Housing Bubble Bursting?

[Randolph Kinney]

Home Prices Decline in Wealthy New York City Suburbs Once Immune to Slump

http://www.bloomberg.com/apps/news?pid=20601203&sid=aHBopkXhEA24&refer=insurance

May 9 (Bloomberg) -- The U.S. housing slump has hit New York City's richest suburbs.


The average price in Westport, Connecticut, home of chief executive officers Herbert Allison of TIAA-CREF and Jeffrey Kindler of Pfizer Inc., and actor Paul Newman, fell 8.2 percent to $1.56 million in the first four months of 2007 from the same period last year, according to multiple listing service data. In Chappaqua, New York, where Bill and Hillary Clinton live, properties sit on the market an average of seven months before they sell, up from five months a year ago.


Wealth and excellent credit have until now spared bedroom communities in New Jersey, Connecticut and New York's Westchester County from declines in home prices. Now the tightening of credit in response to rising subprime defaults has disrupted the real estate food chain, bringing the national housing slump to Manhattan's doorstep. Prices fell as much as 18.8 percent this year in 15 of the 24 areas in which data was collected.


``People who may have bought their first home may not be able to do so now, and that stops some of the movement,'' said Doug Werner, a broker at William Pitt Sotheby's International Real Estate in Darien, Connecticut. ``Whales eat plankton. If the plankton disappears, what will happen to the whales?''


Data on home prices and time on the market for Jan. 1 to April 30 were obtained from listing services in New York, New Jersey and Connecticut. Realtors report sales to the listing services and the listing services then share those numbers with the Washington-based National Association of Realtors. The realtors group will release its data for April on May 25.

 

[Randolph Kinney]

Toll says stricter loans disrupting housing's 'food chain'

http://www.marketwatch.com/News/Story/Story.aspx?guid={D1A91D47-D203-4137-B90C-006539F240F8}&siteid=nbk

BOSTON (MarketWatch) -- Toll Brothers Inc. said Wednesday that it doesn't expect to meet its full-year profit outlook and that more stringent lending standards as a result of problems in subprime mortgages are reverberating in its own luxury-home market.

"Twenty months into this housing downturn, we continue to face difficult conditions in most of our markets," said Robert Toll, the company's chief executive, in a statement.

Despite the small percentage of Toll's customers who use subprime loans, "the impact of stricter lending standards arising from problems in the subprime market is negatively affecting affordability at lower price points," the CEO said.


"This, in turn, can impact the entire 'housing food chain,' including some of our potential customers' ability to sell their existing homes," he added.
These tougher lending standards and fewer new subprime mortgages are likely to further erode housing markets this year and next, the National Association of Realtors says.

The biggest challenges facing the industry right now include reducing the inventory of unsold homes on the market and restoring buyer confidence, he said.

"It all adds up to a recipe for keeping pressure on home prices which should begin to accelerate in their declines in the next few quarters," the analyst said.

 

[Austin]

Just came out of a two hour meeting with our retirement investment account manager and it was very interesting.
First: One of the things I have heard on the internet is that advisors like Buffet are advising Americans to put their assets into international investments. He stated that most investment managers in his company are advising putting 50% of the money in these foreign assets but he is a little more conservative at 25%. That was a real shocker to me. We are already there and making huge returns. He is reinvesting more of our money in that direction.
Second: Our biggest money maker is RET’s where we are earning about 14% return. This is big time commercial stuff like hotels, resorts, etc. They now have some RET’s in which you are guaranteed a rate of return like for example 6% of the value as of the date you bought in. Even if the value of the RET drops to zero you still get the return for the rest of your life based on the 6% value as of date of purchase.
Third: I asked about the subprime housing bubble situation and his reply was that it was a minor problem and of no concern to our account. He never touches any of that kind of stuff.
Forth: Take this job and shove it! I ain’t taking this crap no mo! :new_321:

 

[Randolph Kinney]

Just came out of a two hour meeting with our retirement investment account manager and it was very interesting.
First: One of the things I have heard on the internet is that advisors like Buffet are advising Americans to put their assets into international investments. He stated that most investment managers in his company are advising putting 50% of the money in these foreign assets but he is a little more conservative at 25%. That was a real shocker to me. We are already there and making huge returns. He is reinvesting more of our money in that direction.
Second: Our biggest money maker is RET’s where we are earning about 14% return. This is big time commercial stuff like hotels, resorts, etc. They now have some RET’s in which you are guaranteed a rate of return like for example 6% of the value as of the date you bought in. Even if the value of the RET drops to zero you still get the return for the rest of your life based on the 6% value as of date of purchase.
Third: I asked about the subprime housing bubble situation and his reply was that it was a minor problem and of no concern to our account. He never touches any of that kind of stuff.
Forth: Take this job and shove! I ain’t taking this crap no mo! :new_321:

Any one who has looked at a chart of dollar exchange value knows that foreign markets would be a hedge and it is those foreign markets that are selling to the U.S. consumer.

