Housing Bubble Bursting?

[murray stroupe]

RE;Read

http://www.cnbc.com/id/18276428/for/cnbc/

============================
Interesting read ;
and I still like my old 1995 GM Oldsmobile.

Mighty convenient blaming subprime market, and;
Toyota,Honda ,Nissan havent had much subprime related trouble for years,
but they have been gaining market share.GM has been losing it

 

[murray stroupe]

RE;Not all play blame game

ABC news just reported Toyota just surpassed GM as largest auto maker;
GM is still pretending its others fault, like blaming subprime lenders.

Having owned both,most Toyota trucks were better quality at better price.

 

[Greg Bell]

Read a report that 30% of ALL auto sales were from home refi's..If thats true
the auto industry is in for a big surprise.

 

[moh malekpour]

Subprime Bondholders May Lose $75 Billion in U.S. Housing Slump

It seems that chickens are coming home to roost everyday and lenders and investors are holding the bag for them. Good job lenders and excellent job mortgage bond investors for enabling lenders to generate so many foreclosures for you to enjoy. Due to your good services, California is going to have 24 times more foreclosures in 2008 and now Congressman Frank wants to punish you for over lending your share holders money to mortgage lenders.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aq3flDbwBCbk&refer=home

April 24 (Bloomberg) -- Bond investors who financed the U.S. housing boom are starting to pay the price for slumping home values and record delinquencies in subprime loans.

They will lose as much as $75 billion on securities made up of millions of mortgages to people with poor credit, says Pacific Investment Management Co., manager of the world's biggest bond fund. Some of the $450 billion in subprime mortgage-backed debt sold last year has lost 37 percent, according to Merrill Lynch & Co.

BlackRock Inc., AllianceBernstein Holding LP and Franklin Templeton Investments are vulnerable because investors have replaced banks and thrifts as the primary source of money for U.S. mortgages. More than $6 trillion of mortgage bonds are outstanding, dwarfing the amount of U.S. government debt by about 50 percent.

``Bond investors will be the ones who will take the losses,'' not the banks, said Scott Simon, who oversees $250 billion in asset-backed securities at Newport Beach, California- based Pimco, a unit of insurer Allianz SE in Munich.

Investors are losing money because of places like Riverside County, California, where foreclosures almost tripled last quarter to 6,103 from a year earlier, the biggest increase in the U.S., according to Foreclosures.com.

Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, used Riverside loans as collateral for $1.5 billion of bonds sold in January 2006. Some of the lowest-rated portions of the securities trade at 63 cents on the dollar, down from more than 100 cents in October, according to data compiled by Merrill Lynch.

`Feet to the Fire'

Bondholders are as much to blame as lenders, Federal Deposit Insurance Corp. Chairwoman Sheila Bair in Washington says.

``We should hold the servicers' and the investors' feet to the fire on this,'' Bair said in testimony to the House Financial Services Committee last week. ``We did not have good market discipline with investors buying all these mortgages.''

Barney Frank, a Democrat from Massachusetts and chairman of the House Financial Services Committee, and Spencer Bachus of Alabama, the top Republican on the committee, said earlier this month that they favor legislation making bond investors liable for loans that end up in default.

As many as 2.4 million Americans may lose their homes, the Center for Responsible Lending in Durham, North Carolina said in testimony to Congress last month. The National Association of Realtors in Washington this month said the median price for an existing home likely will fall 0.7 percent to $220,300 this year, the first annual drop since the real estate trade group began keeping records in 1968 and probably the first decline since the Great Depression.

Foreclosures in California will rise to 70,000 in 2008 from 3,000 in 2005, said Bruce Norris, a resident of Riverside, California, who buys houses in foreclosure.

``There is no way this is going to play out without pain,'' Norris said. ``It's already not OK. It just hasn't hit the courthouse steps.''

 

[moh malekpour]

S&P/Case-Shiller Home Price Index Fell 1% in Year

http://www.bloomberg.com/apps/news?pid=20601087&sid=aPjMfAk9kwAI&refer=home

Values fell 1 percent from February 2006 after dropping 0.1 percent in the year ended January, according to the S&P/Case- Shiller home-price index. January's decrease was the first since the group started keeping year-over-year records in 2001.

Slow demand has left a glut of homes for sale on the market that's forcing sellers to reduce prices, economists said. A rise in foreclosures may add to the number of unsold homes, suggesting prices will be slow to rebound and housing will continue to limit economic growth. Sales of existing homes probably fell last month, the National Association of Realtors is projected to report later today.

