Qualitative comments are negative, but the numbers are improving? What are we to glean from this? That conditions are improving around the margins, but managers are talking down expectations to a level they may one day be able to deliver?
An administration official confirms that a $4 billion bridge loan and $3.2 billion in bankruptcy financing won't be paid back by Chrysler following bankruptcy.
"how many stomped their feet and demanded that cheney show us the map of how he and the oil men were drawing the lines to divide the iraqi oil reserves
or the bush claim that the lobbyist visits to the whitehouse were secret (abramhoff)"
Actually, I think most people who visit and post on boards like this are skeptical of most govt actions, regardless of their political stripes. But then again, most people on these boards seem to be educated and somewhat enlightened, unlike 90% of the voting public.
The Federal Deposit Insurance Corp. extended until May 14 the deadline for prospective investors or buyers of the thrift to submit their bids -- a two-week extension -- according to two people familiar with the situation. Spokesmen for the FDIC and the Office of Thrift Supervision declined to comment, as did a bank spokeswoman.
BankU up for this Friday or next? Or, did they find somebody to buy them?
Negotiations between the regulators and Wilbur Ross/Carlyle have been going on for months. The deadline was supposed to be on 4/29 for BKUNA to find a buyer or merging partner, but who's in a rush these days?
I was talking to a builder's wife today, her husband does custom work in the 500k and up range. She blames the production builders for putting up too many houses. I guess nobody wants to see themselves as part of the problem.
Just for the record, I am not anyone important either.
Housing is still going through a nice false spring in bubble places.
The rest of the country is just getting a dose of what the bubble places have been going through for the last two years.
Slow and steady backs down the elephant.
Still waiting for Citi to decide that they should just start cutting rates on loans that are 40% underwater to incetivize the homerenter to remain and keep paying.
i now think each 5% underwater should result in a half percent rate cut credited to the balance at the end of the year, or used to lower monthly payment.
But hey, I didn't get my invite to dinner at the White House.
RockyR, I was amaze at how similar the comments were between homebuilders. They seem to be using the same PR firm! The little bit of good news I mentioned is pretty minor. At least when people sign contracts, they cancel less often - and the builders are not stuck with as much unintended spec inventory.
Until the huge overhang of existing home is worked through - and there are more foreclosed properties coming to market this year and next - the homebuilders will be facing a difficult situation.
I have posted various ideas which will only be ignored.
Was talking to an appraiser today. He agrees with me that 55% off is about the bottom in south Fla.
Not much moving in the now over 450k front; it seems there is some anecdotal evidence that the really high stuff is off even more than the low stuff, except those people are slightly more likely to be able to sit tight for longer.
Somewhat amusing, despite being taken over by the govt, fannie (and freddie) are trying like crazy to avoid taking on much more risk, and are trying to push all the junk in the market to the FHA, unfortunately i think the govt has other plans for them, and BHO and his henchmen are soon going to announce some major changes over there regarding underwriting guidelines et al.
it seems there is some anecdotal evidence that the really high stuff is off even more than the low stuff
Who's stupid enough to lend without a government backstop? unless the government extends the limit for a particular region (e.g. California's $730K limit), houses will start drifting to the existing ones.
Lenders are still lending to the homebuilders, hunh?
I have a developer client who has had 2 really nice homes done for 2 YEARS now, and can't get rid
of them. He was asking about 1.1 mil or so, and is down to just under 800k. He does have lookers, but nobody's buying. He's the one contractor that I would actually recommend.
I told him to slash prices in the fall of 'o7 and he got mad at me. I don't have the heart to tell him
if he wants to sell he has to drop the prices to 550-600k. Sez if he doesn't sell them by the end of summer, he's gonna rent them!
One is free and clear and NOBODY will loan him anything on it. The other one has a construction loan on it, that was supposed to be rolled over when it was done, about 2 years ago. They are (wisely) still accepting interest payments without squawking about being taken out.
I do environmental consulting for manufacturers of wood flooring, kitchen cabinets, and furnishings that are made of wood. All, without exception, are off 55%+ when compared to 2007. Of late, the sales have seemed to stabilize at the 55% off range but the products moving are all low end.
Based on conversations with friends in real estate, in the NC Triad market, the only houses moving are in the <$150K range. The manufacturers I work with are all trying to maximize profit from the residual business in low end products. One is looking at replacing a series of baghouses using ~700 hp with a single can at ~250 hp to reduce energy consumption. Interesting times.......
"Not much moving in the now over 450k front; it seems there is some anecdotal evidence that the really high stuff is off even more than the low stuff, except those people are slightly more likely to be able to sit tight for longer."
