Chuck Ponzi August 21st, 2007

Housing bubble apologists often dismissed bubble believers’ concerns out of hand with the following party line: Southern California’s prices only fell last time due to substantial job losses due to the dislocation of the defense industry. (no matter that the Eastern Seaboard had a similarly-timed slide and did not attribute it to the same) Such job losses cannot happen again; the job market is too strong, diversified, and recession proof.

In a number of past posts, I have connected the dots related to current job strength, even while realizing that it was not just the number of jobs, but in particular, the type of jobs that matters when it comes to affordability. Indeed, it is important that the prices of houses are not supported by those that already live in an area, but rather by those who are coming to an area. On the flipside, as an area becomes too expensive, those unable, unwilling to remain, or tempted by their good fortune will sell to realize their gain and move elsewhere. We have already seen San Diego County’s negative growth rate (in spite of a substantially increased housing stock). These moves happen slowly, and reacclimating boiled frogs to lukewarm pots makes them believe they are actually in frigid arctic waters.

What the mainstream media failed terribly to see was that it is exactly the excesses created during the bubble that must be punished in a downturn. First, it was the mantra that Real estate never goes down. Then, it was a “soft patch”. Later, a “Soft Landing”. Then “A souffle’”. All of those jobs due to lending and construction that have paved the way to even higher housing prices have now turned into a vicious downcycle. Remember that the “Zombie Financial Media Awareness Week” is just a few weeks away. Why is it that the media has no memory that bubble blogs were appearing in early to mid 2005, warning of excesses in lending and finance?

Perhaps just as appropriately, one would ask, why are their virtual undead still haunting the pages of major news outlets. Featured writers, no less, that give denial a new face. It might be valuable to read what Wikipedia has to say about denial before visting one of our local train wrecks.

from Wikipedia:

Denial is a defense mechanism in which a person is faced with a fact that is too painful to accept and rejects it instead, insisting that it is not true despite what may be overwhelming evidence. The subject may deny the reality of the unpleasant fact altogether (simple denial), admit the fact but deny its seriousness (minimisation) or admit both the fact and seriousness but deny responsibility (transference). The concept of denial is particularly important to the study of addiction.

After reading that, you might be able to find perhaps even a bit of humor in a piece written by our own lovable village dolt based out of San Diego, George Chamberlain just last week:

Let me begin by passing along my congratulations to the many people who are celebrating the current situation in the housing market. In concert with much of the national and local media, they have been able to artificially construct something that has never —- I repeat, never —- been done before: drive down housing prices at a time when unemployment is low, the economy is booming and consumer confidence is approaching record highs.

A column I wrote about a year ago on the housing market triggered more hate mail than any other topic that I have discussed. I needed to check underneath my car and use a food taster for a couple of weeks after I suggested that the situation was dramatically overstated.

That this level of denial exists, is not prima facie a surprise. That a person so disconnected from reality, even after it is made known to the world can get published can only mean 2 things. Either the editor couldn’t care less about what is being written, or is in similar denial. Not once does the discussion turn to the primary driver of housing prices; job creation. Stagnation can already force prices down with an increasing housing stock; much more with out-migration.

If you read the entire piece, you’ll see that his article exhibits a number of different defense mechanisms. From minimisation to transference to outright denial. One might wonder if he is addicted to house price appreciation. We sure know many San Diegans are addicted… and their only fix is through another equity extraction. Wall Street just shut off the spigot, and it’s very interesting the stages of grief that participants go through as an outsider.

It wasn’t hard to spot where our problems lied, even a year or 2 ago. Jonathan Lansner was able to identify some time ago that housing related to 17% of Orange County’s entire job base. Many observers have noted that a healthy balance is between 6% and 12%. Just to bring us to parity with a healthy balance, we would have to increase our unemployment figures by 5% to 11% of the total workforce. Those are depression-level statistics.

As scary and frightening as they may seem, there are some actions that they everyday person should have done in the past 2 years: (and might still be able to pull off before the slide gains even more steam)

1. Eliminate any speculation that is lending or real estate related: sell any properties, refinance historic-low fixed rates, sell homebuilder or financial stocks, mutual funds, and even banks.

2. Housing-recession proof your career. Find a new one, or develop your business plan to excel when downturns happen.

3. Reduce debt, and raise cash or liquid investments. This one will allow you to ride out any temporary storms as well as purchase property in 3 to 5 years from now when they once again return to appropriate levels.

