September 26, 2006

Looks like the California NAR head dude didn't get Lereah's talking points...


Yes, folks, this is what a housing crash looks like. "Hitting bottom" as the corrupt David Lereah would have you believe? Nope. We're just getting started...

Home sales fall dramatically in California

Home sales in California fell 30.1 percent in August compared to a year earlier, the most dramatic annual decline since 1982, it was reported on Monday.

"We experienced the greatest year-to-year sales decline last month since August 1982, when sales fell 30.4 percent," said California Association of Realtors (CAR) President Vince Malta.

"This is another indication that we're in the initial stages of a long-anticipated adjustment in the market. Buyers today have a much greater selection of properties from which to choose, while some sellers are still clinging to price expectations that are no longer valid in today's market."

I also liked this quote today:

"Pop goes the housing bubble," said Joel Naroff, chief economist at Naroff Economic Advisors. He predicted prices will fall further as home sellers struggle with a record glut of unsold homes.

40 comments:

Anonymous said...

The worry is if the decline could become so severe that it would mirror the bursting of the stock market bubble in 2000, which helped push the country into a full-blown recession. That is something Federal Reserve Chairman Ben Bernanke and his colleagues are monitoring carefully.

Mr. Smith said...

"That is something Federal Reserve Chairman Ben Bernanke and his colleagues are monitoring carefully."

And just what are they going to do about it....making some paltry little interest rate adjustments? When an economy is in the middle of a massive debt deflation, few people or businesses are taking out loans- so the Feds little rate adjustments don't mean squat. And we just better hope that the Current Account deficit doesn't come home to roost at this particular time.

Oh. Was that a photo of David Lereah in his party clothes?

David in JAX said...

It's more like the MSM. The little hand crank on the side is for the NAR to turn.

Butch said...

Don't make the fatal mistake that the REIC is gonna go down without a fight.

And in their corner, are a number of 800lb gorillas:

1. The Federal Government (Treasury and Congress)

and

2. The Federal Reserve

and

3. Fannie/Freddie

First off, as I posted previously, Treasury announced in Saturday's Financial Times that they are considering allowing Fannie/Freddie to INCREASE their portfolios of mortgages held directly (in violation of their original charters, by the way) from the current approx. $1.5 trillion. The ONLY reason I can conclude for such an announcement is to use Fan/Fred to soak up more and more FBs mortgages.

Next up is the rumor that Treasury is looking into a mortgage bailout (of the banks of course, but it would actually benefit the FBs as well) whereby ARM debt (approximately #3 trillion on the books) would be swapped out for 30-year treasury debt.

And the Fed? Well, let us not forget that they recently added Countrywide financial to the "old boys club" of primary securities dealers which means that Countrywide can simply had their worthless MBS over the Fed and get "temporary" (TOMOs) loans, which will then be converted to "POMOS" (permanent loans).

Oh, and by the way, the Fed can do the same thing with Fannie/Freddie/FHLB MBS as well.

And let's not forget that Congress WILL enact "RTC II--The Sequel". For all you boys and girls out there who are too young to remember, the original RTC (Resolution Trust Corporation) was created by congress to address the PREVIOUS real estate bust of the 1990's during the $500 billion S&L crisis. The madate of RTC was to take all the shi*box properties and projects from the FBs and sell them off in an orderly manner.

And it worked. Sort of.

Also, at the same time, Greenspan was just getting warmed up in his massive money-printing-bail-out machine and dropped interest rates dramatically in 1990 to help bail out the banks (and Fannie/Freddie too) who were sitting on hundreds of billions (gee, that amount seems so small now!) of impared MBS.

So, in summary, try not to think a straight, linear fashion from boom to bust. Rather, think of it as a 15-round prize fight where sometimes each opponent takes a round.

In the end though, the ENTIRE arena will be burned to the ground along with the fighters, referees, and spectators!!!

Anonymous said...

so what does that mean if, through the creation of an RTC, those sh'tbox properties will be sold in an "orderly" manner; would that mean at a very low price?

Anonymous said...

U.S. consumer confidence jumps to 104.5 in September, topping Wall Street

That's the spirit HomeDebtors. Don't go down without a fight. Be sure and rack up lots of credit card debt this Christmas to make 2007 all the more painful.

Butch said...

Anonymous wrote:

"so what does that mean if, through the creation of an RTC, those sh'tbox properties will be sold in an "orderly" manner; would that mean at a very low price?"

(Reply): I means that the federal government will TRY to make sure that the properties are NOT sold at a very low price. Whether or not they will succeed will be another matter altogether. However, I would submit that the prices will be higher than if the feds just sit back and don't intervene.

And NO, I am NOT advocating for this policy!!! I am merely pointing out that one should be cognizant that it will take place.

