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cyphire
ParticipantRead an interesting point in the New York Times. This Sunday week in review had an interesting article “The Loan Comes Due” along with an excellent graphic explaining the process of securitizing mortgages into CDO’s.
http://www.nytimes.com/imagepages/2007/08/05/weekinreview/20070805_LOAN_GRAPHIC.html
One point in the article was “Financial panics don’t happen during depressions”…. “They happen on the brink of depressions. The claim the world is prosperous is beside the point”.
Is the home buyer/seller psychology so low that there is panic selling happening now? Not really – but we haven’t had the fallout from a meltdown yet. Is it coming… you betcha!
My company sold 2 months ago, if that deal was to close this month or in the future, there would be no deal. An astounding 90% of corporate debt availability has already gone out the window, with the fallout still to be seen. The underlying mortgage instruments supporting the Trillion dollars of bonds out there, which were supposedly AAA rated, are defaulting… Again – the fallout is only now happening.
People can’t get mortgages. The data on home sales (as well as unemployment and home building activity) is a lagging time-series variable (data in a few months or more reflects today’s sales) and is both inaccurate as well as underreported. The panic sellers aren’t selling because they haven’t actually experienced the pain of the market. The only extreme pain is for the person who defaults on their mortgage, everyone else is just in hibernation mode.
When does this end? When all the trends reinforce and the pain comes. I’ve been looking around the Home Depot Expos, talking to my mortgage friends, my real estate friends, and my retail friends. Things are SLOW right now. It only snowballs from here.
As the panic does set in for home sellers, the buyers are NOT THERE to step in. As much pent up demand, money, etc. that might be out there, buyers will not respond to low prices in droves, they will be even more afraid to buy. Why? Because the end won’t be in sight, better deals will happen every week and it takes time to sell a house. You can’t day trade houses! As the offers are made, they will be withdrawn.
I think with the market in such a volatile state the acceleration of a downward trend will continue. 20% or more price changes? Nope. Prices can’t move that quickly because the buyers aren’t waiting to catch them. It will be a long slow road to ever decreasing asset prices. There will be upspikes, but mostly just low and slow. If the panic starts, most of the properties will just sit there as the buyers will react with extreme caution, after all – no one wants to be a chump and reverse places with the sellers….
ParticipantRead an interesting point in the New York Times. This Sunday week in review had an interesting article “The Loan Comes Due” along with an excellent graphic explaining the process of securitizing mortgages into CDO’s.
http://www.nytimes.com/imagepages/2007/08/05/weekinreview/20070805_LOAN_GRAPHIC.html
One point in the article was “Financial panics don’t happen during depressions”…. “They happen on the brink of depressions. The claim the world is prosperous is beside the point”.
Is the home buyer/seller psychology so low that there is panic selling happening now? Not really – but we haven’t had the fallout from a meltdown yet. Is it coming… you betcha!
My company sold 2 months ago, if that deal was to close this month or in the future, there would be no deal. An astounding 90% of corporate debt availability has already gone out the window, with the fallout still to be seen. The underlying mortgage instruments supporting the Trillion dollars of bonds out there, which were supposedly AAA rated, are defaulting… Again – the fallout is only now happening.
People can’t get mortgages. The data on home sales (as well as unemployment and home building activity) is a lagging time-series variable (data in a few months or more reflects today’s sales) and is both inaccurate as well as underreported. The panic sellers aren’t selling because they haven’t actually experienced the pain of the market. The only extreme pain is for the person who defaults on their mortgage, everyone else is just in hibernation mode.
When does this end? When all the trends reinforce and the pain comes. I’ve been looking around the Home Depot Expos, talking to my mortgage friends, my real estate friends, and my retail friends. Things are SLOW right now. It only snowballs from here.
As the panic does set in for home sellers, the buyers are NOT THERE to step in. As much pent up demand, money, etc. that might be out there, buyers will not respond to low prices in droves, they will be even more afraid to buy. Why? Because the end won’t be in sight, better deals will happen every week and it takes time to sell a house. You can’t day trade houses! As the offers are made, they will be withdrawn.
I think with the market in such a volatile state the acceleration of a downward trend will continue. 20% or more price changes? Nope. Prices can’t move that quickly because the buyers aren’t waiting to catch them. It will be a long slow road to ever decreasing asset prices. There will be upspikes, but mostly just low and slow. If the panic starts, most of the properties will just sit there as the buyers will react with extreme caution, after all – no one wants to be a chump and reverse places with the sellers….
