April 28, 2007

At this point in the housing crash, HP recommends everyone see "The Pursuit of Happyness"

Just read Casey Serin's latest post (he's alive) to get a glimpse how tough it's gonna get on a personal level for millions of people during the crash.

I also would like to point HP'ers to our official charity, the Denver Rescue Mission, which helps the homeless in foreclosure-central Denver Colorado. Please think about giving, even if it's just a couple of bucks.

The housing crash is here folks. There's no denying it. Lives will be ruined. Families will be torn apart. Crime will soar. The divorce rate will go through the roof. Bankruptcy will become a way of life. Neighborhoods will be decimated.

And the builders, mortgage brokers, bankers and realtors got paid all along the way. Never forget that.


Anonymous said...

Local Housing analyst in Vegas say's, 'end of last year 2006 was the bottom of the housing market!

Today, same idiot say's, 'it was just wishful thinking'!

Glad to see the experts at work!

Anonymous said...

Watching that video made me feel bad for the kids involved. This is not an endorsement for a bailout, just a sad observation. For some strange reason, Americans think wealth and prudence are whatever the herd says it is. If 'Everyone' is getting ARM's and NegAm mortgages, then they must be good, right? That so many people cannot think for themselves w/ regards to money-matters is a sad commentary on our society.

FlyingMonkeyWarrior said...

The majority of the BK's are the 55 and over Boomer segment.

I thought they had taken all the money from gen x and Y etc.

Well if they did they already spent it.
Bankruptcy among seniors rising faster


Americans over the age of 55 are filing for bankruptcy at a faster rate than the general population as growing mortgage debt and higher health care costs make them more vulnerable, a new study shows.

The trend of rising bankruptcies among older Americans is likely to continue for the foreseeable future, according to the study's authors, John Golmant and Tom Ulrich, researchers at the Administrative Office of the U.S. Courts.

They found that the aging of the population alone does not account for the rise in older filers and that "bankruptcy courts can anticipate an influx of new bankruptcy petitions as the baby boom generation continues to age."

Senior researcher Jose Garcia, who examines consumer finance trends at New York-based Demos, said rising costs for housing and health care, especially prescription drugs, have made older Americans more dependent on credit. This, in turn, makes them more vulnerable to financial rough spots.

"We see general trends that will definitely impact coming generations," Garcia said.

The ABI Journal study used data from the courts and public records to track how filing rates among different age groups have changed over time. In 2002, the percentage of Americans older than 45 who entered bankruptcy reached 39 percent, up from 27 percent in 1994, the study found.

The steepest increase in Chapter 7 filings occurred among people older than 55.

Golmant and Ulrich also found that the median age of those filing for bankruptcy rose to 41.4 in 2002, up from 37.7 in 1994.

The youngest Americans, meanwhile, had a drop in filings, with 4 percent of Americans under the age of 25 filing for protection from creditors in 2002. That fell from 11 percent in 1994.

Golmant's and Ulrich's report, "Aging and Bankruptcy: The Baby Boomers Meet Up at Bankruptcy Court," will be published in the May 2007 issue of the American Bankruptcy Institute Journal.


FlyingMonkeyWarrior said...


It is Happiness. But I publish typos all the time, so whatever.

Anonymous said...

I almost feel sorry for the little bastard.

But then I remember that it's thanks to people like him that makes it so hard for the average person to buy a reasonable house right now.

The bubble seems to be deflating quite nicely, however. I'm surprised you haven't posted a taunt post regarding US Q1GDP=1.3 yet. Or did I miss it?

Anonymous said...

Why would a liberal like that movie? It's about a black man who achieves success without the assistance of government. Keith you're really slipping.

Anonymous said...

New trend in Canada bubble markets (vancouver) - Idiot parents "investing" in homes for their infants so that "they can get their property now, before it's too, because the prices will just keep going up"

I kid you not - it's reported on Saturday report, on the CBC


hurry up and watch/capture it before tommorow.

Anonymous said...

For some strange reason, Americans think wealth and prudence are whatever the herd says it is.

For some strange reason, HUMAN BEINGS think EVERYTHING is whatever the herd says it is.

The thought needed to be expanded.

Anonymous said...

Pete, it's not a sad commentary. Most people can pay their bills, hold down a job and stay out of trouble. They shouldn't have to be savvy enough to manage a 401K or play caveat emptor with the mortage lender.

