Home > General Topics > Economics > Housing Threatened by Defaults in Sub-Prime Mortgage Market

Housing Threatened by Defaults in Sub-Prime Mortgage Market

  1. http://www.bloomberg.com/apps/news?pid=20601103&sid=aNoc4LFUSOKw&refer=us


    "...Prince Jones Jr. paid $170,000 a year ago for a six-room Cape-style home in St. Paul, Minnesota, financing it with an adjustable 30-year mortgage.

    Jones, 27, got a so-called sub-prime loan because he was a first-time buyer who is a self-employed barber, has debts and makes about $500 a week. He planned to refinance before December when his monthly payment could jump to $1,646 from $1,291, hoping a good payment record on this mortgage would secure a lower rate..."


    Ok, I am not a banker or a loanshark, but a $1,600 monthly payment for 30 years for a $170,000 home seems really really high. that is almost $600,000 in payments over the term of the loan. Either these facts are incorrect, my interpretation is bad or sub prime lenders make Tony Soprano look like a great deal.
     
  2. ARMS will continue to reset throughout 2007, $1.5-$2 trillion worth of them, foreclosures are rising and will continue to rise for the next 12-18 months.
     
  3. good thing the real estate markets bottomed...he'll probably be able to sell it next year for 500K and make a nice profit...:p
     
  4. yep .:D
     
  5. Hey, get this... was just speaking with my neighbor. He is foreclosing, also had a lot of credit card debt. His card debt was 38K, and the card lender offered to settle for a one-time payment of 22K to get it off the books! My understanding is that more people are just starting to blow off their credit, knowing that they'll never be able to repay. Incredible stuff underneath the surface here...
     

  6. I think were just beginning to scratch the surface of what is yet to come.

    I have read statistics that show if a house goes into foreclosure that houses within a block or 2 usually lose around $10,000 worth of value overnight.
     
  7. [​IMG]

    subprime looking worse ;)
     

  8. Is this the ABX index...?? where did you find this chart?
     
  9. A $1600 on a $170,000 house isn't too bad if his insurance and taxes are escrowed into the payement. With good credit, in my neck of the woods, the payment would probably be $1400 including taxes and insurance on a 30 year fixed note.

    WTF is a guy making $500 a week buying a $170,000 house? I'm just trying to wrap my brain around how far my pity is supposed to go... Maybe a $100K townhouse or something...

    SM
     
  10. Why not default? The US sugar daddy government stands ready to hyperinflate us out of everything.
     
  11. smart money why do you think there is 1.5 trillion in sub-prime loans ? everyone wants to live the american dream.

    bgp
     
  12. you're right james .

    bgp
     
  13. I agree with you. Everyone wants alot of things, a boat, a big car, etc., but they shouldn't buy it if they can't afford it or they don't understand the potential pitfalls of their purchase contract. And if they lose their ass, they shouldn't expect a bail out.

    The way to live the *BIG* American Dream is to start small and work your way up. Jumping into a $170K house on a $500 a week salary is just nuts in my opinion, but buying a smaller place, building up equity, and then purchasing one makes sense.

    I sound like an old guy by saying this (and I'm not), but the new generation wants everything now, and if they don't get it, they are quick to walk away. Job Advancement, Bankruptcy, Divorce, all of that. Everyone seems to be looking for a shortcut and they are quick to blame others if it fails. Sad, really.

    SM
     
  14. So true. The culture is rotten to the core. Its become so superficial, there is no work ethic, there is no patience, were really f-ed in the long run. The next generation is going to retire with nothing because they will be spending their entire paychecks on cars,clothes, big screen TVs, and homes they cant afford just so they can keep up their image of having it "made" or having everything now. Its a whole generation of grasshoppers with no ants.

    I cant complain. Competing against morons like this is really damn easy :D
    I live so far below my means its pathetic because I never bought into that garbage. I could buy a ferrari tomorrow but drive a toyota and im perfectly happy with that. I still have a lot of fun without having to prove crap to my neighbors. I also will have an early and easy retirement waiting for me in the end.
     
  15. I couldn't agree more. While I am not a million net worth, I live my life according to the book The Millionaire Next Door. Other than our home, if I can't pay cash I am not interested. It makes life real simple.

    Hybrid mortgage, hell no for me. 30% down and 15 year loan. Big time interest saved. In fact, I am considering selling and stepping down to less sf and just pay cash. I have about 700 excess sf I don't need at all. Debt free means stress free.

    It's nice to be in the minority in this instance. :p
     
  16. You can say that again! I have zero debt, a pile of cash in the bank, and zero loans. I have no idea how most of my friends with 10K to 30K of credit card debt can live like that :eek:

    These are people in their 30's! When the F are they ever going to retire???

    Have fun working at walmart when your 60! idiots
     
  17. But maybe they are right. Maybe the day of reckoning never comes. From what I read the entire US economy has to create more and more credit in order to survive. We monetize old debt with new debt in order to create GDP. However, it is taking ever larger amounts of debt/credit to keep the wheels going. This has prevented us from having a severe recession since the early 90's. M3 in the early 90s started to level off and then Greenspan changed the banking reserve requirement which caused a money supply explosion that is still going to today expect for a small dip a couple of years ago. As long as credit can be expanded and enough income can be produced to service debt everything can continue, but at some point it won't work and there will be a massive dislocation in the global financial system. Everyone just seems so levered. If you have 3 houses and 5 credit cards there is no room for any kind of unexpected circumstances.
     
  18. Why doom & gloom about housing ?

    Look at DJ Real Estate ishare (IYR) chart which tracks the real estate market.

    Nothing on that chart says the real estate sector is falling apart. The trend is still up.

    Homeowners who are worried about falling housing prices can hedge their risk in the financial market.
     

  19. Look at our leaders, look at the president spending tax monies we dont have, its the american way.
     
  20. Very good advice, and something that I feel similarily about.

    I'm nearly done with being a university student, so I owe a bit more than I would otherwise prefer (still quite small relative to most other students), but I personally believe very much in the "if you can't pay for it cash don't buy it" philosophy. Only two exceptions - housing and vehicle.

    The vehicle side of things is another interesting point. I personally chose to locate myself in an area where I can easily access public transportation, so I do not currently own a vehicle. That plus a few cab rides a month sure beats buying and insuring a car, plus paying for expensive parking where I work.

    The above said, I do realize that at some point a vehicle may become a necessity, but there is still a spectrum of options there. I think that financing is a necessity for most people when they purchase a vehicle, but one should still be smart about choosing the vehicle. Unfortunately most people seem to want the nicest car possible, and end up paying a very nice monthly payment as a result. :)

    In my opinion credit should not be used to finance frivolous purchases, such as widescreen TVs, home theatre systems, expensive furniture sets, etc. I could personally have a much larger number of material posessions right now if I were willing to increase my debt, but I personally do not wish to do so.

