[quote=no_such_reality]Was it distressed inventory clearing or credit freeing up that drove the market back up? Serious question and I’m not being argumentative.
I don’t think banks were hiding their inventory, I think they weren’t acting on their inventory. I also think their incompetence in dealing with distressed assets actually played to their eventual benefit as efficient processing of everything in their pipeline would, IMO, have much more greatly impacted the market.
The short sale we bought and others we bid on are all good examples. For our house, we were the 2nd round bidders after the first short sale fell through after nearly 6 months. Our bid then took another 6 months reach a deal and then close. Having meet the owners, they moved out of the house at the beginning of the first deal and quit making payments close to a year before the first deal to force the banks hand on the short sale.
Other short sales situations were similar were we talked with owners and they’d simple quit making payments and the banks basically ignored them.
Meanwhile, on an open house, I’d be standing in line to get in to see the property.
I even looked at some of the banks foreclosure listings, I couldn’t buy them. Literally, could not get anyone to talk to me about an individual listing. I was ready with 100% cash for the place, couldn’t get people to return a call.
So I agree, they were not hiding their stuff, they were just incompetent. Sadly, they were like a person trying to lose 5 lbs, they kept plugging away at the five pounds and slowly watched their weight crawl up to 400 lbs.
I still tend to think if that backlogged inefficient under performing assets would have been acted on in a more timely manner how much worse it would have made it.[/quote]
interesting antidote,… the left hand does not know what the right hand is doing as they say
what came to mind when I read you mentioned you were looking at various “inventory” and the “short sale” owners,… “simple quit making payments and the banks basically ignored them” AND “I even looked at some of the banks foreclosure listings, I couldn’t buy them,… I was ready with 100% cash for the place, couldn’t get people to return a call” points toward a mechanism like SPEs (that would account for so-called “shadow RE”) because its a type of legal entity that can hold title to a note w/ no ties to a bank
as reported in the WSJ
[quote] Special-Purpose Entities Are Often A Clever Way to Raise Debt Levels
…hidden behind the financial tables, special-purpose entities have recently become the subject of sharper scrutiny. Much of the Enron accounting issues revolved around special-purpose entities…
…Think of the SPE as a trust…To establish this trust, the company must sell the SPE an asset — any of the ones listed on its balance sheet will do…The SPE pays the company for the receivables with the money it collects from these new investors and the company gets to beef up the cash section of its balance sheet.
…With only one asset on its books, investors won’t be hard to find. Even better, they’re willing to accept a lower interest rate because it appears that the repayment of their loan is a pretty sure thing since the SPE has no other debt.
Assuming the parent company has not offered a guarantee on the loan (we’ll get to that shortly), the company no longer has connections to the SPE. And in turn, the SPE’s creditors now only have claim to the assets of the SPE…
…Well don’t forget about the company’s creditors. They aren’t all that thrilled with the fact that the company sold off one of its assets, especially if it did so at a loss. Now how are they going to get paid?
…anyone who spends a second looking at financial statements may be a little perturbed by this arrangement as well. In many instances, we’d like to see that debt reported on the company’s balance sheet. But as long as the company is not liable for the SPE’s debt, FASB allows the transaction to be reported off-balance sheet…
…SPEs have been around for years, stuffed away in some footnote…
so if SPEs are like a “trust” in a footnote, this in my mind this would kinda explain how various wall st banks avoided being considered bankrupt back in 2007/2008 because various toxic assets (like “shadow RE”) was not on the banks official balance sheet, furthermore it could be the reason why you noted “banks basically ignored” various RE owners in default back then
recall anything about other past headline news specifically “mark to market accounting” ???
think about it, if a home (that was underwater) had its note held in SPEs it also kinda makes sense why as you stated “Meanwhile, on an open house, I’d be standing in line to get in to see the property” in other words I’d say what you observed is something akin to Schrödinger’s cat (which is a thought experiment from quantum mechanics that states a particle can exist in two states at the same time) or in this case how investment vehicles like “real estate” can be both owned and not owned by the bank at the same time
so if this hypothesis is true, this (again) makes me wonder about various forecasting models (like the recent one just mentioned in the news about the fed stress test)
yeah I know, including a “zerohedge” link isn’t considered by some users of this forum to be a credible source (but thought posting a link to that site might get a laugh)
anyway the only thing I know for sure is two axiom(s) that in general describe trends w/ in the economic system
# of greedy, dishonest dumbshit (market players)
>> # of honest, not so greedy smart ass (market players)
AND
out flow of ca$h (to market players)
> in-flow of ca$h (to market players)
OR in other words,… lots of unserviceable debt from stuff like pensions
taken together these trends point toward an “inevitable” SHTF event when a majority of people wake up and realize the scope of the problem and then no longer have confidence in the system
