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(former)FormerSanDiegan.
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June 21, 2007 at 11:16 PM #61256June 21, 2007 at 11:16 PM #61295
SD Realtor
Participanttat why do you this website?
SD Realtor
June 22, 2007 at 1:01 AM #61274cyphire
ParticipantThe largest factor is public perception – and mob psychology. It takes time for perceptions to change, especially when there is so much conflicting information.
Realtors are saying (many of them) – wow what a great time to buy! Some are falling for this. True price information is passed around this site, but the general media doesn’t really cover it.
The economy doesn’t suck yet, I believe that the interrelated stock market, bond market, hedge fund nonsense, all getting pressure from US debt and the housing market will start accelerating the pressure on consumers. There will be an ever increasing flight to risk avoidance, that means people selling and downsizing, and people, banks and others taking losses to get out. More pricing pressure, more pain. Right now things are holding together (look at the stock market), but an ever increasing shift will start hitting the market. Interest rates are not going down (more news on wall street) and there is a huge amount of mortgage assets which are not worth what they are written as – but as of now are only starting to be recognized (look at last week Bear-Sterns / ML issue).
As things get worse, employers will be afraid to hire, wages will tank, consumers will get leery, banks will tighten credit and we will have a massive move to the downside. Is this very bearish? Absolutely. Am I right? Who knows! I would bet that this will play out, and if it doesn’t, I also won’t be surprised. But I think I am ahead of the curve on this, especially because i am not prejudiced by having debt, owning a home, or have exposure to being fired / laid off.
June 22, 2007 at 1:01 AM #61313ParticipantThe largest factor is public perception – and mob psychology. It takes time for perceptions to change, especially when there is so much conflicting information.
Realtors are saying (many of them) – wow what a great time to buy! Some are falling for this. True price information is passed around this site, but the general media doesn’t really cover it.
The economy doesn’t suck yet, I believe that the interrelated stock market, bond market, hedge fund nonsense, all getting pressure from US debt and the housing market will start accelerating the pressure on consumers. There will be an ever increasing flight to risk avoidance, that means people selling and downsizing, and people, banks and others taking losses to get out. More pricing pressure, more pain. Right now things are holding together (look at the stock market), but an ever increasing shift will start hitting the market. Interest rates are not going down (more news on wall street) and there is a huge amount of mortgage assets which are not worth what they are written as – but as of now are only starting to be recognized (look at last week Bear-Sterns / ML issue).
As things get worse, employers will be afraid to hire, wages will tank, consumers will get leery, banks will tighten credit and we will have a massive move to the downside. Is this very bearish? Absolutely. Am I right? Who knows! I would bet that this will play out, and if it doesn’t, I also won’t be surprised. But I think I am ahead of the curve on this, especially because i am not prejudiced by having debt, owning a home, or have exposure to being fired / laid off.
June 22, 2007 at 2:02 PM #61452Anonymous
GuestThis is why homes prices are the way that they are! Greedy people thinking they can get $100,000 more for the same basic cookie cutter house!!!!!!!
June 22, 2007 at 2:02 PM #61491GuestThis is why homes prices are the way that they are! Greedy people thinking they can get $100,000 more for the same basic cookie cutter house!!!!!!!
June 23, 2007 at 7:43 AM #61594eyePod
ParticipantDonald I don't know man… The REO pricing is beyond my comprehension…I would figure that the banks would price them aggressively but they never seem to do that…
It appears the banks are in denial also?
June 23, 2007 at 7:43 AM #61633ParticipantDonald I don't know man… The REO pricing is beyond my comprehension…I would figure that the banks would price them aggressively but they never seem to do that…
It appears the banks are in denial also?
June 23, 2007 at 7:51 AM #61596no_such_reality
ParticipantThe banks will hold on until the stock market starts to punish them for underperforming assets being on their books.
