HSBC moved $10 billion from the "denial" column straight to "capitulation" the other day.
The entire subprime industry, which fell off a cliff in the past few weeks, went from "euphoria" to "despondency" overnight it seems. And the contagion will spread. It always does during a the mania unwinding stage.
1.9 million American homes currently listed in foreclosure are in "desperation" stage.
2.2 million Americans who took out toxic loans and are expected to default, well, they've gotta be in "fear" stage now if they're paying attention.
Millions of REIC employees / contractors / commission hungry sharks are in "fear" stage today, wondering when the axe will fall, and how long they'll have to eat ramen.
The 2.1 million homedebtors with an empty home on the market and no buyers in sight have gotta be in some stage of "fear", "desperation" and yes, "panic" today.
One would-be real estate mogul who is now selling off his portfolio of failure and days away from bankruptcy and a knock from the FBI, well, even he's evidently moving past denial lately.
HP'ers, you'd have to be insane, clueless, corrupt, stupid and seriously the greatest fool on earth if you're still in "euphoria" or "anxiety" stage. Man, the train left the station, a long, long time ago. When will Americans (and the world) finally get on board? Or are they?
February 18, 2007
Stop denying Denial. It's Fear my friends. Fear.
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I recently saw that the US housing stock is around 120 million homes. Adding the foreclosed & vacant properties that comes out to about 4 million or 3-4% of the US housing stock. How does this compare to historical norms? While numbers in the millions give the impression of significance, if the % is w/in historical average then we're not that bad off? If its above, how does it compare to past RE bubbles & other tough times for RE, e.g. the Great Depression? Anyone know prior stats so we can get a better perspective of the gravity of the situation?
Keith,
May I add a few more groups who will be severly impacted to your list?:
1. Banks, which have a $3 trillion dollar exposure to real estate and will see millions of homedebtors default and will have REOs piled to the sky
2. Fannie/Freddie/FHLB/private mortgage-backed securities issuers, who will destroyed as homedebtors continue to default and the guarantees that these guys have made are now coming due.
3. Pension funds, mutual funds, money market funds and any other sucker that holds MBS in their portfolios (which also includes foreign central banks such as Japan,China, Taiwan, and OPEC countries)
4. Did I already mention the banks? Well, they have another problem in addition to their $3 trillion in direct real estate loans. They are ALSO sitting on $1 trillion dollars in MBS.
We are talking total losses well above a trillion dollars and pershaps as much as three trillion dollars when it is all accounted for.
Look for the Fed to start dropping interest rates in the next six months, the federal government to step in with debt moratoriums for sheeple homedebtors and "RTC II The Sequel" to create an orderly liquidation of the five to ten million homes dumped back onto the market over the next few years.
Your timeframe is way off. We're, at best, only 2 years into a 10-12 year cycle. The denial stage is next. It could last a year or more.
Houses are still selling in our area.
You have got to remember that Phoenix, Naples, and LA, et.al., do not comprise 99.9% of the U.S. In areas where there has been no housing bubble, there is no place on the chart; it's meaningless to most people here. Now, the credit bubble has hit everywhere, including here, and when that tanks, even though the Fed will move heaven and earth to prevent it, then there will be a place for this area on the curve line of a similar chart.
I know so many people, low to lower-middle income range, who have bought moderately priced houses here for decent, fair prices who, unfortunately, could not even afford or qualify for THAT, in normal lending times.
When all of your bill paying depends on you’re job that’s not DIRECTLY related to housing, housing appreciation or depreciation is meaningless. Will the ripple out from the epicenters hit here, of course, but like a tidal wave, no one here will know it’s coming until it hits the beach!
I dont know if its just an outlying spike in action, but things are begginning to really pick up in my area after a dismal fall.(36830)
Nah.
The put prices (investors betting against) on Countrywide spiked up after NEW crashed but quickly dropped again the next week (Sentiment went quickly to hell but recovered right away).
The housing market is like one of those aliens from those 70's movies. It's going to have to be clubbed to death about 3 times before it's really dead.
Insider selling at Countrywide is happening but I can't post a page showing that since it's an internal web page to my brokerage account (you wouldn't be able to log on to see it).
Though I have no doubt a crash is coming, a lot of optimism is propping up this dead horse. It's like Fidel Castro. They keep hauling him out saying, "Look, he's still alive" but you know it's just a matter of time.
Maybe there is a conspiracy where banks and hedge funds who are about to lose big are desperately doing something in the background to save their asses and buying lender stocks, keeping their prices up, to give themselves more time to divest. Who knows? It's sure strange how the obvious outcome refuses to manfiest.
