This cancellation rate is doubly troubly since this isn't the turmoil of last summer when credit was changing and prices were high. This is in an historically low mortgage interest rate period and surely DHI is vetting their customers more carefully before initiating a contract for sale.
This is a consumer sentiment driven cancellation rate.
Yet they still think its a good idea to build those condos right across the street from the mission valley mall here in San Diego. If that thing makes them one dollar I'd be shocked.
Sure but their stock is up, and since stock prices are predictors of future earnings of the company, then things must really be looking up...or this dead cat is springier than we thought.
Why buy a Horton home when you can select from dozens they built two years ago, located a little closer to the center of town, on sale from a bank at 20% less than Horton's current prices?
HB's are up today. They seem to go up no matter how bad the news. In the past whenever this has occurred, the prices had a sudden drop in the near future. It's like there's a delay between the bad news being announced and the realization of what the bad news means.
...
Johnny Carson sidekick Ed McMahon is also having real estate troubles. He put his 7,000-square-foot Beverly Hills home on the market In July 2006 for $7.7 million. He has since reduced the price three times, and the house is now selling for $5.7 million.
Adjusted for inflation, the Fed's benchmark rate is now approaching zero,'' making itclearly an accommodative level,'' Plosser said. Traders expect the Fed to lower the target rate for overnight loans between banks to 2 percent by June, futures show.
Cancellation rate 44%.
Housing environment is "Challenging"
Average ordered home price fell 17%.
Does The Fed really think that lowering target rates again -- is going to re-stimulate or re-invigorate or re-prime a housing bubble that is out of control and un-contained, un-regulated, and that we have banks that are out of control with synthetic derivatives, which are un-regulated, un-accountable and contributing to systemic failure?
What we have is a Fed that is collusive and corrupt and these retarded bastards should all be hanged for treason!
Maybe we should stand in line and flip coins, because earnings dont matter in this casino, and neither does valuation of stocks, homes, wages, debts.... We need more coins printed!!
Sure but their stock is up, and since stock prices are predictors of future earnings of the company, then things must really be looking up...or this dead cat is springier than we thought.
Actually, the reported backlog as well as Q-Q sales progression is a good predictor of future revenue, and both of those indicators were "bad".
This is a consumer sentiment driven cancellation rate.
MDC reported a cancellation rate of 65%, as well as a backlog that was cut in half. And its stock is up 8% today. It did increase its reported cash position by selling lots for a large loss. Such are the things that gain the favor of "investors". At least for today.
CR,
How is that Cancellation Rate calculated? If a purchase is cancelled, it doesn't go back to inventory. Does that mean any secondary cancellations of that same unit would not count into both the numerator and denominator?
A contact at one of the big builders lead me to believe their cancellation rate was higher than 44%.
Face facts, the truth hurts sometimes, most of the time!
How many homebuilders out there, or lenders can face the truth at this point and thus face the harsh reality that they were retarded beyond all doubt and the fact that they failed to back away from the casino tables while the casino started to burn down!
Everyone saw an un-sustainable bubble, but these types of greedy pigs wanted more and more and more, and they wanted free drinks and more chips and they wanted to play with other peoples money. Screw them, they got what they deserved and they need to fail and lessons do have to be learned! This is like a bunch of cocaine crack heads that wanted the party to last 24 X 7 into infinity.........wah, wah wah and LOL!
Mortgage Guaranty Insurance Corporation
February 6, 2008
Dear Valued Customer:
As a result of our ongoing evaluation of market conditions and loan performance, we are making a number of changes to our base underwriting guidelines and have created a new set of guidelines for areas exhibiting market weaknesses. The following underwriting guideline changes are effective for mortgage insurance applications received by MGIC on or after March 3, 2008:
Standard (A) guideline changes:
LTVs greater than 95% require a minimum credit score of 680.
LTVs 95% or less require a minimum credit score of 620.
Loans with nontraditional credit require a manual MGIC underwrite and are limited to a maximum LTV of 95%.
Primary residence cash-out refinances require a minimum credit score of 680; and the maximum LTV is 90%.
Cash-out refinances of investment property loans are ineligible.
Loans with potential negative amortization, including Pay Option ARMs, are ineligible.
Expanded Criteria (A-) guideline changes:
The maximum LTV is 95%.
The minimum credit score is 660.
Primary residence cash-out refinances require a minimum credit score of 680. (The current maximum LTV of 90% remains.)
Reduced Documentation (Alt-A) guideline changes:
The maximum LTV is 90%.
The minimum credit score is 660.
As announced on Nov. 30, 2007, at least 50% of qualifying income must come from self-employment. See our Underwriting Guide at mgic.com for our self-employed definition.
Streamline Refinance changes:
Only loans already insured by MGIC are eligible for our Streamline Refinance program.Additional revisions to our refinance guidelines will be posted on our website by February 15, 2008.
Restricted Markets:
We are further modifying our Restricted Markets policy (originally announced on Nov. 30, 2007). While we will no longer require reducing maximum LTV/CLTV by 5%, we are establishing specific underwriting guidelines for loans insured in Restricted Markets. MGIC's list of Restricted Markets is posted on our website, MGIC Restricted Markets
Standard (A) guideline changes in Restricted Markets:
LTV/CLTVs of 90.01%-95% require a minimum credit score of 680.
LTV/CLTVs of 90% or less require a minimum credit score of 620.
The maximum LTV/CLTV for condominiums is 90%.
The maximum LTV/CLTV for MGIC's SingleFile program is 95% and a minimum credit score of 720 is required for all LTVs.
The following are not eligible in Restricted Markets:
LTV/CLTVs greater than 95%
Expanded Criteria (A-) product
Reduced Documentation Alt-A) product
Investment property loans
Cash-out refinances
Potential negative amortization, including Pay Option ARMs
Additionally, loans not in an MGIC Restricted Market must meet the declining markets policy of both the lender and of the applicable Agency at the time of origination if:
The appraiser designates the secured property as in a market having declining values and/or The loan receives a "Declining Markets" message from Desktop Underwriter® or Loan Prospector® Please note that MGIC does not automatically approve loans for mortgage insurance based upon specific Agency AUS recommendations/decisions.
All of the above underwriting policy changes supersede existing lender exceptions and program approvals.
As previously announced, new premium rates across many of our insurance products (MGIC Error Page will also go into effect March 3, 2008, subject to regulatory approval.
In addition to these changes, we are in the process of revising our SingleFile, LPMI, Split Premium and One-Time MI programs. We will provide you with updated information as soon as possible.
Thank you for your business in these challenging times.
Sincerely,
Sal Miosi
Vice President - Marketing
Well sit down for this I am looking at some short sales while I look for a new rental. I figure if I can get something around 550k that used to be 800-900 I would buy instead of rent. I called to see what I could borrow so I would know my price range. This idiot bank called Premier Lending is still giving out 100% financing. In fact when I was asking about rates with 20% down he was like why tie up your money if you don't have to. I asked if they were privately owned or publically traded unfortunately private owned. I would love to short these fools.
I've been thinking of paying off my mortgage. Almost did when Greenspan trashed rates after the dot-bomb fiasco.
What happens if I pay it down to a really low balance like $15,000. I have an adjustable from the early 90's. I asked my mortgage company to lower the rate ASAP and they said they couldn't. I'm looking to negociate. Is it possible?
It isn't worth the effort for anyone.
or borrow 15k on your citi card at 4.9 till you pay it off.
nice hat tip Cal- MGIC is going to be the death of housing with changes like those.
I note that insurance rates have gone up significantly, so I guess they will have to be passed on to those mortgage buyers through slightly higher rates. I note that super Jumbo is over 650K.
I just paid off a low balance mortgage loan because it got to the point that I didn't have enough interest expense to break the standard deduction. I agree with Allen, just pay the loan off. It makes life a little simpler and it's one less thing that the bank could mess up - inadvertently, of course.
We call them neutron loans because theyre like a neutron bomb, said Brock Davis, a broker with U.S. Express Mortgage Corp. in Las Vegas. Three years later the house is still there and the people are gone.
Just read of a big auction in my town (NNJ)for dozens of converted apartments. Originally they were 550K + for a 2 bedroom. I looked into buying these as rentals in 2004.
Prices paid were just plain loopy - 25 times comparable rental rates. A bunch of nitwit brokers told me how much money could be made by converting to condos. Rich Dad Poor Dad types.
Oh well, I'll be low balling at the auction.
Btw, all the units were completely re-done with new floors, kitchens and bathrooms. So much for asset appreciation.
All of the old-timers knew that subprime mortgages were what we called neutron loans they killed the people and left the houses, said Louis S. Barnes, 58, a partner at Boulder West, a mortgage banking firm in Lafayette, Colo.
"Homeowners: Can't pay? Just walk away - More and more borrowers are watching their house values sink while the cost of their loans skyrockets. What to do? Skip out on the mortgage all together . . .
I'd prefer no interest and no inflation. Or better yet, deflation.
