Think of the Children! Congress has to do something about these greedy mortgage lending companies. We need a hearing, we need investigations, we need legislation. This has got to stop.
Hard money is running 12% at 65% cltv for a good property in CA,this is a 1 year balloon loan,and about right...6.43% is insane in todays world for a 30 year fixed.
trail writes:
Well, it's a step in the right direction. Someday we'll be back up to 12%, and my CDs down at the S&L will start paying me a fair rate of return.
trail | 07.09.08 - 11:17 am | #
This morning I bought equal dollar amounts of six stocks for my small-cap portfolio (ACM, AMSC, EGLE, GTI, MPWR, NHP), plus a position of equal size in ACAS, a business development company that the market panic has turned into a high dividend play.
I've maintained my SP500 Index fund position continuously since January, currently underwater by about -2.8% (as of yesterday's close) but I don't expect it to be negative much longer.
Finally, although I've never expressed an opinion on it before I recommend steering clear of SRS, if for no other reason than this:
All is right with the world -- Alcoa beat analysts expectations by 6 cents ... when you exclude a 5 cent charge due to lost production. Stocks to the moon!
A bit OT but a lot of you folks know more than I about this stuff...
SRS may be a good way to play the CRE bust, especially in what could easily prove to be a rising interest rate environment later this year, but the incredible volatility is a bit unsettling to say the least.
I know, I know, it's leveraged times two, but even at that it's not uncommon for the damn thing to be up or down 10-15% intraday on no news - it's enough to send you running for the tums.
One thing that makes this rate info, and Freddie Mac's, is that they also include the average of points paid: 30-year fixed-rate mortgages increased to 6.43 percent from 6.33 percent, with points decreasing to 1.06 from 1.09.
With Freddie's data, rates have gone from 5.76 in January to 6.32 in June, but points also increased from .4 to .7, so the rate adjusted for points increased even more.
I know, I know, it's leveraged times two, but even at that it's not uncommon for the damn thing to be up or down 10-15% intraday on no news - it's enough to send you running for the tums.
Throw in many investors personal leverage and its more likely 4X-10X... how is this more rational than the crazies who levered up to buy CDOs?
Anyone know of a good resource that shows us non rosy statistics regarding how much securitization is being done for both residential and commercial, gse and not?
If rates continue to climb, suburban homes will no longer be viable options for grow houses. It costs a fortune to run 20 1000 watt high pressure sodium lights 24/7 during the vegetation stage. If the minimum payment is too high, you can't bring the shit to market for $350/ounce.
Probably something some of you didnt think of.... rates go up, weed gets tighter and more expensive.
..IndyMac reported $17.3 billion of its deposits were insured by the Federal Deposit Insurance Corp. The FDIC has $52.8 billion in its insurance fund to cover bank failures..."
This is a hefty chunk indeed. What if a big bank like WM goes under later? Not many FDIC acorns "stored for the winter" left then.
I just don't see this taking place, at least as long as Bush is president and Senator Schumer's loose cannon politics incur the ire of his appointees on the FDIC, HLB and OTS. Bush is no Schumer fan.
Congress (with some agency input) apparently now thinks that 40 years should be about right for a home purchase.
Couple that with a steady succession of eight-year auto loans, and my graduate school student loans, and I should be sitting pretty right about, oh, say, 2040. Maybe I'll take a vacation or something!
Anyone else sometimes hope that the Mayans were right?
Is there any news as to what the trends for the number of declined mortgage applications are (i.e. are fewer numbers of applications being denied)? I am just wondering if the increase in the number of applications is due to people re-submitting requests (to different lenders, maybe) because they were declined.
I am also very curious as to what the trends are for the distribution of mortgages through wholesale and retail chanels. Have more loans been making it through the wholesale channel recently than in recent quarters past?
I don't particularly understand the attraction of ETF's, although they do make things simpler. Rather than doubleshorting an index and taking a fee hit, wouldn't you just short the most vulnerable member of the index?
By the time I plan to buy a place in California (SD or LA); I'm thinking 36-48 months from now, I bet mortgage rates for a 30 year Fixed are going to be around 10-11%. That will be fun.
But, by then I'll have a really good downpayment and if things are starting to recover, maybe prices will have bottomed enough for awhile and be thinking about starting to move up again. Assuming I don't lose my job and have to live in a tent between now and then.
