Real Estate Crash thread

[Purveyor of Slack]

Notice the flight out of commodities? They are pulling back into "safe" positions.

The BIG money smells something baaaad about to go down.

[Cyber Cop]

This thread is like major buzzkill. Tech talk jongs.

[Nobody Famous]

Notice the flight out of commodities? They are pulling back into "safe" positions.

The BIG money smells something baaaad about to go down.

What are the possibilities you're thinking of?

[Spats]

Notice the flight out of commodities? They are pulling back into "safe" positions.

The BIG money smells something baaaad about to go down.

That's one alternative. The other is that, as housing continues to fall in value, the big money (typically leveraged at 30:1 or more) is having to liquidate winning positions in order to cover the continued deterioration of their housing-based debt. I don't know which is the case, and it may be a combination of both.

Deleveraging is like just musical chairs: not everyone gets to sit down when the music stops.

[Purveyor of Slack]

What are the possibilities you're thinking of?

See Spats answer.



Hedge fund implosion?

Big US, Euro, Asian, Austrailian bank implosion?

Big insurance company implosion?

Further Chinese equity melt down after the games and subsequent treasury dump?

Possibilities are endless or maybe nothing. Who knows.

I'm sure some of the high finance mags around here may have an idea or two.

[kokomas]

i am thinking a nationalization of the gse's is more likely than not at this point. paulson made a gamble when he asked for the authority to buy an equity stake. he was trying to bring a bazooka to the fight in order to prevent needing to use it. it turns out the market called him on it with bill gross of pimco and asian central banks stating that they needed tangible proof the govt would back freddie and fannie debt before they would continue to invest in it. at this point it seems self fulfilling to me. i look at analyst projections and it seems that both gse's need more capital but especially freddie since they didn't raise the government recommended 5.5 billion in may when their stock was at 25. now its at 4 and their market cap is below 5.5 billion. so if you accept they need capital, and also that investors are not going to buy equity or preferred when they expect the gov't to make it worthless at some point, you are at an impasse until either the common stock goes up (not likely now) or the gov't follows through on its promise.

so basically that means the govt injects 15-30 billion into each of them and takes over shop. in order to preserve plausible deniability of moral hazard, they have to wipe out the common stock holders and likely all of the preferred holders, although this part gets tricky as regional banks who are already in trouble hold a lot of this stuff and who wants to further weaken the banking system when credit contraction is already a problem. so current thinking is they may throw the preferred holders some sort of bone. its possible that current management is dismissed but unclear.

all this and the treasury was reported as saying today that they are not planning on investing capital. it seems to me they are just delaying the inevitable.

[Benny Profane]

Notice the flight out of commodities? They are pulling back into "safe" positions.

The BIG money smells something baaaad about to go down.

http://www.nytimes.com/2008/08/17/ma...em&oref=slogin

""For months Roubini has been arguing that the true cost of the housing crisis will not be a mere $300 billion — the amount allowed for by the housing legislation sponsored by Representative Barney Frank and Senator Christopher Dodd — but something between a trillion and a trillion and a half dollars. But most important, in Roubini’s opinion, is to realize that the problem is deeper than the housing crisis. “Reckless people have deluded themselves that this was a subprime crisis,” he told me. “But we have problems with credit-card debt, student-loan debt, auto loans, commercial real estate loans, home-equity loans, corporate debt and loans that financed leveraged buyouts.” All of these forms of debt, he argues, suffer from some or all of the same traits that first surfaced in the housing market: shoddy underwriting, securitization, negligence on the part of the credit-rating agencies and lax government oversight. “We have a subprime financial system,” he said, “not a subprime mortgage market.”"



And BP has a new handle: "permabear".

[Nobody Famous]

The Case-Shiller numbers are making headlines this today.

Per the list here, not one area under study had a year-over-year price change in positive territory. Vegas, the worst case, is down 28%. Charlotte the best case is down 1% for 12 months.

Changes from May do have some in positive territory.

Edit: It looks like the noteworthy item in all this is the rate of decline of prices has slowed.

[Toadman]

http://www.nytimes.com/2008/08/15/bu...15sell.html?hp

"Not long ago, such loans, which used to be known as second mortgages, were considered the borrowing of last resort, to be avoided by all but people in dire financial straits. Today, these loans have become universally accepted, their image transformed by ubiquitous ad campaigns from banks."

