Housing Bubble Bursting?

[moh malekpour]

Housing Crash Deepens in 2008 as U.S. Realtors See Record Drop

For U.S. homeowners, builders, bankers and realtors, the crash of 2007 will only get worse in 2008.

Everyone from mortgage-finance company Fannie Mae to Lehman Brothers Holdings Inc. expects declines next year. Existing home sales will drop 12 percent and existing home prices will fall 4.5 percent, Washington-based Fannie Mae says. Lehman analysts estimate almost 1 million mortgage loans will default in 2008, up from about 300,000 this year.

``We're only halfway through the housing shock,'' said Ethan Harris, chief U.S. economist at New York-based Lehman, the fourth-biggest U.S. securities firm by market value. ``It's just a matter of time before the weakness spreads to the rest of the economy.''

The housing market collapse has been anything but the ``soft landing'' that Federal Reserve Bank of San Francisco President Janet Yellen and David Lereah, former chief economist at the National Association of Realtors in Chicago, predicted for real estate at the start of 2007.

Median home prices declined in the U.S. this year, the first annual drop since the Great Depression, according to forecasts from the National Association of Realtors.

 

[Austin]

12% price drop would be good. I just walked in the door from a property inspection. I appraised the house door last year for the family of a retarted person that lived there for 60 years. He carried papers all his life and he used to be our paper boy when I lived in the neighborhood. I did the appraisal for free because I have known the man for as long as I can remember. About two months ago his sister listed the property with me because she wanted me to get something out of it. I listed it with a Realtor buddy. It is a small house about 65 years old and listed at $45,000.

The day we put the sign up on the property the house next door, a foreclosed property, went on the market. Modern brick rancher with full basement in remodeled condition. Far superior to the subject. Sold two years ago for $55,000. It is under contract of purchase at $30,000 and I got the appraisal. I think that is a 45% drop. That one is just a drop in the bucket. What is that going to do to my deal?

I have had more calls for appraisals this week than I have had in a long time from out of town lenders and clients. I don't even return the calls. I spent Wednesday catfishing and had a very good appraisal week. Plan to spend more time catfishing. I get my first Social Security check April 1 so you guys have fun.

PS: What is determining these prices? It is the local rental rate. Prices are dropping down to what is profitable at the rental rate. Purchaser is rental property owner.

Note! I just searched the sale history of the subject and it sold in 2000 for $68,000 and has sold 4 times since is order: $68,000, $65,000, $55,000, $48,000 as repo, present $30,000.

 

[Randolph Kinney]

7 chickens now home with more debt

Citigroup Rescues SIVs, Takes On $58 Billion of Debt; Moody's Cuts Ratings

Citigroup Inc. will take over seven troubled investment funds and assume $58 billion of debt to avoid forced asset sales that would further erode confidence in capital markets. Moody's Investors Service lowered the bank's credit ratings.

 

[Randolph Kinney]

I'd go with 4/1/09 for the bottom, in those places that will bottom... but, where's that 3rd Quarter recession so many were predicting?

http://www.nytimes.com/2007/12/14/business/14econ.html?th&emc=th

Welcome back Steve. Who was forecasting a recession specifically for Q3 2007?

Greenspan is now forecasting something about a recession: Greenspan Says Recession Risk `Clearly Rising,' Growth Near `Stall Speed'

The U.S. economic expansion, which began in 2001, is cooling after a third-quarter surge as the housing slump enters its third year and consumer spending slows. Martin Feldstein, head of the National Bureau of Economic Research, which is responsible for dating U.S. economic cycles, and former Treasury Secretary Lawrence Summers are among those also raising the prospect of a downturn.

The housing crisis eventually ``has to defuse itself,'' Greenspan said in the NPR interview, which will be broadcast today. CNBC reported yesterday that Greenspan raised his chances of a recession to 50 percent, citing an unidentified person who attended a lunch with Greenspan in Washington.

If you look at sales tax revenue, for example, California is collecting less sales tax this year than last. There are some that claim California is in a recession, now. California's unemployment rate has been rising; it was 4.6% September 2006 versus 5.6% September 2007.

The problem with looking for a recession, you can only say some period of time well after the fact.

 

[Randolph Kinney]

Retail sales signaling slowing economy

Online Sales Growth Slows to 19% in Worst U.S. Holiday Season Since 2002

Dec. 14 (Bloomberg) -- Holiday shopping on the Internet is slower than ever this year as cash-strapped U.S. consumers wait for better bargains on leather coats and high-definition televisions.

Sales from Nov. 1 through Dec. 11 increased 19 percent to $20.5 billion, Reston, Virginia-based ComScore Inc. said yesterday. Online sales in November and December may rise 20 percent, a record low for the industry, and slower than the 26 percent pace of a year earlier.

U.S. retailers may see the worst sales growth this holiday season since 2002 as shoppers grapple with $3-a-gallon gasoline and consumer prices that rose the most in more than two years in November. Target Corp., Kohl's Corp. and J.C. Penney Co. have responded with discounts of 50 percent or more to lure customers.

Retail sales increased 1.2 percent in November, the Commerce Department said in Washington yesterday. That followed a 0.2 percent increase in October, the agency said.

