Housing Bubble Bursting?

[Randolph Kinney]

New foreclosures at record high

http://www.marketwatch.com/news/story/rate-new-foreclosures-us-record/story.aspx?guid=%7B9BDB33B1%2D819E%2D4297%2DA096%2DCCDFB0FB8982%7D

Mortgage delinquencies rise across the board in fourth quarter

CHICAGO (MarketWatch) -- Many more U.S. homeowners were unable to keep up with their mortgage payments in the fourth quarter, the Mortgage Bankers Association said Tuesday, with the rate of homes entering the foreclosure process hitting a record 0.54% and the delinquency rate on U.S. home loans leaping to 4.95% from 4.67% three months earlier.

The rise was led by subprime mortgages, where delinquencies increased to 13.33% from 12.56%, and FHA loans, which saw a record-high delinquency rate of 13.46%. Trouble in subprime mortgages, made to borrowers with the riskiest credit, has roiled lenders and the stock market in recent days.

 

[hastalavista]

Brad has sources you and I do not; I don't see his take as "Pollyanna".

Having said that, however, I have spent some time lurking in the mortgage broker forums. I wouldn't call it "panic", but I would call it significant concern. Deals that were in the pipeline with various lenders are now shut-off. Many of the brokers are speculating about what is going to happen this year when the re-sets really kick-in. Some deals have fallen through because the lending guidelines have changed after initial approval. Some lenders are telling their brokers there just isn't any investors available to fund the programs right now (no kidding!).

My concern is this: If the foreign debt-holders get nervous, then there will be a credit crunch. That could be a problem. If not, then the issues probably can be contained to the sub-prime and alt-A programs. Not a banking/lender failure, but not a happy time. And, as always, there will be some individual homeowner stories that will be heart-breaking. Areas like yours (San Diego) and mine (Bay Area) where there has been rapid new construction and significant price appreciation may be hit hard.

Only time will tell on how bad the fall-out is.
I do think a positive consequence will be a re-evaluation of the loose guidelines and the significant reliance on credit scores. Let's face it: This was uncharted territory, and what may have worked in the past under difference circumstances (like credit-rating FICO scores) for certain loans did not work under these circumstances (NISA, no-doc, etc. loans).

 

[Randolph Kinney]

Home builders will feel subprime's pain

http://www.marketwatch.com/news/story/home-builders-feel-spillover-effects/story.aspx?guid=%7B965D3FD4%2D5B9C%2D4A28%2D8479%2DCC4CC7B0F6B1%7D

Tighter lending standards expected to hit sales, exacerbate inventory glut

BOSTON (MarketWatch) -- Although it's difficult to gauge home builders' direct exposure to the imploding market for subprime loans, none are likely to be immune to the ripple effects resulting from tighter mortgage lending standards whether they sell to first-time buyers or the high-end luxury market.

"The headwinds from deteriorating credit will impact supply and pricing conditions, as well as incremental demand" in the housing market, wrote Credit Suisse analyst Ivy Zelman in a research note this week.

"Tightening liquidity and more stringent appraisals puts current builder backlogs [of homes awaiting construction] at considerable risk for fallout, which should lead to another surge in cancellations and additional speculative inventory on the market," said Zelman.

"As such, we believe the impact of these headwinds will be felt throughout the entire market (regardless of builder price point), and will likely contribute to the next tranche down in pricing," she concluded.

 

[Randolph Kinney]

Brad has sources you and I do not; I don't see his take as "Pollyanna".

I know Brad has sources. I just don't believe those sources reflect the reality I see or what the markets are reacting to and how the subprime defaults are rising faster and higher than anyone has forecasted or is expecting. It has truly bankrupted many mortgage brokers, wholesalers, and direct lenders of subprime.

Having said that, however, I have spent some time lurking in the mortgage broker forums. I wouldn't call it "panic", but I would call it significant concern. Deals that were in the pipeline with various lenders are now shut-off. Many of the brokers are speculating about what is going to happen this year when the re-sets really kick-in. Some deals have fallen through because the lending guidelines have changed after initial approval. Some lenders are telling their brokers there just isn't any investors available to fund the programs right now (no kidding!).

That is a reality that is now being talked about in Wall Street circles. There has been a distinct tightening of standards.

 

[Steve Owen]

Austin, two things should be remembered... Schiff is trying to sell his book... and... he did indeed call the tech stock bust. His scenario sounds very plausible to me.