"“Calling it a ‘second mortgage,’ that’s like hocking your house,” said Pei-Yuan Chia, a former vice chairman at Citicorp who oversaw the bank’s consumer business in the 1980s and 1990s. “But call it ‘equity access,’ and it sounds more innocent.”"

I read that same article last week. Been out of the country skiing so haven't been keeping tabs on things. But this really was an interesting event with these 2nd mortages. I know several people who took them out for various reasons. It sucks to see people not using good judgement or just not fully understanding what these "2nd mortages" really are until things go bad, and suddenly the light goes on. On the flip side, I just got my annual home appraisal/tax assesment, and surprise, surprise, the value of my home has gone up for the 10th straight year. Sweet!

[skier666]

The Case-Shiller index is based on metropolitan figures, which may or most likely, may contain multiple counties and surrounding cities. For ex, the San Francisco figure uses the U.S. Census definition of the area, (Alameda, Contra Costa, Marin, San Francisco and San Mateo counties.) The index is great for getting a national snapshot but in this area that number doesn't give the whole story.

[Benny Profane]

Edit: It looks like the noteworthy item in all this is the rate of decline of prices has slowed.

That was the mantra today. Permabear thinks it's just the eye of the storm. Remember how everyone thought today (September) was going to be just rosey only eight months ago?

[snowsprite]

I was talking to this guy today who's a realtor and he said the media is starting to report some improvement in the situation (have not seen examples of this myself...anyone here seen it?) and that in his experience--17 yrs of selling--he thinks that's usually a good precursor.

I don't know what to think, but am sure hoping the end is in sight. It's still looking like a house selling is in the cards for me soon, like it or not!

Sprite

[Kali Boy]

I am loving this crash. I've been squatting for a long time here in the suburbs. Everywhere I go I have a brand new house to stay in. When times are tough people buy alot more controlled substances. So business is good.

I had better get off this guys computer, hes getting his coffee now.

[thin cover]

hedgefundimplodometer.com one amongst a myriad of sites pertaining to financial institutions and their associated implosions. 75% of americans are not even aware that a home equity line of credit is an actual mortgage. The people peddling this "equity access products'' should be held accountable, clever marketing lures the consumer in and with no associated costs why would the common american deem it a mortgage. Although, I also wholeheartedly agree that the American home owner needs to have and modicum of intelligence especially when dealing with the largest credit obligation of their lives. The bottom line is the credit grew at 5 times the rate of income over the last 7 years and the thrifts, regionals and major investment banks were stoking the fire by feeding the insatiable appetite that the not only the American but the world investment community had for U.S. real estate bound securities. We could not put it out fast enough and when there was more demand then there was supply and we would just open guidelines and allow even more riskier credit be put out on the street than the previous month, predicating future performance of these securities to the purchasers from empirical data compiled from models based on antiquated lending standards. I happened to work for an investment bank that was at the forefront of this debacle and every month it seemed that we were just in a mad race to be the first one up the hill and supplying the most product. The monoline institutions concentrating their whole model on this arena of fixed income will tumble, only the diversifieds will be able to take the balance sheet hit. We are at the end of the begining now, more down grades will come, more foreclosures will come, and more major institutions will fall. Hate to pontificate with more morose jargon but this is a fact that we cannot avoid. Minore relief rallies will stagger the process but the trend is down. And what do you think the rest of the world was doing?? not following America like they always do? Nationalizing the GSE's is just a psychological move, another minor relief move. Over the last year ginnie has been picking up where sub prime left off, only difference is that ginnie requires income documentation which I am not convinced more accurately demonstrates the ability of the home owner to repay anyway. Debt ratios are pushed to the maximum and this is only based on obligations which arise on credit. We are in the same conundrum, all the subprimers out there have now switched to lending ginnie money and are doing it with the same mentality, " put as much out as possible" these people are paid on volume and with applications for purchases and refinances at a 30 year low, do you think that they are not in a mad rush to fund everything that come accross their underwriter's desks? It has not stopped and the illiquid position that the market is in is the exact catalyst to more of these problems. I could go on for pages, all who were involved reaped the rewards, and now it is a reality check like no other.

See Spats answer.