Angry Saver | 02.07.08 - 3:35 pm | #
Probably best to hedge some both ways - likely to see temporary deflation as assets values crash but eventually lots of inflation as policy makers 'respond'. Oh the humanity...
Its so damned unstable it amazes me it hasn't already fallen off the high wire.
Mike Hawk writes:
Romney drops out - Best news all week!
It's just unbelievable that (except for Ron Paul) not one voice of moderation on the Iraq War has emerged among Republicans. Even as the economy sinks into the toilet and the federal deficit soars skyward.
It is one of the most tone-deaf political mistakes of all time.
You don't have to be a genius to see that domestic economic despair will translate into anti-war votes in November.
You don't have to be a genius to see that sectarian militias are re-arming for a bloodbath across Iraq and the middle east this summer.
You don't have to be a genius to count the crowds and votes anti-war sentiment is bringing to Democrats.
It's also shocking how the MSM has universally bought the "surge is working" myth. What happened to common sense in U.S. politics?
"Credit scores are hurt much more by missing multiple payments - on credit cards, cars and so on - than by a single foreclosure.
"The time it takes to regain your credit score [after foreclosure] can be shorter than after bankruptcy," said Watts.
It typically takes three years of a spotless payment record after a bankruptcy before credit scores recover enough for someone to think about buying a home again, he said. After abandoning a mortgage, a person may be able to buy a new house in two years or less."
They make it sound like you'd be really stupid to stay.
And you don't have to be a genius to see that people living in almost every country in the world are rooting for the Democrats to win and bring our troops home!
The world has had enough of Bush. If McClain is elected, the rest of the world will always view him as mini-Bush.
You can't be the financial and military leader of the world when the rest of the world despises and pities your politics.
My interest is related to how The Fed target rate for lending are adjusted in relation to Treasuries.
The following caught my attention today:
Adjusted for inflation, the Fed's benchmark rate is now approaching zero,'' making itclearly an accommodative level,'' Plosser said. Traders expect the Fed to lower the target rate for overnight loans between banks to 2 percent by June, futures show.
Thus my question here, is related to how The 10 year treasury is adjusted for inflation; I think it is not, but perhaps someone can take a few seconds to pull me from confusion?
The reason this interests me today, is because I sometimes look at stock index valuations based on earnings yields, e.g, the inversion of the S&P 500 index P/E is the earnings yield and can be thus correlated to a 10 year bond yield, which gives a simple range of overvaluation of undervaluation. however, I am now very curious as to the great possibility, that the 10 year treasury yield is not adjusted for inflation, thus this valuation benchmark I use could be off by 3 or 4% or more.
Several weeks ago, I wondered if the S&P was overvalued by 5%, but now Im thinking maybe 8% or more.
From Bloomberg (entire article content below, apologies if already posted):
Feb. 7 (Bloomberg) -- Security Capital Assurance Ltd.'s bond insurance unit, hobbled by a decline in subprime mortgage securities, lost its Aaa credit rating at Moody's Investors Service.
XL Capital Assurance Inc. was cut six levels to A3, New York-based Moody's said today in a statement.
You don't have to be a genius to count the crowds and votes anti-war sentiment is bringing to Democrats.
Rich - those are 'my people'... almost all of my family are avid dems (im'm a left leaning inde). I told them last year the economy would blow Iraq off the front page in 08 and they all laughed at me. I can't claim credit for smarts - that conclusion came from reading this blog & a few others.
The anti-war vote won't deliver the dems one electoral vote - I'd be willing to bet that the Nov exits polls as unreliable as they are show that.
The thing that amazes me is that the GOP candidates aren't more pro-actively distancing themselves from Bush vis-a-vis the economy. That to me is the mystery of this election cycle.
I sincerely doubt that Romney gets a VP nod. He sees the writing on the wall, needs to preserve some dignity and earn some capital with GOP insiders for his next run.
My worry is that McCain (a true lunatic, oddly hated by many on the right) will pair up with Huckabee and pull in the evangelic vote.
Bad bond auction on 30yr....
13:14 ET 10-Yr: -23/32..3.681%.. GNMAs: -04/32.. USD/JPY: 107.3895.. EUR/USD: 1.4463
Bonds Bashed on Auction : The long end got clobbered on the heels of a poor showing on the day's auction with action picking up on the way down. The 10-&-30-yrs are flirting with the worst levels since the end of Jan, wiping out any recent gains as the expected demand just wasn't there. Most had been looking for a decent, not great, not really "good" per say, but OK auction. Didn't even get that.
In fact when I was asking about rates with 20% down he was like why tie up your money if you don't have to. I asked if they were privately owned or publically traded unfortunately private owned.
If those are their terms in this environment, I'd be suspecting that they're a front for money laundering.
I don't think Romney will be the VP. Huckabee is more likely. He shores up the social conservative vote, and his economic populism might help pull in one or two of the midwest purple states that would be needed for a win. Romney as VP will annoy the social conservatives, and it's not like he's loved enough that he's going to win MA for the Republicans.
I think the anti-war issues will be one straw among many - everybody gets their own Damascus moment here. Going forward, yeah, the economy is likely to push more people toward the Dems. The anti-war vote is probably already delivered.
Romney is the Reagan of 1976. He will reclaim the conservative mantle in his defeat.
Back on topic. People are strangely sanguine as to the implications of new housing cancellation rates. Home Builders are themselves 2x ETFs because they have both gone vertical and because their focus has been in high growth ares.
Terry, I'm bettin' you disagree with Rich's politics more than you oppose his posting about the subject. If that's what you consider being a troll, it's you that ought to find another site. I mean, Geez, his post is much more relevant to the economy than half the stuff that's posted here.
We ain't seen nothing yet. Wait until 3 to 4 more years from now when the option arms explode.
MOST PEOPLE WITH OPTION ARMS WILL CONTINUE PAYING THEIR MORTGAGES BECAUSE IT IS CHEAPER THAN RENTING SIMILAR HOUSING. The payments are autoficially low.
But many are already know under water. Once the adjustments come with 300% increase in payments WATCH OUT BELOW!
They never 'fail' - or never have. They just 'disappoint'. Meaning the gov doesn't 'pull' the offer like a bridge turned peer LBO loan float... T Bill prices just go to hell & yields sky.
From a Beazer puff piece this morning on a homebuyer survey they commissioned:
-64 percent of Americans believe that for those with good credit and a down payment this is an ideal time to buy a home.
-65 percent of survey respondents agree that given the current supply of homes for sale and special incentives this is truly a buyers market.
and my personal favorite:
-The survey found 70 percent of experienced homebuyers those who have purchased at least one home urging renters to purchase a home as soon as he or she is financially able to do so.
I don't think most Americans have yet had the Damascus moment about the war's economic cost.
The pattern is...as your own personal economic situation deteriorates, you start looking around for something to blame it on.
The U.S. economy was booming through early 2007. It's easy to like a war in good times. Then came the surge, and I don't think it was coincidental that it came as the economy started down. All the hoopla about the surge has wagged the dog.
When the surge collapses, people will start to connect economy with war.
The longest-maturity U.S. debt fell the most since 2004 as bondholders concluded that yields were too low given the Federal Reserve's determination to cut interest rates and keep the economy out of a recession.
>
Is this the reason why feds are trying to talk up inflation?
Yalt:"Across the board, consumers appear optimistic about the availability of home mortgage options."
There is absolutely a lot of mortgage availablity for people out there. This isnt a true credit crunch where well qualified borrowers cant get money. It is a relative credit crunch where borrowers have come to expect no impediment and no money down in access to mortgage credit are getting roadblocks.
Saying you need 5% down isnt a credit crunch, saying you cant get money no matter how much down you have is a credit crunch.
I like how Beazer surveyed households with a minimum income of $40k but took the percentage responses and attributed them to the population as a whole. I'll add it to my "bad stats" Hall of Shame.
The auction yield on the new long bond was the lowest since regular sales of the security began in 1977, according to Steve Meyerhardt, an official in the Bureau of the Public Debt in Washington.
In today's auction, indirect bidders, the class of investors that includes foreign central banks, bought 10.7 percent, the lowest on a new 30-year bond since the Treasury resumed sales of the maturity in February 2006 after an almost five-year hiatus.
Scav, the survey also found 99.75% of experienced BZH shareholders urging nonshareholders to buy a share as soon as they are financially able.
In all seriousness, even if you thought hb's were a good buy at these prices, would you want to buy one with such an apparently total disconnection from reality?
I'm sensing chaos is emerging in the world of U.S. defined benefit pension plans.
We've discussed problems with the long/short quant hedge funds. But there's another popular type of long/short fund that is used mainly by the db plans. It's called 130/30.
You start by putting 100% of the money into long stocks. You then short 30%, and you use the proceed of the shorts to buy another 30% longs. So, your portfolio is net long 100% (same as the market) but you have the potential to add alpha if longs outperform shorts.