    I am now at the threshold of being able to pursue trading more seriously, but it will still be delayed somewhat by my intention to be debt free within 2-3 years. Less debt does indeed mean less stress.
     
  21. I worked at one of the biggest if not the biggest subprime lenders in the country for 3 years and let me say this: if it wasn't for the paper being bought hand over fist from investors this loans would have never been written. I was shocked at first with some of the situations we could lend on. After awhile I realized that my company was charging 5 points in fees on the front end, selling the paper, and then getting there money right back into the door to lend again. A cash machine for a long time but now the truth is coming out. This is just the start of the mess.
     
  22. indytrader, I read a report which stated that the balance on sub-prime loans with "flexible" interest rates was around 1 trillion dollars.

    Do you (or anybody else) happen to know what the mortgage balance is for prime paper ?

    Thanks.
     
  23. DOOM AND GLOOM……It is so funny to read “Speculation” on Real Estate from Elite Traders. It is all most as funny as reading about their “Trading”. I left the trading as a living about three years ago to enter into the world of Land Speculation/Real Estate Development. Although I do trade my personal account, well more like position trading for weeks if not months, I am finding the world of “Real Estate” to be far more interesting and rewarding.

    The biggest problem many do not understand is that when they read the “Talking” heads about “defaults” they are talking about the 9 to 5ers, Lets call them “SHEEP” as we will use “Market” terminology. We are talking about Johnny Joe and Mary Idiot Real Estate Sales person who helps Johnny “ I have hardly any income” but I want to purchase a house 4x my net worth so I can be like Mr. Day Trader across the street. Mary Idiot goes and finds a mortgage broker to help “push” the paper work through. Wolla, big PiP’n Johnny “ I have no money” is now in his new home.

    The median home price, or should you say nation average is some where between $230g to $260g. Of course there are plenty of other areas that run higher, but we are taking the median home price for 2006. These are what the numbers are based on.

    So, you have Johnny “ I have no money” driving his BMW, his wife shopping at Prada because she just watched “DESPERATE HOUSEWIVES” and like the way the women dressed. They come home to that home that they can’t afford. Even at $260g they are doomed.

    Then take the Joey “I can become a Land Investor” with no money down, getting into Investment Property between $200g and say even $400g, thinking the can flip. Surprise,
    He is holding two mortgages and has taxes to pay, “Value” of the property has been pushed up by a hoard of speculators and out of the price range of the general population.


    I do not deal with such crap. I deal with homes from $500g to $4.7 million. Commercial projects that run into the triple digits of the 9 zero range. And I picked the proper region as in the Texas south region, where, property, land and commercial investments are pushing for 14%-25% growth for the next few years.

    So, while the doom and gloom is broadcast, the “Pundits” cry “Crash” and the Mary Idiot Real Estate agents, who are a dime a dozen, much like the trading world during a bull market, hustle for nickels and dimes, the money is flowing fine in the proper areas and High Net Worth Clients are coming by the carloads.

    Oh yea, I did make a trade, bought Oil futures Jans/febs and march months …legged in to average 51.90 and was out about 57.20 on the average. So, I still find time to play the game will I’m creating my own monopoly board…..but what……the Housing Bust is upon us.
     
  24. why yes you picked a fine spot to speculate, but for the majority of the country r.e. is contracting. you forgot about people using their credit cards and 2nd mortgages. isn't texas tied to the oil economy? so it should be fine for a while.

    bgp
     
  25. Every market is different...some start to explode upward, while many others foreclose like no tomorrow, and begin to shift downward...

    I do agree on the fact though that subprimes are screwing a lot of people and a chunk of the system up...and causing a lot of this mess. When you're lending to someone because they can walk, talk, and breathe, there's a problem here...

    But then again, it'll make some house buying on the cheap! :D I love a good deal...
     
  26. Texas does have big oil....but not South Texas. Oil is up in Houston and Dallas. There are a few companies like Valero, Headquartered in SA. But no actual Oil fields like the rest of texas.

    My main clients are coming from Cali, NJ, Chicago, DC, Houston.
    Most of the people I deal with are looking to leave their area, have already become successful and are in the age range of 40 to 60 years old. These are the individuals buying up our houses at say $480g to 1.2 mil.

    Commerical Clients I deal with are privite and not corporate. Microsoft, Pharmac. co's a lot of Banking Headquarters, have moved into this region. My clients are individual developers from out east and other parts.

    Bacially, its a value game. The amount of space you can purchase with serious buying power, trumps any where else, and the South West Region is becoming more Cosmopolitan than ever before. It will take a while to reach "Cool"ness statis....but by then I will be long gone into other markets.

    Very little young money in South Texas. Most of the money is being pumped in from outside sources.

    Of course keep in mind, its much like the Cow-boy-Indian game now. The cow-boys came in and took out the Mexican Indians. Then the stuck around for a while and created the Tex-mex culutre. However, sad to say, its a dump foking culture. Very little brains but a lot of Pride run in this Culture. Machismo is the proper titled. A lot of half educated (from very weak state schools) and a lot of unskilled labor have dominated the San Antonio Region for decades.

    The New Indians are the "Locals" and the East coast/West Coast money are the New Cow-boys. South Texas is also being hit from the Rich side of Mexico, the Educated Elite of Mexico look down upon the Tex-Mex culture, so they are pumping money in but not dealing with the TEX-MEX.

    What you have is a perfect situation of a Robberbarron setup. Prime Real Estate, Location in the center of the US, flights are 3 hours both to East and West. You have a local population that are mainly idiots and could never really take advantage of the surrounding positives to achieve economic advancement. Now, Money swoops in and control is being set by outside sources. It's just like the board game of monopoly only we are not playing for parkave, like the old game. We are jocking to buy Skyscappers, Oil land, Water Aquifers, and paying hardly any taxes and passing GO.

    Dallas has stalled....over priced, Houston Money is running away fast, thanks to the 250, 000 Katrina Victoms looting and killing. East and West Coast slowdown , its like one big implosion of money and the vortex is smack in the middle of the South West Region of Texas...sucking it all in.




    I
     

  27. I believe that is commercial real estate your looking at, commercial real estate hasnt seen any sort of selloff yet.
     
  28. right s2007s, commercial r.e. is last to go.

    bgp
     
  29. If your doing so well why would you respond so strongly to some posts that are written by sheep. I am not a psychologist but it sounds to me like you are trying to convince yourself everything will be fine. Weird post if you ask me.


     
  30. can't agree more....heard the same shit from stock gurus in from 2000 on .." the shorts will have to cover" " You won't see 50% gains every year but 10-15% is likely"...yadee yadee ya!!!


