People tend to make good decisions about their own economic prospects. As Professor Rosen said in an interview, Our findings suggest that people make sensible housing decisions in that the size of house they buy today relates to their future income, not just their current income and that the innovations in mortgages over 30 years gave many people the opportunity to own a home that they would not have otherwise had, just because they didnt have enough assets in the bank at the moment they needed the house. . . .
"future income"!!! "didn't have enough assets"!!! Now tell me where Rosen is a professor.
look, given the laws of probabilities, if i gamble this much next year, this frequently, with this method i developed, i'm going to make an expected $500K, so you should write that down for my income...you can't argue with the laws of probabilities...
Whatever happened to Todd Sinia (sp?) at Wharton who wrote an article (op-ed?) in the WSJ in late summer 2005 saying there was no housing bubble? Did he get rewarded with tenure for his sound reasoning? It is probably a bit unfair to bring up specific names, since he is just one of that seemingly endless stream of academics that just don't get it. However, I'm curious about him since the article was so wrong and struck me as so ridiculous back them.
you can't blame the dude though. it's very hot in vegas, i would drink the kool aid also...those free drinks at the casino are a trick!
i wonder if new century loan officers brought borrowers into hyper-oxygenated rooms with no windows and had sexy ladies walking around offering free drinks...that would make sense to me...the buffet is thataway...
"Despite Clark County's apparently robust economy, home sales are doing so poorly that the first major real estate broker here has filed for bankruptcy court protection"
Connect the dots reporter - maybe the economy is not robust???
"Jimmy Dague, who has sold real estate in Las Vegas since 1978 and whose business was the No. 1 worldwide in sales for Century 21 from 2002 to 2006, filed last week for Chapter 11 bankruptcy protection from creditors while he reorganizes to pay off his debts."
Sorry to go off topic, but this is the #1 realtor worldwide for Century 21...
"To the very young, to schoolteachers, as also to those who compile textbooks about constitutional history, politics, and current affairs, the world is a more or less rational place. They visualize the election of representatives, freely chosen from among those the people trust. They picture the process by which the wisest and best of these become ministers of State. They imagine how captains of industry, freely elected by shareholders, choose for managerial responsibility those who have proved their ability in a humbler role. Books exist in which assumptions such as these are boldly stated or tacitly implied. To those, on the other hand, with any experience of affairs, these assumptions are merely ludicrous. Solemn enclaves of the wise and good are mere figments of the teacher's mind."
Perhaps those of you who are inside the workings of business and politics can tell how far we've come in the past half century. Surely five decades of experience have taken us beyond anything we on the outside can image.
would you please translate the term, buy-to-let, is this something that I already know and just industry speak or something you have not discussed previosuly?
Wow, the posts have tags, uh I mean labels. Not long before an UberNerd post shows up on Digg. Maybe the semantic web can help us sort out this mortgage mess. Computing... computing... and the answer is:
Segmentation Fault
Don't be stingy with the tags if you can help it (i.e. it doesn't screw up your interface somewhere else). If you are just using them for human navigation aids then fewer is probably better, but if you want to mark up the data for better processing later you might want to include "nevada, subprime, corruption, revolving_door, was_worth_it", etc. (not sure if your tags support spaces or not, but since not all systems do, the portability of the data is better without spaces).
The Nevada Guv is the same guy who employed illegal aliens for his domestic help, and who mauled a cocktail waitress in a parking garage before the general election and had the police cover it up. He is out there a few standard deviations. Wonkette.com has a hilarious recounting of those tales. Highly recommended.
I think the fed does not cut because it wants to administer the death blow to the nonbank sector not under its regulatory purview. Not only is that sector responsible for most of the credit problems, it is bringing instability to the bank sector. Tringulating from what Bill Gross described as the shadow banking sector, FT says:
Issuance of commercial paper short-term borrowing central to many financial institutions is drying up, while Libor, reflecting the interest rates at which banks lend to each other, is spiking upwards.
This is because, as George Magnus of UBS puts it, the market is trying to transfer various bad assets from the secondary sector hedge funds, private equity groups, and the various specialist vehicles that banks set up to service them to the primary sector. Those bad assets will have to move to banks balance sheets.
Once there, they will be transparent and confidence can be restored. But putting them there requires huge amounts of cash. That has pushed up Libor rates.
Maybe Ben will be remembered for the "Bernanke Purge". What I can't figure out is how the fed is going to help the too-big-to-fail banks put the pier loans, the CDOs, the mortgage paper & the CP-to-term paper back on their balance sheets. Seems like this is going to take a very long time.
Sorry to go off topic, but this is the #1 realtor worldwide for Century 21...
Bankruptcy is just another Business tool...
It really should'nt be thought of as a Negative.
And since our leader's want us to think of the house as a business investment, filing or walking should'nt be a negative either
I suggest Soarin' Strawberry-Lemonade with a chaser of Raspberry Reaction. We'll be in serious Yabba Dabbo Doo Berry just in time for the next presidential election, lol.
Is one sale per office per month enough to keep the door open ? I'm thinking no (which implies the number of offices is going to shrink as well).
When that office is the shanty bathrooom, Maybe it is enough.