Along with the other responses I previously revealed.

brokersleaveyoubroke said...

As I recall you could buy a house for about $ 20,000 from the RTC. That would be a basic ranch style house in Texas in a location where all the oil jobs had disappeared.

brokersleaveyoubroke said...

I read a story about a FB who couldn't afford the payments when his ARM adjusted to 8.5%. He called his bank and asked if he could switch to a 30 yeat fixed. Much to his surprise they said "sure". He went to the bank, signed a few papers and it was done. No appreisal, no title search, no closing and best of all, no cost. I suspect the bail out has already quietly begun.

Anonymous said...

assuming that RTC will happen, i think it would make sense if the properties regardless of the location, will have to be affordable relative to income. after all, price to income ratio is the basic fundamental of real estate and its too wide of a gap has caused this bubble.

Anonymous said...

"the bail out has already quietly begun."

i think the banks may have realized that even if they take a small loss out of this deal, it's way better than having to hold on to the property. it's the lesser of the two evils.

devestment said...

In the end though, the ENTIRE arena will be burned to the ground along with the fighters, referees, and spectators!!!

That is right. At the end of the last bubble there was NO ONE LEFT STANDING!
I am still seeing a couple sold signs here in LA. It takes time to flush out every last dollar and send the economy to its knees so that the only ones left are the ones that are truly rich. You will see that there just aren’t as many of them as there appear to be.

Alan P. said...

brokersleaveyoubroke,

link please.

Anonymous said...

If you REALLY think about it, banks already own a hugh percentage of homes in direct violation of their charter.

It's basically illegal for banks to hold onto property any longer than they have to after a foreclosure. So what they are doing is giving the properties out to people with no down payment who now have no equity or negative equity. I mean, if a homeowner has no equity in the house, who REALLY owns the property. The BANK. Homeowner is just making interest payments.

Think of this like ENRON. Remember all the off the books companies they owned that were bleeding loses to the tunes of billions of dollars. Banks, but mostly fannie and freddie, now have billions of unrecognized loses on their books. In about 12 months, those loses will start to be recognized and then watch out!!!

hemorrhoidforhousing said...

Sung to the tune of pop goes the weasel..

Prices went up and up
Toxic loans a-plenty
Reality is setting in

Pop goes the bubble!

mr. smith said...

butch-" I means that the federal government will TRY to make sure that the properties are NOT sold at a very low price."

In the housing busts of the 80s, the Feds unloaded housing inventory at whatever the market would bear. They are not in the business of winterizing vacant houses or being rental agents. And they aren't going to hold on to big inventories of vacant suburban RE just to keep prices up.

Oh, and don't forget buyers with actual cash money will be a very rare bird after this event gains momentum.

The Denver 80s bust was like a waterfall of foreclosed properties and the Feds would take just about any legitimate offer just to clear out their inventory and get owners back in those properties.

This coming bust will be far far bigger than the 80s problems. And the USA is in much deeper debt problems at just about every level of the economy.

ecobuilder said...

Butch,

I am agree with you about 800lb gorillas. It worked in 90th, but what would happen now, when so huge twin debt is accumulated?

What would be a strategy for Japan, China and other foreign MBS and Bonds holders? Will it affect our internal market?

Anonymous said...

Here's why I know the San Diego housing market is screwed. Here are 2 data points from the 2 friends of mine who own houses there. Obviously not statistical data, but gives u a flavor of things to come:

Friend #1. Bought his house in 1998 for $190k and watched it peak at $600k in 2005. Only problem is that he's done the housing-ATM and now has a loan for $300k plus a $75k HELOC for $375k total. Meanwhile, prices for his type of house have dropped from $600k to the low $500s. He's in HOUSING PANIC mode cause he's realizing if he doesn't sell soon, he'll have less than $100k gain after the costs of selling. Wants to get out of SD as soon as possible and move to North Carolina where he can buy a house 2x the size for about 30% of the cost. BUT, he's on disability and his girlfriend is making the mortgage payments and won't let him sell cause her extended family (4-6 people) have moved in and they'll have no place to go. He'll be close to $0 in equity by the time they finish arguing about selling.

Friend #2. Oh baby, he's a FB!! Bought a 1 bedroom condo east of San Diego in El Cajon (my wife and I call it El Ca-hood) for $200k at the peak in July 2005. He was sure he would make 20% over the next 2 years and then just refinance to pay off his current $50k+ in credit cards. Unfortunately a 2 bedroom in his complex just sold at a 15% discount from July 2005 prices effectively putting him upside down 15%. Meanwhile the minimum payments on his $50k+ in credit cards have doubled in the last 12 months and he knocked up his girlfriend who just had his kid last month and now needs to pay child support. The only thing keeping him from foreclosure and bankruptcy for now is that he's liquidating his 401k, paying withdrawl penalties so he can afford to live.

