patrick.net

chrisborden says

When will some of you learn that when you have a mortgage, YOU OWN DEBT. Net worth consists of ASSETS (savings, etc., if you have any) MINUS LIABILITIES (a mortgage, credit card debt, etc., etc.). If you believe debt=wealth, you are a fool. Why don’t they teach this in schools anymore? Oh, sorry, housing ALWAYS APPRECIATES, THEREFORE EVERYONE IS GUARANTEED OF WEALTH. Forgive me for being the stupid one.

Who here believes that debt=wealth? I certainly don't. I doubt that anyone here does. No one here believes that housing 'always appreciates'. At least no one that I can tell.

pinnacle says

The big stock market rebound has pushed up interest rates on 10 year treasuries.

That will really help the mortgage market.

I am hearing from a source inside a foreclosure prevention organization that the next dump of properties by the banks in Southern California is likely to happen in about 6 to 8 weeks. Right as the prime home buying season and the moratorium are both coming to an end.

He also thinks that higher rates and the supposedly “improving economy” will cause the Alt-A resets to be

much larger than current payments.

Can we know who this 'source' is?

It is very interesting reading all the varied opinions here. I realize no one has a crystal ball, but since foreclosures seem to be a problem, commercial RE problems on the horizon and mortgages harder to get, what does the mortgage rate future look like in your opinions.

I know mortgage rates are tied to the 10 year treasury and the have shot up recently. Rates are almost 6% for a conventional 30 yr. full documentation.

If rates continue up it may kill the foreclosure purchases etc.

Where do you think rates will go in the next 30 to 45 days????

Bap33 you got a great rate. I am buying a new build. Opted to use Pulte Mortgage via the builder to get the incentives which total over $6000. Now sort of at their mercy. I could get financed elsewhere, but do not want to give up the incentives. They seem to be 1/4 to 1/2 higher than others, but the additional cost is $45 a month which would take about 12 years to break even.
I will just follow the MBS and try to get the best rate available in the next 35 days which is when I have to lock the rate.

Bap33 says

I was wrote a 4.75 30yr fixed on Thursday ….. 6% is for suckers … as is thinking there is a reason to over-pay for a stucco-wrapped POS in mexifornia. Wages X 2 folks, max.

What do you mean wrote up? Do you have a signed lock in at 4.75? If so did you have to pay any points or hidden back end fees, ie YSP? I do not know about the city you are in but the very best rates in my area with no points are around 5.3. Average is in the upper 5's

The free fall has stopped:

http://www.nytimes.com/2009/08/10/opinion/10krugman.html?ref=opinion

Select quote:

And aren’t you glad that right now the government is being run by people who don’t hate government?

>>they can simply say, “Um, it would have been worse if we hadn’t done anything.

And they would be correct, so why quibble?

"They would be correct, so why quibble?"

Just like the Government's response to the Stock Market crash of 1929? The economic downturn of the 1930s only persisted because of misguided Government intervention. Politicians created the Great Depression and risk repeating the feat with stupid and damaging public policy today.

It would have been better and much shorter had the Government not created the problem to begin with or lengthened the downturn by not allowing the markets to clear.

whitneyross,

>>Just like the Government’s response to the Stock Market crash of 1929?

The government response was to increase interest rates (too late), which then plunged the country into the great depression.

>>by not allowing the markets to clear.

"Allowing markets to clear" would cause ALL banks to go under , and all savers to lose all of their deposits. It seems rather obvious to me that such an outcome would NOT be a good thing.

Even FDIC (which did not exist yet in 1929) could not withstand massive bank failures. (in 2007).

I understand that Market Fundamentalism is appealing to a lot of people, but I do not think that they have understood the consequences.

Some Guy says

knightparzival says

What do you mean wrote up? Do you have a signed lock in at 4.75? If so did you have to pay any points or hidden back end fees, ie YSP? I do not know about the city you are in but the very best rates in my area with no points are around 5.3. Average is in the upper 5’s

You are correct. Bap33 is obviously just talking out his ass.

