U.S. Jobless Claims Fell Less Than Forecast Last Week
"The number of first-time applications decreased by 10,000 to 450,000 in the week ended Aug. 9, from a revised 460,000 the prior week that was higher than previously estimated. The total number of people receiving benefits climbed to an almost five- year high." U.S. Jobless Claims Fell Less Than Forecast Last Week (Update2) - Bloomberg.com
That shadow speculation of HELOC supported living is the shadow inventory that will continue to housing. Even though many didn't buy at inflated prices, their free use of their HELOCs to support their lifestyles has them underwater. So, they will eventually swimaway and the REOs will just continue to grow ontop of the subprime, Alt A,and prime. We are still many years off from recovery.
When I first glanced at the numbers, I didn't think they were all that bad, but then I realized the MLS listings include all listings, not just foreclosure listings. So, they're still pretty scary, even if a portion of the distressed inventory is not yet REO.
My personal sense--based on the signs I see in the area where I live--is that, in fact, more homeowners are trying to sell their homes without using an real estate agent. I'm not sure why. In theory, they have access to the MLS, but I expect that few take advantage of the opportunity.
Bad news to the left of us.... worse news to the right - - and what does the market do? IT GOES UP !! Look at it folks - something is seriously wrong on the plantation - or - put another way I'll repost from an earlier thread:
spark writes:
rich writes:
..... at the mercy of hedge fund black boxes, ...
There's different kind of boxes. A true black box is totally automated and algorithm-driven. No humans, other than programmers.
A gray box uses the signals generated by black boxes but filters them through human traders.
A quant box generates data that human traders interpret to arbitrage trades and keep portfolios aligned with parameters.
Hedge funds and prop desks use all kinds of boxes.
Rich's point redefines the notion of "trading against the box". And maybe that's all that is left the market as a price discovery mechanism. If Rich is right, perhaps we should breed a flock of black swans instead of feeding the pigs who created this mess.
spark | 08.14.08 - 9:51 am | #
FWIW I have several friends who want to move out of their homes because their children have left (empty nests).
See if this makes sense to you ( it does not to me): They saw their 'idiot neighbor' get $1 million for their house two years ago, but they hesitate to sell now in this market because they are pretty sure that they can't get that price for themselves right now in the current market, so they'll hold off until they can be confident that they'll get 'their million dollars'.
But, just to be clear, Sood's stats are not unlisted REOs held by some bank in the shadows.
But, just to be clearer>, Sood's stats are not unlisted all REOs held by some bank in the shadows. Some are. We know this for a fact because of great Realtors® like Jim who tell us of the REO stock in his pipeline that the bank has yet to release for MLS listing.
It seems also CR that oh so long go when the blog was much younger there were some spirited debates as to what percentage of NODs would devolve to NOTS. At the time I remember being on the losing end because traditionally 1/4th - 1/3rd went to NOTS and I was sure this time would be much higher. Is 2/3rds higher? More important, is 2/3rds enough?
cr - you seem to think this is some conspiracy theory (maybe I am misreading you)... I think the shadow is simply a result of banks being overwheled by the volume of fc's and not getting them to market as fast as they are coming on their books.
I think the shadow is simply a result of banks being overwheled by the volume of fc's and not getting them to market as fast as they are coming on their books.
But ask yourself(lves) do the banks have an interest in hiding this inventory? I say yes...
C&C i think it a combination of factors,here in sonoma county there are homes that I know for a fact are REO,that are not on the MLS.And I also see one home that is an REO for the second time in 14 months.The non MLS REO's may be being held for some sort of bulk sale or auction? But I don't know that for a fact.
Tom - I am seeing the same here in my market. I am hearing from local REIC members that the banks have so many f/c's they can't get them to the market fast enough. In fact, some realtors dont even want REO's unless they can get a price discount and/or some selling concessions from the banks as their costs to market have increased.
"Psychiatry suggests that people hit by catastrophe begin in denial, become angry, then try to bargain their way out of the dilemma, then get depressed, before finally accepting their misfortune and resuming their lives. One year on, the villains of the credit crunch haven't moved past denial."
Rich's point redefines the notion of "trading against the box".
The black, gray and quant boxes greatly affect trading volume, especially in U.S. domestic indexes, and leveraged capital flows in an out of the U.S market.
But I doubt that they pump much permanent capital into the markets. So, every day, you have these vast flows of borrowed money washing around in the market, in innumerable fast-in-and-out trades.
There has never, ever been this much leverage and trading speculation in the U.S. equity market. It's off the chart.
Europe and Japan don't seem to have this trend to the same degree.
We need a new metric, pure and simple. The NAR dataset is broken, and the banks aren't sharing enough (or they don't know enough.) Vacancy rate is what we're really after; maybe there's some way to estimate it by factoring delinquent property tax rates with foreclosure process data and MLS stats. I dunno. I'll repeat a comment I made earlier:
FWIW, it looks like the pipes are backing up even further. Aside from the usual anecdotes of defaulters staying in their houses mortgage-free for 12-18 months before foreclosure, we've got new laws coming in that are apparently slowing the process.
From Nishu's data, 3.7% of all housing in Sacramento is REO. With alt-a coming on strong in the next year, that number could easily double.
We're nearing a point where the market will become completely broken. (Supply/Demand = infinity. Both the numerator and the denominator are moving in the wrong direction.) At that point, more supply won't change things.
Our local fishwrap publishes foreclosure notices daily (lots of them) but I rarely actually see a for sale sign, although it's obvious the house is empty. Somebodys lying.
Ok, it's official, I piss myself off -- where did I post that stuff on Blackrock the other day in regard to the new security they are engineering with a put feature?
