This seems more consistent with how real estate deflations work out historically; i.e., they take a lot of time. Based on the comments it would appear construction is starting to significantly slow down so the thesis that unemployment in the sector will show more decay in the next few months may play out as expected. I'm still thinking it will not be that sharp a drop and will take another year or more as construction workers move (or are moved) through the various phases of underemployment before tossing in the towel.
If by "fine" Mr Thomas means a return to 2004 to 2006 sales volumes, then I think his hope is misplaced.
It's always hard to tell exactly what they mean when they say things like this. Or when they say "2008 won't be great." Well, compared to what? Give me numbers, damn it!
Steve, I share in your frustration, but how can they give us numbers? They'd need crystal balls. Will the economy contract or will it bump along at the margins and then pick up? Will sales this year be enough to move these vacancy rates down and get some trend toward the norm by spring 2008, or will these vacancy rates stagnate and/or get worse?
Personally, I am scrabbling around trying to get a read on small business. I think it is one of the economic keys, and right now, I don't have a clue other than for some construction-related.
I also have major questions about demographics. The drop in homeownership listed in the vacancy report for the 55-64 group in yesterday's HVH is making me question one of my assumptions, which is that this group will lose jobs at a higher rate from larger businesses, but that it will contribute disproportionately to the small business sector.
From Q12005 to Q12007 the 55-64 homeownership vacancy rate dropped from 81.8 to 80.4. That's significant, but is it a matter of caution, ie some of these folks taking their gains and banking them? Or is it a sign that this group is being hit harder than I thought by lingering debt and "restructuring" of older workers, plus high health insurance?
The peak for this age group was in 2004 at 82.4, so I am guessing that at least some of the drop is due to taking gains and banking them.
There's a lot of money out there. Where, when and how it comes back into play on the ground probably has more implications for the economy than Fed rates.
If you or anyone else at CR has thoughts about these issues, I'd love to hear them.
"so I am guessing that at least some of the drop is due to taking gains and banking them."
Well, MOM, I happen to be in that age group and happen to have no house (but some decent cash) at the moment. I doubt that there is much correlation between that fact and my age group... it just happens to be that way. I moved to a different city (job-related) and decided renting was a good idea while I watched house prices slide.
she[Fed's Yellen] said that in the U.S. economy "there is potential for a downturn that could have major spillover effects around the globe." The United States contributes roughly 25 percent to world economic output, she noted.
...the U.S. central bank does not use inflation targets but is discussing whether to adopt them
Have you heard Ranieri Lew?
At the Milkin Institute
Explainin' the MBS affair
Subprime standards in the air
High interest and loan impairments
Recasts, and ARM adjustments
Losing every dime
It really should be a crime
Agency coupons ignored, we wanted to make more
But there's no risk priced in that spread
Bailout instead
The system's too complicated, you might never get paid
When all the borrowers' loans reset.
Bailout instead
Congress, looking for victims (and some donations)
Hell, the country's already in the red
Bailout instead
If you're broke because you got stuck with a dud loan
It's not your fault, there's no need to fret
Bailout instead
Home builders are coming clean now that it doesn't seem to affect there share price. But are they still in denial? What great new thing is going to come along and boost wages so that first timers don't need to win the lottery to afford the modest house? Are the builders seeing a significant drop in house prices or is there a limit on how "clean" they will come on this housing market?
MOM, I worry about the less affluent boomers (most of them) taking the late (not early) retirement and the poor paying entrance level jobs that used to go to the young people, because they only need supplemental income and the young people have families and housing to worry about. Wages are not rising for so many reasons...
It was amazing how quickly they write off 07 & 08. It was just a few months ago that everyone in the industry were saying that Spirng will be start of selling season.
The china news comes out a week after the China GDP report that caused it but ahead of a week (full week) in which China stock market will be clsoed (so I am told).
GMAC just foreclosed on a house in Stockton. There is so much fraud in the neighborhood, it is impossible to tell where the values really stand. GMACs own appraiser pegged the value at $620,000. Here is the funny part: the builder is selling the same exact house for $485,000 right out of the model around the corner. There are so many cash back mortgage fraud deals with Option One, Fremont, New Century, etc in the last 3 months, the appraiser thinks the fraud deals are the market now. If only he visited the builders model 20 houses away .just a little due diligence is all I ask.
How can so many idiots get in charge of lending so much money?
By the way, GMAC foreclosed on a $554,000 principal loan with a 10% $55,400 second behind it. They will be lucky to sell for $450,000. They will lose about $200,000 on the loan after all the carrying costs, selling costs, foreclosure costs and a market that declines 1% monthly. Cerberus better have a good accountability provision for loan losses. It has only just begun and it will get much, much worse.