4. Pay off any adjustable debt, hoard cash. Many people are carrying unhealthy levels of debt. While comical, the man riding the lawnmower in debt up to his eyeballs is all too real in America. Don’t be the person who loses their home to out of control personal expenses.

If George Chamberlain wants positive to come out of this, Southern Californians need to break their cultural pathology and begin to save, invest, and build, rather than consume. Otherwise, there is nothing for us to look forward to. Last time, the scapegoat was the defense industry. This time, it will be the “Subprime Implosion”. Years from now, people will attribute the downturn, not with the excesses that led to it (that would mean assigning the blame to ourselves and our human nature), but with the trigger that collapsed the house of cards we had built.

We have met the enemy and he is us.

• Psychology , Speculation , SubPrime , Housing Crash
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Chuck Ponzi August 20th, 2007

I hope this amuses you as much as me.

How anyone can say this about our current market considering the data available is appalling.

Realty Times reports:

Orange County, California, real estate appears to be “picking up.” At least according to local real estate professionals.

With 42 miles of beaches and close proximity to busy Los Angeles, this city has healthy demand — that should bring about a 5 to 7 percent appreciation rate this year.

Median home price is $734,000. Home sales are up 1.4 percent from May, though down slightly from last year at this time. Statewide sales have dropped 24.7 percent.

Notes one local expert, “Homes will stay on the market months longer this year — few will have multiple bids the day they go on the market like several years ago — but they WILL be sold and most at the original or slightly reduced selling price as sellers face reality and price their houses equitably.”

Wow.  Just Wow.

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Chuck Ponzi August 15th, 2007

This one is from the Minneapolis Star Tribune:

Deb Greene, president of the Minneapolis Area Association of Realtors, is optimistic that the mortgage market troubles aren’t deep enough to affect the broader housing market, particularly because there are still more borrowers who will qualify for mortgages than those who can’t.

“We’re in our recovery,” Greene said. “It’s a U-shaped recovery and I don’t think we’ve totally hit bottom yet, but we are on our way up.”

This makes me wonder if anyone reads their copy before submitting it, or if the editor even reads it.

A good question is… how can we be on our way up if it is a U-shaped recovery, and we haven’t hit bottom yet?

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Chuck Ponzi August 14th, 2007

For those who might have missed it, the OC register did a great piece on a single street in Santa Ana that highlights just how out of hand the subprime lending got in our little Orange County.

While there are plenty of references to how the real estate market moved on the way up, one of the best descriptions is that of the Plankton Theory submitted by Bill Gross (Pimco’s “Bond King”), it is everpresent that the foundation of the housing market lies not only in entry-level homes and buyers, but also in lower-priced communities.  Without that “first house”, there is no property ladder.

However, the reckless lending was aimed directly at “getting people on the ladder”.  No matter how you look at it, these were in many cases people who would have never been able to buy a home, either because their credit, income, or both would not support it.  In many cases, these would-be homeowners have trouble with their day-to-day finances, much less than the kind of commitment required to buy, pay for, and maintain a home in the long-run.  No doubt about it, in the long run, buying a house is generally a smart move, but those who struggle with daily living expenses often do so, not because of their income, but rather their lack of financial restraint.

The OC Register takes us down Camile Street in Santa Ana:

A year ago, Angelita Medina Albarran, 47, a garment worker at St. John Knits, took out two loans from Fremont Investment & Loan to cover the entire $600,000 purchase price for 919 W. Camile St., a 1,450-square-foot bungalow. Her five grown children help pay the mortgage – $4,000 a month and scheduled to rise in May.

“La droga,” Medina Albarran said. That’s Spanish for “drug” – Mexican slang for a crippling debt. The people of West Camile Street, she said, are “endrogados” – hooked on debt.

With what happened to Fremont, New Century, and other imploded lenders that reads like the who’s who of subprime lending, it is unlikely that these drug addicts will be getting another fix.  When you consider that these people were paying $400 per square foot to live in one of the worst neighborhoods in Southern California, you can just begin to see the problem.  When I first moved to California in 1999, few places cost $400 per square foot, and only in the poshest neighborhoods (Beverly Hills, Bel Aire, just to name a couple).

This was truly subprime central:

A Register analysis of federal housing data pinpointed West Camile Street as a center of the subprime borrowing binge. In 2005, 75 percent of the home loans in the surrounding census tract were subprime.

That’s the highest concentration of subprime loans in Orange County and one of the densest in California. More than 200 neighborhoods in California, particularly in south Los Angeles and the Inland Empire, were similarly dependent on subprime lending. So were at least three dozen counties in other states.

