Home › Forums › Financial Markets/Economics › Robert Campbell Radio Interview
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powayseller.
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November 5, 2006 at 8:23 AM #7838November 5, 2006 at 6:33 PM #39264
Anonymous
GuestBub, thanks for the lead. Excellent series of interviews. Great to hear Campbell and Shiller’s voices and thoughts.
Some highlights:
Neat analog to San Diego: Vancouver had a real estate boom in the early ’80s, with a strong economy benefitting from hot markets in oil and other minerals. Then, prices fell to 1/3 of their values from peak (per Shiller, the sharpest fall that he knows of). Folks said the collapse couldn’t happen, as there was no room to expand in Vancouver (bound by U.S., mountains, and Pacific). Shiller thinks that the sharp fall in prices may have been due to the widespread use of ARMs, which reset high as the U.S. was fighting inflation with high interest rates in the early ’80s.
Campbell recommends parking funds in cash. He says that inflation has never been a problem once the U.S. is in recession. And, Campbell thinks that the best real estate buying opportunities will present themselves in 3-6 years.
Again, thanks, Bub.
November 5, 2006 at 8:22 PM #39267powayseller
ParticipantExcellent interviews. Thanks bub for this unique link. I gained a whole new respect for Robert Campbell. This guy is sharp, and he is so convincing about the 5 problems for the US housing market: real estate dependent jobs, voodoo loans, negative savings, and upcoming recession. He lists 3 reasons for recession: inverted yield curve, -2% growth in new autos, and declining housing market leading to lower consumer spending.
Campbell said that exotic loans are neutron mortgages: “the houses will be left standing, but the people will be gone”. All the people he has talked to have said that people just cannot afford the higher payments due to resets, so if they haven’t refinanced out of their ARM, they are losing their homes. Contractors are calling customers asking for work and lowering their bids. Can you believe it?
Robert Shiller made an interesting comment that in Sydney, Australia and in England, the bubble started to pop as their bank raised interest rates, but then suddenly the trend reversed and prices continued going up. He also mentioned Japan’s long deflation in housing, and wondered if this can happen here.
November 5, 2006 at 9:17 PM #39270PerryChase
ParticipantI have been to Japan and I have Japanese friend with whom I’ve discussed this situation. I would not be surprised to see the same happen in California.
BTW, Vancouver had a revival in 1997 with the Chinese hot money from Hong Kong. Want the best Chinese food in North America? Go to Vancouver.
November 6, 2006 at 6:33 AM #39279ParticipantI just remembered some other comments from the broadcast. Campbell was wrong when he said lenders don’t have the liability for loans-gone-bad. Some lenders keep some loans in-house. Washington Mutual keeps a lot of loans in-house, as we discussed on a thread several weeks ago, and is recording $1 billion (?) of income on interest on those loans, interest it has not received and may never receive. Another factor is that banks are on the hook for loans they sell for a certain time period, depending on how they write the contract with the MBS purchasers. Today I just read in the OC Register that “New Century … said more borrowers are missing early payments, forcing the company to buy back more loans that it sold to investors.”
He questioned the sudden wrapping up of the Fannie Mae investigation, surmising that there was too much bad stuff to be found in the books.
If the Democrats gain control the House, how many investigations will they instigate? Will we see independent audits of Fannie Mae (and the Iraq war too)? I sure would like to get to the bottom of the problems with the GSEs.
November 6, 2006 at 7:53 AM #39285GuestThere may be an even bigger risk. Loan income comes in many parts, primarily origination, servicing, and investment. The originating lender keeps the origination income and may also keep or sell the servicing income. The servicing lender is usually required to make the P&I payment to the entity that purchased the investment portion even if the servicing lender does not receive the payment from the borrower. This is a cost that can add up very quickly as defaults rise.
November 6, 2006 at 1:34 PM #39314ParticipantCan you give examples of servicing lenders? They are the ones to whom you make the mortgage payment? The last mortgage we had was sold to Washington Mutual, so WaMu acts as an originator and a servicing lender then?
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