Whatever we had it wasnt a bubble as clearly demonstrated by Professor Sinai and others
In this paper, we explain how to assess the state of house prices both whether there is a bubble, and what underlying factors support housing demand in a way that is grounded in economic theory. [you know if its grounded in economic theory its gotta be right - as opposed to some vague blog ramblings]
As of the end of 2004, our analysis reveals little evidence of a housing bubble. In high appreciation markets like San Francisco, Boston, and New York, current housing prices are not cheap, but our calculations do not reveal large price increases in excess of fundamentals.
However, we can say that most housing markets did not look much more expensive in 2004 than they looked over the past 10 years, and in most major cities our valuation measures are nowhere near their historic highs.
to be fair, maybe things didn't start bubbling 'til after 2004? But Sinai was still beating the drum in the Sept 19, 2005 WSJ: "For the past several years, Chicken Littles have squawked that the sky -- or the ceiling -- is about to fall on the housing market."
I'd just like to say that I've been lurking here for months and I'm absolutely blown away by the depth of the content from the host(s) and the contributers. I've never seen such an extensive amount of analysis and insight as I've seen on this blog. The discussion here makes the MSM look like a pre-school. Keep up the good work.
Wall Street Awaits Fed Announcement- AP
There are 6 1/2 trading sessions until the Federal Reserve says for certain whether it's lowering interest rates. They're apt to be some of the most anxiety-ridden times on Wall Street in years.
"Subprime loans - high interest loans given to people with spotty credit histories.."
Sorry to rant slightly off-topic, but the MSM continues to portray this as having been a "rates" problem, rather than "lending with balloon terms" problem. If your teaser payment is 45% - 55% of your take-home pay, the interest rate on your full-amortizing payment is likely to be irrelevant.
"Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. . . . With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. . . .
Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending . . . fostering constructive innovation that is both responsive to market demand and beneficial to consumers." (emphasis added)
-Remarks by Chairman Alan Greenspan on Consumer Finance
At the Federal Reserve Systems Fourth Annual Community Affairs Research Conference, Washington, D.C. April 8, 2005
The Fed lead the flock to the watering hole where the preditors feed... apparently the Fed's job is to feed the preditors.
RayOnTheFarm: Plosser Says Fed Shouldn't `Overweight' Loss of Jobs in August
Moral 'suasion. Jawboning. Sometimes the Fed thinks talking is enough without backing it up with action. The fact that that one of them is talking about it could just be an indicator that they are about to take the opposite action. Playing poker with the speculators.
"Seems like this is going to take a very long time."
long time, lots of provisioning, tighter credit, sub-par growth, etc
wonder if sebastian is beginning to comprehend?
risk capital
Not unless he had a road to Damascus moment in the last 24 hours. He's convinced the downturn(whose existence he correctly denied all year) has turned the corner. The economy has had below trend growth since Q306, but growth nonetheless.
The downturn has just started, the depth of the downturn has yet to be determined and the duration is unknown. The depth depends on how long it takes for all the SIV, ABCP, CDO to get sorted out, the duration depends on how long it takes for the HB's to get obliterated.
To be fair to those who wrote there was no housing bubble in 2004, they were right at the time. Peak volume wasn't until summer 2005 and while volumes in 2004 were elevated, loans were still being made at reasonable terms.
-- risk capital wrote: would you please translate the term, buy-to-let
Tanta wrote: Those crazy Brits. I think that means "investment property," although I wouldn't make book on it. --
"investment property" is correct - you buy it to let it [out]. I'm a crazy English person so I would know
First comment from me, hope I do this html thingy right. Long time lurker, thanks for the great education in the wonderful ways of the US mortgage biz.
The real regulators are looking at the servicing end. NYT article (that apparently featured Countrywide) has added some fuel to the (only smoldering now) fire.
Academic economists tend to believe people make rational economic decisions in the face of much more compelling counter evidence than sub-prime foreclosures.
Anyone surprised by this curiosity just isn't very familiar the academic discipline of economics.
Yeah, real tough to accurately observe existing conditions. The bull's big argument about bear's prognostications is one of timing. They don't seem to grasp the concept of direction.
Sebastian won't concede until he's fired and in foreclosure (and yet his models will still be telling him everything is rosy).
She has similar summaries for a number of other Chicago suburan markets. You can plug
Lake_Zurich
Buffalo_Grove
Deerfield
Vernon_Hills
Lincolnshire
Long_Grove
into the URL in place of "Arlington_Heights" to see her reports on those areas.
From the London Times: banking crisis coming this week:
Another senior executive of one of Britains top five retail banks said: These are the worst conditions I have seen in money markets for 20 years.
The huge amount of commercial paper becoming due is the hangover from the crisis in credit markets that began with American sub-prime mortgages. Many of the off-balance-sheet structured investment vehicles (SIVs) set up by the banks were borrowed in the form of asset-backed commercial paper.
Now, even if they succeed in rolling over some of this paper this week, they will eventually be forced to take some of it much of which is of questionable value onto their balance sheets. To meet this potential liability, banks are hoarding cash and have stopped lending to each other. This has created a liquidity freeze.
Asset-backed commercial paper is rolling off every day and the banks are taking more and more onto their balance sheets, which is using up capital, said Paul Mortimer-Lee, global head of market economics at BNP Paribas in London. It is both a liquidity and a capital crisis.
His view was supported by a top banker who said: Even the very solid banks that were not at the sharp end are hoarding liquidity to ensure they can fund the rollover.