ParticipantRead an interesting point in the New York Times. This Sunday week in review had an interesting article “The Loan Comes Due” along with an excellent graphic explaining the process of securitizing mortgages into CDO’s.
http://www.nytimes.com/imagepages/2007/08/05/weekinreview/20070805_LOAN_GRAPHIC.html
One point in the article was “Financial panics don’t happen during depressions”…. “They happen on the brink of depressions. The claim the world is prosperous is beside the point”.
Is the home buyer/seller psychology so low that there is panic selling happening now? Not really – but we haven’t had the fallout from a meltdown yet. Is it coming… you betcha!
My company sold 2 months ago, if that deal was to close this month or in the future, there would be no deal. An astounding 90% of corporate debt availability has already gone out the window, with the fallout still to be seen. The underlying mortgage instruments supporting the Trillion dollars of bonds out there, which were supposedly AAA rated, are defaulting… Again – the fallout is only now happening.
People can’t get mortgages. The data on home sales (as well as unemployment and home building activity) is a lagging time-series variable (data in a few months or more reflects today’s sales) and is both inaccurate as well as underreported. The panic sellers aren’t selling because they haven’t actually experienced the pain of the market. The only extreme pain is for the person who defaults on their mortgage, everyone else is just in hibernation mode.
When does this end? When all the trends reinforce and the pain comes. I’ve been looking around the Home Depot Expos, talking to my mortgage friends, my real estate friends, and my retail friends. Things are SLOW right now. It only snowballs from here.
As the panic does set in for home sellers, the buyers are NOT THERE to step in. As much pent up demand, money, etc. that might be out there, buyers will not respond to low prices in droves, they will be even more afraid to buy. Why? Because the end won’t be in sight, better deals will happen every week and it takes time to sell a house. You can’t day trade houses! As the offers are made, they will be withdrawn.
I think with the market in such a volatile state the acceleration of a downward trend will continue. 20% or more price changes? Nope. Prices can’t move that quickly because the buyers aren’t waiting to catch them. It will be a long slow road to ever decreasing asset prices. There will be upspikes, but mostly just low and slow. If the panic starts, most of the properties will just sit there as the buyers will react with extreme caution, after all – no one wants to be a chump and reverse places with the sellers….
ParticipantMy broker recommends tobacco stocks and liquor stocks. He bought a condo in Little Italy 18 months ago and drinking helps him forget about it and his negative value.
In the future, when prices keep falling, and people start getting more morose, they will be drinking and smoking more. I hate to enable their pain, but it seems like there could be worse stock market advice!
Hi Rustico!
ParticipantMy broker recommends tobacco stocks and liquor stocks. He bought a condo in Little Italy 18 months ago and drinking helps him forget about it and his negative value.
In the future, when prices keep falling, and people start getting more morose, they will be drinking and smoking more. I hate to enable their pain, but it seems like there could be worse stock market advice!
Hi Rustico!
ParticipantMy broker recommends tobacco stocks and liquor stocks. He bought a condo in Little Italy 18 months ago and drinking helps him forget about it and his negative value.
In the future, when prices keep falling, and people start getting more morose, they will be drinking and smoking more. I hate to enable their pain, but it seems like there could be worse stock market advice!
Hi Rustico!
ParticipantI am very freaked out about interest rates, thought they would go much higher, but now am convinced that they will stay stable or possibly go lower (but not by much).
That said my broker, with my permission, took 40% of my money and bought tax free municipal bonds. He wants to lock in revenue for me – seems to make sense. Since selling my company, I have had all the money in cash and some treasuries at Merrill Lynch. I expect some more cash over the next year or two which will make my bonds 1/3rd of the portfolio.
Does anyone see any dangers with the economy on this strategy? I wish I had put my money where my mouth was on the housing bad news, I have very little experience investing even though I understand finance to a reasonable extent.
ParticipantI am very freaked out about interest rates, thought they would go much higher, but now am convinced that they will stay stable or possibly go lower (but not by much).
That said my broker, with my permission, took 40% of my money and bought tax free municipal bonds. He wants to lock in revenue for me – seems to make sense. Since selling my company, I have had all the money in cash and some treasuries at Merrill Lynch. I expect some more cash over the next year or two which will make my bonds 1/3rd of the portfolio.
Does anyone see any dangers with the economy on this strategy? I wish I had put my money where my mouth was on the housing bad news, I have very little experience investing even though I understand finance to a reasonable extent.
ParticipantVery good points PerryChase…..
Cyphire…
I am now in my house 2 months… I am so happy I am renting!!!
ParticipantVery good points PerryChase…..
Cyphire…
I am now in my house 2 months… I am so happy I am renting!!!
ParticipantI will tell you what is keeping home prices too high….
ILLIQUIDITY! EQUITY MARGINS! SIZE OF ASSET TO PORTFOLIO!
