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TheBreeze
ParticipantOne of the problems with trying to sell now is that you are very likely to have to price your home below the current ‘market’ price to get it to move. That’s not an easy thing for most people to do — especially when you will be selling voluntarily. It’s much easier psychologically to sell on the way up as you can price your home at the current market and then sell at an above market price.
You’re in a tough situation. The housing market could still drop 40% from here. However, you may have to price your house 10% below market to get it to sell. I’m not sure what I would do in your spot. Probably stay put.
August 9, 2007 at 8:32 AM in reply to: Nationally televised news program needs family facing forclosure for story #72142Participant“How many other houses do you ‘own’?”
August 9, 2007 at 8:32 AM in reply to: Nationally televised news program needs family facing forclosure for story #72261Participant“How many other houses do you ‘own’?”
August 9, 2007 at 8:32 AM in reply to: Nationally televised news program needs family facing forclosure for story #72269Participant“How many other houses do you ‘own’?”
ParticipantEven if they do increase their limits, will they have any noticeable impact on the subprime market? I think I heard someone on CNBC the other day say that the total subprime and alt-a market was around $2.5 trillion. It doesn’t seem like these two companies could even make a dent in that.
And why would Fannie’s and Freddie’s stock prices rise on this particular tidbit of news? The rotting corpses of subprime lenders and the hedge funds who buy their paper are strewn all over the place, and yet the market cheers when a rumor circulates that Fannie and Freddie are going to fill the gap created by the now defunct hedge funds? Doesn’t make a lot of sense to me.
ParticipantEven if they do increase their limits, will they have any noticeable impact on the subprime market? I think I heard someone on CNBC the other day say that the total subprime and alt-a market was around $2.5 trillion. It doesn’t seem like these two companies could even make a dent in that.
And why would Fannie’s and Freddie’s stock prices rise on this particular tidbit of news? The rotting corpses of subprime lenders and the hedge funds who buy their paper are strewn all over the place, and yet the market cheers when a rumor circulates that Fannie and Freddie are going to fill the gap created by the now defunct hedge funds? Doesn’t make a lot of sense to me.
ParticipantEven if they do increase their limits, will they have any noticeable impact on the subprime market? I think I heard someone on CNBC the other day say that the total subprime and alt-a market was around $2.5 trillion. It doesn’t seem like these two companies could even make a dent in that.
And why would Fannie’s and Freddie’s stock prices rise on this particular tidbit of news? The rotting corpses of subprime lenders and the hedge funds who buy their paper are strewn all over the place, and yet the market cheers when a rumor circulates that Fannie and Freddie are going to fill the gap created by the now defunct hedge funds? Doesn’t make a lot of sense to me.
ParticipantAllan: I didn’t see anything on DSO’s in the 10-Q.
TG: Have you shorted any of the homebuilders? I’d rather not short down here, but I may buy some put options with play money. I think having a few hundred bucks in put options on one of the homebuilders would motivate me to keep digging into these financial statements, which would help me to better understand both the financial markets and real estate.
ParticipantAllan: I didn’t see anything on DSO’s in the 10-Q.
TG: Have you shorted any of the homebuilders? I’d rather not short down here, but I may buy some put options with play money. I think having a few hundred bucks in put options on one of the homebuilders would motivate me to keep digging into these financial statements, which would help me to better understand both the financial markets and real estate.
ParticipantAllan: I didn’t see anything on DSO’s in the 10-Q.
TG: Have you shorted any of the homebuilders? I’d rather not short down here, but I may buy some put options with play money. I think having a few hundred bucks in put options on one of the homebuilders would motivate me to keep digging into these financial statements, which would help me to better understand both the financial markets and real estate.
ParticipantWhen you say “kaput” or “BK” are you meaning Chapter 11 reorg or liquidation (Chapter 7)? If it is Chapter 11, it is no biggie; they can ride through the down turn. I think all builders will go through some sort of bankruptcy during the big bang – the question is can they reorganize or liquidate.
No idea. I’m not an accountant, just a layman trying to see if I can figure out what’s going to happen to Beazer. According to their March 10-Q, Beazer had $2.9 billion in inventory (land and homes), $462 million in what appear to be options on real estate, $200 million in cash, $66 million in receivables, and $526 million in miscellaneous assets. In that same quarter Beazer had $2.6 billion in total liabilities.
On the call, Beazer stated that their “tangible net worth” was $1.3 billion as of June 30. However, their current market cap is only $441 million. Thus, the market is saying that Beazer is worth ~$859 million less than what Beazer said on the call. My guess is that the market is saying that the $462 million in option contracts is worthless and that the inventory is now only worth around $2.5 billion. Is that enough of a write-down? That would be about %16.
