Housing Bubble Bursting?

[murray stroupe]

Re ; Sunny CA home trends

[QUOTE-Jozeph P
& Couch Potato;1504978]A smart lender will do all they can to keep the guy in the house and minimize their loss on the loan. The loss in value alone is not enough to cause someone to walk away. They still have to live somewhere. The real reason to walk away is the person can live somewhere else much cheaper. If they can rent the house across the street for one-third the cost of their mortgage payment, there is a high probability they would move across the street. If the rent across the street is 90% of their mortgage payment, they will likely stay put in anticipation of rents rising over time. The market value of an owner occupied residence is really only important when one is trying to sell it. The value could drop to $1, but I would still make my mortgage payments on a $1,000,000 loan if those payments were cheaper than renting a similar place to live.[/QUOTE]
===============
Agree with that mostly,C P, better usually to make a mistake with a home , than a mistake renting.

Of course some areas in CA may be different,
due to some prices going parabolic. Lady on ABC news had some financial trouble in CA, she had to move out of her home, no equity left. Interesting, she blamed no one, had an attitude of responsibility.

But a company paid her several thousand dollars to leave quickly & orderly;
so it was a win/win compared to a rental.

 

[Randolph Kinney]

:icon_question: The fox has apparently closed the barn door--​

(( BTW: NINA = No Income No Asset ))​

http://www.blownmortgage.com/2007/12/13/indymac-makes-drastic-pricing-changes-to-alt-a-jumbos-and-option-arms/

IndyMac News Leak < ? > tightening up at last:​

"Major guideline changes just announced:​

* No Ratio and NINA has been eliminated on all products.​

* Stated income on jumbo is now limited to 75% max LTV.​

* Hybrid Option Arm is gone again.​

* The lot loan program has been discontinued.​

* Expanded approvals on Agency Conforming will be limited to 75% max LTV.​

No extensions will be allowed on any discontinued products. These loans must close by the original lock period.​

PLEASE read and note important changes:​

Secondary markets have tightened up again.​

Effective immediately:​

Pricing Update:​

The maximum price for Alt- A Jumbo, Alt-A Jumbo No MI and FlexPay Hybrid Option ARMs has been limited to 99.00 for all scenarios. That is correct, a one point borrower cost to fund these specific loan products"​

IndyMac closed today at $5.94 and the low was $5.84.

This stock keeps dropping like a lead sinker in water; where's the bottom?

 

[Randolph Kinney]

Any insurance left to pay off loan losses?

MBIA tumbles 26%

Bond insurer's shares take a big hit after it discloses a $8.84-billion exposure to some complex investment vehicles.

 

[Terrel L. Shields]

CDO squared vehicles take that slicing and dicing one step further by investing in parts of other CDOs.

Good Grief...if the underlying logic is wrong, the whole domino goes down at a multiple rate!

They pass this parsing off as some sort of risk management (spreading the risk) but in effect are concentrating the risk while giving a false sense of security.

This was like a case during the Tech Bubble when a broker got an elderly woman into mutual funds saying he was 'spreading her risk'. In reality, the funds he picked were all top laden with tech....Growth, Tech, Software funds...she lost 60% of her portfolio in under 6 months...

 

[Randolph Kinney]

More write downs for Merrill - will insurance be there to save them?

The Ratings Game: Analyst says Merrill 4Q write-downs could top $8 billion

SAN FRANCISCO (MarketWatch) -- Merrill Lynch & Co. could face another $8.6 billion in mortgage-related write-downs in the fourth quarter, according to new research by Fox-Pitt Cochran Caronia analyst David Trone.

That would come on the heels of the previous quarter's $7.9 billion hit, the analyst said in a Thursday report.

Merrill Lynch had $15.8 billion in CDOs and $5.7 billion in subprime mortgage-related exposure at the end of the third quarter, according to Trone.

 

[airphoto]

Appears to me that the financial crowd is taking advantage of the end of the tax year .. write down enough loans (probably false, btw) so's to not pay any income taxes this year .. tax payments would come out of their capital, otherwise, and they don't wanna let loose of any dollars that they can avoid losing ..

 

[Austin]

I was watching Fox Business with Neil Cavuto last night and he was talking with a lawyer about up coming legal suits. This is where the real danger lays. The banks are suing each other in the first wave of attacks but the real crisis is the suits by shareholders against the banks for fraud. This fraud is multi layered and well documented, That is what can derail the banking and financial industry and the heart of the crisis. Bush's 5 year freeze plan was designed to forestall the law suits from the foreign investors but they are in the works as we speak.

It is hard to live through this crisis because it unfolds in slow motion. One day in the near future we can look back on it with 20-20 vision and sum it up in a nut shell. If you want an education in how money policy works read about the bubble and crash of 1837. Same thing then as now. Easy money to your political cronies and banking buddies resulting in a bubble with 15 million in gold inflated to 200 million in currency.

Last night I also watched MSNBC's Asia market squawk box program. There is a presidential election going on in Thailand. Guess who is running as the leading candidate and what the two issues in the campaign are? A 40 year old X-financial market trader and the main issue is money and credit policy with some interest in human rights. The reason I point that is that is always the issue but it is never addressed because people don't understand it and it puts them to sleep. To keep them focused the politicos must focus their attention on entitlements, abortion, first black of woman president, and class envy.

 

[Lloyd Bonafide]

The WSJ reports that homeowners whose mortgages are bigger than their houses are worth are starting to walk away from their houses, even if they could afford the mortgage payments. ...



http://economistsview.typepad.com/economistsview/2007/12/walking-away-fr.html

See these comments from Bank of America CEO Kenneth Lewis via the WSJ: Now, Even Borrowers With Good Credit Pose Risks

"There's been a change in social attitudes toward default," Mr. Lewis says. Bankers typically have believed that cash-strapped borrowers would fall behind on their credit cards, car payments and other debts -- but would regard mortgage defaults as calamities to be avoided at all costs. That isn't always so anymore, he says.

"We're seeing people who are current on their credit cards but are defaulting on their mortgages," Mr. Lewis says. "I'm astonished that people would walk away from their homes." The clear implication: At least a few cash-strapped borrowers now believe bailing out on a house is one of the easier ways to get their finances back under control.

 

[Workbox]

We'll, if they are seeing these Chief CEO's walking away with $$$$$ for screwing things up and regulators/fed now trying to do the right thing. That pride of home ownership is just not the same.

 

[Randolph Kinney]

Housing bubble burst characterized as a crash

US “Housing Bust” Effects To Linger Until 2009

US housing prices will have declined by an average of 13% before the current “housing bust” ends, according to a new study from Moody’s Economy.com. And housing will subtract an estimated over one percentage point from econmic growth this year and a percentage point and a half in 2008, the report predicts.

The current housing recession is expected to run through early 2009 and will ultimately be severe enough to be characterized as a housing crash.

From peak to trough, sales are expected to fall by over 40%, starts by 55%, and house prices by 13%.

Assuming that the economy is able to avoid a recession, interest rates remain low, and mortgage loan modification efforts quickly increase, home sales are expected to hit bottom in early 2008, housing starts by the fall of 2008, and house prices in early 2009.

This is the rosy scenario for the housing market as a whole: No recession!

I love this caveat:

The already record number of vacant homes for sale is sure to increase further in coming quarters, the report says. “The housing market will only find a bottom when significant progress is made in working off this inventory.”