Housing Bubble Bursting?

[Randolph Kinney]

S&P reports housing-price contraction

http://www.marketwatch.com/news/story/home-prices-go-negative-first/story.aspx?guid=%7B30B54985%2D2189%2D4AE9%2DB8E5%2DECF89F6095F3%7D

Home prices go negative for first time in 11 years


Case-Shiller price index shows prices falling in 17 of 20 cities in January

WASHINGTON (MarketWatch) -- U.S. home prices continued to fall in January, with prices in 10 major cities now down 0.7% year-over-year, according to Standard & Poor's and MacroMarkets LLC, which released the January Case-Shiller price indexes on Tuesday.

The 10-city index is down 0.7% in the past year, the first year-over-year negative reading since 1996. The 20-city index is down 0.2% year-over-year. A year ago, prices were rising 15%.

Falling home prices will exacerbate credit problems, because many borrowers will not be able to refinance their loan or sell their house because they owe more than it's worth.

The Case-Shiller index is considered to be a superior gauge of home prices compared with the median sales-price data released by the Commerce Department or National Association of Realtors, because it tracks multiple sales on the same property and is therefore not influenced by a different mix of homes sold in a period.

 

[Randolph Kinney]

CDOs May Face `Severe' Ratings Cuts on Subprime, Moody's Says

http://www.bloomberg.com/apps/news?pid=20601009&sid=a1XLSF0lSLnQ&refer=bond

March 27 (Bloomberg) -- Some collateralized debt obligations may face ``severe'' ratings cuts because they hold subprime mortgage bonds, according to Moody's Investors Service.

Even top-rated bonds from CDOs with about average exposure to subprime mortgages securities may have their ratings cut if the underlying collateral is downgraded, according to Moody's.

Standard & Poor's said in a report yesterday that mezzanine structured-finance CDOs' average exposure to subprime mortgage bonds grew to 74 percent of assets for ones created in 2006 from 42 percent of assets for ones created in 2003.

 

[Randolph Kinney]

Subprime Crisis May Cost 450,000 Californians Their Homes

http://www.bloomberg.com/apps/news?pid=20601206&sid=aLR1V7FSR.UM&refer=realestate

INDYMAC and COUNTRYWIDE should be looking over their loans and wondering how they made such loans and will there be any consequences levied upon them because they did.

March 26 (Bloomberg) -- More than 450,000 California homeowners could lose their homes through foreclosure because they can't afford payments on risky subprime mortgages, a consumer advocate told state lawmakers in Sacramento.


California leads the nation with more than 833,000 outstanding subprime loans, 22 percent of the U.S. total, according to data from First American LoanPerformance. Subprime borrowers are making late mortgage payments at the highest rate in four years, the Mortgage Bankers Association said March 13.


``About 640,000 people are facing large payment re-sets,'' Leonard said in an interview. ``The structure of the industry is designed to force people to refinance when the market goes up and foreclose when the market drops.''

Many parts of California have concentrations of subprime loans higher than the national average of 14.7 percent, according to First American. In Merced in California's central valley, 21.6 percent of mortgages are subprime, followed by Bakersfield with 20.2 percent, Riverside-San Bernardino with 19.9 percent and Stockton-Lodi with 19.8 percent.

 

[Randolph Kinney]

Consumer spending is slowing - significantly

"the only time ever before that our worthy population had two years in a row of negative savings, as we did in '05 and '06, was in those heartbreak years, 1932 and 1933."

 

[Randolph Kinney]

Any Money Left For Increased Spending?

[FONT=arial,helvetica,verdana]Source: Moody’s Economy.com/BEA, Federal Reserve Board (FRB)


[/FONT]

[FONT=arial,helvetica,verdana]Source: Moody’s Economy.com/ Bureau of the Census, FRB[/FONT]

[FONT=arial,helvetica,verdana]Source: Moody’s Economy.com/BEA[/FONT]

 

[Brad Ellis]

Randolph,

Your quote, "INDYMAC and COUNTRYWIDE should be looking over their loans and wondering how they made such loans and will there be any consequences levied upon them because they did."

I'm surprised at you- really. Normally you back this up with data. From whence did this come? There is plenty of data out there including Indymac's own press release on sub-prime.

Here are the facts:

Indymac's percentage of sub-prime loans was 3% in 2006. Indymac is not now, nor has it ever been, what anyone in their right minds and who do not have particular fish to fry, a sub-prime lender. Our exposure is minimal and our reserves already have all of that accounted for.