I, too, find it a bit suspicious.

looks like lot of old timers who were whistle blowers for housing bubble are now pulling the trigger.

>>I’d rather have the government cover depositors losses directly than give trillions of dollars to insolvent banks

I think you have missed the point. The accumulated cost of liquidating the banks would be many times the cost of the current bailouts. That's the whole point of doing the bailouts in the first place.

I agree that the bailouts are distasteful, and have also been to lax (I think in particular that we should put a major hurt on the bank upper management and risky traders). But it is still cheaper than letting everything unravel. This idea that we could somehow let Citi (say) fail without taking everything else with it is just a pipe dream of the libertarians.

Someguy,

>>Bear Stearns and Countrywide failed. Did they take everything else with them?

You've got your facts wrong. Bear Stearns was on the brink of failure, but was bailed/bought by JP Morgan.
Countrywide was also on the brink of failure, and they were bailed/bought by by BofA.

But back to the big picture:

It was Lehman Brothers that was actually "allowed" to fail (go bankrupt). The bankruptcy announcement of Lehman on 2009-09-14 created a full scale panic in the financial markets, and people lost real money in their money market funds. The Reserve money market fund still has only paid out about 80% of what was invested in their money market fund, and it is almost one year since the Lehman incident.

Are you sure you understand what would happen to us all if Citibank would have to file for bankruptcy? Citi had 1930B in assets in 2008. Lehman had $275B in assets (including all the BAD ones) at the time it went bankrupt.

Do you understand what would happen to the world if Citibank went under? Can you understand how gigantic the realized losses would be during the ensuing panic liquidation of everything from bonds to buildings to factories to farms to houses?

I can't help but think that the crowd that chants no-bailouts-under-any-circumstances just od not realize the incredibly bad consequences of their positions, and the immensely high self-cost of instant punishment for the bankers.

YES, I want to put a major hurt on the bank managers and traders. NO, I don't think it is worth worldwide panic, destruction and losses to accomplish it. There is a better way, and I think in due time we will get to it. But fer gods sake, don't be so blood-thirsty that you must have revenge at ANY cost!

Some Guy,

>>I don’t think YOU understand. Countrywide certainly had a similar amount in assets.

Wrong again. Countrywide had 211B in assets at the end of 2007. That is ~1/9th the size of Citi.
There *is* no bank big enough to absorb Citi. And the buyouts of Countrywide, Bear, and
Merill Lynch has already stretched the healthier banks to the limit. BofA needed a bailout itself
in order to absorb ML.

I'll try to stop there -- I do not care all that much that you cannot be convinced otherwise.
I'm only posting to correct the misconceptions, and hoping that others that have been fooled
by the no-bailouts-under-any-circumstances fundamentalist mantra will realize that their is a
good reason to do this.

And yes, I AM holding my nose all the way to the bank. And I want the Bankers to get their
punishment in due time. And I want housing prices to be 3x income.

http://blogs.wsj.com/deals/2009/08/07/taking-wall-streets-pulse-dawn-of-an-economic-recovery-is-here/#mod=yahoo_hs

'It's Official~ish: Whole World Calls Market BOTTOM'

I really am starting to like reading some of these sunnier stories. They seem to be appearing more and more each and every day. I had the same feeling when I started reading Patrick.net years ago: each day~~~little by little~~~more stories began to appear about the 'bubble' then, of course, the 'bubble' exploded and an onslaught of 'bubble' news appeared each and every day and all positive news stories faded away. The opposite is beginning to happen now.

Perhaps Obama and the stimulus package are good for America? We will find out soon enough.

TOB,

make the taxpayer buy *what* things? I cannot respond unless you are specific.

what TOB and the likes are cribbing about is that some people made bad choices and are not paying for it.
I would say , Life is not perfect ..just get over with it and move on.

BTW, I never made any bad choices during the bubble and always saved...

SG,

Your arguments are so full of errors that it is hard to take them seriously. And then of top of that you distort what I am saying. For posterity, here are two more errors:

Error 1: >>Wrong. The head of BofA said that they did not need bailout money, but were forced to take it.

