patrick.net

I wrote poorly, I don't know that mortgages *originating today* are subprime, rather that many outstanding mortgages are sub-prime.

I don't believe that lax mortgage lending is coming back either nor should it.

Some readers may not know that Fannie&Freddie 1. lost 90% of stock value 2. were placed under "conservatorship"=taken over by U.S. Treasury/ FHFA in Sept. 2008.

Some readers also may not know that the "secondary market"=Mortgage backed securities provides the capital for many mortgages which are largely going to meet FHFA/Fannie/Freddie guidelines.

The whole situation is a little bit interesting, because on one hand many have an interest in continuing the whole elaborate scheme, while on the other there is still risk inherent in the system if they lend money to losers for inflated bubble houses (i.e. the collateral is a bubble) and the loser flakes out.

clambo says

Some readers may not know that Fannie&Freddie 1. lost 90% of stock value 2. were placed under "conservatorship"=taken over by U.S. Treasury/ FHFA in Sept. 2008.

Freddie/Fannie major problem was they were over leveraged 75-1 72-1 they only got into Alt A products in 2006, late in the cycle. However, you're over-leveraged like that and the market turns you're ##!!

Even FHA needed a congressional FHA Solvency Act passed in 2012 with 2 bailouts to them

Everyones current loan are performing good once the standards came back in line. We still have 3 million delinquent loans from the past to work off.

The only item I see that can cause some DTI stress is that some people have 2nd liens come due 2014-2016. So not only do they become a PITI payment, it's amortized 20/15 years which makes it a much bigger payment.

Some of have balloon coming to them at some point.

However, the current standards keep all the homes bought good, in terms of the capacity to own the debt

bgamall4 says

Private mortgage pools took over with bogus AAA mortgages in late 2003

Yes the private label loans were awful. New Century, B&C Mortgage, Countrywide, Downey Saving, Washington Mutal, 2004 is when things got whacky with more exotic loan programs because that was the only way to keep the bubble going.

Speaking of which, all of you should see the documentary, I was at recent conference with the Producer of "Money for Nothing" it's a documentary about the Federal Reserve and its impact on the economy

Here is the trailer, if you haven't seen it Gary you will like, it's a bit basic but in a great format

http://moneyfornothingthemovie.org/trailer/

Documentary website
http://moneyfornothingthemovie.org/

clambo says

I don't believe that lax mortgage lending is coming back either nor should it.

Here was my interview last year on Bloomberg on the myth of tight lending standards

http://loganmohtashami.com/2013/03/27/will-be-on-bloomberg-financial-talking-about-bernankes-myth-on-tight-lending-standards-the-real-housing-story/

Nick Timiraos @NickTimiraos
Mortgages to borrowers with subprime credit: not happening http://on.wsj.com/1kSGLCc Average credit scores staying high

Logan Mohtashami @LoganMohtashami
@NickTimiraos Exactly! Because DTI & LTI levels for lower end score Americans are too light Mark Zandi is wrong! http://loganmohtashami.com/2014/01/27/mark-zandi-its-the-economy-stupid/ …

Logan, what is M2M? CAR?

bg says

Logan, what is M2M? CAR?

Median Income to Median Prices
CAR = California Association of Realtors

Call it Crazy says

Interesting chart....

I have 10,000 economic charts, update everyone economic number daily, if any of you're interesting in charts my facebook personal page has them with some discussion. We are having a good debate on twitter today on retail sales today on the charts on retail sales and how the housing bubble created a false high on consumption

https://www.facebook.com/Logan.Mohtashami

Telling of the true capacity of Americans to own the debt of housing. This isn't a collapsing chart but shows that the YOY demand even on the pending sale front is soft

Barring the Fed balance sheet, government debt, home prices, stock market and student loan debt, a lot metrics going down hill.

Bad QE velocity

Logan Mohtashami says

Bad QE velocity

Another great chart.

Logan Mohtashami says

Speaking of which, all of you should see the documentary, I was at recent conference with the Producer of "Money for Nothing" it's a documentary about the Federal Reserve and its impact on the economy

Here is the trailer, if you haven't seen it Gary you will like, it's a bit basic but in a great format

http://moneyfornothingthemovie.org/trailer/

Documentary website

http://moneyfornothingthemovie.org/

Watched it. Great video.

hrhjuliet says

Watched it. Great video.

