August 06, 2007

"Panic". "Meltdown". "Nightmare". Is it just me, or is Housing Panic here?

Seriously, folks, you'd have to be a clueless fool to buy a home in this market. Even if you were one of the few lucky enough to secure financing as the mortgage lenders implode.

It's a bloodbath out there. Hold tight. This week will be wild. Check that - the next few years will be wild. Good luck out there everyone.

Housing Market to Weaken Even Further As Mortgage Industry Takes Cure

"This week is going to be a nightmare," says Melissa Cohn, chief executive of Manhattan Mortgage in New York. Lenders are scaling back so fast that it isn't clear which loans are available or on what terms, and rates are jumping even on large loans, known as jumbos, for prime borrowers.

These stricter lending standards reduce demand for homes and nudge some people who can't refinance toward foreclosure. Higher foreclosures add to a glut of homes on the market in most of the country. And, completing the vicious circle, a weaker housing market comes back to bite the lenders by wiping out owners' equity in their homes and increasing the risk of even more foreclosures down the road.

"The market is in a panic," says Larry Goldstone, president of Thornburg Mortgage Inc., a lender in Santa Fe, N.M. He says he thinks the mortgage-bond market, which supplies most of the money for home mortgages, will calm down within a few months, but the housing market may need at least another year or two to heal.


Anonymous said...

Just a few months to heal, and all will be fabulous again.

Keith, did this happen last time in late 80's/ early 90's?

When will regular financing replaced the insanity of the last 6 years?

Anonymous said...

I'd say that after this piece of the puzzle firms up this week and another aspect of the market that is propping up demand (loose lending standards) goes away we will be firmly out of the denial phase.

Sellers have already been dealing with the sound of crickets at their open houses, now even they will be silenced as they volume of buyers able to secure financing will plummet.

Anonymous said...

Must be a lot of crazy fools out there. I was about looking at homes and the open houses I went to had other lookers. Maybe they were all like me, lookers with no real intention to buy. I dunno. There did seem to be more people than 3-4 months ago.

tim73 said...

FED decisions do not matter jack sh*t anymore when banks and mortgage companies raise their own interest rates "voluntarily" and tighten their lending standard to ├╝bertight.

gwk said...

You do not want to miss Cramer this morning on Squawk, go jimmy

westwest888 said...

This just in from the brokers:

"Important News: Pipeline Repricing, Product and
Underwriting Changes Effective Immediately!

As a result of recent market changes, Option One has made the decision to reprice loans in the pipeline and make changes to our current suite of products and underwriting guidelines.

Click here for full details related to:

* Repricing our pipeline
* Stated Income program changes
* Non-Owner Occupied and Second Homes

We thank you for your understanding as we continue to make necessary changes in our products, programs and process. We remain committed to providing you and your borrowers the same excellent service you've come to expect from Option One."

Ryan said...

I really hope the guys on CNBC are wrong. I really hope the FED doesn't cut rates. They are talking like by the end of year the FED rate will be 4%. Why are they all so short sighted? Don't they see what they will do to the rest of the economy by doing this?

Anonymous said...

Definitely "panic" for wall street and should be seeping into minds of polyanna RE masses as loans in escrow fail to fund.

Do not think main street gets it yet. (Am amazed there are still "clueless" out there buying at outrageous prices.) Think today's sales are more future foreclosures. Not enough brown lawns, and they do not realize their pension funds have either taken a hit or evaporated!

Agent #777 said...

It's not just you.

Anonymous said...

Panic yet? Nope! When we start seeing sellers implement "drama" pricing on a mass scale, THAT'S panic! We must see a literal, overnight 30-50% price drop across the board. Ain't happend yet...

Anonymous said...

Now we find out who really has kung fu grip.

Twisted Avatar said...

There is no panic!!

There is no panic!!

There is no panic for the insiders...... The bloodbath will be for the sheep who are actually foolish enuff to belive what they see on TV and hear on radio. You have got 2 remember a very important lesson the "men behind the curtain" dont want you 2 figure out. THE JOB OF MEDIA IS NOT 2 INFORM YOU .......THE JOB OF MEDIA IS TO LEAD YOU TO THE CONCULSION THAT THE ELITES WANT YOU 2 BE IN SO THEY CAN EXTACT THEIR TRIBUTE FROM YOU OVER AND OVER AGAIN.

this stratgey in repeated constantly throughout historys booms and busts and this will play out just the same . the only diffrence this time is the rape wil be played out at the speed of light because that how fast information can travel.

This will end very badly for the unprepared

of which I am not

Twisted Avatar

sam said...