    You can try and convince yourself all you want.....Hey, I have two homes and only on very modest mortgage...But as i drive into my development and see for sale signs all over with some now on the market for over a year, i know that my assets are being affected...Im not selling, but my leverage to go and pick up a nice value has just been depleted....hold onto your hats folks....this is gonna be like Hurricane Katrina II
     
  31. From the looks of IYR's move this year (up 20 of the last 22 days) there's no need for a "tag day" to bail out commercial holders....
     
  32. Same thing here. I live in a beach town in S Texas (South Padre Island). There are for sale signs EVERYWHERE. Each street is only a few hundred yards long, and they all have at least a few signs. Its mind boggling. Prices here are way high for Texas, and everyone seems to be bailing at the same time. Very little is moving.

    Jay
     
  33. this may not cause a burst like people seem to think..(I am with you guys in that type of thinking)....the BID has to be hit and hit hard...staying on the offer doesnt necessarly mean a price decrease..just a long mo-F**K time to move your paper....:eek:
     
  34. But think of it like your account with a margin call...you can put a limit order out there to satisfy your call for only so long before the house puts all your shares out there as a market order....same as the ARMs and Balloon payments coming due...
     
  35. in most cases which is speculation people will jst walk away from their deposit, others that used fancy financing to bite off more than they can chew will get burned and some of the pain will be felt by developers...Hey im with ya in your way of thinking ..but a BUBBLE?? as in a crash?? maybe?
     
  36. the sad thing is i have money on the sideline waiting to cash in on this once the bottom hits.....I feel like a Vulture....but i also feel bad because many of my friends and acquaintances are getting smacked down as we speak....IMO..its going to be worse then the stock bubble.
     
  37. There is no one more credible than Robert Shiller, and he has referred to it as the "by far the biggest asset bubble in history."

    The Economist magazine, also long on credibility, did a wonderful expose on it that shows how it could (and will likely) lead to massive global liquidity contraction (as the U.S. cools quickly).

    But then there's Goldilock Larry Kudlow, who disagrees with both.


    You decide who is more credible - Kudlow or Shiller.
     
  38. I usually like Kudlow,,,,but his "real estate is a little soft" stance is maddening...all of CNBC is like that....its like there's a giant Elephant in the room and nobody wants to talk about it:confused:
     
  39. The real trouble hasn't even begun yet.

    All those houses being listed now aren't selling, so the owners are taking them off the market until the spring. Check reality tracker. It's happening right now. Houses will sit for 6 months, unsold, and the realtors will tell the owners to take it off the market for now.

    When the spring hits, there will be the largest spike ever in listings of homes for sale - a complete flood.

    With the exception of very few markets (Seattle is one example), there will be incomprehensibly large inventories of unsold homes.

    Supply and demand disequilibrium will crush prices.
     
  40. Krudlow has NO credibility whatsoever... he's nothing more than a snake-oil salesman... a shill for the media Powers.
     
  41. Agree. Kudlow and credibility are two words that don't belong together, at least not in a positive manner.


     
  42. foreclosures... (lagging)... notice the trend up...
     
  43. subprime delinquencies......

    Again, going up.. BUT WAIT! We aren't even at the 2002 peak!

    Here's an excerpt I wrote on my blog earlier:

     
  44. ===================
    $1291 pmt/month is very very high % of his 2400 month income.

    Sounds like a mortgage broker rammed thru that quote''deal '' unquote.Most local banks have better sense about cents/dollars


    Also all adjustable rate mortgages are not equal;
    that one is a good deal, that is for the lender, not barber

    :D
     

  45. tony soprano IS a good deal
     
  46. An ad:
    "Stop throwing away money on rent and start becoming a homeowner today. Poor credit welcome."

    "Poor credit welcome" - this is just sad
     
  47. The part where people advertise to sell loan products for profit or the part where folks who have made mistakes or had bad things happen to them get a second chance? :) In the 1970's, my folks literally fled to Florida because my Dad had a trucking company that went belly up. A major factor in that was because one guy was embezzling, and another guy got into an accident and refused to pay. My dad took his shot at being an entrepreneur and it just didn't work out. Eventually, he was able to buy a moblile home at a ridiculously high interest rate. Wasn't sad. Because after a short while, it was cheaper than rent, and eventually he could refinance.

    Financial instruments are tools. Like guns, they can be used for good and bad. I took out a 10.375% second mortgage on a piece of property. Don't regret it because it made the purchase possible, and won't refinance it because its so small that the refinance costs would eat up a lower payment. It is good business sense to take a loan at any rate if the resultant will either increase cash flow or increase equity. Just a tool for good people to better themselves.

    SM
     
  48. SM I don't know where you live but here in the gated community of Utopian Meadows if you don't have a Fico above 780, a black amex, a Mc Mansion with a couple of GERMAN SUVs parked in the garage, and a few million in the 401K by the time you are 40 then you must be one the great unwashed and we can't understand why anyone would want to deal with you.
    :D
     
  49. LOL. Gated community? Why on earth would I want to share my estate with others? :) If your Fico is that high, then you're doing something wrong. Turn that couple of million into 10 million by borrowing money while its cheap and letting it work for you...

    SM
     

  50. "From mid-2005 to mid-2006, according to a statistical sampling of a representative group of 7,548 purchasers, nearly half of all first-time buyers financed the entire transaction, obtaining mortgages in the full amount of the home price. Also, 30% put down 10% or less.

    The research was conducted by the National Assn. of Realtors, using information on home transactions supplied by Experian, a major credit and realty data firm. The median down payment of first-time purchasers, according to the study, was just 2%. In other words, the median-sized mortgage for first-timers represented 98% of the home purchase price."
     
  51. Amazing.....but if you want 4:1 leverage in a brokerage account, you cannot go below 25k!!!!
     

  52. Yea, I was thinking about that..Imagine the rally the stock market would have if the powers that be lowered stock purchase margin requirements to 2%..Dow 36,000 wouldn't seem so far fetched then.
     
  53. Well its only 4:1 intraday...you have to be 2:1 overnight!!!

    Not that i don't think it's a good idea...but the fact is 25k can only get you 100k intra day risk, but two years ago 25k would probably get you a 400-500k home....and three years to figure out how to pay for it when rates go up or the balloon is due
     
  54. As usual, a good point. About 20-30 years ago the real estate market changed in a very fundamental way. Before, most mortgages were made by a local S&L that kept some of the loans in their profolio. They had a vested interest in making a sound loan with credible appraisal and underwirting. Now, all that crap gets sold, sometimes over and over. The co originating that loan only cares about one thing. There was an article in the WSJ the other day about how nobody knows where all these loans are and if the investors that have a lot of exposure, actually know the true risk.....read hedge funds.

    LTCM was relatively easy to manage because it was one co. What happens if the shit really hits the fan and you have dozens of these funds go under. Or they have to sell other assets to cover. The worst collapses always affect other, seeming unrelated asset classes.
     