Until the ROA starts to drop and their stock price drops because people see it they’ll hold on. The reason is simple, when they let go, their refiance business, which is still fairly good and more importantly, full of desperate people will dry up. When they let go, they will crater the market. And if they crater the market, they will increase defaults because people will walk away when they are 40% underwater and their ARM reset pushes their payment to over half their net pay.
June 23, 2007 at 7:51 AM #61635ParticipantThe banks will hold on until the stock market starts to punish them for underperforming assets being on their books.
Until the ROA starts to drop and their stock price drops because people see it they’ll hold on. The reason is simple, when they let go, their refiance business, which is still fairly good and more importantly, full of desperate people will dry up. When they let go, they will crater the market. And if they crater the market, they will increase defaults because people will walk away when they are 40% underwater and their ARM reset pushes their payment to over half their net pay.
June 23, 2007 at 3:31 PM #61638patientrenter
Participantnsr,
You paint a scenario of banks (or investors for whom the banks are administering mortgages) beginning to lower REO prices only when the market punishes them by lowering their own stock/loan values. I agree. Is there anything that could prevent that from just playing out over time as most of us here expect (or hope)?
This last week we saw a concerted private bank effort to avoid a melt-down in sub-prime loan values. For a modest infusion of bank capital, a melt-down was averted. If this continues for a long time, banks and others will eventually run out of capital they want to put at risk.
But the federal government has pockets deep enough at that point to put up a very powerful resistance to significant further drops in home prices, and even increase them. Imagine a new program from FNMA that insures loans up to $850,000 with 1% down and no principal payable for the first 10 years, based on the buyer solemnly swearing that he or she has the income to make the payments. How many congressmen would vote against that if home prices were down 20% across a large part of the country? How many lobbying dollars would swing behind that? How would that make the CEO of FNMA look in front of the court of public opinion and congress?
I think we have to be realistic here and realize that, barring an additional powerful downward kick from some unanticipated force, like a global recession, the only circumstance under which house prices in Southern California will drop severely is if the severe drops are restricted to a small fraction of the whole country. Any scenario that would cause a severe drop in home prices for a large number of voters nationwide will be met with very powerful countermeasures.
I realize the federal government is not all-powerful, and anything it does will have downsides that will be considered before decisions are made, but 50 million voters ‘losing’ $100,000 or more each and pounding angrily on the doors of the committees in congress will tilt the debate pretty sharply.
Anyone see a reason this couldn’t or wouldn’t happen? (I already buy into the “shouldn’t”, so this is not a question of what’s right or wrong politically, only what’s most likely.)
Patient renter in OC
June 23, 2007 at 3:31 PM #61678Participantnsr,
You paint a scenario of banks (or investors for whom the banks are administering mortgages) beginning to lower REO prices only when the market punishes them by lowering their own stock/loan values. I agree. Is there anything that could prevent that from just playing out over time as most of us here expect (or hope)?
This last week we saw a concerted private bank effort to avoid a melt-down in sub-prime loan values. For a modest infusion of bank capital, a melt-down was averted. If this continues for a long time, banks and others will eventually run out of capital they want to put at risk.
But the federal government has pockets deep enough at that point to put up a very powerful resistance to significant further drops in home prices, and even increase them. Imagine a new program from FNMA that insures loans up to $850,000 with 1% down and no principal payable for the first 10 years, based on the buyer solemnly swearing that he or she has the income to make the payments. How many congressmen would vote against that if home prices were down 20% across a large part of the country? How many lobbying dollars would swing behind that? How would that make the CEO of FNMA look in front of the court of public opinion and congress?
I think we have to be realistic here and realize that, barring an additional powerful downward kick from some unanticipated force, like a global recession, the only circumstance under which house prices in Southern California will drop severely is if the severe drops are restricted to a small fraction of the whole country. Any scenario that would cause a severe drop in home prices for a large number of voters nationwide will be met with very powerful countermeasures.
I realize the federal government is not all-powerful, and anything it does will have downsides that will be considered before decisions are made, but 50 million voters ‘losing’ $100,000 or more each and pounding angrily on the doors of the committees in congress will tilt the debate pretty sharply.