This phenomenon is happening even here in DFW. That is, with the possible caveat that the high-end stuff is sitting for a long time... builders are discounting, but the resale market is just sitting and waiting it would seem.
5% down FHA loan on a $150k, yeh, $8k tax credit will pay you back your moeny. That makes sense....sell the junk, claim recovery. Problem is in the high end stuff, which will do more than enough damage to compensate for a few piddling crap markets that pick up on foreclosures.
Original research for CR comments: the tales of two towns. Hercules in Contra Costa County, California with a population of 24,500 and Lafayette, same county, population 24,000. Eight miles apart as the crow flies.
In March 2008, 26 houses were sold in Hercules at an average sales price of $457,000. That same month, 20 houses sold in Lafayette at an average price of $1.1 million.
Fast forward to March 2009. 35 houses sold in Hercules, an increase of 46%. The average price was $304,000, a drop of 33%. In Lafayette, 10 houses sold, a drop of 50%, at an average price of $1.2 million, an increase (!) of 8%.
It is also revealing to look at year to date data. 26 houses have sold in Lafayette, Jan 1 through April 20, at an average price of $1.25 million. In Hercules, 105 houses have sold, over four times as many, at an average price of $301,000.
Last, the totals per community are $31.6 million YTD transactions in Hercules, and $32.6 million YTD in Lafayette.
Conclusions? I’m working on a new theory about constant dollars of home transactions per capita … and some thoughts on how wealthier communities can keep prices up by … keeping prices up. Obviously, something has to give and that something is numbers of transactions. I wish I had data on March 2006 and 2007 data, but I don’t.
GDD9000,
I know I've brought it up before, but since I can't remember the answer: Isn't the money you save from the tax credit [(your top marginal rate) * $8k] instead of subtract $8k from final amount owed to the IRS?
Another reason why business in America is going to hell in a handbasket
greedy hedge funds and vultures. They say their the anonymity request is because they feel they are unfairly becoming the focus for a political backlash. BBC NEWS | Business | Chrysler lenders aim to stop sale
You know what I would do if I was in government right now? Offer $10k per newly conceived child, and limit of 2 per mother. Would make managing the social reality easier
My little town of 25K in the Heartland has 17 houses in bank, mortgage, FHA names. Only one is listed by HUD. The public won't see it as they will be marketed by local Realtors.
Isn't the money you save from the tax credit [(your top marginal rate) * $8k] instead of subtract $8k from final amount owed to the IRS?
The former is a tax deduction, the latter is a tax credit. Not only is the first-time buyer (defined very loosely) incentive a tax credit, it is also refundable, meaning if you don't owe $8K, you get the difference back.
The $8k credit expires at the end of this year. Will there be a mad rush to buy for the rest of the year, then yet another sales dropoff? Or will it be extended indefinitely?
"Bernanke Warns of Danger of Credit Market ‘Relapse'
Federal Reserve Chairman Ben S. Bernanke warned that another shock to the financial system would undercut the central bank's forecast that the US recession will give way this year to a slow recovery."
my old links to CMBX, ABX, and LCDX are no longer working. i've cruised Markits website but can't find the graphs anymore. anyone have the new links if they exist?
The funny thing about this housing-led crisis is that many people in the position of power claimed that no would could have predicted this, or see it coming. Then there are others who tell me that I was not the only one that saw it coming, which I agree to be true. However, the details of what I saw coming and why are important too. Below is a reply in response to one of my editorials in 2005 that I came across while searching for an old post. Some people do understand the American system and Americans better than others. It is all about understanding Americans, including the ruling elite.
I always look for your articles and consider your story on the coming housing crunch very real. However I sometimes wonder who the greater fool is here - the indebted public living in their mini mansions or the conservative yokels like me who are lending them the money to do so.
...I hope, Ian, that you are knowingly not lending your money to the recent homebuyers and nor do you own shares of financials. However, "We the People" will end up footing the bill. That is the charm of our "free market" economy and its guardian political system. All lenders know that. They know the protection afforded by the well-known Moral Hazard – moral people must be forced to subsidize immoral behavior of others. Otherwise, where is the need for democracy?!
"PLAY SAFE!," says Merrill Lynch's top economist. Do I need to say more as to what is the prudent course of action when it comes to one's finances and investments in America?