My guess is that a 16% write-down is not enough. Although Beazer is still making sales ($800 million worth in the March quarter), I would bet that the inventory that they have left is stuff that is hard to turn and will get harder to turn. If the inventory turns about to be worth 70% of what it is listed at on the balance sheet, then Beazer’s debt is basically greater than it’s assets and they would be chapter 7 (right?)
I’ve made a lot of assumptions in this post, and I’m not an expert, so I would appreciate feedback from you experts out there to point out places where I’ve steered down the wrong path in this post. And thanks for the responses so far.
ParticipantWhen you say “kaput” or “BK” are you meaning Chapter 11 reorg or liquidation (Chapter 7)? If it is Chapter 11, it is no biggie; they can ride through the down turn. I think all builders will go through some sort of bankruptcy during the big bang – the question is can they reorganize or liquidate.
No idea. I’m not an accountant, just a layman trying to see if I can figure out what’s going to happen to Beazer. According to their March 10-Q, Beazer had $2.9 billion in inventory (land and homes), $462 million in what appear to be options on real estate, $200 million in cash, $66 million in receivables, and $526 million in miscellaneous assets. In that same quarter Beazer had $2.6 billion in total liabilities.
On the call, Beazer stated that their “tangible net worth” was $1.3 billion as of June 30. However, their current market cap is only $441 million. Thus, the market is saying that Beazer is worth ~$859 million less than what Beazer said on the call. My guess is that the market is saying that the $462 million in option contracts is worthless and that the inventory is now only worth around $2.5 billion. Is that enough of a write-down? That would be about %16.
My guess is that a 16% write-down is not enough. Although Beazer is still making sales ($800 million worth in the March quarter), I would bet that the inventory that they have left is stuff that is hard to turn and will get harder to turn. If the inventory turns about to be worth 70% of what it is listed at on the balance sheet, then Beazer’s debt is basically greater than it’s assets and they would be chapter 7 (right?)
I’ve made a lot of assumptions in this post, and I’m not an expert, so I would appreciate feedback from you experts out there to point out places where I’ve steered down the wrong path in this post. And thanks for the responses so far.
ParticipantWhen you say “kaput” or “BK” are you meaning Chapter 11 reorg or liquidation (Chapter 7)? If it is Chapter 11, it is no biggie; they can ride through the down turn. I think all builders will go through some sort of bankruptcy during the big bang – the question is can they reorganize or liquidate.
No idea. I’m not an accountant, just a layman trying to see if I can figure out what’s going to happen to Beazer. According to their March 10-Q, Beazer had $2.9 billion in inventory (land and homes), $462 million in what appear to be options on real estate, $200 million in cash, $66 million in receivables, and $526 million in miscellaneous assets. In that same quarter Beazer had $2.6 billion in total liabilities.
On the call, Beazer stated that their “tangible net worth” was $1.3 billion as of June 30. However, their current market cap is only $441 million. Thus, the market is saying that Beazer is worth ~$859 million less than what Beazer said on the call. My guess is that the market is saying that the $462 million in option contracts is worthless and that the inventory is now only worth around $2.5 billion. Is that enough of a write-down? That would be about %16.
My guess is that a 16% write-down is not enough. Although Beazer is still making sales ($800 million worth in the March quarter), I would bet that the inventory that they have left is stuff that is hard to turn and will get harder to turn. If the inventory turns about to be worth 70% of what it is listed at on the balance sheet, then Beazer’s debt is basically greater than it’s assets and they would be chapter 7 (right?)
I’ve made a lot of assumptions in this post, and I’m not an expert, so I would appreciate feedback from you experts out there to point out places where I’ve steered down the wrong path in this post. And thanks for the responses so far.
ParticipantHLS,
Yes my original response was sarcastic. And you’ve laid out some decent reasons for stated income loans. However, in the grand scheme of things, stated needs to go away because it is too susceptible to fraud.
Also, I agree with you that a 30% LTV refi to a borrower with a 500 score is much less risky than any 100% LTV loan. I think the high LTV rates is what got us into this whole mess. If borrowers had to put 10% of their own money down on every mortgage, I doubt we would have seen this bubble reach the heights it did.
Unfortunately, the way the system works today (well, as of last Monday anyway), if a borrower can get a 100% LTV mortgage, there are no checks and balances to keep the “V” in “LTV” in check. Appraisers are pushed by everyone to make ridiculously high if not downright fraudulent appraisals, mortgage brokers are shooting themselves in the foot if they question the value of a home and will sometimes commit fraud on the borrower’s application just to make a sale, borrowers just want to get in the house, originators want to make as many loans as possible so that they will have more to quickly package and sell, the hedge funds buying these loans on the back end were borrowing from Citi, JP Morgan, Bear Stearns, and Goddam Sachs at 5% in order to purchase these mortgages that would supposedly yield 7% or greater.
Once the borrower was able to take his skin out of the game and get a 100%+ LTV loan, everyone else was using somebody else’s money and there was no incentive for any body to use common sense. Dang it all.
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