Housing Bubble Bursting?

[Randolph Kinney]

Here comes NAR - chicken little housing disaster

`Mortgage Disruptions' Will Deepen U.S. Housing Slump, Realtors Group Says

Aug. 8 (Bloomberg) -- U.S. home sales will tumble to a five- year low this year as a widening credit crunch reduces the number of buyers who can get mortgages, the National Association of Realtors said today.

Sales of previously owned homes probably will fall 6.8 percent to 6.04 million in 2007, the lowest since 5.63 million in 2002, the real estate trade group said today in its monthly forecast, lowering its outlook for the eighth time this year. New- home sales, which account for about 15 percent of the housing market, probably will fall 19 percent to 852,000, a 10-year low, the group said.

Demand for some types of mortgages from the Wall Street firms that package them into securities has dried up as rising defaults and delinquencies in the subprime market spread to borrowers with better credit ratings. The cash crunch has crippled lenders such as American Home Mortgage Investment Corp., which filed for bankruptcy protection this week.

 

[moh malekpour]

HERE COMES THE KNOCKOUT PUNCH! RIGHT ON QUE

I don’t think this threat surprised anyone. Everyone knew that the China and US trade relationship was a marriage of convenience. You, the US, buy my goods and I, the China, buy your treasury Bills and everyone benefit from it. It seemed just perfect marriage at the beginning but started creating problem in most area of US when manufacturing jobs disappeared and people got worried and put pressure on the congress to do something about the unfair trade with China. No manufacturing industry is functioning in the South now because they cannot compete with Chinese prices in the market. Not only, there is no US manufacturing export anymore because China has captured all global markets with cheap price goods but there is no market inside the US market for US made goods because people can buy Chinese goods with cheaper price.
It has been more than a year now that congress gave China a warning that either raises their currency, which would cost them more to export their goods, or their exports to US will be taxed. China hasn’t done anything because they thought they got the upper hand. Chinese are good poker players and they are holding the ACE now and are not going to play it out unless the US shows its hand first. It is an election year in the US and congress and Presidential candidates are under pressure from people in the South and labor movement to do something about the Chinese unfair trade. A bill to sanction Chinese trade is in the congress and has enough vote from both parties to pass the president Veto pen and if that bill passed, the Chinese are going to retaliate by selling US treasury bonds back to the US. If they do, the dollar is going to collapse and interest rate is going to go the roof.
Paulson is in China right now to assure them that they are not going to be sanctioned and the Bill is not going to pass but what these candidates are going to tell to those people in the south who have lost their jobs and business to China?

 

[Randolph Kinney]

Latest re-set statistics

According to MarketWatch, more than $50 billion in adjustable-rate mortgages are due for a re-set in October, and the re-set level will remain above $30 billion per month through September of 2008.

Mortgage products that are not conforming will be tough to get so on those loans that are greater than $417,000 (jumbo), expect to pay 1% more in interest rates than a conforming loan. If the loan is not fully documented, no loan will be available to roll over to.

This is going to be great expectations for NAR and other cheer leading biased groups when these re-sets happen. If they think the market for real estate stinks now ... just wait until fourth quarter finishes. :new_smile-l:

 

[MARK JOLLIFF]

According to MarketWatch, more than $50 billion in adjustable-rate mortgages are due for a re-set in October, and the re-set level will remain above $30 billion per month through September of 2008.

Mortgage products that are not conforming will be tough to get so on those loans that are greater than $417,000 (jumbo), expect to pay 1% more in interest rates than a conforming loan. If the loan is not fully documented, no loan will be available to roll over to.

This is going to be great expectations for NAR and other cheer leading biased groups when these re-sets happen. If they think the market for real estate stinks now ... just wait until fourth quarter finishes. :new_smile-l:

I wonder what percentage of homeowners in California that bought in the last 3 or 4 years have jumbo loans? I bet it's more than %60. In September when everyone has to qualify at the cap rate on these loans and coupled with the fact that hardly anyone of these people can qualify at full doc it's going to be very ugly here in California. I hope I'm not panicking but with todays run up in the stock market I'm very tempted to go all cash and maybe pick something up for my son in the next year or so as I see home prices dropping HUGE here in the Bay Area. What do you think?

 

[Randolph Kinney]

I wonder what percentage of homeowners in California that bought in the last 3 or 4 years have jumbo loans? I bet it's more than %60. In September when everyone has to qualify at the cap rate on these loans and coupled with the fact that hardly anyone of these people can qualify at full doc it's going to be very ugly here in California. I hope I'm not panicking but with todays run up in the stock market I'm very tempted to go all cash and maybe pick something up for my son in the next year or so as I see home prices dropping HUGE here in the Bay Area. What do you think?

