If the Housing tracker data are correct, San Jose, Santa Cruz and Seattle showed increases in houses listed for sale on the order of 10% in the past week. Across the country, the trend is strongly toward gradual increases in inventory and slow decreases in asking price.
Somewhat OT, but here's a PR I just got from Moody's:
Weak liquidity plagues low-rated debt issuers
New York, July 24, 2007 -- The intrinsic liquidity of some low-rated corporate debt issuers is deteriorating, highlighting increasing vulnerability for these companies in the event of what could be an eventual market liquidity crunch, Moody's Investors Service said today.
Moody's believes that a liquidity crunch is inevitable, even if its exact timing is uncertain. If lenders turn cautious -- and eventually they will-- access to additional funding can't readily be assumed for speculative grade companies.
As reported in Moody's latest Speculative Grade Liquidity Monthly Monitor, the percentage of companies rated Caa1 or lower with "weak" or merely "adequate" liquidity has risen steadily since 2005, reaching a high of 93% in June......
I am just glad everything is "contained" to everywhere. I wonder how far upwards this chart will go? How could lending $15K a year strawberry pickers $750K possibly end in problems? I just don't get it... right!
Since Blackstone is now advising Basis and Bear Sterns on liquidation without "pain" on the one hand, and China on where to put their billions, such as Barkleys on the other hand, is it possible they will end up putting their two hands together?
If the Housing tracker data are correct, San Jose, Santa Cruz and Seattle showed increases in houses listed for sale on the order of 10% in the past week. Across the country, the trend is strongly toward gradual increases in inventory and slow decreases in asking price.
According to housingtracker Seattle inventory is down 50% in the past month. That's clearly not the case, so the data for that city is busted.
I live in an area between Riverside and San Diego...an area that realized double digit home prices in the past few years....supposely this is the market that will experience a bubble...but....it just isn't happening. As I have posted before, in the mid eighties we saw a housing problem....signs on every street corner, repo's everywhere. However it just isn't happening this time. What does it mean when the stats say one thing and what you can see with your eyes is totally different. Strange. Very strange. We've even seen the first way of the prime market hit and very little effect on real estate in my community. I admit I'm a layperson and I don't understand the bigger picture but I do have eyes. What could be going on?
Once the headlines in the LA Times show that defaults and foreclosures are at record levels that eclipse the 90s bust panic will set in and prices will drop a lot faster from here, in response, as the race for the exits begins.
The foreclosures have rocketed up so quickly, I don't even think they have impacted the market much yet. They were still below the levels of most of the 90s in '06. I bet a lot of this "inventory" hasn't even hit the market yet, and certainly not at prices that would clear it.
RP,
If that is an affluent area, it might make sense. In the Boston area, RE has slowed considerably. However, in The Back Bay area of Boston where a 1300 sq/ft condo will fetch $1 million +, sales are still brisk. I have an acquaintance who sold an ocean front home in spring 07 with less than a month on the market.
Anecdotes, anecdotes...I think the market is split for now.
Wow. That is crazy growth in NOD. I agree that this stuff hasn't effected the market yet. I bet there is at least a 9-12 month lag from NOD to foreclosure sale.
RP posits; However it just isn't happening this time. [No bubble in the Inland Empire] What does it mean when the stats say one thing and what you can see with your eyes is totally different.
It means you need an optometrist not economist to answer your question.
The annual Standard and Poors Half day conference on CLO’s has just concluded today. Every seat in the 6th Ave auditorium was occupied and some other Investment Executives and Hedge Fund Managers were sitting on the floor The first word after the routine introductions was that the market was experiencing “Significant Contagion” from the sub prime market. Apparently, Loans on the calendar (in the pipeline) through the end of the year and into 2008 are having trouble finding “pricing equilibrium” and consensus was –“there certainly will be no New Issues until late fall--early winter”. Depression tainted the atmosphere but Denial reared its head from time to time-- some speakers believed “New Capital seeking good yields would ultimately find its way into this product marketplace”. Virtually everyone acknowledged there had been sloppy underwitting over the last 6 months especially in connection with the “covenant- lite” corporate loans.
S&P predicted that the default rate would move from a modest 1.2% to an additionally modest 2.4% or three corporate loans per month over the next 18 months
You guys would have had a real “Hoot” at this one.
If that is an affluent area, it might make sense...
I think this is true all over, Prices in my "nice" area of LA are still in nosebleed territory, and sales, though slower, are still happening. I was just in Boston as well, and lama's anecdotes ring true.
