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LA_Renter
ParticipantPart 2
Market Watch: Southern California Housing Slump — Part II
7/11/2007 3:54:52 PMby Susan Baretta
This article continues to examine the Los Angeles Times archives to review Southern California’s last housing downturn, which unfolded from 1988 to about 1996. Part One left off in 1989.
http://www.elliottwave.com/features/default.aspx?cat=mw&articleid=3188
July 11, 2007 at 6:35 PM in reply to: Standard & Poor’s just drove a huge harpoon into the heart of the mortgage credit bubble, #65304Participantrb_engineer, One of the things to take into consideration in regards to market performance is that yes the S&P is up about 10% but our poor US Dollar broke 81 this week. We are sitting at a 30 yr low. In that context the S&P isn’t performing that well. In fact a potential bigger story stemming from the subprime debacle is the dollar index breaking through its 80 support level, that has been the floor for over three decades now. If we break through that level we are in totally unchartered territory. That would be bad, very very bad. You think the price of oil is high now?? Also something to pay attention to is the Yen firming against the dollar which helps unwind that carry trade (less liquidity). Personally I don’t want to see these things happen (I would like to see the housing market correct and thats it), and I think we will weather this but we are in somewhat of a precarious situation here. Just looking at the performance of the Dow and S&P isn’t telling the whole story here IMHO. I didn’t mean to add to the gloom here but what the hay.
July 11, 2007 at 6:35 PM in reply to: Standard & Poor’s just drove a huge harpoon into the heart of the mortgage credit bubble, #65367Participantrb_engineer, One of the things to take into consideration in regards to market performance is that yes the S&P is up about 10% but our poor US Dollar broke 81 this week. We are sitting at a 30 yr low. In that context the S&P isn’t performing that well. In fact a potential bigger story stemming from the subprime debacle is the dollar index breaking through its 80 support level, that has been the floor for over three decades now. If we break through that level we are in totally unchartered territory. That would be bad, very very bad. You think the price of oil is high now?? Also something to pay attention to is the Yen firming against the dollar which helps unwind that carry trade (less liquidity). Personally I don’t want to see these things happen (I would like to see the housing market correct and thats it), and I think we will weather this but we are in somewhat of a precarious situation here. Just looking at the performance of the Dow and S&P isn’t telling the whole story here IMHO. I didn’t mean to add to the gloom here but what the hay.
July 11, 2007 at 10:14 AM in reply to: Standard & Poor’s just drove a huge harpoon into the heart of the mortgage credit bubble, #65202Participant“But is there any huge impact to the home price? to the lenders?”
This will speed up a slowly deflating bubble.
I found this very sophisticated explanation discussing the differences between various bubbles and how they play out on youtube. Enjoy!
July 11, 2007 at 10:14 AM in reply to: Standard & Poor’s just drove a huge harpoon into the heart of the mortgage credit bubble, #65265Participant“But is there any huge impact to the home price? to the lenders?”
This will speed up a slowly deflating bubble.
I found this very sophisticated explanation discussing the differences between various bubbles and how they play out on youtube. Enjoy!
July 11, 2007 at 12:53 AM in reply to: Standard & Poor’s just drove a huge harpoon into the heart of the mortgage credit bubble, #65145ParticipantNo, this is Huge.
“But the bigger news is that S&P isn’t going along with the charade anymore. S&P said it would change its methodology for rating hundreds of billions of dollars in residential-mortgage-backed securities. And it would review its ratings on hundreds of billions of dollars in the more complex collateralized debt obligations based on those subprime loans. A lot of debt will be downgraded to junk status. A lot of that debt will have to be sold at fire-sale prices. A lot of pension funds and hedge funds that once thrived on the high returns they could get from investing in subprime junk will now lose a lot of money.”
Basically they are re-pricing many portfolios due to the Bear Stearns blow up. I found this quote on a chatboard;
“these downgrades will cause a ripple effect in the hedge funds. Even if retail investors don’t care, the fundies have limits based upon debt ratings..and they have been the driving force behind the largest credit and housing bubbles in history. Goodbye mega-liquidity and home refi party”
I guess to answer your question this is old news that wasn’t supposed to come out.
Its late I’m tired i’ll look at this tomorrow.
July 11, 2007 at 12:53 AM in reply to: Standard & Poor’s just drove a huge harpoon into the heart of the mortgage credit bubble, #65206ParticipantNo, this is Huge.
“But the bigger news is that S&P isn’t going along with the charade anymore. S&P said it would change its methodology for rating hundreds of billions of dollars in residential-mortgage-backed securities. And it would review its ratings on hundreds of billions of dollars in the more complex collateralized debt obligations based on those subprime loans. A lot of debt will be downgraded to junk status. A lot of that debt will have to be sold at fire-sale prices. A lot of pension funds and hedge funds that once thrived on the high returns they could get from investing in subprime junk will now lose a lot of money.”
Basically they are re-pricing many portfolios due to the Bear Stearns blow up. I found this quote on a chatboard;
“these downgrades will cause a ripple effect in the hedge funds. Even if retail investors don’t care, the fundies have limits based upon debt ratings..and they have been the driving force behind the largest credit and housing bubbles in history. Goodbye mega-liquidity and home refi party”
I guess to answer your question this is old news that wasn’t supposed to come out.
Its late I’m tired i’ll look at this tomorrow.
July 10, 2007 at 6:24 PM in reply to: Standard & Poor’s just drove a huge harpoon into the heart of the mortgage credit bubble, #65089ParticipantFrom Bloomberg
`Why Now?’“I’d like to know: Why now?” Steven Eisman, a portfolio manager at Frontpoint Partners in New York said on a conference call hosted by S&P to discuss the possible ratings changes. “The news has been out on subprime now for many, many months. The delinquencies have been a disaster for many, many months. The ratings have been called into question for many, many months. I’d like to know why you’re making this move today instead of many months ago.”