Inflation is a persistent problem now in the U.S. Prices are rising on other things like services and labor.

The subprime bubble is minor, except if you are tied to it in some way. Lots of subprime crap was salted into hybrid securities and sold to pension funds, and hedge funds. $600 billion subprime loans were made in 2006. $600 billion is now in someone's 401(k), pension, or hedge fund.

 

[Randolph Kinney]

Bank of America's Lewis Calls for Lending `Sanity'

http://www.bloomberg.com/apps/news?pid=20601087&sid=aT7p.papJIlA&refer=worldwide

May 9 (Bloomberg) -- Bank of America Corp. Chief Executive Officer Ken Lewis said a so-called credit bubble is about to break after six years of historically low interest rates and relaxed lending criteria.


``We are close to a time when we'll look back and say we did some stupid things,'' Lewis said, speaking at a lunch at the Swiss-American Chamber of Commerce in Zurich. ``We need a little more sanity in a period in which everyone feels invincible and thinks this is different.''

Demand for so-called junk bonds is close to its highest in a decade, while risk premiums are near their lowest level in a decade. Investors demand an extra 2.69 percentage points to own high-yield, high-risk securities instead of Treasuries, about 2 percentage points less than the spread's 10-year median, according to Merrill Lynch & Co. index data.


The spread on Feb. 22 came within 5 basis points of the all-time low of 2.44 percentage points, set on Oct. 17, 1997.


Junk bonds are rated below Baa3 by Moody's Investors Service and BBB- by Standard & Poor's. Bank of America has been the No. 2 arranger of high-yield loans every year since 2000, according to data compiled by Bloomberg.


Lending rates for companies rated four or five levels below investment grade are only 28 basis points higher than their all- time low in February of 2.12 percentage points over the London interbank offered rate.

Lewis, 60, said ``We need a deal to go bad, as long as we're not in it.''

 

[Randolph Kinney]

House of denial

http://www.marketwatch.com/news/story/commentary-confronting-housing-market-myths/story.aspx?guid=%7BF7C7F56C%2DEEB1%2D460E%2D9F42%2DD91AE0D47077%7D

CHARLESTON, S.C. (DividendGambit) -- A crumbling housing market and an overextended consumer could result in an ugly ending for this economic party.


Since the market bubble burst in early 2000, everyone has credited housing with not only minimizing the negative impact of the losses, but subsequently generating a tremendous recovery in both equity prices and individual wealth -- and rightly so. Yet now, when all signs point to a rapid end to the glory days of real estate, we appear dead set on believing that the housing sector alone is not powerful enough to throw a wrench into the economic machine. Again, that's a rather unbalanced view.


The idea that a widespread downturn in home prices will not have a major impact on the economy is simply a pipedream. Despite this, true believers in the housing market still abound. Why? Here are a few reasons offered by the acolytes in support of the idea that housing weakness won't lead to large-scale suffering:

'People will always need a place to live, so home prices are protected.'

'The economy will weather a slowdown in housing because of strength in job and income growth.'

'The recent trouble among subprime lenders is contained.'

 

[michaelmoran]

National Association of Realtors view from Bloomberg

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

The National Association of Realtors know how to paint a rosey picture. They are commenting on price averages, not sales volumes and it is pure speculation in my opinion.

 

[Randolph Kinney]

New Orleans, Devastated by Katrina, Hit Again by Subprime Mortgage Crisis

http://www.bloomberg.com/apps/news?pid=20601206&sid=acZ0_ZaHg0Ss&refer=realestate

May 10 (Bloomberg) -- Retired New Orleans cook Hattie Warren survived Hurricane Katrina. Now, at 82, she is struggling with the $100,000 subprime mortgage she took out to pay bills and ``have a few dollars'' five months before Lake Pontchartrain flooded the city.


The payment on her adjustable-rate loan, about $860 a month, eats up three-quarters of her income from Social Security and the rent daughter Gloria pays to share the two-family Creole cottage.


``I'm going to have a little problem,'' she says, sitting in the pink-paneled living room of her home in the city's Treme section, one of the first places in the U.S. blacks were allowed to own property.