Of the 20 areas covered, 15 showed declining home prices compared with January, while three showed an increase and two were unchanged. The biggest month-over-month drop was a 1.2 percent decline in Detroit, while the biggest gain was a 0.5 percent increase in Seattle.

A rise in mortgage defaults and rising foreclosures among subprime borrowers, or those with poor or limited credit histories, will cause U.S. home prices to fall this year for the first time on record, the National Association of Realtors said earlier this month.

 

[Brad Ellis]

Moh,

Your quote,
"Brad,
Why don’t you give me a second solid source except your own opinion or Alt-A lenders opinion that indicates Alt-A loan is O.K? That Alt-A loan is not a liar loan, that Al-A loan is not any income statement or verification loan. That Alt-loan is closer to prime loan than to the sub-prime loan. Then I don’t put Alt-A loan next to sub prime loans any more. The psychology of repetition doesn’t work for me. I am not a parrot to repeat after you, I need sources and proof. Please post an objective source."

Moh, I guess you have not been following this string closely enough since I posted that very data here on this string. Hard facts produced by First American's Loan Performacne unit that is a section of their newly acquired Core Logic group WERE posted.

AND, the data was surprising enough that Roger PM'd me to question the actual data. He was as surprised as I was. Now I knew that Alt-A performed much better than sub-prime- in fact 17 times better in terms of actual credit losses.

Here it is again: Indymac's Alt-A loan performance over the 2002-2005 period resulted in credit losses (actual dollar losses after default, foreclosure and REO sale, complete with lost accruals) came to precisely 0.0881% (from memory). That is under one basis point. Less than one one-hundreth of 1 percent.

Indymac outperforms the market by a wide margin on these- our specialty. Industry losses on Alt-A are about double ours so we are still looking at less than 2 basis points for all issuers. This is about double that of prime full doc loans and about 1/17th of sub-prime loans.

The data is there- you'll just have to seek it out- presuming of course you want to know the truth. I'll see if I can find the post number.

Of course that will not help if you do not believe that First American's Loan Performance Group is not impartial- except that this is the data also being used on Wall St. (when they actually care to know).

Brad

 

[Brad Ellis]

Moh,

Here is is agan- and it was post 2902 and part was addressed to you:

OK- so we have all this press and all the hype, but we are appraisers and we are supposed to deal with facts and not suppositions, right? We shall see.

However, before I get into that, a couple of comments.

Scott- wrongo, bucko! If I hold the loan and season it I get more- not less when I sell it.

Moh,

The highlighted portion of the comments from Schumer (even though he may be misguided in other ways) are right on. Our CEO has already told us to get ready for loan suitability testing. It is in development already and will be implemented well before Congress or anyone else can get off their duffs. And as to some regulation of loan producers in non-bank firms- bravo. Long overdue. I support both of these.

Randolph,

Perhaps part of the problem is who is measuring what and how. NAR uses surveys. Schiller uses resale data only. OFHEO blends in other data but it is limited to conforming loan levels, etc.

Schiller says home prices declined for the first time year over year just last month!. NAR said they have been declining for some months. The median we have been using may well be the wrong measure- perhaps the mean is better- and that shows a year over year decline of 4/10 of 1% for February.

Now- hype vs. fact:

You all heard the horror stories of the delinquency rates on sub-prime and many of you have assumed or even stated that Alt-A is a problem (read carefully , Moh). Here are the actual facts from FALP- First American Loan Performance-

For the period 2002-2006 (yes, it includes all those risky, pesky, loans no one should have made last year too) the actual credit losses are as follows as a percentage of unpaid balance:

Alt-A:

All Alt-A Issuers 4.70 bps (or 0.470%)
#1 Alt-A Issuer 3.60 bps (or 0.360%)
Indymac (just for bragging!) .81 bps (or 0.0081%)

SUBPRIME:

All Subprime Issuers 55.9 bps (or .559%)
#1 Subprime Issuer 22.9 bps (or .229%)
Indymac (just for bragging) 16.4 bps (or .164%)

These are actual results- not by us- not by a biased firm acting on our behalf- just the facts. Pretty clear (I hope) from the above that 1) Alt-A is not subprime; subprime actual losses of UPB (unpaid balance) are 12 times higher +/- than are Alt-A losses and 2) even the industry as a whole the actual losses on subprime are barely above 1/2 of 1%.

Of course I am truly proud of our performance. But more important, I think this independent data shows clearly that all the talk of the subprime meltdown, its impact on the economy, etc. is pretty much overblown hype. And, assumptions that Alt-A has any sort of true relationship to subprime in performance would be an unsupported assumption.