If I would post under one name, maybe I could find it. Can I just be me?
"Psychiatry suggests that people hit by catastrophe begin in denial, become angry, then try to bargain their way out of the dilemma, then get depressed, before finally accepting their misfortune and resuming their lives"
I am near the end, hours at work got slashed and can't afford my house anymore under current situation. Logically I should have walked away last year but was still going through all the stages, in spite of everything I read here. I knew then my down payment was gone forever, guess I needed time to truly accept it. A lot of people are still staying "it will come back." Houses like mine are part of the shadow inventory, soon to be dumped on the market.
SACRAMENTO -- -- One reason California still has no state budget is a closed-door dispute over a tax proposal that could be a multimillion-dollar boon to banks that engage in subprime lending.
The plan would allow many large financial companies that are currently enduring record losses to eventually receive tax breaks millions of dollars greater than are currently available to them. Subprime lenders would be among the largest beneficiaries because they experienced a large boom followed by a bust.
"This is all about bailing out the subprime lending industry...They will have checks written to them by the state of California if this goes through."
Also, new stats from Foreclosure Radar suggest that Nisu's 67% estimate is a bit low:
Notices of Trustee Sale, which are typically recorded 105 days after the Notice of Default, and which set the auction date and time, increased 9.8% to 39,010 filings in July. Looking at this number in comparison to Notices of Default, it is clear that far fewer homeowners are finding a way out of foreclosure. At 97 percent of defaults, Julys Notices of Trustee Sale filings are nearly double the 50 percent that were more typical as recently as February.
If you bring up a list of bank owned/reos from ForeclosureRadar.com and compare it to some MLS listings like RedFin.com. You'll see most of ForeclosureRadar's bank owned list of houses doesn't even show on the MLS.
Fannie Mae ... package the loans into securities for sale to investors in the so-called "to-be-announced" market that is the first stage in the life of a guaranteed MBS. SIFMA's decision follows a controversial debate over whether to allow the loans in the TBA market, whose efficiency affects the cost of mortgages.
"We expect higher balance borrowers to receive both rate relief and increased liquidity as was desired in the legislation, while retaining the overall liquidity of the TBA market," Sean Davy, a managing director at SIFMA in New York, said in a statement.
The MSM will pick this story up in a few months and then the whole world will know...
Yep, just in time for it not to matter. By then we'll be talking about squatters rights. Looks like banks now own 750,000+ homes.
What will change things next will be a large REO portfolio failure. You wanna see price drops, just wait until a Chap 11 judge starts disposing of REO assets.
While I love RT, their data isnt 100%, i compare my legal notices in my local paper vs. RT, plus FC's in hoods including mine and some are simply not there.
"U.S. Home Sales Fall to 10-Year Low as Prices Tumble (Update1)
By Kathleen M. Howley and Dan Levy
Aug. 14 (Bloomberg) -- Existing U.S. home sales fell to a 10-year low in the second quarter and the median price for a single-family house dropped 7.6 percent as the real estate recession deepened.
The median tumbled to $206,500 from $223,500 a year earlier, the Chicago-based National Association of Realtors said today. Sales of single-family houses and condominiums fell 16 percent to 4.913 million at an annualized pace."
WRT FSBO's you are correct. I am witnessing in the DC burbs the same thing. Why list? I guess when you owe you need your 6 % and you can negotiate just as well as they can when it comes down to it...
these FSBO's seem , based on their prices, to be reasonable wrt current market, and they are on higher end homes +417K, but no one is buying...
BlackRock continues to explore alternative forms of leverage for its fixed income closed-end funds. One approach includes the development of a put feature for the ARPS, which would make them eligible for purchase by money market funds. This objective may be accomplished by adding the feature to the existing structure of the ARPS or through the issuance of a new form of preferred stock that includes a put feature. The existing ARPS issued by BlackRock closed-end funds or other issuers as currently structured are not eligible for purchase by money market funds. This potential solution is dependent on identifying third parties to provide liquidity commitments, demand for these instruments in the broader marketplace and obtaining necessary regulatory relief to make the ARPS eligible for purchase by money market funds.
"While there are still significant hurdles to cross in developing this structure, this has the potential to have broad applicability to helping to resolve the current illiquidity of outstanding ARPS," said Anne Ackerley, Chief Operating Officer, BlackRock U.S. Retail Group. BlackRock also continues to explore the availability and cost of other forms of leverage, including various types of bank financing. Any potential solution will be subject to execution risk and dependent on both economic and market factors beyond BlackRock's control.
CR, how can you say these aren't all REO's when the foreclosure radar article shows that 97% of NOD are now ending up as REO's? They might as well ALL be REO's. So yes, the 31K number is the actual inventory number for Sac and represents a huge shadow overhang. Sure, a lot of these are preforeclosures now, but virtually all will turn to REO's in the next 105 days and only a small fraction will be cleared. What do you want to bet that the MLS will not show the true number after 105 days?
You also say this isn't some bank holding a shadow inventory but that is suspect. Who is holding this inventory and why isn't it for sale? Will Wells will dump 12K on Sacto market soon? Will a large bank failure cause a big dump? Right now there is a large motivation for banks to NOT move this inventory due to L3 accounting issues and pricing pressures but at some point they will have to capitulate.
Look at Max's "standard" inventory numbers for 2007 vs. 2008 and you can see the listings on the MLS are less this year than last! Realtors would have us believe that this shows the market is clearing and bottoming but now we know better. Inventory is HUGE and is way larger than ever. 1,300 foreclosures a day in CA.
