Why am I first--isn't this working. I still keep hearing these "financial experts" saying that we have a long way to go--3 to 6 months, maybe next spring. We are only seeing the beginning of the price declines which will cause further increases in foreclosures. We have not seen the peak in ARM resets. Why are people still talking about "bottoming and stabilizing" in a few months?
I think that 2008 will be worse than 2007 for home sales
On the bright side, economists are hopeful that the number can only go up from here, as mortgage lenders relax a bit from Augusts panic.
An amazing bit of hubris on the part of these un-named "economists". A similar quote could have probably been found about the NASDAQ in the Summer of 2000.
What I increasingly believe is that there is a "search for optimism" going on.
It is akin to the drowning man grasping at a straw.
Recall that this generation of players is probably 100% on Prozac and its congeners. They are giving Prozac to kids, so rest assured every single adult is on it.
So, you've got a bunch of traders etc. who are chemical optimists.
Chemical optimists.
What will it take for them to sell? Quite a lot.
This bodes poorly if it has any validity at all. Why? Because it portends a crash. When someone who is jacked up on Prozac gets depressed, they get REALLY depressed REALLY quickly.
Recall that this generation of players is probably 100% on Prozac and its congeners. They are giving Prozac to kids, so rest assured every single adult is on it.
So, you've got a bunch of traders etc. who are chemical optimists.
Hadn't thought of this angle. I did read a few weeks back that there are detectable levels of Prozac in US rivers & streams apparently because so many people are on the stuff and some of it, uh, gets eliminated and makes it through the sewage treatment plants into the rivers. Happy fish? Actually, the article was about scientists who are studying the potential environmental effects.
On the bright side, economists are hopeful that the number can only go up from here
I have used this reasoning for years in regards to getting older and uglier but without success. Sometimes things just keep going downhill despite much hope and optimism.
I compile new homeowner lists in central Texas. Sales for Sept here in San Antonio (Bexar County) are down over 40% yoy. (3,035 in 2006 vs 1,783 in 2007)
"detectable levels of Prozac in US rivers & streams."
Amusing angle, but Prozac mainly metabolised in liver, so kidneys just put out metabolites. I imagine concentrations of Prozac are really low - so this seems like a "whoa, cool, look what we found" story.
Estrogen and related compounds, on the other hand, seem to exist in the wild at meaningful levels due to human civilization.
The equity markets are pricing in a 'Bernanke Put, said Rob McAdie, head of credit at Barclays Capital and a man with a front row seat at the credit crunch.
They are betting that the Fed will cut again and again, but they are not factoring in the effect that this credit squeeze is having on the financial system. Cheap money is now history. There are not going to be any more of the big leveraged buy-out deals for a long time because the CLO market that financed them is effectively closed, he said.
Many forecast it will be only at the end of the first quarter next year or into the second that issuance of loans themselves and the complex vehicles that account for a good proportion of loan demand will return to anything like normal levels.
The market for new large leveraged loan deals has been all but shut down since the failure of banks to sell debt linked to the private equity-backed buy-outs of Alliance Boots in Europe and Chrysler in the US in late July.
This market has received a boost from the surprising level of demand seen for $8bn of loans sold last week by First Data, which was bought for $26bn by KKR.
However, banks in the US and Europe still hold in the region of $350bn of unsold buy-out debt, cramping their desire to fund new deals.
A big part of the problem for the loan market has been that demand for collateralised loan obligations - which pool together loan investments and raise funding in the capital markets - atrophied as investors backed away from all kinds of structured products.
The First Data deal was supposedly $9.4 billion last week, here they say $8 billion. But since they won't release the actual numbers, I guess we'll have to just guess.
I wonder how many of these homes are listed because people cant refinance? Read my article about the looming disaster in prime lending for bubble markets:
100% Home Purchase after 04 cant refi! The Great Loan Blog
My understanding is that the housing bubble started in 1995 due to legislation on Fannie Mae and Freddie Mac that allowed them to grow on average at 20% per year, thus providing plenty of liquidity for mortgages, the same year a company called New Century was founded...
I predict 3M units will be the bottom of the existing housing market...
1977-1982 4M drop to 2M, 50%
2005-???? 7M drop to ??, ??%
The government will eventually do something to keep people in their homes but the only solution for the divergence of affordability and credit standards is for prices to come down considerably...
