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Wednesday, March 03, 1982

03.03.2007 - Weekend Open Thread

This is your open thread for the weekend of March 3-4, 2007. You may post random links and off-topic discussions here.

Be sure to also check out the forums, and get your word in the user-driven discussions there!

24 comments:

christiangustafson said...

WaMu news ...
(page 27 of the 10-K):

(5) Capitalized interest recognized in earnings that resulted from negative amortization within the Option ARM portfolio totaled $1.07 billion, $292 million, and $19 million for the years ended December 31, 2006, 2005 and 2004.

Oh my! But Option-ARM mortgage holders are rock solid. They're not deadbeats, they've got skin in the game, they're going to make good on WaMu's revenue dreams, right?

Lotsa luck!

stephen said...

An interesting sidebar to the market as it unwinds:

Mortgage Fraud Flourishes in Rough Housing Market

stephen said...

"Some people may think the only way they can get into a property is to BS the bank all the way through," says David Reed, president of CD Reed Mortgage Bankers of Austin, Texas, and author of "Mortgage Confidential." "There are so many programs out there. I've never met a borrower who couldn't get a mortgage."

Great qoute ;-)

Tim said...

Who lives at 2200 Westlake? Not yuppies.

http://2200life.blogspot.com

MisterBubble said...

If your definition of yuppie excludes 98% of all yuppies, then I suppose you're right.

AnalysisGuy said...

I just shot up the end of year report for Seattle. Surprising it was the second best year on record. However, a poor fourth quarter is clearly pointing to a change in momentum.

thebubblebuster.com

Jillayne said...

I heard that there is a story in the Wall Street Journal this morning that half of all subprime lenders have now failed or are about to. I don't have a subscription. Can any confirm this?
http://online.wsj.com/public/us

Don Greenup said...

AnalysisGuy said...
I just shot up the end of year report for Seattle. Surprising it was the second best year on record. However, a poor fourth quarter is clearly pointing to a change in momentum.

I have been a Broker here in Seattle for 25 plus years and I just pulled up the stats. Inventory is up a lot and it will be interesting to see how the month of Feb. finishes. I am trying to get a read on the market. At this point am advising my sellers to price aggresively.We will find out soon enough.

Eleua said...

IMHO, WaMu is going to be the Enron of mortgage banking. With that, you can kiss the national housing market goodnight.

Yes, Ardell and 'Shug, that includes Seattle and the rest of King County.

I have been one of the bigger pessimists on this board since '05, and the pace of this implosion has surprised me like no other time in my life.

This is truly breathtaking. If this unwinds in the YEN markets and the subprime contagion becomes the bird flu of finance, you can absolutely bank on "20 cents on the dollar by 2010."

I have it on good authority that the Institute for Economic Reality may very well update its economic hazard rating to CRASH-CON 2 within a few weeks. The IER is currently digesting the reports of the subprime contagion and the very real threat it is moving to alt-A and above.

biliruben said...

Jillayne -

Here is what I presume a syndicated version of the same article.

I don't see a statement to that effect.

How many subprime lenders are there?

This site details the carnage so far.

Mike said...

Jillayne - there was also an article in the WSJ yesterday about bond prices falling for large financial companies. The fall was accredited to exposure to the subprime mortgage sector.

matthew said...

E-

I feel Crashcon 2 is just around the corner. Death threats against bubble blogging sites... The mob is already starting to turn violent!

Jillayne said...

Hi Guys,

THANKS for the links.

Big changes are coming, that's for sure.

Biliruben,

I use the Scotsman Guide. This publication is free. For a list of wholesale lenders, to go

residential
then
directory
then
wholesale lender directory

http://www.scotsmanguide.com/default.asp?ID=1

Tony1790 said...

Here in south Kitsap county prices on homes has been dropping since summer 06, I have successfully sold of 11 of 12 houses and my last was to close last week, but the buyers lender is getting nervous and wanting more docs, etc.

I spoke with the buyers broker, (know her), the local brokers are experiencing a slow down in sales, appraisers are finding difficulty making the numbers work due to falling comps and she has confirmed that the subprime implosion is working it's way into alt A and prime.

Recently the Fed said that the implosion of subprime will be contained......it's my experience that the fact that they felt compelled to make that comment means that the implosion WILL NOT be contained to subprime.

There is a budding credit crunch being fueled by losses in the mortgage industry, on going world stock market decline and a pending potential for a derivatives collapse that will send the national as well as seattle markets and economies into the tank.

