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davelj
ParticipantNot at all surprised. That’s why I structured my contract the way I did.
I think prices will drop in most buildings to the point at which it’s a toss-up between buying and renting. Historically, that has been a very good time to buy in San Diego. I don’t see why it should be any different this time around. Depending on the building that would mean a 35%-60% drop from the peak. When you see those kinds of prices, demand will pick up. But that’s still a couple years off I think.
ParticipantNot at all surprised. That’s why I structured my contract the way I did.
I think prices will drop in most buildings to the point at which it’s a toss-up between buying and renting. Historically, that has been a very good time to buy in San Diego. I don’t see why it should be any different this time around. Depending on the building that would mean a 35%-60% drop from the peak. When you see those kinds of prices, demand will pick up. But that’s still a couple years off I think.
ParticipantNot at all surprised. That’s why I structured my contract the way I did.
I think prices will drop in most buildings to the point at which it’s a toss-up between buying and renting. Historically, that has been a very good time to buy in San Diego. I don’t see why it should be any different this time around. Depending on the building that would mean a 35%-60% drop from the peak. When you see those kinds of prices, demand will pick up. But that’s still a couple years off I think.
ParticipantYeah, basically this guy Genesis doesn’t have a clue as to what he’s talking about, which often happens when otherwise intelligent folks try to decipher the banking industry. As he kind of acknowledges at the beginning of his post: “Let me preface this by saying that I’m not at all certain I understand what I’m looking at here correctly.”
He got it right at the outset. There’s a post, apparently from someone over at Calculated Risk, that’s posted in the middle of the thread that’s approximately correct. (Most importantly, the poster correctly points out the difference between “liquidity reserves” and “capital,” two very different things.)
I’m not going to go through all of the balance sheet math here because it would take too long and wouldn’t accomplish very much. Suffice it to say that banks have five major sources of funding for loans: (1) Common Equity, (2) Trust Preferred and Sub Debt, (3) FHLB Borrowings, (4) Other “Fed-related” borrowings (such as the TAF, currently), and (5) Deposits. If the rates offered through the FHLB system or the TAF are as good or better than the terms that would have to be offered to depositors, then many banks will go with the past of least resistance – FHLB borrowings or the TAF. Remember, deposits not only cost money from the rate side of things but you also have to pay employees, etc. to process them; that is, deposits are “operationally expensive.” Sometimes it’s just cheaper and easier to use the “government’s money” (for lack of a better term), especially when Fed is practically throwing the money at them.
Merely the fact that the banks are availing themselves of the opportunity to use these funds doesn’t mean a whole lot. Nor is it really meaningful to look at liquidity reserves in relation to these funds. If the government gives warning that these funds will no longer be available as of “x” date, the banks will just raise deposit rates, take in sufficient deposits and repay the borrowed funds. Yeah, they’ll see a margin squeeze, but it’s not the end of the world.
Look, the regulators understand liquidity really well. This is a non-issue in the aggregate. The REAL issue is with capital and solvency. And regulators aren’t particularly good at that because it’s hard to analyze a loan portfolio that you didn’t underwrite yourself or a complex MBS portfolio that you didn’t purchase yourself. Liquidity will only become an issue AFTER more capital/solvency issues crop up, as in the recent case of Countrywide.
People should keep their eyes on the losses in the loan and securities’ portfolios. These FHLB/TAF borrowings, while not entirely unimportant, are a red herring.
ParticipantYeah, basically this guy Genesis doesn’t have a clue as to what he’s talking about, which often happens when otherwise intelligent folks try to decipher the banking industry. As he kind of acknowledges at the beginning of his post: “Let me preface this by saying that I’m not at all certain I understand what I’m looking at here correctly.”
He got it right at the outset. There’s a post, apparently from someone over at Calculated Risk, that’s posted in the middle of the thread that’s approximately correct. (Most importantly, the poster correctly points out the difference between “liquidity reserves” and “capital,” two very different things.)
I’m not going to go through all of the balance sheet math here because it would take too long and wouldn’t accomplish very much. Suffice it to say that banks have five major sources of funding for loans: (1) Common Equity, (2) Trust Preferred and Sub Debt, (3) FHLB Borrowings, (4) Other “Fed-related” borrowings (such as the TAF, currently), and (5) Deposits. If the rates offered through the FHLB system or the TAF are as good or better than the terms that would have to be offered to depositors, then many banks will go with the past of least resistance – FHLB borrowings or the TAF. Remember, deposits not only cost money from the rate side of things but you also have to pay employees, etc. to process them; that is, deposits are “operationally expensive.” Sometimes it’s just cheaper and easier to use the “government’s money” (for lack of a better term), especially when Fed is practically throwing the money at them.
Merely the fact that the banks are availing themselves of the opportunity to use these funds doesn’t mean a whole lot. Nor is it really meaningful to look at liquidity reserves in relation to these funds. If the government gives warning that these funds will no longer be available as of “x” date, the banks will just raise deposit rates, take in sufficient deposits and repay the borrowed funds. Yeah, they’ll see a margin squeeze, but it’s not the end of the world.
