Housing: 2007 Thread.

[theeedude]

Originally posted by: Vic

Originally posted by: senseamp
So wait, am I getting this right, does Vic work at a bank? Bank that is probably now stuck with loans whose collateral's value is going to get decimated. No more suckers to sell ARMs too? Too bad, so sad. Seems like he is really pissed off that the gravy train is leaving, so he is attacking those of us who are hopping on the it to make some money on the return trip.

Now THIS is a personal attack. And an untruthful one at that. The market I happen to work in is still seeing appreciating values. Nor do I work in servicing. And fixed rates have been more profitable for banks to originate than ARMs for the past few years now (as long as the yield curves have been inverted).

Based on your comments here, you better educate yourself about how RE works before you get screwed on your investments. And education involves listening to those who actually have knowledge as opposed to letting your paranoia discount such knowledge by imagining a conflict of interest. I'm gonna say this again, competent RE professionals can make money no matter which way the market goes. In fact, if the market did tank, I'd probably make money than if it remained indefinitely at its current semi-stagnant state. How do you think that fund of yours is making money for you? Believe it or not, not everyone acts solely from self-interest. I am genuinely concerned about poor people losing their homes, and am particularly aghast at those who literally want to see that happen solely for their own personal profit.

Oh, OK, so calling me scum wasn't a personal attack, but THIS is? Yeah, right.
If you and your ilk were as "genuinely concerned" about poor people buying homes they couldn't afford, maybe they wouldn't be losing their homes to foreclosure now. This is a credit driven housing bubble. The banks thought the risk of foreclosure was acceptable, so they gave those people mortgages they were in no shape to afford.
Maybe you should take a look at what happened to Japan when they had a housing bubble.
http://app.onlinequickblog.com...87/JapanLandPrices.jpg
We are between "We have reached a permanently High plateau" and the beginning of the long "Never a better time to buy" decline stage. BTW, I am a buyer of Japan now. And after we are done with our cycle, I will be a buyer of US too. But now, I am shorting US RE all the way down to the bottom.

 

[Vic]

The difference is that I disapprove of actions that you yourself here on this board claim to have taken, and take exception to the inconsistency those actions have with your professed beliefs, whereas you have fictionalized slanders against my actual real life professional ethics based on your own fantasy opinions about me from this internet message board.
For example, I could think you're an asshole based on your attitude demonstrated here, and say so, but that doesn't mean anything beyond being my opinion. OTOH, if I started telling everyone here that you rape babies in real life, that would stop being an opinion and will have crossed the life to personal attack.
Get it? You and LegendKiller really should.

 

[theeedude]

Originally posted by: Vic
The difference is that I disapprove of actions that you yourself here on this board claim to have taken, and take exception to the inconsistency those actions have with your professed beliefs, whereas you have fictionalized slanders against my actual real life professional ethics based on your own fantasy opinions about me from this internet message board.
For example, I could think you're an asshole based on your attitude demonstrated here, and say so, but that doesn't mean anything beyond being my opinion. OTOH, if I started telling everyone here that you rape babies in real life, that would stop being an opinion and will have crossed the life to personal attack.
Get it? You and LegendKiller really should.

What is this inconsistency between my actions and professed beliefs? You keep claiming there is one, but you have yet to demonstrate what it is. I want the housing bubble to burst, and I am shorting it. Where is the inconsistency there?

 

[dullard]

Would you gentlemen please step it down a notch. The name calling, personal attacks, and public displays of ill opinions are really ruining this thread.

I like the disagreements and debates. But lets keep these names out of it. Please. I'd hate to have to lock down this thread. I'll ask someone to do it if I must.

 

[Vic]

Meh, no problem, dullard. I'm outta here.

Still, posting information and making comparisons to the Japanese RE bubble was helpful and relevant when I did it several years ago when the market was still going up and I cautioned against too much exhuberence. Doing it now is kind of like telling a person to wear a condom AFTER they've already gotten HIV. I think that misunderstanding is the main source of confusion and animosity here. Some people are just a little bit too after-the-fact reactionary. Almost the point where it's more than a bit silly, like the one who claims to have predicted the market here, yet whose join date is after the decline had already begun.