I believe what's happening has to eventually hit the high end, but I don't know what it's gonna take for it to happen. Foreclosure activity should be a trigger, but in pricey areas it's pretty low at this point. It's like watching paint drying on growing grass...
What do you mean by "...it just isn't happening this time."?
Do you mean that you don't see signs everywhere?
If the data shows that there should be "lots of homes" for sale in your area and there do not appear to be "lots of homes" for sale, then there are any number of explanations:
Maybe the homes are concentrated in weirdo gated communities in certain areas outside of regular neighborhoods.
Maybe Realtors use far fewer "For Sale" signs than in the past since they list homes online.
Maybe the number of homes is a lot higher now versus then. Thus, a smaller percentage of inventory is up for sale.
Maybe your memory is exaggerated.
It could be a mix of any of those.. maybe there just aren't a lot of Notice of Defaults in your particular area? Maybe these are all focused in condo developments and the like.. so you'll just have one large building with 100 empty units?
Lawyer L, thanks for the summary of the S&P meeting. "Significant contagion" is a good description of what appears to be happening.
Back in '89, the LBO market peaked when the UAL deal failed. But at least that deal was contingent on financing. This time - possibly Chrysler - a big deal will fail, and the mess will be on the investment banks' balance sheets. That could really be ugly.
Tanta mentioned something about this a while ago, but I'm beginning to think it may prove to be a bigger trend than anyone appreciated -- the honest poor folk probably made semi-accurate statments when they took out subprime loans, while the really dishonest folks not only lied about their income but swung for the fence (prime and alt-a) to lower their monthly payment even more. That may mean prime and alt-a will have a mix of "normal folk" and "the most fraudulent folks, who make subprime folk look like saints".
Why are absolute numbers of foreclosures relevant at all? By nature of population growth and GDP growth wouldn't we expect, on average, more houses and more mortgages every year, and therefore more forclosures, so that a new record is reached every few years anyway? Isn't foreclosures as a percentage of total mortgages a much more meaningful number?
AO, I'm trying to find some meaningful way to normalize the data. If you have the year by year data on the number of mortgages in California, please send it to me and I'll normalize the chart. For now, just look at the change (year to year), and the story is clear - and I believe it is about to get much worse.
"US Treasury's Paulson says strong dollar in nation's interest"
Presumably he would therefore support policies that would strengthen the dollar. Does that disqualify him from criticizing China's policy of maintaining a weak yuan?
It's hard to have any meaningful comparison of these NoDs since we don't even get NoD data from '88 - '92. That's when the last big flight of money from real estate took place.
Naturally, graphing the data since '92 will show the change in defaults from last year to dwarf any previous change.
1992 was after the initial flight occurred.
Anyone got any NoD guesses for California in the late '80s?
If San Diego was a good proxy for California, the worst pain in the last downturn was in mid 1990. Notices of default peaked in 1992 but were elevated at almost the same level until 1996 (the table starts from 1991).
The foreclosures peaked in 1996. According to this graph the foreclosures for San Diego are now well above any level since 1982 (change x-axis to start in 1982 to see the whole range).
Does that disqualify him from criticizing China's policy of maintaining a weak yuan?
Watson - I'm no fan of the Bush administration nor the SOTT in particular... but it is entirely consistent to be 'pro-strong dollar' while simultaneously pushing for a readjustment with the yen & yuan. In fairness to Paulson - he has tried to do that. Tried - yes, effective - no.
It is likely that if the yen/yuan strengthened vis a vis the USD that the euro would then weaken some against the USD. The current manipulation is almost a 'push through' straight to the euro resulting in a VERY weak yen/yuan vs the euro... yen propping up the dollar has to prop the euro even more by proxy since dollar fundamentals suggest it has to get weaker against SOMEBODY & if not the yen then whom?
With Supereuro it is no surprise that Asian exports to the EU are growing faster than those to NAFTA Zone.
Wouldn't normalizing the number by population give a reasonable estimate of the rate of NOD's over time? Assuming the ratio of homeowner's to
renter's hasn't drastically changed since the early 90's, this would normalize the data.
I estimate about 9% higher NOD activity in 2007 than the peak in 1996 when normalized for population.
Population in 2007: 36.5 million
Population in 1996: 31.8 million (interpolated)
NODs in 2007: 200k
NODs in 1996: 160k
It would seem homes would have to sell for the price to be set? Things do not seem to be moving in my part of San Diego. Most places I have watched have been removed from the market in an effort to wait out the downturn. My guess is these foreclosures would have sold, had there been a decent price and a buyer. The days of expecting to get 850K for 1600Sq Ft home are over. I just hope to get my first home in the 600K range. We seem to need a 30% drop for this to occur. Only time will tell!
