OFHEO: House Prices Fall, Conforming Limit Unchanged
Submitted by
CalculatedRisk on Tue, 11/27/2007 - 8:08am (82 comments)
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OT: Recession Signs Grow as Winnebago Leads First RV Dip Since 2001
Recession Signs Grow as Winnebago Leads U.S. RV Drop (Update2) - Bloomberg.com
As goes Winnebago, so goes the economy.
The FHFB is reporting the year over year national price decline was 3.49%.
What was that NAR line? Oh yeah, something like... "no national decline since the depression". Seems like yesterday.
Sorry, another OT:
U.S. Economy: Confidence Drops More Than Predicted
U.S. Economy: Confidence Drops More Than Predicted (Update3) - Bloomberg.com
p.s.: Looks like one of those "bad news is good news" days for the markets (at least so far).
Didn't Winnebago almost go out of business in the late 70s, early 80s period? High gas crisis and interest rates really hurt them.
See? nothing to worry about: 3.49% (love the precision!) decline in the average national price...so why bother moving that ceiling of $417,000 to $402,000? Not worth the ink...esp in view of the agitation to expand those limits...which are keeping buyers on the sidelines...not the fear that this 3.49% decline might continue...no.
Just a detail about the fickleness of principles (something about helping lower income Americans buy some dream) and the solidity of pragmatism when it appears some pants are full.
OT
It's kind of amazing that even at this point in a correction, the relationship between stocks and leverage (weak yen) stays so tight.
It tells you how ingrained leverage has become in hot-money hedge fund trading.
Somebody said last night on a thread that they were amazed how fast this train wreck is happening. I'm not. This amount of leverage, which we've NEVER seen in the market before, tends to speed things up.
The "typical Tuesday" pump with weak yen tells you that the biggest drop is yet to come, when the leverage finally unwinds. I don't think any powers-that-be will be able to keep the yen weak when the Big One comes. It could take 2-3 months, but I think the yen will hit 100.
I'm dumb.
How do you reconcile this:
By law the maximum conforming loan limit is based on the October-to-October change in the average house price in the Monthly Interest Rate Survey (MIRS) of the Federal Housing Finance Board
with this:
While the house price survey data ... show a decline..., the level will remain at $417,000
Could we have an Unternerd explanation, please?
OT: Recession Signs Grow as Winnebago Leads First RV Dip Since 2001
TJ - you should see the dealer lots - looks like they have enough inventory to last a decade. If the damned things ever got cheap enough - I'd buy one and use it as a mobile office.
In the last 6 weeks I have had 2 Loan Brokers and one Realtor tell me that an increase in the conforming limit to $1M was an "absolute lock" one claimed he heard it from the President of the CAR,the other two were coy.All three were excited because this change was going to "save" the market.When I asked them how,all three got puzzled looks,told me it was obvious and walked away shaking their heads.Being reality based in NOT helpful for salesmen in my experience.
Didn't Winnebago almost go out of business in the late 70s, early 80s period? High gas crisis and interest rates really hurt them.
jim a | 11.27.07 - 11:34 am | #
Yup. They over-built going into the oil shocks & interest rate hike periods. Good thing that can't happen again.
While the house price survey data ... show a decline..., the level will remain at $417,000
Could we have an Unternerd explanation, please?
Markel | 11.27.07 - 11:43 am | #
Its only going to stay the same until they can decide on how much to raise it to... $1 mil sounds about right.
That and the total amount Fanny & Freddy can sponsor - need to bump that too.
Didn't you get Chuck's memo?
Roubini on the CFC bailout:
RGE - Nouriel Roubini's Global EconoMonitor
Could we have an Unternerd explanation, please?
The very short version is that the legislation providing for the October-to-October change metric says, actually, that the conforming limit will be "increased" by that much. It sayeth nothing about it being decreased when the change is negative. It seems that Congress never imagined the possibility.
Lockhart has sponsored new "loan limit guidance" for the GSEs that would address decreases as well as increases. It means, basically, that conforming limits are "sticky" on the downside. No. Really.
Thank you Lockhart for showing some guts. This means when the bail out bill arrives, it will be less unless Congress decides to pass an emergency bill which secretly raises the limits.
OT,
But relevant - this could get way too interesting...