The second largest sub-prime lender basically just Hindenberged and no fallout? I don't think so.
Now, I could be wrong, but it seems to me that, in order to compete with New Century, the other mortgage lenders would have to have taken the same risks and thus are going to face the same problems.
Tuesday morning I'm buying more LEND and CFC puts.
Can some HPer provide info on how to safely buy forclosed properties.
Let's make tomorrow OUR day!!
Here's what probably happened at NEW.
The accounting department probably saw this coming but since they aren't "closers" their "negativity" wasn't allowed to infect the "closers".
Anyone talking to management was afraid to tell them the bad news. Management types and salesmen types usually aren't too bright and shoot the messenger when bad news happens.
So, there you go. Suddenly management was surprised. Uh huh. Yup. If a financially ignorant shlub like me could see this coming, those guys did too. They just socked away the profits offshore and now folding up their tent and moving on won't be a problem.
David lereahs boyfriend was found nude and passed out in the DC area last night.Local autorities are trying to figure out the details of what appears to be a love triange gone bad.David was not available to comment as of last night.
I don't think we're at fear yet. Leaving aside the majority of the sheeple who are permanently blighted with profound ignorance, the majority of the financial media is still blabbing about the 'Goldilocks economy'. Every blue moon or so someone like Nouriel Roubini lands an interview, but the majority of the verbage comes from people like Lying Larry Kudlow.
That said, a lot of the people who depend directly on the REIC are definately starting to sweat, which is hardly surprising.
BULL! There's plenty of denial to go around still!
Housing starts hit a new low this past month. Typically they do not build as many houses in the winter due to frozen ground, inability to mix mortar, pour cement, paint exteriors etc. If the housing market will get new orders it might start to build in the spring, deliveries of new homes were greater in the spring and summer than winter under usual circumstances.
I cannot feel the pain of home builders in Phoenix, Vegas, Denver, Cape Coral, holding extra home and land inventory and stuck with the interest and property taxes,etc. The home building business has always been a cyclical industry.
Typically I have read that the price of an investment home should be no more than 15 times the amount of annual rent or rent less some of the condo fees of comparable properties in order for it to qualify as a candidate for an investment/rental property. Due to tax considerations home owners buying a primary residence might tolerate higher prices.
Housing corrections frequently resulted in recessions. So far no recession seems to be occurring.
There were renewed worries that some of the world's largest oilfields are nearing peak stages of production or under declining production curves. The US government seems to have wanted to get into Iraq to look for oil when in fact spending the 300 billion dollars consumed so far in the Iraqi war on coal to oil technologies would have yielded more oil for the US than what Iraq is now exporting.
The president seemed unable to calculate the costs of his war, nor able to predict the outcome of his actions. Bush was not using high moral standards to produce his invasion plans.
"Great is the guilt of an unnecessary war," John Adams.
I own a house and rental properties around salt lake city utah and things are still selling for more than last month and last year. Anyone tell me different about UTAH UTAH UTAH??????
My house i owe only 50,000 with a 30 year 5.875 and rental property with over 50% equity and the rents easily cover all expenses. BUT this spring i will begin to sell all rentals to californians and look for other investments.
Up here in Seattle we are lagging by a half year or so. I would say we are still in "Denial" stage up here.
--SeattleMoose
Here is the real picture in CHI suburbs what REIC is hiding :
Palatine il 09/25/2006
Here is a quick overview of the single family market in Palatine, IL. There currently is about 13 months of inventory.
currently on the market: 309
currently under contract: 39
closed in the last 90 days: 69
est. inventory: 13 months
lowest price: $239,900
highest price: $1,695,000
Here is a quick overview of the condo market in Palatine, IL. There currently is about 13 months of inventory.
currently on the market: 345
currently under contract: 51
closed in the last 90 days: 80
est. inventory: 13 months
lowest price: $84,000
highest price: $639,000
TWO MONTHS LATER 11/30/2006
Here is a quick overview of the single family market in Palatine, IL. There currently is about 19 months of inventory and the increase is most likely seasonal.
currently on the market: 270
currently under contract: 38
closed in the last 90 days: 43
est. inventory: 19 months
lowest price: $235,000
highest price: $1,695,000
Here is a quick overview of the condo market in Palatine, IL. There currently is about 22 months of inventory and this increase might be more than just seasonal.
currently on the market: 314
currently under contract: 34
closed in the last 90 days: 42
est. inventory: 22 months (9 month increase from the 9/25 update)
lowest price: $94,900
highest price: $525,000
Wow, !