If Pope were to say "have fun" to teenagers, we know how far things have gone.
km4,
I don't think outrage is warranted on the Chrylser bankruptcy. It's not a joke they would be targets for the pitchforks brigade. Chrysler's production needs to be shut down for the good of the US auto industry, lest the remaining companies be starved. Sell of the brands, provide the greenfield for profitable production to make use of equipment, labor, and real estate ressources. The bondholders were not offered the sweet deal Fiat or the UAW got, and if the government wants to hand out those favors they need to secure an agreement that avoids court. The bondholders realize the political cost to the government of going through court is larger than the cost to the bondholders by a complete wipeout. It's game theory 101
Not that Cerberus did anything right with the company, but if not for them and the credit bubble Chrysler would have faced the same shut down years ago. If you want outrage I think leasebacks, infrastructure privatization, public-private-partnerships where the private sector provides high cost financing, etc deserve limitless amounts. Why not get upset about how Circuit was managed into predictable disaster?
In case there is confusion, I am also not heartless/laissez faire/neocon/neoliberal/neoclassical. Accept that US auto production has to contract. Perhaps institute tariffs on imports to help, take advantage of positioning. Provide low cost financing to some kind of alternative production, maybe pursue the German mode of industrial clusters. Probably the best thing that could be done would be to equalize subsidies where desirable, streamline regulation, streamline bankruptcy process once more to facilitate once more the economic use of resources and help cut away the hopeless debt overhang.
Maybe I'm overlooking something, but I'm not just saying this to play devils advocate
Assuming no one bought multiple times, there are least ten very stupid or very wealthy folks who want to live in Lafayette. Probably both. Wouldn't filling a swimming pool with twenty dollar bills, then applying gasoline and a match be more entertaining?
The $8k credit expires at the end of this year. Will there be a mad rush to buy for the rest of the year, then yet another sales dropoff? Or will it be extended indefinitely?
Your congressperson would like to know your preference on the subject.
@ EvilHenryPaulson (profile) wrote on Tue, 5/5/2009 - 4:17 pm I don't think outrage is warranted on the Chrylser bankruptcy.
I agree and no outrage from me...just saying
Obama 'eco-comic' team screwed up and now have $7 billion loss for taxpayers
assclown greedy hedge funds and unsecured creditors need to take their losses and move on as well
"The $8k credit expires at the end of this year. Will there be a mad rush to buy for the rest of the year, then yet another sales dropoff? Or will it be extended indefinitely?"
Do you think that a rush to get the credit before tax day might have had a little to do with some of the "green shoots?"
"Investors Should Buy Stocks, Real Estate, Yale’s Shiller Says"
“The unemployment rate is probably going to go up substantially more, we’re going to have more economic chaos, confidence will come back to a lower level again,” Shiller said. “It’s still a seriously cloudy picture and there’s substantial risk of further substantial home price and further stock price declines.”
That is a pretty awful headline given what he is actually quoted as saying in the article.
"You know what I would do if I was in government right now? Offer $10k per newly conceived child, and limit of 2 per mother. Would make managing the social reality easier" - EHP
how you could tie your name to such a suggestion defies credulity. I mean, really.
"'You know what I would do if I was in government right now? Offer $10k per newly conceived child, and limit of 2 per mother. Would make managing the social reality easier' - EHP
how you could tie your name to such a suggestion defies credulity. I mean, really."
I think Sweden bumped it up to 20K, to reach 0% pop growth.
I think the $8k definitely contributed to a bump in housing sales that might be adding to some of the current hope (hype). However, it's just like low interest rates. Sounds good for the current homebuyer, but look out below when it goes away.
Basel Too when then secured creditors as well.....everybody loses all around on Chrysler i.e. senior secured creditors, junior lenders, administrative claims, unsecured lenders, equity holders, and last but not least American taxpayers to the tune of $7 Billion !
barfly
It's easier to pacify people who have just become parents. It fulfills the goal of wiping out debt through printing and getting foreign creditors to accept as much of the losses as possible, while providing possible hope for an economic boost. I'm not saying it is a good thing, just what I would do if interested in retaining political power. Longer term, it might provide another mini baby boom to help bailout all the old people with no savings. The best argument for it perhaps would be, you're giving away the money already and how is this any worse than existing channels. I'm touched that my username has some kind of value. Perhaps I should make an SEC filing to increase by goodwill which I can use to qualify for a government loan using common equity as collateral
On another note, I think it is ridiculous to buy pools of mortgage, auto loans, and credit card debt with the premise of restarting lending. Those idiots have that money stuck in the lending market, if you want to increase lending then do that... you'll never create net new lending by buying out stupid creditors
No low interest rate is going to help an insolvent homeowner who is seriously underwater on his mortgage. Without an effective cramdown, he's outta there!