The market has just about completely cut-off all non-conforming loans. We're back to credit standards of 15 years ago.
It is now a matter of weeks or months until the effects filter into the real estate markets.

Sellers of $500k condo/rowhomes will only be dealing with people who can put down 5%- $25k cash. Most people with $25k cash are not stupid enough to buy a $500k condo in this market.

As declining prices becoming more entrenched in expectations, no lender in their right mind would make an "Alt-A" junk loan (repayment of which is dependent on constantly increasing prices). Plus, there's $200bn of other debt in the pipeline. So this sh*t's not comin' back for a long time.

Yes, this is game over. Blood will run in the streets of Flipperville, USA.

Anonymous said...

Bill Fleckenstein called it in his column several months ago when he said that the mortgage and CDO markets would just freeze up for some time.
Next on tap: massive government bailout. Method: FHA and the GSE's. First step: look for the government to raise their conforming loan maximum from $417k to $700k...they will say "in order to more accurately reflect the realities of today's home buying market".
Welfare for Wall Street, agian.

Anonymous said...

If you're in the mortgage business or took out a foolish loan....the market is in a panic.

If you're the other 90% and are a long term investor....then Zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz

Wake me when it's over

Anonymous said...

Subprime mortgages account for roughly 20 percent of mortgages even in the most heavily exposed states. About 20 percent of them are delinquent in some way. That's 4 percent of mortgages.

Of these, maybe half, or 2 percent, will go into foreclosure. There will be roughly 50 percent recovery on sale of these. This is a loss of 1 percent in the mortgage market -- a sum the lenders have already made many times over because of the hefty fees on those deals. In the context of the size of the U.S. financial sector, it's nothing.

Anonymous said...

hey bitches, how are all the puts doing? Just as I predicted Friday afternoon, morning is up across the board. Buying on the panic and selling on the pop is just too easy. At this rate I might be able to take the rest of '07 off.

az_mtb said...

Hey Keith, check out this article from AZ Central. It is about FB's abandoning their houses in Phoenix.

planobcl said...


The door just close when Wells Fargo raise its rates on jumbo loans. This will affect the sentiment of the mortgage industry!

Veronica Lodge said...

The official talking head keeps saying, "The chances of a recession... are minimal... there is no reason to worry... (click, buzz)... yes masters... I hear you... my orders are to... reassure the peasants..." (static, click, buzz)

But the housing market domino-effect collapse is already in progress:

1. Subprime lenders implode.

2. Millions of ARMs reset higher.

3. Lenders raise loss reserves.

4. Regulators and politicians suddenly discover "Predatory Lending."

5. Foreclosures and defaults rise, high-risk mortgages returned to lenders for 25% + loss.

6. All lenders tighten standards.

7. Money is "cheap" but you can no longer borrow any.

This is only an excerpt from today's exciting installment of "Sublime Subprime: Beyond The Credit Implosion", which can be found on the website of the incomparable Charles Hugh Smith.


chris g said...

I bought a piece of land in Wisconsin back in February, near the Mississippi River. I thought about building this year to sell later, but decided to hold off because of the way the housing market was behaving. I'm glad I held off. Now I'll just make payments on the land until it makes sense to build again.

The Thinker said...

I would say that Wall Street is catching on fast to the new state of things, but it will yet be a while till Main Street catches on. I have a feeling many people will continue to grossly overpay for homes while Wall Street elite head for the exits.

Anonymous said...


Only 1 in 10 Southern homedebtors think their home value decreased. Only 1 in 5 Northeastern homedebtors think their home value decreased, despite widely reported median home price decreases. These debt-tards all believe they're above-average.

DaveO said...

The timing is just about right. I remember an earlier discussion about the stages of the bubble (euphoria, anxiety, etc.) and how each one so far has seemed to last about a year each. I'd say that the thrill stage was mid-2003 thru mid-2004, then euphoria was mid-2004 thru mid-2005, then anxiety was mid-2005 thru mid-2006, then denial was mid-2006 thru mid-2007 (I remember the "great time to buy or sell" ads during this era). Now mid-2007 thru mid-2008 should be the "fear" stage.

Mark in San Diego said...

YES - panic can be felt - dinner party conversation now is about how low will real estate go. . .local Talk Radio is all about foreclosures, and horror stories about people walking away from their house. . .

Ben Dover said...

Novastar is the biggest decliner on the market this morning.

NFIPRC $5.06 -32.53%

AHM Kaput! delisted

Anonymous said...

I think after 2 year of waiting , that we actually have arrived!

Anonymous said...

Is everybody happy?

roadster said...

You think we have problems?

Note that China plans to "resettle 186 million residents from 22 cities and provinces", and their population will expand by 200 million in the next 12 years.

