It seems anytime I hear someone who was directionless in their career get a new job in the past year or so, it was always in the exciting world of mortgage banking
Pack your boxes folks. Time to go back to Wal-Mart.
Maybe it was the way Alan Greenspan uttered the word "froth" this summer. Or maybe all the doom-and-gloom newspaper articles finally sank in. Whatever the cause, sometime during the last quarter of 2005, the housing boom peaked
Suddenly the mortgage industry's lending machine looks like an eight-cylinder engine crammed into a tiny Ford Focus. During the past few years, the industry built up enough capacity to pump out $3 trillion worth of loans a year. Now retrenchment is in the air
It gets worse. As mortgage demand has slowed, price competition among lenders has heated up. "There are some competitors who are pricing irrationally," says Stephen J. Rotella, chief operating officer at Seattle's Washington Mutual Inc. (WM ), the nation's third-largest home lender.
January 06, 2006
As housing slumps, the roof is falling in on the overbuilt mortgage industry
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12 comments:
"Time to short the lenders?"
I've been in and out of a short position in Countrywide (CFC) since I sold my place in October. Can't believe it hasn't been cut in half already.
I am starting to think that either I am simply too well-informed for my own good making me way too early (like shorting techs in 1998) or that maybe the thinking on The Street is that foreclosures on multitudes of FB's a year out will continue to generate mortgage business too.
I gotta say I am especially appalled by its performance over the past three days (did the FOMC say something everybody didn't already know?), OTOH it's virtually the same insane behavior as the three days after the Dec 13 FOMC meeting itself; a full repeat would put it back to pre-FOMC levels in another week or so.
CFC tends to announce its monthly application figures on the 8th of the month. My best case scenario: nasty numbers on Monday followed by a downgrade or two Tuesday by brokers needing an excuse not to be holding these for any part of 2006 (a la Lowes downgrades the first trading day of the year) and a 10% haircut by Wednesday. Ah one can dream.
(I gotta figure out how to get that "create an account" link to work. It issues a "javascript popup" command which somehow gets blocked deep in the bowels of my IE 6.0.)
Shorting is risky business. This bubble may still have legs.
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My neighbor is a mortgage broker. She has the common sense of a stapler. We actually got into an argument because she is always telling me to buy a house without understanding my situation. I encouraged her to buy in this bubbleicious market to which she said it will never go down, only up up up. I think I'll pick her up a application at the shoe carnival next time I'm there. She's going to need it.
The only thing riskier then investing in a bubble is trying to short one. Huge profits can be made but you open yourself to enormous risk. The stock market of 1929 had a huge run-up at the end in part by breaking the backs of shorts.
I wouldn't short this market - too unpredictable. I sold too early too, but I'm glad I'm out and that money is doing good things in this economy. It must be said that I've tried to discourage good froends from making poor financial committments, but my friend's wife's best friend is a newbie real estate broker. She'll get freaking reamed in the coming year, but unfortunately convinced my friend's wife that it's never going to go down. Maybe we'll buy the loan out.
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RickJ
An interesting read...
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