Look, the regulators understand liquidity really well. This is a non-issue in the aggregate. The REAL issue is with capital and solvency. And regulators aren’t particularly good at that because it’s hard to analyze a loan portfolio that you didn’t underwrite yourself or a complex MBS portfolio that you didn’t purchase yourself. Liquidity will only become an issue AFTER more capital/solvency issues crop up, as in the recent case of Countrywide.
People should keep their eyes on the losses in the loan and securities’ portfolios. These FHLB/TAF borrowings, while not entirely unimportant, are a red herring.
ParticipantYeah, basically this guy Genesis doesn’t have a clue as to what he’s talking about, which often happens when otherwise intelligent folks try to decipher the banking industry. As he kind of acknowledges at the beginning of his post: “Let me preface this by saying that I’m not at all certain I understand what I’m looking at here correctly.”
He got it right at the outset. There’s a post, apparently from someone over at Calculated Risk, that’s posted in the middle of the thread that’s approximately correct. (Most importantly, the poster correctly points out the difference between “liquidity reserves” and “capital,” two very different things.)
I’m not going to go through all of the balance sheet math here because it would take too long and wouldn’t accomplish very much. Suffice it to say that banks have five major sources of funding for loans: (1) Common Equity, (2) Trust Preferred and Sub Debt, (3) FHLB Borrowings, (4) Other “Fed-related” borrowings (such as the TAF, currently), and (5) Deposits. If the rates offered through the FHLB system or the TAF are as good or better than the terms that would have to be offered to depositors, then many banks will go with the past of least resistance – FHLB borrowings or the TAF. Remember, deposits not only cost money from the rate side of things but you also have to pay employees, etc. to process them; that is, deposits are “operationally expensive.” Sometimes it’s just cheaper and easier to use the “government’s money” (for lack of a better term), especially when Fed is practically throwing the money at them.
Merely the fact that the banks are availing themselves of the opportunity to use these funds doesn’t mean a whole lot. Nor is it really meaningful to look at liquidity reserves in relation to these funds. If the government gives warning that these funds will no longer be available as of “x” date, the banks will just raise deposit rates, take in sufficient deposits and repay the borrowed funds. Yeah, they’ll see a margin squeeze, but it’s not the end of the world.
Look, the regulators understand liquidity really well. This is a non-issue in the aggregate. The REAL issue is with capital and solvency. And regulators aren’t particularly good at that because it’s hard to analyze a loan portfolio that you didn’t underwrite yourself or a complex MBS portfolio that you didn’t purchase yourself. Liquidity will only become an issue AFTER more capital/solvency issues crop up, as in the recent case of Countrywide.
People should keep their eyes on the losses in the loan and securities’ portfolios. These FHLB/TAF borrowings, while not entirely unimportant, are a red herring.
ParticipantYeah, basically this guy Genesis doesn’t have a clue as to what he’s talking about, which often happens when otherwise intelligent folks try to decipher the banking industry. As he kind of acknowledges at the beginning of his post: “Let me preface this by saying that I’m not at all certain I understand what I’m looking at here correctly.”
He got it right at the outset. There’s a post, apparently from someone over at Calculated Risk, that’s posted in the middle of the thread that’s approximately correct. (Most importantly, the poster correctly points out the difference between “liquidity reserves” and “capital,” two very different things.)
I’m not going to go through all of the balance sheet math here because it would take too long and wouldn’t accomplish very much. Suffice it to say that banks have five major sources of funding for loans: (1) Common Equity, (2) Trust Preferred and Sub Debt, (3) FHLB Borrowings, (4) Other “Fed-related” borrowings (such as the TAF, currently), and (5) Deposits. If the rates offered through the FHLB system or the TAF are as good or better than the terms that would have to be offered to depositors, then many banks will go with the past of least resistance – FHLB borrowings or the TAF. Remember, deposits not only cost money from the rate side of things but you also have to pay employees, etc. to process them; that is, deposits are “operationally expensive.” Sometimes it’s just cheaper and easier to use the “government’s money” (for lack of a better term), especially when Fed is practically throwing the money at them.
Merely the fact that the banks are availing themselves of the opportunity to use these funds doesn’t mean a whole lot. Nor is it really meaningful to look at liquidity reserves in relation to these funds. If the government gives warning that these funds will no longer be available as of “x” date, the banks will just raise deposit rates, take in sufficient deposits and repay the borrowed funds. Yeah, they’ll see a margin squeeze, but it’s not the end of the world.
Look, the regulators understand liquidity really well. This is a non-issue in the aggregate. The REAL issue is with capital and solvency. And regulators aren’t particularly good at that because it’s hard to analyze a loan portfolio that you didn’t underwrite yourself or a complex MBS portfolio that you didn’t purchase yourself. Liquidity will only become an issue AFTER more capital/solvency issues crop up, as in the recent case of Countrywide.
