That's it! It's the summer heat that is keeping the buyers away. Look for a rebound in the fall...or some fall if not this one.

God, Haloscan sucks!

Check that: As recently as 4 months ago. Also, add CTX to the down list: -2.3%

From a trade color email regarding last week's subprime activity sent by a very large trading desk:

Securitization Summary:
No deals priced

Whole Loan Summary:
No packages traded

I guess it's getting a little stifling in the trading rooms, too.

Well, July is traditionally the slowest month in mortgage trading. We crammed in everything we could in June to beef up Q2, and there are too many people on vacation and the normal settlement calendar is all screwed up because of the 4th holiday hitting right when we're trying to close the books on the quarter and all that nonsense.

However, it's fairly rare for "slow" to mean "zero." What I hear is that nobody wants to buy until the rating agencies publish the new versions of their software. Whether they will want to buy after that is the good question.

fjr,

You are right on!!!!!!

There is a ton of for-sale inventory who are selling because they can't afford to stay...not because they want to move up, move away, or due to divorce or job-loss (since they haven't started in mass yet).

The very nature of this sale is that they couldn't afford the house when they bought it, which means they needed fancy financing to get in, which means they likely didn't put anything down, and payed very little principle (and likely added to it).

There are many many more who aren't even TRYING to sell...they are just waiting around to see "what happens".

Those that are "must-selling" are just looking to "get even" which means they wont sell if it doesn't fulfill their objective. They would rather take a hit to their credit than owe 20 grand!

As it gets easier and easier to see that there is little hope for a "get-even" sell by both the owner and the realtor, then they just wait it out. For sale inventory in these "upsidedown" areas is increasingly bank owned. The only transactions are forclosures.

It is getting worse by the day.

Has anyone noticed brokers increasing margin requirements?

I keep some accounts where I'll gear up relatively small investments. Now I'm noticing substantially less buying power available. The brokers won't tell me outright that they're increasing requirments. They say "no not really, but you can't make that trade you made last week even though you have more money in your account".

This would be a wise thing given all the leveraged insanity that's going on IMO, but it should be applied to me.

Max - I think those stocks are still waaay overpriced.... down about 50% from 2005 but still up about 100% over 5 years. Still riding Dow fluff.

Public builders haven't written down enough to return to profits with current land basis and permanently slower volume numbers - all play into return numbers.

I really surprised to come in from working in the garden and to see HB's down so hard on such a strong day for the rest of the market. Amazing that nearly all of my puts are up big on a day when the overall market is strong. I would have thought that the people who were holding the builders and lenders were agreeing with the "consensus" that are recovery might start in 2008.

Max - more comments on builder's stock prices...

Article states builders writing off $5.4 bil in imparments so far 1st quarter. National building stats average about 1.5 mil. Thats $3,600 per home. I know its not even close to that simple, but believe that current writedowns are the tip of the iceberg as publics usually purchase options and land several years in advance, especially in expensive (aka slow entitlement) markets, many have discounted 15-20%, and velocity has slowed to 1/2 if they'er lucky. What they don't take now will blow their earnings for several years past recovery.

Just gut feel for analysis for college paper level of quality - I would expect much more from a stock analyst specializing in these stocks.

What they don't take now will blow their earnings for several years past recovery.

Here's a naive question: what methodology governs when these builders take a writedown? If they're actively building the land out, does it shift over onto the spec inventory book? Theoretically, the builders could take advantage of the drops in raw material costs and use that to offset the land devaluation.

That would also explain why they keep building...

Anonymous,

On the Zillow trick:

When I saw that the "recently sold" price was well below the Zestimate, I felt that there is no way it could be a legit sale since it was well below where other houses had sold only a year prior. And since these were relatively new houses they were sold new at the peak for much higher. Sometimes I when checking the history, it would show that it sold a year ago for much higher. So I suspected that it was a forclosure and that the bank got it back, with the sale price being what was owed on the first loan or what the bank's reserve bid was at auction (not exactly sure which)

Anyway, I would then drive around to check it out (I am a cop). I would get a list of 20 sales in a certain neighborhood and all but 1 or 2 would still be empty houses. Some with REO signs in the yard. Others with key lock boxes on the doors.

I proved my own theory: If it's well below Zestimate, especially in a newer neighborhood, then it's a 99% chance it's a forclosure. Which means about half of all Zillow recent sales in my city are actually future must-sell inventory.

...at the time the company knows or should know the land and buildings have depreciated in value.

In other words, whenever they feel like it. So there's nothing "wrong" with withholding a revaluation until the land is built out, then applying some sort of "value added" methodology to decrease the writedown?

If you want to know the valuation methodology, you'll have to treat Tanta to dinner.

An offer I would surly make, were she to accept. However, I think you answered my question well enough.

Avg Joe-do you know how they determine the Zestimate? since you're a cop, a clever one at that, let me show you how to trade stocks in your car

Max,
Halo ate my response. Here's an abbreviation:
Not when they feel like it. They must take the loss when the land/buildings are worth less. They can't inflate earnings that way.

yeah BZH, life is real good.

Max, Lama - exactly but how they are determining the current value would be open to question. Litmus test - would they pay today what they have written the value down to? Doubt it. We're talking land in process which is the most fluid, dynamic real estate to value. Hell, there was a book written about its slipperiness - "Whitewater".

Talked to a land broker friend recently who's main client told him they'd talk again Jan '08.