Iraqi Kurds Brush Off Baghdad Gov't Nullifying Oil Deals
by Hassan Hafidh Dow Jones Newswires Monday, November 26, 2007
AMMAN Nov 26, 2007 (Dow Jones Newswires)
The Kurdistan Regional Government brushed off a statement by Iraqi Oil Minister Hussein al-Shahristani in which he declared all oil contracts signed by the Kurdish regional authorities with foreign companies null and void.
"By stating that, al-Shahristani has gone beyond his powers and size," KRG spokesman Jamal Abdullah said in statement published on the KRG Web site.
The KRG has signed 15 oil and gas exploration and exportation contracts with 20 international companies since it passed its own oil law in August, angering the Baghdad government.
Al-Shahristani has in recent weeks angrily denounced the Kurdish authorities for signing the contracts before the national parliament approves a new oil and gas law, declaring them "illegal" and saying the foreign companies who signed these deals would be blacklisted by the Baghdad government.
"Shahristani should file his case to the federal court specialized on solving disputes among Iraqi regions, rather than issuing press statement," the KRG spokesman said.
The deals signed are legal and within the framework of the federal constitution and that of the Kurdistan oil and gas law signed by leader of the KRG Massoud Barzani, Abdullah said.
Under the federal draft oil and gas law, which is still under debate, a federal oil and gas council which is yet to be established is the only body which approves any oil and gas contract signed by regions or provinces all over Iraq. Also under the new draft law, the only body authorized to export Iraqi crude oil and gas, whether produced in the north or the south, is the State Oil Marketing Organization, or SOMO.
Increasing the conforming limit to $1M may cause some to dance,and some to gnash their teeth...but not many can document the income to qualify for $500k,let alone $1M.and aaahh,people seem to think prices are declining for some reason...which sometimes has an effect on the purchase decision.
In my book the very modest RE declines still cannot justify even a mild recession in the face of economic strenght in other sectors.
This is also a reality check for mega-bears advocating absurd declines of 40% or so.
O-Joe
Lockhart has sponsored new "loan limit guidance" for the GSEs that would address decreases as well as increases. It means, basically, that conforming limits are "sticky" on the downside. No. Really
Thanks! Be grateful you could not hear me snort out loud at this.
A problem, in all this, is that no large institutional player has a vested interest in real estate prices resetting downward. Instead, all benefit from giving the bubble CPR, and so both the media and the regulators cater to those one-sided interests.
If I were Decider for the day, I'd force everyone to mark-to-worst-case-scenario on every asset. Bloody, yes, but a short, sharp shock would remove fear of the unknown from the markets. They're perfectly capable of handling properly-priced risk, they just don't do so well with fairy tales of uncertain ending.
p.s.: Looks like one of those "bad news is good news" days for the markets (at least so far).
Remember, the longer the time frame you look at, the more the stock market acts as a rational valuation mechanism for businesses.
But in the short-term, especially during times like now with the market dominated by speculators, the stock market is nothing more than the hottest game of poker around.
If you can confuse people and take their money by driving up the market when "it should be going down because of all the bad news", that's about as rational and sensible as you can get... even if it's not a particularly nice thing to do.
all benefit from giving the bubble CPR
i've got news for you, "CPR" doesn't work anymore! AHAHAHA!!!
"but not many can document the income to qualify for $500k,let alone $1M"
Yes, and then there are those pesky appraisals and let's not forget downpayments that might be a bit of an obstacle.
is there anything better than prepayment jokes?
As goes Winnebago, so goes the economy
Well, now hold on, shouldn't Winnebago function as an inferior substitute for housing?
But I bet you can't buy one with an Option ARM.
Yuk yuk yuk.
Thank you Lockhart for showing some guts. This means when the bail out bill arrives, it will be less unless Congress decides to pass an emergency bill which secretly raises the limits.
franz | 11.27.07 - 12:02 pm | #
It won't be a secret - see Tom Stone 11:47 entry above - every RE agent & loan broker will know about it the instant it becomes law.
Today's casino action is nothing more than a short term bounce off of technically oversold conditions. Don't believe the stooges who will be proclaiming "Day 1 of a new rally" tonight. You'd have to be a special brand of crazy to go long in the face of these technicals and fundamentals.
Disclosure: I bought me some AMZN puts on the dips in the early bounce up this AM.
Please, can you help me in understanding the kind of access to collateral of second lien mortgages. First, HEL/HELOC are sort of second lien? Second, acn we have default on HEL without defaulting on the first mortgage? How is the sequence of events before HEL can reach house collateral in order to recover the loans?
Thanks so much, and sorry for the unconveniences.
