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Housing Bubble Bursting?

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Record foreclosures hit mortgage lenders

http://www.usatoday.com/money/economy/housing/2007-03-13-foreclosures_N.htm

States with the most job losses are seeing the largest number of delinquencies. In Mississippi, Louisiana, West Virginia, Michigan, Alabama, Missouri and Tennessee, at least one in five subprime ARMs is in default.

Percentage of all delinquent loans in the fourth quarter by state (State data are not seasonally adjusted):

Mississippi 10.6%

Louisiana 9.1%

Michigan 7.9%

Indiana 7.8%

Georgia 7.5%

West Virginia 7.4%

Texas 7.4%

Tennessee 7.3%

Ohio 7.3%

Alabama 7.1%

Kentucky 6.3%

South Carolina 6.3%

Pennsylvania 6.3%

North Carolina 6.1%

Arkansas 6.1%

Missouri 6.1%

Oklahoma 6.1%

Illinois 5.4%

Kansas 5.1%

Rhode Island 5.0%

Maine 4.9%

Florida 4.9%

New York 4.8%

Nebraska 4.7%

Massachusetts 4.5%

New Jersey 4.5%

Delaware 4.5%

New England 4.5%

Iowa 4.4%

New Hampshire 4.4%

Colorado 4.4%

New Mexico 4.3%

Connecticut 4.3%

Maryland 4.3%

Wisconsin 4.1%

Nevada 4.1%

Utah 4.0%

Minnesota 4.0%

Mountain 3.9%

District of Columbia 3.7%

Virginia 3.7%

Arizona 3.5%

Vermont 3.4%

Idaho 3.4%

California 3.3%

Alaska 3.1%

Washington 2.9%

South Dakota 2.9%

Wyoming 2.9%

Montana 2.8%

North Dakota 2.7%

Oregon 2.6%

Hawaii 2.4
 
Hey! Something that Arkansas is not dead last in!
 
I thought Calfornia should be worse than it shows. It seems that southern states are at the top.
 
AZ may be LOW in this list BUT we're in the top 5 for RE Fraud. I also noticed they have the New England States then Hew England itself, HMMMM wonder if that so no single state gets really hammered.
 
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In subprime mess, another dumb theory falls

http://www.marketwatch.com/news/story/subprime-mess-another-dumb-wall/story.aspx?guid=%7BC01F1530%2D36B0%2D411C%2D8D55%2D2127D0AE6047%7D

SAN FRANCISCO (MarketWatch) -- It seemed so obvious at the time, back at the peak of the Internet bubble seven years ago this month. Profits no longer mattered.

You see, it was different this time. It was a new paradigm. Internet companies were changing the world and old measurements of success, such as profitability, didn't apply anymore.

Until of course, they did. And we're still living with the fallout from the resulting collapse in Internet stocks and tech stocks in general, seven years later.

The parallel with what's happening in the mortgage market seems eerily familiar.

The thing about the brewing mortgage debacle, however, is that everyone saw it coming. They just refused to believe it.

But the answer was always the same. It's different this time. The banks and lenders have sold the loans. They don't hold them.

Well, who does? The standard answer, seemingly true, was that they'd all been carved up and sold through various derivative instruments, so the risk was spread over a greater number of investors.

Oh, we all said. Those derivative markets are so hard to understand. The big boys like Bear Stearns and Lehman Brothers know how to hedge against this stuff. And they'd never pass along bad goods, right?

So here we are this week at the popping of another great Wall Street myth; another big con that everybody -- even on the street -- bought into because the money was easy and the returns were great.

So just like with the Internet bubble, investors and in this case many home buyers are learning an expensive lesson about boom and bust. Each day subprime housing loan problems are turning up in new unexpected areas -- General Motors, H&R Block, specific mutual funds tied to real estate. The list will get larger and more unusual with each passing week.

At the end of the day, the horrible reality is that in some way, we all own them. And it serves us right
 
Bear Stearns Profit Rises 8% on Credit Derivatives

http://www.bloomberg.com/apps/news?pid=20601087&sid=at_QPq0hTf7I&refer=worldwide

March 15 (Bloomberg) -- Bear Stearns Cos., the biggest U.S. underwriter of mortgage bonds, said first-quarter profit rose 8 percent as higher revenue from trading derivatives and debt of troubled companies overcame a slowing market for home loans.

Residential mortgage-related revenue decreased in the quarter, "reflecting weakness in the U.S. residential mortgage- backed securities market,'' Bear Stearns said.

Credit derivatives and distressed debt helped the credit business post record net sales, the firm said.
 
CDO Sales Surged as Subprime Bond Market Collapsed

http://www.bloomberg.com/apps/news?pid=20601009&sid=a3gM_ovpIJwE&refer=bond

March 15 (Bloomberg) -- Global sales of collateralized debt obligations surged 90 percent in the first two months of this year as issuers rushed to complete deals while the subprime bond market was collapsing, Morgan Stanley said.