Colin, As the dollar gets crushed the NYSE can't be far behind. I can't imagine the margin calls that await the hedge funds in the AM, or tonight for that matter. The wild counter-intuitive trading in early Aug when hedge funds had their first dance with margin calls was something to behold and something to stay out of the way of. Once it subsided it was a license to print money. Luckily, I'm 80% cash right now.
OT - So I logged on to my bank's online trading site and looked up what economic news is coming this week. The site reports that Consumer Credit is being reported on Monday and this is the detail that was given on that:
"This number is an important measure of consumers' perception of the economy and when it is increasing, consumers are more confident about the state of the economy."
SAY WHAT, consumers taking another hit on the crack pipe is now considered "confident about the state of our economy!
If that was the text book definition, I think we are starting to write new text books.
I think we have the most "confident" consumers in all of history.
Yes and recently though briefly - I think it tagged around 110 yen to the dollar at the depths of the Nikkei 5% drop just before the opex Friday discount window rate decrease - but a continuing decline would suggest a continuing unwind of the yen carry trade.
But look for lots of volatility there IMNSHO, more whipsaw action as the yen just popped to 112.96 (and it has moved by multiple yen in a day up or down recently).
arbogast usually has some good observations on the yen...
I worked a year ago for a large health industry non-profit, and we had to "correct" one of Goolsbee's Slate magazine article for basic institutional details about the subject. I suspect that he does a lot of wind-blowing, and is not that "up to speed" with "on the ground knowledge" about some of the subjects he writes about.
"Colin, As the dollar gets crushed the NYSE can't be far behind. I can't imagine the margin calls that await the hedge funds in the AM, or tonight for that matter."
If you equate "liquidity" with hedge funds going long equities, then we are facing a perfect storm of illiquidity.
Margin calls
Shareholder redemptions
Yen carry unwind
Frozen CDOs and RMBSs
Commercial paper and SIV unwinds
and dont forget...
The strongest, the smartest and most successful hedge funds capitalizing on the misfortunes of their peers by GOING SHORT.
I read somewhere - here? - that the magic number for the $/yen is 112. At that number or lower things get ugly. It was about 113.5 at Friday's close.
If it is at 112.71 now, it would seem that one more strong down day on the Dow will pull it below 112. The unwinding of positions will be costly to those on the wrong side, which is many.
[If you equate "liquidity" with hedge funds going long equities, then we are facing a perfect storm of illiquidity.]
THedge funds go short plenty. Last time they faced a liquidity crunch lenders and builders had an incredible short squeeze rally. Great trade to get in on the fade. Oils got crushed as they unwound those long positions.
It was crazy until it became apparent that the price movement was nothing but a pure high octane liquidity unwind. Not fun to be swept up in it going the wrong way...
If August 15th was the cutoff for redemption requests this quarter, then the hedgies have to be busy unwinding trades for the remainder of the month. Perhaps some are waiting for a rate cut in order to salvage something by selling into the bounce?
If that rate cut (and bounce) doesn't materialize, things could get real ugly around the end of the month. If it does, the selling will limit any bounce severely. Either way, September will not be good to the markets.
I still think October may yet again prove to be a very bad month for markets.
REAL ESTATE: Despite dropoff, median prices are holding steady.
By HOWARD FINE
Los Angeles Business Journal Staff
The expanding mortgage crisis and credit crunch slammed the Los Angeles housing market in August, with home sales plunging 50 percent from the same month last year and 25 percent from July.
Sales of new and existing homes in Los Angeles County slid to 4,107 units in August, just under half the 8,246 units that sold in August 2006 and well below Julys 5,458 units, according to figures compiled for the Business Journal by Melville, N.Y.-based HomeData Corp.
jm, I recall an article a month or so ago in the Chicago Tribune talking about the number of families in tony Chicago suburbs that were struggling. The writer was surprised by the number of kids on free and reduced lunch in her school district now.
Just got off the phone with an old friend of mine who lives in San Diego, their business is booming at-present doing reverse mortgages. However guess what outfit is their no. 1 lender based on most favorable terms?
You mean the same FBI that has been too busy chasing terrorists to prosecute mortgage fraud UNTIL THIS YEAR? (I think they finally have a token amount of money earmarked and a unit up and running, albeit small). Hey, FBI fraud unit, we have some low-hanging fruit for you!
Clyde- "FBI" was a quote from the article. BTW, I was working at FDIC on 9/11 and had worked closely with FBI agents mostly in Houston, Dallas, Tyler & Boston since 1986. After 9/11 they never called me again on anything and I never had another face-to-face meeting with FBI. It was an immediate shift in resources and the financial terrorist knew it and took complete advantage of it. I knew this would end badly but the FDIC continued downsizing thru late 2005 when 'banker' Don Powell was chairman.
Please stop advocating that the federal department of Housing and Urban Development immediately take over the payments on every mortgage in the United States, especially the ones who committed fraud on their mortgage applications. That's just crazy.
And stop saying that Angelo Mozilo is really just a nice guy who got caught on the wrong side of a macro interest rate trade and that he deserves no more than a 25 basis point spread at the discount window. You say that all the time and I'm tired of it!