 

[theeedude]

We aren't posting here as public service. We are discussing the housing market. People can make their own decisions about what to do about it. IMO it's too late to do anything about the irrational exuberance of the past. It's not too late to either immunize yourself from a housing decline or to benefit from it by shorting REITs. I don't see why suggesting it should make one a subject of personal attacks.

 

[Vic]

Originally posted by: senseamp
We aren't posting here as public service. We are discussing the housing market. People can make their own decisions about what to do about it. IMO it's too late to do anything about the irrational exuberance of the past. It's not too late to either immunize yourself from a housing decline or to benefit from it by shorting REITs. I don't see why suggesting it should make one a subject of personal attacks.

Uh... surely it couldn't be because you're obviously shilling for a particular fund that you are personally invested in and therefore have a monetary interest?
Nah... couldn't be.

:roll:

 

[dullard]

Originally posted by: Vic
Meh, no problem, dullard. I'm outta here.

Still, posting information and making comparisons to the Japanese RE bubble was helpful and relevant when I did it several years ago when the market was still going up and I cautioned against too much exhuberence. Doing it now is kind of like telling a person to wear a condom AFTER they've already gotten HIV. I think that misunderstanding is the main source of confusion and animosity here. Some people are just a little bit too after-the-fact reactionary. Almost the point where it's more than a bit silly, like the one who claims to have predicted the market here, yet whose join date is after the decline had already begun.

Have a good day, Vic.

Predicting an imminent crash can be quite useful. If you predicted it right before the crash, congrats on your excellent analysis skills. But if you predicted it far before the crash, that isn't of much use either. It would be the same as the predictors of the stock market crash in 1998. Yes, it did crash, but 2 years later and it never crashed below the 1998 levels. Thus people who sold in 1998 missed out on the gains and didn't get saved from any crash.

I agree with your intent. Wildly swinging markets can wreck havok on people who got caught up in them. I don't want anyone to suffer the pain of having their housing dream crash around them. Warnings of an immient crash could have saved them. People SHOULD be notified that a crash can and will happen eventually. Maybe that could have saved people from ever getting into a mess that they couldn't have handled.

But, here is where it appears that we disagree. I also believe people should be notified and educated when the market is falling. Just as people need to know the market is going up and may crash, they need to know the market is going down and may bottom. Thus, discussions NOW about a crashing market ARE important. They are valuable (unlike your condom case). This way people can hopefully plan and mitigate any losses.

I also think we disagree on people profitting from market moves. People who jump on market moves often have the effect of smoothing it out and lessening the ups/downs. It used to be thought that currency traders harmed currency rates. But actually, they help mimize currency swings. Don't chastise people for profetting on the way down, they (when combined with the others betting against them) help minimize the distance it goes down.

 

[Vic]

No question of your last argument there, dullard (I'm sticking in here because I feel I can have a reasoned discussion with you). We're already starting to see investors jumping into what they are calling "buying opportunities" on distressed properties for "pennies on the dollar" (quotes are their words, not mine), and the mostly collapsed subprime mortgage market has already been replaced by government programs and private financing (there's been a particularly strong resurgence in lease-option contracts).
I think that's another part of my argument that is being overlooked, which is that the market is not going to fall nearly as far as many here are fanatical on arguing. For example, I'd have to look it up, but I believe that LK's argument has been all along that we would see a drop to circa 1995 value levels, which I find to be unlikely in the extreme. In order for that happen, as I already argued, we would need to see available financing dry up to the point where most people, including those posters who argue so strongly in favor of such thing, would not be able to buy in no matter how much they wanted to. It seems that I get personally attacked the most whenever I bring up that obvious bit of logic there. To me, however, it seems only obvious that in housing there is an extremely strong correlation between values and cost/availability of funds.