O-Joe, unfortunately your book is "The Very Hungry Caterpillar".
You can't buy these buses with HELOC money anymore either. I think a good chunk of these albatrosses were bought that way.
--
Breaking News
Feds Plosser: Fed May Need to Raise Rate
Reported on Boob-berg.
Jas
Why should we be worried about increasing the conforming loan limit? Isnt this all about problems in the subprime market? How many houses in subprime markets go for more than $400,000?
Oh wait I forgot We are all subprime now.
Hmm Plosser is saying FED may need to raise rates. Somebody get him his kool-aid he is coming out of it again.
Sorry Jas,
Your comment hadn't posted yet
They are trying to kill oil.
Dryfly- You'd buy a Winnebago? I always thought the interiors weren't "engineer" friendly, i.e., you'd do better buying a box truck and installing furnishing yourself.
When O-Joe capitulates I am going 100% long.
Market tells Plosser you are full of it! DOW shot up after his comments...
Jas - "Feds Plosser: Fed May Need to Raise Rate"
LOL! Never heard a more hollow joke. It should be played on Comedy Central, not Bloomberg. No one will take this seriously, not even the oil markets.
The NAR reports Q3 '07 prices are up 1% from Q3 '05. Never since the figures were first kept has there been a two year consecutive price decline.
The NAR reports Q3 '07 prices are up 1% from Q3 '05. Never since the figures were first kept has there been a two year consecutive price decline.
Robert Coté | Homepage | 11.27.07 - 12:57 pm | #
Oh, this is going to be a fun game! At least the NAR provides some humor in this train wreck.
Marketwatch headline says "Celebrating Citi's bailout - Indexes up across the board..."
I just don't get it - is it possible the entire market doesn't realise what a desperate situation Citi was in to have to take this deal? Don't they realise nearly 10% of Citi is now owned by Middle East investors? Exactly what are they celebrating here?
is it possible the entire market doesn't realise what a desperate situation Citi was in
Keep chanting the mantra -
"2 big 2 fail"
"2 big 2 fail"
They've just changed the headline to "Celebrating Citi's infusion". So just to be clear there was no bailout.
When O-Joe capitulates I am going 100% long.
squeezed
I will be going long when there is follow-thru (I follow IBD methodology for market timing). An isolated rallye indeed does not show if a correction ends. It's the follow thru that tells the tale. Every correction is different and the keyis to patient, but taken all things into consideration the next meaningful upturn cannot be far away (within 2 weeks is my guess).
I also think that the whole credit fear story will be worked thru by early February at the latest. The RE market will continue to correct modestly for a while.
O-Joe
You just can't get this kinda comedy with the writers on strike,
thx Oj
Dryfly- You'd buy a Winnebago? I always thought the interiors weren't "engineer" friendly, i.e., you'd do better buying a box truck and installing furnishing yourself.
sdtfs | 11.27.07 - 12:41 pm | #
Depends on the company making them - actually I wouldn't buy a Big Winnie but would look at the Freightliner/Dodge delivery van platforms a number of firms now use to produce smaller RVs. The come with diesels & get approx. 25 mpg... plus I could park it in a regular space, make an ideal rolling office.
But they aren't cheap yet. They are going for about $80-$100K new and $50-60K used. Divide that in half and I start thinking about it. Divide by three and I jump on it tomorrow.
But I'd want a 'pro' to make it. I had a full sized van customized once and they did a crap job. I was completely unable to make anything out of it after that too.
is there anything better than prepayment jokes?
How about prepayment jokes when they're in ABX remittance analyses?
Didja see Goldman?
"Stabilizing."
I have coffee in my nasal passages.
Abu Dhabi blazes trail with Citi deal
| Reuters
US starts down the road to (economic) serfdom:
Not changing the conforming limit in a declining market (and against other factor like steadily rising wages) effectively, well, RAISES the conforming limit.
In my neighborhood alone, the asking prices on about fifty active listings have dropped from a median of $477,000 to a median of 449,000. That is out of 196 active listings. The conforming limit is being met by more and more sellers coming closer to capitulation.
This is also a reality check for mega-bears advocating absurd declines of 40% or so.
O-joe has'nt seen a chart before may 2007
look back a little further o-joe, where were the indices June 2006?
Oh, above I meant to add that those declines are all in the last eight months...
--
Fed's Plosser IS Forecasting recession early next year! + CC Confirms Recession
How?
He is predicting Unemployment rate (UR) to reach 5% early next year.