"Here's some fresh info from Foreclosure Radar (via LA Times):
Notices of Trustee Sale, which are typically recorded 105 days after the Notice of Default, and which set the auction date and time, increased 9.8% to 39,010 filings in July. Looking at this number in comparison to Notices of Default, it is clear that far fewer homeowners are finding a way out of foreclosure. At 97 percent of defaults, Julys Notices of Trustee Sale filings are nearly double the 50 percent that were more typical as recently as February."
Paul,
As it happens, I'm 100% cash {in more than one currency}. I'm not denying anything, I'm attempting to explain this market to myself. Let's take a case in point..... may I suggest TGT.
Granted TGT is repurchasing 20% of their outstanding; granted they sold 50% of their credit card portfolio 3 months ago and don't "need" cash. Given that TGT has a currently "out of date" model compared to WMT. Given that the consumer is strapped and about to be whipped.
Please explain to me how or why or under what set of logic, the price of TGT moves from $41/share to - and, I'm giving you a bargain here - $50 today ... in less than one week.
It takes time to get the new REO ready for market and asset managers come and go pretty fast so the adminstrative side to the business is not very smooth. I went out and looked at many non MLS REO's and found that many still had the orginal owners living there waiting for the badge to kick them out or the property needed cleaning etc to get it ready for mkt.
The true shadow inventory is the owners holding out waiting for higher prices to sell, they purchased or have refi'd beyond the properties current market value and need to sell based on job, health, divorce etc.
Is it possible that some lenders are purposefully dragging their feet with foreclosures on delinquent home-owners because they don't want to add to their REO book? I have certainly heard that some banks have increased the length of time required to be delinquent. Could there be more subtle (and more hidden) efforts under-way that simply allow struggling home-owners to remain in their homes rent-free indefinitely?
Maybe we could discern this type of behaviour by looking as the growth rates of a given lender's list of non-performing loans vs the growth rates of the REO book. If the average length of time of non-payment is rising then we might be able to infer that they are dragging their feet.
I run a foreclosure data source in Wisconsin and the data shows that the percentage of initial (pre-foreclosure) filings that eventually go to Default Judgment has increased considerably. Statewide we are nearing a 67% rate as compared with a historical rate of less than 50%.
So, a lot more houses are ending up (eventually) back in the market.
Unfortunately for short sellers (and everyone), the banks still don't understand the benefits of short sales. Hopefully they will soon.
The revision of 141 is part of the FASB's push toward "fair value," or mark-to market accounting.
Financial Week (December 10, 2007) reports that Dennis Beresford, a former FASB chairman now serving on a Securities and Exchange Commission advisory committee that is studying the U.S. financial reporting system says The rules will be difficult to apply and will require companies and analysts to relearn a lot of things. The article goes on to say that the revisions to 141 essentially extend the fair-value requirements to new areas. That will increase the valuation work required of corporate finance departments, and in some cases jack up the volatility of reported earnings as various assets and liabilities are marked to market.
I am aware in our market (S.W. Ohio) where the regulators are requiring small banks to hire property managers vs. trying to sell (the banks would go under) they want them to try and lease the properties and ride it out. Here is another example of the Federal Government and its short sighted policies.
regulators are requiring small banks to hire property managers vs. trying to sell (the banks would go under) they want them to try and lease the properties and ride it out
Wow! Is there any evidence to prove that some lenders are trying to avoid sales of REOs to avoid taking write-downs? If this is the case it would have BIG implications.
So far we have been hearing that the only reason there is a back-log in foreclosures and REOs is due to the fact that the lenders are swamped dealing with the volume. However, it a different picture altogether if some lenders are intentionally dragging their feet.
actually, something like that needs to happen, imho. Otherwise, where are the foreclosed and evicted going to live? No one will give them a new purchase loan... rental demand is going way up. Not saying the banks are the ideal landlord, but sometimes there isn't a good choice.
In some areas this may be true but not in Sac. There are plenty of houses that sellers (flippers and also banks) couldn't sell that have been converted to rentals and there has been a flood of rentals around here. The problem is years of overbuilding where "demand" was really specuvestors that "needed" two and three houses a piece, and also consolidation of households as the recessions kicks in (kids going to live with parents, downsizing, etc.)
Not in Stanislaus or Merced Counties either, from my experiences (counties south of Sac in the Central Valley).
Swedish Chef, the Bay Area is less overbuilt, but still overpriced. I'll never expect vast swathes of empty homes, but I expect at least one major downdraft in prices.
The difference is that there is generally demand for existing housing in the Bay Area at some price level; but that can't be said for all the developments built 'way out in the farmland of the San Joaquin and Sacramento valleys.
To speed up the disposition of the 54,000 foreclosed properties it owns, Fannie Mae is opening offices in California and Florida and is considering selling those properties in bulk to investors. "I do not think this is a time to be holding onto (foreclosed properties) hoping for a better day," CEO Daniel Mudd said last week.
they own 7% of REO, REO is right now 17% of current inventory.
it would be interesting if htey decide to dump their REO
The number of foreclosures "could start to stabilize as early as the first quarter of next year if the government program gains any traction," said Rick Sharga, RealtyTrac's vice president for marketing. "That's really the unknowable right now."
How many homeowners in trouble don't have any seconds? that seems to be a mayor inconvenience for the housing bill to gain traction.
What you guys are saying is true about the BA. More to Bob's point about the demand at some price level, the question is at what price level, and more importantly what will have an effect on that level?
In Sac, the RE bubble itself (and subsequent bust) will be the primary driver of lower prices, while in the BA the primary driver will be economic conditions. I would submit that the other shoe hasn't dropped with respect to the recession (that is also primarily caused by the RE bubble, or credit bubble bust) so the effects on the BA, while substantial, are so far muted compared to Sac.