Mark,

The San Diego market has already collapsed and still heading down. It is now below 2005 price levels. Take a look at this site for the Case/Shiller index month over month for the San Diego MSA: http://www.paperdinero.com/CSI.aspx?id=SDXR&start=2000&stop=2007&yoy=0

You can overlay SF to see how much better you have it.

Buyers with money (rich folks) are king. The upper end of the market is still selling although at a slight discount. This skews the median statistics so that it appears prices are rising. Yeah right.

I see the dollar continuing to fall. I see a floor for preferred coastal locations. Foreign buyers are coming in packed with cash. Inland homes will continue to slide in value. Foreclosures are still rising and will increase come this fall.

At some point, the national economy is going to feel this credit crunch and housing recession. Watch retail sales for a stall or decline. When that happens, the stock market will fall and continue to fall. The FED will be too late to react and it can't cut fast enough without destroying the greenback exchange rates. Europe is raising interest rates in response to inflation and the dollar has continued to fall against the Euro.

I have liquidated half of my holdings to cash. The rest is invested overseas.

 

[Randolph Kinney]

Bush - tough luck, no help for mortgage market

Bush: Congress shouldn't overreact to mortgage mkt. woes

WASHINGTON (MarketWatch) -- President Bush said that Congress shouldn't overreact to the turmoil in the mortgage sector. "I think the government tends to overreact at times with laws that are counter-productive," Bush said Wednesday in a television interview on Fox News. "What we ought to be doing is encouraging markets and taking care of those who can't help themselves. Markets tends to adjust and if government throws up special laws that will prevent it from adjusting in an orderly way, it will be counter-productive," he said. Bush said he opposed a proposal by Sen. Hillary Clinton of New York to create a $1 billion fund to help those at risk of foreclosure.

 

[Randolph Kinney]

More funds in trouble over subprime

Funds suspended

LONDON (MarketWatch) -- French bank BNP Paribas said Thursday that it will temporarily stop valuing three of its funds and won't allow customers to withdraw their investments after U.S. subprime-mortgage woes led to the "complete evaporation of liquidity."

"The complete evaporation of liquidity in certain market segments of the U.S. securitization market has made it impossible to value certain assets fairly regardless of their quality or credit rating," the bank added in a brief statement.

Without an up-to-date valuation, it is not possible to let customers withdraw their investments or make further subscriptions in the fund.

BNP said it will resume valuations as soon as liquidity returns to the market and it is able to reliably value the funds again.

The three funds affected are Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia.

All three funds invest in U.S. asset-backed securities, which are pools of debt that include mortgages.

BNP's decision follows a similar move on Friday by German fund manager Union Investment, which suspended redemptions in one of its funds that has exposure to the U.S. subprime market through ABS investments.

Union Investment argued that it didn't want to be forced to sell assets in a market that would command steep discounts.

 

[Greg Bell]

Good time for the stock market to go up.The big boys can't loose money fast enough.The talking heads keep telling the CNBC wonks that all is O.K. and it's a good time to buy , say , BNP Paribas.What a steal??

 

[Greg Bell]

Whew..If you buy stocks today you are a very brave soul.More to come to match 1929..

 

[Randolph Kinney]

Central Bank Intervenes - Liquidity Crisis In Europe

ECB Lends $130.2 Billion to Banks in Unprecedented Bid to Ease Credit Rout

Aug. 9 (Bloomberg) -- The European Central Bank, in an unprecedented response to a sudden demand for cash from banks roiled by the subprime mortgage collapse in the U.S., loaned 94.8 billion euros ($130.2 billion) to assuage a credit crunch.

The overnight rates banks charge each other to lend in dollars jumped to the highest in six years. The so-called dollar London interbank offered rate rose to 5.86 percent today from 5.35 percent and in euros gained to 4.31 percent from 4.11 percent.

The ECB's response to the fastest increase in the dollar bank rate since June 2004 signals that lenders are reducing the supply of money as losses triggered by the U.S. mortgage slump spread worldwide. BNP Paribas SA halted withdrawals from three investment funds today and Dutch investment bank NIBC Holding NV said it had lost at least 137 million euros on subprime investments, reversing evidence yesterday that credit markets were stabilizing.

``Liquidity in the market has completely dried up as investors aren't recycling their money back because of subprime concerns,'' said Saher Bin Jung, a trader on the commercial paper desk at Commerzbank AG. ``Levels have shot up dramatically since yesterday as issuers are trying to entice investors back.''