Everybody likes to pick on a few select areas like AZ, FL, NV, and CA, but, we all know the problems is generally pervasive, and loans are as likely to go bad in one overbuilt area as another. Maybe not the same significance of loss, but loss nonetheless. The punative nature of successive losses are the real killer.
OT on energy- Interesting report from S&P. The % of household income spent on energy is the same as it was in 1971. You wouldn't guess that from some of the extreme comments one reads.
While there may be a few C&D loans in infill areas, the vast majority of them are probably in distant new subdivisions where that in many markets are down more than 50%.
All over San Diego you see places sell for under $150/SF, which is well below the cost of new construction.
There was a large C&D loan default on a 70-unit condo building in Portland late last year. I am writing an article about the major junior lender, which I think will be entirely wiped out by the default.
Here is the funny part:
Amazingly, sales in the project appear to be going backwards. As of 12/31/07 CRZ reported that 47 of the 70 units had been sold. Now the figure is 35 sold and 10 "under contract." It will be interesting to see the updated figure on 6/30.
If prices stay this low maybe San Diego's suburbs can again be a big retirement location for people in the Midwest. Prices may still be a bit more than Florida, but some people like the dryer climate hear, and of course you don't have to spend so much on summer air conditioning.
Greg: Building costs in an active CA desert area near me run $160/ft; sales last year averaged $200/ft., recent sales have been at $125/ft., and new asking prices are at $100/ft.
Area foreclosure listings that I track weekly have risen 21% in 4 months and continue to rise 5%/month, putting pressure on prices. It's not getting better.
M & I used to be a very conservative bank with almost zero loan losses. They were almost rediculously conservative. This Furlong clown most likely came from a black hole bucket shop bank with promises of huge profits. Thanks Mark, Milwaukee needs more retards!
OT, Has anyone heard any thing about Goldman Sacks and the State Of Alaska working out a arrangement with Trancanadian Pipeline inc. on the construction of a NLG line from Prudhuo Bay to TOK, then down to the Lower States though Canada!!!!!!
Their new financials will be "either stated doc or stated income" so all will be fine.
And "Real-estate owned ("REOs") went from $21 .1 million to $45.5 million, also more than doubling" which might morph into a REIT, to be spun off and income realized, no?
Peak credit: The figures you gave of building costs of $160/sf are right in the range I was recently told by a small construction company owner, of $150-$175.
Quite simply, a very large part of Southern California is selling for below the cost of new construction, which makes most spec homebuilding completely nonsensical.
I'm not sure if building costs are going to be going up or down in the next few years. The prices of metals, gas, energy, and finance are way up, but the price of labor is down, and I am pretty sure than timber prices are down from their peak, though perhaps timber will recover to peak prices during the raw material boom.
Used construction equipment has probably gotten cheaper too.
With these countervailing factors it looks like that the price of new construction probably won't move much in either direction, so as resale values continue to crater, C&D loans are going to be even worse as people choose the might cheaper option of buying an existing home.
The gap is so large even a substantial recovery in 2009 can't save C&D loans.
The % of household income spent on energy is the same as it was in 1971. You wouldn't guess that from some of the extreme comments one reads.
Some of the home energy costs have yet to trickle down to the consumers mailbox. Fuel price increases happen almost instantaneously, while coal/nat-gas price increases are buffered (somewhat) by tariffed rates. The various public utilities have recently been petitioning for rate hikes and/or fuel surcharges. These prices will be going up, just watch the next 6-12 months.
Ray-That is true and the number may rise somewhat, perhaps to the levels of the early 80s. However, that can be greatly mitigated by conservation. My point is that the energy situation is a challenge that needs to be dealt with not an end of the world scenario. Throwing up your hands in despair simply creates paralysis.
Up to $175k for Prof. of Leadership position in Arlington, VA. Part job description: to change the culture. Change the culture of a federal bureaucracy? Does this have a precedent?
M & I used to be a very conservative bank with almost zero loan losses. They were almost rediculously conservative
Up to there, the Cynic was correct.
But M&I's CEO did NOT come from the outside.
What made attentive people in Milwaukee notice this is precisely M&I's historically "clean" book. The damn bank almost NEVER reports a loss--quarterly or otherwise.
I find the Timing of the M&I Disclosure just before the long holiday weekend to be quite interesting. The verbage in the statement "current market cycle" is also interesting, especially considering that M&I released a statement about expectations for a profitable Q3, which sounds a lot like "rosy wishiness" to me.
The current SUB-PRIME crisis that they seem to have leveraged themselves into quite heavily doesn't look anything like a historic market "cycle" to me, especially considering surging OIL PRICES that are apparently affecting every country's markets & economies, for better or for worse (for most), and every person on the planet. It looks like some banks will fail if OIL PRICES don't return to the $100/Barrel range very soon, especially bank & trust companies that are so heavily leveraged into bad loans.