People should keep their eyes on the losses in the loan and securities’ portfolios. These FHLB/TAF borrowings, while not entirely unimportant, are a red herring.
ParticipantYeah, basically this guy Genesis doesn’t have a clue as to what he’s talking about, which often happens when otherwise intelligent folks try to decipher the banking industry. As he kind of acknowledges at the beginning of his post: “Let me preface this by saying that I’m not at all certain I understand what I’m looking at here correctly.”
He got it right at the outset. There’s a post, apparently from someone over at Calculated Risk, that’s posted in the middle of the thread that’s approximately correct. (Most importantly, the poster correctly points out the difference between “liquidity reserves” and “capital,” two very different things.)
I’m not going to go through all of the balance sheet math here because it would take too long and wouldn’t accomplish very much. Suffice it to say that banks have five major sources of funding for loans: (1) Common Equity, (2) Trust Preferred and Sub Debt, (3) FHLB Borrowings, (4) Other “Fed-related” borrowings (such as the TAF, currently), and (5) Deposits. If the rates offered through the FHLB system or the TAF are as good or better than the terms that would have to be offered to depositors, then many banks will go with the past of least resistance – FHLB borrowings or the TAF. Remember, deposits not only cost money from the rate side of things but you also have to pay employees, etc. to process them; that is, deposits are “operationally expensive.” Sometimes it’s just cheaper and easier to use the “government’s money” (for lack of a better term), especially when Fed is practically throwing the money at them.
Merely the fact that the banks are availing themselves of the opportunity to use these funds doesn’t mean a whole lot. Nor is it really meaningful to look at liquidity reserves in relation to these funds. If the government gives warning that these funds will no longer be available as of “x” date, the banks will just raise deposit rates, take in sufficient deposits and repay the borrowed funds. Yeah, they’ll see a margin squeeze, but it’s not the end of the world.
Look, the regulators understand liquidity really well. This is a non-issue in the aggregate. The REAL issue is with capital and solvency. And regulators aren’t particularly good at that because it’s hard to analyze a loan portfolio that you didn’t underwrite yourself or a complex MBS portfolio that you didn’t purchase yourself. Liquidity will only become an issue AFTER more capital/solvency issues crop up, as in the recent case of Countrywide.
People should keep their eyes on the losses in the loan and securities’ portfolios. These FHLB/TAF borrowings, while not entirely unimportant, are a red herring.
ParticipantRich has a copy of the contract on my place (with certain identifying details left out) as well as (by definition) your email address. I hesitate to speak on Rich’s behalf, but I bet if you ask Rich nicely he’d forward you a copy. (Rich, if you’re reading this, I don’t have a problem with this.) I’d ask, however, that you keep the contents and structure of the contract to yourself.
ParticipantRich has a copy of the contract on my place (with certain identifying details left out) as well as (by definition) your email address. I hesitate to speak on Rich’s behalf, but I bet if you ask Rich nicely he’d forward you a copy. (Rich, if you’re reading this, I don’t have a problem with this.) I’d ask, however, that you keep the contents and structure of the contract to yourself.
ParticipantRich has a copy of the contract on my place (with certain identifying details left out) as well as (by definition) your email address. I hesitate to speak on Rich’s behalf, but I bet if you ask Rich nicely he’d forward you a copy. (Rich, if you’re reading this, I don’t have a problem with this.) I’d ask, however, that you keep the contents and structure of the contract to yourself.
ParticipantRich has a copy of the contract on my place (with certain identifying details left out) as well as (by definition) your email address. I hesitate to speak on Rich’s behalf, but I bet if you ask Rich nicely he’d forward you a copy. (Rich, if you’re reading this, I don’t have a problem with this.) I’d ask, however, that you keep the contents and structure of the contract to yourself.
ParticipantRich has a copy of the contract on my place (with certain identifying details left out) as well as (by definition) your email address. I hesitate to speak on Rich’s behalf, but I bet if you ask Rich nicely he’d forward you a copy. (Rich, if you’re reading this, I don’t have a problem with this.) I’d ask, however, that you keep the contents and structure of the contract to yourself.
ParticipantDowntown is a disaster. I bought here in November ’06 in an odd deal, the details of which I won’t bore you with, that protects me from a peak-to-trough decline of 40%. And I’d like to buy another place down here as well, so I’m pleased with the direction and speed that prices are moving.
In my building there are two REOs and three or four short sales that haven’t sold yet. They are priced at 20%-30% below their last sales, depending on the unit. And they aren’t moving. This is happening in several other buildings as well. So, we’re going to see a dramatic drop in the comps over the next 6-9 months. I believe that in 2009 there will be many units available downtown for which the mortgage+taxes+HOA will be at or below comparable rental prices using conventional financing.
But as for right now, there ain’t no hurry. Just sit back and enjoy the show.
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