dollar, it is pure fiat, it will die, it can be defended for a time, and then it is over. As such the banking system tied to the dollar and as such all pure fiats (the world-wide paper orgy) will all follow the same route. Oh boy am I the village idiot for saying this eh?
I am just happily taking the other side to a position espoused on this blog. I think you are not allowing yourself to see the larger political picture. You think I am a nut. Cool!
Thanks!
When I searched MSM, I came up with a lot of different companies. None of which seemed to apply.
Yes, this is a great site and slowly I am learning the meaning of the acronyms. Finally, I am beginning to understand the derivative market. Mind boggling!
Glad to hear about the progress wrt the derivative market (nothing to do with calculus...to make sure we are both on the same track)...should be called obscuratives because not only are the trades derived from more tangible assets and features like interest rates, but many features of the individual trades are not made public.
Watch the yen, not the euro - euro doesn't matter!
euro
yen
Ya think maybe somebody with a very strong hand took an interest in the yen on say.... March 5th? I wonder who that someone was?
Oats
Of course, all civilizations of note took the fiat course.
The ones we never hear about took the other.
Will all its apparent disadvantages, it seems to work better than the rest.
Will all its apparent disadvantages, it seems to work better than the rest.
If they hadn't already invented fiat we'd invent it all over again. It does what its supposed to do - facilitate trade. It only has to keep its value long enough to exchange hands.
Stephen Kim reminds me of the Iraqi Information Minister...