Housing Bubble Bursting?

[DTB]

Gee should my 17 year old son wait to buy his 1st 3 unit until the coast is clear?

Think he'll make money when it's time to buy a SFR at 25? How about when he hits 40, 55, 65?

A proud weekend indeed when son decides to follow the family footsteps.

I think he will become very rich in the current real estate climate and looking at the young college grads with 40K+ in school loans upon graduation. Many will be LOOONG term renters.:blush:

 

[JSmith43]

In the past five years the average house in the US has increased in price by 57%. Over the same period real gross-domestic-product growth was 15%. The most optimistic White House Estimate of real after-tax compensation increased by 8%. [3] Unreal-estate price increases are just that. Brace yourself for a dose of reality that will fall heavily on the shoulders of those Americans least able to bear the load.

Inflation adjusted GDP is quoted. I wonder if that 57% home price increase is inflation adjusted?

If not, the comparison is more like 57% vs 27% based upon 2000-2005 GDP increase not adjusted for inflation. Darned alarmists.

Randolph, maybe you could validate those numbers in your spare time

 

[moh malekpour]

Inflation adjusted GDP is quoted. I wonder if that 57% home price increase is inflation adjusted?

If not, the comparison is more like 57% vs 27% based upon 2000-2005 GDP increase not adjusted for inflation. Darned alarmists.

Randolph, maybe you could validate those numbers in your spare time

How did you calculate your adjusted inflation? According to the Government reports, the CPI (consumer price index) ,which is the mostly used index to measure the inflation, has been 2 to 2.25% per year. That does not add up to 27% in 5 years, It would be 10 to 11%. I am not saying that their measurment is a real indication of real inflation but that is what they use which is baskets of selected goods. They don't include home sales prices as if it is not the consumer price. I feel 10% price increase in the market for anything I buy except items that comes from China but the Government says it is 2.25% or 2.5% increase on price index.

 

[moh malekpour]

http://www.bloomberg.com/apps/news?pid=20601103&sid=ahwzaBwuNaII&refer=us

Hold on to your assets. The deepest housing decline in 16 years is about to get worse.

As many as 1.5 million more Americans may lose their homes, another 100,000 people in housing-related industries could be fired, and an estimated 100 additional subprime mortgage companies that lend money to people with bad or limited credit may go under, according to realtors, economists, analysts and a Federal Reserve governor. Financial stocks also could extend their declines over mortgage default worries.

The spring buying season, when more than half of all U.S. home sales are made, has been so disappointing that the National Association of Home Builders in Washington now expects purchases to fall for the sixth consecutive quarter after it predicted a gain just last month.

``The correction will last another year,'' said Mark Zandi, chief economist for Moody's Economy.com in West Chester, Pennsylvania.
If this slump follows the same pattern as the last one, in 1991, it will persist for at least another year and may fuel a recession. New-home sales declined 45 percent from July 1989 to January 1991 and about 1 percent of all U.S. jobs, or 1.1 million, were lost in that recession, said Robert Kleinhenz, deputy chief economist of the California Association of Realtors.

This time around, new-home sales have declined 28 percent since September 2005, hitting a low in January, the last month for which data is available. And though the national jobless rate is near a five-year low this month, mortgage-related jobs fell by almost 2,000 in January alone. At least two dozen of the more than 8,000 mortgage lenders have been forced to close or sell operations since the start of 2006

``What we're seeing in this narrow segment is the beginning of the wave,'' Bies said. ``This is not the end, this is the beginning.''

About 1.5 million U.S. homeowners out of a total of 80 million will lose their homes through foreclosure, University of California-Berkeley economist Ken Rosen said last week.

It's a little too early to tell how it shakes out for investment banks,'' said Andrew Davidson, president of New York- based Andrew Davidson & Co., which advises fixed-income investors on mortgage bonds. ``If it turns out that they have large losses, the investment banks tend not to be very forgiving and usually terminate businesses that haven't worked for them

 

[moh malekpour]

http://www.bloomberg.com/apps/news?pid=20601087&sid=aVr_mJBUCFVo&refer=home

New Century Financial Corp., the nation's second-biggest subprime lender, said today it can't meet demands by its creditors for accelerated payments. The shares, already down 90 percent in 2007, lost half their remaining value.

New Century said it doesn't have the cash to give to lenders including Morgan Stanley, Citigroup Inc. and Goldman Sachs Group Inc. The companies sent New Century letters last week alleging default, the Irvine, California-based home lender said in a filing today with the U.S. Securities and Exchange Commission. Creditors are demanding New Century repurchase all outstanding mortgage loans financed by them.

``The company and its subsidiaries do not have sufficient liquidity to satisfy their outstanding repurchase obligations,'' New Century said in the filing

 

[Greg Bell]

This sums up the reaction of Mortgage lenders...first is denial

http://www.youtube.com/watch?v=dGvw6WpHSF4

 

[Randolph Kinney]

Countrywide subprime volume falls as guidelines tightened

NEW YORK (MarketWatch) -- Countrywide Financial , one of the nation's largest mortgage lenders, said Monday that the volume of subprime loans it made in February fell as the company tightens lending standards in response to rising defaults. Countrywide said subprime loan fundings in February fell to $2.6 billion from $2.8 billion a year ago. Total loan fundings climbed 10% to $35 billion, it said. Countrywide added that subprime applications have fallen as the company has tightened its lending criteria. It plans to tighten its criteria further, and said it expects short-term earnings volatility as the changes are made.

 

[Randolph Kinney]

Treasurys sent higher by subprime lending fears

http://www.marketwatch.com/news/story/treasurys-higher-funds-flow-out/story.aspx?guid=%7B0BBBAD93%2DB3B4%2D4610%2DBA6C%2D8AFFEE944D1E%7D

Roger, more butterfly wings are flapping.

Liquidity looks good. Cash and near cash is king.

NEW YORK (MarketWatch) -- Treasury prices gained early Monday, sending yields lower, as a new set of subprime lending worries sent cash flows out of the equities market and into bonds and other low-risk instruments.

 

[Dee Dee]

Cry Not for Mortgage Lenders

http://test.denverpost.com/headlines/ci_5404197

Another subprime market leader, Countrywide Financial, recently reported that 19 percent of its subprime loans were more than 30 days delinquent. That's nearly one out of five going bad. The company also said it made $41 billion worth of subprime mortgages last year and $46 billion in 2005.
Before news of Countrywide's widening subprime delinquencies broke, its CEO, Angelo Mozilo, sold $140 million in stock over the past 14 months, The Wall Street Journal reported last week. Mozilo, who co-founded the company 38 years ago, defended a 19 percent delinquency rate.

 

[Randolph Kinney]

U.S. stocks fall on fresh concern about supbrime

NEW YORK (MarketWatch) -- U.S. stocks open mised on Monday, after an article in the New York Times over the weekend highlighted risks of a crisis in the subprime mortgage market and after fresh problems emerged for lenders New Century Financial and Countrywide Financial. New Century plunged over 56% before the open after the stricken subprime mortgage firm said its lenders are cutting off credit. Countrywide dropped 3% after saying that the volume of subprime loans it made in February fell as the company tightens lending standards in response to rising defaults.