Prices won't revert all the way to 4x income because house prices don't update via sale anywhere near as fast as incomes which update biweekly. The median income is not buying the median house this year. While there may be dozens of houses that meet the buyer's needs there is only that one buyer for those dozens of houses. All the houses that don't sell are effective not being marked to market. Right now the RE sales market is in turmoil. Don't expect any rational data from an environment with twice as many agents and houses for sale than can be supported by the market.
Saturday, August 25, 2007
It Won't Get That Bad
Prices won't revert all the way to 4x income because house prices don't update via sale anywhere near as fast as incomes which update biweekly. The median income is not buying the median house this year. While there may be dozens of houses that meet the buyer's needs there is only that one buyer for those dozens of houses. All the houses that don't sell are effective not being marked to market. Right now the RE sales market is in turmoil. Don't expect any rational data from an environment with twice as many agents and houses for sale than can be supported by the market.
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murst too! It's strange in my neighborhood a couple houses have sold like that. the others....well they just sit. I notice that the one's that have agents that have worked in the neighborhood for years tend to sell better. Kicker is...If you're going to sell your house...due diligence on the agent is key IMO. Of course pricing the house right is important too.
The two go hand in hand. A good realtor will make sure you get the price right.
steepest decline in 20 years
http://biz.yahoo.com/ap/070828/home_price_index.html?.v=10
ouch!
The CaseShiller Index is twice predictions. The market reaction should be interesting.
I don't think the market is controlling CFC right now. It has a steady $1 a day drop going on which indicates at least one big boy is managing the end of day price
What's absolutely remarkable to me is the lack of panic in the housing market. At some level, people genuinely believe that it's all going to turn out favorably, or at the worst, they will simply walk away from the house, with no impact to their future.
Consequently, they are seemingly content to sit on an unrealistic price until the home goes into foreclosure. A few people are desperate and will start slashing prices, but just not that many. The home price won't get adjusted until it gets to the bank--and even then the bank may sit on an unrealistic price rather than take a loss. Even at the institutional level, there is a deep-seated resistance to the reality of the situation, based on belief in an impending bailout.
And so prices stay high. The few sales that occur are from people who must buy, many of whom are selling a similarly overpriced house, and who aren't happy about overpaying, but can afford to do it. Overall, however, the end result is slow sales and inventory through the roof.
The prices won't get adjusted until it is the banks themselves going into bankruptcy, when the homes on bank balance sheets will be sold at a real auction, for real market prices. I'm not sure if true panic will ever set into the real estate markets, but aside from certain specific locales, it hasn't yet.
The whole scheme seems to be more of the lenders not wanting to take a loss. They don't want to refi these loans, they don't want to foreclose these properties, they want things like they were in Aug 2005 when they had an infinite market for bad paper. Now that they can't peddle their bad paper on the street they are asking to peddle it to the taxpayer.
No amount of shuffling paper changes the fact that these loans were written against assets at amounts that are unsustainable. No matter where they go, they will still be bad loans.
There is panic. Cramer let some of it out two weeks ago. Now the wagons are circled. The people who know are putting on a calm face but they are scrambling behind the facade.
Was watching BUY ME last night, had two studly men who after two years felt it was time to move up to a bigger house. They had some POS house which they listed at like 630 to start. Anyways, long story short, being like less than 1500 square feet, they had to drop the price over and over again. Don't even ask about the inspection, the house was almnost 100 years old.
The biggest line of the night as one of these guys had to drop the price from 600K to 570K to 536,500;
"I can't believe how much money I HAVE lost in the last 24 hours!!!!"
No shithead, that was how much money you expected to get, it was a dream a wish, kind of like the idea that the baby you adopted isn't going to be a little fucked in the head having you two bozos as fathers.
By the way, in two years, despite his slashing prices, he and his partner made 270K profit on the house they sold.
What a douchebag.
@rob
hey as long as it's still off the books, it's not offically a "loss"
What most of you seem to forget is that this crisis is largely due to Sushi. Japan has used this yucky product to artificially improve their national economy last year and now we see the effects of it !
Exibit 1 - index inflation on Sushi
Exibit 2 - push Sushi prices by adding avocado
BTW, thanks Akubi for first discovering this global conspiracy that is the Shushi Market at 410 Avocado.
heh cfc is kicking ass! I may just have to go out and get oompa loompad just like Mozillo.
The question is what all the Mortage and Realtor offices will be transformed into once we are all done with this....