Have you been checking out the new notices coming from your credit card issuers. Most of them say (in 4 point type) that they may change the days in the billing cycle every period. It basically prevents consumers from setting up a payment schedule using electronic bill pay and then forgetting about it.

The second "stick it to em" provision is that the effective interest rate jumps to OVER 30% if a payment is late. I figure this isn't to scare consumers, but is to maximize tax losses that can be written off when people declare bankruptcy or the debt otherwise becomes uncollectible. My bet is this tax savings will far outstrip the extra income Banks book from neg-am draws on mortgages.

It probably wouldn't be a bad idea to highlight the fine print on your credit card notice and send a copy into your elected representative. Let them figure it out. Or better yet, let them bring it to commitee hearing and ask the bank representatives to clear up the confusion. I'm assuming most of the people on here are pretty highly educated. See if you can understand it and then imagine Pete's average consumer having any chance of knowing what they are getting into.

Anonymous said...

That does it,I'm buying a wrecking yard.Sell everything all the FB's bring to the Chinese.I will meet lots of them,buying there cans ,and bottles for crv.Then I will consult for them on how to bust out of the DOLLAR TRAP.

Anonymous said...

Coincidence: just watched Pursuit of Happyness! Despite the happy ending for Chris, can't forget the overflow back at the homeless shelter. Personally, I don't take anything for granted.

Anonymous said...

Americans are going to have to learn the hard way.

I still have friends at work taking out Home Equity money, leveraging themselves to the brim as they just bought their overpriced bubble houses last year.

"Our house is worth 10,000 more than last year?? Woo hoo! Take a loan out and buy shit!".

Anonymous said...

I just heard China is about to go on a spending spree in the U.S., with all the Treasury debt they own.

I hope it stays out of the housing market. Imagine 250 BILLION dollars(25% of their U.S. Debt holdings) injected into the housing industry?
Maybe we WILL see housing prices start rising, just not by the middle class American, but by our DEBT HOLDERS!!!

Scary thought.

THEIR pursuit of happiness?

Anonymous said...

well said pete...

Paul E. Math said...

I can't look at Casey's blog without wanting to reach out and give him a slap. The kid is a complete waste of space. Mind you, he's no more useless than a lot of other people who made a lot of money in RE over the last 10 years and think they earned it. A lot of people born on 3rd base and think they hit a triple.

Anonymous said...

Spending May Take a Hit as U.S. Home Prices Decline (Update2)

By Bob Willis

April 27 (Bloomberg) -- Carol Francis says her customers are less likely to make big furniture purchases these days than they were at the height of the housing boom two years ago.

``The housing market right now is affecting everybody's spending,'' said Francis, a design consultant at Thomasville Home Furnishings in Woodbridge, Virginia, 25 miles south of Washington. Before, ``I had people who would buy two and three bedrooms of furniture. Now many come in and just buy one piece at a time.''

With home prices in danger of falling this year for the first time in at least four decades, Americans are turning wary about borrowing against their houses to pay for vacations, education or remodeling projects. In a reversal of the ``wealth effect,'' people who once viewed soaring home values as a rationalization for higher spending appear to be pulling back.

``We're in a housing recession; it's not over and it's going to spread to other parts of the economy, mainly consumer spending,'' said Paul Kasriel, director of economic research at Northern Trust Securities in Chicago. ``House prices are going to continue to fall, and that's going to play havoc with consumers because it means the home ATM is now draining, it's no longer filling.''

The housing slump helped hold U.S. gross domestic product growth to a 1.3 percent annual pace in the first quarter, the slowest in four years, the Commerce Department reported today.

Consumer Pessimism

Consumers turned more pessimistic this month, a private report showed, as concerns about sinking home values intensified. The Reuters/University of Michigan index of consumer sentiment dropped to a seven-month low in April.

While home sales and construction have been falling for more than a year, the secondary impact on consumer spending, which accounts for 70 percent of the economy, may just be kicking in.

Kevin Logan, senior market economist at Dresdner Kleinwort in New York, says the reverse wealth effect will subtract about 0.7 percentage point from consumer-spending growth this year. He expects spending in the fourth quarter to be 2.7 percent higher than a year earlier, compared with growth of 3.6 percent in the fourth quarter of 2006.

Staying Power

Some economists say the consumer still has staying power.

``People have been a little too quick in looking for the consumer to cash it in,'' said Ethan Harris, chief U.S. economist at Lehman Brothers Inc. in New York. ``Housing wealth looks like it's flattening, not collapsing.''