This is basically a discussion of primary effects vs. secondary effects viz the housing bubble. But because the RE bubble was really a climax of the much larger and more dangerous Great Credit Bubble of which the BA was a HUGE beneficiary, the BA will see astounding price drops once the bubble economy really start cratering. Just an educated guess.
There is a shadow inventory, no doubt. But these researchers are relying on RealtyTrac numbers, which are trumped up - RT told me that they don't screen for accuracy.
The researchers are using 31,168 for San Diego County as 2/3 of the NODs? That equals 46,519 NODs total.
But in 2008 there have only been 23,454 NODs filed in SD County, and many of those have been foreclosed and sold again by now.
I wouldn't be surprised to see 40,000 next year, but these guys were led astray by RealtyTrac.
I'd also chime in with a 90% or higher conversion rate of NOD to NOTS, there's no stopping the flood now.
Are NODs automatically issued when someone has missed payments for a lengthy period of time, or do lenders have a lot of discretion as to when they want to declare a borrower as being in default?
Basically, I am just wondering if there are is a possilbe "shadow" NOD inventory that lenders are sitting on because they don't want to deal with any more foreclosures?
Actually, the whole discussion of "shadow" NOD inventory makes me wonder if we are seeing any increase in property tax delinquencies WITHOUT the home-owners have been issued an NOD? This would be a red flag that lenders were dragging their feet in dealing with defaults.
"if we are seeing any increase in property tax delinquencies WITHOUT the home-owners have been issued an NOD? This would be a red flag that lenders were dragging their feet in dealing with defaults."
Sniglet, methinks the $17B (and growing) CA deficit says yes to this question, although calmer (read: head in sand) folks would say that CA is falling behind simply because they are getting less property taxes due to lower RE values!
Is it possible that another reason banks may footdrag on listing REO's is because in some neighborhoods, most of the mortgages are held by just one particular bank?
Which means, if that one bank suddenly starts dumping all these properties on the MLS, all it will do is to devalue the comps for the rest of the properties the bank holds in that area?
Greetings fellow fans of transparency. I must confess I have lurked here among you for two years. Are there any fellow fans out there from the Jacksonville, FRAUDLIA/Saint Augustine area? My husband and I have been renting in a development for two years. There are approximately thirty foreclosures and at least twenty shadow foreclosures and climbing. I frequently ride my bicycle around the neighborhood counting the homes with lock boxes but not listed nor advertised (my husband thinks I am a freak). I can only extrapolate this snapshot country wide and grimace. Question for those who are smarter than I am (Laywer Liz?). I have been watching a home that has been vacant for two years and an unlisted REO property since January. Who really owns this property? What are they waiting for? The property records indicate the following:
Mailing address:
c/O COUNTRYWIDE HOME LOANS INC
7105 CORPORATE DR MAILSTOP PTX-B-35 PLANO, TX 75024-0000
Owners as:
DEUTSCHE BANK NATIONAL TRUST COMPANY TRUSTEE
MORGAN STANLEY ABS CAPITAL I INC TRUST 2005-HE1
Bimbo -- I'm only a semi-expert myself, not being in the industry but having investigated foreclosures in my neighborhood.
I'm guessing that Countrywide originated the loan, if they're on the mailing address. It looks like the loan itself ended up in a Morgan Stanley ABS (Asset-Backed Security), which is probably owned by some investor who-knows-where.
But if Deutsche Bank National Trust is listed as the trustee, they are the ones basically in charge of doing something with the property. I've dealt with them before with a property in our neighborhood. If you look them up online they have a phone number with a pre-recorded message that basically directs you to fax your inquiries to their fax number. We sent them a few official-looking and mildly threatening faxes from our neighborhood association asking when they were going to list the property, if they had a contact # for an asset manager, who the realtor would be, etc.
We never got a response, I'm guessing they are probably bombarded with requests at this point. But they did happen to finally list the property not too much later.
Huge.
U.S. Jobless Claims Fell Less Than Forecast Last Week
"The number of first-time applications decreased by 10,000 to 450,000 in the week ended Aug. 9, from a revised 460,000 the prior week that was higher than previously estimated. The total number of people receiving benefits climbed to an almost five- year high."
U.S. Jobless Claims Fell Less Than Forecast Last Week (Update2) - Bloomberg.com
CR, thanks, I was hoping you would comment on this report.
That shadow speculation of HELOC supported living is the shadow inventory that will continue to housing. Even though many didn't buy at inflated prices, their free use of their HELOCs to support their lifestyles has them underwater. So, they will eventually swimaway and the REOs will just continue to grow ontop of the subprime, Alt A,and prime. We are still many years off from recovery.
When I first glanced at the numbers, I didn't think they were all that bad, but then I realized the MLS listings include all listings, not just foreclosure listings. So, they're still pretty scary, even if a portion of the distressed inventory is not yet REO.
My personal sense--based on the signs I see in the area where I live--is that, in fact, more homeowners are trying to sell their homes without using an real estate agent. I'm not sure why. In theory, they have access to the MLS, but I expect that few take advantage of the opportunity.
Bad news to the left of us.... worse news to the right - - and what does the market do? IT GOES UP !! Look at it folks - something is seriously wrong on the plantation - or - put another way I'll repost from an earlier thread:
spark writes:
rich writes:
There's different kind of boxes. A true black box is totally automated and algorithm-driven. No humans, other than programmers.
A gray box uses the signals generated by black boxes but filters them through human traders.
A quant box generates data that human traders interpret to arbitrage trades and keep portfolios aligned with parameters.
Hedge funds and prop desks use all kinds of boxes.
