January 05, 2008

HousingPANIC Stupid Question of the Day


Have we just recently started the next leg down?
___________


And for fun I give you this now-hilarious quote from Ben Bernanke:

"At this juncture, the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained"

- Ben Bernanke said in prepared testimony to Congress' Joint Economic Committee, March 2007.

36 comments:

Anonymous said...

The US economy is truly in deep doo-doo. We have sharply rising (but officially understated) unemployment (much of it in the housing sector), sharply rising (but officially understated) inflation, virtually no production, and crashing consumption. The so-called "subprime" mortgage/ foreclosure is clearly not confined to subprime borrowers. What's scary and annoying is that we're already in a recession / crash scenario, yet none of the government, mainstream media, or Wall Street pundits (save a small "lunatic fringe") are willing to come out and admit it.

A lot of people are in over their heads in debt, and will have to slash spending to the bone to even attempt to survive. Many would rather just turn in the keys and let the repo man tow away the Lexus.

The crash is only just getting started.

Anonymous said...

`Subprime' is linguists' word of year

CHICAGO - Even the American Dialect Society knows how risky home mortgages are these days. The group of wordsmiths chose "subprime" as 2007's Word of the Year at its annual convention Friday.

"`Subprime' has been around with bankers for awhile, but now everyone is talking about `subprime,'" said Wayne Glowka, a spokesman for the group and a dean at Reinhardt College in Waleska, Ga. "It's affecting all kinds of people in all kinds of places."

Anonymous said...

"seems likely" I love the confidence of this man, he is more slippery than deer guts on a door knob.

Anonymous said...

Keith,

I've noticed that some of your later posts seem to show up lower down on your blog. If it's a bug, I hope it gets fixed because I hate missing any of your informative and entertaining posts.

Adam Slowhand Smith said...

I'm no fan of ANY talking head, but in his defense, Uncle Ben said, "at this juncture", which indicates his sentiment at the time he spoke.

He wasn't predicting how he'd feel in the future, and wasn't speaking about how me might feel 9 months later.

Besides, what else COULD he say? The role of a talking head is to spout platitudes, telling the sheeple that "all is well".

Paul E. Math said...

Actually Bernanke is speaking in fedspeak and he is completely right: the subprime problem is contained and has not spread to the larger economy.

The problem with prime mortgages and the skyrocketing foreclosures in that category is also contained to prime mortgages.

And the problem with homebuilders is contained to the homebuilding industry.

And the problem with the banking industry is contained to the banking industry.

The problem with the US economy in general is its own problem entirely and cannot be blamed on one particular sector.

If he has learned anything from Greenscam he will say, in a couple years, that this is what he meant. Just like when Greenspan amended his 'froth' dismissal of a housing bubble to actually mean that there were many housing bubbles, not just one.

Veronica Lodge said...

RE: Ben Bernanke's financial blather:

Even a child knows the basic rules of physics as they apply to falling objects.

A ball rolls off the top stair, bounces up as it hits the first step down, falls down a couple more steps, bounces up again, hits another step farther down, bounces up again and repeats this process until it hits the bottom.

All the while, the falling, bouncing ball gains downward momentum. Never during the ball's decent does the child believe that the falling ball has reversed its downward course when it makes temporary upward bounces during its accelerating downward course.

Contrast this logic with how Ben Bernanke makes a proclamation that the terminally ill and crashing US economy has made a rebound with each dead cat bounce.

Bernanke's comments represent the height of asininity.

V.L.

Mark in San Diego said...

As I have posted before, it scares the sh#t out of me that a handfull of economists and a few thousand bloggers know what is going on, but the entire membership of the Federal Reserve, etc. doesn't have a clue. . .aparently they send their maids out to the supermarket to do their shopping, and think she is ripping them off because $100 doesn't buy much anymore. . .they probably get a government limo drive to work, and haven't set foot in coach class in decades. . .yup! living in another world.

Anonymous said...

on a 1-10 scale on how bad it will get we're at a 6 right now. 10 will be in July '08. Recovery by early '09.

