Housing Bubble Bursting?

[jfalco1]

We never had a bubble to bust in Michigan.

 

[Randolph Kinney]

We never had a bubble to bust in Michigan.

The real estate values are supported by the population, demand, and wages.

You can look at this way; wages were high, population was stable and supported whatever real estate value the market allowed. Population and wages fell, guess what?

 

[Randolph Kinney]

Home equity loans are causing major problems at banks

Home equity emerges as real trouble spot for banks

NEW YORK (Marketwatch) -- Just as banks are struggling to get out from under the subprime mortgage mess, they're facing a new burden: growing delinquencies for home equity loans.

Three of the U.S.'s largest banks that reported earnings this week, Citigroup, Wells Fargo and J.P. Morgan, said that mounting pressure on home equity loans were a major -- and growing -- problem in the fourth quarter.

J.P Morgan took a 34% cut in profit over the fourth quarter, a change it attributed at least in part to its lagging home equity products. The bank said it expects home equity chargeoffs to rise to 1.5% of total loans this quarter.

Likewise, Wells Fargo announced it would reserve $1.4 billion for losses in its home equity lending unit, more than half of the $2.6 billion it set aside for all loan losses. The company more than tripled the amount it would earmark for losses in the fourth quarter.

Well Fargo will also divest itself of more than $12 billion of its riskiest home equity loans, instantly cutting its $72 billion portfolio by 16%.

Wells said it was especially hard hit by rising default rates in states experiencing rapid home price depreciation such as California and Ohio.

Citigroup, too, pointed to faltering consumer loans as a major factor in the bank's decision to reserve $5.1 billion to increasing loan losses and delinquencies.

Banks are right to be worried. Ratings agency Moody's and consumer credit reporting agency Equifax estimated last week that nearly 4.65% of fixed-rate home-equity loans were delinquent in the fourth quarter. The same data found that across the board, delinquencies on home-equity lines of credit have jumped to 2.01% from 1.07% a year earlier.

But as housing prices have rapidly depreciated and the housing market has tanked, home equity loans are becoming increasingly delinquent. Borrowers who are already stressed by a slowing economy, rising gas prices and creeping unemployment are finding payments on home equity loans to be a lower priority.

More bad paper, more write offs. Just wait until the recession hits with layoffs. This really looks grim.

 

[Terrel L. Shields]

Just wait until the recession hits with layoffs.

I've heard that J. B. Hunt locally is laying off. Wal-Mart may trim jobs in HDQ. RV sales are in the pits. A fellow I knew went to a big RV show with the boss with 26 RV's in Branson, MO. Not one sale. The boss came back and laid off about one-half the staff.
We are seeing lawn care people being laid off.
We are seeing flight of Hispanic bricklayers, carpenters, roofers, electricians, and plumbers. Springdale lost 700 students and are losing students during the year, mostly hispanics who are moving out.
Realtor dues are due Jan. 31. Nobody is blinking and the local board is already sending out reminders and also begging for money to jazz up sales.
Ratlieff Realty - in bankruptcy court
3 of 5 newest banks in NWA reported losses
Local oil change place laid off employees last year and was run by man and wife. Did not reopen Jan. 1.
Equipment (backhoes, trucks, tractors, forklifts) sitting on every corner for sale.
Benton County unemployment climbed to 3.9%...highest in nearly 30 years. We were about 2.6% last year.

If the Fed and the government were truthful about the situation it would cause a panic and maybe a run on the banks.

 

[Terrel L. Shields]

here is another thought from "The Black Swan"

Anyone reading the Black Swan has my respect. It give pause to the very notion that our appraisals have any meaning. We are supposedly predicting price, but do so in a time frame that is not helpful. Like the turkey who eats everyday and doesn't expect what happens to him mid-November.

After all, he could read it two ways (as Taleb pointed out). One, I got up today, therefore I am immortal and will get up every day. Or, I got up today and tomorrow will be different...maybe not in a good way....Two opposite outcomes with the same set of information.