There's tens of billions of dollars in 130/30 funds and 30% of that is short crummy stocks. These funds are suppose to always keep 30% short, and they don't use high leverage (130%). But they could be experiencing redemptions and unwinding, too.
I saw the CNN article pretty much advising people to walk away but just to be contrary, I'm just going to stick it out as the neighborhood empties out and turns into a war zone, now I'm just pissed off.
I mentioned this to dryfly a few days ago. My parents are lifetime dems. Donate,volunteer etc...They both refuse to vote for Hillary or Obama. Kinda surprised me. Whats even weirder is they both said the would vote for McCain. I have a feeling the conservative dem vote might surprise a lot of people.
"Finally a replacement for all those shows on HGTV that would be interesting enough to attract viewers."
I actually find HGTV more interesting now than ever. Particularly the show where they get a realtor to tell them how many hundred thousand dollars their 3 year old property has appreciated so they can borrow against it to do more improvements or buy a vacation home.
Gee, owl, thanks for reminding us. It's been - what - 3 days since a post on the evils of OAs?
So, if we assume some sort of bailout is inevitable for those folks, let's get some fresh ideas on the board. And I'm not talking Sheila Bair ideas, I'm talking about REALLY oUt of The BOx thinking! Since these people like 'options' so much, how about a more 'optional' approach to bailouts? In other words, those who feel they just couldn't deal with the higher payments once their option ARM when it resets, can choose the new 'option' of turning to the newly-created Federal Foreclosure Prevention Corporation, or FFPC, for help.
In exchange for accepting the aid of the FFPC, you (the borrower) will:
Relinquish an equity share to FFPC in direct proportion to the pencentage of loan principal repaid by FFPC.
The FFPC may assign 1 previously homeless person to each spare bedroom of your home. Those individuals are further entitled to help themselves to whatever is in your fridge.
Cobradriver - but isn't that indicative of the same basic zeitgeist of people simply having had it with large chunks of the existing socio-political system/framework? MSM, govt, political parties, corporations, run down the list. Things don't seem to be working well and the general fed-up-with-it-ness is rising - there may be more than classic "populism" rising. Nations as well as economies rely fundamentally on trust.
On top of all the inflation fears that the Fed, Bush budget and LT Treasury yields are creating, you really have to like the technical chart of physical silver:
It's also shocking how the MSM has universally bought the "surge is working" myth. What happened to common sense in U.S. politics?
rich
Come on, Rich. What news have we ever heard from Iraq since things turned around for the better? - Right, none. Since violence fell off a cliff in Iraq, the media coverage dropped more than 50%. Only bad news sells. That's also why CR posts only negative news IMO.
Negative news allow people to overlook their own shortcomings, that's why there are so many consumers thereof. Like: Geeze, the FED and government can't keep the economy up either, so when I screw up in my life it's really not so bad.
Bad bond auction on 30yr....
13:14 ET 10-Yr: -23/32..3.681%.. GNMAs: -04/32.. USD/JPY: 107.3895.. EUR/USD: 1.4463
Bonds Bashed on Auction : The long end got clobbered on the heels of a poor showing on the day's auction with action picking up on the way down. The 10-&-30-yrs are flirting with the worst levels since the end of Jan, wiping out any recent gains as the expected demand just wasn't there. Most had been looking for a decent, not great, not really "good" per say, but OK auction. Didn't even get that.
I just noticed the auction results came out at 1:00pm with the yield awarded. I guess it was coincidence that I saw Fisher's inflation comment reported at exactly the same time.
"Exit polls showed that 90 percent of those who voted in the California Democratic primary, which was open to independents, said the economy was "not so good" or poor."
So what is someone on the fence to do? I have some money to put down, I live in an area not getting killed by a dropping market. I'm in Charlotte, NC and it has help up favorable compared to many other areas because we didn't have a huge run up.
There are a few good houses in pre-foreclosure or REO that I'm considering making an offer on one of them to live in with my family (not investment), but the sentiment here - and I respect the opinions of those here - is to hold on?
Even with a great deal now you are all saying WAIT...it is going to get better?
I'm just trying to understand where we are at and where we are going and not miss a great deal on an FC or REO.
If you want your pensions, mutuals and money market funds safe, read your prospectus and make sure you know how your money will be "managed"!! Very good time to keep on top of things if you have been out to lunch for a few months!!!
I use the old school rule. 2-2.5 times income. When home prices fall to that point here in Florida I will start looking. Is this even close for you??
Honestly,I do not see prices rocketing up anytime soon...So waiting will not hurt and could help a bunch price wise.
Japanese government bonds slipped in early trade, pushing up the benchmark 10-year yield 1.5 basis points to 1.420%.
U.S. 10-Year Treasury\t3.77\t0.19
`To the extent that long term inflation expectations have risen a fair degree, as the Fed has been aggressive in easing, it would be negative for the 30-year,'' said Kurush Mistry, an interest-rate strategist in New York at Lehman Brothers Holdings Inc., a primary dealer.
U.S. economic growth will accelerate at a 2.5 percent annual rate in the fourth quarter, double the pace of this quarter, according to the median forecast of analysts surveyed by Bloomberg News. U.S. consumer prices rose 4.1 percent in 2007, the most since 1990, the Labor Department said last month.
Traders see an 80 percent likelihood that Fed policy makers will reduce their target for overnight loans between banks by a half-point to 2.50 percent at or before their next scheduled meeting on March 18, futures on the Chicago Board of Trade show. The rest of the bets are for a 75 basis point cut.
OK, what blows my mind, is the divergence between a 10 year US Treasury and a 10 year Japanese gov bond. It says a little something about globalization IMHO, like Japan is highly overvalued and IMHO, you will see that market crash and we will see a global liquidity trap!
Larmier - if its a house you plan to live in, you can afford it without a stretch and you don't plan to look at whether it goes up or down again for a long time - buy it if you want it.
If you are looking to buy an 'investment' to live in - then rent, save and wait instead. Its that simple.
Larmier - If I lived in Charlotte I'd be a home owner. I think this blog has a very coastal/bubble focus. Yes, there's a national bubble but if a house is only $200,000 or so if it goes down 10-20% you're out less than 2-3 months' salary. Who cares?
If you lived in the Bubblezone and were looking at $600,000 starter houses like we are, with rents less than $2000 for the same house, I'd say wait. But in Charlotte? Go for it!
"Never get involved in a land war in Asia!"
Red Pill | 02.07.08 - 4:25 pm | #
I really do wonder how many people in D.C. have read A Peace to End All Peace.
As for cancellation rates, Richmond, VA is feeling the heat in the condo market, with rent signs going up more and more. But surprisingly, in the past week and a half I have seen at least 10 sf homes (languishing on the market for months and months) now displaying "under contract" signs. How to explain? This, btw, is in the Fan area, not the burbs. Any other Richmonders to shed some light on this flurry of new contract signings?
Inflation fears could give investors false hope that rates won't go down further.
REBear | 02.07.08 - 4:51 pm | #
But, aren't we seeing a decoupling of long term rates from the Fed rate? Greenspan's conundrum.
Won't longer term debt become more expensive to finance if no one wants it?
I am no expert but it seems like the bond situation is more complex than is portrayed. The rate would seem to be a complicated function of inflation/deflation expectations and confidence in the issuer of the debt.
Sir Bush, Sir! Reporting for duty to spend the rebate check, sir! It's my sworn duty to help the economy by spending them on gas and Chinese products, SIR!
Feb. 7 (Bloomberg) -- Deutsche Bank AG Chief Executive Officer Josef Ackermann said rating downgrades for bond insurers pose risks that could match the U.S. subprime market collapse.
It could be a tsunami-like event comparable to subprime,'' Ackermann said in a Bloomberg Television interview in Frankfurt today. Deutsche Bank, Germany's biggest bank, iswell positioned'' on its risk from bond insurers, he said.
Be very careful about buying properties in FCL or REO - don't think such properties are discounted just for the hell of it. If you're willing and able to create real sweat equity, they might be a viable option for you. But the days of easy flips are over, if indeed they ever happened in Charlotte.
Like dryfly said, if your want to own a home is a matter of lifestyle preference - don't try to time the market, just buy. If you primarily looking to invest, residential real estate might not be the best choice at the moment.
Larmier, You should do a lot more research on the Charlotte market. I've seen several articles recently that are not so upbeat regarding the Charlotte area's perceived immunity to the burst of the bubble (I can't direct you to them, sorry).
It's been said here many times: We're all sub-prime now.
Anon @ 5:01
I agree there is a decoupling of long term rates from fed rates. IMO, one of the main reasons for this decoupling is the fed rate is lower than the inflation rate. I believe the feds over the past two days are trying to reverse this process by assuring investors that inflation is still a concern and therefore further cutting of interest rates is not guaranteed.
Charlotte Observer via January 30th edition of thehousingbubbleblog.com
Home building and sales are falling more sharply in the Charlotte area than nationally, a sign the housing slump is worsening in what has been one of the countrys stronger markets. Building permits, an indicator of future home sales, fell 40 percent in the eight-county Charlotte region during the fourth quarter, compared with the same period in 2006.