According to Rosenberg, when the UR goes up 0.5% from the bottom in the cycle the economy is already in recession with 100% probability. Since the bottom in this cycle was 4.3%, the UR of 5% means that the economy would already be in recession "early next year."
Thank you, Mr. Plosser, for validating my call.
Consumer Confidence (CC) report earlier today has confirmed that the economy is already in recession. Fall of 20-25 point in four months, in the absence of natural or political disaster, confirms the recession.
CR, jump on the recession bandwagon if you want to look "gooder" compared to other dismal scientists.
Jas
"Don't they realise nearly 10% of Citi is now owned by Middle East investors? Exactly what are they celebrating here?"
I think the question kind of answers itself.
MR. JENSEN: "The Arabs have taken billions of dollars out of this country, Mr. Beale, and now they must put it back. It is ebb and flow, tidal gravity, it is ecological balance!"
Network
1976
How about prepayment jokes when they're in ABX remittance analyses?
Didja see Goldman?
touche.
What if Winnebago goes green? How big of a battery would it need?
"Well, now hold on, shouldn't Winnebago function as an inferior substitute for housing?"
Believe it or not, it was proposed as part of a sort of economic nightmare scenario I read in the Atlantic last year, supposedly several years in the future: millions of flat broke foreclosure victims are forced out of their homes, and Congress reacts by giving them all no-interest loans for RVs and setting up special RV parks around the nation.
Yeah, I thought it was stupid, too.
"Believe it or not, it was proposed as part of a sort of economic nightmare scenario I read in the Atlantic last year, supposedly several years in the future: millions of flat broke foreclosure victims are forced out of their homes, and Congress reacts by giving them all no-interest loans for RVs and setting up special RV parks around the nation."
Believe it or not, the Cyberpunk Sci-Fi writers were writing about this in the 90's. Bruce Sterling's work in particular. The future is here.
RVs for forclosure victims makes no sense when there are acres of FEMA trailers down in MS.
Or, people could just, like, rent, and stuff.
Dammit Tanta. Now I'm going to have to start early and self medicate in the other direction for a while.
I imagine the following conversation in some basement cubicle: "Wadda ya mean these 30 year notes are gonna take 30 years? That's not how it used to work. Don't tell me what... I've been in this business more than six, yes s-i-x years. I've seen it all."
What if Winnebago goes green? How big of a battery would it need?
homedad43 | 11.27.07 - 1:33 pm | #
Well that depends on if you plan to drive it (using the batteries). Park it forever like a 'van down by the river' and you wouldn't need a big battery at all - hell solar panels & a few car batteries would do it.
If you drive something that big any distance at all with electricity, you'd probably need a semi running behind you just to haul the batteries...
O-Joe, this is the 30th minute of a football match. The August credit crunch was the 1st goal your team gave up, the 1st round of subprime writeoffs was the second, the 2nd round of writeoffs was the 3d & Citi's moves are the keeper getting a straight red.
The 1st rule of this game is don't fight the tape, you'd be well advised to read up.
You write of the strength of the economy other than housing, what strength?
ex retail, housing, auto, finance, tech(chip maker & its foodchain), brewing; the economy's roaring?
The only industries making out are ag & related biz, mining, microsoft & other bubble 2.0 biz & Boeing.
So the 15% of GDP is gonna carry the other 80%?
Your havin a laugh.
They've just changed the headline to "Celebrating Citi's infusion"
Was it infused with Absolut or Smirnoff?
Speaking of forclosures, this is an actual headline over at Yahoo:
Report: Foreclosures to hit metro areas
No word if Area Man will be affected.
Peter Principle --
Brilliant comment! (And possibly the best film of all time.)
Re: Plosser
Whom, exactly, does he think he is kidding?
What, exactly, is he trying to do?
I wonder FF, how important that adjustment is...back to renting.
Dang it all, it was just a dream afterall.
If we can believe Fannie, "homeownership" (such a cruel term of endearment now) was nudging 70% at it's peak several years ago from some relatively stable plateau of 65%. So just pushing 5% back onto the landlord sounds manageable...if the wealth distribution remained unchanged over that period.
But something tells me it didn't and the new plateau (esp if house prices and wages remain disconnected) will be lucky to hit 60%.
Can we have a 10% shift out of Dreamhood without major civil unrest?