If you think there will be a deep recession in an election year you're all nuts. There will be tax cuts, rate cuts, spending increases you name it.

Anonymous said...

Nope, Gold will probably go up some more before this bubble burst too. From today's WSJ:
Demand from investors is driving the price of gold higher, even though demand for the metal for things like jewelry is surprisingly soft.
"The single most important thing to understand about the gold price is that it's being driven higher by investment," says Jeffrey Christian, managing director of CPM Group, a commodity-focused financial-services firm in New York.
According to CPM, gold demand among private investors prospecting for returns has nearly doubled to more than 40 million ounces a year since the end of 2001. By contrast, global demand for gold to make jewelry and other items has fallen nearly 13% during the period. Gold's price in the period more than tripled.
Gold was once the linchpin of the global financial system. The value of the dollar was pegged to its value. That relationship formally ended decades ago, but some investors continue to treat it as a kind of quasimoney, something that could hold its value even as the dollar weakens or inflation soars.

Anonymous said...

Ben Bernanke is a bald-headed, hairy-faced liar. In knew there was a tsunami headed this way and told the people on the beaches that everything was fine.

Anonymous said...

Ben Bernanke should resign

Anonymous said...

NASDAQ was down 4% Friday that feels like the next leg but we'll see what Monday holds!

Anonymous said...

The following was published in the OC Register, CA in response to a report by one of the Wells Fargo financial analysts. It's an average example of what's happening to many of us.

This was a particularly good read for me, since I’ve a WF mortgage and am in default with it now and for 3 months.

Laid off of a ‘bullet proof’ position in August - and try as I might - nothing has stuck re-work yet. I’m on the very senior side (65) of the work palette and am sure this has something to do with what has become a hugely competitive job market - with MANY of us losing our spots.

I was in Landscape Design and Architecture (20 years) and because of the specialized area the company I was with pursued (for 50 years), when the housing/real estate down turned - so did the company’s business - they just weren’t diversified enough to handle such a sudden thud. My potential earnings for this year would have been just over a respectable 60k - and would’ve seen me finally making decent headway to a small nest egg.

So after over 45 applications and under a half dozen interviews - I’m still searching and waiting to see if Wells Fargo will do the ’smart thing’ and re-write my ‘bloated, original’ loan to one I can actually pay now, if it’s low enough. We’ve been in this rather one-sided dialog for over three months now.

When I last called them (two days ago) they said my most recent submitted paperwork had still not been assigned for review, due to the extreme number of loss mitigation cases now on their desks. I don’t think she meant that to blurt out - it was me pressuring her for some kind of reason why, after three weeks, the paperwork was stalled.

I agree - the ‘eyeball’ comments are rather optimistic and I suppose it’s good to be optimistic - but Wells Fargo needs to seriously consider cutting edge alternative ‘work arounds’ such as I suggested to them.

I have a little extra income now other than just unemployment as I’ve signed onto SSI - something I didn’t want to do for another few years at least… but for me - until I can re-gain employment - this helps.

I could actually afford to pay WF - if they re-write the loan and take part responsibility in the current loss of value of this modest condo I have.
I’d stick it out if they’re willing - but it seems they more want to just take it back - let them… I’ve been in it going on two years and lose only the ‘potential’ equity - since it’s lost about 20k in value from the purchase price, and that was from the original WF appraisers.

It’s a disaster for millions across the board.

Lenders need to re-think what to do on their own and not rely on bail-outs which apparently won’t help us average purchasers, but place a bandaid on the lenders bleeding points only. It’s poor business all the way around.

And there WILL be more layoffs, losses and falling financial dominoes for sure.

original article at http://lansner.freedomblogging.com/2008/01/05/wells-fargo-eyes-added-10-home-price-drop/#comments

Ben Kenobi said...

I wanted you to have this, but your uncle (Ben B) would not allow it...

KNOWLEDGE

Expect a bumpy ride, but all signals are DOWN. Expect a market rally on anything implying that things are not as bad as they look, but don't buy into the suckers rally.