RP, until a few nonths ago I'd have agreed with everything you wrote re ny neighborhod.
We always have a few houses sell due to death, divorce, job transfers, etc. Maybe 5 a year. In the past, they sold promptly within a week or so not even an open house. But the last 3 that have come up for sale - NOTHING, NADA, ZERO. Open houses - no one shows up, price drops - still nothing. Switching to other realtors - no go.
The thinking around here - prices too high. But of the people trying to sell 2 have been here less than a year, they can't take less. The 3rd is trying to retire, wants as much as possible. The 2 that have to sell are looking at some major losses IMO.
But until recently you'd never know there is anykind of RE problem here. Strange.
Eeeeeeeek! I need some Depends!
If the Housing tracker data are correct, San Jose, Santa Cruz and Seattle showed increases in houses listed for sale on the order of 10% in the past week. Across the country, the trend is strongly toward gradual increases in inventory and slow decreases in asking price.
Somewhat OT, but here's a PR I just got from Moody's:
Weak liquidity plagues low-rated debt issuers
New York, July 24, 2007 -- The intrinsic liquidity of some low-rated corporate debt issuers is deteriorating, highlighting increasing vulnerability for these companies in the event of what could be an eventual market liquidity crunch, Moody's Investors Service said today.
Moody's believes that a liquidity crunch is inevitable, even if its exact timing is uncertain. If lenders turn cautious -- and eventually they will-- access to additional funding can't readily be assumed for speculative grade companies.
As reported in Moody's latest Speculative Grade Liquidity Monthly Monitor, the percentage of companies rated Caa1 or lower with "weak" or merely "adequate" liquidity has risen steadily since 2005, reaching a high of 93% in June......
I am just glad everything is "contained" to everywhere. I wonder how far upwards this chart will go? How could lending $15K a year strawberry pickers $750K possibly end in problems? I just don't get it... right!
Wow! Imagine if you had incorporated momentum into the 2007 estimate...
Since Blackstone is now advising Basis and Bear Sterns on liquidation without "pain" on the one hand, and China on where to put their billions, such as Barkleys on the other hand, is it possible they will end up putting their two hands together?
If the Housing tracker data are correct, San Jose, Santa Cruz and Seattle showed increases in houses listed for sale on the order of 10% in the past week. Across the country, the trend is strongly toward gradual increases in inventory and slow decreases in asking price.
According to housingtracker Seattle inventory is down 50% in the past month. That's clearly not the case, so the data for that city is busted.
HousingTracker.net | Median Home Asking Price & Inventory Data for Seattle, Washington
From MarketWatch:
Delinquencies rising in all mortgage classes-Countrywide CEO
Those numbers have to be wrong. Several months ago, Paulsen said the bottom in the housing market was in. wink wink.
"US Treasury's Paulson says strong dollar in nation's interest"
So according to Paulson:
-housing bottomed
-subprime is contained
-strong dollar is in the nations interest
So basically since we know the first two to be untrue we can conclude that the US doesn't give a crap about the dollar. Watch out below...
Call in the X-Files!
I live in an area between Riverside and San Diego...an area that realized double digit home prices in the past few years....supposely this is the market that will experience a bubble...but....it just isn't happening. As I have posted before, in the mid eighties we saw a housing problem....signs on every street corner, repo's everywhere. However it just isn't happening this time. What does it mean when the stats say one thing and what you can see with your eyes is totally different. Strange. Very strange. We've even seen the first way of the prime market hit and very little effect on real estate in my community. I admit I'm a layperson and I don't understand the bigger picture but I do have eyes. What could be going on?
Once the headlines in the LA Times show that defaults and foreclosures are at record levels that eclipse the 90s bust panic will set in and prices will drop a lot faster from here, in response, as the race for the exits begins.
CA lenders are in deep trouble.
Correction...I meant 1984 not mid eighties....sorry.
The foreclosures have rocketed up so quickly, I don't even think they have impacted the market much yet. They were still below the levels of most of the 90s in '06. I bet a lot of this "inventory" hasn't even hit the market yet, and certainly not at prices that would clear it.
RP,
If that is an affluent area, it might make sense. In the Boston area, RE has slowed considerably. However, in The Back Bay area of Boston where a 1300 sq/ft condo will fetch $1 million +, sales are still brisk. I have an acquaintance who sold an ocean front home in spring 07 with less than a month on the market.
Anecdotes, anecdotes...I think the market is split for now.