Hedge fund implosion?

Big US, Euro, Asian, Austrailian bank implosion?

Big insurance company implosion?

Further Chinese equity melt down after the games and subsequent treasury dump?

Possibilities are endless or maybe nothing. Who knows.

I'm sure some of the high finance mags around here may have an idea or two.

[timvwcom]

Aaaahhh... SHIT! Looks like it's gonna go down;

Fannie Mae, Freddie Mac to be Put Under Federal Control, Sources Say

Friday, September 5, 2008; 8:33 PM

The government has formulated a plan to put troubled mortgage giants Fannie Mae and Freddie Mac under federal control, dismiss their top executives, and use government funds to prop them up, government officials told the two companies yesterday, according to sources familiar with the conversations.

Under the plan, the federal government would place the firms in a legal state known as conservatorship, the sources said. The value of the company's common stock would be diluted but not wiped out while the holdings of other securities, including company debt and preferred shares, would be protected by the government. (meaning many of the big investors will be fine - Tim)

Instead of giving each company a big capital infusion up front, the government plans to make quarterly infusions as the companies' losses warrant, the sources said. This would be an attempt to minimize the initial cost of the rescue. (trying to pass some of the cost on to the next Administration - Tim)

As the pace of discussions accelerated today, Treasury officials contacted senior congressional leaders, telling them they might be briefed on the plan this weekend and asking for telephone numbers at which they could be reached.

Fannie Mae and Freddie Mac have backed 70 percent of new mortgages in recent months, but have incurred vast losses on their loan portfolios as the housing market has tanked. Treasury Secretary Henry M. Paulson Jr., the architect of the plan, and other government leaders have said the companies remain vital to preventing an even broader financial crisis and economic downturn.

The chief executives of the two companies were called into afternoon meetings today at the 17th Street NW offices of the Federal Housing Finance Administration, their direct regulator, according to sources familiar with the events.

Executives of the two companies were told to show up without being told of an agenda. Daniel Mudd, chief executive of Fannie Mae, was accompanied by outside lawyers. He showed up at around 3 p.m. for a two hour meeting. Richard Syron, chief executive of Freddie Mac, started his meeting at around 5 p.m., accompanied by several members of the Freddie Mac board.

Paulson, Federal Reserve Chairman Ben S. Bernanke, James Lockhart, the director of the housing finance regulator told the executives of the plan, which would strip them of their jobs.

(Edit: Adding some comments of my own above - in green)

[timvwcom]

^^^ Probably pushed by this;

U.S. Mortgage Foreclosures, Delinquencies Reach Highs

Sept. 5 -- Foreclosures accelerated to the fastest pace in almost three decades during the second quarter as interest rates increased and home values fell, prompting more Americans to walk away from homes they couldn't refinance or sell.

New foreclosures increased to 1.19 percent, rising above 1 percent for the first time in the survey's 29 years, the Mortgage Bankers Association said in a report today. The total inventory of homes in foreclosure reached 2.75 percent, almost tripling since the five-year housing boom ended in 2005. The share of loans with one or more payments overdue rose to a seasonally adjusted 6.41 percent of all mortgages, an all-time high, from 6.35 percent in the first quarter.

...

Existing home sales fell to a 10-year low in the second quarter and the median price for a single-family house dropped 7.6 percent, according to the National Association of Realtors in Chicago.

...

Sales of previously owned homes rose 3.1 percent in July to an annualized pace of 5 million, boosted by foreclosures that accounted for about a third of all transactions, the National Association of Realtors said in an Aug. 25 report.

...

[Benny Profane]

Ah.....hahahahaha......right after the convention.......ah...hahahaha....somebody should stick a microphone into Palin's smiling face and try to get an intelligent reaction.......ah...hahahahah....."Ms. Palin, what are your thoughts on this butt fuck of the American taxpayer by an outgoing administration?" ........."Uh.......[blank smile, slight look of pain]......Uh........."I HAVE 5 CHILDREN! I didn't kill any of them!" ....ah...hahahahahaha...."Thank you, Governor."

Paulson in one year will be back at the helm of a lucrative financial company and industry that has been supported by you, you schmucks. Socialism for the rich. Wonder what those CEOs are getting for a severance package.