Won't last forever though. Here's his monthly cash flow:
-$4k after tax income
-$1k average monthly 401k money

-$1.5k mortgage and association fees
-$2.0k credit card debt
-$1.0k child support

That leaves him with an extra $500 per month to make car payments (just bought an almost new Honda Passport), gas to work (100 gallons per month), pay utilities, eat and other stuff - and he likes to go out alot. I give him about 12-18 months before he runs out of credit with the credit card companies and 401k money....then he starts bankruptcy/foreclosure.

Did I mention his condo-conversion was a former crack house! Honest truth!

Meanwhile, my wife and I live in a nice little apartment in East Pasadena. Beautifully landscaped and well maintained, pool, great neighbors. Rent is about 10% of our after-tax income. We live debt free, drive well-used cars and pack everything away into the market. I can only imagine the kind of stress my friends are dealig with but I told them for years they were living outside their lifestyle but they wouldn't listen.

Now these are just 2 people but gives you an idea of the personal finaces of some. And that neither of these people will sell their house for 6-12 months. So the real pain hasn't even begun.

Cheers!

Anonymous said...

anon 5:59:33,

be prepared, because they will be moving with you guys soon. what are friends for - right?lol!

Stuck in So Pa said...

"brokersleaveyoubroke said...
As I recall you could buy a house for about $ 20,000 from the RTC. That would be a basic ranch style house in Texas in a location where all the oil jobs had disappeared."

Just so! My cousins (both work at home software developers) bought huge places when they moved to Texas in 1990-91. Acre+ lots, 6000 sqft, inground pools, 3 to 4
car garages, nice area, $20-25000,unbelievable! My favorite aunt wanted us to come down and look at some properties but warned us to have cash on hand and not attempt getting a mortgage because there were NO JOBS.
RTC-II will be selling these turkeys for anything it can get, just like the original RTC did, before it was all over the first time.

Anonymous said...

There are soooo many houses for sale in Fallbrook Ca, Northern san deigo county. who in there right mind would buy on now. Southern Cal is trashed and becoming the great northern state of Mexico, and they took it without firing a shot.

Anonymous said...

"Meanwhile, my wife and I live in a nice little apartment in East Pasadena."
I dont subscribe to the 'bitter renter' non-snese but after reading your post and claiming to be friends to these people., I belive you have sucumbed to a case of schendfreude. I think in both cases its not that they bought too much house but that one guy ATM the sheat out of it (bad mistake) and now he owes post-bubble mortgage amount. The second guy also didnt but too much home. 200k amountto what he makes is a good ratio. Its his credit cards that are killing him. So the price theyt paid makes sense to what they make and you are just bitter because you are shut out. Even with a 2 income family, you cant afford PASADENA. Time to head to CHINO. LOL!!

Anonymous said...

"Even with a 2 income family, you cant afford PASADENA. Time to head to CHINO. LOL!!"

You must have a learning disability. The East Pasadena poster clearly stated that they're renting a nice apartment for 10% of their after-tax income. Thus, assuming that to be the case, it's not that they CAN'T afford Pasadena, it's that at the currently extremely inflated prices (which will soon be plummeting back to reality) they DON'T WANT to "afford" Pasadena.

Just because one has some surplus funds is no reason to toss them into a bottomless pit, better known as the Southern California housing market.

Anonymous said...

Anon above:
You pretentious pmopous ass. Dont you know houses only go up? THey are not making any more land. If you dont buy now you will neve own a home. Interest rates will rise. I just zillowed my home and it appreciated another 55k in the last 4 months. I am in SoCal. Real Esatate is ALWAYS a good investment. Suck it and suck it good bitter renters.

Anonymous said...

This is good for a few laughs...

"Anon above:
You pretentious pmopous ass."

Hey, at least I know how to spell. That's a core course at 'pompous ass school.'

"Dont you know houses only go up? THey are not making any more land. If you dont buy now you will neve own a home."

OK, you're kidding, right? Good one. They might not be making any more land, but are they making any more good jobs? Maybe in China and India they are, not in the USA. Most of the productive jobs (e.g., engineering and manufacturing) are either gone or in the process of being offshored. How many pesos will a starter home in Mexifornia be worth in 20 years?

"Interest rates will rise."

I hope so. That will allow those of us who have been fiscally responsible enough to have a positive savings rate to come in and buy some highly leveraged, formerly high priced, property for pennies on the dollar.

"I just zillowed my home and it appreciated another 55k in the last 4 months."

Good for you! You should tap some of that equity with a HELOC and buy an Escalade with blinging rims! What good is your wealth if you can't take it out for a spin?