EHP - isn't it cool how one can always qualify a statement after the fact? Never a price to pay if you can say what you really meant in a follow-up. BTW, I consider you one of the most intelligent posters on this board, so never fear, I will always listen to what you have to say. That one just took me a little aback, that's all. I could see giving money to parents of existing children, no problem, but as an incentive program to have children, well, to that I must take exception. Why? It's like marrying for money. Venal.
The amazing thing is that all over the San Francisco Bay Area, there are wealthy communities that have seen lower volumes, not prices. Belvedere/Tiburon in Marin County has had 22 transactions so far this year with an average price of $2.3 million per transaction. Ross, Alamo, Palo Alto, Orinda, Blackhawk, and many more, including fairly well defined sub areas: all have had average transactions over $1 million. So if you want to live in one of these communities, you pay if you can afford it. Or you go somewhere else. So far, the fastest way to have burned swimming pools worth of 20 dollar bills has been to be anywhere but one of these enclaves ...
A great example would be the typical buyer who put 20% down, and is now %45 total underwater. Still employed, can make the payments, but is being tempted by thought of doing the walkaway. Give them a low rate (say 3%) which cuts the monthly mortgage payment by amount underwater, and give them an extra 3% off the balance at the end of the year when they make timely payments. Viola!! Instant happy campers, still underwater, but with money in their pocket every month, and a balance that is declining faster to allow a chance at a sale when they have to move. Three or four years of that, the market will have rebounded 20%, and the seriously underwater buyer is breakeven or better.
Now, that is not an instant whomp there it is solution, it is a real solution that would allow folks to stop viewing their houses as millstones.
How far in advance of delivery do people book a home.? If people stopped booking would it not inevitably result in a decline in the number of people canceling homes.? No bookings no cancellations - under those circumstances a 0% cancellation rate would scarcely be considered good news. Given all that has happened in the markets the new "normal" cancellation rate should be below the historic average since those most likely to cancel have been weeded out earlier in the process.
The only thing these tax credits do is change the timing of a purchase not he quantity and thus is a handout to those who were going to buy anyway. These are incredibly expensive ways of achieving a marginal increase in sales. The only exception is at the lowest end of the of the market where a $8,000 credit is a meaningful amount and might be the difference between somebody renting and buying. Although if a renter shifts it swaps an empty home for an empty rental.
what monkey
Green shoots!
Lennar?
How are these guys still around?
i deleted my own comment as too political and way off topic...going for walk best to you all
Is BankU up for this Friday or next? Or, did they find somebody to buy them?
Qualitative comments are negative, but the numbers are improving? What are we to glean from this? That conditions are improving around the margins, but managers are talking down expectations to a level they may one day be able to deliver?
The homebuilders have figured out that the government is the only game in town, so they're marketing the hell out of FHA/GSE and the tax credits.
Also, from the hoocoodanode dept:
Chrysler won't repay bailout money
An administration official confirms that a $4 billion bridge loan and $3.2 billion in bankruptcy financing won't be paid back by Chrysler following bankruptcy.
Wonder what Mulalley is thinking about right now
"how many stomped their feet and demanded that cheney show us the map of how he and the oil men were drawing the lines to divide the iraqi oil reserves
or the bush claim that the lobbyist visits to the whitehouse were secret (abramhoff)"
Actually, I think most people who visit and post on boards like this are skeptical of most govt actions, regardless of their political stripes. But then again, most people on these boards seem to be educated and somewhat enlightened, unlike 90% of the voting public.
Wasn't there a rumor about GS taking on all or part of BankU?
There's never been a better time to build or demolish homes!
"The homebuilders have figured out that the government is the only game in town, so they're marketing the hell out of FHA/GSE and the tax credits."
I've noticed that too - especially the FHA deals. Lots of new developments are advertising "FHA Financing Available"
Which is why I think the FHA is the next domino to fall, and fall big. I am guessing they will come to the government asking for $20BB - $30BB.
lawyerliz, BKUNA received an extension to May 14th.
Feds extend deadline for resolving BankUnited's future
The Federal Deposit Insurance Corp. extended until May 14 the deadline for prospective investors or buyers of the thrift to submit their bids -- a two-week extension -- according to two people familiar with the situation. Spokesmen for the FDIC and the Office of Thrift Supervision declined to comment, as did a bank spokeswoman.
best wishes.
BankU up for this Friday or next? Or, did they find somebody to buy them?