  55. 4:1? 2:1? 25K down? with a 500K home?

    HA, try san diego where the norm is:

    10:1 leverage, zero to 25K Down, on a $1,000,000 home :eek:

    I just saw a property sale hit Zillow, that sold less than its 2003 price (almost 50% below the Zillow "zestimate" ) :eek:

    Signs of a meltdown creeping in...
     
  56. That is because it was most likely bought at foreclosure auction. When an appraiser goes out to appraise a home in the area, this one will not be used as a comparable for this reason. The guy who bought it at auction is happy because he has instant equity in the home.
     

  57. Heh! In Canada we can trade usa markets without the PDT
    and no 25k required

    Your 'freedoms' continue to peeve me!!:p
     

  58. ...of course, then when somebody loses their life savings, they will complain loudly that "they should have had more protections"


    Isn't it all about credit risk? Im not totally against PDT or high leverage loans...but there has to be some protection for BOTH the the lender and the lendee.
     
  59. 07:27 Micro-lending industry could be beneficiary of subprime mortgage defaults

    Wachovia view the current credit weakness in subprime mortgage as a longer-term positive development for the micro-lending industry. As subprime mortgage defaults and delinquencies rise, this will likely have a significant negative impact on the overall credit scores and credit profiles of a portion of the population. Thus firm believes that future credit availability could be limited or more expensive, and therefore micro-lending services could better meet these customers' needs. Firm's best ideas for investing in the micro-lending sector are diversified lenders that derive revenue from more than one business line, such as FCFS, DLLR, and CSH.
     
  60. http://www.latimes.com/business/la-fi-foreclose13feb13,0,791237,full.story?coll=la-home-headlines

    "The biggest problem, Bosch believes, was created by the lenders. They used to be cautious. They'd want the borrower's tax returns, pay stubs and bank statements, and it would all have to match up. The borrower would make three times his monthly payment. He'd have to scrape together a down payment.

    Sub-prime loans changed all this. Originally these high-interest loans for credit-challenged buyers were a small segment of the market. But as houses got more expensive, fewer buyers qualified under the traditional guidelines, so they went sub-prime.

    Lenders would take their word on income. They no longer needed down payments. They didn't worry that their loans would soon reset to higher interest payments.

    Nobody cared too much as long as prices went up, although many people in the business knew the day of reckoning wasn't canceled but merely postponed.

    "To make a living, you had to push a product you didn't believe in," said Aimee Quigley, a Home Center mortgage broker. "It was like being a defense attorney where you know your client did it, but you have to say he didn't."

    Quigley says she tried to emphasize how quickly these loans would adjust, causing payments to balloon, but the message rarely got through.

    "Nine out of ten times when these loans closed, we would sit there and say, 'How long can they hold it together?' "

    Now the initial wave of those who can't hold it together need to do something, but Quigley can't help them. Some sub-prime lenders have gone out of business; other banks have tightened their standards. Money isn't free anymore "
     
  61. LOL My first home was such a hassle...I had to actually explain in writing why i was late with a Discovory card payment.....3 years earlier!!!!!! ( It was because I moved and Discovery wrote a letter on my behalf)...then they harassed me because my mortgage payment would be equal to 40% of my monthly salary...i had scramble to get it under 33% or they couldn't approve! and i had to have 15% equity down to boot..I think in the long run it was better that i saved and earned and got my shit together
     
  62. Things about homes:

    When I bought my house my mortgage brokers said I had the highest credit score he'd ever seen. Interestingly enough - all the things I'd heard you needed to increase a credit score - loans being paid off etc. I had nothing, never leased a car or took one loan out in my life. Misinformation.


    I wonder several things about the housing market which I'm watching eagerly since I sold that house 7 months after buying it due to a relationship issue and then watched the Los Angeles real estate market soar to crazy new height for the next 3 years as my jaw was agape with amazement and dismay (house sold 3 years later for twice what I'd sold it for). So I WANT the market to crash... like many here it seems.

    However, I'm on the fence whether it will for the medium to high level homes. I think sadly the low income areas will once again be hit hard and those and near by areas will definitely feel more pain.

    But is there any reason to believe that this will affect mid to high range homes in neighboring cities? Is there any evidence of a trickle up effect?

    Something else.... I've lived in Los Angeles 20 years and I can say for sure... it's getting hotter. I think Global Warming is real and will get a lot worse in the the next ten to 20 years before it gets better. I'm wondering how that will affect housing values in hot locations (like San Diego and areas of Los Angeles). I wonder if people will be inclined to move northward. I wonder if in 20 years Alaska will be a prime real estate spot.

    Anyone have thoughts on any of this?

    I feel my personal desires are clouding my objectivity.
     

  63. Hey, an honest bear! I like the "want it to crash" comment. In my neck of the woods, it is the upper end houses that are feeling the pinch. As it gets harder to buy a house because interest rates are rising, more folks settle for smaller houses. Also, at the same time, rents rise, which also tends to firm the small house market. I guess what I'm driving at is that the big fancy houses are the most volatile part of the housing market, IMHO. So if you believe that the correction is over, or nearly over, then you could act on your feelings by buying yourself a McMansion now. If you think its not over, then don't. Personally, I feel the bigger houses already took the brunt of it, and if you factor in the fact that rates are still pretty low, we're close to the time to pull the trigger. I'm house shopping for a bigger place myself.

    SM
     
  64. Rents are not going up.

    The landlord tried raising rents this year and I laughed at him, told him he couldnt get that much for this place and that it was already over prices. I pulled out a list of 10 places that were nicer for less.

    He held his ground. So I gave 2 months notice.

    A week later he comes crawling back begging for me to stay at the SAME price, hahahahaha. I havent returned his call.

    Too many nicer places around now for less. There is record over supply here and lots of desperate "2nd home/condo" owners trying to rent their places out so they dont have to sell them.
     
  65. Ive been looking at craigslist in chicago lately. Rents are without a doubt dropping.
     
  66. 11:51 Bernanke says distress in subprime lending area is a concern
     
  67. Weeeeee!!!!!!

    Everything is perfect!!!!!!!!

    Milk and honey.

    Soft landing.

    Greatest story ever sold.

    Yada yada yada.
     
  68. Ok..Ok...I can see that for the areas that are oversaturated with condos. But those areas are the exception rather than the rule.

    SM
     
  69. In Los Angeles, the market didn't even peak until mid 2006. An average home in jan 2004 was around 210k, that same home was about 598k in mid 2006. The area I'm watching went from 405k to 996k in that same period.

    Today it looks like the average home has really only dropped by at most 10k and the area I'm watching maybe 50k.

    (Which would support the idea that higher end homes drop faster).

    But it seems like this isn't much of a drop considering where it started.

    I'm on the fence though. Because I also know that there are a LOT of people waiting for a chance to get into a home still.
     