Off subject but anyone notice you can't find this site through yahoo or MSN anymore? I had to go through Google to get here.
Anonymous | 10.02.07 - 9:04 pm | #
I did notice that. What do you think? No red pills for the masses?
In the Seattle area at least, the '97 capital gains exclusion did indeed set the bubble off.
It made perfect sense. You had a home that last year would have sold for 150-180K. Now you could throw it on the market for 250K and hope for a miracle and a huge tax-free windfall. Within a year those same homes were selling for 300 -325 K and every other home on the block was up for sale and people were making off with their profits.
I think the increase in sales around 1995 was caused by the baby boomers buying their upgrade homes. Now you have the baby busters in this phase of life. 1.7 million less people born a year means a lot less home sales.
Why am I first--isn't this working. I still keep hearing these "financial experts" saying that we have a long way to go--3 to 6 months, maybe next spring. We are only seeing the beginning of the price declines which will cause further increases in foreclosures. We have not seen the peak in ARM resets. Why are people still talking about "bottoming and stabilizing" in a few months?
I think that 2008 will be worse than 2007 for home sales
--
CR,
Do you have an explanation for much higher level of home sales since 1996?
I call the period since 1995 as the Twin Bubbles period. Do you think that once both bubbles fully burst the sales will fall to 3-4M a year?
Thanks.
Jas
On the bright side, economists are hopeful that the number can only go up from here, as mortgage lenders relax a bit from Augusts panic.
An amazing bit of hubris on the part of these un-named "economists". A similar quote could have probably been found about the NASDAQ in the Summer of 2000.
--
Another Question: Did the tax bill of 1997 (cap gain exemptions) create artificial move-up demand?
I know some people who moved up without any real need for it.
Jas
indeed jas. i did three buy and sell moves. this gets surprisingly little comment
CR - good call for those whose history of real estate started before 2001 - she doesn't know how low IS low.
Seems there may be trouble brewing in the Sallie Mae transaction...
Sallie Mae says it expects banks to honour contract - Forbes.com
Sales are going to fall until the prices do.
What I increasingly believe is that there is a "search for optimism" going on.
It is akin to the drowning man grasping at a straw.
Recall that this generation of players is probably 100% on Prozac and its congeners. They are giving Prozac to kids, so rest assured every single adult is on it.
So, you've got a bunch of traders etc. who are chemical optimists.
Chemical optimists.
What will it take for them to sell? Quite a lot.
This bodes poorly if it has any validity at all. Why? Because it portends a crash. When someone who is jacked up on Prozac gets depressed, they get REALLY depressed REALLY quickly.
"When someone who is jacked up on Prozac gets depressed, they get REALLY depressed REALLY quickly."
arbogast | Homepage | 10.02.07 - 3:14 pm |
Strangely, this makes more sense to me than trying to track non-borrowed reserves over at the Fed.
Sales velocity continues to grind down, more industry wide layoffs, more industry downsizing coming to Newport Beach!
pretty ominous looking graphs there I would say...wow
Recall that this generation of players is probably 100% on Prozac and its congeners. They are giving Prozac to kids, so rest assured every single adult is on it.
So, you've got a bunch of traders etc. who are chemical optimists.
Hadn't thought of this angle. I did read a few weeks back that there are detectable levels of Prozac in US rivers & streams apparently because so many people are on the stuff and some of it, uh, gets eliminated and makes it through the sewage treatment plants into the rivers. Happy fish? Actually, the article was about scientists who are studying the potential environmental effects.
"Another Question: Did the tax bill of 1997 (cap gain exemptions) create artificial move-up demand?"
Probably fairer to say it lowered the transaction costs of moving, thus leaving more money in the hands of buyers.
"Do you have an explanation for much higher level of home sales since 1996?"
Modern subprime era started in 1996..
2003 was the big push for IO & option arms on the subprime masses for purchases.
Prozac and its congeners? You must be speaking of Soma
I'm not on prozac. Am I like that grumpy cab driver in Brain Candy?
I also don't have any debt.
On the bright side, economists are hopeful that the number can only go up from here
I have used this reasoning for years in regards to getting older and uglier but without success. Sometimes things just keep going downhill despite much hope and optimism.
Oh well,
I'm on Zoloft.