If a buyer can't get or doesn't want to get a option ARM loan or other type to pay for these overpriced homes, what do you think will happen to prices?

I pray to God that my sale doesn't fall through, then I'm 100% out of this over inflated market.

Defensive is the word of the day....no debt, no exposure to the stock market or local housing market.

Take care

Tony in Kitsap

Eleua said...

tony,

Good data. Thanks. Best wishes for your last sale.

I think Kitsap is in for a huge shock when this subprime thing shakes out. Example:

Kitsap = Navy.

In the Navy, rank = money.

When I was in the Navy, we had 78 officers in our squadron. 3 of which owned a home. The Commanding Officer was married to a college prof. The Operations Officer was married to a Delta stew, and we had one Lieutenant that lived in the attic of his house and rented out the downstairs to the Intel Officer.

That's it. A few of the Chiefs may have owned homes, if they had been in the area for several years.

Now, just about every mid-grade Petty officer and up owns a house. Why? They are all on the real estate escalator, and hope to retire here.

This will end in tears. One of my jobs was to council young enlisted men on the perils of debt and buying a car from the local auto dealers. I would set up budgets for them and get them on a savings plan.

I can tell you that we had a tremendous problem with auto debt. When homes become illiquid in Kitsap, and the members transfer, you will see the fur fly. If there is one thing a CO hates, it is dealing with creditors knocking on his door because one of his men is in over his head.

If it is an officer, kiss the career goodbye. An officer can lose his security clearance by being in too much debt.

When modest homes in Poulsbo and Silverdale are going for $400K+, you know this will end in catastrophe.

You have to think that a First Class Petty Officer is qualifying for his Kitsap retirement home on a subprime loan. If he transfers to Orlando or Pearl Harbor, and can't sell his place in Silverdale, he is going to hemorrhage money at his new duty station. He won't be able to rent it out for cost, so that will suck.

It won't be much better for officers.

Wanderer said...

E-
As we have said before, the military officers and enlisted personnel are going to have a very rough go of it for a very long time. Many future BKs' problems will arise due to losing a job and not being able to sell a house that has depreciated. That is bad. The military homeowners are nearly GUARANTEED that their emplotey is going to make them move every 3-4 years. That is worse. I am sure many of them think that they can just rent out their investment while they are at their next duty station. Like you said, 5 years ago there were a very small number of officers successfully doing that... and it was hard work then. there is no way at todays mortgage payments and rents that they are going to be able to survive when they can't sell. PNW might not feel that right away, but it just so happens that there are a couple military bases in san Diego. If the military is going to continue removing clearances for people with finanacial problems, there won't be enough people to whisper the secrets to.

Tony1790 said...

That's it in a nutshell, plus toss in Kitsap as a bedroom community of Seattle and as the housing bubble unwinds, it is worse at the edges first. Even within Kitsap, south Kitsap goes down before North Kitsap and BI.

I just retired from the Coast Guard as a Chief, another Chief buddy just sold his house for $405k in Poulsbo, he had to drop the price from $440k to get it sold.

With Fremont getting a cease and desist order from the FDIC and many of the other top lenders going under, there is going to be a loud screeching sound heard as the brakes are applied to the liquidity train......no loans = no money = no sales = foreclosure city.

I've spoken to recent buyers and buyers of years ago, EVERYONE has some form of ARM and they are resetting. The long ago buyers refi'ed for RV's, Plasma TV, etc That's what's been driving our consumer lead economy.

Compusa and Best buy announced massive store closings due to inability to make money, deflation in electronics, deflation in home prices, deflation in auto prices.....yes a 2007 Ford Expedition cost $4300 less than the same model 2006 sans rebates.

The inflationary pressures, excess liquidity has flowed into the derivatives, etc and that is fixing to take a hit, with more bank losses, more credit tightening and less loans issued.......again, no money, no buying, no sales, no kidding home prices are heading for the cliff.

Good to be outside looking in right now.

Tony

Eleua said...

Tony,

Yes, Kitsap tries to market itself as a bedroom community to Seattle. I buy that for Bainbridge Island, but nothing else.

Today, I drove by a house in Poulsbo that was advertised as an "easy commute to Seattle."

I had to throw the BS flag on that one.

First off, it's 15 minutes to the Agate Pass bridge (connects Bainbridge to mainland Kitsap). It's another 10 minutes to the ferry dock. If you are not careless, it's a 15 minute wait for a boat. Add 35 minutes crossing time, and that puts you in DT Seattle. It's another 15 minutes to unload and get to I-5.