One of the first will be when oil eases on decreased demand expectations in the US. Fill your tank, but don't jump back in the market.

Anonymous said...

Keith

What would you have had Bernanke do? Tell Congress and Wall Street, "Gee, you guys did a lot of bad underwriting! Looks like the chickens are coming home to roost, so you'd better watch out!" Then the markets would crash and everyone would blame him.

Cut Bernanke some slack-- he's got a really hard job. He's got to figure out how to exorcise the bad loans out of the system without causing a panic, or inflation, or deflation. Shouldn't we be wishing him well?

Do you actually WANT a depression? I wasn't alive back in the 1930s, but it didn't look like a lot of fun.

Anonymous said...

I expect the worst to hit July-August of this year. From what I've read there's a tidal wave of resets coming in Mar-May timeframe. give them another 3 months before bank/lender starts foreclosure or forces short sale and the market will be so flooded with homes for sale that prices will drop another 20-30% in a month.

Anonymous said...

The economy is like a blindfolded man about to step off a permanently high plateau. That will be the next leg downnnnnnnnnnnnnn

roybean said...

anon from 12:52 said:

"Keith

"What would you have had Bernanke do? Tell Congress and Wall Street, "Gee, you guys did a lot of bad underwriting! Looks like the chickens are coming home to roost, so you'd better watch out!" Then the markets would crash and everyone would blame him.

"Cut Bernanke some slack-- he's got a really hard job. He's got to figure out how to exorcise the bad loans out of the system without causing a panic, or inflation, or deflation. Shouldn't we be wishing him well?"

You got a point; OTH, we can't TRUST him to be HONEST. So he miz well STFU.

Dopes Daddy said...

America will THRIVE as long as the following happens:
- People queueing up for Green cards, work visas and the opportunity to set foot on US soil. Europeans may not be interested. Have you seen the queues outside consulates in India and China ? There are hundreds of well educated, hard working people still willing to give their US dreams a shot.
- As USD becomes cheap, opportunistic investors in the Middle East, Asia and Europe start acquiring assets in the US cheap.
- The amount of money that can be plowed back into the US economy once the floodgates are opened to investors with American dollars will cause asset fluctuation never imagined within the US and the housing bubble will look like a pebble in the road. This looks a likely way out of the mess, especially with the drop in the value of the dollar.
- Nobody is leaving or will ever leave the US. In fact for every moron trying to leave, there are one thousand waiting to get in...
- The US is the bulwark and ultimate protector of western culture and without us, the Europeans would have been speaking Russian or maybe Arabic. Allowing the US to sink means all entrenched economies will not escape either.

Just checkout the home prices in desirable neighborhoods in the Bay Area or NYC. They have appreciated by 10 to 20% over the last 18 months. So much for generalizing the housing bubble!

Anonymous said...

Bernanke is much better then Greenscam.

It was Greenscam's ideological opposition to traditional banking and mortgage regulation which directly enabled the catastrophe we now see. As well as the dot com bubble and recession (he should have increased stock margin requirements massively, not raise overall interest rates)

Bernanke restored it, but it is obviously much too late for this cycle.

Greenscam was just like Chauncey The Gardener (Being There), a senile old fool who happened to be in the right place in the right time.

What was that time? The magical time when globalization and outsourcing to China only lead to deflationary pressures even in a growing economy. Well now they want resources and prosperity for their work and dollars, and that's inflationary, along with the war.

Greenspan had nothing to do with it, he just had to sit there and collect the fawning blowjobs.

Greenscam and the Goldman Sachs' got the goldmine, Ben and the real economy are gonna get the shaft.

Anonymous said...

give them another 3 months before bank/lender starts foreclosure or forces short sale

The lender cannot force a short sale unless there is a willing buyer. Only a few fools are willing buyers in the bubble markets now. With the credit crunch, that number is thinned down to almost nothing.

Don't forget that many of the "sales" are actually lenders buying back their homes at the foreclosure auctions.

Anonymous said...