[Rontele]

Ah.....hahahahaha......right after the convention.......ah...hahahaha....somebody should stick a microphone into Palin's smiling face and try to get an intelligent reaction.......ah...hahahahah....."Ms. Palin, what are your thoughts on this butt fuck of the American taxpayer by an outgoing administration?" ........."Uh.......[blank smile, slight look of pain]......Uh........."I HAVE 5 CHILDREN! I didn't kill any of them!" ....ah...hahahahahaha...."Thank you, Governor."

Paulson in one year will be back at the helm of a lucrative financial company and industry that has been supported by you, you schmucks. Socialism for the rich. Wonder what those CEOs are getting for a severance package.

Hey shitstain, you should try going out sometime. You will be less bitter.

[Benny Profane]

What's your fucking problem? Take out a stupid loan on the double wide and your WalMart overnight shelf stocking job just won't pay for it? Go fuck yourself.

[timvwcom]

Foreclosures still getting worse... no chance real estate market can start to recover until this pattern reverses course. I had hopes for 2009, now that is dimming... such fun!

August foreclosures hit another record high
There were 304,000 homes in some stage of default last month, and 91,000 families lost their homes.

September 12, 2008: 9:51 AM EDT

NEW YORK (CNNMoney.com) -- Foreclosures hit another record high in August: 304,000 homes were in default and 91,000 families lost their houses.

More than 770,000 homes have been repossessed by lenders since August 2007, when the credit crunch took hold.

The report from RealtyTrac, an online marketer of foreclosures properties, is the latest in string of bad news for housing.

Foreclosure filings of all kinds, including notices of defaults, notices of auctions and bank repossessions, grew 12% in August over July, and 27% compared with August 2007.

The 27% jump over last August represents a more modest year-over-year increase than in previous months, but that's only because the housing crisis was already underway in August 2007, which saw a big spike in foreclosures.

"In August 2008 the total number of U.S. properties that received foreclosure filings, as well as the national foreclosure rate, were both the highest we've seen in any month since we began issuing our report in January 2005," RealtyTrac CEO James Saccacio said in a statement.

Fannie Mae (FNM, Fortune 500) chief economist Doug Duncan isn't surprised by the swelling numbers. "It's been my view for a long time that foreclosures won't peak until the last three months of 2008," he said.

And now that the nation in a recessionary economy, with job losses exceeding 400,000 a month, Duncan speculates that the foreclosure crisis may be drawn out even longer.

"We've been saying that the foreclosure trend has not yet peaked," said Doug Robinson, a spokesman for the foreclosure prevention organization NeighborWorks America. "Before it was a subprime problem," he said. "Now, it's everybody's problem."

...

[Nobody Famous]

No comments here given the impending collapse of Lehman Brothers, and the outright sale of Merrill Lynch today?

I'm not sure what to make of these events. Surely it will be all over the news tomorrow. But I am glad to see the republi-cons are sticking to no gov-mint handouts to the corporate greed-meisters who control and run these institutions.

[timvwcom]

No comments here given the impending collapse of Lehman Brothers, and the outright sale of Merrill Lynch today?

I'm not sure what to make of these events. Surely it will be all over the news tomorrow. But I am glad to see the republi-cons are sticking to no gov-mint handouts to the corporate greed-meisters who control and run these institutions.

A small specific thread here in Padded Room... but the more robust one is in the PolAss; http://www.tetongravity.com/forums/s...d.php?t=132644

[Hugh Conway]

Hey shitstain, you should try going out sometime. You will be less bitter.

Benny - get a rontele patented trustafarian lobotomy! Problems will cease to exist for you, shitstain venture capital lawyer! You can now throw barbs without irony!

[Purveyor of Slack]

No comments here given the impending collapse of Lehman Brothers, and the outright sale of Merrill Lynch today?

Don't forget AIG.

If the fire isn't put out this week watch the counterparty implosion begin.

Keep your eyes on the periphery.....these are the times for major distractions.

[Nobody Famous]

A small specific thread here in Padded Room... but the more robust one is in the PolAss; http://www.tetongravity.com/forums/s...d.php?t=132644

That thread seems headed toward a 'my candidate is better then your candidate' insult-fest. But it's interesting reading.

This thread, even though it's up to 39 or 40 pages, still generates insightful comments with minimal douchebagery.