And stop attacking people who just want to express their own personal moral superiority which has unfortunately never been recognized by their brother-in-law Ned (that idiot) or by their teachers in junior high school who gave the science fair blue ribbon to Gus Snavely even though Gus' parents helped him build that working model of the human esophagus. No bailouts for Ned or Gus!
I was just thinking why is there a discrepanies between jobless claim and employment data.
It seems to me that maybe the reason is that many that are laid off are relatively high income earners (bankers, lenders, financial engineers, engineers etc) and may not find the jobless claim benefit worth the trouble.
On the other hands, if jobs lost are burger flippers and waiters or Walmart cashier, they would probably file for jobless claim quite promptly
Update on Asia markets-
The hedgies have made a strong push on the equity markets in the last 2 weeks. Not likely to give up their long positions and fold until things in US/ Europe get worse. However, I suspect that when things start to unfold, things could get ugly fast, and not without a few hedge fund casualties to get the margin calls going....
I would be interested to know what the advisers to the following candidates have been saying:
Hillary Clinton
Fred Thompson
Mitt Romney
Rudy Giuliani
By and large, political leaders are especially ignorant when it comes to finance. As someone who took many a shuttle ride between Boston and N.Y. and N.Y. and D.C., I can attest that something changes just south of New York.
Almost an ionic shift. It's hard to gauge who is more of a mark for the sharpies, doctors or politicians.
I was probably the first group of investors to get BUY TO LET mortgage in London from Halifax, HBOS, the troubled bank now, back in 1996. At that time, we could borrow up to 85% of the value which was one of the highest in the industry. After the 1990 crash, few banks were willing to lend on high ratio. There were credit check etc to get buy to let loan.
Few years ago when owning a property in England believed to be a sure win business, ratio was pushed up to 100% and there was NO credit check.
Buy to let mortgage in this decade means you don't need to have income proof or credit check as long as your rental income can cover the borrowing cost. Of course with property prices up 3 times from the market low in the 1990's, rules became even more relaxed. Even income couldn't cover costs, your capital gain might help you, hence........
I just did a google search for "illusion of prosperity" and my site came up second. It doesn't seem I'm being hijacked. Perhaps it has been fixed by the "blogspot" host? I'm crossing my fingers anyway.
The #1 result was a youtube video and is definitely worth a watch!
Before you can truly understand the Nevada Governor's appointment of this jerk, you have to understand who actually appointed him ...Mendy Elliot, the Gubernor appointed Director of Business and Industry who is also a former bank lobbyist ...for Wells Fargo.
Generally you hire the successful crook as head of security AFTER they've reformed their ways.
From this point forward, we shall affectionately refer to such blunders as making a Goolsbee.
Every Sunday, the NY Times lists the top yielding bank CDs in the country. This week's #1s:
Small saver 6 mo. Countrywide 5.55%
Small saver 1 yr. Countrywide 5.65%
Jumbo 6 mo. Countrywide 5.55%
Jumbo 1 yr Countrywide 5.65%
Isn't FDIC insurance wonderful?
This is the kernel of the problem I suspect:
People tend to make good decisions about their own economic prospects. As Professor Rosen said in an interview, Our findings suggest that people make sensible housing decisions in that the size of house they buy today relates to their future income, not just their current income and that the innovations in mortgages over 30 years gave many people the opportunity to own a home that they would not have otherwise had, just because they didnt have enough assets in the bank at the moment they needed the house. . . .
"future income"!!! "didn't have enough assets"!!! Now tell me where Rosen is a professor.
Professor Rosen appears to hang out at Princeton, would you (could you) believe?
what sort of loans do professional gamblers get?
look, given the laws of probabilities, if i gamble this much next year, this frequently, with this method i developed, i'm going to make an expected $500K, so you should write that down for my income...you can't argue with the laws of probabilities...
I noticed the ad also. That is certainly not a promising sign.
Whatever happened to Todd Sinia (sp?) at Wharton who wrote an article (op-ed?) in the WSJ in late summer 2005 saying there was no housing bubble? Did he get rewarded with tenure for his sound reasoning? It is probably a bit unfair to bring up specific names, since he is just one of that seemingly endless stream of academics that just don't get it. However, I'm curious about him since the article was so wrong and struck me as so ridiculous back them.
how come you kept the 'mortgage' tag?
how come you kept the 'mortgage' tag?
So that I can do statistical research in the future proving that it was always about mortgages.
Generally you hire the successful crook as head of security AFTER they've reformed their ways.
Well, and you wait until after they can be served on a civil or criminal matter regarding their previous employer.
you can't blame the dude though. it's very hot in vegas, i would drink the kool aid also...those free drinks at the casino are a trick!
i wonder if new century loan officers brought borrowers into hyper-oxygenated rooms with no windows and had sexy ladies walking around offering free drinks...that would make sense to me...the buffet is thataway...
The sun is on fire today (LOL). Nice story on a realtor BK...
Stories published September 8, 2007Las Vegas Sun
"Despite Clark County's apparently robust economy, home sales are doing so poorly that the first major real estate broker here has filed for bankruptcy court protection"
Connect the dots reporter - maybe the economy is not robust???
"Jimmy Dague, who has sold real estate in Las Vegas since 1978 and whose business was the No. 1 worldwide in sales for Century 21 from 2002 to 2006, filed last week for Chapter 11 bankruptcy protection from creditors while he reorganizes to pay off his debts."
Sorry to go off topic, but this is the #1 realtor worldwide for Century 21...