Negotiations between the regulators and Wilbur Ross/Carlyle have been going on for months. The deadline was supposed to be on 4/29 for BKUNA to find a buyer or merging partner, but who's in a rush these days?
I was talking to a builder's wife today, her husband does custom work in the 500k and up range. She blames the production builders for putting up too many houses. I guess nobody wants to see themselves as part of the problem.
HUD, which funds FHA, had budget shortfall warnings pre-craziness
HUD Budget Contains Major Funding Shortfalls — Center on Budget and Policy Priorities
random charts, http://graphics8.nytimes.com/images/2008/12/10/business/1210-biz-fha.jpg http://whistleblower.ml-implode.com/wp-content/uploads/2008/09/chart-5-fha-pur-dp-00-08.jpg
Just for the record, I am not anyone important either.
Housing is still going through a nice false spring in bubble places.
The rest of the country is just getting a dose of what the bubble places have been going through for the last two years.
Slow and steady backs down the elephant.
Still waiting for Citi to decide that they should just start cutting rates on loans that are 40% underwater to incetivize the homerenter to remain and keep paying.
i now think each 5% underwater should result in a half percent rate cut credited to the balance at the end of the year, or used to lower monthly payment.
But hey, I didn't get my invite to dinner at the White House.
Someday this war's gonna end...
Thanks, CR.
RockyR, I was amaze at how similar the comments were between homebuilders. They seem to be using the same PR firm! The little bit of good news I mentioned is pretty minor. At least when people sign contracts, they cancel less often - and the builders are not stuck with as much unintended spec inventory.
Until the huge overhang of existing home is worked through - and there are more foreclosed properties coming to market this year and next - the homebuilders will be facing a difficult situation.
best wishes
Computer is starting to overheat. Signing off.
Excellent idea, AllenM.
I have posted various ideas which will only be ignored.
Was talking to an appraiser today. He agrees with me that 55% off is about the bottom in south Fla.
Not much moving in the now over 450k front; it seems there is some anecdotal evidence that the really high stuff is off even more than the low stuff, except those people are slightly more likely to be able to sit tight for longer.
I hate the word "challenged".
Challenged == about to go bk.
Somewhat amusing, despite being taken over by the govt, fannie (and freddie) are trying like crazy to avoid taking on much more risk, and are trying to push all the junk in the market to the FHA, unfortunately i think the govt has other plans for them, and BHO and his henchmen are soon going to announce some major changes over there regarding underwriting guidelines et al.
https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2009/0912.pdf
edit, the CRS report was a waste of time so I deleted my comment
it seems there is some anecdotal evidence that the really high stuff is off even more than the low stuff
Who's stupid enough to lend without a government backstop? unless the government extends the limit for a particular region (e.g. California's $730K limit), houses will start drifting to the existing ones.
I wonder how many banks the home builders will take down with them when their lines of credit max out.
And still the homebuilders stock prices assume earnings will return to near-bubble levels.
Those investors sure do have a good deal of paitience.
Lenders are still lending to the homebuilders, hunh?
I have a developer client who has had 2 really nice homes done for 2 YEARS now, and can't get rid
of them. He was asking about 1.1 mil or so, and is down to just under 800k. He does have lookers, but nobody's buying. He's the one contractor that I would actually recommend.
I told him to slash prices in the fall of 'o7 and he got mad at me. I don't have the heart to tell him
if he wants to sell he has to drop the prices to 550-600k. Sez if he doesn't sell them by the end of summer, he's gonna rent them!
One is free and clear and NOBODY will loan him anything on it. The other one has a construction loan on it, that was supposed to be rolled over when it was done, about 2 years ago. They are (wisely) still accepting interest payments without squawking about being taken out.
Talking to myself.
Nitey-nite.
For cancellation rates, what's the denominator change YoY?
I do environmental consulting for manufacturers of wood flooring, kitchen cabinets, and furnishings that are made of wood. All, without exception, are off 55%+ when compared to 2007. Of late, the sales have seemed to stabilize at the 55% off range but the products moving are all low end.
Based on conversations with friends in real estate, in the NC Triad market, the only houses moving are in the <$150K range. The manufacturers I work with are all trying to maximize profit from the residual business in low end products. One is looking at replacing a series of baghouses using ~700 hp with a single can at ~250 hp to reduce energy consumption. Interesting times.......
CR, thank you... for everything.
only houses moving are in the <$150K range.
the refundable tax credit is larger than the downpayment...
"Not much moving in the now over 450k front; it seems there is some anecdotal evidence that the really high stuff is off even more than the low stuff, except those people are slightly more likely to be able to sit tight for longer."
