patrick.net

I just read something here which is not addressed normally and I think is an important point. There are many people here who seem to think only home prices will change, and everything will be left alone, so they will just sweep in and snatch up bargains. The most annoying thing is when people use the term 'below market'. Guys there is no such thing.

It is the changes themselves that are the final trigger in the price slide. Loans are now harder to get, and yes, incomes are already very visibly sliding. If you have a way to shield yourself that is the best strategy. People are going to lose jobs, there will be fewer buyers, and prices (market prices) will drop accordingly. I do not expect to see the teaser rate, no qualifying, no money down loans available, especially when you are buying from a cash strapped bank who needs to move rotting inventory. Cash is going to be king again. That's what I have really been looking forward to.

Brand,

:)
Sounds like Mongo from Blazing Saddles.

Anyone interested in having a TROLL FREE discussion, feel free to at my blog. I've revived it from the dead, and I'll be focusing mainly on housing again (and not the cult second life virtual kind either). Email me if you wish to author also. I'm not trying to steal from Patrick.net, just provide a mature place to have discussions free of the noise.

Malcolm,

In that way, sadly, TOS is surprisingly right on one of her scare tactics - the housing downturn will likely lead us into recession. I think this will happen no matter what the Fed Funds rate is, and no matter what cockamanie bailout gets passed. You know what, despite all the scare tactics of bailout etc from nimrods like Donald, they will be too little too late. The slow-moving train that is the housing market (and economy in general) takes time to turn in either direction.

The result will be job loss. And let's not forget that despite the heavily massaged jobs data the government spews out every month, we are at the tail end of a so-called "jobless recovery." There are fewer jobs to start with, especially in manufacturing, and even in high tech, compared with the late 1990's, and there will be fewer, as most of the new jobs were in RE-related industries, and those are disappearing in front of our eyes.

By the time most economists agree we are in a recession, housing will have already bottomed out. If you have the means to buy at that low point (a job, a 20% or more down payment, good credit), you will be in good shape.

Totally agree. I feel like it is 1991 all over again. This is going to be bad, and I literally have real fears about unrest in this country. Likewise I believe that it is a non-issue to discuss bailouts seriously because the problem is so massive there is nothing that can be done. It is a trainwreck. We don't have the resources to stop what is coming even if it were right to do so.

What I really disagree with the TOS point of view is the effect of a 3 times monthly mortage payment verses renting, and the inflexibility of being stuck in a house which can't be sold. A lot of these types of honest people are engineers who seem to relocate to a different part of the country with each job change. They will find themselves in a vicious catch 22, they are out of work and can't afford the house, and can't accept a job because they own a house and can't move. They can't rent it. It is a miserable scenario.

TOS :

You are so right ! But your argument is incomplete. You forgot the part about being "my family on the street when the landlord throws me out".

I have already declared that you are the Aristotle of this blog. I cannot even dare to argue with you.

randy, do you know any other way to deal with people who don’t agree with you than calling them a ‘troll’?

At least we did not call you a commie. :)

Bubble bloggers are the real communists. Congress should shut them down. They're artificially holding down the prices by posting confusing mathematical treatise like the difference between Median and Mean. You want mean? There is nothing meaner than making fun of the math on an exploding NINJA ARM!

Time to call it quits...Being responsible, both financially and morally, in this world financial charade equates to being broke in the long run as wealth is transfered to debtors....

If anyone has a better idea, I would surely like to know.

Donald,

There is no free bailout ... read this:

http://www.financialsense.com/editorials/kasriel/2007/0824.html

THERE'S NO SUCH THING AS A FREE BAILOUT
by Paul L. Kasriel
Senior Vice President & Director of Economic Research
The Northern Trust Company
August 24, 2007

Is Patrick.net a bubble blog? I thought it is a reality parser.

Well said PermaRenter.

So on top of being about 2 standard deviations below mean intelligence, Donald also seems to have skipped the lectures on "Irony" during his elite Ivy League education.

Seriously, that site is scarry.

Not as "scarry" as your asscrack after it's been reamed by the upcoming ARM reset on the home you overpaid for in the "Gold Coast."

Seriously dude, you can't play with the big boys. Go home and read up a little on economics, housing, and basic grammar. Maybe you should stop using your "reading time" trying to "find Waldo."