From the Preface to Parkinson's Laws (1957):
"To the very young, to schoolteachers, as also to those who compile textbooks about constitutional history, politics, and current affairs, the world is a more or less rational place. They visualize the election of representatives, freely chosen from among those the people trust. They picture the process by which the wisest and best of these become ministers of State. They imagine how captains of industry, freely elected by shareholders, choose for managerial responsibility those who have proved their ability in a humbler role. Books exist in which assumptions such as these are boldly stated or tacitly implied. To those, on the other hand, with any experience of affairs, these assumptions are merely ludicrous. Solemn enclaves of the wise and good are mere figments of the teacher's mind."
Perhaps those of you who are inside the workings of business and politics can tell how far we've come in the past half century. Surely five decades of experience have taken us beyond anything we on the outside can image.
Tanta-
would you please translate the term, buy-to-let, is this something that I already know and just industry speak or something you have not discussed previosuly?
thanks in advance.
I ask due to this article-
FT.com / UK - Credit squeeze hits buy-to-lets
Wow, the posts have tags, uh I mean labels. Not long before an UberNerd post shows up on Digg. Maybe the semantic web can help us sort out this mortgage mess. Computing... computing... and the answer is:
Segmentation Fault
Don't be stingy with the tags if you can help it (i.e. it doesn't screw up your interface somewhere else). If you are just using them for human navigation aids then fewer is probably better, but if you want to mark up the data for better processing later you might want to include "nevada, subprime, corruption, revolving_door, was_worth_it", etc. (not sure if your tags support spaces or not, but since not all systems do, the portability of the data is better without spaces).
Las Vegas, 20,000 homes on the market, he still has 500 agents??!! I wonder what they are selling...crack, perhaps?
The Nevada Guv is the same guy who employed illegal aliens for his domestic help, and who mauled a cocktail waitress in a parking garage before the general election and had the police cover it up. He is out there a few standard deviations. Wonkette.com has a hilarious recounting of those tales. Highly recommended.
I think the fed does not cut because it wants to administer the death blow to the nonbank sector not under its regulatory purview. Not only is that sector responsible for most of the credit problems, it is bringing instability to the bank sector. Tringulating from what Bill Gross described as the shadow banking sector, FT says:
Issuance of commercial paper short-term borrowing central to many financial institutions is drying up, while Libor, reflecting the interest rates at which banks lend to each other, is spiking upwards.
This is because, as George Magnus of UBS puts it, the market is trying to transfer various bad assets from the secondary sector hedge funds, private equity groups, and the various specialist vehicles that banks set up to service them to the primary sector. Those bad assets will have to move to banks balance sheets.
Once there, they will be transparent and confidence can be restored. But putting them there requires huge amounts of cash. That has pushed up Libor rates.
Maybe Ben will be remembered for the "Bernanke Purge". What I can't figure out is how the fed is going to help the too-big-to-fail banks put the pier loans, the CDOs, the mortgage paper & the CP-to-term paper back on their balance sheets. Seems like this is going to take a very long time.
"Seems like this is going to take a very long time."
long time, lots of provisioning, tighter credit, sub-par growth, etc
wonder if sebastian is beginning to comprehend?
Last month, there were about 1,300 home sales in the Las Vegas area; that was divided among 1,400 real estate offices.
"Do the math," Dague said. "That's about one sale per office ."
Is one sale per office per month enough to keep the door open ? I'm thinking no (which implies the number of offices is going to shrink as well).
I think the fed does not cut because it wants to administer the death blow to the nonbank sector not under its regulatory purview.
who is not cutting the rate going to kill that isn't already dead or going to die regardless?
Sorry to go off topic, but this is the #1 realtor worldwide for Century 21...
Bankruptcy is just another Business tool...
It really should'nt be thought of as a Negative.
And since our leader's want us to think of the house as a business investment, filing or walking should'nt be a negative either
It was bipartisan Kool Aid then, and it's bipartisan Kool Aid now.
But which flavors of Kool-Aid?
I suggest Soarin' Strawberry-Lemonade with a chaser of Raspberry Reaction. We'll be in serious Yabba Dabbo Doo Berry just in time for the next presidential election, lol.
Is one sale per office per month enough to keep the door open ? I'm thinking no (which implies the number of offices is going to shrink as well).
When that office is the shanty bathrooom, Maybe it is enough.
Whatever we had it wasnt a bubble as clearly demonstrated by Professor Sinai and others
In this paper, we explain how to assess the state of house prices both whether there is a bubble, and what underlying factors support housing demand in a way that is grounded in economic theory. [you know if its grounded in economic theory its gotta be right - as opposed to some vague blog ramblings]
As of the end of 2004, our analysis reveals little evidence of a housing bubble. In high appreciation markets like San Francisco, Boston, and New York, current housing prices are not cheap, but our calculations do not reveal large price increases in excess of fundamentals.
However, we can say that most housing markets did not look much more expensive in 2004 than they looked over the past 10 years, and in most major cities our valuation measures are nowhere near their historic highs.
http://real.wharton.upenn.edu/~sinai/papers/Housing-Bubble-Himmelberg-Mayer-Sinai-wp-09-07-2005.pdf
to be fair, maybe things didn't start bubbling 'til after 2004? But Sinai was still beating the drum in the Sept 19, 2005 WSJ: "For the past several years, Chicken Littles have squawked that the sky -- or the ceiling -- is about to fall on the housing market."
cluck cluck
I'd just like to say that I've been lurking here for months and I'm absolutely blown away by the depth of the content from the host(s) and the contributers. I've never seen such an extensive amount of analysis and insight as I've seen on this blog. The discussion here makes the MSM look like a pre-school. Keep up the good work.