M-F said: "Sebastian, I don't get your point on SRS, why steer clear just because of the link you posted? Just because SRS has done well recently?"
Its popularity is a problem in terms of over-bullish sentiment.
Here's another one at Yahoo! Finance, scroll down to the "Community Sentiment" box on the left-hand side of the screen, "Top stocks creating buzz on Yahoo! Finance message boards."
Never mind the possibility that the (alleged) CRE bust might already be reflected in SRS' price. Or that the CRE bust may or may not actually materialize in the near future. Or that a major break-down in price on high volume is a warning that SRS has made a major high that will hold for a long while.
Traditionally, REITs share price didn't appreciate much, they were just fairly safe income producers paying about (I believe) 5-6%. Then super easy money became available, property values jumped, and investors were satisfied with returns in the 3-4% range because REIT shares were jumping.
It reached a point where REITs were often valued based on the perceived value of the real estate, rather than the income it could produce. Some were actually selling buildings to fund dividends.
The CDO debacle is not a reason to avoid SRS, it's the reason to own it. Credit is harder and hasrder to come by. Plus, the commercial building completions will crest over the next year, just as vacancies are rising.
If the volatility bothers you, sell enough until you find it manageable. I was way into housing/bank puts early last year and each time the market went against me, I'd have a knots in my stomach. I covered about half my puts, at slightly less than break-even. That made it easier to sleep at night.
Of course, now all I can think about is how much money I left on the table....
Mocek resigns? Midst increasing scrutiny of oversight practises? The energy part could be a head fake. He also was responsible for other areas, including metals--where an incredible over concentration on the short side is under fire from more than one angle.
Its popularity is a problem in terms of over-bullish sentiment.
That's the type of argument you get from the moronic financial horoscope crowd, idiots like Mark Hulbert. Guess what sentiment was like in 1930? And the market fell for two more years.
On-topic for a change, as I was leaving my local grocery store last night I noticed the branch bank in there was offering 100% mortgage loans and home-equity loans at .50% below prime.
"Never mind the possibility that the (alleged) CRE bust might already be reflected in SRS' price. Or that the CRE bust may or may not actually materialize in the near future. Or that a major break-down in price on high volume is a warning that SRS has made a major high that will hold for a long while."
It's really simple. Either you believe CRE is going to tank in which case SRS is a good long term play. Or you don't believe in which case SRS is a bad buy. No way in hell is the "alleged" CRE bust reflected in SRS.
BTW If people can't read between the lines, parse the data and see that CRE is already starting to crumble then they need to take off the rose colored glasses.
The $20 drop was a short-squeeze plain and simple.
Okay Sebastian, thanks, I see what you are saying. I don't agree with it, but thanks for clarifying.
Personally, the way I see it, is that the following factors are favorable for SRS.
IYR is going to tend to go back to 2003-2004 levels over the long term as the bubble unwinds at the very least
CRE has ben overbuilt and vacancies are on the increase, which means most of the real fall out is infront of us, this could make IYR fall further than 2003 levels, the confessions will dribble out over the next couple of years.
Macro trends in office space use suggest more work from home arrangements
US growth will be at least anemic for the next few years
Gasoline over $3.00 (yes $3.00) is going to cause consumer spending on (non gasoline) retail items to decrease putting more pressure on small businesses and retail REITs
REITs are not going to be beneficiaries of crazy Federal Reserve bailouts like the financial sector (so I stay away from SKF- too risky)
I am not leveraged on my SRS position, so no amount of volatility can cause me to bust... so I can be patient. I will buy some more if it goes to 90 and even more if it goes to 80, I can wait.
And unfortunately, my 401k money has nowhere to hide... so I am not short with nearly everything I have.
When fannie and freddie eventually collapse(either by their own weight, or by a dollar crisis/collapse that ends the federal gov's ability to finance them), people in the US will no longer be talking about mortgage rates.
There simply will not be mortgages available for 95% of the people, so houses will be priced in a range that can be bought with cash. Prices will likely end up at 2-10% of the peak prices in most areas.
Only productive land and highly desirable areas that attract the small percentage of people that have wealth will hold any value.