 

[dullard]

Originally posted by: Vic
No question of your last argument there, dullard (I'm sticking in here because I feel I can have a reasoned discussion with you). We're already starting to see investors jumping into what they are calling "buying opportunities" on distressed properties for "pennies on the dollar" (quotes are their words, not mine), and the mostly collapsed subprime mortgage market has already been replaced by government programs and private financing (there's been a particularly strong resurgence in lease-option contracts).
I think that's another part of my argument that is being overlooked, which is that the market is not going to fall nearly as far as many here are fanatical on arguing. For example, I'd have to look it up, but I believe that LK's argument has been all along that we would see a drop to circa 1995 value levels, which I find to be unlikely in the extreme. In order for that happen, as I already argued, we would need to see available financing dry up to the point where most people, including those posters who argue so strongly in favor of such thing, would not be able to buy in no matter how much they wanted to. It seems that I get personally attacked the most whenever I bring up that obvious bit of logic there. To me, however, it seems only obvious that in housing there is an extremely strong correlation between values and cost/availability of funds.

Hopefully, there will be enough support to minimize any major crash. But, in some high priced areas that won't happen (ie California). But you agree with that.

I don't know how much the market will fall. I can look at historical results and see 20% drops tend to be fairly routine in the areas where it fell. Thus, everyone with a house or who is buying a house should think about that possibility. Can they still afford that house if it falls 20%? If the answer is yes, buy it or stay in it. If the answer is no, then don't buy it or sell it. Hopefully, that situation won't happen. But people really need to think about it. I started these threads in response to the dozens of posters here stating that housing can never and will never fall. It is those people who never thought about the potential fall that I hope to target.

I believe LKs argument is that it'll drop to 1995 levels + ~2%/year appreciation. That is slightly different from what you just posted. Dropping purely to the 1995 levels (ignoring his 2%/year rise) would be quite unlikely. Ultimately LK may be correct, but I think it will fall as fast or as far as he predicts.

I do have a big concern about what will happen around Oct 2007. A massive amount of people will have thier mortgages soar right around that time. Will a ~$500/month extra charge be too much to keep the house (ie GDP stays fine but housing is pummeled)? Or will they maintain hold on the house and curtail spending (housing has supports but GDP falters significantly). I know that is a pessimistic view. But it is a question that must be asked. It will also depend on what the investers/banks do with that extra ~$500/month interest that they receive. Will it go to making more money available to borrowers? Or will it be sucked up into an investment portfolios black hole?

If you don't mind a little criticism, your "I was personally attacked" meter seems to be a bit too sensitive. Yes, posters went to far against you. But is there a way to come back with a nicer tone? This applies to other people as well in this thread, not just you. Heck, I've been guilty of that myself now and then.

 

[dmcowen674]

Originally posted by: dullard

People who jump on market moves often have the effect of smoothing it out and lessening the ups/downs.

It used to be thought that currency traders harmed currency rates.

But actually, they help mimize currency swings.

Don't chastise people for profetting on the way down, they (when combined with the others betting against them) help minimize the distance it goes down.

Thanks, this just confirms it's a monopoly game for the rich.

 

[theeedude]

Originally posted by: Vic

Originally posted by: senseamp
We aren't posting here as public service. We are discussing the housing market. People can make their own decisions about what to do about it. IMO it's too late to do anything about the irrational exuberance of the past. It's not too late to either immunize yourself from a housing decline or to benefit from it by shorting REITs. I don't see why suggesting it should make one a subject of personal attacks.

Uh... surely it couldn't be because you're obviously shilling for a particular fund that you are personally invested in and therefore have a monetary interest?
Nah... couldn't be.