Keif,
You’re getting a little ahead of yourself, the cycle may be a little advanced in places like CA, FL, and AZ… Here in the Mid Hudson Valley NY area, we just entered the Denial phase about a month ago and will most likely peak in late spring when reality wont bring the expected bounce, Summer and Fall will likely be the ‘Fear’ phase, because the number of homes on the market will the greatest in recorded history, and in winter of 08 we’ll begin hearing the MSM talking heads advising not to buy unless you can afford to sit on a property for years (next up cycle) before making a profit.
Look for the Fed to start dropping interest rates in the next six months....
+++++++++
I just don't see this happening. The dollar is NOT the yen, and America is NOT Japan. The US dollar is the world's reserve currency. I can't believe our government will allow the value of the dollar to crash and burn, thus destabilizing the world economy and effectively ending the U.S. global empire.
The realtors i have talked to in seattle say house prices in seattle will always just go up,because we are special
I think that it is funny that people talk about all the places that didn't bubble will be the great saviors of our economy.
I lived In Missouri from 2001-2005...yup...we had no bubble.
But I had a roommate.
He worked for one of those "lenders"
He said the majority were writing the same neg am loans.
So...the moral of that story is that you don't have to live where there is a bubble to be screwed...all you have to do is live beyond your means through toxic loans.
"I just don't see this happening. The dollar is NOT the yen, and America is NOT Japan. The US dollar is the world's reserve currency"
I agree. While "Chopper" Ben Bernake has stated on numerous occasions that dire economic situations can be mitigated by "opening the spigots" and flooding the system with liquidity, that is not a viable option at this stage.
Our currency has already been devalued substantially and with the increasing popularity of the Euro, it is difficult to simply pump more money into the system without providing a counter-balancing incentive.
Since a large portion of our debt derivatives are held by foreign nations, a further devaluation of our currency means that we need to raise interest rates to ensure that China and others buy our dollars.
Did anyone notice what happened at the most recent treasury auction? The Fed had to increase the interest rate of the 10 year note in order to promote buying.
Essentially at this stage, the Fed is stuck between two situations:
- Situation 1: decrease interest rates and print more money in a desperate attempt to soften the housing landing
- Situation 2: continue to supply the market with cheap dollars but increase interest rates to ensure that the debt derivatives are purchased.
Between a rock and a hard place. Essentially, it comes to either sacrificing parts of the housing market that are in bubbles or sacrifice the economy. Which do you think they will choose?
From their standpoint, they know many folks will be flattened by this housing debacle. But they are betting on the fact that they can keep the economy limping through it. As long as the majority of Americans can pay their mortgages, the worst case scenario for them is the house loses value but they can continue to "own" it. Note that in places like California, Florida, Phoenix and Las Vegas, we will likely see far more dire situations as a massive increase in the number of foreclosures causes those states to enter far deeper recessions, or perhaps even depressions.
Anonymous said...
The realtors i have talked to in seattle say house prices in seattle will always just go up,because we are special
February 18, 2007 9:01 PM
HUH, that's what the realtors here in DC are saying. But then what explains my friend buying a TH for 56k after being listed for 630k for 6 months and where everyone who bought in his plan the last few years paid nothing under 600k!!
keith, you were ahead of the curve in 2005, you're still ahead of the curve.
the masses are beginning the anxiety stage about now.
@devestment
One of the major restaurant chains is already in trouble. They own Don Pablo's (doing really badly) along with Hops and Romano's Macaroni Grill (does well for no reason I can fathom--the product is awful, as bad a ripoff as TGIF).
They have been running "value three course meal" promotions in the last few months. Don Pablo's is really crashing and burning. They've dropped the quality of the food, so I won't be back (it was nice with the old quality and coupons).
These chains were on the pricier side of sit-down chain food. The Darden crap-asbord (Red Lobster, Olive Garden) still seems to do okay, perhaps on the strength of major advertising to their dumb-dumb lower middle class clientele. (Yes! Let's overpay for overcooked, unhealthy food.)
We're on the watch for other chains to be in pain. Target did horribly last year, so did Walmart, so did GAP; the money just isn't there (also the product didn't have lustre, imo). The little woman works in produce (direct sales to restaurants/schools). Thanks to external events the wholesale prices will only be going up this year ... ouch.