"Gone are the days of the three-year car loan. The length of the average automobile loan hit five years, four months in October, up more than six months from 2002, according to the Federal Reserve. And nearly 45% of loans written today are for longer than six years."


This is symptomatic of the financial apocalypses that is soon to unfold. As home values decrease, the collateral supplied to back the bonds that paid for their purchase is declining. Another 6.3% decline, like the last Case Shiller report, will cave in the entire mortgaged backed bond market. Not only subprime, but Alt-A, Jumbo and Prime loans will no longer have enough assets behind them to keep their bonds from collapsing. Loans will disappear as funding dries up, and housing prices will decline further and faster, being that there will be no one who can then buy a house.

As this financial tsunami rolls in, all consumer debt backed bonds will begin unraveling. The happy new Escalade owner, now cut off from their home ATM, with maxed out credit cards and facing an ever increasing under water position on their home, will increasingly be watching the tow truck haul away their latest acquired, no money down, no equity, six year loan asset. As this progresses, the bonds backing auto loans and credit cards will head into the same dismal swamp of Wall Street fraud as the housing backed bond is going.

Trillions will vanish from the banking and bond industry, making the Magic Show look like a back street trickster’s soap box gig. Corporate profits will plunge, pension fund and municipal bonds will buckle; unemployment will spread like wild fire.

Anonymous said...

Your site is an example of what makes America so great. Keep up the good work and don't let anyone bring you down! Also... GO PACKERS!!! If you post this, THANKS!

Adam Slowhand Smith said...

[i]on a 1-10 scale on how bad it will get we're at a 6 right now. 10 will be in July '08. Recovery by early '09.[/i]

Are you kidding? I agree with the 1st post who says this thing has BARELY gotten started! We're at the beginning/middle of the 1st inning, at best.

Review the course of prior housing bubbles (per Case-Schiller indices), and you'll see the down-cycle will take roughly as long (if not longer) to correct as it did to create the up-cycle.

Given that housing prices rose 70% (national average; and let's just forget about the bubbliest areas like the West, for now) over the course of 6-7 years, I'd say a nationwide down-turn of 6% means there's lots of room to drop.

Remember, declining prices tend to be notoriously 'sticky'; it's not like stocks, which crash in value MUCH quicker: there's many factors which make home prices slide slower. That stated, a nationwide drop of 6% is HUGE, and should grab people's attention to realize this WAS a bubble, and the inflator was:

1) loose lending practices for investors, which were enabled by:

2) promises from Wall St. firms who pumped investment $$$ into mortgages, based on equally over-optimistic promises of returns on CDOs.

In effect, the banks connected greedy Wall St. investors with the greedy Main St. real estate specuvestors, and THAT connection has now been severed.

Driven well past the point of rational affordability, with funds provided by irrational expectations of continued home appreciation, home prices must (and will) fall....

Restated, a real estate agent can no longer easily bamboozle an illiterate 'bagholder' buyer into taking a $500k ARM mortgage that makes absolutely NO financial sense (where the lender is left holding the bag)!


[i]If you think there will be a deep recession in an election year you're all nuts. There will be tax cuts, rate cuts, spending increases you name it.[/i]

The problem is we're pretty much tapped out of such tricks up our sleeves: Bush had already used every trick in the bag to energize the economy post-9/11 (where we were already in a recession), including firing up our military into war in not just ONE theatre of operation, but TWO. While it helped delay entry into recession, those military expenditures drove us into a deficit unlike any we've seen!

What about rate cuts? That would work, if we weren't already sitting at historic low interest rates (remember when rates withered to 50 year lows, post-9/11? We're not so far off from there). That card ALSO has already been played. Remember that drops in the fed rate take awhile to 'trickle down' into the economy, generally 12-18 months. Once again, too little, too late.

You want tax cuts? Uh, do you remember the first thing I pointed out, i.e. the HUGE Federal deficit? Bush et al spent like drunken sailors on leave after 2001, and you now want him to CUT taxes? Brilliant.

Adam Slowhand Smith said...