Sales of existing houses, townhouses and condos also fell 24 percent in the fourth quarter, according to Market Opportunity Research Enterprises.
The national malaise was late coming to Charlotte, but it happened very quickly once it arrived, said Chuck Graham of Newton Graham Consultants, a veteran of the area real estate market. I think we still have a little further to go.
Rates, yields, smoke, mirrors, bongwater, koolaid, does not matter.
The truth here is that The Euro gained value against The Dollar, as the dollar fell, Treasury Yields fell and continue to fall, thus a weak currency linked to excessive debt and lower yields will result in an increasing over supply of Treasuries which will have to absorb more debt, which will drive yields lower and lower and in associated correlation, the currency will reflect the disconnect between Treasury debt and future value of the currency. which obviously will obviously have less value stored in its utility.
The flight to safety from overvalued equities will be thus search for greater value in foreign debt or foreign stocks, but as we see, London, Tokyo and many Asian countries are impacted by debt, banking trouble, derivative implosions, accounting fraud and bonds that are falling in value as well.
Currency exchange remains an interesting activity, because the US war debt is a burden realtive to America and thus foreign currencies do not have that burden, and thus foreign currency can be used to obtain future value in the form of foreign debt. However, if one flips this coin, one then understands why a sovereign power or wealth fund can take foreign cash to buy American debt cheap, i.e, they are using a currency with more stored value not attached to war debt, and thereby leveraging currency to obtain devalued equities.
The problem is that they are getting a great deal, but they will take the rewards of this plunder back home and leave bagholders holding nothing; this is the reality of pirates.
To sum up, you need to find a better currency not attached to too much debt, then use leverage to obtain greater debt and then wait for your payoff and then get the F--K outta there!
To sum up, you need to find a better currency not attached to too much debt, then use leverage to obtain greater debt and then wait for your payoff and then get the F--K outta there!
Great idea, which one:
US - Public Debt: 64.7% of GDP (2005 est.)
UK - Public Debt: 42.2% of GDP (2006 est.)
DE - Public Debt: 66.8% of GDP (2006 est.)
JP - Public Debt: 176.2% of GDP (2006 est.)
IT - Public Debt: 107.8% of GDP (2006 est.)
BR - Public Debt: 50% of GDP (2006 est.)
CHE - Public Debt: 51% of GDP (2006 est.)
Now, factor in demographics to estimate what the future Debt/GDP ratios will be in those countries when you want your money back.
I agree with dryfly. If you can buy a house to live in, afford the payments comfortably without stretching, and not need to look at what it's "worth" for a decade, then buying may be an option.
if you want/need any appreciation, then do some serious due diligence on your home.
my in-laws are in Charlotte. There are a lot of areas that are massively overpriced there. While it is true that some of the areas didn't appreciate much, IMO many of those areas would have DEPRECIATED if not for 'the bubble'.
Some areas that I believe are massively overpriced:
-almost every condo in or near the so-called 'uptown'
-a lot of the lower income places (e.g. where the big Beazer lawsuit orignated)
-a lot of the newer construction, especially in the further out places in south-eastern Charlotte and Matthews and Pineview etc...
-most of the new construction in Lake Norman.
I'm not sure where you are in Charlotte, but Lake Norman and the southwest part of the city SKYROCKETED in the last few years.
Northern Rock was officially reclassified as a public enterprise yesterday in a move that means one of the Treasury's cherished rules for the public finances has been breached.
The Office for National Statistics said it had taken the decision to designate it a state entity because the size of the government's support for the stricken bank meant it had effective control. The move has the effect of bringing up to £100bn of Northern Rock's liabilities onto the national debt.
Although the Treasury said the move was only temporary, it means that one of Gordon Brown's two fiscal rules - that public debt should not exceed 40% of gross domestic product - will be broken. The national debt stands at £537bn, equivalent to 37.7% of GDP. The ONS said the reclassification would add 6.7 percentage points to that figure, taking it to 44.4%.
Northern Rock was officially reclassified as a public enterprise yesterday in a move that means one of the Treasury's cherished rules for the public finances has been breached.
Rules were made to be broken. Plus somebody has to be first...
44%~ ouch! That reinforces CR's perspective on new home inventory, way, way understated.
This cancellation rate is doubly troubly since this isn't the turmoil of last summer when credit was changing and prices were high. This is in an historically low mortgage interest rate period and surely DHI is vetting their customers more carefully before initiating a contract for sale.
This is a consumer sentiment driven cancellation rate.
Horton hears a WTF ¿
Horton is Tangled Up In Blue:
YouTube -
Yet they still think its a good idea to build those condos right across the street from the mission valley mall here in San Diego. If that thing makes them one dollar I'd be shocked.
Can a brother get an "AMEN" !?!
Sure but their stock is up, and since stock prices are predictors of future earnings of the company, then things must really be looking up...or this dead cat is springier than we thought.
Why buy a Horton home when you can select from dozens they built two years ago, located a little closer to the center of town, on sale from a bank at 20% less than Horton's current prices?
HB's are up today. They seem to go up no matter how bad the news. In the past whenever this has occurred, the prices had a sudden drop in the near future. It's like there's a delay between the bad news being announced and the realization of what the bad news means.
Amen brothers and sisters, let he rain fall
So what hopelessly optimistic rumor just goosed the market up???
MS
OT: Finally a replacement for all those shows on HGTV that would be interesting enough to attract viewers.
Celebrity Real Estate Losers
Celebrity Real Estate Losers - Forbes.com
...
Johnny Carson sidekick Ed McMahon is also having real estate troubles. He put his 7,000-square-foot Beverly Hills home on the market In July 2006 for $7.7 million. He has since reduced the price three times, and the house is now selling for $5.7 million.
Amen!
the bigger they are the harder they will fall?
Stay focused people:
Housing environment is "Challenging"
Average ordered home price fell 17%.
Does The Fed really think that lowering target rates again -- is going to re-stimulate or re-invigorate or re-prime a housing bubble that is out of control and un-contained, un-regulated, and that we have banks that are out of control with synthetic derivatives, which are un-regulated, un-accountable and contributing to systemic failure?
What we have is a Fed that is collusive and corrupt and these retarded bastards should all be hanged for treason!
Actually, the stock is up 5% today, so it's not clear how "bad" the news really is, at least according to the market.
Realtor translation:"God is not making any more investors".
Re: s tock is up 5% today
Maybe we should stand in line and flip coins, because earnings dont matter in this casino, and neither does valuation of stocks, homes, wages, debts.... We need more coins printed!!
the market is up because of:
short covering
the PPT
fools and idiots
time to go clean my house that getting foreclosed.
Sure but their stock is up, and since stock prices are predictors of future earnings of the company, then things must really be looking up...or this dead cat is springier than we thought.
Actually, the reported backlog as well as Q-Q sales progression is a good predictor of future revenue, and both of those indicators were "bad".
HB's are up today. They seem to go up no matter how bad the news.
That's the problem with too much short interest. Plan for it though and it can be your friend.
This is a consumer sentiment driven cancellation rate.
MDC reported a cancellation rate of 65%, as well as a backlog that was cut in half. And its stock is up 8% today. It did increase its reported cash position by selling lots for a large loss. Such are the things that gain the favor of "investors". At least for today.
eh | 02.07.08 - 2:25 pm | #
eh,
Then I'll go with dead cat theory, or oy vey's greater fool/PPT/short covering theory.
CR,
How is that Cancellation Rate calculated? If a purchase is cancelled, it doesn't go back to inventory. Does that mean any secondary cancellations of that same unit would not count into both the numerator and denominator?
A contact at one of the big builders lead me to believe their cancellation rate was higher than 44%.
Thanks,
Face facts, the truth hurts sometimes, most of the time!
How many homebuilders out there, or lenders can face the truth at this point and thus face the harsh reality that they were retarded beyond all doubt and the fact that they failed to back away from the casino tables while the casino started to burn down!
Everyone saw an un-sustainable bubble, but these types of greedy pigs wanted more and more and more, and they wanted free drinks and more chips and they wanted to play with other peoples money. Screw them, they got what they deserved and they need to fail and lessons do have to be learned! This is like a bunch of cocaine crack heads that wanted the party to last 24 X 7 into infinity.........wah, wah wah and LOL!
Those headlines would be great interspersed with Leslie Nielsen's "give it to me straight, doc" shtick from the Naked Gun.
Don't beat around the bush!
Damn it, come clean with me!
Just what are you trying to say!?
Mortgage insurance getting tigher...
Mortgage Guaranty Insurance Corporation
February 6, 2008
Dear Valued Customer:
As a result of our ongoing evaluation of market conditions and loan performance, we are making a number of changes to our base underwriting guidelines and have created a new set of guidelines for areas exhibiting market weaknesses. The following underwriting guideline changes are effective for mortgage insurance applications received by MGIC on or after March 3, 2008:
Standard (A) guideline changes:
LTVs greater than 95% require a minimum credit score of 680.