Rich's point redefines the notion of "trading against the box". And maybe that's all that is left the market as a price discovery mechanism. If Rich is right, perhaps we should breed a flock of black swans instead of feeding the pigs who created this mess.
spark | 08.14.08 - 9:51 am | #
Alright, this is mildly OT, but I finally created my own blog:
"116% Loss Severity on a $1 Home"
Detroit Mortgage Meltdown
Enjoy.
FWIW I have several friends who want to move out of their homes because their children have left (empty nests).
See if this makes sense to you ( it does not to me): They saw their 'idiot neighbor' get $1 million for their house two years ago, but they hesitate to sell now in this market because they are pretty sure that they can't get that price for themselves right now in the current market, so they'll hold off until they can be confident that they'll get 'their million dollars'.
But, just to be clear, Sood's stats are not unlisted REOs held by some bank in the shadows.
But, just to be clearer>, Sood's stats are not unlisted all REOs held by some bank in the shadows. Some are. We know this for a fact because of great Realtors® like Jim who tell us of the REO stock in his pipeline that the bank has yet to release for MLS listing.
It seems also CR that oh so long go when the blog was much younger there were some spirited debates as to what percentage of NODs would devolve to NOTS. At the time I remember being on the losing end because traditionally 1/4th - 1/3rd went to NOTS and I was sure this time would be much higher. Is 2/3rds higher? More important, is 2/3rds enough?
CR and Max are the two blogs I follow...I wish there was someone similar who cover Madera county....
Fannie / Freddie big loans push mkt up?
U.S. Stocks Rise as Fannie Mae, Freddie Mac Spur Bank Rally - Bloomberg.com
oy.
Only the shadow knows.
Certainly the banks have so much kaka in the shoot, there's bound to be a bunch that has yet to hit the fan.
Cheers,
Shadow banking; see covered bonds and repackaging toxic garbage into hyped AAA-rated properties, assets and securities that will fuel the future...
cr - you seem to think this is some conspiracy theory (maybe I am misreading you)... I think the shadow is simply a result of banks being overwheled by the volume of fc's and not getting them to market as fast as they are coming on their books.
Who knows what REO's lurk in the shadows?
I saw that Bloomberg piece on the GSE's, too, but can't find any detail. Anyone know more about that?
I think the shadow is simply a result of banks being overwheled by the volume of fc's and not getting them to market as fast as they are coming on their books.
But ask yourself(lves) do the banks have an interest in hiding this inventory? I say yes...
C&C i think it a combination of factors,here in sonoma county there are homes that I know for a fact are REO,that are not on the MLS.And I also see one home that is an REO for the second time in 14 months.The non MLS REO's may be being held for some sort of bulk sale or auction? But I don't know that for a fact.
Tom - I am seeing the same here in my market. I am hearing from local REIC members that the banks have so many f/c's they can't get them to the market fast enough. In fact, some realtors dont even want REO's unless they can get a price discount and/or some selling concessions from the banks as their costs to market have increased.
How do FSBOs fit in here?
Off topic. Great commentary on the credit crunch from Bloomberg:
Credit-Crunch Villains Should Own Up, Do Penance: Mark Gilbert
Credit-Crunch Villains Should Own Up, Do Penance: Mark Gilbert - Bloomberg.com
"Psychiatry suggests that people hit by catastrophe begin in denial, become angry, then try to bargain their way out of the dilemma, then get depressed, before finally accepting their misfortune and resuming their lives. One year on, the villains of the credit crunch haven't moved past denial."
The black, gray and quant boxes greatly affect trading volume, especially in U.S. domestic indexes, and leveraged capital flows in an out of the U.S market.
But I doubt that they pump much permanent capital into the markets. So, every day, you have these vast flows of borrowed money washing around in the market, in innumerable fast-in-and-out trades.
There has never, ever been this much leverage and trading speculation in the U.S. equity market. It's off the chart.
Europe and Japan don't seem to have this trend to the same degree.
Most likely because it's (both) equal to our SEC isn't in bed with the banking industry.
Wave a flag wrap.. yourself in it and all will be just fine.
I expect the SEC to do something with yet another regulation against those evil short sellers.
Ciao
MS
Thanks for the major hat tip, CR!
We need a new metric, pure and simple. The NAR dataset is broken, and the banks aren't sharing enough (or they don't know enough.) Vacancy rate is what we're really after; maybe there's some way to estimate it by factoring delinquent property tax rates with foreclosure process data and MLS stats. I dunno. I'll repeat a comment I made earlier:
FWIW, it looks like the pipes are backing up even further. Aside from the usual anecdotes of defaulters staying in their houses mortgage-free for 12-18 months before foreclosure, we've got new laws coming in that are apparently slowing the process.
From Nishu's data, 3.7% of all housing in Sacramento is REO. With alt-a coming on strong in the next year, that number could easily double.
We're nearing a point where the market will become completely broken. (Supply/Demand = infinity. Both the numerator and the denominator are moving in the wrong direction.) At that point, more supply won't change things.
Our local fishwrap publishes foreclosure notices daily (lots of them) but I rarely actually see a for sale sign, although it's obvious the house is empty. Somebodys lying.
Ok, it's official, I piss myself off -- where did I post that stuff on Blackrock the other day in regard to the new security they are engineering with a put feature?
If I would post under one name, maybe I could find it. Can I just be me?
"Psychiatry suggests that people hit by catastrophe begin in denial, become angry, then try to bargain their way out of the dilemma, then get depressed, before finally accepting their misfortune and resuming their lives"
I am near the end, hours at work got slashed and can't afford my house anymore under current situation. Logically I should have walked away last year but was still going through all the stages, in spite of everything I read here. I knew then my down payment was gone forever, guess I needed time to truly accept it. A lot of people are still staying "it will come back." Houses like mine are part of the shadow inventory, soon to be dumped on the market.