Selling Fear on a Sunday Afternoon
Wall Street Awaits Fed Announcement- AP
There are 6 1/2 trading sessions until the Federal Reserve says for certain whether it's lowering interest rates. They're apt to be some of the most anxiety-ridden times on Wall Street in years.
"Subprime loans - high interest loans given to people with spotty credit histories.."
Sorry to rant slightly off-topic, but the MSM continues to portray this as having been a "rates" problem, rather than "lending with balloon terms" problem. If your teaser payment is 45% - 55% of your take-home pay, the interest rate on your full-amortizing payment is likely to be irrelevant.
Ok, back to the topic....
"Innovation has brought about a multitude of new products, such as subprime loans and niche credit programs for immigrants. . . . With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. . . .
Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending . . . fostering constructive innovation that is both responsive to market demand and beneficial to consumers." (emphasis added)
-Remarks by Chairman Alan Greenspan on Consumer Finance
At the Federal Reserve Systems Fourth Annual Community Affairs Research Conference, Washington, D.C. April 8, 2005
The Fed lead the flock to the watering hole where the preditors feed... apparently the Fed's job is to feed the preditors.
Plosser Says Fed Shouldn't `Overweight' Loss of Jobs in August
Plosser Says Fed Shouldn't `Overweight' Loss of Jobs (Update1) - Bloomberg.com
Facing weaker economy, Wall Street eyes Fed rescue
AFP: Facing weaker economy, Wall Street eyes Fed rescue
Two sides of the coin. The second one keeps screaming "Dude: Wheres My Free Lunch ?"
would you please translate the term, buy-to-let
Those crazy Brits. I think that means "investment property," although I wouldn't make book on it.
I do know that "self-certified" is better than anything us Yanks ever came up with, except my very own "snow doc."
RayOnTheFarm: Plosser Says Fed Shouldn't `Overweight' Loss of Jobs in August
Moral 'suasion. Jawboning. Sometimes the Fed thinks talking is enough without backing it up with action. The fact that that one of them is talking about it could just be an indicator that they are about to take the opposite action. Playing poker with the speculators.
"Seems like this is going to take a very long time."
long time, lots of provisioning, tighter credit, sub-par growth, etc
wonder if sebastian is beginning to comprehend?
risk capital
Not unless he had a road to Damascus moment in the last 24 hours. He's convinced the downturn(whose existence he correctly denied all year) has turned the corner. The economy has had below trend growth since Q306, but growth nonetheless.
The downturn has just started, the depth of the downturn has yet to be determined and the duration is unknown. The depth depends on how long it takes for all the SIV, ABCP, CDO to get sorted out, the duration depends on how long it takes for the HB's to get obliterated.
To be fair to those who wrote there was no housing bubble in 2004, they were right at the time. Peak volume wasn't until summer 2005 and while volumes in 2004 were elevated, loans were still being made at reasonable terms.
-- risk capital wrote: would you please translate the term, buy-to-let
Tanta wrote: Those crazy Brits. I think that means "investment property," although I wouldn't make book on it. --
"investment property" is correct - you buy it to let it [out]. I'm a crazy English person so I would know
First comment from me, hope I do this html thingy right. Long time lurker, thanks for the great education in the wonderful ways of the US mortgage biz.
The real regulators are looking at the servicing end. NYT article (that apparently featured Countrywide) has added some fuel to the (only smoldering now) fire.
Academic economists tend to believe people make rational economic decisions in the face of much more compelling counter evidence than sub-prime foreclosures.
Anyone surprised by this curiosity just isn't very familiar the academic discipline of economics.
How about some laughs:
Part 1: YouTube - Real financial heros part 1 of 3
Part 2: YouTube - Real financial heros part 2 of 3
Part 3: YouTube - Real financial heros part 3 of 3
I send this to my family members and co-workers knowing that they WOULD NOT appreciate it !!!
...they were right at the time.
Yeah, real tough to accurately observe existing conditions. The bull's big argument about bear's prognostications is one of timing. They don't seem to grasp the concept of direction.
Sebastian won't concede until he's fired and in foreclosure (and yet his models will still be telling him everything is rosy).
Informative article in the October issue of Bloomberg Markets Magazine, detailing Money Market Funds stuffed with CDO's backed by sub prime mortgages.
Geez risk capital,
How do you find so much stuff? Better yet, where do you find the time??? Whatever the answer is, keep it up!
Found this video linking over to this website. Great website.
YouTube - THE HOUSING CRASH IS ON!!! TELL ME CAN YOU FEEL IT!
From Inman's Realty Times:
Lenders' Worst Enemy in the Short Sale Arena
NYC - hiring freeze.
Budget memo from Mayor Bloomberg
Barb Hibnick's excellent summary of current market conditions in Arlington Heights, IL:
realtor in a neighboring community
She has similar summaries for a number of other Chicago suburan markets. You can plug
Lake_Zurich
Buffalo_Grove
Deerfield
Vernon_Hills
Lincolnshire
Long_Grove
into the URL in place of "Arlington_Heights" to see her reports on those areas.