Tom Warrack, an S&P managing director, said it takes time for performance to show through.
“We have been surveilling these deals actively on a regular basis beginning in 2005 and 2006,” Warrack said on the call. “We believe that the performance that we’ve been able to observe now warrants action.”
In response to the investor criticism, executives at S&P, Moody’s and Fitch have said they were waiting until foreclosure sales of homes proved that the collateral backing the bonds has declined enough to create losses.
Fran Laserson, a spokeswoman for Moody’s, and James Jockle, a spokesman for Fitch, said they had no immediate comment.
Huh!!
July 10, 2007 at 6:24 PM in reply to: Standard & Poor’s just drove a huge harpoon into the heart of the mortgage credit bubble, #65150ParticipantFrom Bloomberg
`Why Now?’“I’d like to know: Why now?” Steven Eisman, a portfolio manager at Frontpoint Partners in New York said on a conference call hosted by S&P to discuss the possible ratings changes. “The news has been out on subprime now for many, many months. The delinquencies have been a disaster for many, many months. The ratings have been called into question for many, many months. I’d like to know why you’re making this move today instead of many months ago.”
Tom Warrack, an S&P managing director, said it takes time for performance to show through.
“We have been surveilling these deals actively on a regular basis beginning in 2005 and 2006,” Warrack said on the call. “We believe that the performance that we’ve been able to observe now warrants action.”
In response to the investor criticism, executives at S&P, Moody’s and Fitch have said they were waiting until foreclosure sales of homes proved that the collateral backing the bonds has declined enough to create losses.
Fran Laserson, a spokeswoman for Moody’s, and James Jockle, a spokesman for Fitch, said they had no immediate comment.
Huh!!
ParticipantDollar broke 81, yields are down, Stock market down, Rating agencies are actually rating bonds (check out the ABX), Retail stocks look weak, and you have alot of uncertainty concerning the scope of this subprime mess. I predict a stock market rally. Note: usually when I make a prediction on the market the opposite happens.
ParticipantDollar broke 81, yields are down, Stock market down, Rating agencies are actually rating bonds (check out the ABX), Retail stocks look weak, and you have alot of uncertainty concerning the scope of this subprime mess. I predict a stock market rally. Note: usually when I make a prediction on the market the opposite happens.
ParticipantJennyo, thanks for clarifying that. I did indicate I could be wrong. I think it is the narrative of the piece that seems to play into a RE permabull argument. That could be unintended. I think it would have ben a better article if they brought out the current state of population growth in the state. The decrease of the 25 – 44 demographic, the closing of elementary schools throughout the area, The high velocity outbound status of moving companies etc. This is a key topic of debate in California RE right now. In the short term CA is actually losing key elements of its population.
ParticipantJennyo, thanks for clarifying that. I did indicate I could be wrong. I think it is the narrative of the piece that seems to play into a RE permabull argument. That could be unintended. I think it would have ben a better article if they brought out the current state of population growth in the state. The decrease of the 25 – 44 demographic, the closing of elementary schools throughout the area, The high velocity outbound status of moving companies etc. This is a key topic of debate in California RE right now. In the short term CA is actually losing key elements of its population.
ParticipantThis was on the front page of the LA times this morning. The thing that comes to my mind is the timing of the article in the face of a rapidly deteriorating California housing market. This definitely plays into, they are not making any more land meme.
“Other demographers argue that the huge population increase the state predicts will occur only if officials complete major improvements to roads and other public infrastructure. Without that investment, they say, some Californians would flee the state.
If the finance department’s calculations hold, California’s population will rise from 34.1 million in 2000 to 59.5 million at the mid-century point, about the same number of people as Italy has today.
And its projected growth rate in those 50 years will outstrip the national rate — nearly 75% compared with less than 50% projected by the federal government. That could translate to increased political clout in Washington, D.C.
Southern California’s population is projected to grow at a rate of more than 60%, according to the new state figures, reaching 31.6 million by mid-century. That’s an increase of 12.1 million over just seven counties.
L.A. County alone will top 13 million by 2050, an increase of almost 3.5 million residents. And Riverside County — long among the fastest-growing in the state — will triple in population to 4.7 million by mid-century.
Riverside County will add 3.1 million people, according to the new state figures, eclipsing Orange and San Diego to become the second most populous in the state. With less expensive housing than the coast, Riverside County has grown by more than 472,000 residents since 2000, according to state estimates.
But many residents face agonizingly long commutes to work in other areas. And Monday, the state’s growth projections raised some concerns in the Inland Empire.
Registered nurse Fifi Bo moved from Los Angeles to Corona nine years ago so she could buy a house and avoid urban congestion. But she’d consider moving even farther east now that Riverside County is grappling with its own crowding problems.
“But where am I going? People used to move to Victorville, but [housing prices in] Victorville already got high,” the 36-year-old said as she fretted about traffic and smog and public services stretched thin. “We don’t know where to go. Maybe Arizona.”
This article barely touched on the fact that we are already seeing a net domestic out migration, housing sales have slowed to a trickle and look at the U-Haul rates leaving the state verses coming in.
I could be wrong but my gut tells me this article was designed to put fear in potential buyers heart that if you don’t buy now you will be priced out forever, look at the population growth heading your way.
I remember hearing Chris Thornberg say in one of his lectures that the housing shortage of California is very misunderstood. There is a shortage of multi-tenet housing in the state, this is an immigration issue, these people could not afford a home in Birmingham Alabama much less Los Angeles CA. Right now there is no shortage of bubble priced SFR’s in So Cal in fact there appears to be an over supply.
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