What this means is that all of the wealth that was “created” in the last few years was primarily created by former entry level buyers selling and buying larger and so on up the food chain.  When these plankton are gone, there is no food for the chain and it dies off.

From April through June a record 17,408 California homes were lost to foreclosure, according to DataQuick Information Systems, a La Jolla real estate tracking company. The Center for Responsible Lending, which opposes predatory lending, estimates that 23 percent of subprime mortgages made in Orange County last year will end in foreclosure. That would be about 2,500 of the 11,000 homes bought with subprime mortgages, or 7 percent of the 36,000 homes bought last year in Orange County.

That would be only a small portion of what the larger problem is.  I wouldn’t be surprised to see 10 to 20% of the homes bought last year to enter foreclosure.  Never before has there ever been this kind of speculation, never before has there been so little to lose put down by buyers.

In a related link, another article trumpets that “OC is Home to many of the Top 10 Subprime Lenders”

Their list is as follows:

1. Argent Mortgage (Orange)

2.  New Century Mortgage (Irvine)

3.  Fremont Investment & Loan (Brea)

4. Option One (Irvine)

5.  National City Bank of Indiana (Indianapolis)

6. Countrywide Home Loans (Calabasas)

7.  Long Beach Mortgage Company (Seattle) a.k.a. WaMu

8.   WMC Mortgage (Burbank)

9.  Ameriquest (Orange)

10. Accredited Home Lenders (San Diego)

While you might marvel  that these top 10 represent over 40% of the subprime market, it is perhaps even more surprising to know that all but 2 are Southern Californian companies.  (although, I might count Long Beach Mortgage as well), but that these 90% of the top 10 by number and volume.  The remainder of the market is perhaps not as concentrated, but make no mistake, lending is the biggest business here.

When we feel the pinch, it will be doubly bad.  Not only were we selling the stuff, we were snorting it too.

Remember, kids, drugs kill.

I’ll leave you with this moment of zen.  21% of the outstanding loans in Orange County are of the subprime variety, and I’d wager a guess at at least that many Alt-A.  Much of those sources of lending are over 10% now, and even Jumbo Prime loans have jumped to rates and spreads not seen since 2000.  Since the median income has not made a substantial move in the past 7 years, you’d be believing a lie if you heard anyone tell you that OC housing prices won’t come down hard.  They will.

• Credit Bubble , Lending Standards , SubPrime
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Chuck Ponzi August 9th, 2007

This was the headline of some financial reasearch issued by Joseph Hargett of Schaeffer Research on March 27th, 2007.

I’ll let you decide how prudent that advice was by viewing the top homebuilders’ stocks from that date until today measured against the S&P 500.

I’m predicting that even with all of the price declines, I believe there’s still a lot more.

Here is what Joseph had to say:

It seems you can’t talk about the housing sector these days without mentioning the “S” word. Subprime, yes I said it, has even wormed its way into the vernacular of many Fed watchers and Fed members - not to mention the warning shots fired from the sidelines by former Federal Reserve chief Alan Greenspan every other week or so. This morning, the Fed sounded yet another gloom and doom note for the housing sector, as Sandra Braunstein, the director of the Fed’s division of consumer and community affairs, stated that borrowers could see “more difficulty” in the next one to two years. In particular, those borrowers with recently originated adjustable-rate mortgages are likely to experience more delinquencies and foreclosures, Braunstein said.

and

Admittedly, the situation is not very flattering for the U.S. housing market. However, I think that the hype over the popping of the so called “housing bubble” is being overplayed just a bit too much. Just take this quote from a March 18 New York Times article titled “On the Homefront”: “In many quarters, Greenspan was essentially accused of cheating the country out of the depression we deserved: instead of allowing the swooning Nasdaq to bring down the United States economy and punish us for our sins, he had rolled the tech bubble into a housing bubble and allowed the party to go on.”

Blaming Greenspan seems convenient at this point, especially with Bernanke’s Fed in a holding pattern. And comparing the “Dot-com” bust to the current situation in housing seems rather irresponsible. After all, betting on virtual real estate seems a far cry from betting on housing prices and “real” real estate. I mean, can you really compare the long defunct Pets.com and WebVan to Lennar ( LEN: sentiment, chart, options) and Hovnanian (HOV: sentiment, chart, options) ?

I have sat on this article for 5 months to see if my research was right on where they were headed… in an effort to dispel any myths. He was dead wrong, and worse than that, revealed poor research on the underlying fundamentals of the housing problem. It is and still is an affordability crisis. The decline in sales will not abate until that affordability standard is reachieved. At current course and speed, that won’t be for another 2 years at the minimum.