Only mildly optimistic...
I compile new homeowner lists in central Texas. Sales for Sept here in San Antonio (Bexar County) are down over 40% yoy. (3,035 in 2006 vs 1,783 in 2007)
I took Paxil and changed from a value investor to momentum investor. Man did I ever screw myself, but I was on top of the world Ma!
"detectable levels of Prozac in US rivers & streams."
Amusing angle, but Prozac mainly metabolised in liver, so kidneys just put out metabolites. I imagine concentrations of Prozac are really low - so this seems like a "whoa, cool, look what we found" story.
Estrogen and related compounds, on the other hand, seem to exist in the wild at meaningful levels due to human civilization.
Nice surmise, Arbogast.
Prozac: finally an opiate of the people that works even better than the opiate of the people.
CR, I'd like to see a chart tracking the bubble and antidepressant consumption.
From Ambrose Evans Pritchard's blog:
Deranged Bull
The equity markets are pricing in a 'Bernanke Put, said Rob McAdie, head of credit at Barclays Capital and a man with a front row seat at the credit crunch.
They are betting that the Fed will cut again and again, but they are not factoring in the effect that this credit squeeze is having on the financial system. Cheap money is now history. There are not going to be any more of the big leveraged buy-out deals for a long time because the CLO market that financed them is effectively closed, he said.
A wait before new CLO deals emerge
Many forecast it will be only at the end of the first quarter next year or into the second that issuance of loans themselves and the complex vehicles that account for a good proportion of loan demand will return to anything like normal levels.
The market for new large leveraged loan deals has been all but shut down since the failure of banks to sell debt linked to the private equity-backed buy-outs of Alliance Boots in Europe and Chrysler in the US in late July.
This market has received a boost from the surprising level of demand seen for $8bn of loans sold last week by First Data, which was bought for $26bn by KKR.
However, banks in the US and Europe still hold in the region of $350bn of unsold buy-out debt, cramping their desire to fund new deals.
A big part of the problem for the loan market has been that demand for collateralised loan obligations - which pool together loan investments and raise funding in the capital markets - atrophied as investors backed away from all kinds of structured products.
The First Data deal was supposedly $9.4 billion last week, here they say $8 billion. But since they won't release the actual numbers, I guess we'll have to just guess.
What a freakin' joke.
I think that all the home flipping shows will wake people up to how bad the bubble had become:
Economic Disconnect: House Hunters That Flip this Property Ladder
I wonder how many of these homes are listed because people cant refinance? Read my article about the looming disaster in prime lending for bubble markets:
100% Home Purchase after 04 cant refi!
The Great Loan Blog
Off subject but anyone notice you can't find this site through yahoo or MSN anymore? I had to go through Google to get here.
My understanding is that the housing bubble started in 1995 due to legislation on Fannie Mae and Freddie Mac that allowed them to grow on average at 20% per year, thus providing plenty of liquidity for mortgages, the same year a company called New Century was founded...
I predict 3M units will be the bottom of the existing housing market...
1977-1982 4M drop to 2M, 50%
2005-???? 7M drop to ??, ??%
The government will eventually do something to keep people in their homes but the only solution for the divergence of affordability and credit standards is for prices to come down considerably...
1995 is also the same year the S&P and Dow started moving dramatically upward...
Off subject but anyone notice you can't find this site through yahoo or MSN anymore? I had to go through Google to get here.
Anonymous | 10.02.07 - 9:04 pm | #
I did notice that. What do you think? No red pills for the masses?
Denver Post
Mortgage pliancy urged
FDIC Chair wants changes in some adjustable rate loans before rising payments add to foreclosures.
Mortgage pliancy urged - The Denver Post
In the Seattle area at least, the '97 capital gains exclusion did indeed set the bubble off.
It made perfect sense. You had a home that last year would have sold for 150-180K. Now you could throw it on the market for 250K and hope for a miracle and a huge tax-free windfall. Within a year those same homes were selling for 300 -325 K and every other home on the block was up for sale and people were making off with their profits.
A terrifying thing to behold.
CR - Your post is elegant and eloquent. Thanks!
I think the increase in sales around 1995 was caused by the baby boomers buying their upgrade homes. Now you have the baby busters in this phase of life. 1.7 million less people born a year means a lot less home sales.