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equalizer
Participantfrom WSJ
Mr. Mozilo said aggressive buying by Wells and other big banks drove profit margins too low in correspondent lending.
Wall Street firms, including Lehman Brothers Holdings Inc. and Bear Stearns Cos., are emerging as bigger rivals in home-mortgage lending, expanding beyond their business of creating and trading in mortgage securities. “They don’t know anything about the mortgage business, which makes them a dangerous competitor,” Mr. Mozilo said. These firms “have no hesitation about paying two or three times what we would pay personnel because they’re used to the big bucks.”
Countrywide says it has been careful to give these loans only to borrowers with relatively strong finances. Still, the test of these loans will come when borrowers face “resets” to higher monthly payments, Mr. Mozilo said during the conference call. “I’m not sure exactly what will happen then,” he added.
August 7, 2006 at 11:53 PM in reply to: San Diego County Assessor Promotes Buying Real Estate #31198ParticipantTo all realtors and loan officers
Since he is a public official, what are his real estate holdings and his loan data? My bet is that he has many rentals where he is cash flow positive. So he’s not worried.
ParticipantDaniel
This summary of housing concern in website below probably the same as in the primer but it is very good. Please take a look. The charts are awesome.
Rich
Do you think this link deserves a permanent place in the primer?ParticipantDaniel & co
Disclaimer: No offense should be taken by this rant except for the Maestro.
The following is really moot because nobody really listened (I hope) to the maestro. Most people used ARMS because of affordability issues.
Feb 04 speech
http://www.federalreserve.gov/boardDocs/speeches/2004/20040223/default.htm
“American homeowners clearly like the certainty of fixed mortgage payments. This preference is in striking contrast to the situation in some other countries, where adjustable-rate mortgages are far more common and where efforts to introduce American-type fixed-rate mortgages generally have not been successful. Fixed-rate mortgages seem unduly expensive to households in other countries. One possible reason is that these mortgages effectively charge homeowners high fees for protection against rising interest rates and for the right to refinance.
American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage. To the degree that households are driven by fears of payment shocks but are willing to manage their own interest rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home.”
So, yes he was talking about the past ARMS better than fixed and did say that consumers would be taking the interest rate risk. HOWEVER, he clearly sent a message to banks to give more ARMs and implicitly told consumers they could save money with ARMS. You have to remember that Greenspan works to protect the banks, not the consumers!! He wanted banks to stay healthy and banks would be if they offloaded interest rate risk to the consumer. He did his job. Now, the media may have overstated his statement without including the risk portion. AGREED! However, he is/was one of the most powerful men on the planet. If he disagreed with the media interpretation, why didn’t he call a major press conference to Quell the furor?? Suzy Orman, finance columnist for Yahoo/CNBC lambasted Greenspan for suggesting ARMS with fixed rates at 40 year lows. No comment from the maestro. Only problem is that realtors and brokers may have used his “filtered” comments to pacify nervous consumers.
No conspiracy theory here. Read Jim Grants Interest Rate observer and Bank Credit Analyst, two highly respected newsletters for the straight scoop. Also check out Barry Ritholtz at http://bigpicture.typepad.com/.
BTW Greenspan made more in a single book advance than most of us will make in a lifetime. I don’t think he deserves an unpaid apologist.“The words I use are strong, they make reality.”
ParticipantDaniel
Dont worry about it is a complete Non sequitur.
Gene Epstein, Barrons economist, is MR. Optimist, but at least he presents valid points such as fact that only X % of homes have a mortgage, etc.Participantsdsundevil
you say that there are always corrections and downturns. Then you “whimsically” state that if there is a bottom. What does that mean? That correction will only last 3-6 months, so you must buy now?
“In the long-term you will be fine.” Sure, if you can afford the fixed mortgage. What about people who bought in the last year or so on ARMs? Is that what you told everyone who may face huge payment increases soon?
ParticipantSteve
I doubt there are too many people who have 20% down and could afford fixed rate right now. The rent/own differential could be $500-1000 a month, INCLUDING 30% tax deduction.
Participantto add a second story? make it into a duplex?
what was the problem, too expensive or city wouldnt approve?Participant9 blocks from beach, but stats:
Bedrooms: 2
Full Baths: 1
Partial Baths: 0
Square Feet: 618
Lot Size: 2,500 Sq. Ft.
Year Built: 1951No garage. 55 years old but hey its so small its cheap to rebuild!
Participantps
I’ll babysit your computer if you teach my young little boy not to whine! Just kidding! But I will take kid tips.
Participantpause and no action till after the elections.
Participantybc
you are correct about earnings. Just read article somewhere that during 90s downturn some builders went without profit and Price/Book bottomed at 0.5-0.7 ratio.
Of course book values may be under/overstated now with land costs on books, so thats where your Marty Whitman types (Third Avenue Value fund manager) come in.About CFC, have you read interviews with their CEO mozilo? heres an old ione in Businessweek Mar 06,
“How severe are the price declines you are expecting?
MOZILO: I would expect a general decline of 5% to 10% throughout the country, some areas 20%. And in areas where you have had heavy speculation, you could have 30%. We will see…sellers back off from the prices they have been demanding. A year or a year and half from now, you will have seen a slow deterioration of home values and a substantial deterioration in those areas where there has been speculative excess.”Admitting there is a bubble one would think that he would have protected his company. However, it appears he has either sold half or all his stock for $6M in May/June 06. [Someone please confirm.] Looks like he sees no upside!!
ParticipantSDrealtor
The black helicopters are starting up. Ben should be opening his suitcases full of money soon. 10 year yield cant go too much lower, probably 4.5 worst case in next 6 months. But if major recession starts next year, Ben will cut FF rate to 4.5 and yield could go lower.
As for Private Annuity Trusts, all I know is from the radio show am 1000 from 3-4 weekdays I think where they are always making fancy claims about RE. I think One major problem with these trusts is that everyone is trying to sell you one. Therefore there must be massive commissions and fees that they will STEAL from you. You should probably talk to Ray Lucia http://www.raylucia.com(am 1700 9-noon) and get advice/sale pitch from him. Then please post your findings.
ParticipantLets look at one homebuilder
DRhorton (DHI)close At 4:01PM ET: 22.71
PUT OPTIONS Expire at close Fri, Jan 18, 2008
Strike Symbol Last Chg Bid Ask Vol Open Int
15.00 YRIMC.X 1.40 0.00 1.10 1.25 1 279
20.00 YRIMD.X 2.45 0.35 2.70 2.80 123 4,816So if you’re very bearish about DHI, a 20 put would pay if DHI drops to 17 or less in 1.5 years. If they return land options and/or reduce prices more then it could work. Problem is that some deep value managers are starting to buy homebuilders, so they must see some value here. Its a big risk since the stocks are sitting at only 5 times earnings.
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