15+10+15+35+15= 90 minutes from Poulsbo to I-5. Now, you have to drive to your office. 20 minutes? That's almost 2 hours with no traffic and you hit the first boat. Now, you have to do that on the way home. Miss a boat, and you add an hour.

If my productive day is 8 hours, and I spend an additional 1/3 of that commuting at $24 round trip (not including gas and parking), I wouldn't define that as an "easy" commute.

Silverdale, Bummerton, and Kingston are even worse.

Many new homes are in the pipeline in Poulsbo. We have 3 major housing developments in work, and this will probably increase the population by 20-25% of the city's population. With subprime imploding, these homes will really weigh on the market. I hate to see this happen, but stupidity should be painful.

Kitsap ends in tears. Guaranteed.

I'm already crying. This is my home, and I wish I could send the Californians back to the Golden State, knock down the empty homes, and replant the firs and cedars.

All this for what? Honestly, what is the purpose of this? How many more x-Cal real estate agents do we need? How many more x-Cal investors do we need? How many retired Navy can we support?

Every school district in Kitsap has declining enrollment (except Bainbridge). With all the building, just who is living here? How many DINKs with dogs can there be? Don't they normally live in more urban areas?

End of pointless rant.

Crashcadia said...

Is there anyone else here watching the Asian Stocks melt down again.
Should be a bumpy ride in the U.S. markets this week.

Typically foreclosures go up when we enter recession. Here, the foreclosures are skyrocketing even before we enter the recession/depression/repression.

I have been watching this whole mess build up for a few years now. It hasn’t bothered me too much over the years, but lately, my eye is beginning to twitch and I get an occasional whiff of spilled blood on the warm breeze.

This is getting interesting real fast.

matthew said...

I see the Japanese market has already started down today. Should be an interesting few months.

Eleua said...

crashcadia (I really like that name),

Yes, I am watching this. This is happening much faster than I had anticipated. Honestly, I am a little scared, although my massive put position should allieviate that. It sucks when you know that your entire country has acted in an immature, irresponsible fashion, and is about to get spanked.

It is all one trade. The dollar, housing, stocks, bonds...It's all over. Unless the PPT can actually plug this hole, it is going to be Mr. Toad's Wild Ride.

77million crying Babyboomers is going to be a national spectacle.

Up until now, all the talk, all the research, all the postering has been run in a simulator. Now, it's for real. It's game time. Now, the enemy shoots back.

"Master Arm is enabled; bomb bay is open; weapon selected; we have attack criteria and launch authorization...Set Battle Condition One."

Richard said...

Eula, I gotta wonder what people are thinking when they plan on a downtown commute from the west sound. I've known a few people over the years that have done it and it's been extrememly hard on their life and relationships.

A few weeks ago I was out at a friends housewarming party in the Banner Road area of Port Orchard. The house was a "great deal" - excluding the massive amount of land, the house alone would have cost over $1M in seattle - but the commute has them getting up at 4 am and arriving back home after 7:30 PM, 5 days a week.

It's a sprawling brand new ranch house decked out in granite, cherrywood and stainless steel with vaulted ceilings on a wooded 2 acre lot - the kind of place I'd love to come home to at night. But spending less than 9 hrs/day there would slowly kill my enjoyment.

Tony1790 said...

eleua,

That commute is one of the reasons that I'm leaving Kitsap, with the exception of the shipyard, the jobs that you can get in Kitsap do not support the home prices here. I worked in Seattle, the commute from Port Orchard was hell...drive to the park in ride, wait for the bus, take the bus to the ferry terminal, ride the ferry to bremerton or to Vashon (south end) connect with another ferry in Bremerton or Vashon and take it to downtown Seattle. I worked within walking distance from the terminal.

Still that's 2.5 to 3 hours each way, 5 to 6 hours per day to get to work, add 8 - 9 hours at work and you have one hell of a long day. I rode the ferry every day with people that have been doing this for years. 13 - 15 hours per day working and commuting because they can't afford to work and live within a reasonable distance of work.

Kitsap is beautiful, but $230,000 for a double wide trailer or $400,000 for a decent home is ridiculus.

Tony

Eleua said...

Tony/Richard,

You guys understand what commuting from Kitsap is like. I only have to do that commute 3 or 4 times per month, so I don't care.

If I had to do it 21x per month, I wouldn't do it. I'd get a Kitsap job, and a more humble abode.

Quality of life is precious. You can always make up money, but you can never get back your daughter's 8th birthday. If you don't take care of yourself, you can age 10 years in 3.