I believe that we will still see some of these builders declare bankruptcy (ch 11) before this bust is through.

• Bubble , Mean Reversion , Inventory , Housing Costs , Contrary Indicators , Housing Crash
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Chuck Ponzi August 8th, 2007

Over the past few weeks, as MBS holders have run for the hills, their flocks have meant that yields on Treasuries have depressed.  A number of attributed this to a “flight to quality”.  This happens whenever a risk reassessment happens.  However, this flight to quality may only stem the tide of a massive tsunami.

In a dramatic turn of events, China has all but declared war financially on the US.  China could overrun us without a single shot fired.  It has even been referred to as the “Nuclear Option”.  In short, China holds enough USD based paper to pound our little currency into oblivion.  Don’t think it’s possible?  Not only would I say it is possible, but the likelihood is in my opinion increasing daily.  With trade sanctions all but the talking points of Sen. Hillary Clinton, China is revealing their muscle.

In old testament fashion, we have power to bruise their heel (trade sactions), but they have power to bruise our head (currency crash).

the Telegraph reports:

Xia Bin, finance chief at China’s Development Research Centre (which has cabinet rank), kicked off what appears to be government policy, with a comment last week that Beijing’s foreign reserves should be used as a “bargaining chip” in talks with the US. …

He Fan, an official at the Chinese Academy of Social Sciences, went further yesterday, letting it be known that Beijing had the power to set off a dollar collapse, if it chose to do so.

“China has accumulated a large sum of US dollars. Such a big sum, of which a considerable portion is in US Treasury bonds, contributes a great deal to maintaining the position of the dollar as a reserve currency,” he told China Daily. “Russia, Switzerland and several other countries have reduced their dollar holdings. China is unlikely to follow suit as long as the yuan’s exchange rate is stable against the dollar.

This has the power to dramatically readjust the equation of low mortgage rates.  It’s not inconceivable that this adjustment could throw interest rates as much as 2% or 3% higher than they currently are.  That would place mortgage rates in the double-digit range, and crush the homebuying public.

In a similar article:

Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress.

Shifts in Chinese policy are often announced through key think tanks and academies.

Described as China’s “nuclear option” in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.

It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.

In true idiotic fashion, Sen. Clinton sticks her head up her patootie with this one:

The threats play into the presidential electoral campaign of Hillary Clinton, who has called for restrictive legislation to prevent America being “held hostage to economic decisions being made in Beijing, Shanghai or Tokyo”. She said foreign control over 44pc of the US national debt had left America acutely vulnerable.

Bad news, Hillary, it’s already happened.  We have the sword of Damocles hanging by a single horsehair.  And China’s threats are not to be taken lightly.  I don’t believe they like being bullied when we came to a gunfight with a knife.  They’re holding all of the cards here, and we best stay on their good side.

What, you say?  We don’t care?

A bill drafted by a group of US senators, and backed by the Senate Finance Committee, calls for trade tariffs against Chinese goods as retaliation for alleged currency manipulation.

What are our leaders thinking?  Where is common sense and prudence?  Have we learned nothing from our international bullying?  I’m hoping this is more a reflection of general politics than a reflection on the best thinkers the Baby Boomer generation can muster.  If it isn’t… my goodness we’re in trouble.

While worrying does nothing to help you prepare for the possibility, protecting your assets from a dollar crash is a wise approach at this juncture.  It is unlikely that domestic stocks and bonds can offer the kind of security or gains that can be had with the dollar breaking through support levels and a whole lot of swords hanging over our head.

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Chuck Ponzi August 8th, 2007

Anyone here like to listen to soundbytes put to techno music?

I heard this recently, and love the Crystal Method Fat Boy Slim tie-in to Cramer’s rant.

Enjoy!

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Chuck Ponzi August 6th, 2007

The action around MBS’s and other derivatives related to the housing market reminds me of an often quoted speech given by Alan Greenspan.

“This vast increase in the market value of asset claims is in part the indirect result of investors accepting lower compensation for risk. Such an increase in market value is too often viewed by market participants as structural and permanent… But what they perceive as newly abundant liquidity can readily disappear. Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher asset prices. This is the reason that history has not dealt kindly with the aftermath of protracted periods of low-risk premiums.”

While he didn’t do enough to prevent asset bubble from forming, at least he understands what the aftermath does.  “newly abundant liquidity can readily disappear”.