:roll:

Considering that I am waiting for the fund to pull back so I can double up, no, my immediate monetary interest is not telling people to go buy it right now.
And ATPN is not a place to shill funds since the real movers and shakers aren't sitting here reading it.
What I want is for people to be aware of this option to benefit from the housing bubble bursting. I was looking for a good vehicle to do so, but there wasn't anything aside from buying puts on REITs, which is a bit too risky for most investors. Now there is, and I think it's a good thing, and I am telling people to consider it. I made no secret of the fact that I am invested in it. If you don't like it, don't buy it. I don't care. It's like trying to stop the rain from falling. It's going to happen regardless of what we here do.

 

[Trianon]

S&P: Whoops! A $5 billion subprime blunder
Rating agency lowers amount of mortgage-backed securities under review to $7.3 billion from $12.1 billion.
July 13 2007: 7:06 AM EDT

NEW YORK (Reuters) -- Standard & Poor's admitted to making a nearly $5 billion blunder in correcting its own estimate for subprime securities it is reviewing for ratings cuts.

S&P corrected the volume of residential mortgage-backed securities it placed under review for downgrade on Tuesday to $7.35 billion from $12.1 billion.

"This is obviously sloppy by S&P," said Mirko Mikelic, a fund manager at Fifth Third Asset Management in Grand Rapids, Michigan. "I don't think anyone's doing back flips."

Standard & Poor's original statement announcing the review of 612 residential mortgage securities on Tuesday spooked investors, driving them away from financial stocks and other riskier investments and into the safety of U.S. government bonds. A benchmark subprime index fell to a record low.

"It was an error and we corrected it," S&P spokesman Adam Tempkin said on Thursday. "It was human error. It is what it is."

S&P said the volume corrected represents 1.3 percent of the $565.3 billion U.S. subprime mortgage market it rated between the fourth quarter of 2005 and the fourth quarter of 2006.

The changes by S&P, the credit-rating unit of McGraw-Hill Cos., come on the heels of increasing troubles in the subprime mortgage market that caters to borrowers with spotty credit histories.

"The market's been so sensitive to the subprime issue, so you would think that they would dot their I's," Mikelic said. "It doesn't help when S&P is changing their numbers."

CNN

26 indicted on mortgage scheme
U.S. attorney alleges defendants obtained millions to pay for rent-regulated condominium apartments in Manhattan.
By Zak Sos, CNN assignment editor
July 12 2007: 6:27 PM EDT

NEW YORK (CNN) -- The federal government announced Tuesday a bust in a multi-million dollar subprime mortgage lending scheme and indicted more than two dozen alleged co-conspirators.

Michael J. Garcia, U.S. Attorney for the Southern District of New York, charged 26 people with fraudulently acquiring over 1,000 home mortgages and home equity loans totaling at least $200 million.

The charges came after an exhaustive joint investigation by the FBI, New York Police Department, and the U.S. Immigration and Customs Enforcement (ICE).

According to Garcia's office, the applications, which were submitted from 2004 through December 2006, induced "the lenders to make loans that otherwise would not have been funded."

Among the properties alleged to have been bought using the loans is a block of ten rent-regulated apartments on Manhattan's Upper West Side Side.

Certain defendants may have garnered millions of dollars in loan proceeds by omitting from their loan applications information such as their income, the fair market value of the apartments, and the fact the apartments were subject to New York's rent regulation laws, the indictment states.

Among those charged in the case was Galina Zhigun, the owner of mortgage brokerage AGA Capital NY, Inc. who along with other individuals is accused of processing the fraudulent loan applications.

Zhigun's attorney Rober Katzberg was not immediately available for comment.

AGA Capital - later succeeded by Lending Universe Corporation - and Northside Capital, another lender which processed the loans, initially earned a total of at least $4 million in commissions and fees from the transactions. None of the firms were indicted in the case. (See correction)

However, as a result of the fraud, the companies have now each suffered at least $4.5 million in losses.

If convicted, each defendant could face a sentence of at least 30 years in jail and a maximum fine of $250,000. Pre-trial hearings are set to begin on Oct. 17.

Correction: An earlier version of this story failed to say that none of the companies: Lending Universe Corporation - and Northside Capital were indicted in the case. CNNMoney.com regrets the error.