That was *before* Ken Lewis understood that ML has $21.5B in losses in 2008/Q4. After he realized, he was happy to take not only the $20B money the "forced" upon him (poor baby), but also another $25B in 2009/Q1.

Error 2: >>There are other options besides giving away trillions of dollars of taxpayer money.

Again you are severely mistaken. Neither Treasury nor FED has "given away" trillions of dollars. What they did was to (1) buy preferred shares in the Banks and (2) lend the banks cash against toxic collateral (MBS and the like). Item (1) is less than 700B. Item (2) *is* in the trillions, but they are LOANS, not giveaways.

If you insist on being disingenuous, there is not much I can do about, but for everyone else I will try and set the facts straight, as I have done above.

Now, I never used the phrase "too big to fail", those are your words, but I will nevertheless explain what it means:

It means that eventual cost of failure (to the taxpayer) will be much larger than the cost of shoring the bank up and then letting it earn itself out of the hole over a longer period of time.

Do you get it, or do you insist on sticking your head in the sand and/or be a complete financial Luddite?

WE HAVE CHOSEN THE LESSER OF TWO EVILS.

It is not palatable, but it is what needs to be done. Now, can I count in your support for REAL regulation so that this does not happen again??

Jesus Christ man, you cannot be saved. Forget it. In your imaginary world, you win. In the real world, everybody loses, including you.

agree with TOB aka thunderlips11

thunderlips11,

>>Why was only the Gov’t willing to buy them?

Well, according to SG, the problem was that the banks were unwilling to SELL. And you say nobody were willing to BUY except Gov. The truth must be somewhere in between.

Why does SG (correction: RFESJ) say that TL11 is TOB? Is there some secret text web-alyzer one can run?

Some people just cannot be bothered with facts, and will deny them until their last gasp. There's not much I can do about that.

Yes, the Fed has been buying over a trillion in mortgage backed securities from the banks. Here is info on the program on the NY Fed's site: http://www.newyorkfed.org/markets/mbs_FAQ.HTML

The Fed's stated goal for this program is to "The goal of the program is to provide support to mortgage and housing markets and to foster improved conditions in financial markets more generally."

The program began in January, arguably well after the "credit crunch" had eased a bit. Given that other Fed and government policies have been aimed at propping up the value of these toxic assets (PPIP, removing the mark to market requirement, etc), we can only assume that the Fed paid at or near top dollar for these assets. At discount prices, there would have likely been ample private buyers.

No matter how you cut it...this is what the FED has being doing : providing capital for an entity which otherwise will go broke. You and me will never get a loan form govt if we screw up but the banks have been getting free capital even though they have been screwing up big time. But banks always had access to capital from govt.the only difference is that they get it now based on thier toxic assets...but does it really matter ? free access to govt money is not new for banks.

PS, if you haven't seen this interview with William K. Black, the senior regulator who cracked the the S&L scandal, it's worth the watch: http://www.pbs.org/moyers/journal/04032009/watch.html. It's a pretty scathing critique of the banking system and of Paulson/Geithner's handling of the bailouts.

also , can someone tell me how much we (GOVT) actually lost ( dollars) during the bank bailout ?
I am not talking about the loans...etc. just give me the actual cash equivalent that we will never get back.

renter for ever_san jose - what matters is that this time, banks and bank bond and shareholders are being funneled huge profits directly from government coffers. In the past (S&L crisis, etc), bailouts merely went to depositors, and the banks/bondholders/shareholders were left with nothing.

The question wasn't whether the government would be stuck paying for the bank screwups, it was how much they would pay and whether that payment would include handouts to the very same people that caused the problem in the first place through their incompetence and malfeasance.

renter for ever_san jose - it's hard to pin down since the bailout is still in progress. And it depends on what the Fed and others can eventually get for all the mortgage backed securities they purchased. If you assume 50 cents on the dollar (they currently would be lucky to get 30 cents on the dollar), then they would "lose" 600 or 700 billion from the MBS purchases alone. Estimates for PPIP run the gamut from an actual modest profit to 1-2 trillion losses.