We are at the end stage of denial overall nationally, with some variation depending upon the regional market. When the Silent Spring of 07 manifests itself with a massive surge of inventory and buyers still standing on the sidelines and/or demanding 10% price reductions + incentives/closing costs then we will see the absolute end of denial and entry of the fear stage, approximately June 07. Then fear to desperation transition will occur in the fall/winter of 07. The smart money is cutting price now to entice buyers only in borderline denial. Smart buyers will wait for blood in the water this fall as they will likely see 03 pricing, its not the optimum but hell if you've got to move and prefer ownership over renting fall 07 will be the best buyer's market in 5 years.
The Fed will try to inflate out of this mess. There won't be a bailout because the gov't is too deep in debt. We're running a $400 billion annual deficit. Inflation will ease the deficit and ease the crash. There will still be many casualties though
What is an HPer??
"my friend buying a TH for 56k after being listed for 630k for 6 months"
What's a "TH"? Toll House? If so, how?
I agree with Keith, I think it has finally reached the fear point in this cycle.
I had lunch with a friend last week, who bought a second "retirement" (she and hubby are in their mid 40's) home and when I mentioned everything is slowing down, she said nothing, no comment of any sort. I mentioned then that housing was slowing down, and again, not a word. Change of subject...
I only know one other couple, (my SIL and BIL) who will be shopping for a house in the next 1-2 years, other than that, everyone I know has already bought houses in the last 6 years, and are now struggling with loan resetting, or sticker shock from tripled property taxes.
Fun said:" agree, fear combined with impending doom should be the mindset of the day. However, why is it I sense the media is still intent on minimization, denial and nimby"?
All areas are different, but here in Reno the newcaster actually came out and said "if your house isnt selling, "it's because the price is too high"! The RE talk around here is very negative. Nothing is moving, two houses on my street that were for sale, are now rentals.
In the bay area, homes are still selling but priced lower than last year.
Everyone is waking up if they watch TV that sales are slipping and forclosures are up.
Let the games begin.
Anon said:"They have been running "value three course meal" promotions in the last few months. Don Pablo's is really crashing and burning. They've dropped the quality of the food, so I won't be back (it was nice with the old quality and coupons)".
My hubby and went to Chevys last week (special price meals) and the food was horrible! Just two months ago it was good. Seems like it went downhill overnight - we arent going back...ever. No more chain restaurants, we'll dine only at small family owned restaurants from now on.
Agree, all the food chains restaurants are in budget tightening mode, I think half of them will go under due to 1)Poor food quality 2)No customers.
"We're on the watch for other chains to be in pain. Target did horribly last year, so did Walmart, so did GAP; the money just isn't there (also the product didn't have lustre, imo)".
I think all the major stores are in trouble except for Ross and those like discounters.
A TV show exposed Potterybarn selling Mahogany coffee tables for $700 which were then sawed in half to show they were not mahogany at all, only poplar wood with 1m of "mahogany" veneer.
I hope Pottery barn and other majors have seen the last of the "big spenders" for the rest of this decade.
I think you're ahead of the curve a little too, Keith. The NAR is announcing, yet again, that the market contraction has reached bottom and the MSM is still reporting NAR pronouncements as though they have some credibility. The media is still in the denial stage and all most people know is from the media.
There are stories here and there that identify the flaws in the conventional rosy scenario but I feel as though they are given short shrift.
As impossible as it may be to deny the housing bubble, people are still doing it and keeping their fear in check. I think fear will only really set in when more foreclosures occur and when everybody knows someone who has been caught in a toxic mortgage.
I am awaiting the day when the buzz at work or at some cocktail party is all about so-and-so who is going through foreclosure. That's the tipping point.
Chet -
Great story! There are volumes of education in the glimpse of conversation you shared!
Let your Portland bound relative know that I'd be willing to write him a check for $ 300 K by Wednesday if he decides he can't stand the soggy weather here in AZ and just wants to get out!
(it's raining today)
The $ 2K profit and $ 100 K over mortage should be more than enough to get into any kind of mortgage in Portland. That is, if he hurries and beats the coming financing reform.
Actually, with $ 100K in his pocket, he should be able to buy the house, pay 0 down, and with some creative "cash back" dealings have about $ 150K total to fund a retirement account!
Guys, let's stop bashing TGIF. It's the most standardized mid-tier national chain out there. I mean really, the Pot Sticklers are the best Americanized Asian dumplings around (Read: for western tastes) and I can't really complain about the "Jack Daniels" sauce on the steaks. I mean c'mon, what else can you expect from a chain? At least it isn't IHOP where outside of the Aunt Jemima pancakes, the chicken/beef are vulcanized rubber.
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