I call for pawn shops! Thats the only place people will be able to get any money from. There should be a booming market.....
@sweet
Well around where I live there are or were 4 women that owned a mortgage broker company. They pretty much treated my fiancee and I like shit when we went there two years ago, something about half a million dollar loan not being worth their time.
Anyways, I go there now to watch em swing on a pole and do lap dances for dollars. The chicken wing tuesday nights aren't bad, but the real special is the surf and turf, cod filet and hamburger on a bun.
@Rob: "There is panic. Cramer let some of it out two weeks ago. Now the wagons are circled. The people who know are putting on a calm face but they are scrambling behind the facade."
There is panic in the credit markets, because they know what's happening. Uncounted billions in market value have been wiped off of various credit instruments after the "emperor's clothes" moment when it was realize that they weren't backed by real value.
But the credit markets have put on a brave face, the itsallgood™ mentality, to try and keep calm among consumers. Cramer excepted, of course (I can only image the "loose lips sink ships" talking-to he got from his friends in the hedge fund industry). But for the most part, the general public has bought the deception, and the general atmosphere is one of nervous uncertainty, but not panic.
The tricky issue for the market insiders, of course, is that they are also trying to convince the Fed to lower rates and flood the markets with liquidity. So they have to convince the general public that things aren't bad enough to panic, but convince the Fed that things are bad enough to warrant emergency intervention. Sort of an anti-Goldilocks. Oh, the irony.
Fed funds are effectively below 5% already and worse anyone indexed to prime is not getting any benefit from the stealth lowering. Double screwing the people who need the most relief but it does help the banks for the moment. Notes; T-Bills and Bonds this week auction $130bns worth. This on top of last weeks $30bn. That's a lot of green toilet paper. It will be poured down the subprime hole and go to carry trade and other useless conduits but it will buy the banks a few more weeks.
Panic is not a good word for what is going on. Just like an empty shopping mall is the picture of a financial meltdown.
If the feds are wasting/dumping money in the wrong things, which I hate and dislike like anyone else, why not use it to your advantage?
Looks like the banks know this since day one and are ridding the gravy train since.
There's a wonderful line in an F. Scott Fitzgerald's story, in which a man who used to be wealthy and who lost it all in the crash and the Depression is asked how he went broke. And he says, "Slowly at first, and then all at once."
Looks like somebody leaked the Fed minutes.
Which seem to indicate the usual "Oh sh*t we have no idea where this is going but we will monitor it and react accordingly...."
Nothing to see here, move along....
The Fed has stated, clearly and unequivocably, that they are aware that something is going on, and they are keeping their eyes on things, and if things happen, then they can do something to make sure that something else doesn't happen, unless nothing happens, but they can do something about that too.
If that doesn't reassure the markets, I don't know what will.
My take:
The Fed is reluctant to push on a string for fear of being seen as pushing on a string and giving away the secret that the tools at their disposal are not up to the task.
The Fed is a little like the Wizard of Oz, the people have not yet realized just how much of an illusion the power really is. At this point, the Fed wants attention fixed on the talking head and not the man behind the curtain.
Dow down 215, oops 220. At this rate we can get back to overpriced in only 3 more weeks. Doesn't work that way on the downside. When today is digested anybody with a brain is gonna want to not be in this market in Sept/Oct. What you think there's a danger of "missing" a pop up?
Home Depot is up, Lowes is down. Do the math. HD has cash. Second hint, gold is down. Why? Not going into the market, going into cash.
Ooops -240. Let's be real clear the Fed won't rescue the stock or hou8sing markets. Three reasons; not their job, they can't, asset bubble popping makes their job easier and makes it possible for their tools to start working again.
Drove by the house I sold last year in a upper-middle income city near Sacramento that's is near a lake and a prison of the same name. Yeah, figure it out.
Anyway, the house next door is "Bank Owned" and two houses next door to each other and 3 houses away across the street were in the same situation. Crazy.
OK, folks. Let's return to more critical issues such as the fact that avocado does not belong in sushi and Zillow Book is no longer the #1 Google result for "hot ass in fishnet" (safe search off of course).
Akubi, you'll never improve your search engine ranking if you don't link "hot ass in fishnet" to the article. I'd do it myself, but not on looser W2 time.
On topic, I'm starting to notice a slight increase in "price reduced" signs in my neighborhood.