This phenomenon is happening even here in DFW. That is, with the possible caveat that the high-end stuff is sitting for a long time... builders are discounting, but the resale market is just sitting and waiting it would seem.
5% down FHA loan on a $150k, yeh, $8k tax credit will pay you back your moeny. That makes sense....sell the junk, claim recovery. Problem is in the high end stuff, which will do more than enough damage to compensate for a few piddling crap markets that pick up on foreclosures.
Original research for CR comments: the tales of two towns. Hercules in Contra Costa County, California with a population of 24,500 and Lafayette, same county, population 24,000. Eight miles apart as the crow flies.
In March 2008, 26 houses were sold in Hercules at an average sales price of $457,000. That same month, 20 houses sold in Lafayette at an average price of $1.1 million.
Fast forward to March 2009. 35 houses sold in Hercules, an increase of 46%. The average price was $304,000, a drop of 33%. In Lafayette, 10 houses sold, a drop of 50%, at an average price of $1.2 million, an increase (!) of 8%.
It is also revealing to look at year to date data. 26 houses have sold in Lafayette, Jan 1 through April 20, at an average price of $1.25 million. In Hercules, 105 houses have sold, over four times as many, at an average price of $301,000.
Last, the totals per community are $31.6 million YTD transactions in Hercules, and $32.6 million YTD in Lafayette.
Conclusions? I’m working on a new theory about constant dollars of home transactions per capita … and some thoughts on how wealthier communities can keep prices up by … keeping prices up. Obviously, something has to give and that something is numbers of transactions. I wish I had data on March 2006 and 2007 data, but I don’t.
GDD9000,
I know I've brought it up before, but since I can't remember the answer: Isn't the money you save from the tax credit [(your top marginal rate) * $8k] instead of subtract $8k from final amount owed to the IRS?
Another reason why business in America is going to hell in a handbasket
greedy hedge funds and vultures. They say their the anonymity request is because they feel they are unfairly becoming the focus for a political backlash.
BBC NEWS | Business | Chrysler lenders aim to stop sale
fu*ck them !
You know what I would do if I was in government right now? Offer $10k per newly conceived child, and limit of 2 per mother. Would make managing the social reality easier
My little town of 25K in the Heartland has 17 houses in bank, mortgage, FHA names. Only one is listed by HUD. The public won't see it as they will be marketed by local Realtors.
Taxpayers lose $7 billion as Obama administration writes off Chrysler loan
Greedy hedge funds and vultures can lose as well !
Isn't the money you save from the tax credit [(your top marginal rate) * $8k] instead of subtract $8k from final amount owed to the IRS?
The former is a tax deduction, the latter is a tax credit. Not only is the first-time buyer (defined very loosely) incentive a tax credit, it is also refundable, meaning if you don't owe $8K, you get the difference back.
The $8k credit expires at the end of this year. Will there be a mad rush to buy for the rest of the year, then yet another sales dropoff? Or will it be extended indefinitely?
Is Chrysler going to pay The Fed back? (CPFF)
"Bernanke Warns of Danger of Credit Market ‘Relapse'
Federal Reserve Chairman Ben S. Bernanke warned that another shock to the financial system would undercut the central bank's forecast that the US recession will give way this year to a slow recovery."
Interest rates to become a problem?
"10y bond 3.17% +0.03 (0.96%)"
Printing won't fix that.
my old links to CMBX, ABX, and LCDX are no longer working. i've cruised Markits website but can't find the graphs anymore. anyone have the new links if they exist?
In “Lot of Others Saw It Coming” Department
The funny thing about this housing-led crisis is that many people in the position of power claimed that no would could have predicted this, or see it coming. Then there are others who tell me that I was not the only one that saw it coming, which I agree to be true. However, the details of what I saw coming and why are important too. Below is a reply in response to one of my editorials in 2005 that I came across while searching for an old post. Some people do understand the American system and Americans better than others. It is all about understanding Americans, including the ruling elite.
Jas
-x-x-x-x-x-x-x-xx-x-xx-
...I hope, Ian, that you are knowingly not lending your money to the recent homebuyers and nor do you own shares of financials. However, "We the People" will end up footing the bill. That is the charm of our "free market" economy and its guardian political system. All lenders know that. They know the protection afforded by the well-known Moral Hazard – moral people must be forced to subsidize immoral behavior of others. Otherwise, where is the need for democracy?!
"PLAY SAFE!," says Merrill Lynch's top economist. Do I need to say more as to what is the prudent course of action when it comes to one's finances and investments in America?