Aarghh. From today's LA Times:
SACRAMENTO -- -- One reason California still has no state budget is a closed-door dispute over a tax proposal that could be a multimillion-dollar boon to banks that engage in subprime lending.
The plan would allow many large financial companies that are currently enduring record losses to eventually receive tax breaks millions of dollars greater than are currently available to them. Subprime lenders would be among the largest beneficiaries because they experienced a large boom followed by a bust.
"This is all about bailing out the subprime lending industry...They will have checks written to them by the state of California if this goes through."
Subprime lenders may see boon - Los Angeles Times
Also, new stats from Foreclosure Radar suggest that Nisu's 67% estimate is a bit low:
Notices of Trustee Sale, which are typically recorded 105 days after the Notice of Default, and which set the auction date and time, increased 9.8% to 39,010 filings in July. Looking at this number in comparison to Notices of Default, it is clear that far fewer homeowners are finding a way out of foreclosure. At 97 percent of defaults, Julys Notices of Trustee Sale filings are nearly double the 50 percent that were more typical as recently as February.
I'm watching a house on which I made an unsuccessful short-sale offer. It sold at a trustee's sale in May for $10k less than my offer.
Three months later, it still has not been put on MLS. I do not believe that a backlog of REOs here in the Mid-South is responsible for the delay.
Meanwhile, the weeds are a meter high and the roof is beginning to leak....
Sorry for continued whippin of OT horse, but can someone savvier than moi weigh in on this?
2 days ago S&P downgrades jumbo prime and then today SIFMA lets fannie and freddie bond 'em? Toxic waste team to the rescue?
Agency MBS may include 10 pct of high-balance loans-SIFMA
| Reuters
Max - that is the problem...every home is going back to the bank.
My 15 seconds of fame are over!
lol
You are still on the LA times.com...so you have a few more minutes left.
The MSM will pick this story up in a few months and then the whole world will know...
Nishu Sood gots it right.
If you bring up a list of bank owned/reos from ForeclosureRadar.com and compare it to some MLS listings like RedFin.com. You'll see most of ForeclosureRadar's bank owned list of houses doesn't even show on the MLS.
Yes,
that is nice;
Fannie Mae ... package the loans into securities for sale to investors in the so-called "to-be-announced" market that is the first stage in the life of a guaranteed MBS. SIFMA's decision follows a controversial debate over whether to allow the loans in the TBA market, whose efficiency affects the cost of mortgages.
"We expect higher balance borrowers to receive both rate relief and increased liquidity as was desired in the legislation, while retaining the overall liquidity of the TBA market," Sean Davy, a managing director at SIFMA in New York, said in a statement.
The MSM will pick this story up in a few months and then the whole world will know...
Yep, just in time for it not to matter. By then we'll be talking about squatters rights.
Looks like banks now own 750,000+ homes.
What will change things next will be a large REO portfolio failure. You wanna see price drops, just wait until a Chap 11 judge starts disposing of REO assets.
While I love RT, their data isnt 100%, i compare my legal notices in my local paper vs. RT, plus FC's in hoods including mine and some are simply not there.
The NY ATNY GEN: "Investors have to believe in the system...that its going to work..."
"U.S. Home Sales Fall to 10-Year Low as Prices Tumble (Update1)
By Kathleen M. Howley and Dan Levy
Aug. 14 (Bloomberg) -- Existing U.S. home sales fell to a 10-year low in the second quarter and the median price for a single-family house dropped 7.6 percent as the real estate recession deepened.
The median tumbled to $206,500 from $223,500 a year earlier, the Chicago-based National Association of Realtors said today. Sales of single-family houses and condominiums fell 16 percent to 4.913 million at an annualized pace."
Terry,
WRT FSBO's you are correct. I am witnessing in the DC burbs the same thing. Why list? I guess when you owe you need your 6 % and you can negotiate just as well as they can when it comes down to it...
these FSBO's seem , based on their prices, to be reasonable wrt current market, and they are on higher end homes +417K, but no one is buying...
in my county, 1400+ on mrket,
Progress on Other Potential Solutions
BlackRock continues to explore alternative forms of leverage for its fixed income closed-end funds. One approach includes the development of a put feature for the ARPS, which would make them eligible for purchase by money market funds. This objective may be accomplished by adding the feature to the existing structure of the ARPS or through the issuance of a new form of preferred stock that includes a put feature. The existing ARPS issued by BlackRock closed-end funds or other issuers as currently structured are not eligible for purchase by money market funds. This potential solution is dependent on identifying third parties to provide liquidity commitments, demand for these instruments in the broader marketplace and obtaining necessary regulatory relief to make the ARPS eligible for purchase by money market funds.
"While there are still significant hurdles to cross in developing this structure, this has the potential to have broad applicability to helping to resolve the current illiquidity of outstanding ARPS," said Anne Ackerley, Chief Operating Officer, BlackRock U.S. Retail Group. BlackRock also continues to explore the availability and cost of other forms of leverage, including various types of bank financing. Any potential solution will be subject to execution risk and dependent on both economic and market factors beyond BlackRock's control.
CR, how can you say these aren't all REO's when the foreclosure radar article shows that 97% of NOD are now ending up as REO's? They might as well ALL be REO's. So yes, the 31K number is the actual inventory number for Sac and represents a huge shadow overhang. Sure, a lot of these are preforeclosures now, but virtually all will turn to REO's in the next 105 days and only a small fraction will be cleared. What do you want to bet that the MLS will not show the true number after 105 days?