CNN

Russian immigrants seem to pick up/bring bad habits into business very quickly.

 

[Vic]

While I don't wish to stereotype, they bring them. Russia has one of the world's highest crime rates, both for violence and property. Their murder rate is 5x that of the US.
I have read quite convincing theories that it was Russia's historical crime syndicates, the so-called Thieves World, who brought about the fall of the Soviet Union from the inside, and that they run the country right now.

 

[Vic]

BTW, for those arguing the 2% per annum "rule" of the housing market, I am curious as to when you think the DJIA will correct back to ~2,000?

 

[LegendKiller]

Originally posted by: Vic
BTW, for those arguing the 2% per annum "rule" of the housing market, I am curious as to when you think the DJIA will correct back to ~2,000?

The 2% rule doesn't apply to equities, keep in mind risk/return.

 

[Vic]

Originally posted by: LegendKiller

Originally posted by: Vic
BTW, for those arguing the 2% per annum "rule" of the housing market, I am curious as to when you think the DJIA will correct back to ~2,000?

The 2% rule doesn't apply to equities, keep in mind risk/return.

Should I also keep in mind that you tend to be completely full of it for the sake of pushing a single-sided agenda, like when you always bring up the 2% "rule" as to why you think RE is such a poor investment, but all the while you ignore any and all arguments about how tenants pay the bulk of the investment costs for the investor (and thus actual value appreciation is only a small part of the return)?

 

[Trianon]

Originally posted by: Vic
I have read quite convincing theories that it was Russia's historical crime syndicates, the so-called Thieves World, who brought about the fall of the Soviet Union from the inside, and that they run the country right now.

They do have influence, kinda like Italian mafia, but not on the scale large enough to bring down the USSR. The fall was mostly due to misc internal problems, Afghanistan War and active work of CIA on all fronts. Few people bother to investigate, but entire Thieves World(Vorovskoj Mir) was setup to control Gulag population during Stalin years by NKVD.

 

[LegendKiller]

Originally posted by: Vic

Originally posted by: LegendKiller

Originally posted by: Vic
BTW, for those arguing the 2% per annum "rule" of the housing market, I am curious as to when you think the DJIA will correct back to ~2,000?

The 2% rule doesn't apply to equities, keep in mind risk/return.

Should I also keep in mind that you tend to be completely full of it for the sake of pushing a single-sided agenda, like when you always bring up the 2% "rule" as to why you think RE is such a poor investment, but all the while you ignore any and all arguments about how tenants pay the bulk of the investment costs for the investor (and thus actual value appreciation is only a small part of the return)?

I guess all finance is "full of it". The return of an asset is normally highly and positively correlated to the return, the more risk, the more return. Incremental risk ads incremental return. A AAA bond will return less than a CCC bond, because it's much less risky.

Equities grow not only with the economy but also based upon several other factors. These are also much more risky than a house, thus they demand a premium. You're whining about houses being stuck at 2% without providing any foundation for saying they should be higher, you're simply tring to create an argument where there is no proof, no basis, no logic, nothing. You whining about this and accusing me of being "full of it" is akin to somebody who invests only in CD's saying they should get the same return as a stock.

As far as your piece of a tendant paying a bulk of the investment cost. This isn't always the case and even if it were, you're still in a relatively less risky situation, resulting in less returns.

You can quit your spurrious arguments at any time. It's blatantly obvious you really don't know your way around financial markets and the only person you're trying to target is me. Everybody else will (I think) agree with me.

 

[dullard]

More trouble is showing up on the new home side of the picture. New home permits are at a 10-year low. New home starts are up 2.8% for the month after last month was revised downward about that much. So things have been flat for quite a while on the starts. However, with plunging permits, the starts will fall again soon.

Note: this is a good sign for housing prices. If fewer homes are built, then there would be less supply. This could be a good way to maintain a base price for houses. The drawback, of course, is for the employees and shareholders of the home builders.