I wonder what the "adjusted" writedowns will really be in this increasingly pressured regulatory climate. Many banks seem to be using various tactics to avoid coming clean with the real bad debt figures, which will probably soon prove to be very scary to investors of publicly traded bank & "trust" companies. Forget about the rosy profitable expectations.
Monday (& the next 10 days) will probably be very racy on the M&I (MI) rollercoaster ride. Where are the Bottom Feeders in this "current market cycle"?? I like the short term $10 PUT OPTIONS on MI Stock, which has already plummeted to 11 year lows. I see a lot more downside potential here.
The holiday-weekend release of the writeoff was interesting, yes.
M&I has long been the subject of takeover rumors, but has been an acquirer instead. Now has Boatmen's (St Louis), and a Twin Cities presence in addition to having covered Wisconsin (but not "blanketed" Wisconsin...)
The Bank spun off Metavante (M&I Data Services) which means that the bank-stock is a pure play now. It's also no longer supported by Metavante earnings, which were always considerable...
At least the Fed didn't warn as well. In fact, it's amazing just how stable their $28.8b of mortgage assets has been. Static, almost.
Like regulatee, like regulator, I guess.
Sounds like CEO Furlong should be fired.
after the close, before a long weekend, surprise, surprise, surprise...
2005-2008...a bad time for a bank to be expanding rapidly
Everybody likes to pick on a few select areas like AZ, FL, NV, and CA, but, we all know the problems is generally pervasive, and loans are as likely to go bad in one overbuilt area as another. Maybe not the same significance of loss, but loss nonetheless. The punative nature of successive losses are the real killer.
OT on energy- Interesting report from S&P. The % of household income spent on energy is the same as it was in 1971. You wouldn't guess that from some of the extreme comments one reads.
U.S. energy outlays fall to 1971 pace, S&P says - MarketWatch
M&I had been AZ during the late 80's when they took over Thunderbird Bank.
When you're public every genius becomes a lemming otherwise they get thrown out on their ear too early.
Man, I was expecting Bank of America news for the long weekend. Guess they're good 'till Labor day.
a lot more of this coming, that's for sure.
Here are two article I wrote on weak regional banks.
First Federal in California:
9 Reasons to Short FirstFed Financial -- Seeking Alpha
First Mariner in Maryland:
Will First Mariner Bancorp (FMAR) be the next small bank to go bankrupt? « Greg’s Law & Economics Blog
Fed: Size of Bear Stearns Loan Unchanged at $29 Billion
Fed: Size of Bear Stearns Loan Declined by $1 Billion - CNBC
While there may be a few C&D loans in infill areas, the vast majority of them are probably in distant new subdivisions where that in many markets are down more than 50%.
All over San Diego you see places sell for under $150/SF, which is well below the cost of new construction.
There was a large C&D loan default on a 70-unit condo building in Portland late last year. I am writing an article about the major junior lender, which I think will be entirely wiped out by the default.
Here is the funny part:
Amazingly, sales in the project appear to be going backwards. As of 12/31/07 CRZ reported that 47 of the 70 units had been sold. Now the figure is 35 sold and 10 "under contract." It will be interesting to see the updated figure on 6/30.
Maybe they should have just stayed in the Midwest!
My general recommendation to all Midwesterners...
A distant San Diego suburban house selling for below its 2000 price:
SDLookup.com | 1100 Madera Ln - Map & Public Records
If prices stay this low maybe San Diego's suburbs can again be a big retirement location for people in the Midwest. Prices may still be a bit more than Florida, but some people like the dryer climate hear, and of course you don't have to spend so much on summer air conditioning.
Greg: Building costs in an active CA desert area near me run $160/ft; sales last year averaged $200/ft., recent sales have been at $125/ft., and new asking prices are at $100/ft.
Area foreclosure listings that I track weekly have risen 21% in 4 months and continue to rise 5%/month, putting pressure on prices. It's not getting better.
Peak,
That is just another bullet in the head of the nobuilders. Cost to built is way above asking prices. Later to you publics.
M & I used to be a very conservative bank with almost zero loan losses. They were almost rediculously conservative. This Furlong clown most likely came from a black hole bucket shop bank with promises of huge profits. Thanks Mark, Milwaukee needs more retards!
"A distant San Diego suburban house selling for below its 2000 price:"
distant? LOL
OT, Has anyone heard any thing about Goldman Sacks and the State Of Alaska working out a arrangement with Trancanadian Pipeline inc. on the construction of a NLG line from Prudhuo Bay to TOK, then down to the Lower States though Canada!!!!!!
Greg,
"Prices may still be a bit more than Florida, but some people like the dryer climate hear,"
They might also like the lack of mosquitoes, alligators, hurricanes, and thunderstorms.
Really never understood the retirement allure of Fl.
Cheers,
Misean,
Aren't you in Van Nuys? Has the word "allure" ever been associated with VN?
RGM,
Here is the official word on current status of the Alaska natural gas pipeline...
Alaska Natural Gas Pipeline
Greg
Their new financials will be "either stated doc or stated income" so all will be fine.