Largely empty places like Australia, and debtor nations like the USA with large tracts of arable land had better get ready. What the Chinese don't take by military coercion, they will buy outright with their cash reserves.

Tom said...

I think we are in the "confusion" area. A lot of the people previously in denial are now scratching their heads, wondering what is going on. Maybe the smart ones have already transitioned into fear. But I don't think we are in panic mode just yet.

GringoDOPE said...

dear DOPES:
does anyone have a link for a website with stcok market indicators? i am especially interested in the P/E of the DJIA as a whole. also now that the mainstream is slowly "getting it" and housing related stocks are tanking, when do you guys think would be a good time to buy said stocks?
thanks DOPES

Anonymous said...

>> and horror stories about people walking away from their house...


PLEASE stop using utterly stupid phrases like "horror story" and "cautiously optimistic", mmmkay?

Thank you - the Management.

DOPES said...


Anonymous said...

people in south central texas are in complete denial and complete blissful ignorance about what is happening. when asked, they point to the fact that this area is one of the fastest growing areas on the country. when i ask them , well do you think that what is going on in california, nevada, colorado, and florida will come here one day? they just give me that blank stare. when i ask them, well do you think that what has been going on in the financial areas of loans and morgage in other states has not also been done here, i get a blank stare....when you ask them, do you think that the same money that is involved in other states is also involved here, i get a blank stare. many of the builders that are in trouble in other states are still building here. i see this and i scratch my head. how can this be? but only time will tell. and in time, these things will work themselves out and yes, even old texas will feel the wrath of the coming financial armagaddon. in texas, when it hits, it hits hard. this land is full of wetbacks who work in the construction industry and overload our hospitals with their health needs. in the winter they infiltrate back to mexico for a few months. during the times they are here, they send dollars to now when this thing hits here, these people will have nothing to do. what will they do then? will they go back to mexico? it would be nice but i don't see that happening. no there are more than financial problems and recession and depression on the horizon. i really don't think many people, even here on this forum, really know what is happening , in real terms nor do they know why this is all happening nor do they understand the ramifications to life as we have known it in our time. america is dying now. there will be no return to business as usual. it is a plan. it is on purpose. nothing happens by chance. on this you can be sure.

Anonymous said...

I thought about buying a Countrywide foreclosure. The comps were $150K while Zillow had it at $170K. The listing price was $109K but somebody beat me to it. PITI would have been lower than my current rent in the same neighborhood.

bmg said...

California is dead meat with jumbo rates at 8% and a 20% down payment requirement. Every home in a decent neighborhood will require a jumbo mortgage. Everything else is subprime and that spigot has been shut the past two months. The buyer pool has been cut down to 2% of the population which are super rich Google types or trust fund kids.

Vandal said...

Luminent Mortgage Capital (LUM) was halted a few hours ago pending news. They were just downgraded as well and are nearing a dividend payment date.

Wondering if we have another AHM about to hit the market.

art andersen said...

The prices are sticky because FB's cannot lower prices and the banks won't lower prices yet until the FDIC forces them to get the NPA's off the books. That might be later this year or early next year when the NPA's really start piling up due to the ARM resets this summer. I know Fannie is pretty aggressive about getting REO's off their books. The other lenders are still in denial.

DOPES said...

Yea, some dopes

Anonymous said...




Anon E Muss said...

Just curious -- what's the stock market doing up 125 points right now? Huh? We're facing a huge economic crisis and stocks are rising?

k.w. - southern ca. said...

The Fed is composed primarily of very wealthy individuals. Those that put them there are also very wealthy, and they expect *their* interests - regardless of the impact on the economy - to be taken care of.

YES, it is short-sited, and YES, it will further weaken the economy, but our governing bodies for too long now have shown no respect for the majority of citizens within this country.

Meanwhile, the war in IRAQ continues at 12-bil/month - and we know who gets stuck with the bill.


Ryan said...
I really hope the guys on CNBC are wrong. I really hope the FED doesn't cut rates. They are talking like by the end of year the FED rate will be 4%. Why are they all so short sighted? Don't they see what they will do to the rest of the economy by doing this?

k.w. - southern ca. said...

Be sure to come back to the blog
around Sept. or October of this year.

Panic will be replaced with hysteria for many house debters.


Anonymous said...
Panic yet? Nope! When we start seeing sellers implement "drama" pricing on a mass scale, THAT'S panic! We must see a literal, overnight 30-50% price drop across the board. Ain't happend yet...

k.w. - southern ca. said...

If house debting is your desire, then you'll have plenty more opportunities as the year progresses - for less.