You also say this isn't some bank holding a shadow inventory but that is suspect. Who is holding this inventory and why isn't it for sale? Will Wells will dump 12K on Sacto market soon? Will a large bank failure cause a big dump? Right now there is a large motivation for banks to NOT move this inventory due to L3 accounting issues and pricing pressures but at some point they will have to capitulate.
Look at Max's "standard" inventory numbers for 2007 vs. 2008 and you can see the listings on the MLS are less this year than last! Realtors would have us believe that this shows the market is clearing and bottoming but now we know better. Inventory is HUGE and is way larger than ever. 1,300 foreclosures a day in CA.
"Here's some fresh info from Foreclosure Radar (via LA Times):
Notices of Trustee Sale, which are typically recorded 105 days after the Notice of Default, and which set the auction date and time, increased 9.8% to 39,010 filings in July. Looking at this number in comparison to Notices of Default, it is clear that far fewer homeowners are finding a way out of foreclosure. At 97 percent of defaults, Julys Notices of Trustee Sale filings are nearly double the 50 percent that were more typical as recently as February."
Paul,
As it happens, I'm 100% cash {in more than one currency}. I'm not denying anything, I'm attempting to explain this market to myself. Let's take a case in point..... may I suggest TGT.
Granted TGT is repurchasing 20% of their outstanding; granted they sold 50% of their credit card portfolio 3 months ago and don't "need" cash. Given that TGT has a currently "out of date" model compared to WMT. Given that the consumer is strapped and about to be whipped.
Please explain to me how or why or under what set of logic, the price of TGT moves from $41/share to - and, I'm giving you a bargain here - $50 today ... in less than one week.
Tom Stone writes
C&C i think it a combination of factors,here in sonoma county there are homes that I know for a fact are REO,that are not on the MLS.
tom, hear is a link for sonomareo that shows somoma county MLS and non MLS listed REO properties.
UPCOMING SONOMA COUNTY TRUESTEE SALES
It takes time to get the new REO ready for market and asset managers come and go pretty fast so the adminstrative side to the business is not very smooth. I went out and looked at many non MLS REO's and found that many still had the orginal owners living there waiting for the badge to kick them out or the property needed cleaning etc to get it ready for mkt.
The true shadow inventory is the owners holding out waiting for higher prices to sell, they purchased or have refi'd beyond the properties current market value and need to sell based on job, health, divorce etc.
It's even higher than that. I'd say 30% of owners I know would like to cash out right now but "aren't sure they can get a good price"
(translation= We have negative equity but don't want to admit it).
Prices need to reset. $120K not $250K.
50% drop & record homeownership=?.
Is it possible that some lenders are purposefully dragging their feet with foreclosures on delinquent home-owners because they don't want to add to their REO book? I have certainly heard that some banks have increased the length of time required to be delinquent. Could there be more subtle (and more hidden) efforts under-way that simply allow struggling home-owners to remain in their homes rent-free indefinitely?
Maybe we could discern this type of behaviour by looking as the growth rates of a given lender's list of non-performing loans vs the growth rates of the REO book. If the average length of time of non-payment is rising then we might be able to infer that they are dragging their feet.
I run a foreclosure data source in Wisconsin and the data shows that the percentage of initial (pre-foreclosure) filings that eventually go to Default Judgment has increased considerably. Statewide we are nearing a 67% rate as compared with a historical rate of less than 50%.
So, a lot more houses are ending up (eventually) back in the market.
Unfortunately for short sellers (and everyone), the banks still don't understand the benefits of short sales. Hopefully they will soon.
Foreclosure Alarm
The revision of 141 is part of the FASB's push toward "fair value," or mark-to market accounting.
Financial Week (December 10, 2007) reports that Dennis Beresford, a former FASB chairman now serving on a Securities and Exchange Commission advisory committee that is studying the U.S. financial reporting system says The rules will be difficult to apply and will require companies and analysts to relearn a lot of things. The article goes on to say that the revisions to 141 essentially extend the fair-value requirements to new areas. That will increase the valuation work required of corporate finance departments, and in some cases jack up the volatility of reported earnings as various assets and liabilities are marked to market.
I am aware in our market (S.W. Ohio) where the regulators are requiring small banks to hire property managers vs. trying to sell (the banks would go under) they want them to try and lease the properties and ride it out. Here is another example of the Federal Government and its short sighted policies.
regulators are requiring small banks to hire property managers vs. trying to sell (the banks would go under) they want them to try and lease the properties and ride it out
Wow! Is there any evidence to prove that some lenders are trying to avoid sales of REOs to avoid taking write-downs? If this is the case it would have BIG implications.
So far we have been hearing that the only reason there is a back-log in foreclosures and REOs is due to the fact that the lenders are swamped dealing with the volume. However, it a different picture altogether if some lenders are intentionally dragging their feet.
ask the lender
actually, something like that needs to happen, imho. Otherwise, where are the foreclosed and evicted going to live? No one will give them a new purchase loan... rental demand is going way up. Not saying the banks are the ideal landlord, but sometimes there isn't a good choice.
"rental demand is going way up"
In some areas this may be true but not in Sac. There are plenty of houses that sellers (flippers and also banks) couldn't sell that have been converted to rentals and there has been a flood of rentals around here. The problem is years of overbuilding where "demand" was really specuvestors that "needed" two and three houses a piece, and also consolidation of households as the recessions kicks in (kids going to live with parents, downsizing, etc.)
Coming to a neighborhood near you soon.
Darth Toll
Thanks for the reality check. The bay area is a lot less over built, and housing consolidation, multi-person households, already in place here.
""rental demand is going way up"
In some areas this may be true but not in Sac. "
Not in Stanislaus or Merced Counties either, from my experiences (counties south of Sac in the Central Valley).