Anyone see a reason this couldn’t or wouldn’t happen? (I already buy into the “shouldn’t”, so this is not a question of what’s right or wrong politically, only what’s most likely.)
Patient renter in OC
June 23, 2007 at 5:23 PM #61644Participantnsr and patient renter –
I am not saying I disagree with the analysis but I do want to add my concerns. For one thing, why hold the asset, why not dribble them or at least get rid of a them a few at a time. Why would lenders hold ALL of them when they will be acquiring more and more of them at a faster rate?
Also by holding them then who is paying the interest on the bonds that have been issued?
We also saw that large auction in May where “supposedly” some of the properties did go at pretty low prices. Although I am not so sure if that indeed is true.
So… yeah nsr I “think” you are right… but I still think that the lenders would indeed start to try to move a small fraction of the properties while holding most of them…
UNLESS
Now to patient renters point. I have always been stressing out about what you brought up… the sheer size of the parties who DONT want the housing market to crash. Think about it, all the lenders, the banks, Wall Street, the federal government…. the sheer amount of power and money that has a vested interest in propping up the market or at least forstalling the crash and making it a prolonged stall over many years… this is what has always worried me the most. Patient renter your example was just one way that it could happen…kind of an indirect bailout by FNMA…
Now I don’t want to get political (aka known as the knell for any Realtor) but tell me how happy Hillary would be to promise to save all those poor middle class homeowners who are about to lose their homes. Are you kidding me? (don’t confuse that statement for an endorsement of the current administration because it is not) It is just an example.
Sorry for rambling… there is just alot of money and power that I am sure will be lobbied to try to prop things up.
SD Realtor
June 23, 2007 at 5:23 PM #61684Participantnsr and patient renter –
I am not saying I disagree with the analysis but I do want to add my concerns. For one thing, why hold the asset, why not dribble them or at least get rid of a them a few at a time. Why would lenders hold ALL of them when they will be acquiring more and more of them at a faster rate?
Also by holding them then who is paying the interest on the bonds that have been issued?
We also saw that large auction in May where “supposedly” some of the properties did go at pretty low prices. Although I am not so sure if that indeed is true.
So… yeah nsr I “think” you are right… but I still think that the lenders would indeed start to try to move a small fraction of the properties while holding most of them…
UNLESS
Now to patient renters point. I have always been stressing out about what you brought up… the sheer size of the parties who DONT want the housing market to crash. Think about it, all the lenders, the banks, Wall Street, the federal government…. the sheer amount of power and money that has a vested interest in propping up the market or at least forstalling the crash and making it a prolonged stall over many years… this is what has always worried me the most. Patient renter your example was just one way that it could happen…kind of an indirect bailout by FNMA…
Now I don’t want to get political (aka known as the knell for any Realtor) but tell me how happy Hillary would be to promise to save all those poor middle class homeowners who are about to lose their homes. Are you kidding me? (don’t confuse that statement for an endorsement of the current administration because it is not) It is just an example.
Sorry for rambling… there is just alot of money and power that I am sure will be lobbied to try to prop things up.
SD Realtor
June 23, 2007 at 5:33 PM #61646ParticipantDribbling them out is what they are doing. selling 50 a month with 650 a month are piling up, leads for a long long backlog to be dribbled out. Years worth. Empty houses with no power, no running water, no ventilation, don’t age well.
It’ll be interesting, in general, housing across a broad swath of American isn’t nearly as over extended as SoCal. SoCal and Cali in is one of few island of housing psychosis.
Will the Fed come riding to the housing rescue of California and Florida? Or will the excesses and fraud in the California and Florida be painted as the root of the problem?
The problem Cali has coming has already come to the rust belt in Ohio and Michigan. I see lip service, but I don’t any traction.
In the end, this is a credit bubble, and their only two solutions, the credit bubble inflated assets have to return to fundamental values or fundamental value have to rise to the bubble.
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