Next, our product tightening began a year ago.

Brad

 

[Steve Owen]

Maybe the average American is slightly more savvy about their personal finances than the previously posted graphs and numbers would indicate.

http://www.inman.com/hstory.aspx?ID=62636

the single biggest issue cited by renters who were asked what, if anything, was holding them back from buying a home today. Nearly 40 percent of renters polled nationwide said they could not afford a home, with price being an even bigger issue in the Northeast (49 percent) and western states (48 percent).

Could it be that falling home prices in some areas will wind up being a boon to the economy?

 

[GENTEEL]

State regulator calling for ban on stated-income loans

Luv it!!!

Moh, I'd sent you an email a few days ago and was awaiting your reply. Wondering if you received it, igoned it or simply not interested? Thanks.

 

[moh malekpour]

Here are the facts:

Indymac's percentage of sub-prime loans was 3% in 2006. Indymac is not now, nor has it ever been, what anyone in their right minds and who do not have particular fish to fry, a sub-prime lender. Our exposure is minimal and our reserves already have all of that accounted for.

Next, our product tightening began a year ago.

Brad

Brad,
Since you are on it and you know more than any other appraiser about the mortgae business, I have one case from IndyMac for you and I don’t intend to generalize it or criticize your bank but I would like to find out what is going on.
I have to analyze and make a comment on a listing, which is located in the same subdivision that my subject is located in the city of Garden Grove, Orange County. I cannot ignore this listing because it is right next door and may have some adverse effects on the property values in the subdivision. This listing has been on the market since02/18/2007 for $569,000 and after 37 days, has no offer yet. When I looked at the listing history of this listing, I found out that it was sold at $635,000, which was $15,000 above its listing price on 07/25/2006 at 7 month prior to its recent listing date. I looked at its lender when it was sold at 7/25/2006 and I saw it was financed by IndyMac at 100% (80/20) . It seems that it is one of IndyMac At-A loans and is a pre-foreclosure sale after 7 moths of closing and the price may still need to come down further in order to be sold but even if it is sold at its current listing price that I doubt it will, Indymac is going to lose $100,000 on this transaction including the commission fee within 7 months. If Indymac is going to lose 18% or 35% on each Alt-A loan, it is going to be in a big trouble.
What I would like to know is that how your bank financed this property at that price 7 or 9 months ago. The general neighborhood price hasn’t come down yet but this property has already have 18% declines. Was it appraised at the sold price or it had an AVM on it? It seems that your bank financed an over priced property at 100% to a borrower with who knows what kind of credit. It is not my business to knwo what your bank is doing but this is a problem for me to make a comment on it. Could you please clear this one out for me.
I can give you the address of the property or the MLS# if you like to see it.

 

[Randolph Kinney]

Randolph,

Your quote, "INDYMAC and COUNTRYWIDE should be looking over their loans and wondering how they made such loans and will there be any consequences levied upon them because they did."

I'm surprised at you- really. Normally you back this up with data. From whence did this come? There is plenty of data out there including Indymac's own press release on sub-prime.

Here are the facts:

Indymac's percentage of sub-prime loans was 3% in 2006. Indymac is not now, nor has it ever been, what anyone in their right minds and who do not have particular fish to fry, a sub-prime lender. Our exposure is minimal and our reserves already have all of that accounted for.

Next, our product tightening began a year ago.

Brad

Brad, the data is indirect. I posted a chart showing the schedule of ARMs that are due to reset in the coming months awhile ago in this thread and I will post it again for you. See the chart below:

Subprime mortgages are not the only problem loans, especially here in California. Most of the home purchases in the housing boom in California were financed with ARMs. Therefore any bank that has a concentration of their loans in California is going to have more defaults in general and specifically subprime.

Also, the article from Bloomberg that your are responding to specifically identified California as having a major problem with subprime loans:

California leads the nation with more than 833,000 outstanding subprime loans, 22 percent of the U.S. total.

More than 450,000 California homeowners could lose their homes through foreclosure.

That Bloomberg article is saying more than 50% of the total subprime loans in California could end in foreclosure where the homeowner no longer owns their home. Couple this news item with total ARMs made in California that will reset as well, my assertion is that INDYMAC and COUNTRYWIDE are going to have severe problems going forward. The California Association of Realtors report that 30% of the home purchased last year were first time buyers and they used ARM financing.

I know Brad, wait and see.