  70. Please explain to me any fundamental, rational reason why a home would appreciate that much in value. Tulip bulbs in Amsterdam, internet stocks, Tokyo Real estate and other such "investments" have also defied such scepticism.
     
  71. There are no rational reasons in san diego.

    The population has gone DOWN, as supply has hit record levels. So that aint it.

    Wages are flat or down if you consider inflation.

    So why the boom? Insanely low interest rates with non-existent lending standards. which allowed a huge number of people to finally buy what they couldnt afford.

    Now weve gone thru 17 rate hikes, and lending standards are starting to tighten.

    This move is 3X the magnitude of the last move up which caused a 7 year down turn/crash in SD real estate.

    Lets see what happens this time.

    If you believe in mean reversion, prices need to come down another 30% or more.
     
  72. All I can think of is that during the stock boom, everyone's money was focused there. When money came out of the market (and the market sagged), it coincided with the low interest rates and so money rushed into real estate.

    But the only time in recent Los Angeles history that I can see where the market dropped significantly was after the Northridge earthquakes.

    Seems like there can't be a crash until there are no buyers. But everyone who missed the run-up while renting still wants to be a buyer - maybe even more now than ever.

    So while there is no real fundamental cause for the run-up and despite the fact that people will start foreclosing - I think buyers will rush in at every opportunity. The rates today are still better than they were in 2003.
     
  73. TheDudeoLife:

    I am totally thinking the same thing. I live in San Francisco, and a tiny and ok-looking condo in my neighborhood is easily over $500k. Even though people tell me that houses are almost always going up in SF, I just cannot logically feel that paying that much money for such a tiny place is a right thing for me !

    When I went to Tokyo last November, condos in good neighborhoods (not the most expensive areas) of Tokyo was about the same price as here, or even cheaper, which is very surprising to me for knowing how expensive housing used to be in Tokyo.

    While I don't know much about real estate neither in U.S. or Japan, when the bubble burst in Japan in 1988, I believe the general public did not feel much of the pain (investors did, of course) or took it seriously until at least 1993 or so. Since then the real estate market there has kept declining over 10 years until only recently value in some areas in Tokyo start going up. Through the while time, there are many people saying in each year that the market hit the bottom and purchased their house only to see their house value going down.

    Again, I'm not familiar with real estate markets, and U.S markets are definitely different from Japanese, I am inclined to think that the initial process of going up and down in the real estate market is relatively slow, but that does not mean that the trend will stop and rebound to the other direction.

    Since speculations might have been big part of driving the prices and value up for this recent bubble, it would also depend on how the speculators would feel over the course of next few years or several years....
     
  74. This is an interesting picture:

    http://en.wikipedia.org/wiki/Image:Barrons_shiller_06-20-2005.gif

    related to Japan:

    http://en.wikipedia.org/wiki/Image:EconomistHomePrices20050615.jpg

    I actually often feel Japan is about 10 years ahead of us in their economics. In 1990 I was working as a designer for an American based company that worked with Japan and we were reviewing one project where some of our co-workers were deciding that Japan was trailing our design trends by about 10 years - but I disagreed and proved to tthem that they were actually doing the retro design long before we would even get there. I took this concept a little further and decided it was around a 10 year advancement of our own sense of design. (There's always an exchange of concepts - but this was my rule of thumb.) Then the Japan economy crashed and there was a bit of time back then which I thought "I wonder if our economy will crash in 10 years." See, they'd had a huge tech boom run up. Well, unfortunately by the time it hit 2000, that realization was not at the forefront of my mind.

    But now thinking back on all of that and looking at the housing market figures for japan. It certainly makes me wonder a little bit.
     
  75. 11:28 BONDX Bernanke is concerned over delinquencies in exotic mortgages

    Warns that lenders need to be more transparent offering "full disclosure" on los (Bloomberg)

    11:26 Bernanke says foreclosures in subprime market is a concern for Fed, watching closely - Reuters
     
  76. Please explain to me how a home tripling in price approaches the speculative mania akin to the examples you provided.

    I'm not particularly bullish on RE but it's stupid statements like yours that cause me to rethink my position.

    Where was the SPX in 1989? I'll give you a clue. The S&P was one eighth today's value. Compared to stocks housing prices are hardly a PUMPED asset class.

    Even in this decades huge price run-up, most homes have lagged gold since '02.

    In 90% of U.S. metro's the average SFH can be purchased for under 250k. If you think that's tulip mania then you're a piker.
     
  77. no you're a piker ..under $250k ...maybe on the wrong side of the street... :p
     
  78. LOL. :p

    Street? That's for rich folks.

    With the week I'm having I'm going to be piching a tent on a canal in Sawgrass.

    It cracks me up Cohiba when I hear such whining about high prices in mega desirable areas. Boohooo I can't afford to live on Star Island or in the Hollywood Hills or LaJolla or the Upper East Side.

    Most of ET should be shooting for a home in Gary Indiana.........:D
     
  79. IYR is experiencing short covering rallies, imo

    sub-prime mortgage loan problems are bad, but not as bad as first thought, yet....

    my guess is a solid bottom has been put in NFI and AHM...

    not unlike the bottoms that are now in for the home builders, imo.
     
  80. Gates Foundation just sold off ALL homebuilding stocks today.
     

  81. source for this?
     
  82. Ill say it again, when less than 5% of the public can afford a home without extremely low interest rates combined with insanely loose loaning standards, how the hell are homes prices going to go up in hot areas like san diego???

    Who's gonna buy them? With the population moving away, and wages flat or down when considering inflation, the only thing supporting this market in my opinion is "panic buying". People who think this is their last chance to ever be able to own a home in the hot area.

    Also known as bag holders :D

    RE market will be very lucky if the economy keeps cruising along so its swimming against a strong current which keeps it propped up.

    Im already seeing homes selling at 2003 prices around here. Its sporadic. Price per square foot jumps all over the place. Sorta like the volatile top of a quick run up in a NAZ stock before it plummets.
     
  83. My wife works for Indy Mac bank in accounting.
    There is a hiring freeze. If someone leaves position stays unfilled. No bonuses and no yearly salary increase. Most of the personal has been moved from Los Angeles (Pasadena) to Austin TX. This is just FYI. Most of the people I know refinancing from Interest only into Pay Option (which is Neg. Am.) just to keep monthly payment low.

    It is my understanding that not hiring and not increasing salary wages is good for the financial statements and for the stock market. Is it good for housing?

    What is total percentage of home owners invested in the stock market? Any place to find that info?
     
  84. http://today.reuters.com/news/artic...RTRIDST_0_GATES-HOLDINGS.XML&rpc=66&type=qcna

    WASHINGTON, Feb 15 (Reuters) - Microsoft Corp. (MSFT.O: Quote, Profile , Research) Chairman Bill Gates has shed most of his investments in home builders, as revealed in a quarterly filing of the holdings of his charitable foundation.