 

[WhipperSnapper]

Why is that a good sign for housing prices? Good--only if you want higher prices. From my perspective, it's bad.

Thus, I think an increased supply of housing is good! The nation's rapidly expanding population needs to live somewhere.

I think that housing prices are still outrageous and far higher than people's incomes should allow. I'm hoping for a huge correction in the price of housing.

 

[dullard]

Originally posted by: WhipperSnapper
Why is that a good sign for housing prices? Good--only if you want higher prices. From my perspective, it's bad.

Thus, I think an increased supply of housing is good! The nation's rapidly expanding population needs to live somewhere.

I think that housing prices are still outrageous and far higher than people's incomes should allow. I'm hoping for a huge correction in the price of housing.

There are ~130M houses in the US. With housing starts currently at 1.47M/year, that is a 1.1% growth rate. The US population growth rate (including immigration) is currently ~0.9%. Thus, even with this lowered number of housing starts, housing is growing faster than our "rapidly expanding population". Your point isn't useful yet, at least not until housing starts go below 1.2M/year.

Housing prices are still outrageous in many locations. But, extreme volitility in any market can harm the US and its economy. Yes, housing prices skyrocketted up. But the best solution isn't for them to skyrocket down. The best thing we collectively should hope for is for prices to stabolize until incomes increase enough for them to be affordable again.

Of course, that paragraph above looks only at the issue macroscopically. On an individual level, people's personal needs will vary quite a bit. For example, some people want house prices to plummet so that they can buy a house. I want stock prices to plummet, so that I can buy stocks cheap when I'm young. On the other hand, some people want house prices to soar. I want house prices to soar because I may marry my GF in a year or two and we each own a home, so I need to unload one. Similarly, people with stocks and who are near or at retirement want stocks to soar. Individually, we want completely different things. But in total, a massive swing of the stock market up/down (such as before/during the depression) is bad. Same with housing prices, a massive swing up/down is bad.

I want fewer homes to be built to stabolize prices. Incomes will eventually catch up.

 

[Mursilis]

Originally posted by: dullard
There are ~130M houses in the US. With housing starts currently at 1.47M/year, that is a 1.1% growth rate. The US population growth rate (including immigration) is currently ~0.9%. Thus, even with this lowered number of housing starts, housing is growing faster than our "rapidly expanding population". Your point isn't useful yet, at least not until housing starts go below 1.2M/year.

Just curious, do you know how much inventory is 'lost' each year? There must be some loss as houses become run-down/uninhabitable/are demolished to utilize the land for other purposes. I can't imagine the loss is much, but are those numbers even collected by anyone?

 

[dullard]

Originally posted by: Mursilis
Just curious, do you know how much inventory is 'lost' each year? There must be some loss as houses become run-down/uninhabitable/are demolished to utilize the land for other purposes. I can't imagine the loss is much, but are those numbers even collected by anyone?

I thought about that, but I really didn't know how to get that data. So I ignored that fact. Yes, it is a flaw in my argument. But even then, I'd think a 1.1% growth rate in houses minus whatever loss rate they have is sufficient for a 0.9% population growth.

I'm sure insurers collect and utilize that number; it would be critical to their actuary calculations. Maybe someone with some time can search it up.

I can do a VERY crude back of the envelope calculation. $600 will insure a $150,000 house for a year. Giving them a 10% profit magin (just a wild guess there), they have $540 in claims on average for that house. If half are small claims, that leaves $270 for total house destruction. $270/$150,000 = 0.18%. If that is even close to correct, 1.1%-0.18% = 0.92%. We still are building slightly more houses than population growth.

Then you can throw in the curveball of a greater proportion of people wanting houses instead of apartments. That data should be out there.

 

[PingSpike]

I agree that the best thing to happen for housing and the economy would be for wages to rise while house prices remain flat. This would hurt the least amount of people while still helping the situation.

Rampant inflation to the rescue?