A rising stock market may also dissipate some of the consumer gloom over lower housing prices, said Joel Prakken, chairman of Macroeconomic Advisers in St. Louis, Missouri.

The first quarter may have been the consumer's last fling. Today's report on gross domestic product showed that personal consumption grew at a 3.8 percent annual rate in January through March. Spending growth is projected to slow to an average 2.5 percent annual pace in the last three quarters of 2007, according to the median estimate of economists surveyed this month.

Francis, 44, said the housing slump has prompted her to change her own home-remodeling plans. ``It does affect me,'' she said. ``I've slowed the renovation work.''

No Meat

She says furniture sales have been weakening for more than a year. ``A lot of people bought houses at a time when they were making $200,000, $300,000'' on the sale of their previous homes, Francis said. Now, they have ``these big, beautiful homes, but there is no meat in the freezer.''

Some homeowners are strapped as their mortgage payments increase after low ``teaser'' rates expire.

John Silva, a software salesman in Raleigh, North Carolina, makes about $45,000 a year and has struggled since his monthly mortgage payment adjusted to $1,205 from $945.

``I have a 20-year marriage anniversary coming up, but it won't be what I had wanted it to be,'' he said. ``We can't even afford going to fast-food restaurants, never mind a nice restaurant.''

Median existing-home prices will drop 0.7 percent this year from 2006, the first decline since recordkeeping began in 1968, according to the National Association of Realtors. Prices in March were below year-earlier levels for the eighth consecutive month.

``Without home prices rising any more, people will become more cautious in their spending,'' said Raymond Stone, managing director at Stone & McCarthy Research in Skillman, New Jersey.

Home Equity

Borrowing against home equity financed 2.1 percent of consumer spending in 2005, up from a 0.6 percent average between 1991 and 2000, former Federal Reserve Chairman Alan Greenspan said in research published this week.

In the last three months of 2006, homeowners took cash out of their houses through borrowing or profit from sales at an annual rate of $386.1 billion, less than half the $801.6 billion rate in the fourth quarter of 2005, according to research compiled by Greenspan and economist James Kennedy.

At Holly Acres, a boat dealership in Prince William County, Virginia, general manager Debbie D'Amico says sales are slowing: ``People are a little bit scared. In this county, home assessments dropped 4.6 percent where every year they've been steadily rising.''

Home prices may fall further as foreclosures in the subprime-lending market add to the supply of unsold homes.

``If subprimes get worse then it'll pull down home prices more, and we'll have a bigger adverse wealth effect,'' said Dresdner Kleinwort's Logan.

With reporting by Bob Ivry and Stefan Whitney in New York. Editor: Rohner (mpg/mfr)

To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net .

Anonymous said...

Title should be "Why This Slump Is Worse".

Why This Slump Is Different
Foreclosures are rising fast, investors are sweating, and lenders are now bending over backwards to keep bad loans alive

First comes the reminder notice that a borrower is late on the mortgage payment. Then the phone calls start. Later a brochure arrives, maybe even a DVD, explaining the homeowner's options. Around month four, there will be a knock on the door.

Don't call them bill collectors. Today, the industry has a softer term, "debt counselors," for the swelling ranks of people who are pounding the pavement trying to stem the tide of mortgage foreclosures. Says Steve Bailey, senior managing director at mortgage giant Countrywide Financial Corp. (CFC ), who oversees the company's $1.4 trillion portfolio: "You need to keep the revenue stream flowing and keep hope alive."

As the housing downturn grinds on, that has become the mantra for everyone from homeowners and lenders to agents and investors. There have been previous busts, but this one is markedly different. Never before have home prices fallen so broadly: Median national home prices slipped 0.3% in March from a year earlier, and the National Association of Realtors predicts a fall of 0.7% for 2007, which would mark the first annual drop since the Great Depression era. And foreclosure filings are increasingly common, jumping 42% in 2006 to 1.2 million, calculates RealtyTrac. There's little relief in sight; in the first quarter, 2 million homeowners were at least 30 days late on their payments, an increase of 26% from last year, according to Moody's Economy.com Inc.

Foreclosure is never an attractive option, but now it's even less appealing. With prices falling nationwide, lenders are wary of holding on to properties whose values could sink further. And unlike in previous cycles, a big chunk of the loans made recently are held not by federally insured thrifts or banks but by hard-charging hedge funds and other big investors that are aggressively pushing lenders to stop the bleeding. What's more, the steep rise in second mortgages that accompanied the boom means lenders in foreclosure proceedings are increasingly fighting one another for the scraps. Such pressures are inspiring some to dream up creative alternatives to foreclosure, from tinkering with loan terms to subsidizing sellers.