Donald,

Your "witty" repartee is killing me. First it's gays in SF, now it's the West Coast falling into the ocean? Man, get some originality, douchebag.

Actually, it was I who wished that PA could saw off NJ at the border and drop it into the ocean. In case you're still struggling on Mapquest, the Commonwealth of Pennsylvania is the state to your immediate west. We don't worry much about earthquakes there. But maybe you didn't have geography at Princeton? Or did you and JFK both get jaundice at the same time and drop out in the first semester?

Right after I bought my house, a tear down sold for $1.1 million in about 2 weeks.

And thus the official peak of the "Gold Coast" real estate market was declared. It's been downhill from there!

skibum Says:
And thus the official peak of the “Gold Coast” real estate market was declared. It’s been downhill from there!

Speaking of stuff rolling downhill, I wonder if the "gold" coast got its name because the sewage from Manhattan washes up over there...

SP

>The top Democrat and Republican on the House Financial Services Committee >said investors in mortgage bonds should be liable for deceptive loans made by >banks.

In a thread long gone, I found myself joining the scolding of democrat Barney Frank, based on the above snippet from a news report.,

Tonight, I saw the aforementioned Frank in an interview on PBS, and I have to say that he came across as a much more sensible person than the above characterization seemed to imply.

I'm starting to think that the characterization above was not quite correct. I went back to the source

http://www.bloomberg.com/apps/news?pid=20601103&sid=aeC9v1sgMqoI

and read the fine print. It appears that Frank was really referring to the "packagers" and "securitizers" of the MBS bonds, and not the retail investors that might end up buying them.

Back to tonight's interview, the transcript does not seem to be up yet, but one of his causes was that hedge fund managers should be pay income tax and not the lower capital gains tax on their earnings from the funds (also known as "carry", short for "carried interest", of the fund).

Here's an older transcript hat shows some of Frank's thoughts on MBS:

http://www.pbs.org/nbr/site/onair/transcripts/070621b/

All in all, I think I won't rely on Bloomberg.com for an accurate characterization of what some Democrat might or might not stand for,

[please unmoderate if necessary, there are two web links in here]

Sir Donald said :
I have been predicting this bailout well before Bush’s Rose Garden Speech. Prices will not come down by more than 5%. From what I hear, Florida and California are the 2 hardest hit states in the housing market. Here in “slimey” NJ, things are better.

That 5% prediction is senseless. For each area exactly are you making the prediction of less than 5% ? From which price ? Median or same-house ?

I was at an open house this weekend. The asking price was 740K. The realtor said it's a great deal because last year he sold 3 such houses (exact same plan, in the same community) ... each over 790K. This is in a very good school district in BA.

Figure out if the drop in price is more than 5%.

You guyz worry 2 much about the bail out... WHo is going to get bailed out?? People who can qualify for FHA loans... ie. nobody who:

1. has much negative equity
2. cannot substantiate income
3. has way too screwed up credit.
4. is not in a jumbo product above limits.
5. owner occupied homes only

Even if they relax the standards a bit, the average FB has so much F that he still won't qualify. Further point: by the time this thing gets organized, prices will have dropped through another 2 quarters, and we are just ramping that up now... sales have fallen below the floor here in PHX-metro, so even the stupid median price will probably begin dropping next quarter.

Bush is a tard, look at the other proposal: cut the tax bill for loan forgiveness , short sales/ foreclosures for a period of time. What do you think happens at the end of that time period? Everybody then has an added incentive to walk right then and there, rather than gamble and hold on longer.

They don't even seem to understand that it is the BORROWER that is subprime, not the LOAN!

Expect Ben to cut rates at least .5% and may 1%... But don't cry too much over that either... so a few percent of FBers manage to hold on after their interest rate adjustments because that blunts the edge of the sword a bit... so what? The rest of the world knows damn well that inflation will rise, and the long bond rate will not stay down afterwards. At the same time that ARM's are becoming extinct, fixed rates will climb!

Holy unintended consequences Batman! Back to the batcave...

hmm, actually, I just found this in the paper today re Dubai by a coincidence... Maybe this is why SP PgDns past my posts...

Australia's Leighton buys Al Habtoor stake - Reuters

SYDNEY, Sept 3 (Reuters) - Australian construction firm Leighton Holdings Ltd (LEI.AX: Quote, Profile, Research) said on Monday it will pay about A$870 million ($707 million) for a 45 percent stake in Dubai-based Al Habtoor Engineering as it continues to expand in the lucrative Gulf market.

