[betting on fall]

Countrywide has the properties that are foreclosed and ready for resale on its website: http://www.countrywide.com/purchase/f_reo.asp

There is a blog that has been charting the growth in the number of listings at: countrywide-foreclosures.blogspot.com

If they file for bankruptcy, a court would technically be supervising operations and ensuring that assets are preserved, or at least disposed of in a manner that most benefits the creditors. I suspect that would mean the continued one at a time market price sales, rather than bulk discount sales to others.

If they do file, I would expect the company would exit the loan writing business, but loan servicing- and the related work of disposing REOs- would continue unchanged. Just like the airlines still operate even when in bankruptcy court. If something is producing cash, its worth preserving.

One more thing- It’s not clear to me if Countrywide is truly the owner of record on all those houses, or if they are disposing of them for the bondholders for whom they do the mortgage servicing. Clearly if Countrywide does not really own all these houses, its not for them to decide exactly how to get rid of them.

[betting on fall]

I think the fundamental problem is that with home sales cut in half and higher interest rates eliminating refinancing, demand for loans is probably down 75%.

If we were suddenly buying 75% fewer cars, what would happen to the auto industry?

There are two choices: downscale yourself quickly, or have a bankruptcy judge and your creditors decide how to do it.

[betting on fall]

I think the fundamental problem is that with home sales cut in half and higher interest rates eliminating refinancing, demand for loans is probably down 75%.

If we were suddenly buying 75% fewer cars, what would happen to the auto industry?

There are two choices: downscale yourself quickly, or have a bankruptcy judge and your creditors decide how to do it.

[betting on fall]

I think the fundamental problem is that with home sales cut in half and higher interest rates eliminating refinancing, demand for loans is probably down 75%.

If we were suddenly buying 75% fewer cars, what would happen to the auto industry?

There are two choices: downscale yourself quickly, or have a bankruptcy judge and your creditors decide how to do it.

[betting on fall]

So long as the number of expected residents won’t increase, the developer can probably make the changes.
However, a career ago I was somewhat involved in development from the government side. When times were bad, many developers wanted to change plans they had in place to build higher density stuff that now wasn’t so profitable. City planners generally said no to those requests, since higher density housing- where there is infrastructure in place to support it- is thought to be good thing.

[betting on fall]

So long as the number of expected residents won’t increase, the developer can probably make the changes.
However, a career ago I was somewhat involved in development from the government side. When times were bad, many developers wanted to change plans they had in place to build higher density stuff that now wasn’t so profitable. City planners generally said no to those requests, since higher density housing- where there is infrastructure in place to support it- is thought to be good thing.

[betting on fall]

So long as the number of expected residents won’t increase, the developer can probably make the changes.
However, a career ago I was somewhat involved in development from the government side. When times were bad, many developers wanted to change plans they had in place to build higher density stuff that now wasn’t so profitable. City planners generally said no to those requests, since higher density housing- where there is infrastructure in place to support it- is thought to be good thing.

[betting on fall]

I see it happening in San Diego. Probably down in Chula Vista first.
Link below is for a listing of a house the developer sold for $900,000 in 2005. Today its an REO listed at $685,000. Scroll through the listing pictures, and what do you see from the balcony? Acres of graded lots ready for new homes! If/when those lots get homes on them, they will have to be sold at 40-50% off the developers 2005 prices.

http://www.sdlookup.com/MLS-071041920-1624_Hillsborough_St_Chula_Vista_CA_91913

[betting on fall]

I see it happening in San Diego. Probably down in Chula Vista first.
Link below is for a listing of a house the developer sold for $900,000 in 2005. Today its an REO listed at $685,000. Scroll through the listing pictures, and what do you see from the balcony? Acres of graded lots ready for new homes! If/when those lots get homes on them, they will have to be sold at 40-50% off the developers 2005 prices.

http://www.sdlookup.com/MLS-071041920-1624_Hillsborough_St_Chula_Vista_CA_91913

[betting on fall]

I see it happening in San Diego. Probably down in Chula Vista first.
Link below is for a listing of a house the developer sold for $900,000 in 2005. Today its an REO listed at $685,000. Scroll through the listing pictures, and what do you see from the balcony? Acres of graded lots ready for new homes! If/when those lots get homes on them, they will have to be sold at 40-50% off the developers 2005 prices.

http://www.sdlookup.com/MLS-071041920-1624_Hillsborough_St_Chula_Vista_CA_91913

[betting on fall]

very funny, and true.

But I am half in Bugs camp too.
There are two problems:
First- the cow shit problem- customers won’t buy until they are confident that cow dung is not an ingredient. When confidence in the ingredidents is still low, the price needs to such that you don’t care what is in them (this is how hot dogs get sold). In other words, higher interest rates provide investors enough return that they ignore the lingering stench. This risk premium will go away in time as people gain confidence in the ingredients again.

Second is the home pricing problems- to date, mortgage investors have assumed stable or growing home prices. Mortgage backed bonds are a much worse risk when prices are falling, so again higher interest rates are needed to make them attractive. This “falling price premium” may be with us for a while.

[betting on fall]

very funny, and true.

But I am half in Bugs camp too.
There are two problems:
First- the cow shit problem- customers won’t buy until they are confident that cow dung is not an ingredient. When confidence in the ingredidents is still low, the price needs to such that you don’t care what is in them (this is how hot dogs get sold). In other words, higher interest rates provide investors enough return that they ignore the lingering stench. This risk premium will go away in time as people gain confidence in the ingredients again.

Second is the home pricing problems- to date, mortgage investors have assumed stable or growing home prices. Mortgage backed bonds are a much worse risk when prices are falling, so again higher interest rates are needed to make them attractive. This “falling price premium” may be with us for a while.

[betting on fall]

very funny, and true.

But I am half in Bugs camp too.
There are two problems:
First- the cow shit problem- customers won’t buy until they are confident that cow dung is not an ingredient. When confidence in the ingredidents is still low, the price needs to such that you don’t care what is in them (this is how hot dogs get sold). In other words, higher interest rates provide investors enough return that they ignore the lingering stench. This risk premium will go away in time as people gain confidence in the ingredients again.

Second is the home pricing problems- to date, mortgage investors have assumed stable or growing home prices. Mortgage backed bonds are a much worse risk when prices are falling, so again higher interest rates are needed to make them attractive. This “falling price premium” may be with us for a while.

[betting on fall]

I do always wonder what the people did with the money in these situations. Where the hell did the 200k go? Even a hummer, boat and bigscreen would only waste half of it.

I hope they at least enjoyed spending it enough to make the next seven years of credit hell worthwhile.

[betting on fall]

I do always wonder what the people did with the money in these situations. Where the hell did the 200k go? Even a hummer, boat and bigscreen would only waste half of it.

I hope they at least enjoyed spending it enough to make the next seven years of credit hell worthwhile.

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