Yal,
The valuation question is interesting. I think there is much self-reinforcement going on there and that led, in many cases, to real errors in appraisals. In my city you can look up EMV (the 'estimated market value' on the tax rolls) on line. However, EMVs shot up when values started to climb and that started a vicious circle.
I like to calculate a square foot price and compare that to approximate new construction values.
Things have sure changed here in a year. Last summer houses were popping up that had ask prices 25 and 30 percent over the EMV; now most are near it and I've seen some that are below. I've also noticed that some entire condo buildings have had EMVs adjusted downward.
This is a lot of erratic behavior in an area that is customarily called "the biggest purchase you will make in your life". That kind of volatility is scary.
The frauds by industry insiders, appraisers, brokers, realtors, underwriters,... will continue, because despite all the rhetorics by Congress in recent days nothing meaningful and punitive have been implemented or enforced to deter these fraudulent activities. Scam artists now including foreclosure specialists still operate unchecked.
Repeatedly, people ask why a customer should trust a mortgage broker to get them a good loan if a bad one would give the broker a higher fee. This will be of interest to them:
"I would argue that if there was no apparent way for repayment down the road after these things started adjusting and it was readily apparent to someone who ought to know, we would investigate, get all the sides. Unless there was some sort of reasonable explanation (as to how the borrower would pay off the loan), I think that's an actionable offense," says Tom Pool, spokesman for the California Department of Real Estate.
"State courts have found that mortgage brokers are fiduciaries in these types of transactions," Pool adds.
CR,
Nice post.
It would be very applicable in the thread just above this one ("Subprime..."). If you would post it there I think many would appreciate it.
This seems more consistent with how real estate deflations work out historically; i.e., they take a lot of time. Based on the comments it would appear construction is starting to significantly slow down so the thesis that unemployment in the sector will show more decay in the next few months may play out as expected. I'm still thinking it will not be that sharp a drop and will take another year or more as construction workers move (or are moved) through the various phases of underemployment before tossing in the towel.
If by "fine" Mr Thomas means a return to 2004 to 2006 sales volumes, then I think his hope is misplaced.
It's always hard to tell exactly what they mean when they say things like this. Or when they say "2008 won't be great." Well, compared to what? Give me numbers, damn it!
Steve, I share in your frustration, but how can they give us numbers? They'd need crystal balls. Will the economy contract or will it bump along at the margins and then pick up? Will sales this year be enough to move these vacancy rates down and get some trend toward the norm by spring 2008, or will these vacancy rates stagnate and/or get worse?
Personally, I am scrabbling around trying to get a read on small business. I think it is one of the economic keys, and right now, I don't have a clue other than for some construction-related.
I also have major questions about demographics. The drop in homeownership listed in the vacancy report for the 55-64 group in yesterday's HVH is making me question one of my assumptions, which is that this group will lose jobs at a higher rate from larger businesses, but that it will contribute disproportionately to the small business sector.
From Q12005 to Q12007 the 55-64 homeownership vacancy rate dropped from 81.8 to 80.4. That's significant, but is it a matter of caution, ie some of these folks taking their gains and banking them? Or is it a sign that this group is being hit harder than I thought by lingering debt and "restructuring" of older workers, plus high health insurance?
The peak for this age group was in 2004 at 82.4, so I am guessing that at least some of the drop is due to taking gains and banking them.
There's a lot of money out there. Where, when and how it comes back into play on the ground probably has more implications for the economy than Fed rates.
If you or anyone else at CR has thoughts about these issues, I'd love to hear them.
Be in Heaven by '11?
The housing industry is violating the "well contained" rule and is being blamed on poor auto sales, especially trucks for contractors.
Edmunds.com Forecasts April Auto Sales: Weak April Expected As
Domestics Continue to Decrease Production and Cut Fleet Sales
"so I am guessing that at least some of the drop is due to taking gains and banking them."
Well, MOM, I happen to be in that age group and happen to have no house (but some decent cash) at the moment. I doubt that there is much correlation between that fact and my age group... it just happens to be that way. I moved to a different city (job-related) and decided renting was a good idea while I watched house prices slide.
CNNMoney.com: 404 Page Not Found
she[Fed's Yellen] said that in the U.S. economy "there is potential for a downturn that could have major spillover effects around the globe." The United States contributes roughly 25 percent to world economic output, she noted.
...the U.S. central bank does not use inflation targets but is discussing whether to adopt them
I posted this on the last thread, but I'm sure no one will read it.
I wouldn't exactly call this "rock blogging", but there's not a lot you can do with 20s music.
Bailout Instead
Have you heard Ranieri Lew?
At the Milkin Institute
Explainin' the MBS affair
Subprime standards in the air
High interest and loan impairments
Recasts, and ARM adjustments
Losing every dime
It really should be a crime
Agency coupons ignored, we wanted to make more
But there's no risk priced in that spread
Bailout instead
The system's too complicated, you might never get paid
When all the borrowers' loans reset.