Leighton also said on Monday that it planned to move the headquarters of Leighton International from Kuala Lumpur to Dubai as part of the increased Gulf focus.

Al Habtoor Engineering was established in Dubai in 1970 and has more than 25,000 employees. Past projects include building Dubai's sail-shaped Burj Al Arab, the world's tallest hotel.

hey, patrick/.net got into the LA Times again, mostly re the bailout:

Is America really pro-bailout? - Los Angeles Times

He's an econ guru now! And we're all basking in his reflected fame... it feels good, doesn't it?

DS, thanks for LA Times. Rather a nice read.

Well played, Patrick!

Eliza Says TOS… You have to add inflation to the drop in housing prices if you want to make any meaningful statement. ..And if you are getting your -2% from the median–well, we’ve all been over this. The median is easily skewed. If the jumbo loans are gone, the median may actually drop quite a bit–to something a bit closer to 417K.

---------------------------------------------------------------------------------

TOS says to Eliza...

1- Eliza, you have to remember that I'm just a realtor troll.

You see on bubble blogs, they use REAL price as opposed to NOMINAL prices simply to confuse people like me

2- The picture is exactly the same if you use repeat sales numbers including jumbo loans from the Case-Shiller index (the very index that haunts me in my sleep because I'm too fucking stupid to understand it)…

= = > CA experienced a 100%-150% increase in prices between 2002-2007. That's why you guys call it a bubble :-)

Conclusion: Don't listen to me. I'm a looser.

3- so tell me, who wants to buy a house from me, please i'm getting desperate :-)

StuckInBA Says I was at an open house this weekend. The asking price was 740K. The realtor said it’s a great deal because last year he sold 3 such houses (exact same plan, in the same community) … each over 790K. This is in a very good school district in BA. Figure out if the drop in price is more than 5%.

--------------------------------------------------------------------------

StuckInBA, I know that you are very smart, and you know that these little tricks are for the uninitiated…

Do you mind sharing with us how the required cash at the table and PITI compared on a:

1- Last year picture: 790K loans @ 7% on a (30 year jumbo + piggyback) minus a 160K in a CD at +4.5% (downpayment money invested in a CD, because some crazy investor was mis-pricing piggyback loans)

versus

2- Today picture: 592K loan @ 8.5% (30 year jumbo) amortized over 29 year (to compare apple to apple) plus the return that you realized on your downpayment last year (assuming it was not in your mattress in US $$) plus your rental savings…

ha ha ha...we have done this calculation before…

Bottom line:

3- Don’t be emotional, and read the posts of MALCOM…He brilliantly summarized the current situation …

4- Prices are going down but it is far from clear that buying conditions have improved for people on the sideline (need for a 20% down, PMI, higher jumbo rate if you can find one)

Ps:

5- Malcom, I only disagree on the fact that I believe that the losses on the bad mortgages will be small, that many of the bad mortgages will be reworked, and we will avoid multiple waves of foreclosures and we will also avoid a recession because the credit crunch will be contains by the feds…at worst we may have a 1 quarter long benign recession… the numbers out of the 5 Investment banks should be revealing in the next few weeks…but we shall see!!!

Malcom,

I agree, where's the apology from the perma-bulls? The last several times I've run into my house/loan flipping former neighbor I've taken great pains to avoid anything bubble related. Of course if I'm willing to gloss over it, he's only too happy to get his "free pass" and excuse himself from the conversation.

He knows full well that I was 99% right and he was 100% wrong! Yet for all the touting he had done in 2005 you'd think that from a logical perspective I would be allowed equal time? Forget it. He's not about to allow that to happen. I mentioned to my wife that the next time we cross paths I just might not be as generous as I've been in the past. So I'm waiting for the usual "You're such an @sshole, why can't you let it go, look" and was pleasantly surprised when she said she wouldn't be as generous either! Made my... Labor Day.

"it is the BORROWER that is subprime, not the LOAN!"

Interesting.

WRONG!....

But... interesting.

Multiple MSM sources have already made it clear that CFC had incentives in place for MB's to place many fine folks with perfectly acceptable credit into subprime loans. (If CFC did it, can we safely assume they weren't the only ones doing it...?) Hmm... In addition many specuflippers (TM) with 2 or 3 or 10 investment properties leveraged their 790 FICO to the hilt and were shifted to the subprime realm.

