Are houses selling fast now?

[CAwireman]

What would really be great is a report by zipcode of the number of ARM loans and month/year of reset.

Kicked this around a little bit at the meet up. Realistically, people thought it would be nearly impossible to get at this data – rather, more reasonable to see what happens on the back side: month per month, look at the lagging indicators (which I think sdrealtor is doing by tracking short sales stats each monday)to some degree.

The banks have their own data on this and I’m sure they have connected the dots and are positioning themselves as best they can (banks that ended up holding the loans, not
the banks that merely originated them.)

But, back to my imaginary report. If we could see the monthly/annual ARM reset data by zipcode, we could really do a good job in assessing the trends. So, the degree to which ARM resets affect realestate prices, would be the degree to which a report like this would be valuable.

1) For example, with the resets taking place, let’s say in Jan 07 in any/all zipcodes, watch the number of homes going up for sale, watch the number of shorts/foreclosures, continue tracking the pricing trends. In the first month, one wouldn’t expect much change – it takes time to react to a loan reset.

2) After watching this for 6 months, some trends might emerge. 12, 18, 24 months, even more.

3) For those bubble sitters like me who have a zipcode preference for eventually buying a place, we could watch the progress. If the zipcode for whatever reason was at or above the typical ARM saturation, then one might anticipate more downward price pressure. Or, conversely if the ARM saturatation in one’s dream zipcode was unusually low, then you might either accept that you’ll pay closer to the higher end of the scale for a property – or the cost may price you out and force you into your next more desireable zipcode.

4) As both the banking industry and the government are looking at the effects of allowing exotic loans onto the market, detailed monitoring and assessment of ARM loans and the like may help them to determine if the short term benefits the Mortgage folks appreciate are worth the long term suffering of: fearless homebuyers, RE industry, builders, banking industry, retail industry, and everyone else who might suffer if a realestate-induced recession takes place.

By the way, if the government creates this data, aren’t they obligated to make it public?

From an individual perspective, point 3 would benefit people who don’t want to repeat the sins of their fathers/mothers. Point 4 would provide some postmordem data to help the industry keep itself out of trouble in the future, unless the industry doesn’t particularly want to.

But anyway, I know that the data may not be available, but Christmas is just around the corner and you never know what St. Nick might surprise us with…..

I hope everyone’s Thanksgiving was enjoyable.

[powayseller]

Could you see if this data is available? Maybe First American Real Estate Solutions or LoanPerformance have this? I considered buying this data early next year, so I have not even checked into its availability.

[CAwireman]

PS, I’ll poke around and see what I can find.

[davelj]

PS, you made a generic bet regarding home prices falling when you sold your house. I’m talking about a SPECIFIC bet regarding defaults on existing ARMs in 2007. Two different things entirely.

So, how about a specific wager? Your bet is that greater than 50% of all existing ARMs will ultimately default. My bet is that it will be less than 50%. Make it a dollar amount that’s worth my while, say anywhere north of $10K. How ’bout it? Are you willing to walk your talk? I am.

[Mexico Resident]

What could make this very interesting is if the Fed decides not to lower interest rates. Do any of you gurus think this is possible on account of the Fed might have to defend the dollar against other currencies?

[powayseller]

I read (Roubini?) recently, that high economic growth is slowed by raising rates, then keeping them level for 6-9 months, and then lowering them once the recession was apparent.

A cheaper dollar is good for the government,because they can repay our debt in devalued dollars. Since the yuan is pegged to the dollar, we wouldn’t have to worry about paying more for goods from China.

[powayseller]

davelj, I don’t gamble with strangers over the internet.

I was reading anotherf&ckedborrower.blogspot.com last fall, before I even sold my house. His insider views of mortgage lending led me to see how bad this is going to be, so I realized already last year that we would have high rates of foreclosure.

Here’s a sample of what I was reading last November: “I think a squeeze is coming that will affect the entire banking system. The madness of bankers has become unprecedented. They have forgotten about loan diversification. They have been caught up in Greenspan’s counter-cyclical policy of lowering the federal funds rate. Now this policy is being reversed. Rates are climbing. This will contract the loan market. Banks will wind up sitting on top of bad loans of all kinds because the American economy is now housing-sale driven.

You may think that you are shielded. But your banker is not shielded. You may not deal with bankers. But your employer does.