LTVs 95% or less require a minimum credit score of 620.
Loans with nontraditional credit require a manual MGIC underwrite and are limited to a maximum LTV of 95%.
Primary residence cash-out refinances require a minimum credit score of 680; and the maximum LTV is 90%.
Cash-out refinances of investment property loans are ineligible.
Loans with potential negative amortization, including Pay Option ARMs, are ineligible.
Expanded Criteria (A-) guideline changes:
The maximum LTV is 95%.
The minimum credit score is 660.
Primary residence cash-out refinances require a minimum credit score of 680. (The current maximum LTV of 90% remains.)
Reduced Documentation (Alt-A) guideline changes:
The maximum LTV is 90%.
The minimum credit score is 660.
As announced on Nov. 30, 2007, at least 50% of qualifying income must come from self-employment. See our Underwriting Guide at mgic.com for our self-employed definition.
Streamline Refinance changes:
Only loans already insured by MGIC are eligible for our Streamline Refinance program.Additional revisions to our refinance guidelines will be posted on our website by February 15, 2008.
Restricted Markets:
We are further modifying our Restricted Markets policy (originally announced on Nov. 30, 2007). While we will no longer require reducing maximum LTV/CLTV by 5%, we are establishing specific underwriting guidelines for loans insured in Restricted Markets. MGIC's list of Restricted Markets is posted on our website, MGIC Restricted Markets
Standard (A) guideline changes in Restricted Markets:
LTV/CLTVs of 90.01%-95% require a minimum credit score of 680.
LTV/CLTVs of 90% or less require a minimum credit score of 620.
The maximum LTV/CLTV for condominiums is 90%.
The maximum LTV/CLTV for MGIC's SingleFile program is 95% and a minimum credit score of 720 is required for all LTVs.
The following are not eligible in Restricted Markets:
LTV/CLTVs greater than 95%
Expanded Criteria (A-) product
Reduced Documentation Alt-A) product
Investment property loans
Cash-out refinances
Potential negative amortization, including Pay Option ARMs
Additionally, loans not in an MGIC Restricted Market must meet the declining markets policy of both the lender and of the applicable Agency at the time of origination if:
The appraiser designates the secured property as in a market having declining values and/or The loan receives a "Declining Markets" message from Desktop Underwriter® or Loan Prospector® Please note that MGIC does not automatically approve loans for mortgage insurance based upon specific Agency AUS recommendations/decisions.
All of the above underwriting policy changes supersede existing lender exceptions and program approvals.
As previously announced, new premium rates across many of our insurance products (MGIC Error Page will also go into effect March 3, 2008, subject to regulatory approval.
In addition to these changes, we are in the process of revising our SingleFile, LPMI, Split Premium and One-Time MI programs. We will provide you with updated information as soon as possible.
Thank you for your business in these challenging times.
Sincerely,
Sal Miosi
Vice President - Marketing
Check out the restricted market list
Arizona, California, Nevada and Florida... whole states.. all restricted
PROFIT TAKING NOW AND RESHORTING.
It is about time for an FHAIASL loan.(illegal alien secure loan)
There's trouble in Hooville!
MGIC's list of Restricted Markets is posted on our website, www.mgic.com/restrictedmarkets.
Arizona Entire State
California Entire State
Florida Entire State
Nevada Entire State
That makes it easy !
Ray
Any ideas on what spooked the treasury market at 1:00 EST?
Well sit down for this I am looking at some short sales while I look for a new rental. I figure if I can get something around 550k that used to be 800-900 I would buy instead of rent. I called to see what I could borrow so I would know my price range. This idiot bank called Premier Lending is still giving out 100% financing. In fact when I was asking about rates with 20% down he was like why tie up your money if you don't have to. I asked if they were privately owned or publically traded unfortunately private owned. I would love to short these fools.
Any ideas on what spooked the treasury market at 1:00 EST?
Could be the negative real interest rates and fear of a loss in purchasing power. Just a hunch though.
Agreed MAB why tie your moneyh up for 10 years at these rates in a dead currency.
Paradigm Lost writes:
There's trouble in Hooville!
A merciless attack under cover of night by the faceless Coodanode?
O/T: Hearing that the raise of GSE conforming loan limits is in the Senate version in the stimulus package.
Duceswild at 02.07.08 - 3:01 pm writes:
Any ideas on what spooked the treasury market at 1:00 EST?
Tepid demand for 30 year Treasuries?
http://www.bloomberg.com/apps/news?pid=20601087&sid=aWv_IyXmRAPA&refer=home
Is the pitter pat of capital flight turning into hippity hop on the way to a stampede?
From a Bloomberg story on the latest Treasury auction:
Investors bid $1.82 for every $1 of new debt sold. The average for the past three sales of new bonds since February 2006 is $2.03.
Romney drops out - Best news all week!
- NY Times
lama, most builders calculate the cancellation rate as the number of cancellation in the quarter divided by the number of sales in a quarter.
So if the company sold 1000 units, and received 440 cancellation from sales in previous quarters - the cancellaton rate would be 44%.
What really matters is the change in the cancellation rate (it can also be distorted if sales fall or rise rapidly).
Best Wishes.
Romney drops out - Best news all week!
Wow! So McCain now has a completely unimpeded path... so was this a QPQ to get a VP bid?
I've been thinking of paying off my mortgage. Almost did when Greenspan trashed rates after the dot-bomb fiasco.
What happens if I pay it down to a really low balance like $15,000. I have an adjustable from the early 90's. I asked my mortgage company to lower the rate ASAP and they said they couldn't. I'm looking to negociate. Is it possible?
Moody's downgrades XL Capital to A3 from Aaa
Sorry. Page not found. is available.
shouldn't it be hoocoodanode.com?
Angry at that point just finish it off.
It isn't worth the effort for anyone.
or borrow 15k on your citi card at 4.9 till you pay it off.
nice hat tip Cal- MGIC is going to be the death of housing with changes like those.
I note that insurance rates have gone up significantly, so I guess they will have to be passed on to those mortgage buyers through slightly higher rates. I note that super Jumbo is over 650K.
Someday this war's gonna end...
I just paid off a low balance mortgage loan because it got to the point that I didn't have enough interest expense to break the standard deduction. I agree with Allen, just pay the loan off. It makes life a little simpler and it's one less thing that the bank could mess up - inadvertently, of course.
OT little quote on certain mortgage loans:
We call them neutron loans because theyre like a neutron bomb, said Brock Davis, a broker with U.S. Express Mortgage Corp. in Las Vegas. Three years later the house is still there and the people are gone.
nice hat tip Cal- MGIC is going to be the death of housing with changes like those.
Good thing that stimulus package hasn't passed yet - still time for amendments at conference committee.
All,
Just read of a big auction in my town (NNJ)for dozens of converted apartments. Originally they were 550K + for a 2 bedroom. I looked into buying these as rentals in 2004.
Prices paid were just plain loopy - 25 times comparable rental rates. A bunch of nitwit brokers told me how much money could be made by converting to condos. Rich Dad Poor Dad types.
Oh well, I'll be low balling at the auction.
Btw, all the units were completely re-done with new floors, kitchens and bathrooms. So much for asset appreciation.
Angry Saver,
I say refi, take out all equity possible, buy yourself some nice things, perhaps invest in some stocks and real estate.
If you don't, you hate America.
Ron, that is actually an old saying. Here is an excerpt from last August:
How Missed Signs Contributed to a Mortgage Meltdown
All of the old-timers knew that subprime mortgages were what we called neutron loans they killed the people and left the houses, said Louis S. Barnes, 58, a partner at Boulder West, a mortgage banking firm in Lafayette, Colo.
Best Wishes
OT but loved this CNN Money headline:
"Homeowners: Can't pay? Just walk away - More and more borrowers are watching their house values sink while the cost of their loans skyrockets. What to do? Skip out on the mortgage all together . . .
Seemed like a directive - stupid not to . . .
At this point my interest from savings are far below my mortgage rate. The ARM only resets twice a year.
I'd prefer no interest and no inflation. Or better yet, deflation.
I'd prefer no interest and no inflation. Or better yet, deflation.
Angry Saver | 02.07.08 - 3:35 pm | #
Probably best to hedge some both ways - likely to see temporary deflation as assets values crash but eventually lots of inflation as policy makers 'respond'. Oh the humanity...
Its so damned unstable it amazes me it hasn't already fallen off the high wire.
It's just unbelievable that (except for Ron Paul) not one voice of moderation on the Iraq War has emerged among Republicans. Even as the economy sinks into the toilet and the federal deficit soars skyward.
It is one of the most tone-deaf political mistakes of all time.
You don't have to be a genius to see that domestic economic despair will translate into anti-war votes in November.
You don't have to be a genius to see that sectarian militias are re-arming for a bloodbath across Iraq and the middle east this summer.