CDOs are backed by pools of student, home, corporate or credit-card loans and sliced into bonds with different credit ratings and maturities.
 
Red County

http://www.redcounty.com/tabid/146/articleType/ArticleView/articleId/50/Game-Over.aspx
The perception that easy money can be made with little risk is reinforced by the media and “cocktail chatter” which serves to suck in the public (the “dumb money”). Those that believe they are very smart want to display their intelligence by sharing with others how well their investments are doing. Those not in the game feel like they are stupid and not keeping up with their neighbors who are on the path to the American Dream. Other characteristics of an investment mania are a lot of borrowing, fraud at the tail end of the boom, questionable quality supply of whatever is in high demand, and then a crash.
Prior to the housing boom, the most recent financial bubble was the dot com/telecom craze of 1995-2000. Let’s compare the two:

DOT COM & TELECOM
Public Participation: Enormous numbers of day traders.
Borrowing: Huge margin debt and massive corporate spending on technology.
Fraud: Illegal IPO allocation, fraudulent accounting, and now back dating of stock options. Just think of Enron and Worldcom.
Questionable Supply: Junk companies going public in which most of them failed.
Crash: NASDAQ dropped 80%

HOUSING
Public Participation: Large numbers of condo flippers and investor/speculators.
Borrowing: Extraordinary amount of mortgage lending much of which is highly risky given the repayment terms and interest rate risk.
Fraud: Widespread appraisal fraud and false information provided on loan applications encouraged by shady mortgage brokers. Massive accounting irregularities by Fannie Mae and Freddie Mac.
Questionable Supply: Massive numbers of condo conversions of basic apartments and a large amount of new condo construction.
Crash: Housing prices are falling rapidly in areas that have experienced great appreciation, inventory is exploding, and new home sales have dropped 25% from its peak.

Supply and demand are out of balance. Second home buyers and speculators are no longer buying. In many cases they are selling. Inventory of new and existing homes for sale is at a record level and it is taking longer and longer to sell homes.

My assertion is that all investment manias have the common characteristics of the perception of easy profits with little or no risk, loose lending standards, and outright fraud and deceit. This housing boom has been fueled by a mortgage finance bubble on an unprecedented scale that will have enormous economic implications as it unwinds. With Federal Reserve Chairman Ben Bernanke acknowledging the risk of an economic slowdown due to a deflating housing market, long-term interest rates have very little risk of moving much higher.

When you read my article in 2015 don’t be surprised if the value of Southern California homes has not changed from where they were at the peak in 2005. Meanwhile, enjoy your home; remember that its primary purpose is for shelter and satisfaction and not necessarily a source of wealth creation. On the other hand, it may be hard to find an apartment over the next decade as the allure of home ownership begins to fade and financing tightens up.
 
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Housing Drop May Spur Recession Unless Fed Cuts Rates

http://www.bloomberg.com/apps/news?pid=20601206&sid=aCinpzqNUgj4&refer=realestate

March 15 (Bloomberg) -- Tighter credit standards among mortgage lenders might lower U.S. home prices by 10 percent this year and push the economy into recession if the Federal Reserve doesn't respond by lowering interest rates, a Merrill Lynch & Co. analyst said in a report.

Declines in home prices would have an effect on everything from furniture and appliance sales to landscaping and the price of copper. That would drive unemployment above 5 percent by the end of the year and the probability of a recession to ``very close to 100 percent'' unless the Federal Reserve cut benchmark interest rates by a full percentage point, Rosenberg said.

In a March 1 report, CreditSights Inc. said rising mortgage defaults by subprime borrowers may add more than 533,000 homes to the market. That would increase inventory of new and existing of homes by about 13 percent. The National Association of Realtors and the U.S. Commerce Department said 4.09 million homes were for sale in January.
 
Pulte Says Housing Market Unlikely to Recover Quickly

http://www.bloomberg.com/apps/news?pid=20601206&sid=aLNjEPameC3E&refer=realestate

March 15 (Bloomberg) -- Pulte Homes Inc., the fourth- largest U.S. homebuilder, said the housing market is unlikely to have a quick recovery as buyers wait out the drop in prices.

``We're not projecting anything to bounce off the bottom at this point,'' Chief Financial Officer Roger Cregg said at a UBS conference in London. ``There's been a lot of buyers that have moved to the sidelines.''

Donald Tomnitz, the chief executive officer of D.R. Horton Inc., said at a Citigroup Inc. conference on March 7 that his company would miss its projections for closings this year, and that ``2007 is going to suck, all 12 months of the calendar year.'' The company is the second-largest home builder by revenue.

Increasing numbers of speculators expecting to make a quick profit by ``flipping'' houses helped fuel the housing boom. When demand started to ebb and house price appreciation slowed, many investors put their houses on the market, increasing inventory.
 
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