To trace the turmoil in the subprime mortgage market, come to New Orleans, where borrowers who can't repay are fueling a surge in delinquencies. With acres of gutted houses and weed- choked yards, Louisiana's largest city is being slammed again as lenders exit the business, demand late payments and impose tougher standards on new loans.

``We are urging lenders not to demand immediate payment,'' Louisiana Governor Kathleen Blanco says. ``It's in all of our best interest that they help our people.''


``If your income is going to be steady and your mortgage payments are going to reset, you are essentially forcing somebody into a situation where they are going to be either delinquent or forced into foreclosure,'' he says.

 

[Randolph Kinney]

'Subprime tsunami' hits home

http://www.lvrj.com/business/7436711.html

[FONT=verdana,arial]Realtors need to separate fact from fiction to protect clients from the "subprime tsunami" and false pretenses of getting rich quickly in real estate, a panel of home loan experts said Wednesday.[/FONT]
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[FONT=verdana,arial]"We're never going to see 54 percent appreciation again, I have a hunch," Shane Watson, managing partner of Direct Access Lending, said during a three-hour symposium for local Realtors. "We believe the market is very strong here and this is just the calm before the storm."[/FONT]
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[FONT=verdana,arial]Watson said that Nevada leading the nation in foreclosure filings and Clark County being second to Los Angeles County is actually good for the industry. It will drive away investors who entered the market with marginal credit and perhaps even misrepresented their income on loan applications, he said.[/FONT]
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[FONT=verdana,arial]"What's the old saying? Buyers are liars," he said.[/FONT]


[FONT=verdana,arial]"You can't slash the price below what you owe on the house," he said. "I seriously think most people in Vegas pulled out all their equity and blew it on who-knows-what. Those 10,000 or 11,000 vacant properties on the (Multiple Listing Service) represent anxious sellers that are slowly bleeding to death and would love to sell at just about any price."[/FONT]
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[FONT=verdana,arial]With no equity, home owners list their house for what they owe plus commissions and closing costs and it sits on the market, Pugh said. Eventually it goes back to the bank.[/FONT]


[FONT=verdana,arial]Rebecca Froass, senior director for Freddie Mac in Washington, D.C., said subprime loan origination grew from $126 billion in 2000 to more than $590 billion in 2006, from 11 percent of all home loans to 24 percent. Nevada's share grew by 133 percent, she said.[/FONT]

 

[Randolph Kinney]

Home sales could take a bigger hit

http://www.usatoday.com/money/economy/housing/2007-05-08-nar-hosuing-forecast_N.htm?csp=34

WASHINGTON — Home sales and prices will fall more sharply than expected this year, due to troubles in the subprime mortgage market and stricter lending standards, a top real estate group said Tuesday.


The National Association of Realtors' outlook came as a House subcommittee debated possible legislation to overhaul the mortgage market.


Lawmakers are looking at ways to help homeowners with subprime mortgages, which are higher-cost loans to consumers with impaired credit.
More broadly, they want to crack down on unfair or unsafe lending. Over 14% of subprime adjustable-rate loans are now delinquent.


Lenders, consumer groups and Wall Street representatives who testified before the House Financial Services subcommittee Tuesday generally endorsed tougher laws against predatory or unsound lending, along with supervision of mortgage brokers, who are now lightly regulated by states.


But they were split on whether to hold Wall Street firms more accountable for the quality of the mortgages they buy and repackage into bonds.

Rep. Spencer Bachus, R-Ala., said expanding liability for bad loans could scare firms away from the subprime market and create a credit crunch harming low- and middle-income Americans.


Separately, the National Association of Realtors predicted existing home sales of 6.29 million this year, down from 6.48 million in 2006. New-home sales could fall from 1.05 million in 2006 to 864,000 in 2007 and then rise to 936,000 next year. The national median existing-home price could slip 1% to $219,800 this year, then inch up 1.4% in 2008. The median price of a new home should remain flat this year at $246,400. If prices do fall, it would be the first annual drop since the group began keeping records in 1968.


So far, lawmakers have stressed voluntary efforts by lenders to help consumers in danger of losing their homes. But Rep. Carolyn Maloney, D-N.Y., said Tuesday the committee "is by no means waiting for the private sector to do what it thinks is right."


Larry Litton, CEO of Litton Loan Servicing, opposed a broad moratorium on foreclosures, saying it could provide an incentive for people to default without penalty. He did suggest firms give people an extra two weeks to restructure or refinance.