Unproductive areas such as the desert hellholes(Vegas, parts of SoCal, etc) will be mostly ghost towns, as fuel, water, and food prices combined with lack of living wage employment cause a mass exodus to areas that are livable without AC.
The US treasury bubble and the GSE bubble will collapse before this "recession" is over.
The HSH survey, which closes Friday, shows conforming rates down only two beeps this week - due, among other factors, to Friday's brouhaha over Fannie and Freddie.
Good morning
Third! Why nobody here?
Steve and Barry are holding hostages.
Marsupial Market!
Can't wait for the average contract interest rate at 16.43%...should be there in about 2 years.
6.43% for a fixed 30. Now that's getting rewarded for all the risks if you're lending. Borrow short lend long, as inflation is running 5% LOL!
Something is going to have to give, rate wise.
/sarcasm on
Think of the Children! Congress has to do something about these greedy mortgage lending companies. We need a hearing, we need investigations, we need legislation. This has got to stop.
/off
ef...
oh boy CLF
Hard money is running 12% at 65% cltv for a good property in CA,this is a 1 year balloon loan,and about right...6.43% is insane in todays world for a 30 year fixed.
Who would have thought? I mean, lowering the FFR will save housing right? snark snark
I spent a moment thinking about the children...Is that market still active outside of Iraq where we are trading 20 year olds for $136 a barrel oil?
12th
Well, it's a step in the right direction. Someday we'll be back up to 12%, and my CDs down at the S&L will start paying me a fair rate of return.
Tom Stone,
It's more of a tranche of 20 year-olds for a $140 a barrel...
trail writes:
Well, it's a step in the right direction. Someday we'll be back up to 12%, and my CDs down at the S&L will start paying me a fair rate of return.
trail | 07.09.08 - 11:17 am | #
No one forcing you to buy CDs.
SEC says rating agencies had a conflict according to FT.
FT.com / In depth - SEC finds conflicts at rating agencies
Ya think?
SEC must be reading CR while they wait to see whose adminstration they need to suck up to come Nov.
gomer
Egregiously (OT)
This morning I bought equal dollar amounts of six stocks for my small-cap portfolio (ACM, AMSC, EGLE, GTI, MPWR, NHP), plus a position of equal size in ACAS, a business development company that the market panic has turned into a high dividend play.
I've maintained my SP500 Index fund position continuously since January, currently underwater by about -2.8% (as of yesterday's close) but I don't expect it to be negative much longer.
Finally, although I've never expressed an opinion on it before I recommend steering clear of SRS, if for no other reason than this:
Hot Stocks You're Buying Now (DXD, SMN)
Sebastia
All is right with the world -- Alcoa beat analysts expectations by 6 cents ... when you exclude a 5 cent charge due to lost production. Stocks to the moon!
Blackhat,thanks for the correction,accuracy is important.
I wanna get me a piece of that 6.43% for 30 year money. Damn, that's a suhweeet! return.
Cheers,
Bulls are running hard lately....
A bit OT but a lot of you folks know more than I about this stuff...
SRS may be a good way to play the CRE bust, especially in what could easily prove to be a rising interest rate environment later this year, but the incredible volatility is a bit unsettling to say the least.
I know, I know, it's leveraged times two, but even at that it's not uncommon for the damn thing to be up or down 10-15% intraday on no news - it's enough to send you running for the tums.
Any thoughts on the volatility of SRS?
One thing that makes this rate info, and Freddie Mac's, is that they also include the average of points paid: 30-year fixed-rate mortgages increased to 6.43 percent from 6.33 percent, with points decreasing to 1.06 from 1.09.
With Freddie's data, rates have gone from 5.76 in January to 6.32 in June, but points also increased from .4 to .7, so the rate adjusted for points increased even more.
Why don't they simply control for the address?
Max
I know, I know, it's leveraged times two, but even at that it's not uncommon for the damn thing to be up or down 10-15% intraday on no news - it's enough to send you running for the tums.
Throw in many investors personal leverage and its more likely 4X-10X... how is this more rational than the crazies who levered up to buy CDOs?
I think Iran will have to fire more missiles to get oil back up...pesky US inventories are up again.
Max: 'cause they want to paint a rosy picture.
Anyone know of a good resource that shows us non rosy statistics regarding how much securitization is being done for both residential and commercial, gse and not?
