04.18.2007 - Wednesday Open Thread
This is your open thread for Wednesday, April 18, 2007. You may post random links and off-topic discussions here.
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37 comments:
This may serve as a blow to our World City candidacy, Sonics may leave town. Oh well, I personally won't shed too many tears.
Yup. This Clay Bennett is one shrewd dude! He knows exactly what he is doing. Regardless of what happens with respect to a new stadium deal, he wins either way.
But if the WA legislature says 'no' as they apparently did, he can put the blame for the Sonics leaving town squarely on their shoulders and quietly leave as the spurned savior who really wanted to help keep them here.
I still have this bad feeling in my gut that there are 11th hour backroom meetings going on down in Olytown as we speak to try to get some deal done. Seems like the exact same thing happened with the Mariners new digs, and that was even after two public 'no' votes!
It won't ruin my life either if they leave. If they stay, Key Arena is the best place for them--there is plenty of evening downtown parking, and it draws a lot of people into the center of the city for dinner before the game and drinks afterwards. I was at the Key two times in the past 6 months and I really can't see anything wrong with the place.
But let's face it--they're lucky to pull in 12-14K people at a game, whereas you can easily see 3x that many attend a Mariners game or 4x at a Seahawks game, so the economic justification for keeping the Sonics isn't in the same league as either professional baseball or football.
A friend of mine runs a start up called Altos Research. They provide weekly market data to lenders, real estate firms, i-banks, etc based on some proprietary analysis of MLS data.
Their primary innovation is something called "Market Action Index", which I am not sure how it is calculated - but it shows how "hot" a market is - down to zip code level. I've posted a snapshot of the current state for seattle here. It shows that Seattle was WAY hot up until about 6 months ago - then dropped to a level of 35 where it has been stuck all winter/spring. Thier metric is that anything above 30 is a sellers market, below 30 is a buyers market. Kind of interesting.
He sent me the Seattle report for this week (122 pages!) but given that the report is proprietary (and expensive) I can't post the whole thing.
Hi DJ...thanks for Altos report. I was wondering what their more detailed reports looked like. You can see their basic stuff here:
Real-time Market Profile for SEATTLE
I've watched it for a while....frankly it doesn't seem to correlate with the market very well. It seems like they're trying to make real estate look like the stock market, with volatile changes by the month, day, and hour. Like you could buy a house in the morning and sell it in the afternoon for a 50% profit. But of course real estate doesn't work that way...YOY #s are the most reliable. Not MOM, DOD, or HOH.
But interesting that they do say the market is very strong and the inventory is low. As they say, a sellers market for sure.
Great link Deejayoh.
The way I see the Seattle statistics, the MIA dropped and is now hovering slightly on the seller's market side. However, if you check surrounding areas, like Pacific or Skykomish, you'll find that they have entered the buyer's market. But they're probably lacking in pink ponies and gumdrops.
Hmmm... not sure how one draws your conclusion But interesting that they do say the market is very strong and the inventory is low. As they say, a sellers market for sure.
Inventory rising, DOM up, $ per square foot down...
yup. Median price is up and all is well as long as you ignore the leading indicators.
I was betting your next permabull post would be the unemployment numbers (which the last time they were this low were right before we entered a recession)
Shug - FYI - MIA for 98107 is 39. Looks like one of the better markets in Seattle - so perhaps there is something to your man on the street postings after all. Of course, as I said, it is one of the better markets.
”….what bubbles up must eventually come down. It would just be nice if Lereah, the mortgage bankers, and the rest of the crowd would recognize the monster they've made and make real amends. But don't bet on it. Their paychecks depend on the myth of housing as an investment, rather than a sound living choice if purchased at the right price.”
House Price Drop? That's Unpossible!
House Price Drop? That's Unpossible!
Thanx Tim
Altos says:
Med home price down
Market action down
Days on market up
Price per square foot down
Slightly a sellers market
Shag says:
"a sellers market for sure."
Hmmm. Does "slightly a sellers market" really equal "a sellers market for sure"???
http://davidlereahwatch.blogspot.com/search?q=alexandria+condo
"Under Virginia law, property assessment are valued to be at "100 percent of fair market value. The Virginia Supreme Court has provided the following definition of fair market value: The fair market value of a property is the price which it will bring when it is offered for sale by one who desires, but is not obliged, to sell it, and is bought by one who is under no necessity of having it."
Mr. Lereah bought the condo unit for $276,900 in April 2005. In 2007 the condo was assessed at $248,977 which is a loss of $27,923. This represents a price decline of 10% (nominal dollars).
It is fitting to see the drop in value of David Lereah's Alexandria condo. He bought just a few months away from the peak bubble in the Washington, DC area. Mr. Lereah clearly made a bad investment decision."
Poor Dave. Not that this will pull him under, but as a supposed arbiter of housing trends, this is amusing.
Does this Sonics nonsense remind anyone else of a kid who throws a tantrum, running down the hall to his room and slamming the door, then coming out again every five minutes for more attention?
Kids, at least, eventually learn that their parents aren't playing that game.
Regarding the Sonics, All the stuff we hear in the media is simply posturing and not much more.