[i]I expect the worst to hit July-August of this year. From what I've read there's a tidal wave of resets coming in Mar-May timeframe. give them another 3 months before bank/lender starts foreclosure or forces short sale and the market will be so flooded with homes for sale that prices will drop another 20-30% in a month.[/i]

Wow, 20-30% in a MONTH? More than a bit extreme, IMO.

[i]Just checkout the home prices in desirable neighborhoods in the Bay Area or NYC. They have appreciated by 10 to 20% over the last 18 months. So much for generalizing the housing bubble![/i]

Good point: some areas like NYC will be more impervious to price declines, since there's a more international component. Unlike what your local agent may have told you, not EVERYONE wants to live in YOUR area! More people are likely to be attracted to major metros like NYC (which is probably the #1 attraction in the U.S. for foreigners).

Also NYC tends to demand buyers with cash reserves (very little of that zero-down nonsense, from what I understand, not to mention significant down-payments). Co-ops are much more stringent in terms of whom they sell to.

Main argument I can think of that works against that theory is that many Europeans are propped up by their OWN real estate bubbles, and are lagging the U.S. for their own crashes! The EU banks don't have as much transparency as the U.S. banks, so we don't have an idea of how many skeltons they have hiding in their closets.

Also, we'll see what rising fuel prices (and terrorism) do to the concept of flying frequently to the U.S. from Europe.

Anonymous said...

The Greater Depression will soon be here. Of course, America will not even notice until the economy has completely collapsed. By then it will be too late and the mighty US military will be immobilized due to a completely bankrupt government. Chasing down those Al Quaeda terrorists sure is expensive. How many hundreds of billions does it take and still no Osama?

Anonymous said...

Fits right in with the rest of the Bush administration who believe saying it will make it so. Close your eyes and clap your hands and the economy will come back to life. Just like Iraq will be a cakewalk that pays for itself, deficits won't matter, tax cuts will cure everything and Brownie did a heckuva job!

Anonymous said...

Osama is a good friend of the bushies. He is just part of the PNAC plan and will remain alive forever. Besides, he had nothing to do with 9/11. 9/11 was the worlds biggest bullshit scam and most people are to stupid to see the proof or to shut-down the false news TV stations and newspapers. We are sooooo f*cked. The US failed government, GOP corporations, and criminal USA gov agencies nightmare will continue at all costs. We are all f*cked to hell. Get ready for these assholes to destroy everything. Its all bad going to worse. F*ck all bush supporters and the bushco republican criminal networks.

Anonymous said...

For all of you folks predicting a catastrophic depression you are all wrong. America is too big to fail. It cannot and won't fail because foreigners have given way too much money to America and thus if they allow that to happen then they will lose out too.

Anonymous said...

"Just checkout the home prices in desirable neighborhoods in the Bay Area or NYC. They have appreciated by 10 to 20% over the last 18 months. So much for generalizing the housing bubble!"

I'm sure your statistics are valid, but my source for the Bay Area disagrees: www.housingtracker.net Care to site your sources?

Anonymous said...

People always wonder about statements from the Fed. I think the Fed should have made a stronger statement.

When the FED says one thing and does another, statements won't do diddly because they have lost all credibility.

It's "watch what I do, not what I say."

Anonymous said...

relax, the stock market will be back up in no time. This is the election year and no politician will let it fall.

devestment said...

On Saturday I met another mortgage broker who is loosing his job, that makes 2 for me this year. He bragged about he just got a new Mercedes

Anonymous said...

In 2002 we sold our 1500 sq. ft. townhome in Tempe, AZ for $86 a sq.ft, when my company transferred me to another state. We are now back in Phoenix area. This morning I'm watching one of the RE channels on Cox cable here, and I'm seeing new homes going for about $85-$90 a sq.ft and that doesn't include other incentives like builder paying closing costs. Granted builders are holding fire sales to get rid of inventory, but this should be a real wakeup call to any homeowners who think they are going to get $125-$150 a sq.ft for their homes.

Anonymous said...

Looooooosers! The way you guys are predicting, you guys might as well blow your brains out. There is nothing to live for!