It reminds me of a post I made back in the heady days of September 2005, Greenspan’s Interesting Clarity.  Yes, nearly 2 years of blogging ago.

Where does this lead us? Well… we’re acting a bit like the japanese in our debt lending by accepting low risk premiums, and the longer this goes on, the greater the risk to all participants, lenders and borrowers. If liquidity were to be suddenly shored up by investors demanding a greater return for thier risk, or if percieved risk were to suddenly jump, borrowing would become much more difficult for buyers. Interest rates will increase accordingly. Even established buyers might not be able to purchase homes due to restricted risk premiums; all of which will only serve to slow the real estate market and put the power of purchasing into well qualified buyers.

It has been my assertion that the housing bubble was caused not by low interest rates, but by excess liquidity that banks could only farm out by lowering lending standards. It was this easy credit that was extended to a whole set of the population that had never before been entrusted with credit; this caused “neverending” demand. Much like college students that max out their first credit card, only to find that the payments exceed their income, many of today’s buyers will be unable to make payments in the future.

Our little “deflationary concern” may soon turn into a financial meltdown since problems tend to spiral: Increases of forced sales trigger lower prices, which triggers lower spending and more foreclosures; lower spending triggers more layoffs; foreclosures trigger financial losses for banks and MBS holders; financial losses triggers less liquidity; less liquidity triggers higher interest rates; which triggers more defaults on ARMs and HELOCs… the list of effects could go on forever. Our economy is increasingly dependent on house price appreciation, but 2 things keep these trees from growing to the sky.
1. Credit has limits, since some risk premium must be attached to borrowing money, and interest must be charged. Investor sentiment is everything here.
2. Even a leveling off will decrease construction jobs that will kick-off the above process, so increasing growth is necessary to keep the merry-go-round going.

As you can see, it is easier to predict WHAT is going to happen, opposed to WHEN it is going to happen.  It was surprising to me that the housing boom ended with a consumer-led paring back of purchases, as I had expected the lending environment to tighten considerably before it did.  What this likely means is that while it postphoned the inevitable crash, it will likely only amplify the severity of the downturn.  As they say, the bigger they are, the harder they fall.

However, not trying to be a Monday morning quarterback, but had the FED raised rates twice more as I had hoped they would, they would have had an additional half-point lowering room when the credit event happened.  The fact that they did not either says that they did not understand the extent of the credit market’s problems and attendant risk mongering, or they simply believed (and perhaps still do) believe that the credit markets can self-correct without affecting unemployment, or currency attractiveness.  It may be that with the weakness exhibited by the currency, Ben B. should likely be raising rates when the world is calling for cutting them.  It’s always easier to get out in front of the problem than cleaning up after the mess, but when has the Federal reserve done that since Paul Volker?

• Psychology , Credit Bubble , Lending Standards , Debt
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Chuck Ponzi August 6th, 2007

If you consider all that has happened over the past week, past month, and past 6 months, it is likely that many of us have never seen before the kind of turning point we have just seen.

American Home Mortgage bit the dust

Accredited Home Lenders is teetering on insolvency

Countrywide warned

Indymac pulled core products

Numerous other lenders are also pulling their main products as well

If we take the logical next steps to what this means for the overall housing market, where does it leave us?

While Gary Watts would like you to believe that all that has to happen is that the FED needs to lower interest rates, the problem is not that easily solved… and I’m not sure we want to solve a problem that the market is currently working on solving anyway.

In addition, many in the housing market will fail to see the turning point and are going to be suspended in the air for another six months like Wile E. Coyote.  It won’t be until next year that we really see the freefall in values.

Nowhere in the Constitution does it offer the right of ever appreciating real estate in this country. Neither does it promise that you won’t get hurt for your own stupid decisions.

This is the end of the housing market as it has been for the past 7 years. It is a changed market, and we will likely not see the end of the housing bust for at least 3 or 4 years from now at the very soonest. With all of the lending losses, it will be very unlikely that lending would approach the reckless abandon it achieved over the past few years any time in the forseeable future. Even the FED can’t save this now. It would be as they say “Pushing on a String”. lenders do not need to lend money if they do not want to, or if they percieve the risk to be too high.  Lenders are not worrying about interest at this point, they are worried about principal.

Homesellers, I warned you, if you didn’t listen, it was your own fault, and now you are stuck.

No, the best thing for this market, and for the economy overall is a monumental housing crash. All houses immediately marked down 30-40% throughout SoCal would just about put us right with where we should be considering household formation, interest rate risk, personal incomes, affordability, and consumer debt load.