So who knows. That's why it's all so scary.

Hey Wanker...anyone point out to you that the clip that you posted was about national prices? As for the Westside of LA? Prices are falling and will continue to fall. Up until a short time ago the requirements to get a loan for a $4M house was $200K down with $400K in income. Now it is $1.2M down with $700K in income. That's going to affect prices.

Just because people have delusions about the value of their property doesn't make it true.

http://www.redfin.com/CA/Los-Angeles/120-S-Anita-Ave-90049/home/6838669

The people who own the house above seem to believe that it has increased in value by $499K since they bought it in 2005. The fact that it has been on the market for 218 days shows that they are delusional.

Oh, and the house right next door, same McMansion style, slightly smaller, is has been on the market for 24 days and is listed at $2.985K.

At the height of the boom, houses on Anita sold the day they went on the market (including the first one I listed). If you want to belive that the bust is over on the westside of LA, go right ahead. But you are also...delusional.

No way, the Westside is immune. Prices never drop here. We're sprinkled in magical pixie dust. We have lots of "entertainment" types, and you KNOW they're all rolling in money. Things are different here. It's always sunny and warm! (Except at the beach in the summer... and spring... and winter.) Did I mention the pixie dust already?

guys...what is the expectation on this board.
What would make you guys happy ??

1) prices 50% less than long term trend of case shiller index
2) prices 20% less than long term trend of case shiller index
3) prices in line with long term trend of case shiller index

I am getting sick of the pessimism here..you guys are sounding like the same bunch of irrational people who use to believe that housing will go up for ever during housing bubble.

Please do me and others a favor and look at the graphs :http://www.recharts.com/cme.html (scroll to the bottom)

rational1 says

Hey Wanker…anyone point out to you that the clip that you posted was about national prices? As for the Westside of LA? Prices are falling and will continue to fall. Up until a short time ago the requirements to get a loan for a $4M house was $200K down with $400K in income. Now it is $1.2M down with $700K in income. That’s going to affect prices.
Just because people have delusions about the value of their property doesn’t make it true.
http://www.redfin.com/CA/Los-Angeles/120-S-Anita-Ave-90049/home/6838669
The people who own the house above seem to believe that it has increased in value by $499K since they bought it in 2005. The fact that it has been on the market for 218 days shows that they are delusional.
Oh, and the house right next door, same McMansion style, slightly smaller, is has been on the market for 24 days and is listed at $2.985K.
At the height of the boom, houses on Anita sold the day they went on the market (including the first one I listed). If you want to belive that the bust is over on the westside of LA, go right ahead. But you are also…delusional.

irrational1, I realize the article was written regarding national prices. Thanks for pointing out the obvious. Secondly, let me know when the houses in Brentwood are available for $400K. I'll pick up a baker's dozen.

renter for ever_san jose says

guys…what is the expectation on this board.

What would make you guys happy ??
1) prices 50% less than long term trend of case shiller index

2) prices 20% less than long term trend of case shiller index

3) prices in line with long term trend of case shiller index
I am getting sick of the pessimism here..you guys are sounding like the same bunch of irrational people who use to believe that housing will go up for ever during housing bubble.
Please do me and others a favor and look at the graphs :http://www.recharts.com/cme.html (scroll to the bottom)

My sentiments, exactly.

I don't believe it's that difficult to guess where prices might bottom. Check out the price in a given area in 1999, then adjust for inflation. Since prices tracked inflation for the prior 100 years, there's good reason to assume they will revert to that trend. In fact, I would say, any argument that prices will NOT revert to the 100 year trend should include substantial data to back up such a claim, as it would represent a complete break from established market history.

We know why prices bubbled, and most of the forces that led to the bubble are now absent. Given that it took a rather unique confluence of events to cause such an extreme diversion from trend levels in the first place, what do you believe could potentially cause prices to keep from reverting?

srla says

Since prices tracked inflation for the prior 100 years, there’s good reason to assume they will revert to that trend.