Moving from 69% home ownership to 70% can not begin to explain the explosion in the growth of the subprime market.

TOS :
StuckInBA, I know that you are very smart, and you know that these little tricks are for the uninitiated…

Do you mind sharing with us how the required cash at the table and PITI compared on a:

So I call you Aristotle and you call me smart. Quid pro quo !

But in reality I am not even half as smart. Had I been, I would have realized that "howmuchamonth" is the more important number and would have purchased long ago. Now all I can do is spending time on bubble blogs and pretending that I was right. Please don't break my bubble of illusion !

TOS shifts her weight to one plus-sized cheek and pulls out a "bottom-line" forecast:
the credit crunch will be contains by the feds…at worst we may have a 1 quarter long benign recession…

Ah so, no need for that rate-cut then. Nothing to see over here, go forth and buy, buy, buy - and don't forget to tip your nice realtwhore. She love you long time.

SP

http://www.projo.com/opinion/contributors/content/CT_baker31_08-31-07_8G6SA6I.1c1d9dc.html

Here is the fair yet compassionate option.

And NO bailout needed and No or very little government bureaucracy and the least amount of fraud possible.

1. Give the mortgage to the mortgage holder on those distressed properties.
2. The former owner has the right to rent as long as they want at an fair appraised value.
3. The mortgage holder can sell the property but the renter gets to stay (as long as they keep paying the rent and want to stay).
4. To limit size of program cap the amount available to local median price of homes or lower.

Read the article for more information.

SP,

The even funnier thing about TOS' "bottom line" is that by strict definition, a recession is technically defined as at least TWO quarters of negative GDP growth.

Bottom line - TWO quarters are more than ONE quarter.

TOS said:
Do you mind sharing with us how the required cash at the table and PITI compared on a:
1- Last year picture: 790K loans @ 7% on a (30 year jumbo + piggyback) minus a 160K in a CD at +4.5% (downpayment money invested in a CD, because some crazy investor was mis-pricing piggyback loans)
versus
2- Today picture: 592K loan @ 8.5% (30 year jumbo) amortized over 29 year (to compare apple to apple) plus the return that you realized on your downpayment last year (assuming it was not in your mattress in US $$) plus your rental savings…

Last year picture (sic): $ 4700 p.m. (5250 - 550) with a zero down FB loan.

Today picture (sic): $4600 p.m. with 20% down payment, assuming you have the credit to get it funded.

The only people to whom the "last year picture" would look good are those who cannot do real math and have to rely on Realtor-Math + howmuchamonth logic + MID.

What fool would put 160K in a CD at 4.5% and borrow 792K at 7% just to get a zero down loan?

SP

To limit size of program cap the amount available to local median price of homes or lower.

That is a form of price control, right?

I think the most sensible way is to bail out the banks so that the crisis does not spread. There is no way to help "enough" homeowners without effectively nationalizing housing.

America is built on the foundation of free enterprises. Any form of gross market intervention should be frowned upon.

Bailing out banks is a form of free enterprises?

Since when?

Pretty contradictory if you ask me.

Anyway, how is it a form of price control?

Bailing out banks is a form of free enterprises?

It is easier and more effective than bailing out the homeowners. Expect some "homeowners relief" bill that has nothing to do with helping families.

Anyway, how is it a form of price control?

You were trying to limit the amounts, right?

Sorry, there will not be a public vote as to whether the bailout gets passed.

As I have said, there will be a banks bailout disguised as a homeowners bailout. "Something" will be done, just not what you think.

Realtors should lobby for bailing out the banks instead so that mortgages can remain affordable for new buyers.

If foreclosing families are given a break, then they will hold on to the homes. There will be no transactions/commissions.

The Democrats want to help out the homeowners, not the banks.

The Democrats wants to help the homeowners as much as I want world peace. Am I going to do anything about it? I have better things to do.

You need to take a class in human nature.

With me, the number should have been 99.9%.

So, you want us to... delete your posts? :)

So it is not free enterprise, just easier. Thought so.

They are limiting the total available, not the price. What is said is not set in stone, either. If the total is not that high they could help billionaire homeowners too. Oh that is what you want with the bank bailout.

Everyone I talk to knows that the problem is two-fold, not just one way. Why should just FB suffer and not FCs?