Your employer had better have a signed line of credit to keep the doors open. Without this, there may not be money to borrow when the housing bubble pops.

There will be great opportunities to buy houses at discounts during the down phase of the cycle. Be patient.”

Just read his articles, – it is just amazing.

— Monday morning update – Just read this from Mish’s site from a mortgage broker in Orange County, talking about subprime borrowers:

“What people don’t see, the NAR in particular, is the upcoming train wreck. I am talking about all the sub prime loans for refinances as well as purchases that were taken out 2 to 3 yrs ago and are now all coming due to reset….Ninety percent of those who take an interest only loan can only afford the interest only part and not only that, there entire lifestyles are planned around that payment…. “

[34f3f3f]

It’s an interesting and hypothetical notion, that if enough people realise that by actively boycotting the market, supply and demand will do the rest. However, markets fluctuate because consumers are fickle and this is the essense of it. A completely rational market would only be possible if we were all robots, and then there wouldn’t be a need for one. Suppose for a moment that if enough buyers got together and decided to collectively boycott house buying, then theoritically it may have the desired effect. However, they would all be competing with each other when they all decided the time was right to buy, and we’d all be back where we started. The fact that some “stupid” people are still buying may well be in the fence sitters’ interests, because if their decision was “stupid” then it will likely have negative consequences.

[kev374]

even in a downturn the graph doesn’t come down uniformly, there are short periods where it appears things are picking up. The truth is that we have a VERY LONG way to reach the bottom of this market, perhaps another 5 years or so. In SoCal I’m very sure of at least a 30-35% decline when all is said and done. Markets always re-align to fundamentals like income and rents, that is just the reality.

When the ratios between prices, rents and incomes make sense then and ONLY THEN is it a good time to buy.

Just my $0.02.

[davelj]

PS, you don’t gamble with strangers over the internet? No problem; if you’re in for more than $10,000 on this bet I’ll be happy to meet up with you. I’ll even pay for my attorney to draw up a simple agreement. Think of it as a personal credit default swap agreement where you’re taking the more bearish side of the swap. Unless of course you’re just full of hot air…

I went to talk to my employer about this banker issue you brought up and then I remembered, “Hey, wait a second… I’m my employer; I own the company!!” After that revelation, I thought I should get on this credit line issue you brought up and then I remembered, “Hey, wait a minute… my business generates more far more capital than it uses and my investment capital is captive… so I don’t need a credit line.”

Every time I think I’ve read the most ridiculous and uninformed post you’ve made, you take it up another notch. And for that, PS, I must salute you.

[Daniel]

Davelj,

Funny thing you proposed that trade. I actually thought (some time ago) about offering to take opposing bets to Powayseller’s, from the 50% nominal housing price drop to the S&P at 600 by next year. If you two agree to enter into such an arrangement, please let me know. I am willing to put up pretty good money against some of those predictions. And I’m sure it can be crafted as a perfectly legal contract, too.

Daniel

[sdrealtor]

D & D,
Relax guys. PS would never and could never take a bet like that as all her decisions are made in the name of avoiding risk not jumping in with both feet. By her own admission, she sold her house because she saw the opportunity to take a profit of a magnitude she might not see again. By my calculations while it was a tidy sum, it was certainly not what I would call F U money.

[Anonymous]

Hey, Mexico Resident, do you have Ben's ear? http://news.yahoo.com/s/ap/20061129/ap_on_bi_ge/bernanke_19

 

[Mexico Resident]

Ha, Ha. Yeah, I was playing golf with Ben the other day. I told him that really he needed to make his own decisions because after all HE was the fed chief. He responded “Nine iron!” You guys should get off of PS’s case. She makes some pretty thought provoking statements.

[powayseller]

D&D, You guys might enjoy opening an account at Intrade, so you can bet on events like bird flu, who will win the Oscars, legal and political race outcomes, whether Dick Cheney will resign by a certain date, and other events.

Even though I am not going to take you up on your offer, I hold the conviction of that high default rate. Many things can transpire to change the likelihood of a 90% default occurence, such as new federal regulations, a lending overhaul by banks to salvage the market, a Fed funds rate under 2%, so betting on that would be really stupid.

You really think a person who put 90% of their money in fixed income accounts would gamble in prediction markets, LOL? No way, Jose!

[Author]

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