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  • Economic Report Summary: Higher Durable Goods Orders and New Home Sales
    Tim: Can you do us all a favor and elaborate some more on this:

    "Based on the peak-to-trough history of home prices in Southern California experienced during the mid-1990s (i.e., from 1990-91 to 1995-96), anything less than a five year period from peak-to-trough during the current cycle seems unreasonable. This implies that a bottom in home prices might be expected in 2010 or later."

    I am unfamiliar with the peak to trough terminology and would like to understand it a tad better.
    Jul 27 23:54 pm |Rating: 0 0 |Link to Comment |View article
  • June Existing Home Sales Dip While Supply Rises
    Problem is, they can't. All loans are pretty much sold to GSE's and they are losing money left and right and they need to make up the losses. Dont you just see that cat chasing its tail?
    Jul 25 12:33 pm |Rating: 0 0 |Link to Comment |View article
  • Setting a New High Mark for the Next Housing Bubble
    irondoor... I dont disagree with you. You have excellent points. Those points can also work for the opposite result. All consumers may see is that a payment is cheaper than rent so I am better off buying without all the details of maintenance, etc. However, I have to agree with you, in the broader analysis, your points are excellent. I think you would agree with me, given the present environment, we will not even come close to seeing a turn around until the values get so low that it appeals to the broader market as kind of a no brainer and they start buying. Afterall, in my market, if the price falls so low that I can buy a 4000 sq. ft house for $50 a sq. ft. or 200k, I will buy it. Right now, at around $100 per sq. ft., no way.
    Jul 25 11:55 am |Rating: 0 0 |Link to Comment |View article
  • Setting a New High Mark for the Next Housing Bubble
    I said it before and I will say it again, I like the facts that Tim presents in his articles. I am disagreement with the comment by Ames above. I beleive that what will happen will be what I call a "parity effect". That is the point in which demand will pick up just because it is cheaper to buy than it is to rent. In Sacramento, where I am at, the average 1700 sq. ft. home built in the last 10 years is going for around $250k in typical suburban neighborhoods. Assuming someone puts down 25k and secures a 90% new first, the payment will be somewhere around $1,750.00 per month PITI. Rent for that same house is around $1,400.00 today. It would seem that once the value of that home hits around $200k, the "parity effect" will come into play in which persons will buy just because it is cheaper than renting. Couple that with the tax savings, they will be ahead of the game. Not to say that it will spark an overnight frenzy, it will just start to inch up demand, which should level off the market and then inventory will begin its long process to normalize. Agreed we have some pain ahead of us. But, the "parity effect" most likely will be the defining moment in time when a bottom can begin to be seen. Dont get me wrong, even when we hit that, we will be flat for a long time as foreclosures are here for a while impacting inventory. I just dont think we will have 3 years more of declining value but believe we will flatten sometime next year as we hit the "parity effect" but I do think we could remain flat for 3 years. But alas... my crystal ball fell off the edge of the desk and broke. Darn, dont you hate when that happens?
    Jul 25 08:26 am |Rating: 0 0 |Link to Comment |View article
  • Housing: Barron's Calls a Bottom
    No offense, but this is just a pipe dream. The problems have not even begun yet. The litigation machine is just getting warmed up. I know that I am involved in approximately 10 new lawsuit filings per month as we finalized a more standardized template to address hybrid mortgage products. My prediction? (of which I am no body) We have just entered a full fledged housing depression and things are about to get a whole lot worse.

    I just drove around a relatively new neighborhood in the Sacramento, CA region (2005) and was shocked. In this pocket of nice homes that sold for 500k, 2 houses for sale but 8 houses had bad front yards and had the infamous Notice of Trustee Sale posted on the front door. I would say this neighborhood has about 50 homes in it. In effect, this is what I was worried about. Inventory is not going down, people have thrown in the towel.

    Many many homeowners owe more than the property is worth even with putting 20% down and have resetting loans and have given up. We will never solve this problem as long as everyone is focused on getting to a bottom. A 300 billion package does not make a dent. I think we have about a 2 trillion dollar problem.
    Jul 13 19:44 pm |Rating: 0 0 |Link to Comment |View article
  • Who's to Blame for IndyMac's Failure?
    Next one looks like Washington Mutual... I recently read this analysis which scared the heck out of me:

    HOW CLOSE IS WAMU TO THE BRINK?

    Here is a write-up I found on the internet at walltreetexaminer.com about Washington Mutual.

    "In order to get a better idea of the likelihood that ...(this) leading mortgage lender... will “go under”, I thought it would be a good idea to dig into their last 10-K annual report filing to obtain information on what is their total exposure in higher risk loan categories. As you read through this post, keep this quote in mind: The option ARM is “like the neutron bomb,” says George McCarthy, a housing economist at New York’s Ford Foundation. “It’s going to kill all the people but leave the houses standing.”

    "Let’s start with Washington Mutual’s portfolio, shall we?

    Option ARMs $63.4 billion

    Loans with combined loan-to-value over 80% (and no insurance) $7.5 billion

    Home equity loans and home equity lines of credit $15.6 billion

    Interest-only loans $11.7 billion

    Total exposure: $98.2 billion

    You can find all these numbers on page 79 of their last annual report.

    Tangible equity: $14.4 billion (Source: Yahoo Finance)

    "Therefore, it would only take a write-down of 15 percent on their higher risk loans for Washington Mutual to be completely wiped out. (14.4B / 98.2B).

    "Also, keep in mind that 1/2 of their total loan portfolio is in California (ground central for the US real estate meltdown—the highest risk region of the country)."