It's a nice documentary and a good timeline of economic history with current and previous Federal Reserve members. The producer/director and I hit it off when he heard my interview on Bloomberg arguing Bernanke poor QE velocity thesis

http://loganmohtashami.com/2013/03/27/will-be-on-bloomberg-financial-talking-about-bernankes-myth-on-tight-lending-standards-the-real-housing-story/

Logan Mohtashami says

hrhjuliet says

Watched it. Great video.

It's a nice documentary and a good timeline of economic history with current and previous Federal Reserve members. The producer/director and I hit it off when he heard my interview on Bloomberg arguing Bernanke poor QE velocity thesis

http://loganmohtashami.com/2013/03/27/will-be-on-bloomberg-financial-talking-about-bernankes-myth-on-tight-lending-standards-the-real-housing-story/

Definitely a must watch for anyone who is trying to figure out what is going on in the market today.

Hmmmmm

What is your take on the above chart?

hrhjuliet says

What is your take on the above chart?

It shows the correlation of crony Fed purchases (MBS etc.) and rising house prices (LA in this instance) with brutal clarity. Case closed. Real median income has been dropping, party's over.

hrhjuliet says

What is your take on the above chart?

California has had a massive rise in home prices since April 2012. One item to remember is that using mix sale data a lot upper homes are selling now and not a lot of low end homes to the market. So the people who have cash, strong incomes and assets and buying it and the lower end home aren't selling as much. So, the price inflation is rampant.

Logan Mohtashami says

trong incomes and assets and buying it and the lower end home aren't selling as much.

Are you saying, rich are getting richer and poor are getting poorer?

bubblesitter says

Are you saying, rich are getting richer and poor are getting poorer?

In every economic cycle that goes positive the rich will get richer because they own the assets and they usually own them debt free, while others have to take on debt which leaves a massive gap. If they do own equities they benefit from that. However, the gap will always rise for the rich and even richest of the 1% even. Professor Sufi from University of Chicago Booth asked me to come to go to his Housing conference in LA last year, we kind of see eye to eye on the wealth factor model and we both agree in this cycle it's going to be less for the lower end class

http://houseofdebt.org/2014/03/29/measuring-wealth-inequality.html

The middle class gets a pretty sad deal in this too.

Logan Mohtashami says

Hmmmmm

This graph is very telling.

Misery loves Company

hrhjuliet says

This graph is very telling.

That graph can only mean one thing...."TOAST"

Bubbabear says

.."TOAST"

limits to this expansion. This a big reason why we don't see top line revenue growth from the business in America

Logan Mohtashami says

Bubbabear says

.."TOAST"

limits to this expansion. This a big reason why we don't see top line revenue growth from the business in America

Damn! Coming up for air or going down for the third time?

If any of you like economic charts updated daily my facebook page has almost every economic data updated on the wall with other charts as well.

https://www.facebook.com/Logan.Mohtashami

We got back all the jobs loss on the private sector side from the Great Recession, but........ #DTI #LTI even with the 10 year at 2.76% and ZIRP in play, it's a different cycle for sure and capacity consumption isn't a strong as many as thought. Hence why we don't have top line revenue growth and CAP X spending is light

Where do you see it going from here?

hrhjuliet says

Where do you see it going from here?

Which sector

Housing market, tech stocks and first time home buyers?

hrhjuliet says

Housing market, tech stocks and first time home buyers?

Housing market
Exisiting home sales most likely will end the year between 4.9-5 million so flat market would be the best case but slightly negative most likely

New home sales will likely be up 8-12% in total sales

First time home buyers will be soft this year 26-30% of the market place which is very low on historical standards

Tech stocks are getting spanked, stock market will be ok Up 3-7% this year because ZIRP is in play and the 10 year note is still very low to help demand.

Thank you. I really appreciate your input; always intelligent and practical.

>

As you can see here, we clearly overbuilt for housing and the even new home sales and starts got impacted when housing inflation rose on both fronts

http://www.businessinsider.com/jpmorgans-q2-complete-guide-to-markets-2014-4#jp-morgan-funds-q2-guide-to-the-markets-16

Take all affordability indexes the media and financial companies like Zillow and the NAR promote with a grain of salt because they thesis is based on the fact that everyone has a 20% down payment. Comical with this cycle I know .... and yet they never add an * to their metrics

http://www.businessinsider.com/jpmorgans-q2-complete-guide-to-markets-2014-4#jp-morgan-funds-q2-guide-to-the-markets-18

Hence rental nation, if this much can't create liquidity through liquid assets