"I am in SoCal. Real Esatate is ALWAYS a good investment."

With the exception of all the times when it's a bad investment.

"Suck it and suck it good bitter renters."

You sound a little angry there, tough guy? Is your ARM starting to get a little sore?

Anonymous said...

I love that this guy could buy a former crack house for $200K! Where did the crack dealers go, though?
Probably priced out of San Diego.

I forgot that after the stock market investments, house as ATM, and credit cards are used up there is always
the 401K to tap into in emergencies. Thank god that I can liquidate my $27,100 in 401k assets to pay my
grocery bills, restaurant tabs, gasoline and what-not even with the 10% interest penalty.

What do these people with no incomes think they are doing in San Diego? You don't get to keep your
house money unless you *sell* the house. It's called "taking money off the table." Why do people spend
loan money like it's money from a job? Notice how no one goes out and finds their wife a second job when
things get tough?

These guys are just lazy!

Anonymous said...

"What do these people with no incomes think they are doing in San Diego?"

Well, the weather and beaches are nice, so everyone wants to live there. It's also a better place to be homeless than somewhere where it gets too hot or too cold.

"You don't get to keep your
house money unless you *sell* the house. It's called "taking money off the table." Why do people spend
loan money like it's money from a job?"

Maybe they're just following the example set by our deficit-spending 'leaders.' Or maybe it's just the market's way of creating a large pool of 'motivated sellers' for the bust part of the boom-bust cycle.

Bigger picture than RE said...

You peeple think BB is the main guy at the reigns? Nope, it is Paulson and his buddies. It is the computer trading. It is the printing presses.

The FBs are only noise. So what if the GFs (greaqter fools, missing from the HP dictionary I believe) lose money. The ones who sold to the GFs are now in equities. Gasoline is cheaper. All is green going into November.

Anonymous said...

"The ones who sold to the GFs are now in equities."

Could be. That would explain why the stock market is up on the eve of a recession (or worse). That, and the expectation of various (inflationary) government bailouts and interest rate cuts.

"Gasoline is cheaper. All is green going into November."

Exactly. Funny how gasoline went down by something like 65 cents a gallon just in time for the Repugs to (try) to hold on to control of Congress? Will we see $4 next year?

Anonymous said...

Exactly. Funny how gasoline went down by something like 65 cents a gallon just in time for the Repugs to (try) to hold on to control of Congress? Will we see $4 next year?

Try mid november, right after elections

Anonymous said...

"'Exactly. Funny how gasoline went down by something like 65 cents a gallon just in time for the Repugs to (try) to hold on to control of Congress? Will we see $4 next year?'

Try mid november, right after elections"

Oh well, my car gets pretty good gas mileage. It'll be worth the price of admission to see the SUVers get theirs.

Shakster said...

Butch--
If you are right about the ARM swaps for 30year,which you are,then it smells like a deliberate "Bait ,and Switch".
They(Greenspan,Central Banks,and Goldman Sachs)don't do anything too short sighted.The ponzi scheme as an art.This forces,or more accurately pits anyone with an ARM in a corner,over a barrel.They will be forced to accept locking in a Higher rate,LOCKED.Then when the lower rates and higher inflation kick in the ARMs won't hurt the markets as bad.

dan said...

It is just amazing how many of my neighbors with homes on the market are "holding out" for the
price "they deserve". Man they are going to chase this hissing bubble all the way to the bottom.

Anonymous said...

Home sales in California fell 30.1 percent in August compared to a year earlier, the most dramatic annual decline since 1982, it was reported on Monday.

"We experienced the greatest year-to-year sales decline last month since August 1982, when sales fell 30.4 percent," said California Association of Realtors (CAR) President Vince Malta.
------------------

I almost want to say: Big Deal. Home sales and prices were way too high the last few years. FOR NOW, they are jst returning to normal.

Let's see what happens.....

Anonymous said...

2 me, THIS is the biggest unexploded bombshell just sitting nose first in your living room:


Report Slams Fannie Mae
U.S. Regulators Find Accounting Failures At Housing Financier


By David S. Hilzenrath
Washington Post Staff Writer
Thursday, September 23, 2004; Page A01

Anonymous said...

ANON 12:03
Please look up the definition of SARCASM you lame little douchebag.

Anonymous said...

"ANON 12:03
Please look up the definition of SARCASM you lame little douchebag."

Whoah! Easy there, Keyboard Kommando! Maybe if you concentrated on improving your writing skills, instead of on insulting people, others would actually know you're trying to be sarcastic. Otherwise, you just plain sound stupid.

Anonymous said...

Maybe if you would stop fucking around on these boards wishing bad times for your friends and focus on your own life, you just might own a home one day.

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