Sales fell 2.7 percent in the seven days through Dec. 8, following a 4.4 percent decline a week earlier, Chicago-based research firm ShopperTrak RCT Corp. said this week. About 12 percent fewer shoppers visited stores last week compared with the same period a year ago, ShopperTrak said.

Stores may further reduce prices, hurting profit margins, to lure bargain hunters. Target, the second-largest U.S. discount chain, and J.C. Penney, the nation's third-biggest department-store company, missed analysts' sales estimates for November. CompUSA, the 23-year-old computer retailer, said Dec. 7 it will shut down after the holidays.

Office Depot Inc., the world's second-largest office- supplies chain, forecast ``continued erosion'' of sales and earnings in the fourth quarter because of declining demand from corporate customers. Sales at Office Depot and Staples Inc. have slowed as small businesses and consumers buy fewer copiers and furniture during the worst housing slump in at least 16 years.

 

[Randolph Kinney]

Downey points the way down

Extrapolating Downey to WaMu, others

DSL was supposed to be the best underwriter. That’s why I owned it at one point. They were the lowest loan-to-value lender, which is interesting considering the data we are seeing now. The problem is that lenders did a horrible job tracking if there was a second lien behind them. Borrowers have so much leverage (first lien + second) and house prices are falling so fast, that they are just deciding to walk away from the home. This is something the Paulsen plan does not address. It’s not a question of being able to make the next payment…it’s looking at the value of your home and thinking ‘wow I am going to be under water for a long time…better to get out now before the next guy does’. Classic prisoner’s dilemma. The only way I think we can get out of this mess is by cramming down the mortgage. A very scary thing for the banks but the reality is there is too much leverage in US housing and prices are falling very quickly.

 

[Riick]

Just got an REO in from Fannie; spoke to the Broker.
She now has 70 REO and RELO property listings, including 12 REOs that showed up this week.
She noted that the REOs are priced from $200k to $650k, and are not moving
-- The Investors say the prices are too high, while the Banks ...think they have Gold.
Any bets on who's right ?? <smile>

" PS: What is determining these prices? It is the local rental rate.
" Prices are dropping down to what is profitable at the rental rate.
" Purchaser is rental property owner. "

I think Austin has a good handle on what's going to be driving prices;
if I can't rent it and make a profit, why do I want to own it?

Next question is: What rate of return are our investor friends looking for?
- Once again, as it was in the days of yore, tax advantages are just icing on the cake.

 

[Terrel L. Shields]

The housing market collapse has been anything but the ``soft landing'' that Federal Reserve Bank of San Francisco President Janet Yellen and David Lereah, former chief economist at the National Association of Realtors in Chicago, predicted for real estate at the start of 2007.

When has the NAR been right?

Locally, we have seen rent signs in front of duplexes and fourplexes that had waiting lists until last year. There are double the rentals available. There were a ton of 'investors" [dumb investors i might add] who bought new homes and held them six months thinking they'd flip them. They didn't want renters. So now they desperately want renters and cannot find them because their rents are overpriced and they paid too much to begin with.

 

[Austin]

http://www.nbc11.com/news/14858065/detail.html

http://www.nbc11.com/news/14858065/detail.html

Schwarzenegger Will 'Declare Fiscal Emergency' In Weeks


POSTED: 2:06 pm PST December 14, 2007
UPDATED: 2:47 pm PST December 14, 2007

Gov. Arnold Schwarzenegger said Friday he will declare a "fiscal emergency" in January to give him and the Legislature more power to deal with the state's growing deficit.
Schwarzenegger made the announcement Friday after meeting with lawmakers and interest groups this week to tell them California's budget deficit is worse -- far worse -- than economists predicted just a few weeks ago.
California is struggling with shrinking state tax revenue from the meltdown of the subprime housing market and the credit crunch on Wall Street.
State spending also has increased by more than 40 percent since Schwarzenegger took office after the 2003 recall of then-Gov. Gray Davis.

http://www.nbc11.com/news/14858065/detail.html

The other shoe is about to fall in coocooland. One domino at the time each one knocking down the one next to it. Where she stops nobody knows.

 

[Austin]

[FONT=verdana,arial,helvetica,sans-serif]
http://hosted.ap.org/dynamic/stories/H/HOUSING_SLUMP_CANADIANS?SITE=VADAR&SECTION=BUSINESS

Canadians Snapping Up American Homes
By CHRIS KAHN
AP Business Writer
[/FONT] CHANDLER, Ariz. (AP) -- Two hours after his flight landed in Phoenix, Calgary resident Doug Farley already was cruising the city's vast stuccoed suburbs in search of the one attraction Canadians can't seem to get enough of these days, cheap homes.
There are thousands of them here: almost new, unoccupied and dropping in value. The mortgage meltdown, combined with a surging Canadian currency, has Farley - and many of his countrymen - dreaming of winter golf on grass that's always green.

There is a spider that lives in Africa that has an unusual poison it uses to subdue its victim. The spider injects the poison into its victim, then it takes the victim by the leg and it willingly follows the spider into its den and patiently waits to be eaten. This poison completely suppresses the will of the victim to live and turns it into some kind of zombie.