We never had a bubble to bust in Michigan.

You went from bad to worse. I know it has to hurt.

 

[MARK JOLLIFF]

In the last week I spoke to a buddy who is my age(47) and has been a self employed plumber his whole life. he hasn't worked in 6 weeks and says it's the slowest he's ever seen. My friend who helped me become an appraiser was making 500k a year owning her own mortgage company. She has one employee left out of 8 and is doing BPO's at 50 a pop just to eat. Last night another friend came over and said she can't find work and has bills stacked high and just spent a month in the house with panic attacks.Another buddy's girlfriend went to work part time as a waitress after not selling a home in 8 month's. My neighbor across the street has his own insurance company and is laying off employees. I think it was Austin who said the public would panic if the gubment told everyone the truth about what's happening and I believe he's right! Finally my Mark Jolliff quirky economic indicator report. I drive a big rig up and down interstate 580 all day and have been driving this route for 28 years. Everyone going to work is coming from Stockton, Modesto and other places in the San Jouquin Valley which is ground zero for foreclosures in the country. Normally it will take me 60 to 90 minutes to travel the 30 miles back to our yard during commute time. For the last 2 months that time has been cut in half cuz people aren't going to work. During boom times the traffic is double. As weird as it sounds the commute traffic is a great indicator of the health of the job market!

 

[john snyder]

As is the count of U-hauls leaving as opposed to arriving in MI.

jbs

 

[Austin]

http://www.ft.com/cms/s/0/fc4bacb2-c51e-11dc-811a-0000779fd2ac.html
California’s sweeping budget cuts draw fire

By Matthew Garrahan in Los Angeles
Published: January 17 2008 18:36 | Last updated: January 17 2008 18:36

Schwarzenegger’s tough stance on climate change and a recent willingness to engage with Democratic rivals in the California state legislature has won praise and backing from across the US political spectrum.
The subprime collapse has had a direct impact on state revenues: house price sales have dried up which has, in turn, reduced property tax collections. This has hit state coffers by $1bn during the past two financial years, according to Bill Lockyer, California’s Treasurer.

Remember a few pages back I stated that if you want to know where the country is headed just watch California. They are a year ahead, or behind depending on your point of view, of the rest of us. California has the same problem as the state of Michigan. No politico will state what the problem is but they all know what it is. It is the unions and the union mentality. Unions control the California legislature. These people live in a parallel universe based on a state of non reality. If you don't believe that just try and explain the facts of life to them and watch how they react. They immediately respond by attacking the messenger revealing their cult mentality. I call it the Holly Wood High state of mind and it is a fantasy land of make believe. Any problem can be solved by raising taxes. The idea that this is repressive and has a negative effect in their mind is conservative propaganda. Any voice of reality is viewed as a disruptor.
Watch them and learn.

 

[Lost Cause]

Remember a few pages back I stated that if you want to know where the country is headed just watch California. They are a year ahead, or behind depending on your point of view, of the rest of us. California has the same problem as the state of Michigan. No politico will state what the problem is but they all know what it is. It is the unions and the union mentality. Unions control the California legislature. These people live in a parallel universe based on a state of non reality. If you don't believe that just try and explain the facts of life to them and watch how they react. They immediately respond by attacking the messenger revealing their cult mentality. I call it the Holly Wood High state of mind and it is a fantasy land of make believe. Any problem can be solved by raising taxes. The idea that this is repressive and has a negative effect in their mind is conservative propaganda. Any voice of reality is viewed as a disruptor.
Watch them and learn.

I thought the Lounge had been closed?

 

[Austin]

I thought the Lounge had been closed?

See what I mean folks? The truth is censored like the lounge for the same reason. The truth/reality offends some. The only allowable discussion is for increased taxes and business as usual. The number 1 issue in this election cycle is the political economy due to an issue appraisers are directly implicated in but we can't discuss it under the cult rules.
I rest my case.