Many of the homeowners in trouble are first-timers who bought recently or investors who got in over their heads. Vikki Kuick, a real estate agent in San Diego, has a listing on a three-bedroom condo that the owners bought as an investment property three years ago for $447,000. Payments on their adjustable-rate loans have since gone from about $2,000 a month to $3,800, while their tenant pays just $1,800. Kuick says she has an offer for $370,000, which she has taken to the couple's lenders. If the lenders agree, the holder of the second mortgage would receive a token amount—as little as $1,000. "If it goes to foreclosure, [the second lender] may get zero," she says.

For the first time in years, houses are hitting the market with asking prices below the value of their mortgages. Stretched owners are hoping for a so-called short sale, in which the lenders forgive the difference. National statistics are scarce, but according to a study performed for BusinessWeek by the online agency ZipRealty, there are 1,100 such listings in Miami, nearly 1,000 in Atlanta, and 700 in the Washington area. In Sacramento, real estate agent Patrick Hake counts 1,079, more than 10% of the total homes on the market. "If home values are falling, short sales are better because they can be done cheaper and quicker [than foreclosures]," says Kevin J. Kanouff, head of the bond group at mortgage consulting firm Clayton Holdings Inc.

Quick is good, given the unprecedented pressures lenders are facing. In previous downturns, most loans were owned by federally insured lenders. Now roughly 56% of all loans outstanding, $5.7 trillion worth, have been pooled into mortgage-backed securities, vs. just 12% in 1980. "Wall Street has been very tough, and it's encouraging lenders to act rapidly," says Douglas G. Duncan, chief economist for the Mortgage Bankers Assn. "The faster you act, the lower your losses."

With so much at stake, lenders are scrambling to cut delinquencies and avoid foreclosures. In Dallas, EMC Mortgage Corp. (BSC ), a unit of Wall Street investment bank Bear, Stearns & Co. (BSC ), recently set up a "Mod Squad" team—short for loan modification—of 50 workout specialists who travel the country helping homeowners renegotiate. Citigroup Inc. and Bank of America Corp. (BAC ) have pledged to make a total of $1 billion in new, below-market loans to homeowners in trouble through the nonprofit Neighborhood Assistance Corp. of America. Ocwen Financial Corp. (OCN ), which collects payments on $50 billion in mortgages for other lenders, has recently doubled the size of its loan-mitigation department and has put people on the ground for face-to-face meetings with borrowers before there is a problem. It even pays its staff bonuses if they can avoid foreclosure. Says John Vella, president of EMC: "We want to protect the loan from going all the way south."

That's good for everybody. Each foreclosure costs lenders, the government, and homeowners an estimated $80,000. Even neighbors take a hit, since foreclosure can have a ripple effect on property values. One foreclosure can cut the price on nearby homes by 1.4%.

Still, with so many loans packaged and sold as pools, the industry has tied its hands to some extent. To take advantage of the accounting and tax benefits, many lenders wrote restrictions on the mortgage-backed securities; generally just 5% of loans in such investments can be renegotiated. Some pools containing subprime loans already have delinquency rates of 8% or more. It's possible to change the deal, but it's time-consuming and costly. "What was once a simple, often personal relationship between a borrower and lenders is now a complex structure involving many parties, including services, investors, trustees, and rating agencies," said Federal Deposit Insurance Corp. Chair Sheila C. Bair in testimony to Congress.

By keeping borrowers in houses they never should have bought, lenders could simply be setting everyone up for a steeper fall down the road. But for now the focus is on working out some alternative to foreclosure. With the housing market being buffeted by the harshest storm it has seen in memory, everybody's just trying to hold on.

Anonymous said...

I'm hoping for chaos and the end of the nation-state. Living in this police/welfare/warfare state is boring. A lot of collectivists need to face justice.

Anonymous said...

I wonder if the housing bust will cause a crash in the birth rate, like the economic crash in Russia did in the 1990s.

So far, as of August 2006, things seem a-okay, but the birth rate has a lag of nine months...

Anonymous said...

Nigel wants you to believe this is no big deal. Massive foreclosure trends are just a natural ebb and flow of the industry!

Anonymous said...

And then govt will save the day by offering a new currency, dismantling the United States, and providing the world with free healthcare, housing and food. Utopia here we come.

Dr Housing Bubble said...