    The Bill & Melinda Gates Foundation Trust showed a strong interest in the industry, according to a filing in November. It took stakes in at least seven home builders, only to quickly divest in those companies, according to a filing on Wednesday that disclosed the foundation's holdings as of Dec. 31.

    The overall value of the holdings dropped about 4 percent to $5.9 billion.

    KB Home (KBH.N: Quote, Profile , Research), Centex Corp. (CTX.N: Quote, Profile , Research), Pulte Homes Inc. (PHM.N: Quote, Profile , Research), Lennar Corp. (LEN.N: Quote, Profile , Research), Beazer Homes USA Inc. (BZH.N: Quote, Profile , Research), Ryland Group Inc. (RYL.N: Quote, Profile , Research), and WCI Communities Inc. (WCI.N: Quote, Profile , Research) were dropped from the list of holdings.

    A slew of U.S. home builders reported weak quarterly results last month, saying they did not see an inkling of a rebound in the U.S. housing market.

    Gates, through his foundation, also stepped back from the energy industry, unloading his stakes in AES Corp. (AES.N: Quote, Profile , Research), Chevron Corp. (CVX.N: Quote, Profile , Research), Consolidated Edison Inc. (ED.N: Quote, Profile , Research), Dominion Resources Inc. (D.N: Quote, Profile , Research), Duke Energy Corp. (DUK.N: Quote, Profile , Research) and FPL Group Inc. (FPL.N: Quote, Profile , Research).

    The foundation also removed Ameren Corp. (AEE.N: Quote, Profile , Research), Brookfield Asset Management Inc. (BAMa.TO: Quote, Profile , Research), Scholastic Corp. (SCHL.O: Quote, Profile , Research) and Univision Communications Inc. (UVN.N: Quote, Profile , Research) from its portfolio's disclosed listings.

    The Gates Foundation took on an interest in Respironics Inc. (RESP.O: Quote, Profile , Research), reporting a new stake of 500,000 shares in the maker of ventilators and respiratory drug-delivery systems.

    It also added shares in Wal-Mart Stores Inc. (WMT.N: Quote, Profile , Research), increasing its stake about 50 percent to 1 million shares from 670,000 shares.

    The foundation increased its holdings in Caterpillar Inc. (CAT.N: Quote, Profile , Research) to 1.32 million shares from 335,000 shares. It upped its holdings in DaimlerChrysler (DCX.N: Quote, Profile , Research) (DCXGn.DE: Quote, Profile , Research) to 1 million shares from 666,000 shares.

    It reduced its shares in Great Plains Energy Inc. (GXP.N: Quote, Profile , Research) to 775,084 shares from 1.8 million shares, and in IAC/InterActiveCorp. (IACI.O: Quote, Profile , Research) to 50,000 shares from 670,000 shares.
     

  85. thanks for the prompt response for the source...A very very nice short term capital gain for the Gates' Foundation...Where oh' where will their money flow now...?????
     
  86. No prob.

    According to that article, they lost 4% on their homebuilder holdings before unloading their shares.

    The way I interpret that is a an extreme lack of faith in a turnaround anytime soon for the builders or new home market.
     
  87. I realize Hollywood Hills has a name value - but the homes there are not that much higher priced than other Los Angeles homes which are in safe areas. Since the Hills are much less convenient, it knocks down the demand. Good for people who work form home though.

    At the moment, I would not probably feel safe in an area where the homes were 400,000 or less in Los Angeles. That's twice what I would have said five years ago though. And I say that as someone who spent six years living in those areas with the mugging attempts (1 successful, 2 I ran), car thefts, and vandelisms against me and my property to prove it.
     
  88. In Canada our mortgages are not tax deductible. I always envied our American neighbors with deductible mortgages. However, now I question the value of the American policy.

    What I see is that housing prices become inflated because of the mortgage deduction. In Canada there are some high housing prices, but nowhere near as high as they are in the USA. So even though Americans might get a deduction for their mortgage payments, the payments can be higher so the net cost for housing might be about the same.

    Making a mortgage deductible doesn't provide a lot of value to the economy. In Canada as in the USA, investment loans are deductible. Investment in business as opposed to housing should provide for a lot more growth for the economy.

    Even though it might be better for the country, any politician that ended the deduction for mortgages would be chased out of office right away.
     
  89. Homes are not inflated because of the mortgage deduction. Thats been around forever.

    They are inflated because of the super cheap money that flooded the market after the stock market crash to kick start the economy.

    Coupled with insane lending standards (500K loans without even verifying income), we now have real estate bubble markets in many parts of the country.





     
  90. It's only just beginning.

    People haven't even caught a glimpse or taste of the pain to come.

    Biggest asset bubble in the history of the world, including tulips and dot.com stocks.

    Argue with Shiller at one's own peril.
     
  91. Yes, no way we are even close to over. This will take years to unwind.
     
  92. hmmm. The article is misleading. I interpret that their overall portolio dropped 4%. It seems to me that they were buying the homebuilder late last summer which was near the bottom in the Homebuilder Index, which rallied very nicely through the 4th quarter..+30% or so I think..But I could be very wrong..
     
  93. DOL, it is ambiguous, the way it's written. I agree:

    "The Bill & Melinda Gates Foundation Trust showed a strong interest in the industry, according to a filing in November. It took stakes in at least seven home builders, only to quickly divest in those companies, according to a filing on Wednesday that disclosed the foundation's holdings as of Dec. 31.

    The overall value of the holdings dropped about 4 percent to $5.9 billion."



    But based on the 5.9 billion figure, I think I agree with you.
     
  94. Not only the tax deductibily but especially the no capital gains tax on homes lived in for 2 years, made people use the house as an investment vehicle in many cases. The law several years back was that you "carried" the gains from 1 house to the next but that is no longer necessary. A funny thing I've noticed in the last few years has been the now more used word "home" where 10-20 years ago people would say "house".

     
  95. Well this is probably the truth because this would be the worst thing for me. :)

    Also when I look at the japan home price drop as in the picture I posted earlier http://en.wikipedia.org/wiki/Image:EconomistHomePrices20050615.jpg

    I see 15 years to get back to what might have been normal inflation.... So if we follow that path at all, it will end up being about 15 years before a home starts to turn profit... so the new rule is buy if you want to live there and hold the property for 30 years, don't buy as an investment thinking that your home will take care of you in the future. Unless the future is 30 years from now....

    That would be one way of looking at this data....

    ...pretty much the worst case for me personally, but somehow seems to ring true.
     
  96. People need to remember that the average person lives in a home about 6 years.

    In other words, in the hot markets we will have people moving away, or across town and they will have to sell their homes.