Bailout instead
Congress, looking for victims (and some donations)
Hell, the country's already in the red
Bailout instead
If you're broke because you got stuck with a dud loan
It's not your fault, there's no need to fret
Bailout instead
Home builders are coming clean now that it doesn't seem to affect there share price. But are they still in denial? What great new thing is going to come along and boost wages so that first timers don't need to win the lottery to afford the modest house? Are the builders seeing a significant drop in house prices or is there a limit on how "clean" they will come on this housing market?
MOM, I worry about the less affluent boomers (most of them) taking the late (not early) retirement and the poor paying entrance level jobs that used to go to the young people, because they only need supplemental income and the young people have families and housing to worry about. Wages are not rising for so many reasons...
China drain $22B from the money supply:
China Orders Banks to Set Aside More Reserves (Update1) - Bloomberg.com
This after loans made this Q were double the rate of last year.
If the BIA is saying 2009, the reality is much worse.
It was amazing how quickly they write off 07 & 08. It was just a few months ago that everyone in the industry were saying that Spirng will be start of selling season.
"It was just a few months ago that everyone in the industry were saying that Spirng will be start of selling season."
and it is a start of a selling season, selling of dollars
As a former homebuilder working in the apartment business, I can tell you everyone knows in the business knows it is dead for the rest of the decade.
The china news comes out a week after the China GDP report that caused it but ahead of a week (full week) in which China stock market will be clsoed (so I am told).
it gives a full week to read this:
404 Not Found
The pain in spain: FT.com / Comment / Op-Ed Columnists - The pain in Spain will follow years of rapid economic gain similarities to the US.
The pain in Spain is mainly on the wane - Telegraph
China maybe open Monday but closed the rest of the week.....
more on the "pain in Spain":
Premium content | Economist.com
from HBB:
GMAC just foreclosed on a house in Stockton. There is so much fraud in the neighborhood, it is impossible to tell where the values really stand. GMACs own appraiser pegged the value at $620,000. Here is the funny part: the builder is selling the same exact house for $485,000 right out of the model around the corner. There are so many cash back mortgage fraud deals with Option One, Fremont, New Century, etc in the last 3 months, the appraiser thinks the fraud deals are the market now. If only he visited the builders model 20 houses away .just a little due diligence is all I ask.
How can so many idiots get in charge of lending so much money?
By the way, GMAC foreclosed on a $554,000 principal loan with a 10% $55,400 second behind it. They will be lucky to sell for $450,000. They will lose about $200,000 on the loan after all the carrying costs, selling costs, foreclosure costs and a market that declines 1% monthly. Cerberus better have a good accountability provision for loan losses. It has only just begun and it will get much, much worse.
http://www.securitization.net/pdf/Publications/ESFDataRprt0407.pdf
Yal, do you have a link for that story on GMAC, or a date for it?
sorry it is from housing bubble blog
Yal,
The valuation question is interesting. I think there is much self-reinforcement going on there and that led, in many cases, to real errors in appraisals. In my city you can look up EMV (the 'estimated market value' on the tax rolls) on line. However, EMVs shot up when values started to climb and that started a vicious circle.
I like to calculate a square foot price and compare that to approximate new construction values.
Things have sure changed here in a year. Last summer houses were popping up that had ask prices 25 and 30 percent over the EMV; now most are near it and I've seen some that are below. I've also noticed that some entire condo buildings have had EMVs adjusted downward.
This is a lot of erratic behavior in an area that is customarily called "the biggest purchase you will make in your life". That kind of volatility is scary.
The frauds by industry insiders, appraisers, brokers, realtors, underwriters,... will continue, because despite all the rhetorics by Congress in recent days nothing meaningful and punitive have been implemented or enforced to deter these fraudulent activities. Scam artists now including foreclosure specialists still operate unchecked.
yes. wally hit the nail right at the head.
Buyer is srounded by people telling him: Buy Now and the price keeps going up upo up.
CR,
Repeatedly, people ask why a customer should trust a mortgage broker to get them a good loan if a bad one would give the broker a higher fee. This will be of interest to them:
"I would argue that if there was no apparent way for repayment down the road after these things started adjusting and it was readily apparent to someone who ought to know, we would investigate, get all the sides. Unless there was some sort of reasonable explanation (as to how the borrower would pay off the loan), I think that's an actionable offense," says Tom Pool, spokesman for the California Department of Real Estate.
"State courts have found that mortgage brokers are fiduciaries in these types of transactions," Pool adds.
Subprime crisis offers a chance to step up
CR,
Nice post.
It would be very applicable in the thread just above this one ("Subprime..."). If you would post it there I think many would appreciate it.
I came across to this very interesting video of real estate...take look at it...
Credit/Debt Recovery: Real estate video
Daniel.