Sadly, it won’t happen that way. No, today’s sellers agents are as delusional, and as thick-skulled as they come. Transactions will likely come to a screeching halt from their already stymied location. The only thing that will move this market is need-to-sell inventory by the way of foreclosure forced sales and short-sales. Now it’s time to get down and dirty with the housing bubble.

Collectively, we could have all avoided this point, but individually, we did what each thought was the best for us and it has failed. No amount of public preaching from a blog telling people to ready themselves for the coming crash would have changed many people’s minds. I only hope that some readers have read, understood, believed, and acted upon the recommendations. You have been saved. The lemmings coming after you have only the cliffs of insanity, and the cold, hard rocks of reality below.

On the other hand, depression about (not) owning a home in Southern California occasionally grips even me. Even knowing all of the pain to come (it was a certaintly last year and the year before, so it’s still a certainty), I’m not confident that I’m interested in waiting it out here. Many of the people our age have left the area, leaving a swath of people 5 years older or 3 or 4 years younger than us. The older ones don’t understand the predicament since they don’t have it, and those younger don’t have the pressures of a peaking career and growing family. The ones before us are “over the hump”, and those younger haven’t begun looking at the hump. Periodically, I just want to throw in the proverbial towel and say “bag it”, it’s not worth the wait and just work somewhere else. If I weren’t in the middle of some big things at work and I could walk away without harming the company I work for, I would. Alas, by the time my projects slow enough for me to leave, we may already be in a recession with a difficulty finding a new job out of state.  I’ll just have to see at the beginning of next year.

My wife is not oblivious to the pressures, she feels them as well. On the other hand, it has made us realize what we don’t like about Southern California (or at least L.A. and O.C., not including S.D. or Ventura), the self-righteous, self-centered, selfish home-trust-fund babies that inhabit not only the dark corners, but the visible ones, and frankly, much of the cry-me-a-river-my-house-lost-10K-but-went-up-400K-before-that crowd that is 90% of all OC. It all but sickens us with the idiotic drivel that escapes their lips. My god, what a bunch of whiny bitches! And their wives are even worse.

Luckily, our children don’t sense the pressure, or at least not at 3 and 1. Ever feel like a failure? Just spend a few hours with your preschool kids, and it’ll change your opinion. (disclaimer, I’ve heard this only works until they are teenagers)

No, at this point, we are basically in it for the long haul. We’ve gotten over the hardest part being former owners and renters… the back side of the slop is in front of us, and it’s hardly worth leaving at this point with family here, a good job, and security… although that would change with the right job offer. I suppose that we’re not the only ones in this situation, except that if an employer needed us next week, we can break our lease. Most around us would need to sell a house in probably the worst housing market since the Great Depression.

So, all in all, I consider what I have just witnessed, and suppose that there are a number of people just like us.  We will get our house someday… regardless of what the “priced out forever” crowd of real estate agents have told us.  It is sad to see so many houses in our area begin to fall into an untended mess, but there’s no escaping that many of our neighbors just can’t afford their houses.  I can’t imagine anyone wishing ill to them, but when they were driving H3 Hummers and bragging about how much their house was worth, I had to remember that all things would return to the way they were.  The financial lessons people are learning now are hopefully strong enough to prevent a repeat, but easy enough to not sink our economy.

If you have any thoughts on staying put/leaving, leave them here.

• SoCal , Moving , Housing Crash
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Chuck Ponzi August 2nd, 2007

Bloomberg finally catches up to where Calculated Risk was already early today.

Referring to Indymac:

The market for mortgage bonds has become “very panicked and illiquid,” CEO Michael Perry wrote in e-mail to employees yesterday. National City Corp. this week stopped buying second mortgages from other lenders and making some stated-income loans. Wachovia Corp., the fourth-biggest U.S. bank, today decided to stop making Alt A mortgages through brokers.

It gets worse.

Atlanta-based SunTrust Banks Inc., the 14th largest home lender, has “pretty much gotten out of Alt A” for now, said Sterling Edmunds, who heads its mortgage unit.

“Over the past week there’s been no liquidity in the non- conforming mortgage market,” Edmunds said. He said he has less ability than ever before in his career to sell loans to companies other than Washington-based Fannie Mae or McLean, Virginia-based Freddie Mac, or in securities guaranteed by them. That includes so-called prime jumbo loans, or ones with little risk that are larger than the companies can buy, he said.

Consider for a moment what “no liquidity” means.

Some talking heads have stated that we are not in a “credit crunch”.  What do you think after reading this?

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