If Pope were to say "have fun" to teenagers, we know how far things have gone.
Jas
km4,
I don't think outrage is warranted on the Chrylser bankruptcy. It's not a joke they would be targets for the pitchforks brigade. Chrysler's production needs to be shut down for the good of the US auto industry, lest the remaining companies be starved. Sell of the brands, provide the greenfield for profitable production to make use of equipment, labor, and real estate ressources. The bondholders were not offered the sweet deal Fiat or the UAW got, and if the government wants to hand out those favors they need to secure an agreement that avoids court. The bondholders realize the political cost to the government of going through court is larger than the cost to the bondholders by a complete wipeout. It's game theory 101
Not that Cerberus did anything right with the company, but if not for them and the credit bubble Chrysler would have faced the same shut down years ago. If you want outrage I think leasebacks, infrastructure privatization, public-private-partnerships where the private sector provides high cost financing, etc deserve limitless amounts. Why not get upset about how Circuit was managed into predictable disaster?
In case there is confusion, I am also not heartless/laissez faire/neocon/neoliberal/neoclassical. Accept that US auto production has to contract. Perhaps institute tariffs on imports to help, take advantage of positioning. Provide low cost financing to some kind of alternative production, maybe pursue the German mode of industrial clusters. Probably the best thing that could be done would be to equalize subsidies where desirable, streamline regulation, streamline bankruptcy process once more to facilitate once more the economic use of resources and help cut away the hopeless debt overhang.
Maybe I'm overlooking something, but I'm not just saying this to play devils advocate
double post
"mock turtle (profile) wrote on Tue, 5/5/2009 - 6:01 pm
i deleted my own comment as too political and way off topic...going for walk best to you all"
In the shadow of a Quayle:
To delete oneself,
How sad; but even sadder,
Not to have a 'Self'
"Conclusions? "
Assuming no one bought multiple times, there are least ten very stupid or very wealthy folks who want to live in Lafayette. Probably both. Wouldn't filling a swimming pool with twenty dollar bills, then applying gasoline and a match be more entertaining?
Thanks for the clarification Basel Too.
Dead Shtick,
I would expect the tax credit to be extended and possibly increased, the housing market will be in very bad shape this winter
Two hours+ and no comments yet approved on Krugman's blog.
..........Investors Should Buy Stocks, Real Estate, Yale’s Shiller Says.........
Investors Should Buy Stocks, Real Estate, Yale’s Shiller Says - Bloomberg.com
The $8k credit expires at the end of this year. Will there be a mad rush to buy for the rest of the year, then yet another sales dropoff? Or will it be extended indefinitely?
Your congressperson would like to know your preference on the subject.
@ EvilHenryPaulson (profile) wrote on Tue, 5/5/2009 - 4:17 pm I don't think outrage is warranted on the Chrylser bankruptcy.
I agree and no outrage from me...just saying
Obama 'eco-comic' team screwed up and now have $7 billion loss for taxpayers
assclown greedy hedge funds and unsecured creditors need to take their losses and move on as well
assclown greedy hedge funds and unsecured creditors need to take their losses and move on as well
the ones complaining are actually secured creditors, hence the brouhaha over the Administration's roughshodding over the absolute priority rule.
"The $8k credit expires at the end of this year. Will there be a mad rush to buy for the rest of the year, then yet another sales dropoff? Or will it be extended indefinitely?"
Do you think that a rush to get the credit before tax day might have had a little to do with some of the "green shoots?"
Did the UAW and retirees get the same pennies on the dollar offered the bond holders?Did Fiat kick in money even at pennies on the dollar?
Obama 'eco-comic' team screwed up and now have $7 billion loss for taxpayers
I think $4B of that $7B is on last season's team, not that it really matters when you're on a losing streak.
Another 'Haiku Moment' by Samdog:
My Jas is not "hip"
When he looks out at the world
He sees only Dopes
Two hours+ and no comments yet approved on Krugman's blog.
Makes you appreciate low-brow us a little more, eh?
"Investors Should Buy Stocks, Real Estate, Yale’s Shiller Says"
“The unemployment rate is probably going to go up substantially more, we’re going to have more economic chaos, confidence will come back to a lower level again,” Shiller said. “It’s still a seriously cloudy picture and there’s substantial risk of further substantial home price and further stock price declines.”
That is a pretty awful headline given what he is actually quoted as saying in the article.
"You know what I would do if I was in government right now? Offer $10k per newly conceived child, and limit of 2 per mother. Would make managing the social reality easier" - EHP
"'You know what I would do if I was in government right now? Offer $10k per newly conceived child, and limit of 2 per mother. Would make managing the social reality easier' - EHP
I think Sweden bumped it up to 20K, to reach 0% pop growth.