Anonymous said...
I thought about buying a Countrywide foreclosure. The comps were $150K while Zillow had it at $170K. The listing price was $109K but somebody beat me to it. PITI would have been lower than my current rent in the same neighborhood.

Anonymous said...

I had a question for a friend. In modern days is it possible to have a "run on the bank" in modern times? If the saving rate is zero and people live check to check do people even have money in the bank??

Anonymous said...

Uh-Oh. Half hour to go in trading today. Looks like I am a "Dopes!" again today.

Joe Sixpack said...

Art Andersen you got it dead on. Panic will hit when the FDIC forces bank to late their non performing assets. At that time Joe Six Pack will wake up and smell the coffee,as the sheriff show up with his eviction notice. Great thinking Art.

Anonymous said...

Funny, It could be that most Americans have no money in the bank anyways. So, no panic. :)

Well, we only see Cramer and his buddies panicked.

daniel said...

Good info…rising credit rates are affecting the market due to the America’s overspending on credit cards plays a significant factor in the housing market. I recommend this report on home sales that is useful…

Home Sales Report: What’s Left?


alan's butt boy said...

Yeh, it's just you Keith. A tribe of Indians in North Dakota eased the chore of hunting when they discovered they could scare an entire herd of Bison off a cliff. The dumb animals rushed headlong to their death where hundreds of women were waiting, ready to butcher and process the meat to store for the coming Winter. Simple, efficient, and much easier than picking them off one by one.

Cramer and his pals pulled off a similar feat and now they're laughing their asses off over the money they made from the phoney market panic. So go ahead and keep giving Cramer free publicity for his stock market theatrics - he and his insider buddies love it!

Anonymous said...






forget dopes.


Anonymous said...

Cue the trolls, until tomorrow when the dow will be back down again after the fed throws cold water on everything by refusing to drop rates & the reality that more mortgage lenders are imploding and more credit is drying up as each day goes by.

Anonymous said...

Dollar up? What, its 80.15 USD index. That is dangerously low, we don't know what the magic number is but we know its around 80 and every one dumps.

Anonymous said...

The Wall Street Journal calls it the "Great Unwinding", lol

Anonymous said...

To the gut calling everyone idiots: You know it is getting bad when the stock market gyrates like a cheap penny stock. The OTC and pink sheets are safer than the NYSE. Think about it- when housing and stock prices disconnect from common sense pricing it simply means buying and investing have turned into speculating and betting. I've played penny stocks and made $3000 dollars in one day on $500 invested. I also lost it all over the week. I can nt believe people think the current stock market is "investing". It is naked betting period.

the othertrader said...

Thanks for the link.
I saw Boone Pickins on CNBC today, he was in China.
The last comments he made were concerning the air pollution.
Now this link.

China will buy all the crap MBO's for pennies on the dollar, then take the titles on all these homes.

Guess what they would do next?
Maybe send the economic refugee's?

Or maybe this is setting up the North American alliance. (Amero)...?

Daniel (the other one) said...

The Trollosers crack me up. Housing stocks take a short breather from their death spiral and they're all over HP, like cockroaches.

Anon 3:03 asks how the puts are going. Thanks for asking Anonatrolloser. Well, since I've had them for months, in aggregate they are up more than 100%, starting with a 400+% gain on my LEND puts when that POS crashed and burned in March.

And although there appear to be lots of HP'ers all in cash, I am not one of them. I've got about 10% in commodities, 10% in precious metals, 15% cash, 30% foreign stocks, and 35% large cap domestic stocks. So besides the easy profits I'm making shorting the crap out of housing stocks, I'm also riding the wave as your precious Dow climbs.

Anonymous said...

OK, I went in to get pre-qual'd today(jus check'n). 10% down on a house worth(?) less than 1 years salary, and no can do. Not even at 7 or 8%. Reason was no credit. No car, mortgage or card payments for nearly 5 years. It looks as though many people are already being taken out of the market and the standards are already tightening. Had I really needed the loan this would suck. This tells me we are in meltdown and the panic will follow.

Anonymous said...

I'm a mortgage broker and kinf of tired of hearing that we "stuck" people in bad loans. What we did was keep people with bad credit in their homes, paid off all their debt so they can get their credit up and soon after lock into a fixed rate. (atleast most of us did) If these loans didnt exist, these foreclosures would have just started years earlier. This meltdown rests on the shoulders of the people who have to keep up with the jones' and have every piece of materlialistic thing they can charge on their credit card. Try giving a person with very low credit a 12% 30 year fixed rate and see if they can make the payment. Give them a chance to make 7% payments for a few years to get back on track but instead they just spend more money b/c now they can.