Of course, perception can end up being reality but I mush prefer facts.

Alright, gentlemen, start your keyboards- I AM ready for the spin.

Brad


Now Moh,

My 1/17th is the Indy performance part- all Atl=A issuers are about 1/12th. Alt-A will double for this year (projected by FALP). So, we will be at just over 1.5 Bps vs. under 1 for the last 5 years.

And, as Roger pointed out to me I may have omitted a zero in a couple of percentages so pay more attention to the Bps losses.

I hope that this data is deemd by you to be both independent and accurate as FALP has no fish to fry here. And, if you will accept it, then I certainly hope you will stop this absurd comparison as well as the inflamatory terms such as liar loans. Do you really think we cannot figure out that a hairdresser who works at some else's shop probably does not make $10K per month? Who cares if they lie? Of course they do- and guess what? They lie on prime loans, too. If they did not, who would need underwriters?

Perhaps you will finally see that the risk of making an 80/20 loan to a borrower with a FICO of 480 is a remarkably different thing from making an 80% LTV loan to a borower who tells us he makes $100K per year as an appraiser and who has a FICO of 710.

Brad

 

[Randolph Kinney]

Home prices fall at fastest rate in 13 years

http://www.marketwatch.com/news/story/home-prices-fall-fastest-rate/story.aspx?guid=%7B9859C039%2DF005%2D42EB%2DAEAC%2DD8A4F0AB14E1%7D

WASHINGTON (MarketWatch) -- U.S. home prices continued to fall in February, with 17 of 20 major metro areas seeing lower prices in February compared with January, according to the S&P/Case-Shiller home price index released Tuesday.

Prices are down 1.5% in 10 major cities in the past year, the fastest decline in 13 years.

In 20 major cities, prices are down 1% in the past year.

A year ago, prices were rising 14%.

The report comes amid heightened concerns about the housing market.

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 10-city Case-Shiller index turned negative in mid-1990 and remained negative for much of the next three years. Prices did not return to the peak seen in October 1989 until January 1998.

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]

Home Resales in U.S. Fell Last Month, Economists Say in Survey

http://www.bloomberg.com/apps/news?pid=20601206&sid=aa9hlT8qg_jM&refer=realestate

April 24 (Bloomberg) -- Home resales in the U.S. probably fell in March to the lowest in three months, delaying housing's recovery from a slump that's shown some signs of reaching bottom.


The National Association of Realtors may report home resales fell 4.3 percent last month to a 6.40 million annual rate, according to the median forecast in a Bloomberg News survey of 65 economists.


Such a decline in sales, while partly weather related, would renew concern that the housing slump may linger, putting at risk the Federal Reserve's forecast for moderate economic growth. Subprime mortgage defaults are rising, and owners' reluctance to reduce prices may keep more unsold properties on the market.


``It'll probably be a long trough before we see housing picking up,'' said Lynn Reaser, chief economist at the Investment Strategies Group at Bank of America Corp. in Boston. ``Buyers are waiting on the sidelines to see if they can get lower prices. Once sellers become more realistic about the price, the inventory will be worked down.''


The Realtors group will release existing home sales figures at 10 a.m. in Washington. Estimates in the Bloomberg survey ranged from 6.2 million to 6.75 million. Home sales in February were at an annual rate of 6.69 million.


Monthly figures on home resales are compiled from contract closings and may reflect sales agreed upon weeks or months earlier. Unusually warm weather at the end of 2006 helped bring out more house hunters than usual, contributing to a jump in resales reported during the first two months of 2007. After a January gain, existing home sales rose in February by the most in three years.

 

[Randolph Kinney]

Randolph,

Perhaps part of the problem is who is measuring what and how. NAR uses surveys. Schiller uses resale data only. OFHEO blends in other data but it is limited to conforming loan levels, etc.

Schiller says home prices declined for the first time year over year just last month!. NAR said they have been declining for some months. The median we have been using may well be the wrong measure- perhaps the mean is better- and that shows a year over year decline of 4/10 of 1% for February.

Brad, I believe that if you study carefully the data that is being quoted by NAR, Case-Shiller and OFHEO, you will realize that they are in agreement; the housing market on a grand scale is declining. Your point may be that they do not all have the same magnitude and duration of decline. Nonetheless, you have to be desperate to claim that house prices are not declining.

For the latest graph of the Case-Shiller Index showing a complete history, check out this link: http://www.paperdinero.com/CSI.aspx

You can see a plot of year over year data versus month to month changes. If you look at month to month, it shows that prices have been declining for the last 12 months. You like the year over year number; it does not looks so bad.