And "Real-estate owned ("REOs") went from $21 .1 million to $45.5 million, also more than doubling" which might morph into a REIT, to be spun off and income realized, no?
tj,
Nope Encino. Van Nuys is as alluring as a 30 year old, rotten toothed, drug adled Mexican hooker. Funny, you can find them there. Or so I've heard.
Cheers,
Misean,
Ah, Encino! Yes, I've found that part of town quite alluring... especially the Royal Oaks section.
Please accept my humble apologies!!!
Or so I've heard.
LOL!
Executive Summary (19 page pdf)
The overview on current status, thanks for mentioning it I haven't read up on it in awhile...
tj,
NP. Happy 4th.
Cheers,
Peak credit: The figures you gave of building costs of $160/sf are right in the range I was recently told by a small construction company owner, of $150-$175.
Quite simply, a very large part of Southern California is selling for below the cost of new construction, which makes most spec homebuilding completely nonsensical.
I'm not sure if building costs are going to be going up or down in the next few years. The prices of metals, gas, energy, and finance are way up, but the price of labor is down, and I am pretty sure than timber prices are down from their peak, though perhaps timber will recover to peak prices during the raw material boom.
Used construction equipment has probably gotten cheaper too.
With these countervailing factors it looks like that the price of new construction probably won't move much in either direction, so as resale values continue to crater, C&D loans are going to be even worse as people choose the might cheaper option of buying an existing home.
The gap is so large even a substantial recovery in 2009 can't save C&D loans.
The % of household income spent on energy is the same as it was in 1971. You wouldn't guess that from some of the extreme comments one reads.
Some of the home energy costs have yet to trickle down to the consumers mailbox. Fuel price increases happen almost instantaneously, while coal/nat-gas price increases are buffered (somewhat) by tariffed rates. The various public utilities have recently been petitioning for rate hikes and/or fuel surcharges. These prices will be going up, just watch the next 6-12 months.
Ray-That is true and the number may rise somewhat, perhaps to the levels of the early 80s. However, that can be greatly mitigated by conservation. My point is that the energy situation is a challenge that needs to be dealt with not an end of the world scenario. Throwing up your hands in despair simply creates paralysis.
Office of Thrift Supervision
OTS Releases Initial Mortgage Metrics Report
The page cannot be found
FDIC has new job postings that require frequent overnite travel and massive cold pizza consumption:
FDIC Careers
FFDIC
Interesting look at the 1160 series of openings...see where the "Many" openings exist and you find it pretty well matches the RE bubble regions.
Picosec,
ie "the entire USA."?
Up to $175k for Prof. of Leadership position in Arlington, VA. Part job description: to change the culture. Change the culture of a federal bureaucracy? Does this have a precedent?
Home energy cost data point:
Just received proposed winter heating oil contract, NE Boston exurb. Last year $2.529/gal, this year $4.649/gal. Ouch.
M & I used to be a very conservative bank with almost zero loan losses. They were almost rediculously conservative
Up to there, the Cynic was correct.
But M&I's CEO did NOT come from the outside.
What made attentive people in Milwaukee notice this is precisely M&I's historically "clean" book. The damn bank almost NEVER reports a loss--quarterly or otherwise.
Not familiar with cheese country. Is this bank a candidate for a takeover, or simply a falling knive. Any thoughts.
I find the Timing of the M&I Disclosure just before the long holiday weekend to be quite interesting. The verbage in the statement "current market cycle" is also interesting, especially considering that M&I released a statement about expectations for a profitable Q3, which sounds a lot like "rosy wishiness" to me.
The current SUB-PRIME crisis that they seem to have leveraged themselves into quite heavily doesn't look anything like a historic market "cycle" to me, especially considering surging OIL PRICES that are apparently affecting every country's markets & economies, for better or for worse (for most), and every person on the planet. It looks like some banks will fail if OIL PRICES don't return to the $100/Barrel range very soon, especially bank & trust companies that are so heavily leveraged into bad loans.
I wonder what the "adjusted" writedowns will really be in this increasingly pressured regulatory climate. Many banks seem to be using various tactics to avoid coming clean with the real bad debt figures, which will probably soon prove to be very scary to investors of publicly traded bank & "trust" companies. Forget about the rosy profitable expectations.
Monday (& the next 10 days) will probably be very racy on the M&I (MI) rollercoaster ride. Where are the Bottom Feeders in this "current market cycle"?? I like the short term $10 PUT OPTIONS on MI Stock, which has already plummeted to 11 year lows. I see a lot more downside potential here.
The holiday-weekend release of the writeoff was interesting, yes.
M&I has long been the subject of takeover rumors, but has been an acquirer instead. Now has Boatmen's (St Louis), and a Twin Cities presence in addition to having covered Wisconsin (but not "blanketed" Wisconsin...)
The Bank spun off Metavante (M&I Data Services) which means that the bank-stock is a pure play now. It's also no longer supported by Metavante earnings, which were always considerable...