That being said, Seattle needs that arena space for convention business square footage space. Not really having a great economic interest in the Sonics vs what would come with the added convention space revenue and the impact on the city for conventions, it woudl be in Seattle's best interst for the Sonics to leave.
So no mention of WAMUs stock-holders meeting today in blog land here. $164 Million in lost revenue on home loans. Of course with the increase in Retail, and the market already discounting for the anticipated home loans, WAMU's stock went up today. But that doesn't discount the important news of substantial losses in the HL sector. very, very interesting. And they aren't even exposed in Florida or most of the east coast if at all.
Freddie Mac offering $20 bil for problem Mortgages:
http://www.msnbc.msn.com/id/18178681/from/RS.4/
Wamu to offer $2bil:
http://seattletimes.nwsource.com/html/businesstechnology/2003671370_webwamu18.html
However, if you check surrounding areas, like Pacific or Skykomish, you'll find that they have entered the buyer's market. But they're probably lacking in pink ponies and gumdrops.
The problems in Pacific and Skykomish have nothing to do with pretty pink ponies; like I said before, per capita pretty pink pony ownership throughout Western WA is 18X the national average.
The problem with Pacific and Skykomish is that they have the highest density of frat boys in the entire state of WA. You can't throw a can of "Vitamin R" without hitting an Abercrombie-laden, flipflop-wearing "frattie" in the head. They meander around the streets of Skykomish like a lost herd of cattle. And we all know that there is a positive correlation between presence of frat boys and heavy traffic.
In addition, Skykomish and Pacific have really high levels of renters. It's been scientifically proven that renters are fat, stupid, and ugly.
Lastly, can anyone name a single famous musician that was born in either Pacific or Skykomish? I didn't think so.
So of course Skykomish and Pacific are buyers' markets. Who would want to live in such a hell-holes?
Mr. TVB - Yesterday the WSJ posted a huge article on WaMu showing that it has dramatically increased its sub-prime portfolio to 9% and has the largest amount of investor homes in its portfolio. Analysts were predicting a loss in the Home Loans Dept (where I worked last year) double or triple the $164 Million for HL, thus the reason the stock jumped over $2.00 today!
You are right that there are many issues and many people bought PUT OPTIONS (betting the company would have horrible earnings, yet they came in at $0.86 instead of $0.83 analyst estimates), however WaMu has a good platform and risk mitigation strategy (I was an Operational Risk Analyst, and compiled a monthly package of the internal risk for David Schneider, the HL President.) Overall WaMu has indicated that it is getting ahead of any problems and starting a huge reserve for those falling behind to refinance easier (better than the bank losing out completely due to bankruptcies).
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Gosh, I wish I would have let my mortgage go, claim foul, and get free money and keep my home and all the rest of the suckers who actually pay their bills could carry my load.
TVB - WAMU put out a statment indicating that they were not giving out free money, yet just allowing them to have lower refi fees, yet not give the bank away, just on better terms to save money in the long run.
The home-loan business lost $113 million in the quarter, compared with a profit of $52 million a year ago. WaMu executives said good performance for the prime-mortgage business was swamped by problems in the subprime business.
Great work finance! Looks like your underwriting tool is really doing its job!
Miss DisInformation is at it again
Foreclosures in state fall, bucking national trend
By Elizabeth Rhodes
Seattle Times business reporter
Washington state continues to defy the growing national trend in home foreclosures, according to a report released today
Hi Finance, appreciate your insight on this.
I wasn't actually refering to WAMU on the free money thing, though the post came up right after yours, (you type faster than I apparently) I was refering to the Freddie Macs etc.. and the congressional bail out plans. I think WAMU is prudent in doing what they are.
I actually purchase WAMU stock prior to the stock holders meeting for that very anticipated favorable report about retail etc...
the telling sign is not so much about what WAMU is doing right to protect themselves, but simply that there is a very large problem brewing in the areas of which they madd their loans. I do not think BofA will be so lucky as I suspect that their exposure is a bit more.
Renting Makes More Financial Sense Than Homeownership
Foreclosures in state fall, bucking national trend
By Elizabeth Rhodes
At least this one didn't include any twisted presentation of facts or strange assertions.
Given that Seattle has half the exposure to subprime that CA/AZ/FL have - this should not be surprising.
I suspect we will see more local exposure as Alt-A resets come - but I don't think it will be CA like. Those folks have a bit more time to figure out options and probably more of them.
I know when I went for financing in 2006 my broker wanted to sell me a 5-year no doc ARM - and I think it's a stretch to call me a risk or that a "suicide loan".
In the end I made him qualify me for a full-doc because the rate was lower but I bet a lot of qualified buyers would not.
He was being lazy but for a quarter point I doubt he made enough more to qualify as greedy.
fb - I did not work on the underwriting tool, as I was doing reporting on internal bank risks (of which I was just informing the leaders on trends and monthly data).
One way WaMu was gaming the system was through their new checking accounts. Current customers have to close their old account and open a new one to get the great 5% savings and checking account benefits…a lame way to boost their new checking account numbers, (and one thing investors look at for an indication of growth).