Has the dollar ever been this low against the yen? - it's at 122.71 tonight.
Sorry,- the yen is at 112.71 tonight.
From the London Times: banking crisis coming this week:
Another senior executive of one of Britains top five retail banks said: These are the worst conditions I have seen in money markets for 20 years.
The huge amount of commercial paper becoming due is the hangover from the crisis in credit markets that began with American sub-prime mortgages. Many of the off-balance-sheet structured investment vehicles (SIVs) set up by the banks were borrowed in the form of asset-backed commercial paper.
Now, even if they succeed in rolling over some of this paper this week, they will eventually be forced to take some of it much of which is of questionable value onto their balance sheets. To meet this potential liability, banks are hoarding cash and have stopped lending to each other. This has created a liquidity freeze.
Asset-backed commercial paper is rolling off every day and the banks are taking more and more onto their balance sheets, which is using up capital, said Paul Mortimer-Lee, global head of market economics at BNP Paribas in London. It is both a liquidity and a capital crisis.
His view was supported by a top banker who said: Even the very solid banks that were not at the sharp end are hoarding liquidity to ensure they can fund the rollover.
Colin, As the dollar gets crushed the NYSE can't be far behind. I can't imagine the margin calls that await the hedge funds in the AM, or tonight for that matter. The wild counter-intuitive trading in early Aug when hedge funds had their first dance with margin calls was something to behold and something to stay out of the way of. Once it subsided it was a license to print money. Luckily, I'm 80% cash right now.
OT - So I logged on to my bank's online trading site and looked up what economic news is coming this week. The site reports that Consumer Credit is being reported on Monday and this is the detail that was given on that:
"This number is an important measure of consumers' perception of the economy and when it is increasing, consumers are more confident about the state of the economy."
SAY WHAT, consumers taking another hit on the crack pipe is now considered "confident about the state of our economy!
If that was the text book definition, I think we are starting to write new text books.
I think we have the most "confident" consumers in all of history.
Colin,
Yes and recently though briefly - I think it tagged around 110 yen to the dollar at the depths of the Nikkei 5% drop just before the opex Friday discount window rate decrease - but a continuing decline would suggest a continuing unwind of the yen carry trade.
But look for lots of volatility there IMNSHO, more whipsaw action as the yen just popped to 112.96 (and it has moved by multiple yen in a day up or down recently).
arbogast usually has some good observations on the yen...
I worked a year ago for a large health industry non-profit, and we had to "correct" one of Goolsbee's Slate magazine article for basic institutional details about the subject. I suspect that he does a lot of wind-blowing, and is not that "up to speed" with "on the ground knowledge" about some of the subjects he writes about.
Here is a picture of the Nevada governor with a fistful of wine & a cloth napkin tied on is head. Really.
Wonkette
Please be forwarned that Wonkette's stock in trade is political satire.
Why real estate and mortgage business attracts the bottom of th barrel ?
"Colin, As the dollar gets crushed the NYSE can't be far behind. I can't imagine the margin calls that await the hedge funds in the AM, or tonight for that matter."
If you equate "liquidity" with hedge funds going long equities, then we are facing a perfect storm of illiquidity.
Margin calls
Shareholder redemptions
Yen carry unwind
Frozen CDOs and RMBSs
Commercial paper and SIV unwinds
and dont forget...
The strongest, the smartest and most successful hedge funds capitalizing on the misfortunes of their peers by GOING SHORT.
I read somewhere - here? - that the magic number for the $/yen is 112. At that number or lower things get ugly. It was about 113.5 at Friday's close.
If it is at 112.71 now, it would seem that one more strong down day on the Dow will pull it below 112. The unwinding of positions will be costly to those on the wrong side, which is many.
Makes me want to throw up.
Nikkei Down 460.29. Ouch
Asia indices are red
Major World Indices - Yahoo! Finance
[If you equate "liquidity" with hedge funds going long equities, then we are facing a perfect storm of illiquidity.]
THedge funds go short plenty. Last time they faced a liquidity crunch lenders and builders had an incredible short squeeze rally. Great trade to get in on the fade. Oils got crushed as they unwound those long positions.
It was crazy until it became apparent that the price movement was nothing but a pure high octane liquidity unwind. Not fun to be swept up in it going the wrong way...
If August 15th was the cutoff for redemption requests this quarter, then the hedgies have to be busy unwinding trades for the remainder of the month. Perhaps some are waiting for a rate cut in order to salvage something by selling into the bounce?
If that rate cut (and bounce) doesn't materialize, things could get real ugly around the end of the month. If it does, the selling will limit any bounce severely. Either way, September will not be good to the markets.
I still think October may yet again prove to be a very bad month for markets.
LA home sales off 50% yoy in August
August Home Sales Take a Major Plunge
REAL ESTATE: Despite dropoff, median prices are holding steady.
By HOWARD FINE
Los Angeles Business Journal Staff
The expanding mortgage crisis and credit crunch slammed the Los Angeles housing market in August, with home sales plunging 50 percent from the same month last year and 25 percent from July.