Yeah I heard all that "we'll just acquire all the weaker players" rhetoric at my former telecom employer. All the way down the crapper.
Gavshire Hathaway,
"Bulls are running hard lately...."
--Light goes on--Yeah, that's it, it's the running of the bulls in Spain this week, isn't?
Yes it is.
"Europe's most dangerous tradition held every year in Pamplona from July 6-14."
Pamplona Running of the Bulls Tours
Cheers,
If rates continue to climb, suburban homes will no longer be viable options for grow houses. It costs a fortune to run 20 1000 watt high pressure sodium lights 24/7 during the vegetation stage. If the minimum payment is too high, you can't bring the shit to market for $350/ounce.
Probably something some of you didnt think of.... rates go up, weed gets tighter and more expensive.
Maybe we'll have a weed bubble.
OT and maybe close enough to be related:
Has anyone read this?
This is a hefty chunk indeed. What if a big bank like WM goes under later? Not many FDIC acorns "stored for the winter" left then.
I just don't see this taking place, at least as long as Bush is president and Senator Schumer's loose cannon politics incur the ire of his appointees on the FDIC, HLB and OTS. Bush is no Schumer fan.
That's why they invented wine, CSC. (and meth)
I don't care if the mortgage apps go up, and so what if the rate is up a tick?
Anyone asking what kind of credit score will qualify for this rate? What about the down stroke?
Mortgage rates going up will increase the duration of a liquidity trap, at least that is what my super computer told me.
Gotta re-do those ROI calculations.
Congress (with some agency input) apparently now thinks that 40 years should be about right for a home purchase.
Couple that with a steady succession of eight-year auto loans, and my graduate school student loans, and I should be sitting pretty right about, oh, say, 2040. Maybe I'll take a vacation or something!
Anyone else sometimes hope that the Mayans were right?
Is there any news as to what the trends for the number of declined mortgage applications are (i.e. are fewer numbers of applications being denied)? I am just wondering if the increase in the number of applications is due to people re-submitting requests (to different lenders, maybe) because they were declined.
I am also very curious as to what the trends are for the distribution of mortgages through wholesale and retail chanels. Have more loans been making it through the wholesale channel recently than in recent quarters past?
Really Interesting snippets :-
Economic Views
Whether the pressure on the economy might not let up so quickly, with Nouriel Roubini.
Video - CNBC.com
Top CFTC investigator resigns
FT.com / US & Canada - CFTC loses its lead fraud enforcer
Sebastian, I don't get your point on SRS, why steer clear just because of the link you posted? Just because SRS has done well recently?
I don't particularly understand the attraction of ETF's, although they do make things simpler. Rather than doubleshorting an index and taking a fee hit, wouldn't you just short the most vulnerable member of the index?
More chance of a home run, less volatility risk.
By the time I plan to buy a place in California (SD or LA); I'm thinking 36-48 months from now, I bet mortgage rates for a 30 year Fixed are going to be around 10-11%. That will be fun.
But, by then I'll have a really good downpayment and if things are starting to recover, maybe prices will have bottomed enough for awhile and be thinking about starting to move up again. Assuming I don't lose my job and have to live in a tent between now and then.
ACM Sep. 25 puts are .50
M-F said: "Sebastian, I don't get your point on SRS, why steer clear just because of the link you posted? Just because SRS has done well recently?"
Its popularity is a problem in terms of over-bullish sentiment.
Here's another one at Yahoo! Finance, scroll down to the "Community Sentiment" box on the left-hand side of the screen, "Top stocks creating buzz on Yahoo! Finance message boards."
Yahoo! Finance - Business Finance, Stock Market, Quotes, News
Never mind the possibility that the (alleged) CRE bust might already be reflected in SRS' price. Or that the CRE bust may or may not actually materialize in the near future. Or that a major break-down in price on high volume is a warning that SRS has made a major high that will hold for a long while.
Sebastia
Here's the case for SRS: Dow Jones US Real Estate
Traditionally, REITs share price didn't appreciate much, they were just fairly safe income producers paying about (I believe) 5-6%. Then super easy money became available, property values jumped, and investors were satisfied with returns in the 3-4% range because REIT shares were jumping.
It reached a point where REITs were often valued based on the perceived value of the real estate, rather than the income it could produce. Some were actually selling buildings to fund dividends.