    At which point, prices will come down because the next generation of buyers do not have the same super low interest rates and nearly non-existent lending standards to qualify with. They simply cant get loans at these price levels, so sellers will have to come down to meet them.

    This constant rotation of real estate will lead to the constant grind down until we reach a level that is more realistic and in line with reality and fundamentals.

    I think we will hit 2003 prices within 2 years, wild guess, and then continue down at a slower pace.
     
  97. It might not take the US as long as it took Japan though.

    US always seems to prefer drastic and fast way to cure problems.

    In Japan, culturally laying off people and cutting unnecessary things off have been a hard thing to do, as the government and the community does not want anyone to suffer from major changes like not having jobs, etc.

    Therefore, the entire country is sinking, but people there don't feel strong pains, cause the most of them still have jobs, and thanks(?) to deflation (I know it's not good for the country), things are much cheaper. So over the past 10 or 15 years, people mentality and attitude have changed (they thought that they would reach the sky. ; ), but the living standard has been still good.

    But in the US, unnecessary things and people get let-go, so it hit the bottom faster and rebound from the bottom faster.

    Japan sees the US approach positively, and have been trying to move things a bit faster.
     
  98. Well, that has been historyically true, but new factors could change that. For example - in CA, you pay the tax on your home at the price you bought it. For life.

    So the person who has the 1,000,000 home (not at all uncommon here) that they paid 500k for 3 years ago (very common). They have a life which involves a probably paid off home and maybe 500k / month in property tax. If that person buys a new home, they would now need to pay 1000 /month just in property tax - and that's if they moved to an exactly equivalent home. Now think about the person who bought that 1 million home for 200k. Back when that was maybe an extra 100 dollars a month, I could see it not being as much an issue. I have to imagine it comes into play now.
     
  99. Thats a good point about taxes, but many people move because they dont have a choice.

    Every single friend of mine who has moved away from san diego left because of work related issues.

    Most couldnt find jobs that paid well enough.
     
  100. (Before anyone corrects this... I said "propbably paid off home" - that was meant to be deleted, I originally started with a different example but changed it to the 3 year one because I thought it made more relevant impact.)
     
  101. So a property tax is set based on your purchased price, not on the current value of the house? For a life?

    I've never bought a house, and missed the boat for housing bubble. As of the situation right now, it's hard to believe that the housing market would go up like it had been.

    I have not done math on this, but I am thinking renting might make economical sense than buying in an expensive city like SF. Especially if you want to live in a nice neighborhood...Or does owning a house still give you better financial benefits and security in the long run??? (I am not jumping in this market now, but maybe consider years later.)
     
  102. Don't get married then. She will nag you day and night to buy a house.Women's nesting instincts to own a home are very strong. I have a theory that post 9/11 fears exacerbated the female nesting instinct. Many people made decisions to overpay for homes.. Finanical difficulty is one of the leading causes of divorce. I wonder how many marriages will be destroyed because people made imprudent decisions to buy a home.
     
  103. I can only speak about California. And yes.


    What has happened (here at least) is a paradigm shift. Buying a house used to be thought of like this: It can be cheaper than renting if you can come up with the down payment and can get credit for a loan.

    I don't think that rule works today. Locally I've seen some new apartments that rent for around 3000/ month for a 2 bedroom. A similar type of condo would sell for 1 million or so, let's call it an even million.

    Let's put 20% down. Okay 800,000 load at 6%, 30 year fixed - 4796 / month.

    now add tax - quick calculation is 1% of full price per month - so another $1,000.

    Also, in an apartment, you don't NEED insurance, but for your house you do... That won't be less than 100 a month.

    Oh - and repairs... because your landlord is you now and you have to fix everything. Let's be super conservative and add another 104 a month for that to take us to a nice round number.

    $6000 / month for home with 200k down. (initially $4500 after tax deduction sch. A, but eventually 6k)

    $3000 / month for apartment with nothing down.

    What this, to me, reflects, is exactly that 3 year double in home prices.

    You can write off the interest portion of your loan it's true though.... and you'll be paying a lot of interest at first... but it's true that there may be a 1500 or so tax discount at the beginning which will decrease over time to nothing near the end of the 30 years. (And for traders, you can't trade that 200k anymore.)

    So.... something is wrong here... but that doesn't mean necessarily that anything will happen. Because there is pride in ownership. There are emotional factors. Also - most of the people in homes now got in a long time ago and I betcha they don't have any interest in facing new taxes and such. And they already refinanced at a lower rate during the finance craze. So - this will limit inventory which will keep supply limited which will, in fact, slow the crash. It's not like a stock because you don't live in your stocks.

    I am making no predictions here, just putting numbers on the table for discussion.

    (BTW to the earlier comment about people saying home vs. house - it's because of the proliferation of condos and real estate people wanting to include those and brand those as homes as well.)
     
  104. Thanks for showing this in numbers. I thought that the scenario would be something like this. It's more clear to me now.

    And yes, there are a lot of emotional factors such as pride in ownership, women instincts, etc., so whether buying a house makes sense or not is an individual choice, of course.

    About a year ago, when I was looking for an accountant and I haven't daytrading actively yet (was taking baby steps to learn how to trade), I had an initial consultation with an accountant. I told him that my intension is to become an active trader so I want to find a way to make this as business for tax purpose as well in the future, and asked for his advice on how to save money on tax.

    Two things he said to me - first, people don't make money in day-trading, so don't think about that. second, buy a house. That's the best choice for me to save tax.

    I was like buying a house now??? You save money on interest payments, but what about decreasing value in your house?? Your loss in the decrease might be bigger than your tax saving on the interest !

    I did yahoo search to find out where he lives, just out of curiosity whether he is doing well pursuing his own advice. He lives in one of the undesirable neighborhoods in the city. I should not judge people based on where they live, but I decided not to go to him...
     
  105. does this poor sap remind you of someone you know?

    or his wife?

    http://www.youtube.com/watch?v=Ubsd-tWYmZw&mode=related&search=
     
  106. 2gtt:

    The end all is what he said.
    Those two combined give a sell signal.


    Totally. I agree. :)
     
  107. Wow. Whoever approved making that add should be fired. Is it a joke? If so it might be over the head of most. But... seriously.... that's surreal.

    It's funny to read the youtuber comments completely missing what is really scary about that - people marching like lemmings into a future bankruptsy - and instead focsing on the buying being "p-whipped."
     
  108. What happens to the home owner when their subprime lender goes broke?
     
  109. Women have always wanted a home. That is the main reason they marry. Home and Kids.

    It was the 1% interest only, no doc loans that caused the problems, not some new paradigm shift in women's nesting instincts.

    John
     
  110. I would guess that some other lender buys the loans. Someone please correct me if I'm wrong.
     
  111. I imagine you are right.

    If the subprime lender goes belly up for say 30 cents in the dollar in an asset fire sale, the home owner's mortgage of say 300K is effectively being sold for 90K.