Another down cycle and a bunch of easy money will be cleansed like a yearly enema. What most of these people were participating in was the world's largest casino; even if they don't like to admit they were gambling they were. Maybe they weren't doubling down on 11 but the premise is the same. These people were betting on housing going up. That bet was good in 2000-2006, not anymore.

I do feel bad that financial prudence is looked upon by the mainstream media as some kind of disease. They are full of contradictions. You watch a segment on NBC in the mornings and you'll hear about how to cut down on debt for two minutes. Next thing you know you have a commercial pushing CashCall and how they can send you $10,000 for buying a car or smoking pot.

It is a cultural cleansing that we will be facing in the next decade and to be honest, we need it. We are such a consumption economy that most people believe their identity is solely based on their possessions. If this is true and you were king when housing went up, what are you when housing goes down?

Dr. Housing Bubble

Anonymous said...

Maybe Serin can change his blog's name to:


Anonymous said...

>>>Pete, it's not a sad commentary. Most people can pay their bills, hold down a job and stay out of trouble. They shouldn't have to be savvy enough to manage a 401K or play caveat emptor with the mortage lender.<<<

I'll agree w/ you about managing a 401K, but just about everybody here and on every other Bubble Blog I read seems to know instinctively about the toxicity of ARM's and NegAms. Like the old saying goes, if it's too good to be true, it probably is. That saying is pretty popular, but the masses seem to have forgotten it.

>>>Have you been checking out the new notices coming from your credit card issuers. Most of them say (in 4 point type) that they may change the days in the billing cycle every period. It basically prevents consumers from setting up a payment schedule using electronic bill pay and then forgetting about it.<<<

Good! People SHOULD NOT 'forget' about their credit card debt. Log on every month like I do and take a look at it. Don't just "send them fifty bucks" every month and keep on spending (maybe 'digging' is a better word) Better yet, get rid of your credit card if you don't like the terms. If enough people did that, the credit card companies would take notice and start treating their customers more fairly.

>>>It probably wouldn't be a bad idea to highlight the fine print on your credit card notice and send a copy into your elected representative. Let them figure it out. <<<

Yea, and maybe our Representatives can send us all back some pacifiers to suck on while they figure it all out. This is exactly the problem I was talking about: Americans ARE NOT THINKING FOR THEMSELVES!!! The credit cards companies may be A-holes, but it's the consumers who are racking up all of this debt in the first place. You don't need 4-point print notices to know how to live w/i your means. Our 'consumer' society participates willingly and happily. No one is putting any guns to anyone's head to get them into Best Buy to charge the latest HDTV on their big meanie credit card.

Anonymous said...

"And the builders, mortgage brokers, bankers and realtors got paid all along the way. Never forget that."

All these crooks got paid "all along the way" while creating a mania which sucked in millions of GFs who now are the bagholders while all the shucksters slip away with their "transaction earnings".

Really bad karma for all of the above...

Anonymous said...

Did anyone really think for a minute Casey Serin wouldn't publish again???

Cockroaches may be the only known thing to survive a nuclear war, but Casey Serin's blog will too!

Anonymous said...

"The housing slump helped hold U.S. gross domestic product growth to a 1.3 percent annual pace in the first quarter, the slowest in four years, the Commerce Department reported today."

I pity the poor fools who believe the Bush government statistics.

Anonymous said...

I feel bad for the lady in that picture. She has a coat of some kind on. It the picture from Arizona or California? I didn't think it ever got cold there.

The woman should be the poster child for all those people who voted for Bush and his Libertarian theology in 2000 and 2004. We are going to have a country like Mexico or Colombia, a few rich people on top, and masses of very poor people on the bottom.

Thanks Libertarians.

Anonymous said...

"Nigel wants you to believe this is no big deal"

Nigel will soon be unemployed, and working at McDonalds.

Anonymous said...

got no cellular rejuvenation pill today, so i could be forever 23, must thank the govt and the pill makers and doctors who know there is no profits from cured and healthy people

Anonymous said...

We need more of these homeless bag people around. Someone should pay them a dollar to hang a sign with the reason for their situation around their necks.

This way they can serve as examples to the younger people that there are consequences to financial decisions.

Start printing up a lot of "I borrowed too much" signs.

Anonymous said...

"Why would a liberal like that movie? It's about a black man who achieves success without the assistance of government. Keith you're really slipping."

I guess there will be a lot more whiteys looking for that "government assistance" real soon. Pray to God you're not among them, jerk.