Ratlab,
You just don't get it. John Lockwood has the real scoop:
"The real estate market in Folsom is somewhat stronger than Sacramento County as a whole, with lower inventory. In July, 2007, the average home sold in F****m for $498,793, or 98.3% of list. This was down 5.5% from last year’s average of $527,616. This year’s home being somewhat larger, the average price per square foot fell 8.2% during this period, from $249.94 last July to $229.33 this July. The median price was down 4.2%, from $490,000 last July to $469,500 this July.
Unit volume is actually up slightly this year, from 73 units to 74. This year there were 7 REOs (bank foreclosures) sold out of those 74 units, so just shy of 10%. Last year of the 73 units that sold, none of them were REOs."
See? Nothing wrong in the city/prison. Who you gonna trust? A RE Broker who censors comments or your lying eyes? ;-)
Thanks Akubi for bringing us back on topic. In your absence I have been strongly avocading against sushi and its effects on our local economy. As far as fishnet is concerned I don't think I will be of any help as I personally don't wear any...
Crisp update :
http://bakersfieldbubble.blogspot.com
CFC is quite the cash cow. My long position, purchased at 16.48, was stopped out at $20, while my short - initiated at $22.60 - is still running strong.
I love that company. I may go long on it again if it gets down below $17.
I will admit I'm a bit amused by all of the headlines blaming the market drop on the Fed. Forget unrealistic valuations, credit market turmoil, defaulting debt, a crisis of confidence in the markets--it's all the Fed's fault, because they're not following the script!
anyone read this guy's analysis of wells fargo. Explains how mortgage companies make those magical gains.
http://greenspanfuckedus.blogspot.com/
sorry he just posted someone else's article. still a good read.
You're right Rob, I just don't get it. ;) RE Brokers know way more than I do.
98.3% of list? Wow. Figure this one out. The house next to my old house (not the one that is Bank Owned) was about 900 sq ft larger, same lot size, and had a few more upgrades, but sold for $153K more than mine. What the hell? Something is fishy. Even the same models in another part of the development could get a buyer at $60K less than what this one house sold for.
*couldn't get a buyer at $60K less*
@ratlab
Can you say cashback at close?
The cost to insure the debt of Countrywide Financial Corp.'s home loan unit rose around 43 basis points on Tuesday to 265 basis points, or $265,000 per year for five years to insure $10 million in debt, said an analyst. (CFC.N: Quote, Profile, Research) Reuters Messaging:
Thats 13 billion in insurance costs to a company with revenue of about 10 billion.
Don't have the figures in front of me Rob, but John is correct when he states that Folsom is somewhat stronger than the rest of the Sacramento market. Sactown is not looking pretty and there are some Folsom city blues too.
Sac RE,
Yes, his figures are correct as reported but like DOM there has a lot of fiddling with "last price" or should I say last published list price.
I object to being down only 5.5% being described as strong in any form. The excuse of larger homes for the 8.2% decline in $/sf is equally patronizing.
@FCB
4000 shares shorted at 22.79 myself. And I agree, it is a cash cow.
Legion, nice.
For the moment, it seems to be one of the main vessels into which the collective, chronic market psychosis is being poured, and damn good money can be made in such vessels.
Funny Bear:
In other words, shorting stocks could become the next "big" thing among investors (after someone figures out how to get the sheeple involved)
Now just where will that lead?
@FCB
I think it does take some balls going long on these guys like you did though:-)
Long, short, long short...lol, guess there is a way to make money no matter what the market is doing.
Tomorrow has the potential to gap down and not look back. It seems fairly obvious that the financials a set up to be wacked. Talk to me about going long when the smoke clears from the remnants of the carry trade. IMO that's the only thing left holding the financials and hedgies and such on life support. We fall through 112 and we'll see quant models pulling triggers that can't be unpulled for at least a couple thousand points.
alright, I feel better. Just had to spell out a worst case. And what of it? Dow 10,800 is where we were last summer. Now if the home builders and financials are rightfully lower then general market conditions reflected by Dow 10,800 is a decent y-o-y gain for the rest. Blood in the streets? Only if you overleveraged and get what you deserve.
Here is a tip:
If you work on Wall Street and are not a full partner, get the AMG 500 polished and sold on Long Island before returning to work on Tuesday.
Cause you may not have a job by the end of next week and most your buddies will not have any spare cash to swoop it up from you.
I do believe Wall Street is finally going to meet Main Street for the first time in 30 years. And it is not going to be pretty.