You don't have to be a genius to count the crowds and votes anti-war sentiment is bringing to Democrats.
It's also shocking how the MSM has universally bought the "surge is working" myth. What happened to common sense in U.S. politics?
more on CNNs' walk-away:
"Credit scores are hurt much more by missing multiple payments - on credit cards, cars and so on - than by a single foreclosure.
"The time it takes to regain your credit score [after foreclosure] can be shorter than after bankruptcy," said Watts.
It typically takes three years of a spotless payment record after a bankruptcy before credit scores recover enough for someone to think about buying a home again, he said. After abandoning a mortgage, a person may be able to buy a new house in two years or less."
They make it sound like you'd be really stupid to stay.
Troubled borrowers are walking away from their homes - Feb. 6, 2008
Wow. my BZH short is falling off the table. is something going on with them?
XL Capital Assurance Inc. was cut six levels to A3, New York-based Moody's said today in a statement.
And you don't have to be a genius to see that people living in almost every country in the world are rooting for the Democrats to win and bring our troops home!
The world has had enough of Bush. If McClain is elected, the rest of the world will always view him as mini-Bush.
You can't be the financial and military leader of the world when the rest of the world despises and pities your politics.
um, Rich, you noticed much common sense running around loose anywhere in the nation?
I am sorry if this seems OT, but I wanted to see if anyone can help me on this Q:
I went here to find out about inflation and this is a little new to me: Institutional - TIPS/CPI Data
My interest is related to how The Fed target rate for lending are adjusted in relation to Treasuries.
The following caught my attention today:
Adjusted for inflation, the Fed's benchmark rate is now approaching zero,'' making itclearly an accommodative level,'' Plosser said. Traders expect the Fed to lower the target rate for overnight loans between banks to 2 percent by June, futures show.
Thus my question here, is related to how The 10 year treasury is adjusted for inflation; I think it is not, but perhaps someone can take a few seconds to pull me from confusion?
The reason this interests me today, is because I sometimes look at stock index valuations based on earnings yields, e.g, the inversion of the S&P 500 index P/E is the earnings yield and can be thus correlated to a 10 year bond yield, which gives a simple range of overvaluation of undervaluation. however, I am now very curious as to the great possibility, that the 10 year treasury yield is not adjusted for inflation, thus this valuation benchmark I use could be off by 3 or 4% or more.
Several weeks ago, I wondered if the S&P was overvalued by 5%, but now Im thinking maybe 8% or more.
Any thoughts in blogworld?
From Bloomberg (entire article content below, apologies if already posted):
Feb. 7 (Bloomberg) -- Security Capital Assurance Ltd.'s bond insurance unit, hobbled by a decline in subprime mortgage securities, lost its Aaa credit rating at Moody's Investors Service.
XL Capital Assurance Inc. was cut six levels to A3, New York-based Moody's said today in a statement.
Its so damned unstable it amazes me it hasn't already fallen off the high wire.
Yeah, lol, I'm really glad our fed has been able to achieve such stability.
No inflation or deflation is easy - I save and invest. Our current instability makes investing a crap shoot.
Cancellation rate 44%.
Housing environment is "Challenging" -means they are drinking Cuervo in the morning.
Average ordered home price fell 17%.- really means 71%...bad accounting.
Inventory of homes is "too high"- means stratospheric.....drink more Cuervo.
You don't have to be a genius to count the crowds and votes anti-war sentiment is bringing to Democrats.
Rich - those are 'my people'... almost all of my family are avid dems (im'm a left leaning inde). I told them last year the economy would blow Iraq off the front page in 08 and they all laughed at me. I can't claim credit for smarts - that conclusion came from reading this blog & a few others.
The anti-war vote won't deliver the dems one electoral vote - I'd be willing to bet that the Nov exits polls as unreliable as they are show that.
The thing that amazes me is that the GOP candidates aren't more pro-actively distancing themselves from Bush vis-a-vis the economy. That to me is the mystery of this election cycle.
I sincerely doubt that Romney gets a VP nod. He sees the writing on the wall, needs to preserve some dignity and earn some capital with GOP insiders for his next run.
My worry is that McCain (a true lunatic, oddly hated by many on the right) will pair up with Huckabee and pull in the evangelic vote.
Any ideas on what spooked the treasury market at 1:00 EST?
I think it was Fisher's comment that there weren't any signs inflation was slowing.
Rich, why don't you go troll a politics board?
AC....
Bad bond auction on 30yr....
13:14 ET 10-Yr: -23/32..3.681%.. GNMAs: -04/32.. USD/JPY: 107.3895.. EUR/USD: 1.4463
Bonds Bashed on Auction : The long end got clobbered on the heels of a poor showing on the day's auction with action picking up on the way down. The 10-&-30-yrs are flirting with the worst levels since the end of Jan, wiping out any recent gains as the expected demand just wasn't there. Most had been looking for a decent, not great, not really "good" per say, but OK auction. Didn't even get that.
In fact when I was asking about rates with 20% down he was like why tie up your money if you don't have to. I asked if they were privately owned or publically traded unfortunately private owned.
If those are their terms in this environment, I'd be suspecting that they're a front for money laundering.
I don't think Romney will be the VP. Huckabee is more likely. He shores up the social conservative vote, and his economic populism might help pull in one or two of the midwest purple states that would be needed for a win. Romney as VP will annoy the social conservatives, and it's not like he's loved enough that he's going to win MA for the Republicans.
link-
Briefing.com: Bond Market Update
I think the anti-war issues will be one straw among many - everybody gets their own Damascus moment here. Going forward, yeah, the economy is likely to push more people toward the Dems. The anti-war vote is probably already delivered.
Terry, economics and politics are inextricably linked, and Rich wasn't the one who brought up Romney.
What happens if a Treasury auction fails?
My likely only political comment on this blog:
Romney is the Reagan of 1976. He will reclaim the conservative mantle in his defeat.
Back on topic. People are strangely sanguine as to the implications of new housing cancellation rates. Home Builders are themselves 2x ETFs because they have both gone vertical and because their focus has been in high growth ares.
Terry, I'm bettin' you disagree with Rich's politics more than you oppose his posting about the subject. If that's what you consider being a troll, it's you that ought to find another site. I mean, Geez, his post is much more relevant to the economy than half the stuff that's posted here.
We ain't seen nothing yet. Wait until 3 to 4 more years from now when the option arms explode.
MOST PEOPLE WITH OPTION ARMS WILL CONTINUE PAYING THEIR MORTGAGES BECAUSE IT IS CHEAPER THAN RENTING SIMILAR HOUSING. The payments are autoficially low.
But many are already know under water. Once the adjustments come with 300% increase in payments WATCH OUT BELOW!
We are in the top of the 3rd inning at best.
What happens if a Treasury auction fails?
They never 'fail' - or never have. They just 'disappoint'. Meaning the gov doesn't 'pull' the offer like a bridge turned peer LBO loan float... T Bill prices just go to hell & yields sky.
From a Beazer puff piece this morning on a homebuyer survey they commissioned:
-64 percent of Americans believe that for those with good credit and a down payment this is an ideal time to buy a home.
-65 percent of survey respondents agree that given the current supply of homes for sale and special incentives this is truly a buyers market.
and my personal favorite:
-The survey found 70 percent of experienced homebuyers those who have purchased at least one home urging renters to purchase a home as soon as he or she is financially able to do so.
Sorry, forgot the link:
Expired
and another choice quote:
Across the board, consumers appear optimistic about the availability of home mortgage options.
I'm speechless--the NAR are rank amateur prevaricators next to these clowns....
I don't think most Americans have yet had the Damascus moment about the war's economic cost.
The pattern is...as your own personal economic situation deteriorates, you start looking around for something to blame it on.
The U.S. economy was booming through early 2007. It's easy to like a war in good times. Then came the surge, and I don't think it was coincidental that it came as the economy started down. All the hoopla about the surge has wagged the dog.
When the surge collapses, people will start to connect economy with war.
30-Year Treasuries Fall Most Since 2004 After $9 Billion Sale
http://www.bloomberg.com/apps/news?pid=20601087&sid=a2mQtJAaw6lw&refer=home
The longest-maturity U.S. debt fell the most since 2004 as bondholders concluded that yields were too low given the Federal Reserve's determination to cut interest rates and keep the economy out of a recession.
Yalt, but isn't the "Related Quote" graph for BZH a major giggle given the context?
Yalt:"Across the board, consumers appear optimistic about the availability of home mortgage options."
There is absolutely a lot of mortgage availablity for people out there. This isnt a true credit crunch where well qualified borrowers cant get money. It is a relative credit crunch where borrowers have come to expect no impediment and no money down in access to mortgage credit are getting roadblocks.
Saying you need 5% down isnt a credit crunch, saying you cant get money no matter how much down you have is a credit crunch.
The market was up on rumors that Buffett was buying USG from Halliburton for 70 cents on the Dollar.
