01.10.2007 - Wednesday Open Thread
This is your open thread for Wednesday, January 10, 2007. Please post random links and off-topic discussions here.
Off-topic comment? Interesting link?
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23 comments:
Well, since nobody has anything much to input at the moment, I want to repost this as I wanted to get some thoughts on the comments from this housing lending bank...
Last week, I was in an e-mail discussion with one of my clients, (I am in the Hospitality Industry) They are with a major national bank that provides home loans. I possed a question to my client where they felt the housing market and loan market was heading. i have deleted the name of the bank to protect the "innocent" but got this standard response....
We continue to be confident in the markets we operate within and are dedicated to providing the dream of home ownership, home improvement and home protection to as many Americans as possible. It is as important to "Bank Un-named" that our customers stay in their homes as it is for them to get into them in the first place. Therefore, we concentrate on helping the customer find the right mortgage or home equity product that benefits them long term."
If that is not a standard piece of B.S. suitable for a newspaper quote, and certainly contrived, I don't know what is.
Maybe banks don't really have that much to worry about in a real-estate downturn anyway. Many banks no longer keep the loans in their own portfolios, and just spin them off as Mortgage Backed Securities to various investors (hedge funds, pension funds, etc). Thus, any fall-out from increased foreclosures will be felt by someone else.
As far as these down-stream investors go, their investment options are so limited, that many of them are sticking with poor quality MBS assets because it's one of the few things that offers any kind of decent return. There is just too much money floating around chasing investment opportunities. Investors can't be greedy, and need to take whatever they can find with a promising yield, even if it has a lot of risks.
Americans struggle to afford housing:
An annual income of about $85,000 is needed to afford median-priced homes; salaries have not seen modest gains, according to a study.
CNNMONEY
While the median home price in the 202 largest metropolitan areas declined 2 percent from a year ago to $248,000 in the third quarter of 2006, mortgage rates rose enough over the year that homes actually became less affordable as pay did not keep pace.
But yet its a buyers market!!!
"We continue to be confident in the markets we operate within and are dedicated to providing the dream of home ownership, home improvement and home protection to as many Americans as possible. It is as important to "Bank Un-named" that our customers stay in their homes as it is for them to get into them in the first place. Therefore, we concentrate on helping the customer find the right mortgage or home equity product that benefits them long term."
This statement admits that there are lots of people who bought homes they could not afford, with risky mortgage products.
I've never heard a bank discuss "home protection" as one of their services. Never.
good point nolaguy. "home protection" implies that it needs to be protected from the bank taking it back. I saw the news stating that mortgage applications for the first week of Janaury have risen substantially. One might assume that means buyers are out there applying for mortgages. What it doesn't say is if these are refinancing, or if they are even getting approval
t.v.,
Was the rise in applications month-to-month, or Year-to-Year?
I'm guessing that a month-to-month rise in applications from december to January happens every year.
The increase was both week over week and YOY.
calculated risk rocks
He also shows that both refis and originations went up.
He tracks this stuff religiously - every week. Great site.
Wow Cam, thanks for that. He really is a Freak when it comes to that. the info is good though. Glad somebody does it. that stuff hurts my brain too much. so the question is, what peice of the puzzle does that show us as far as direction is going? I imagine, too early to tell
Yeah, pretty noisy series. One week is not a trend.
My prediction that I made a couple of years ago was that we would start seeing serious declines nationally in mid to late 2007, but that early 2007, we would see "bargain hunters" give a temporary up-surge in sales.
We'll see how close I am.
Maybe I shouldn't use the word surge these days. ;)
This isn’t only a local housing bubble or a national housing bubble, this is a global housing bubble. Or more accurately, this is a global credit debt bubble. Hard to believe that Seattle is enjoying the same bubblelicious phenomenon we are experiencing here in Southern California.
The MBA is also predicting a reset of over 1 trillion in mortgage debt in 2007. The other interesting item in 2007 is the number of those loans resetting that are in the sub prime market. There was a recent study showing that 8 percent of all mortgage debt is in the sub prime market and that 1 out 5 of the holders of these loans will default in the next two years. Is it any wonder that many folks are getting shocked that their teaser rate goes away like the night back at prom when you thought you were going to get lucky only to leave with the drama girl? Ah yes, the shock of not knowing what you are getting into.
Again the four horsemen of the housing apocalypse are approaching. Southern California will realize how quickly debt service can put you down especially when it is linked to an asset you are unable to sell.
Regarding Global housing bubble. check out the irish newspaper by googling housing market news. the UK and Ireland have seen massive increases as well, and are now seeing signs of trouble.
Has anyone noticed this gem: No Mortgage Payment for 12 Months
The 12-month deferral plan is perfect since it exceeds the 12-month period where loan originators might be required to buy back these crazy, crappy loans.
Man. Did the roads ever fill up with the panic-stricken quick!
Run! Flee! The snow is coming! The snow is coming!
But the weather here is so nice and mild!!!!!
I guess we know why the housing market won't recover in January -- super bowl and snow!
Hey everybody1 the weather here SUCKS! don't take that boeing job, don't take that Microsoft Job and transfer here. Go someplace with a winter in the 70's like DC, or Philly.
Wow, The UN is a bit skiddish and puts out a warning that our housing market could damper the whole world economy....
The U.N. report also warned that if the U.S. housing market falls at a dramatic rate, the global economy could become unhinged, "enhancing the risk of a major upheaval in financial markets."
http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=94e6be4f-6d09-482d-919a-6222ea9f63a8
Tim, I was looking at some of the other blogs you have linked on yours. Kudos to you for connecting to "Seattle Bubble?"
Ironic that his name is Tim as well. Seems to be a lot of Tims in Seattle. Do you think all of the Tims in Seattle might have an acutal effect on the market if they bought or sold? :-)
What I find intersting, is he doesn't seem to be garnering much support in his views despite his "facts" that he touts as evidence on a strong Seattle housing market.
I heard a fascinating podcast "2007: Beginning of the Slowdown" yesterday. Its topics include housing slowdown, the humongous levels of consumer debt, and oil. Nothing about specific markets like ours however.
I mention this as these related topics have been discussed in previous open threads.
The vociferous denials of reality from industries are fascinating. I can't fathom the $$$$ campaigns spent to convince people black is white, debt is great, housing will appreciate beyond 4% annually for the rest of a twenty-something's life, the emperor has shiny new threads. And I can't fathom how people believe those messages.
Dr_housing_bubble,
Russ Winters at WallStreet Examiner does some excellent insight into the subprime loans - specifically, the 2004 and 2005 vintages of piggyback 80/20's.
It's a great read with lots of data.
http://tinyurl.com/wmss6
I’m not even going to address much the myriad of additional wild man loans: interest only, Alt A, midprime ARMs, and neg am pay options out there, other than present this snapshot in the next chart. In fact I would suggest that the presence of these buyers with these exotic loans and at this magnitude was the causa promixa of the final push and peak in housing and blow off consumer credit expansion. And the fact that they were still around in 2006 with this credit type is the only reason housing prices didn’t severely correct this year.
The house down my street:
For sale originally (Oct 2006): $545000
Nov 2006: $525000 -- advertised as five-bedroom house
Jan 2007: $519000 -- advertised as four-bedroom house and den w/closet
Granite countertops in kitchen and in bathroom.
2415 NE 115th: on sale for one year, advertised as five bedrooms (County records say three) steadfastly at $499,950.
Meanwhile houses in my area are selling for about 10% less than they would have six months ago.
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