The CDO debacle is not a reason to avoid SRS, it's the reason to own it. Credit is harder and hasrder to come by. Plus, the commercial building completions will crest over the next year, just as vacancies are rising.
If the volatility bothers you, sell enough until you find it manageable. I was way into housing/bank puts early last year and each time the market went against me, I'd have a knots in my stomach. I covered about half my puts, at slightly less than break-even. That made it easier to sleep at night.
Of course, now all I can think about is how much money I left on the table....
Mocek resigns? Midst increasing scrutiny of oversight practises? The energy part could be a head fake. He also was responsible for other areas, including metals--where an incredible over concentration on the short side is under fire from more than one angle.
Hold tight everybody.
Sebastian, I concur with being long here.
None of those charts really floated my boat, though.
My longs here are GSK off that island bottom. 3 sessions ago, it filled the gap. I caught a fortunate tick on it.
The other is MO off that base at 20 with divergences.
However, our aims are likely very different. I am playing to hit very consistent singles.
Its popularity is a problem in terms of over-bullish sentiment.
That's the type of argument you get from the moronic financial horoscope crowd, idiots like Mark Hulbert. Guess what sentiment was like in 1930? And the market fell for two more years.
On-topic for a change, as I was leaving my local grocery store last night I noticed the branch bank in there was offering 100% mortgage loans and home-equity loans at .50% below prime.
A gradual return to business as usual, I guess.
S.
ZackAttack said: "None of those charts really floated my boat, though."
They never do with me at the beginning, either.
Mostly, they look pretty scary.
))
S.
MO Sep 20 puts are .53
"Never mind the possibility that the (alleged) CRE bust might already be reflected in SRS' price. Or that the CRE bust may or may not actually materialize in the near future. Or that a major break-down in price on high volume is a warning that SRS has made a major high that will hold for a long while."
It's really simple. Either you believe CRE is going to tank in which case SRS is a good long term play. Or you don't believe in which case SRS is a bad buy. No way in hell is the "alleged" CRE bust reflected in SRS.
BTW If people can't read between the lines, parse the data and see that CRE is already starting to crumble then they need to take off the rose colored glasses.
The $20 drop was a short-squeeze plain and simple.
Okay Sebastian, thanks, I see what you are saying. I don't agree with it, but thanks for clarifying.
Personally, the way I see it, is that the following factors are favorable for SRS.
I am not leveraged on my SRS position, so no amount of volatility can cause me to bust... so I can be patient. I will buy some more if it goes to 90 and even more if it goes to 80, I can wait.
And unfortunately, my 401k money has nowhere to hide... so I am not short with nearly everything I have.
When fannie and freddie eventually collapse(either by their own weight, or by a dollar crisis/collapse that ends the federal gov's ability to finance them), people in the US will no longer be talking about mortgage rates.
There simply will not be mortgages available for 95% of the people, so houses will be priced in a range that can be bought with cash. Prices will likely end up at 2-10% of the peak prices in most areas.
Only productive land and highly desirable areas that attract the small percentage of people that have wealth will hold any value.
Unproductive areas such as the desert hellholes(Vegas, parts of SoCal, etc) will be mostly ghost towns, as fuel, water, and food prices combined with lack of living wage employment cause a mass exodus to areas that are livable without AC.
The US treasury bubble and the GSE bubble will collapse before this "recession" is over.
SRS is one broke-ass chart. Inside day giving you a good opportunity to take some profits.
Sell, sell, sell.
"Prices will likely end up at 2-10% of the peak prices in most areas."
There are way too many optimists here today.
Sebastian, I don't get your point on SRS, why steer clear just because of the link you posted? Just because SRS has done well recently?
Sebastian, much like Cramer, is a great contrarian indicator. Therefore, when he says 'sell', it's time to stock up.
Sebastian said:
"plus a position of equal size in ACAS"...
Nice call - down 5+% today. I know ACAS very well. Your toast. You'll see....
The MBA's rate data are a week old, and who knows where they come from anyway?
In Bankrate's survey, rates are down 5bp this week. Freddie's will probably be down between 5 and 10bp.
The HSH survey, which closes Friday, shows conforming rates down only two beeps this week - due, among other factors, to Friday's brouhaha over Fannie and Freddie.