Delinquencies rising in all mortgage classes-Countrywide CEO
That's inflammatory
There has to be a subset of all that's doing ok....said Nik Naylor
Wow. That is crazy growth in NOD. I agree that this stuff hasn't effected the market yet. I bet there is at least a 9-12 month lag from NOD to foreclosure sale.
RP posits;
However it just isn't happening this time. [No bubble in the Inland Empire] What does it mean when the stats say one thing and what you can see with your eyes is totally different.
It means you need an optometrist not economist to answer your question.
Let's see an area between Riverside and San Diego??? Maybe Temecula or Murrieta?
Ever hear of someone name Hendrix Montecastro RP??
If you haven't, then you are either ignoranct or disingenous.
"It means you need an optometrist not economist to answer your question."
Classis. Absolutely classic.
The annual Standard and Poors Half day conference on CLO’s has just concluded today. Every seat in the 6th Ave auditorium was occupied and some other Investment Executives and Hedge Fund Managers were sitting on the floor The first word after the routine introductions was that the market was experiencing “Significant Contagion” from the sub prime market. Apparently, Loans on the calendar (in the pipeline) through the end of the year and into 2008 are having trouble finding “pricing equilibrium” and consensus was –“there certainly will be no New Issues until late fall--early winter”. Depression tainted the atmosphere but Denial reared its head from time to time-- some speakers believed “New Capital seeking good yields would ultimately find its way into this product marketplace”. Virtually everyone acknowledged there had been sloppy underwitting over the last 6 months especially in connection with the “covenant- lite” corporate loans.
S&P predicted that the default rate would move from a modest 1.2% to an additionally modest 2.4% or three corporate loans per month over the next 18 months
You guys would have had a real “Hoot” at this one.
If that is an affluent area, it might make sense...
I think this is true all over, Prices in my "nice" area of LA are still in nosebleed territory, and sales, though slower, are still happening. I was just in Boston as well, and lama's anecdotes ring true.
I believe what's happening has to eventually hit the high end, but I don't know what it's gonna take for it to happen. Foreclosure activity should be a trigger, but in pricey areas it's pretty low at this point. It's like watching paint drying on growing grass...
RP,
What do you mean by "...it just isn't happening this time."?
Do you mean that you don't see signs everywhere?
If the data shows that there should be "lots of homes" for sale in your area and there do not appear to be "lots of homes" for sale, then there are any number of explanations:
It could be a mix of any of those.. maybe there just aren't a lot of Notice of Defaults in your particular area? Maybe these are all focused in condo developments and the like.. so you'll just have one large building with 100 empty units?
Does this data include apartments/condos?
Lawyer L, thanks for the summary of the S&P meeting. "Significant contagion" is a good description of what appears to be happening.
Back in '89, the LBO market peaked when the UAL deal failed. But at least that deal was contingent on financing. This time - possibly Chrysler - a big deal will fail, and the mess will be on the investment banks' balance sheets. That could really be ugly.
Best to all.
Lawyer L-so what was someone like you doing at this mtg? i smell blood, grrrrrrrr!!!!
Defaults on Some `Alt A' Loans Surpass Subprime, Citigroup Says
- Bloomberg.com
"Defaults on some so-called Alt A mortgages packaged into bonds last year are now outpacing those from subprime loans, according to Citigroup Inc. "
Defaults on Some `Alt A' Loans Surpass Subprime, Citigroup Says
- Bloomberg.com
Lurker,
Tanta mentioned something about this a while ago, but I'm beginning to think it may prove to be a bigger trend than anyone appreciated -- the honest poor folk probably made semi-accurate statments when they took out subprime loans, while the really dishonest folks not only lied about their income but swung for the fence (prime and alt-a) to lower their monthly payment even more. That may mean prime and alt-a will have a mix of "normal folk" and "the most fraudulent folks, who make subprime folk look like saints".
Why are absolute numbers of foreclosures relevant at all? By nature of population growth and GDP growth wouldn't we expect, on average, more houses and more mortgages every year, and therefore more forclosures, so that a new record is reached every few years anyway? Isn't foreclosures as a percentage of total mortgages a much more meaningful number?
AO, I'm trying to find some meaningful way to normalize the data. If you have the year by year data on the number of mortgages in California, please send it to me and I'll normalize the chart. For now, just look at the change (year to year), and the story is clear - and I believe it is about to get much worse.
Best to all.
"US Treasury's Paulson says strong dollar in nation's interest"
Presumably he would therefore support policies that would strengthen the dollar. Does that disqualify him from criticizing China's policy of maintaining a weak yuan?