    Considering the closure of Indymac Bank and its Option ARM clobbering them, it looks to me that WAMU is next.
    Jul 13 15:53 pm |Rating: 0 0 |Link to Comment |View article
  • IndyMac Bancorp Failure: Sen. Schumer vs. OTS
    Thank God Senator Schuemer is not part of the intellegence committee... he would be quite helpful to the cause of terrorism. "Loose lips sink ships." An old WWII saying... Indymac Bank is sitting on the bottom of the ocean.

    I thought legislators were to legislate. If he did not like what the OTS and FDIC were doing, float a bill.
    Jul 13 10:04 am |Rating: 0 0 |Link to Comment |View article
  • Just Think Positive!
    P.S. Boy those rebate checks sure jump started the economy well.
    Jul 12 01:48 am |Rating: 0 0 |Link to Comment |View article
  • Is 'Reducing Principal' a Good Principle for the Fed?
    I think a different method is better... reduce the interest rate down to 2% on those discounted purchases for 3 years, forgive all back payments and start fresh with a fully amortized 30 year loan at 2% for 3 years, step rate and payment up to 3% in 4th year, step up payment to 4% in 5th year, 5% in 6th year, and then 6% in 7th year. While principal is underwater, payment will be so low that renting would be more expensive in most cases and most assets become performing. As the market corrects, you are gradually bringing the payment and rate up on a performing loan.
    Jul 11 11:15 am |Rating: 0 0 |Link to Comment |View article
  • Just Think Positive!
    Tim:


    You missed your calling. Comedy is really line of work. I think we all miss the point even further, when I was at Disneyland recently with my kids I was given the opportunity to rub Alladins lamp and was granted 3 wishes. The first was for the housing crisis to go away. Poof it was gone. The second wish involved some money... and finally, I wished that life was wonderful and normal. Poof, the housing crisis came back. Sorry, I ran out of wishes. Maybe someone else can go to Disneyland and get their wishes.

    All kidding aside. Your point is well taken. Who knows with any certainty where the bottom of prices will hit. I would agree that the "shock" of the bubble bursting is now over and anyone with half a brain acknowledges we are in deep doo doo... but we are still in the spin spin where she stops no body knows phase. All data points to increasing inventory based on rapidly accelerating foreclosures caused by resetting option arms with homeowners who are under water.

    Financial institutions could stop that increase in foreclosure inventory right now by not resetting all of those option arms for the next two years by freezing the loan balances and rates and stopping the negative amortization.

    But... that wont happen.
    Jul 11 09:50 am |Rating: 0 0 |Link to Comment |View article
  • CNN/Money: Housing Rebound in Sight!
    I am glad he has such a broad sense of humor. You would have to be the biggest idiot on the planet at this time to think that housing is turning around and Mr. Iacono says it in the nicest way.
    Jul 08 16:54 pm |Rating: 0 0 |Link to Comment |View article
  • CNN/Money: Housing Rebound in Sight!
    The bottom is in sight for a blind man...
    Jul 08 13:15 pm |Rating: 0 0 |Link to Comment |View article
  • Housing Market Still Struggling; Positive Signs Beginning to Emerge
    No offense... but I would not get optimistic yet! You look at the Countrywide deal, Indymac shutting down mortgage lending and it appears Wachovia and WAMU are coming up right behind them, that is happening for a reason. Furthermore, the news today is that FNMA and FHLMC need to raise serious capital and are having problems. All of that equates to tighter lending standards and higher cost. Couple that with Option ARM resets and just a general desire by homeowners to walk from properties that they are substantially under water and the future continues to look gloomy. I would also argue that the litigation cycle of this has not really kicked in. Lawyers are just now beginning to understand the twists and turns necessary to get homeowners out of these transactions. I am betting on keep away from saying that anything is "positive" related to real estate until we take a look at it around this time 2009. A slight blip is meaningless when we see foreclosures doubling and tripling over the next few months and option arms begin resetting at an alarming rate. Good news will come... just not anytime soon.
    Jul 07 23:04 pm |Rating: 0 0 |Link to Comment |View article
  • Economic Report Summary: Plunging Home Prices and Consumer Confidence
    Tim... your articles are always excellent and this is a perfect example. You hit this one right on the nail head. Housing sales have stabilized, real estate agents can now see the bottom but that is only one least important aspect of the market. Good for agents as most of their competition is off doing something else but absolutely terrible still for buyers/sellers. With the number of resetting option arms increasing to almost 4 times what they are today, the problems of increasing inventory of distressed properties competing against new home sales and the resell market, this market is still on a downward trend in values and increase trend in inventory. Well done!
    Jun 30 23:21 pm |Rating: 0 0 |Link to Comment |View article
  • The Deflation/Inflation/Stagnation Debate
    I agree with the article but think that the Fed could have done things differently that would have made for a softer landing. For example, on housing, they could have provided a homebuyer tax credit if anyone buys a home in the next two years of $10,000 to $15,000.00. This would have brought out buyers. While home prices would continue to decline, the rate would slow with the increased demand. Energy prices could get under better control with an inverted windfall profit tax... the higher the price for fuel, the greater the tax on the oil companies. That would create incentives to try and keep prices down. Oil should also be removed as a comodity in the open market and the Federal government should be the direct purchaser of oil from the suppliers and then reselling it the oil companies for refining and distributing. Now, we have so many middlemen speculating, that is more driving the price then true supply and demand. Finally, we should impose a food/fuel supplement. Food export cost has a percent to percent increase in relation to oil. If oil increases by 25%, all food exports increase by 25%. If the government is the purveyor of oil, the supplement can be be used to offset the rising cost of oil.
    Jun 29 12:01 pm |Rating: 0 0 |Link to Comment |View article

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