Swedish Chef, the Bay Area is less overbuilt, but still overpriced. I'll never expect vast swathes of empty homes, but I expect at least one major downdraft in prices.
The difference is that there is generally demand for existing housing in the Bay Area at some price level; but that can't be said for all the developments built 'way out in the farmland of the San Joaquin and Sacramento valleys.
To speed up the disposition of the 54,000 foreclosed properties it owns, Fannie Mae is opening offices in California and Florida and is considering selling those properties in bulk to investors. "I do not think this is a time to be holding onto (foreclosed properties) hoping for a better day," CEO Daniel Mudd said last week.
they own 7% of REO, REO is right now 17% of current inventory.
it would be interesting if htey decide to dump their REO
The number of foreclosures "could start to stabilize as early as the first quarter of next year if the government program gains any traction," said Rick Sharga, RealtyTrac's vice president for marketing. "That's really the unknowable right now."
How many homeowners in trouble don't have any seconds? that seems to be a mayor inconvenience for the housing bill to gain traction.
FT.com / Financials - Subprime rescue hit by second mortgages
Bob Dobbs, Swedish Chef,
What you guys are saying is true about the BA. More to Bob's point about the demand at some price level, the question is at what price level, and more importantly what will have an effect on that level?
In Sac, the RE bubble itself (and subsequent bust) will be the primary driver of lower prices, while in the BA the primary driver will be economic conditions. I would submit that the other shoe hasn't dropped with respect to the recession (that is also primarily caused by the RE bubble, or credit bubble bust) so the effects on the BA, while substantial, are so far muted compared to Sac.
This is basically a discussion of primary effects vs. secondary effects viz the housing bubble. But because the RE bubble was really a climax of the much larger and more dangerous Great Credit Bubble of which the BA was a HUGE beneficiary, the BA will see astounding price drops once the bubble economy really start cratering. Just an educated guess.
Thank you Rob Dawg for the kind thoughts.
There is a shadow inventory, no doubt. But these researchers are relying on RealtyTrac numbers, which are trumped up - RT told me that they don't screen for accuracy.
The researchers are using 31,168 for San Diego County as 2/3 of the NODs? That equals 46,519 NODs total.
But in 2008 there have only been 23,454 NODs filed in SD County, and many of those have been foreclosed and sold again by now.
I wouldn't be surprised to see 40,000 next year, but these guys were led astray by RealtyTrac.
I'd also chime in with a 90% or higher conversion rate of NOD to NOTS, there's no stopping the flood now.
Are NODs automatically issued when someone has missed payments for a lengthy period of time, or do lenders have a lot of discretion as to when they want to declare a borrower as being in default?
Basically, I am just wondering if there are is a possilbe "shadow" NOD inventory that lenders are sitting on because they don't want to deal with any more foreclosures?
Actually, the whole discussion of "shadow" NOD inventory makes me wonder if we are seeing any increase in property tax delinquencies WITHOUT the home-owners have been issued an NOD? This would be a red flag that lenders were dragging their feet in dealing with defaults.
Saw this in a thread from earlier today:
The Dean of Penny Stocks | CollegeStock
"if we are seeing any increase in property tax delinquencies WITHOUT the home-owners have been issued an NOD? This would be a red flag that lenders were dragging their feet in dealing with defaults."
Sniglet, methinks the $17B (and growing) CA deficit says yes to this question, although calmer (read: head in sand) folks would say that CA is falling behind simply because they are getting less property taxes due to lower RE values!
Is it possible that another reason banks may footdrag on listing REO's is because in some neighborhoods, most of the mortgages are held by just one particular bank?
Which means, if that one bank suddenly starts dumping all these properties on the MLS, all it will do is to devalue the comps for the rest of the properties the bank holds in that area?
Invisible hand meets invisible supply. Result = invisible demand at visible price.
Greetings fellow fans of transparency. I must confess I have lurked here among you for two years. Are there any fellow fans out there from the Jacksonville, FRAUDLIA/Saint Augustine area? My husband and I have been renting in a development for two years. There are approximately thirty foreclosures and at least twenty shadow foreclosures and climbing. I frequently ride my bicycle around the neighborhood counting the homes with lock boxes but not listed nor advertised (my husband thinks I am a freak). I can only extrapolate this snapshot country wide and grimace. Question for those who are smarter than I am (Laywer Liz?). I have been watching a home that has been vacant for two years and an unlisted REO property since January. Who really owns this property? What are they waiting for? The property records indicate the following:
Mailing address:
c/O COUNTRYWIDE HOME LOANS INC
7105 CORPORATE DR MAILSTOP PTX-B-35 PLANO, TX 75024-0000
Owners as:
DEUTSCHE BANK NATIONAL TRUST COMPANY TRUSTEE
MORGAN STANLEY ABS CAPITAL I INC TRUST 2005-HE1
Thanks to all.
Bimbo -- I'm only a semi-expert myself, not being in the industry but having investigated foreclosures in my neighborhood.
I'm guessing that Countrywide originated the loan, if they're on the mailing address. It looks like the loan itself ended up in a Morgan Stanley ABS (Asset-Backed Security), which is probably owned by some investor who-knows-where.
But if Deutsche Bank National Trust is listed as the trustee, they are the ones basically in charge of doing something with the property. I've dealt with them before with a property in our neighborhood. If you look them up online they have a phone number with a pre-recorded message that basically directs you to fax your inquiries to their fax number. We sent them a few official-looking and mildly threatening faxes from our neighborhood association asking when they were going to list the property, if they had a contact # for an asset manager, who the realtor would be, etc.
We never got a response, I'm guessing they are probably bombarded with requests at this point. But they did happen to finally list the property not too much later.
VacantHomes- Thanks for the insight. Have a great day.