Paulson is so full of excrement everything he says makes me furious. This is deception and lies on a scale we haven't seen ever.
Calculated Risk and AO,
It's hard to have any meaningful comparison of these NoDs since we don't even get NoD data from '88 - '92. That's when the last big flight of money from real estate took place.
Naturally, graphing the data since '92 will show the change in defaults from last year to dwarf any previous change.
1992 was after the initial flight occurred.
Anyone got any NoD guesses for California in the late '80s?
eli,
If San Diego was a good proxy for California, the worst pain in the last downturn was in mid 1990. Notices of default peaked in 1992 but were elevated at almost the same level until 1996 (the table starts from 1991).
The foreclosures peaked in 1996. According to this graph the foreclosures for San Diego are now well above any level since 1982 (change x-axis to start in 1982 to see the whole range).
"CA lenders are in deep trouble" ??
Who is watching the muni bond market. With these high figures, munis will suffer from a "watch" as the ability to repay will be under the mocroscope.
It might be the local and states govt. that are in trouble with a shrinking tax base, negative consumer spending, flat retail sales.
Does that disqualify him from criticizing China's policy of maintaining a weak yuan?
Watson - I'm no fan of the Bush administration nor the SOTT in particular... but it is entirely consistent to be 'pro-strong dollar' while simultaneously pushing for a readjustment with the yen & yuan. In fairness to Paulson - he has tried to do that. Tried - yes, effective - no.
It is likely that if the yen/yuan strengthened vis a vis the USD that the euro would then weaken some against the USD. The current manipulation is almost a 'push through' straight to the euro resulting in a VERY weak yen/yuan vs the euro... yen propping up the dollar has to prop the euro even more by proxy since dollar fundamentals suggest it has to get weaker against SOMEBODY & if not the yen then whom?
With Supereuro it is no surprise that Asian exports to the EU are growing faster than those to NAFTA Zone.
I don't understand the angry postings of Robert Cote or JWM in response to my comment.
CR,
Wouldn't normalizing the number by population give a reasonable estimate of the rate of NOD's over time? Assuming the ratio of homeowner's to
renter's hasn't drastically changed since the early 90's, this would normalize the data.
I estimate about 9% higher NOD activity in 2007 than the peak in 1996 when normalized for population.
Population in 2007: 36.5 million
Population in 1996: 31.8 million (interpolated)
NODs in 2007: 200k
NODs in 1996: 160k
"I don't understand the angry postings of Robert Cote or JWM in response to my comment"
Well of course you don't. Now run along and try to sell that overpriced house or two you're holding.
it is entirely consistent to be 'pro-strong dollar' while simultaneously pushing for a readjustment with the yen & yuan
Isnt the theory that markets should set currency values, and that governments should not get involved?
Bear Stearns is testing 130.
Countrywide says it hasn't seen this kind of house price depreciation since the Great Depression.
Stock Market Update - Tue Jul 24 14:30:01 EDT 2007
| Reuters
Blackstone. What a dog! Down 25%, and after all the hype the Street could muster. Thank you, Bear Stearns! Money is definitely freezing up.
CR, Bill Gross might want to double-up on his yoga classes. He didn't look too good on Bloomberg today. He looked 'skeered'.
It would seem homes would have to sell for the price to be set? Things do not seem to be moving in my part of San Diego. Most places I have watched have been removed from the market in an effort to wait out the downturn. My guess is these foreclosures would have sold, had there been a decent price and a buyer. The days of expecting to get 850K for 1600Sq Ft home are over. I just hope to get my first home in the 600K range. We seem to need a 30% drop for this to occur. Only time will tell!
RP, until a few nonths ago I'd have agreed with everything you wrote re ny neighborhod.
We always have a few houses sell due to death, divorce, job transfers, etc. Maybe 5 a year. In the past, they sold promptly within a week or so not even an open house. But the last 3 that have come up for sale - NOTHING, NADA, ZERO. Open houses - no one shows up, price drops - still nothing. Switching to other realtors - no go.
The thinking around here - prices too high. But of the people trying to sell 2 have been here less than a year, they can't take less. The 3rd is trying to retire, wants as much as possible. The 2 that have to sell are looking at some major losses IMO.
But until recently you'd never know there is anykind of RE problem here. Strange.
Defaults on Some `Alt A' Loans Surpass Subprime, Citigroup Says
There's that other shoe I've been looking for. Now I can go out and take a walk on this fine NODay. [whistle, whistle]
Isnt the theory that markets should set currency values, and that governments should not get involved?
Tell that to the Chinese & Japanese & Koreans & ....