I think the $8k definitely contributed to a bump in housing sales that might be adding to some of the current hope (hype). However, it's just like low interest rates. Sounds good for the current homebuyer, but look out below when it goes away.
Somebody put out an APB on Jas's assets, they've gone missing.
Basel Too when then secured creditors as well.....everybody loses all around on Chrysler i.e. senior secured creditors, junior lenders, administrative claims, unsecured lenders, equity holders, and last but not least American taxpayers to the tune of $7 Billion !
"I think Sweden bumped it up to 20K, to reach 0% pop growth. " - Blackhalo
-so we'd have a generation of ' bonus babies'? How materialistic.
Child subsidies? Horrors !!
Going Dutch
How an American learned to love Holland's "welfare state."
barfly
It's easier to pacify people who have just become parents. It fulfills the goal of wiping out debt through printing and getting foreign creditors to accept as much of the losses as possible, while providing possible hope for an economic boost. I'm not saying it is a good thing, just what I would do if interested in retaining political power. Longer term, it might provide another mini baby boom to help bailout all the old people with no savings. The best argument for it perhaps would be, you're giving away the money already and how is this any worse than existing channels. I'm touched that my username has some kind of value. Perhaps I should make an SEC filing to increase by goodwill which I can use to qualify for a government loan using common equity as collateral
On another note, I think it is ridiculous to buy pools of mortgage, auto loans, and credit card debt with the premise of restarting lending. Those idiots have that money stuck in the lending market, if you want to increase lending then do that... you'll never create net new lending by buying out stupid creditors
reptillian on Going Dutch
I read that article last week and it brought out some excellent points - pro and con America.
"Somebody put out an APB on Jas's assets, they've gone missing"
Don't worry.
They've been "invested" in the Fed's MBS holdings.
Q: Is the swine flu spread by contact or by air?
A: Neither. It's spread by the government!
@AllenM
No low interest rate is going to help an insolvent homeowner who is seriously underwater on his mortgage. Without an effective cramdown, he's outta there!
EHP - isn't it cool how one can always qualify a statement after the fact? Never a price to pay if you can say what you really meant in a follow-up. BTW, I consider you one of the most intelligent posters on this board, so never fear, I will always listen to what you have to say. That one just took me a little aback, that's all. I could see giving money to parents of existing children, no problem, but as an incentive program to have children, well, to that I must take exception. Why? It's like marrying for money. Venal.
The amazing thing is that all over the San Francisco Bay Area, there are wealthy communities that have seen lower volumes, not prices. Belvedere/Tiburon in Marin County has had 22 transactions so far this year with an average price of $2.3 million per transaction. Ross, Alamo, Palo Alto, Orinda, Blackhawk, and many more, including fairly well defined sub areas: all have had average transactions over $1 million. So if you want to live in one of these communities, you pay if you can afford it. Or you go somewhere else. So far, the fastest way to have burned swimming pools worth of 20 dollar bills has been to be anywhere but one of these enclaves ...
Markar,
I think you are wrong.
A great example would be the typical buyer who put 20% down, and is now %45 total underwater. Still employed, can make the payments, but is being tempted by thought of doing the walkaway. Give them a low rate (say 3%) which cuts the monthly mortgage payment by amount underwater, and give them an extra 3% off the balance at the end of the year when they make timely payments. Viola!! Instant happy campers, still underwater, but with money in their pocket every month, and a balance that is declining faster to allow a chance at a sale when they have to move. Three or four years of that, the market will have rebounded 20%, and the seriously underwater buyer is breakeven or better.
Now, that is not an instant whomp there it is solution, it is a real solution that would allow folks to stop viewing their houses as millstones.
Someday this war's gonna end...
How far in advance of delivery do people book a home.? If people stopped booking would it not inevitably result in a decline in the number of people canceling homes.? No bookings no cancellations - under those circumstances a 0% cancellation rate would scarcely be considered good news. Given all that has happened in the markets the new "normal" cancellation rate should be below the historic average since those most likely to cancel have been weeded out earlier in the process.
The only thing these tax credits do is change the timing of a purchase not he quantity and thus is a handout to those who were going to buy anyway. These are incredibly expensive ways of achieving a marginal increase in sales. The only exception is at the lowest end of the of the market where a $8,000 credit is a meaningful amount and might be the difference between somebody renting and buying. Although if a renter shifts it swaps an empty home for an empty rental.