I like how Beazer surveyed households with a minimum income of $40k but took the percentage responses and attributed them to the population as a whole. I'll add it to my "bad stats" Hall of Shame.
Lowest on Record
The auction yield on the new long bond was the lowest since regular sales of the security began in 1977, according to Steve Meyerhardt, an official in the Bureau of the Public Debt in Washington.
In today's auction, indirect bidders, the class of investors that includes foreign central banks, bought 10.7 percent, the lowest on a new 30-year bond since the Treasury resumed sales of the maturity in February 2006 after an almost five-year hiatus.
Scav, the survey also found 99.75% of experienced BZH shareholders urging nonshareholders to buy a share as soon as they are financially able.
In all seriousness, even if you thought hb's were a good buy at these prices, would you want to buy one with such an apparently total disconnection from reality?
I'm sensing chaos is emerging in the world of U.S. defined benefit pension plans.
We've discussed problems with the long/short quant hedge funds. But there's another popular type of long/short fund that is used mainly by the db plans. It's called 130/30.
You start by putting 100% of the money into long stocks. You then short 30%, and you use the proceed of the shorts to buy another 30% longs. So, your portfolio is net long 100% (same as the market) but you have the potential to add alpha if longs outperform shorts.
There's tens of billions of dollars in 130/30 funds and 30% of that is short crummy stocks. These funds are suppose to always keep 30% short, and they don't use high leverage (130%). But they could be experiencing redemptions and unwinding, too.
I saw the CNN article pretty much advising people to walk away but just to be contrary, I'm just going to stick it out as the neighborhood empties out and turns into a war zone, now I'm just pissed off.
rich | 02.07.08 - 4:08 pm |
Rich,
I mentioned this to dryfly a few days ago. My parents are lifetime dems. Donate,volunteer etc...They both refuse to vote for Hillary or Obama. Kinda surprised me. Whats even weirder is they both said the would vote for McCain. I have a feeling the conservative dem vote might surprise a lot of people.
Chris
CR,
CMBX hat trick today - new high in all indices.
ABX looks like modest deterioration.
LCDX looks to continue blowing out spread.
Aside on CP, second week of ABCP contraction in a row, financial CP also contracted and 30 day spread was 52 bps on the FRB CP update.
Is this the reason why feds are trying to talk up inflation?
REBear | 02.07.08 - 4:08 pm | #
Why would they want to talk up inflation? Wouldn't that just make financing all this debt more expensive?
I think the war will be firmly linked with the economy by November.
Man oh man. Foreign wars are ruinously expensive.
"Never get involved in a land war in Asia!"
Rumor that drove the market up initially was that the ISM Services number was a misprint (really).
ISM came out and said, no its right, market tanked, and then PPT came to the rescue.
"Finally a replacement for all those shows on HGTV that would be interesting enough to attract viewers."
I actually find HGTV more interesting now than ever. Particularly the show where they get a realtor to tell them how many hundred thousand dollars their 3 year old property has appreciated so they can borrow against it to do more improvements or buy a vacation home.
Gee, owl, thanks for reminding us. It's been - what - 3 days since a post on the evils of OAs?
So, if we assume some sort of bailout is inevitable for those folks, let's get some fresh ideas on the board. And I'm not talking Sheila Bair ideas, I'm talking about REALLY oUt of The BOx thinking! Since these people like 'options' so much, how about a more 'optional' approach to bailouts? In other words, those who feel they just couldn't deal with the higher payments once their option ARM when it resets, can choose the new 'option' of turning to the newly-created Federal Foreclosure Prevention Corporation, or FFPC, for help.
In exchange for accepting the aid of the FFPC, you (the borrower) will:
What we have is a Fed that is collusive and corrupt and these retarded bastards should all be hanged for treason!
Anonymous
So this time it's the FED's fault that your Armageddon phantasies did not come true. Who's it going to be next time, the Salvation Army?
O-Joe
Cobradriver - but isn't that indicative of the same basic zeitgeist of people simply having had it with large chunks of the existing socio-political system/framework? MSM, govt, political parties, corporations, run down the list. Things don't seem to be working well and the general fed-up-with-it-ness is rising - there may be more than classic "populism" rising. Nations as well as economies rely fundamentally on trust.
OT
On top of all the inflation fears that the Fed, Bush budget and LT Treasury yields are creating, you really have to like the technical chart of physical silver:
Technical Silver Charts and Data - London Fix
SLV now owns 165 million ounces of silver, equal to one-quarter of global annual silver mine supply.
It's also shocking how the MSM has universally bought the "surge is working" myth. What happened to common sense in U.S. politics?
rich
Come on, Rich. What news have we ever heard from Iraq since things turned around for the better? - Right, none. Since violence fell off a cliff in Iraq, the media coverage dropped more than 50%. Only bad news sells. That's also why CR posts only negative news IMO.
Negative news allow people to overlook their own shortcomings, that's why there are so many consumers thereof. Like: Geeze, the FED and government can't keep the economy up either, so when I screw up in my life it's really not so bad.
O-Joe
AC....
Bad bond auction on 30yr....
13:14 ET 10-Yr: -23/32..3.681%.. GNMAs: -04/32.. USD/JPY: 107.3895.. EUR/USD: 1.4463
Bonds Bashed on Auction : The long end got clobbered on the heels of a poor showing on the day's auction with action picking up on the way down. The 10-&-30-yrs are flirting with the worst levels since the end of Jan, wiping out any recent gains as the expected demand just wasn't there. Most had been looking for a decent, not great, not really "good" per say, but OK auction. Didn't even get that.
I just noticed the auction results came out at 1:00pm with the yield awarded. I guess it was coincidence that I saw Fisher's inflation comment reported at exactly the same time.
"Exit polls showed that 90 percent of those who voted in the California Democratic primary, which was open to independents, said the economy was "not so good" or poor."
RealClearPolitics - Articles - Economic Woes Lift Clinton
As goes CA, so then goes the nation.
So what is someone on the fence to do? I have some money to put down, I live in an area not getting killed by a dropping market. I'm in Charlotte, NC and it has help up favorable compared to many other areas because we didn't have a huge run up.
There are a few good houses in pre-foreclosure or REO that I'm considering making an offer on one of them to live in with my family (not investment), but the sentiment here - and I respect the opinions of those here - is to hold on?
Even with a great deal now you are all saying WAIT...it is going to get better?
I'm just trying to understand where we are at and where we are going and not miss a great deal on an FC or REO.
Thanks for the input in advance!
rich
how would u explain the disconnect btwn SRS and CMBX blowout? is it possible hedgies r doin a short CMBX, long IYR trade?
If you want your pensions, mutuals and money market funds safe, read your prospectus and make sure you know how your money will be "managed"!! Very good time to keep on top of things if you have been out to lunch for a few months!!!
Saw an ad today for Beazer's Dollar Days promotion Feb 8-10:
Home Builders | Beazer Homes
Who says there's a credit crunch? These guys are still shipping 100% LTV deals.
Larmier | 02.07.08 - 4:41 pm |
I use the old school rule. 2-2.5 times income. When home prices fall to that point here in Florida I will start looking. Is this even close for you??
Honestly,I do not see prices rocketing up anytime soon...So waiting will not hurt and could help a bunch price wise.
Chris
Credit default spreads on CRE (CMBX) are looking now like they did on residential real estate (ABX) last August. 6 months delay.
This still blows my mind:
Japanese 10-Year Bond\t100.49\t-0.14
Japanese government bonds slipped in early trade, pushing up the benchmark 10-year yield 1.5 basis points to 1.420%.
U.S. 10-Year Treasury\t3.77\t0.19
`To the extent that long term inflation expectations have risen a fair degree, as the Fed has been aggressive in easing, it would be negative for the 30-year,'' said Kurush Mistry, an interest-rate strategist in New York at Lehman Brothers Holdings Inc., a primary dealer.
U.S. economic growth will accelerate at a 2.5 percent annual rate in the fourth quarter, double the pace of this quarter, according to the median forecast of analysts surveyed by Bloomberg News. U.S. consumer prices rose 4.1 percent in 2007, the most since 1990, the Labor Department said last month.
Traders see an 80 percent likelihood that Fed policy makers will reduce their target for overnight loans between banks by a half-point to 2.50 percent at or before their next scheduled meeting on March 18, futures on the Chicago Board of Trade show. The rest of the bets are for a 75 basis point cut.
OK, what blows my mind, is the divergence between a 10 year US Treasury and a 10 year Japanese gov bond. It says a little something about globalization IMHO, like Japan is highly overvalued and IMHO, you will see that market crash and we will see a global liquidity trap!
Red Pill,
Inflation fears could give investors false hope that rates won't go down further.
Larmier - if its a house you plan to live in, you can afford it without a stretch and you don't plan to look at whether it goes up or down again for a long time - buy it if you want it.
If you are looking to buy an 'investment' to live in - then rent, save and wait instead. Its that simple.
CR, all you have to do is stop adding capitalization and punctuation, and you could write some very poignant poetry with that style.