Sales of new and existing homes in Los Angeles County slid to 4,107 units in August, just under half the 8,246 units that sold in August 2006 and well below Julys 5,458 units, according to figures compiled for the Business Journal by Melville, N.Y.-based HomeData Corp.
jm, I recall an article a month or so ago in the Chicago Tribune talking about the number of families in tony Chicago suburbs that were struggling. The writer was surprised by the number of kids on free and reduced lunch in her school district now.
Countrywide CEO Gets Lucky Grantitis
"Where is the FBI?"
Countrywide CEO Gets Lucky Grantitis -- Seeking Alpha
Just got off the phone with an old friend of mine who lives in San Diego, their business is booming at-present doing reverse mortgages. However guess what outfit is their no. 1 lender based on most favorable terms?
A: CFC
FFDIC,
You mean the same FBI that has been too busy chasing terrorists to prosecute mortgage fraud UNTIL THIS YEAR? (I think they finally have a token amount of money earmarked and a unit up and running, albeit small). Hey, FBI fraud unit, we have some low-hanging fruit for you!
the name of the writer for energyecon's article just kills me .
if he has a phd.
would he be . .
dr. howard ?
dr. fine ?
dr. howard ?
Clyde- "FBI" was a quote from the article. BTW, I was working at FDIC on 9/11 and had worked closely with FBI agents mostly in Houston, Dallas, Tyler & Boston since 1986. After 9/11 they never called me again on anything and I never had another face-to-face meeting with FBI. It was an immediate shift in resources and the financial terrorist knew it and took complete advantage of it. I knew this would end badly but the FDIC continued downsizing thru late 2005 when 'banker' Don Powell was chairman.
Tanta, I am outraged.
Please stop advocating that the federal department of Housing and Urban Development immediately take over the payments on every mortgage in the United States, especially the ones who committed fraud on their mortgage applications. That's just crazy.
And stop saying that Angelo Mozilo is really just a nice guy who got caught on the wrong side of a macro interest rate trade and that he deserves no more than a 25 basis point spread at the discount window. You say that all the time and I'm tired of it!
And stop attacking people who just want to express their own personal moral superiority which has unfortunately never been recognized by their brother-in-law Ned (that idiot) or by their teachers in junior high school who gave the science fair blue ribbon to Gus Snavely even though Gus' parents helped him build that working model of the human esophagus. No bailouts for Ned or Gus!
And...what's that?
This isn't the Reich thread?
Oh.
Nevermind.
I was just thinking why is there a discrepanies between jobless claim and employment data.
It seems to me that maybe the reason is that many that are laid off are relatively high income earners (bankers, lenders, financial engineers, engineers etc) and may not find the jobless claim benefit worth the trouble.
On the other hands, if jobs lost are burger flippers and waiters or Walmart cashier, they would probably file for jobless claim quite promptly
Update on Asia markets-
The hedgies have made a strong push on the equity markets in the last 2 weeks. Not likely to give up their long positions and fold until things in US/ Europe get worse. However, I suspect that when things start to unfold, things could get ugly fast, and not without a few hedge fund casualties to get the margin calls going....
how come nobody made a Bud Fox joke yet?
Candyman_Asia
Max benefit in Ala is about $230/week.
Taxable.
So if you have made big bucks until just now, it may really not be worth the effort.
I would be interested to know what the advisers to the following candidates have been saying:
Hillary Clinton
Fred Thompson
Mitt Romney
Rudy Giuliani
By and large, political leaders are especially ignorant when it comes to finance. As someone who took many a shuttle ride between Boston and N.Y. and N.Y. and D.C., I can attest that something changes just south of New York.
Almost an ionic shift. It's hard to gauge who is more of a mark for the sharpies, doctors or politicians.
On BUY TO LET.
I was probably the first group of investors to get BUY TO LET mortgage in London from Halifax, HBOS, the troubled bank now, back in 1996. At that time, we could borrow up to 85% of the value which was one of the highest in the industry. After the 1990 crash, few banks were willing to lend on high ratio. There were credit check etc to get buy to let loan.
Few years ago when owning a property in England believed to be a sure win business, ratio was pushed up to 100% and there was NO credit check.
Buy to let mortgage in this decade means you don't need to have income proof or credit check as long as your rental income can cover the borrowing cost. Of course with property prices up 3 times from the market low in the 1990's, rules became even more relaxed. Even income couldn't cover costs, your capital gain might help you, hence........
Stagflationary Mark:
someone if hijacking/redireting your website to:
http://http//illusionofprosperity.blogspot.com//robots.txt#365
sorry to the rest of you for the clutter, I don't know his email address.
EEngineer,
Thank you. People are still leaving comments. Things seem okay. When I click on my homepage here it seems to send me to me.
How can I verify that I'm being hijacked?
Better still, how can I fix it?
(I apologize to everyone for being VERY off topic.)
I just did a google search for "illusion of prosperity" and my site came up second. It doesn't seem I'm being hijacked. Perhaps it has been fixed by the "blogspot" host? I'm crossing my fingers anyway.
The #1 result was a youtube video and is definitely worth a watch!
The Video
Hahaha! That's certainly not off topic.
Governor Jim Gibbons - Press Releases
Before you can truly understand the Nevada Governor's appointment of this jerk, you have to understand who actually appointed him ...Mendy Elliot, the Gubernor appointed Director of Business and Industry who is also a former bank lobbyist ...for Wells Fargo.