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LA_Renter
ParticipantNow that I think about it that line of reasoning reminds me of the Nasdaq implosion. (special note: I know the difference between a stock market correction and a housing correction). During the darkest days of that crash you still had the tech investors hanging on to the “New Metrics” of stock valuations. You still had people jumping from start up to start up in search of options only to find shells of companies with no more venture capital. They were still preaching the Gospel of the “New Economy” all the way to bottom. Patient Renter this rationalization is tortured at best especially in the face current market realities.
LA_Renter
ParticipantNow that I think about it that line of reasoning reminds me of the Nasdaq implosion. (special note: I know the difference between a stock market correction and a housing correction). During the darkest days of that crash you still had the tech investors hanging on to the “New Metrics” of stock valuations. You still had people jumping from start up to start up in search of options only to find shells of companies with no more venture capital. They were still preaching the Gospel of the “New Economy” all the way to bottom. Patient Renter this rationalization is tortured at best especially in the face current market realities.
LA_Renter
ParticipantI ain’t buying it either. This smacks of the “New Paradigm” of lending that right now is unfolding as a colossal failure.
LA_Renter
ParticipantI ain’t buying it either. This smacks of the “New Paradigm” of lending that right now is unfolding as a colossal failure.
July 8, 2007 at 11:35 AM in reply to: OCRegister with a great article on the BoFA report regarding the ARM resets #64634LA_Renter
ParticipantFrom Barons via Big Picture
“After modest reflection, any disinterested observer can’t help but find that accompanying table quite alARMing. It’s from a recent MacroMavens report, the handiwork of the incomparable Stephanie Pomboy, whose rants and raves we’ve had the pleasure of occasionally sharing with you. What its blood-curdling numbers depict is that the woes of mortgage lenders are not, as so widely believed, confined to the beleaguered subprime contingent, but are casting a much larger and chillier shadow.
More specifically, the table shows all too clearly that an astounding percentage of adjustable-rate mortgages already are underwater, and it estimates how much equity would be wiped out if home values decline by 5%, 10% and 15% and translates the corresponding losses into dollars.
As Stephanie comments: “Based on the share of ARMs in some state of negative equity at the end of last year and the decline in home prices so far in 2007, a stunning $693 billion in mortgage loans are already in the red. Assuming lenders are able to recover 70% of those assets — which seems optimistic given the massive amount of housing inventory yet to be unwound — that means mortgage lenders are already grappling with $210 billion in outright losses.”
And that, she points out, is merely the direct hit. Thanks to what she nicely dubs the “divine miracle of leverage,” the total financial exposure to these claims is many multiples of that. To which we say, ugh!
What’s more, Stephanie notes, these horrendous losses are coming at a time when the financial sector is “uniquely unprepared to withstand them.” Commercial banks, she points out, have let their loan-loss provisions sink to 20-year lows while increasing their exposure to real estate to record highs. Mortgages, she reckons, account for a tidy 55% of total bank loans — and that doesn’t include the trillion dollars worth of mortgage-backed securities on bank balance sheets.
So much for the myth that banks have cleverly “offloaded” their real estate risk.
Chart is on this link
http://bigpicture.typepad.com/comments/2007/07/underwater-arms.html
July 8, 2007 at 11:35 AM in reply to: OCRegister with a great article on the BoFA report regarding the ARM resets #64693LA_Renter
ParticipantFrom Barons via Big Picture
“After modest reflection, any disinterested observer can’t help but find that accompanying table quite alARMing. It’s from a recent MacroMavens report, the handiwork of the incomparable Stephanie Pomboy, whose rants and raves we’ve had the pleasure of occasionally sharing with you. What its blood-curdling numbers depict is that the woes of mortgage lenders are not, as so widely believed, confined to the beleaguered subprime contingent, but are casting a much larger and chillier shadow.
More specifically, the table shows all too clearly that an astounding percentage of adjustable-rate mortgages already are underwater, and it estimates how much equity would be wiped out if home values decline by 5%, 10% and 15% and translates the corresponding losses into dollars.
As Stephanie comments: “Based on the share of ARMs in some state of negative equity at the end of last year and the decline in home prices so far in 2007, a stunning $693 billion in mortgage loans are already in the red. Assuming lenders are able to recover 70% of those assets — which seems optimistic given the massive amount of housing inventory yet to be unwound — that means mortgage lenders are already grappling with $210 billion in outright losses.”
And that, she points out, is merely the direct hit. Thanks to what she nicely dubs the “divine miracle of leverage,” the total financial exposure to these claims is many multiples of that. To which we say, ugh!
What’s more, Stephanie notes, these horrendous losses are coming at a time when the financial sector is “uniquely unprepared to withstand them.” Commercial banks, she points out, have let their loan-loss provisions sink to 20-year lows while increasing their exposure to real estate to record highs. Mortgages, she reckons, account for a tidy 55% of total bank loans — and that doesn’t include the trillion dollars worth of mortgage-backed securities on bank balance sheets.