    It is a great pity that the home owner is not offered the opportunity to better this offer.
    They could then approach another lending shop or bank with the deal as they would no longer be subprime since they now have equity in their home.
     
  112. I would never, and I mean never let me RE agent sway me like that. That's just laughable. I remember when were pre-qualified. Oh your fine you can afford to spend xxx amount more if you like. No thanks I said.

    I have the chance to speak to a few self made multi millionaires. One of them said something I always remember.........No one cares as much about your money as you do. I think the saying goes a fool and his money are soon parted. Perfect for this sucker, uh I mean commercial.
     
  113. Basically all subprime lenders sell their paper to another lender. I would say that possibly 10% is held by the original lender at most. A majority of the time either HSBC, Countrywide, or another huge company purchases the paper. If the lender goes into bankruptcy (which has been happening to quite a few recently), then the paper is picked up by another company. It is not like there is a call for the money by the lender if this happens. It also does not effect the term of the loan.

    I saw someone mention on here that the borrower should be able to renegotiate the deal. This is not an option and shouldn't be. It would be a disadvantage to the company that is willing to purchase the paper in good faith. They could refinance if they like, but if their credit situation has not improved, the refinance is pointless. Not only that, regulations are getting much stricter in the subprime market because of all the bad paper floating around.
     
  114. Check these prices & charts out.
    http://www.markit.com/information/affiliations/abx

    When the market has crashed like this, 20% or more, it's safe to say that the real estate loan market is closed.

    The refinance game is over. No more debt, Americans.
     
  115. Would watch HRB, could be the next one to fall.
     
  116. In recent weeks, warnings from banking giant HSBC Holdings and New Century have shaken subprime confidence further, sparking speculation that a major bank is aggressively making margin calls.
    Accredited Home Lenders (LEND :
    accredited home lendrs hldg com
    has had to come up with more cash after getting margin calls from some of its warehouse lenders, Stuart Marvin, executive vice president at the subprime specialist told analysts during a conference call on Wednesday. See story on Accredited's recent results.
    "We have eight different warehouse lenders; I would say the majority of them are acting very rationally," Marvin said. "There is one that is acting somewhat irrationally, although I won't mention them by name. We have migrated the fundings away from that warehouse lender to one of the other seven until they begin to act more rationally again."
    Industry publication National Mortgage News said this week that Merrill Lynch has been making margins calls. A Merrill spokesman declined to comment.
    In late January, J.P. Morgan Chief Executive Jamie Dimon noted rising defaults in some of its riskiest home loans and said the bank had largely exited the subprime business.
     
  117. Knew I sold out of my NFI 20 puts to soon - was satisfied with my 300% return but could have had nearly 1000%. Didn't want to be greedy, etc...

    Rats.
     
  118. Just amazing how fast this subprime junk can fall. So credit-default swaps have widened already 1000 bps. Who can afford to take a loan at 15%+??

    Bloomberg reports that Peter Schiff says the subprimes are going to zero.
    http://www.bloomberg.com/apps/news?pid=20601087&sid=a3VtwSIcEGAo&refer=worldwide

    Roubini is following this closely in his blog. Here's the latest piece, a nice summary.
    http://www.rgemonitor.com/blog/roubini/179416

    But who is holding all this junk?? There's (almost) a trillion dollars of it floating around somewhere. Enough to blow up quite a few banks and hedge funds.
     
  119. 1 trillion, if concentrated appropriately, could sink the system.

    It makes the LTCM debacle look like a pimple on an elephant's ass.

    I believe total hedge fund leverage is about 1.5 trillion.
     
  120. [​IMG]

    subprime
     
  121. is it true insider selling in corporate america is in the high end, historically? I know insiders were selling in the housing sector long time ago...
     
  122. Where to find info...

    1) Which stocks are most affected by this meltdown?
    Which liquid, publicly-traded companies are most dependent on the lending business?

    So far I have gathered this list:
    AHM AHR CFC CHC COF DRL FNM FRE IMH LEND LUM MBI NEW NFI

    2) How have these junk bonds been distributed? Which (and what kind of) institutions have most invested in them?
     
  123. Subprime loans are everywhere. They were bundled and sold to all manner of investors, large and small - through hedge funds, brokerage houses, bond funds, pension funds.

    They're like pixie dust.
     
  124. So pixie dust is everywhere? :)
     
  125. These guys had 75 branches..Thats is quite a little scam operation..

    No more Enron type scams, no more Mortgage fraud...Online poker collusion is now getting harder..

    What is the next big crime...Will car jacking become in vogue again..???

    http://www.azcentral.com/community/mesa/articles/0225mortgageshutdown0225.html


    Nino Brown in "New Jack City": You gotta rob to get rich in the Reagan era.
     
  126. I told you all so...
     
  127. Well, they've been jacking catalytic converters around my area lately from people and the car lots...$100+ a piece to sell...:(
     
  128. Where did all of the loans go?

    Asset Backed Securities is one answer.
     
  129. hhmmm...

    as BSC lawsuit talk swirls...rating agency stocks...mco and mhp are getting pounded

    what a septic tank
     
  130. Houston, we have a problem...
     
  131. Maybe in hindsight giving $700,000 mortgages to $8/hour strawberry pickers was a bad idea....



    American Home Mortgage Shares Plunge
    Tuesday July 31, 2:07 pm ET
    American Home Mortgage Shares Plummet After Trading Resumes Following Liquidity Comments


    NEW YORK (AP) -- Shares of American Home Mortgage Investment Corp. plunged Tuesday after a halt on trading was lifted.
    Shares fell $8.47 or 80.1 percent, to $1.95.

    The Melville, N.Y.-based lender's stock did not trade on Monday because of pending news. The halt was lifted at about 2:05 p.m. after the company released a statement that said it is facing a liquidity crunch and is trying to resolve its credit issues.


    The company said it hired advisers to help it evaluate options, including a liquidation of its assets, after lenders began calling loans and it was unable to pay off debt or borrow on its credit lines on Monday. The company also said it can't fund lending obligations of about $300 million.

    Late Friday, American Home Mortgage Investment said it would not pay the 70 cent-per-share dividend scheduled to be paid that day.

    Some of the company's financial backers want their money back because American Home Mortgage's investment portfolio has lost so much value.

    The lender said it needs to keep its cash until the company gains a better grasp of how bad conditions in the mortgage market are going to become.

    Those conditions include more missed payments on home loans, sagging home prices and less cash available to lenders.

    At least three analysts downgraded American Home Mortgage's stock on Monday.

    A suspended dividend is particularly significant because American Home Mortgage Investment is classified as a real estate investment trust, meaning instead of paying taxes it distributes 90 percent of its taxable income to shareholders through dividends.
     
  132. Happy Birthday subprime.