The odd thing is all this market froth is being attributed to the Abu Dhabi Doo deal, but C is still only marginally above its low from yesterday. Everybody feels good about the IV drip except the patient.
economic nightmare scenario I read in the Atlantic last year
this is sometyhing i think we all need to read. got a link.
I imagine the following conversation in some basement cubicle: "Wadda ya mean these 30 year notes are gonna take 30 years? That's not how it used to work. Don't tell me what... I've been in this business more than six, yes s-i-x years. I've seen it all."
You know the old joke? What's the difference between a bond and a bond salesman? (Bonds mature.)
So prepayments were up very slightly from last month. On the basis of this one-month trend, Goldman says things are "stabilizing."
UBS says yeah, but a significant portion of the increase in payoffs over last month was liquidations. You know, those icky kinda payoffs.
So the good news is that refinances are still largely unavailable, but some REO actually got sold!
RVs? FEMA trailers?
When there are huge neighborhoods of brand newly built vacant homes, ripe for squatting?
Maybe I will write a novel. The PUDs of Wrath.
Tanta, mortgage people are experts at extrapolating insufficient historical data and making wildly inappropriate conclusions...
Nonsense. I never extrapolate insufficient historical information. I make mine up.
Kids these days are so lazy.
-
Alan Sinai is also forecasting 5% or higher UR. He (on Boob-berg right now) says, "it is a bad looking US economy."
Jas
All this talk about RV's but fwiw, manufactured housing (aka trailers) had their own meltdown a few years ago and are now in fine shape.
Most of the manufacturers and lenders are no longer around to enjoy the consolidation.
No one ever seriously thought of a trailer as an investment, although in CA some of em sold for a mil. Location, location, location.
lazy? hey at least i put clothes on to come to work miss pajama blogger.
Jas- Alan Sinai is also forecasting 5% or higher UR. He (on Boob-berg right now) says, "it is a bad looking US economy."
Take a look at the Chicago Fed's national activity index. Recession NOW is becoming more likely.
Conjure and I have been standing by Q1-08 since August. Our view remains firm.
--
mp,
Q1-08 means you will be late by 3-4 months. Roubini also said Q1-08 recently.
I have many confirming indicators for my call of we are already in recession, most likely began in Oct. The best indicator is the occurence of the word "recession" in the media!
Jas
They've just changed the headline to "Celebrating Citi's infusion"
Was it infused with Absolut or Smirnoff?
ABSOLUT
Specialty flavor for US financial markets.
Laughter.
I saw an estimate that was using my 5.0 million for housing this year.
On the other hand,O-Joe will most likely be correct in the market rally through Xmas- the 50 basis points that the fed will hand out will make life very good for one last big reflexive rally, to be followed by a New Year's hangover of epic proportions.
Yen=75 and Yuan=5 per dollar next xmas. Oil, well, who knows, it will be a race between US demand destruction and falling production.
And the ten year in the US will be 2.93. Party on Pimco.
so, when real estate becomes a giant sucking black hole, you just have to ask yourself, does anybody rational want to buy? And would anybody rational put 20% or 30% down with price declines on the way. The answer is no. So there will be considerable damage in the pipeline for real estate, no matter what the Fed or Congress does.
But housing and commercial real estate are special cases that easy money made happen. It would take years of easy money to restart the happy fun machine with regard to real estate, and Wall Street seems strangely reluctant to play. So down that goes, no matter what.
Now, as for the rest of the economy; we could raise rates and cut off credit to everything else and make it much worse. Everybody besides Jas and Plosser raise your hands. (I hear crickets and the sound of the rooms emptying fast.)
So cut rates, and push fiscal stimulus to raise wages and make the folks feel happy. Ignore imported inflation. Give them something like universal healthcare and hit the bailout button every once in a while.
Someday this war's gonna end...
--
"Alan Sinai is also forecasting 5% or higher UR. He (on Boob-berg right now) says, "it is a bad looking US economy.""
I might have mistook Ed Hyman for Sinai. Sorry.
Jas
Maybe I will write a novel. The PUDs of Wrath.
Tanta | Homepage | 11.27.07 - 2:05 pm
Now, that is funny!! Course, I now have to clean Diet Coke off of the 'puter screen.
Re: Winnebago.
In Stephenson's "Snow Crash", the hero (:)| lived in converted public storage.
This may become reality soon (if it isn't already).
It means, basically, that conforming limits are "sticky" on the downside. No. Really.
which means that the more home prices fall, then more McMansions will be 'conforming'. Keep dropping the prices for long enough, and everything could be conforming