Foreclosures in State Fall, Bucking National Trend
By Elizabeth Rhodes
Link
Year over year, Washington state filings dipped 5.9 percent in March.
RealtyTrac estimates that one household in every 775 experienced some stage of foreclosure nationwide last month. In Washington state, it was one household in every 1,378.
However by one measure, Washington matches the national norm: Compared with February, March foreclosure filings increased about 7 percent, both nationally and in the state.
God bless her, she put the best positive spin on the situation that she could!
Interesting dissection of WAMU's results here.
I must say, I didn't pay too much attention - as I don't care one way or the other how the local S&L does. As someone once described them to me, they are "tallest of the midgets"
However, the writer here makes a pretty good case that they used just about every bit of accounting trickery that was legally available to the to make the story sound good - and that it will come back to bite them in the @ss next quarter.
good read.
Uncle same to the rescue. http://www.market-day.net/article_67847/20070418/Fannie-Freddie-to-buy-subprime-loans.php
Fannie, Freddie to buy subprime loans
Posted on April 18, 2007
from Staff Reports
Fannie Mae and Freddie Mac will buy billions of dollars in subprime home mortgage loans, the U.S. mortgage finance companies said Wednesday.
Fannie Mae, the biggest provider of money for U.S. home loans, will spend "tens of billions of dollars" over several years buying subprime home mortgage loans, a spokesman told The Wall Street Journal Wednesday.
Freddie Mac Chairman Richard Syron said earlier Wednesday his company would purchase $20 billion in such loans to help borrowers and would-be home buyers hurt by the tightening of credit standards caused by the recent spike of defaults.
Freddie Mac's products, slated to be introduced mid-summer, will limit payment shock by offering reduced adjustable-rate margins, longer fixed-rate terms and longer reset periods, the finance company said.
Both companies were responding to congressional calls for them to help avert foreclosures among subprime borrowers.
Until now, the two companies rarely directly bought subprime mortgages, but did buy triple-A portions of securities backed by such loans that were packaged by Wall Street firms, the Journal said.
Freddie Mac, officially known as the Federal Home Loan Mortgage Corp., is the No. 2 money provider for U.S. home loans after Fannie Mae, the Federal National Mortgage Association.
Copyright Market-Day.net/United Press Intl
Deeyaoh - I believe that WAMU has a lot of issues that they need to work through their system, yet they are smart about how they do things (from seeing internal strategy planning).
My plan is to by WAMU once they hit about $35/share which will have a yield of ~7% by then, or in about a year from now. They cut costs aggressively (as in they laid off 11,000 people in the last year). They truly have a long run focus and going to be an incredible investment in the next financial upturn...the last several years their stock price has been flat (yet have a nice Dividend)
Wednesday his company would purchase $20 billion in such loans to help borrowers and would-be home buyers hurt by the tightening of credit standards caused by the recent spike of defaults.
OPERATION: SPEED BUMP
Come on, everybody! Let's have a money-burning party!
I think we may be in for a good caining. Anyone watching the Asian Markets?
Yes, I have been watching it for a while now. Asia is getting whacked. The US Peso is getting clubbed.
48 hours late, but welcome news.
The asian market is down because the market worry that China's GDP is growing too fast and the government might try to slow it down? Isn't growing GDP a good thing, what kinda bs is that.
Finance,
You might want to read this prior to loading the boat on WM stock at any price.
You have declining earnings with phantom earnings making up a larger and larger part of those declining earnings.
WM is declaring IOUs as income. You can't spend IOUs. These IOUs are at the highest risk of never becoming actual income.
Given the accounting tools available to banks like WM, shareholders could have their value vanish and they would never know it until the bank run began.
Here is an example of what WM is doing.
Back in the day, a first officer with a global airline had a predictable income structure.
1st year - $25K
2nd year - $45K
3rd year - $105K
5th year - $120K
8th year - $175K
Now, if that FO decided that $25K for the first year really sucks (and it does), he might want to bring income from the "out years" into the present so he can pimp his ride.
In fact, he might want to live as if he is making $107.5K/yr. He can burn savings at a higher rate and assume he will replace it when the pay raises come in.
Unfortunately, his company is run by morons, and his union has no balls. He never gets above the $70K mark - even in his 8th year.
Financial considerations due to management incompetance force incomes lower, and those "out years" never arrive. The savings was burned, and continues to burn.
So, was our savvy FO correct when he declared that he made $107.5K in his first year? Nope. That money never came into his direct deposit account. It never will.
End result? Savings was gutted. Earnings need to be restated. Wife is really pissed off that she has to give the Lexus back to the leasing company. Bankruptcy lawyer demands payment in cash.
It's one thing to live beyond your means. It's quite another to live beyond your means and tell yourself that you are saving a ton of money.
In fact, it is very much like taking out a HELOC on paper profits and assuming that the equity will always rise.
It works right up until it doesn't. At that point, you are totally screwed and you can't do anything about it.
It is one thing if it is a $500K Ballard POS; it is quite another thing if it is a multi-billion dollar thrift HQed in the local area.
For anyone who is interested...
China is getting clipped for 5%.
Japan is down almost 2%
Dollar is getting bitch-slapped all over the Western Pacific.
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