And as some have pointed out, it may overshoot "the trend" on the way down before any appreciation starts.

Yeah, I would assume it would overshoot too, based mainly on the extreme nature of the bubble itself. In general, the more extreme the bubble on the upside, the more extreme the downside.

Dr. Housing Bubble has accumulated a ton of data that indicates the other shoe is about to drop in So Cal, mainly in the middle and upper end. I have yet to see any real data that would counter his argument. In fact, he and others predicted an upward trend in the median many months ago, as more houses begin to sell in the higher priced areas.

If I had to guess, I would say a bottom might be in in the I.E. (I sure hope it is in, for family that live out there!) But I can't see us being anywhere near a bottom here in L.A.

There are 3 foreclosures within a block of my house that have been empty from 6 to 10 months. All are listed for around 35-45% off their last sale price, and yet they have found no buyers, despite signs being up and one of the banks even springing to mow the lawn! (talk about staging.) Other non REO properties have sold for around 40% below peak, but a few more are just sitting there and have been for months.

It sure doesn't feel like a bottom in these parts, especially since many listing prices are still about 2-3 times the 2001 values.

I think the main variable is: Is it cheaper to buy or rent the same house.

Where I live (Lone Rock, WI) I bought a house because my interest, taxes, maint, insur., etc. add up to $654 per month. This is for a nice 3 bd/2 bath house.

I would have to pay $850 per month to rent the same type of property. So for me, it's a non brainer to buy vs rent.

Now from where I came (Long Beach, CA) I would most likely rent vs buy as it would be cheaper monthly to rent.

This way of dealing with the housing bubble takes the appreciation-depreciation out of it for me.

peace out,

don
thelittleguylobby.org

Yeah, I would assume it would overshoot too, based mainly on the extreme nature of the bubble itself. In general, the more extreme the bubble on the upside, the more extreme the downside

now thats called irrational thought process...once it undershoots, i'll buy and then sell when it over shoots ( since the previous event was undershoot) again and do this multiple times and be multi millionaire...common guys its not a damped sinusoidal wave! if the world was so simple, everybody would be millionaires.
My suggestion : If you need a home and like it and the shiller index in your area is in line with long term trend...buy it.

renter for ever_san jose - it's not an irrational thought process, it's simply an empirical observation made by a number of economists. And we're not talking a perpetual motion machine here. If you have evidence to the contrary, then by all means, present it.

And we're not talking a perpetual motion machine or a pendulum here. In fact, it's more like a roller coaster. This bubble was inflated by a series of unique events and policies and a by rather unique mindset. Now that these things are largely absent, the bubble is deflating and returning to mean. Bubbles are driven by emotion and fear both on the upside and on the down. One reason larger bubbles tend to overshoot is that people panic on the downside once they realize how fast prices are falling or how far they have already fallen.

This has been documented in many past bubbles.

Of course, market timing is a whole other story as you never know just where a bottom will be. But there seems to be a very good chance there will be a prolonged flat period after this bubble, so while you might not be able to time the bottom, there is no reason to rush to by "before prices rebound" either.

renter for ever_san jose says

guys…what is the expectation on this board.
What would make you guys happy ??
1) prices 50% less than long term trend of case shiller index
2) prices 20% less than long term trend of case shiller index
3) prices in line with long term trend of case shiller index
I am getting sick of the pessimism here..you guys are sounding like the same bunch of irrational people who use to believe that housing will go up for ever during housing bubble.
Please do me and others a favor and look at the graphs :http://www.recharts.com/cme.html (scroll to the bottom)

I'm just curious, but why do you come to a board that clearly states Housing Crash Continues and then get "sick of the pessimism" when people post things about prices continuing to decline? I don't go to a Red Sox board expecting them to say positive things about the Yankees.

As for your question, I just want prices to be in line with rents or at least close. Right now I'd have to pay $4-5k for a mortgage when I could rent the same place for $2-3k. I don't think I'm being unreasonable for waiting.