So much for the myth that banks have cleverly “offloaded” their real estate risk.
Chart is on this link
http://bigpicture.typepad.com/comments/2007/07/underwater-arms.html
LA_Renter
Participant4plexowner, I have to admit it has been difficult rapping my mind around this whole investment banking situation but the Adams Family analogy above gave me a much deeper understanding which could say something about me. I do think we are going to see some fireworks in the offing.
LA_Renter
Participant4plexowner, I have to admit it has been difficult rapping my mind around this whole investment banking situation but the Adams Family analogy above gave me a much deeper understanding which could say something about me. I do think we are going to see some fireworks in the offing.
LA_Renter
ParticipantThe OC is looking like the San Fernando Valley in unit sales
“O.C. housing suffers slowest-selling start since ’95
For the month of May, DataQuick reports this morning that 2,675 homes sold or 29 percent below a year ago. It’s the slowest-selling May in the 20 years DataQuick has tracked the market.”http://blogs.ocregister.com/lansner/archives/2007/06/oc_housing_suffer.html#comments
Yes the almighty OC home sales are plummeting too!!
LA_Renter
ParticipantThe OC is looking like the San Fernando Valley in unit sales
“O.C. housing suffers slowest-selling start since ’95
For the month of May, DataQuick reports this morning that 2,675 homes sold or 29 percent below a year ago. It’s the slowest-selling May in the 20 years DataQuick has tracked the market.”http://blogs.ocregister.com/lansner/archives/2007/06/oc_housing_suffer.html#comments
Yes the almighty OC home sales are plummeting too!!
LA_Renter
Participant“Yes, yes sales are down but so what?”
Does anybody else find it amazing how entrenched the “RE prices do not Fall” meme is with the general public? It’s almost like magical thinking on a very large scale. I run across this all the time, I feel like I am talking to people that have been hypnotized by the NAR.
Scruffy, Sales are down a whole bunch, I mean unit sales are falling below the worst levels of the last downturn in the early 90’s as I have shown using the San Fernando Valley as an example. Now to address your argument; at the peak of the current market people and economist were saying that actual home sales would not fall that much unless unemployment returned to the 90s levels or worse. As long as people have jobs they will continue to buy houses, Yet we are looking at sales transactions plummet across the entire state of California. So, yes home sales can fall with the current rate of unemployment, in fact they can fall further than anytime in this states history. Now go out on a limb with me here. If actual home sales can fall with the current rate of employment then wouldn’t it be possible that home prices can fall with the current rate of employment. I know it’s a stretch. I mean i had to agonize over this but i figured that home sales signifies demand in relation to price and supply and much to my surprise the conclusion that i came up with is that unless demand increases, like if we all win lotto at the same time, then something will have to happen to price. Maybe you can help me with my thinking here.
LA_Renter
Participant“Yes, yes sales are down but so what?”
Does anybody else find it amazing how entrenched the “RE prices do not Fall” meme is with the general public? It’s almost like magical thinking on a very large scale. I run across this all the time, I feel like I am talking to people that have been hypnotized by the NAR.
Scruffy, Sales are down a whole bunch, I mean unit sales are falling below the worst levels of the last downturn in the early 90’s as I have shown using the San Fernando Valley as an example. Now to address your argument; at the peak of the current market people and economist were saying that actual home sales would not fall that much unless unemployment returned to the 90s levels or worse. As long as people have jobs they will continue to buy houses, Yet we are looking at sales transactions plummet across the entire state of California. So, yes home sales can fall with the current rate of unemployment, in fact they can fall further than anytime in this states history. Now go out on a limb with me here. If actual home sales can fall with the current rate of employment then wouldn’t it be possible that home prices can fall with the current rate of employment. I know it’s a stretch. I mean i had to agonize over this but i figured that home sales signifies demand in relation to price and supply and much to my surprise the conclusion that i came up with is that unless demand increases, like if we all win lotto at the same time, then something will have to happen to price. Maybe you can help me with my thinking here.
LA_Renter
ParticipantI just wanted to add a comment to this;
“That if the contents of each tranch (probably mispelled) within each fund were studied, the investors would find that they are really not holding what they thought they were holding.”
That fact that this is being discussed on blogs and chat boards all over the place pretty much indicates that the Jeanie is out of the bottle. I mean if I know that these subprime contents are trash then I would assume the major players also know this. A major re-pricing of these portfolios is inevitable at this point.
LA_Renter
ParticipantI just wanted to add a comment to this;
“That if the contents of each tranch (probably mispelled) within each fund were studied, the investors would find that they are really not holding what they thought they were holding.”
That fact that this is being discussed on blogs and chat boards all over the place pretty much indicates that the Jeanie is out of the bottle. I mean if I know that these subprime contents are trash then I would assume the major players also know this. A major re-pricing of these portfolios is inevitable at this point.
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