Larmier - If I lived in Charlotte I'd be a home owner. I think this blog has a very coastal/bubble focus. Yes, there's a national bubble but if a house is only $200,000 or so if it goes down 10-20% you're out less than 2-3 months' salary. Who cares?
If you lived in the Bubblezone and were looking at $600,000 starter houses like we are, with rents less than $2000 for the same house, I'd say wait. But in Charlotte? Go for it!
Japanese government bonds slipped in early trade, pushing up the benchmark 10-year yield 1.5 basis points to 1.420%. U.S. 10-Year Treasury 3.77%
So much for the US is addicited to cheap credit. If so, how much more are the Japanese?
O-Joe
"Never get involved in a land war in Asia!"
Red Pill | 02.07.08 - 4:25 pm | #
I really do wonder how many people in D.C. have read A Peace to End All Peace.
As for cancellation rates, Richmond, VA is feeling the heat in the condo market, with rent signs going up more and more. But surprisingly, in the past week and a half I have seen at least 10 sf homes (languishing on the market for months and months) now displaying "under contract" signs. How to explain? This, btw, is in the Fan area, not the burbs. Any other Richmonders to shed some light on this flurry of new contract signings?
Larmier, if you are happy with your quality of life as it is, rent.
If you're an able and willing buyer, there's certainly no hurry to enter this market.
For me, the comparison between what I'm paying on me 1B vs. a 2B condo will drive my decision to pull the trigger.
Buying now is like buying a car, the longer you wait, the better deal for your money you will get.
Inflation fears could give investors false hope that rates won't go down further.
REBear | 02.07.08 - 4:51 pm | #
But, aren't we seeing a decoupling of long term rates from the Fed rate? Greenspan's conundrum.
Won't longer term debt become more expensive to finance if no one wants it?
I am no expert but it seems like the bond situation is more complex than is portrayed. The rate would seem to be a complicated function of inflation/deflation expectations and confidence in the issuer of the debt.
Wow, O-Joe's on a roll!
Sir Bush, Sir! Reporting for duty to spend the rebate check, sir! It's my sworn duty to help the economy by spending them on gas and Chinese products, SIR!
Optimistic Joe: The Fourth Horseman of the Economic Apocalypse.
[Deutsche Bank] Ackermann Says Bond Insurers Threaten Debt `Tsunami'
By Aaron Kirchfeld and Andreas Scholz
Feb. 7 (Bloomberg) -- Deutsche Bank AG Chief Executive Officer Josef Ackermann said rating downgrades for bond insurers pose risks that could match the U.S. subprime market collapse.
It could be a tsunami-like event comparable to subprime,'' Ackermann said in a Bloomberg Television interview in Frankfurt today. Deutsche Bank, Germany's biggest bank, iswell positioned'' on its risk from bond insurers, he said.
Larmier -
Be very careful about buying properties in FCL or REO - don't think such properties are discounted just for the hell of it. If you're willing and able to create real sweat equity, they might be a viable option for you. But the days of easy flips are over, if indeed they ever happened in Charlotte.
Like dryfly said, if your want to own a home is a matter of lifestyle preference - don't try to time the market, just buy. If you primarily looking to invest, residential real estate might not be the best choice at the moment.
BZH's price action today portends an event.
Larmier, buy now or you will be paying 20% less next year! I am warning you!
OT:
Third day in a row where the Fed's Open Market Desk failed to defend the Federal Funds Rate:
Temporary Open Market Operations - Federal Reserve Bank of New York
Since they were just rolling over repos today it doesn't show a huge demand for money even at 3%.
Larmier, You should do a lot more research on the Charlotte market. I've seen several articles recently that are not so upbeat regarding the Charlotte area's perceived immunity to the burst of the bubble (I can't direct you to them, sorry).
It's been said here many times: We're all sub-prime now.
Anon @ 5:01
I agree there is a decoupling of long term rates from fed rates. IMO, one of the main reasons for this decoupling is the fed rate is lower than the inflation rate. I believe the feds over the past two days are trying to reverse this process by assuring investors that inflation is still a concern and therefore further cutting of interest rates is not guaranteed.
As you might have noticed, i'm no expert either.
Charlotte Observer via January 30th edition of thehousingbubbleblog.com
Home building and sales are falling more sharply in the Charlotte area than nationally, a sign the housing slump is worsening in what has been one of the countrys stronger markets. Building permits, an indicator of future home sales, fell 40 percent in the eight-county Charlotte region during the fourth quarter, compared with the same period in 2006.
Sales of existing houses, townhouses and condos also fell 24 percent in the fourth quarter, according to Market Opportunity Research Enterprises.
The national malaise was late coming to Charlotte, but it happened very quickly once it arrived, said Chuck Graham of Newton Graham Consultants, a veteran of the area real estate market. I think we still have a little further to go.
Rates, yields, smoke, mirrors, bongwater, koolaid, does not matter.
The truth here is that The Euro gained value against The Dollar, as the dollar fell, Treasury Yields fell and continue to fall, thus a weak currency linked to excessive debt and lower yields will result in an increasing over supply of Treasuries which will have to absorb more debt, which will drive yields lower and lower and in associated correlation, the currency will reflect the disconnect between Treasury debt and future value of the currency. which obviously will obviously have less value stored in its utility.
The flight to safety from overvalued equities will be thus search for greater value in foreign debt or foreign stocks, but as we see, London, Tokyo and many Asian countries are impacted by debt, banking trouble, derivative implosions, accounting fraud and bonds that are falling in value as well.
Currency exchange remains an interesting activity, because the US war debt is a burden realtive to America and thus foreign currencies do not have that burden, and thus foreign currency can be used to obtain future value in the form of foreign debt. However, if one flips this coin, one then understands why a sovereign power or wealth fund can take foreign cash to buy American debt cheap, i.e, they are using a currency with more stored value not attached to war debt, and thereby leveraging currency to obtain devalued equities.
The problem is that they are getting a great deal, but they will take the rewards of this plunder back home and leave bagholders holding nothing; this is the reality of pirates.
To sum up, you need to find a better currency not attached to too much debt, then use leverage to obtain greater debt and then wait for your payoff and then get the F--K outta there!
To sum up, you need to find a better currency not attached to too much debt, then use leverage to obtain greater debt and then wait for your payoff and then get the F--K outta there!
Great idea, which one:
US - Public Debt: 64.7% of GDP (2005 est.)
UK - Public Debt: 42.2% of GDP (2006 est.)
DE - Public Debt: 66.8% of GDP (2006 est.)
JP - Public Debt: 176.2% of GDP (2006 est.)
IT - Public Debt: 107.8% of GDP (2006 est.)
BR - Public Debt: 50% of GDP (2006 est.)
CHE - Public Debt: 51% of GDP (2006 est.)
Now, factor in demographics to estimate what the future Debt/GDP ratios will be in those countries when you want your money back.
Larmier:
I agree with dryfly. If you can buy a house to live in, afford the payments comfortably without stretching, and not need to look at what it's "worth" for a decade, then buying may be an option.
if you want/need any appreciation, then do some serious due diligence on your home.
my in-laws are in Charlotte. There are a lot of areas that are massively overpriced there. While it is true that some of the areas didn't appreciate much, IMO many of those areas would have DEPRECIATED if not for 'the bubble'.
Some areas that I believe are massively overpriced:
-almost every condo in or near the so-called 'uptown'
-a lot of the lower income places (e.g. where the big Beazer lawsuit orignated)
-a lot of the newer construction, especially in the further out places in south-eastern Charlotte and Matthews and Pineview etc...
-most of the new construction in Lake Norman.
I'm not sure where you are in Charlotte, but Lake Norman and the southwest part of the city SKYROCKETED in the last few years.
oops:
should have said: many parts of southwest and southeast Charlotte skyrocketed.
Kicker,
I was just about to look at Debt as a percent of GDP, very good, stay tuned!
GDP story of the day:
Northern Rock was officially reclassified as a public enterprise yesterday in a move that means one of the Treasury's cherished rules for the public finances has been breached.
The Office for National Statistics said it had taken the decision to designate it a state entity because the size of the government's support for the stricken bank meant it had effective control. The move has the effect of bringing up to £100bn of Northern Rock's liabilities onto the national debt.
Although the Treasury said the move was only temporary, it means that one of Gordon Brown's two fiscal rules - that public debt should not exceed 40% of gross domestic product - will be broken. The national debt stands at £537bn, equivalent to 37.7% of GDP. The ONS said the reclassification would add 6.7 percentage points to that figure, taking it to 44.4%.
The world has had enough of Bush.
Who cares? Fact is, most Americans aren't, and that is what matters.
Northern Rock was officially reclassified as a public enterprise yesterday in a move that means one of the Treasury's cherished rules for the public finances has been breached.
Rules were made to be broken. Plus somebody has to be first...
Jim Cramer, you IDIOT!
Jim Cramer is my lover. Signed, lustily, Mr. Burns.