The thing to remember is once it starts, a lot of us w-2 loosers are going to get whacked before this is all over. A lot of the kiddies do not remember the late 70s or early 90s.
The 70's weren't even a wake-up call. It was a deer in the headlights event. J6P didn't know what was happening or who to blame.
This time we know who to blame and that's going to be interesting.
Who to blame?
Maybe the U.S. just can't control international markets as much as we did in the past.
In other more critical news, Liz Vicious does not wear non-hot pink fishnets and I want to return Zillow Book to it's rightful state of murtness for "Hot Ass in Fishnet" - and dogs f-ing fart when they eat dal and Liz Vicious is Awesome and Where's Toxxy with her Goddamn f-ing next breakfast cereal agenda?
And I Do NOT want to listen to some loser self-help Boomer A-hole on PBS when there isn't a f-ing pledge drive. This dick knows as much about the Tao as one of my dog's farting a-hole.
In addition, Anastasia is hot.
Signed,
Your source of hot ass in fishnet found here.
Apparently there is another pledge drive.
I'd like to reiterate the fact that Dr. Wayne W. Dyer is a POS poser.
Sad state of affairs that stupid ass Boomers need to get the Tao via this shithead.
Re: CFC
Did any shorters get squeezed when BoA bought into them and it popped something like 20% in one day?
@PM
I got stopped out at 19.75 short from 29 something.
Funny Circus bear had gone long at like 15 dollars so he made out when BoA popped it.
We are both in now short from like 22.
The 70's weren't even a wake-up call. It was a deer in the headlights event. J6P didn't know what was happening or who to blame.
Well, according to certain elected officials at the time, the 70s happened because of Big Oil. That's why they passed the "Windfall Profits" tax, which they thought was a powerful tool to fight the "malaise."
and the good news just keeps coming
http://biz.yahoo.com/ap/070829/mortgage_applications.html?.v=1
this should help the market! ;)
Market futures pointing up; I think the markets think the Fed is bluffing™.
(And who is going to get all these inside jokes after the haterz™ have gone their separate ways?)
Subprime Mortgage Woes Spreading
The subprime mortgage crisis is spreading to a somewhat unexpected place: homes costing more than $500,000.
Unexpected? Maybe if you've done nothing but watch Kudlow & Co. for the last five years . . .
The Yen carry trade lives another day.
An amusing thread
Looks like the roller coaster is back up and running on Wall St . . . volatility didn't stay low for long. And it's not even September yet.
Anyone interested in a petition to get ms south carolina teen usa to run for president?
Either that or I want her running CFC.
Oh man I just had to pin up this quote from the housing bubble blog. The sheer assholiness of this realtor..once again the idea that she is entitled and actually "worked" for her success.
The St Petersburg Times reports from Florida. “Liz Seither deftly juggles the two phones that never stop ringing in her kitchen. The Clearwater Realtor’s eyes are puffy below unkempt flaming orange hair. Seither invested in expensive Clearwater waterfront property at the peak of the recent boom. Lenders are after her for millions of dollars in debts.”
“After juggling 15 calls from debtors, creditors and clients, Seither lays the phones aside and delivers a pep talk to herself. ‘I’m not a real estate bum,’ the president of Executive Preferred Properties announces. ‘I wear diamonds, Rolexes and necklaces. I’m a classy Realtor.’”
You're a homeless bitch with diamonds rolexes and necklaces that are not your anymore. Classy realtor is an oxymoron. The two words are mutually exclusive of each other.
Oh, apparently she has six investment properties herself...lol..dumbass.
speaking of "it's not all good", looks like CFC is going after their own who helped trash the company's finances.
http://www.mortgagefraudblog.com/index.php/weblog/permalink/alaskan_branch_manager_sentenced_for_falsifying_information/
Snowflake had better turn himself in before CFC gets a hold of his broker and then comes after him with the law...
H.
@H
Fat chance of that, if there is one thing we know about fliptard, it's that he will lie and spin the story as much as he can until he is met with irrefutable evidence. there is no way he is going to volunteer himself for anything unless it is to rat out other people to save his skinny ass. If I were that countrywide broker, I'd be making a deal with the feds first before fliptard.
From thestreet.com --
Mozilo Cashed Out at Top of Market
In total, company filings show Mozilo has sold a staggering $425 million worth of Countrywide stock to outsiders over the past three years. Average price: $36.50 a share.
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