Houses are not stocks, they can’t be dumped on a moments notice. People aren’t going to dump houses until they have to. A typical investment in stock has 0-50% in margin. A lot of homes (especially ones that NEED to sell) have 100% in margin (the amount owed vs. the potential selling price).
This coupled with the Days on Market lies (Games played with days on market for a home), create a large number of sellers who would like to sell, but buyers not stepping up to the plate. There are also a large number of buyers who are not willing to sell, because they hope for better times.
As it takes longer and longer to sell a home, and as prices stay stagnant, the market will stay stagnant. As prices fall and economic data gets worse, prices will continually come down and there should be a change in the mindset of sellers. Unfortunately this will make the buyers even more frightened and they will demand even lower prices.
It seems to me that this stagnation is just a lull, prices will come down much more in the fall, and then might have little rebounds along the way. With the true data being as bad as it is (inability to compare apples to oranges, lies about actual selling price (because lots of costs have shifted but aren’t shown in the actual price), and more egregious data games by the NAR, it isn’t surprising that we keep hearing conflicting viewpoints.
Just like the war in Iraq (over 6 years), we keep hearing politicized viewpoints, we don’t get any real data, we hear so many conflicting points that it is difficult to get a handle on the outcome…. (I’m not saying this for political reasons! Just an analogy!) Same stuff in real estate. The Realtors control most of the media messages (completely controlled it until 6 months ago), the data is impossible to get accurate, and only blogs like this really have a discourse on what the future holds (but none of us have a crystal ball).
Anyone see what happened to Countrywide yesterday / today? They think that even by 09 it won’t get better (just like the war, they will keep calling the end until it’s 2015!)
ParticipantI will tell you what is keeping home prices too high….
ILLIQUIDITY! EQUITY MARGINS! SIZE OF ASSET TO PORTFOLIO!
Houses are not stocks, they can’t be dumped on a moments notice. People aren’t going to dump houses until they have to. A typical investment in stock has 0-50% in margin. A lot of homes (especially ones that NEED to sell) have 100% in margin (the amount owed vs. the potential selling price).
This coupled with the Days on Market lies (Games played with days on market for a home), create a large number of sellers who would like to sell, but buyers not stepping up to the plate. There are also a large number of buyers who are not willing to sell, because they hope for better times.
As it takes longer and longer to sell a home, and as prices stay stagnant, the market will stay stagnant. As prices fall and economic data gets worse, prices will continually come down and there should be a change in the mindset of sellers. Unfortunately this will make the buyers even more frightened and they will demand even lower prices.
It seems to me that this stagnation is just a lull, prices will come down much more in the fall, and then might have little rebounds along the way. With the true data being as bad as it is (inability to compare apples to oranges, lies about actual selling price (because lots of costs have shifted but aren’t shown in the actual price), and more egregious data games by the NAR, it isn’t surprising that we keep hearing conflicting viewpoints.
Just like the war in Iraq (over 6 years), we keep hearing politicized viewpoints, we don’t get any real data, we hear so many conflicting points that it is difficult to get a handle on the outcome…. (I’m not saying this for political reasons! Just an analogy!) Same stuff in real estate. The Realtors control most of the media messages (completely controlled it until 6 months ago), the data is impossible to get accurate, and only blogs like this really have a discourse on what the future holds (but none of us have a crystal ball).
Anyone see what happened to Countrywide yesterday / today? They think that even by 09 it won’t get better (just like the war, they will keep calling the end until it’s 2015!)
July 25, 2007 at 11:21 AM in reply to: NEED your input, About to buy a new Pienza home in 4S Ranch #67634ParticipantIf rates go up, house prices should correspondingly go down, perhaps at an even greater rate. Could you imagine the price of homes if there was another 1% added to the 30 year benchmark?
As more potential buyers flee from owning, interest rate increases should accelerate the trend.
Am I banking on this? No. I think that interest rates will stay stable for some time as it would put too much pressure on housing. Could they fall? Perhaps but not by much.
Note: I am no expert. I am a computer exec. This is just my humble opinion, but at this point nothing would surprise me!
July 25, 2007 at 11:21 AM in reply to: NEED your input, About to buy a new Pienza home in 4S Ranch #67701ParticipantIf rates go up, house prices should correspondingly go down, perhaps at an even greater rate. Could you imagine the price of homes if there was another 1% added to the 30 year benchmark?
As more potential buyers flee from owning, interest rate increases should accelerate the trend.
Am I banking on this? No. I think that interest rates will stay stable for some time as it would put too much pressure on housing. Could they fall? Perhaps but not by much.
Note: I am no expert. I am a computer exec. This is just my humble opinion, but at this point nothing would surprise me!
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