 

[Randolph Kinney]

Market appears gripped by 'contagion,' equity strategist says

http://www.marketwatch.com/news/story/us-stocks-selloff-subprime-woes/story.aspx?guid=%7B5B5999CF%2D0C10%2D4964%2D99EF%2D7B591F5254BF%7D

NEW YORK (MarketWatch) -- U.S. stocks sank on Tuesday, causing the Dow Jones Industrial Average to give up 242 points, as the rising tide of problems in the subprime mortgage market spurred fear of contagion across the whole financial sector, while weaker-than-expected retail sales confirmed a slowing economic outlook.


The market is gripped by "subprime contagion," said Peter Boockvar, equity strategist at Miller Tabak. "These are the same problems that have been weighing on the market for the last couple of weeks," he said, referring to the downtrend seen ever since the Dow fell 415 points exactly two weeks ago.

The market's downturn accelerated in the early afternoon after news that the number of homeowners unable to meet mortgage payments and entering the foreclosure process hit a record high in the fourth quarter.

"The subprime issue is a little more contagious than people thought and it is spreading some fear in the market," said Jay Susskind, director of trading at Ryan Beck & Co.

With the implosion of the U.S. subprime mortgage market and global concerns about financial liquidity, "there has been a real change of sentiment for financials and that's a sign the market is getting more risk adverse," Hyman said.

 

[Scott Kibler]

The real "new paradigm" commeth

http://www.bloomberg.com/apps/news?pid=20601206&sid=aX5_ORASPbvY&refer=realestate

Senate Weighs Aid to 2.2 Million Subprime Borrowers (Update2)

By James Tyson
March 13 (Bloomberg) -- U.S. lawmakers will have to consider providing aid to about 2.2 million subprime mortgage borrowers who are at risk of defaulting and losing their homes, Senate Banking Committee Chairman Christopher Dodd said today.
``The impact of losing 2.2 million homes I suspect will be in a lot of areas of our cities and towns that are already pretty hard hit, so we clearly want to look at that and legislate,'' Dodd, a Democrat from Connecticut, told reporters in Washington after a speech to the National League of Cities.

 

[Steve Owen]

Everybody grab your torches and pitchforks, indeed! The one thing we do not need is government action to hold greedy buyers who got into houses they could not afford harmless at the expense of the taxpayers!

"The subprime issue is a little more contagious than people thought and it is spreading some fear in the market," said Jay Susskind, director of trading at Ryan Beck & Co.

The real question is whether there is real weakness in the markets or whether there is irrational fear. Irrational fear can bring a market to its knees the same way real weaknesses can... they don't call it "depression" for nothing. However, if it is not a real weakness, or even not as real as the market movers feel it is, then smarter investors will rush in to take advantage of it.

There is no question that there are areas of the country suffering major problems with their housing markets. (However, there definitely might be a question about the 2.2 million homeowners in need of government assistance.) There is also no question that some lenders are getting clobbered in the market... some of them justifiably so. The real question is how great an impact that will have on the broader economy... or, to what extent is it real weakness and to what extent irrational fear.

 

[Randolph Kinney]

Money managers flee subprime

http://www.marketwatch.com/news/story/managers-limit-subprime-exposure-look/story.aspx?guid=%7BC56E0A15%2DFC7B%2D4AC8%2D9BE7%2DB2B9260CFF49%7D

Steve, here comes some more of that irrational fear. Time to step in and put your money where your mouth is (figuratively speaking).

SAN FRANCISCO (MarketWatch) -- As subprime lenders sink lower, many mutual fund and institutional money managers say they're preparing for the next shoe to fall.

That means moving away from banks and brokers heavily involved in secondary mortgage markets tied to more risky credit issues and at the same time finding some niche plays from companies that stand to benefit from subprime's fall.


"The key for us is avoiding names even at the margins of that industry," said David Honold, financial services analyst at Turner Investment Partners. "We're staying completely clear of that whole area of the market."

 

[JSmith43]

My butterfly wings caused this crap. Before the market opened this morning, I rebalanced my 401K to 50% safe rate stuff. Who knows when the transaction got posted? I did it via computer before the market opened. Worst case, it switched at close

No matter. Rates are down, the phone is ringing. 80/20 programs are getting cut back, loaded up with risk based pricing adjusters, etc. So, what falls in my lap today? A zero down jumbo. I have to see if we can even do them any more for this scenario. I know we could last month