se7en

That's just a one month comparison. If you read the article you posted you'd see that prices have actually dropped for 7 straight months. And as an FYI, later spring and summer is when most people put their homes on the market. Add that new flood of homes to the market with more expected foreclosures and we could be in for one heck of a summer.

82CardsGrad

Yea, between the coming housing market crash, stock market crash, and the Bushies/Nazi takeover scheme, I'm gonna get started on my undergroung bomb shelter first thing!!!

se7en

Hey, we can joke and have fun with wild Bush/Nazi conspiracy theories all day. However, I don't think the housing market conditions should be taken lightly. There is a lot of pressure on the market right now and anything can happen. I'll grant you that there is certainly some psychology involved, but sometimes just a "perceived" market weakness can cause a panic.

It's definitely worth keep a close eye on - not that there's anything we could do about it if the market does collapse.

82CardsGrad

Thanks for the sage, insightful context se7en... I can sleep easy now.

se7en

I'm not about to tell you who I work for in a public forum, but I have a great deal of knowledge about the housing industry and broader market trends. Dismiss it, make fun of it - I understand. Life goes on.

ajcardfan

Ain't that the truth. I'm sure those of us in Arizona remember the gas lines of the summer before last. If people had just BOUGHT GAS LIKE NORMAL, there almost certainly wouldn't have been a shortage. Instead, just the possibility of a problem caused people to freak out and try to hoard.

I know the media has the responsibility of reporting the news, but sometimes they play a role in exacerbating a crisis.

__________________
We live in a world which is full of misery and ignorance, and the plain duty of each and all of us is to try to make the little corner he can influence somewhat less miserable and somewhat less ignorant than it was before he entered it.

T.H. Huxley

40yearfan

conraddobler

Yeah yeah yeah, all problems are never governments fault expesically your boy Georges.

The media stinks however, right now someone carrying a new airborne aids virus couldn't scare people out of the stock market.

This one is mostly all our fault for how we've chosen to allow our government to conduct it's financial affairs, if anything a serious debate in the media about what's really happening could have avoided this, although it's just not as sexy as who's going to get Anna's baby and millions...

__________________
At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide.

~Abraham Lincoln Lyceum Address

conraddobler

So far though they've managed to wipe themselves with the constitution and drive us to the verge of bankruptcy while getting us mired in a stupid war, I have to say they're multitaskers if nothing else.

__________________
At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide.

~Abraham Lincoln Lyceum Address

40yearfan

This because I agreed with Aj? I don't recall giving any credit to GW. Am I missing something?

conraddobler

http://www.billcara.com/CS%20Mar%201...%20Housing.pdf

If anyone has the time, this is an exhuastive look at the problem.

You can question me at any time but this isn't written with political spin, this is written for serious heavy hitter investors that want to play this phenom, it's basically a surgical dissection of the entire problem from a business standpoint.

They don't preach, they label their assumptions and it's ironclad IMO.

__________________
At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide.

~Abraham Lincoln Lyceum Address

se7en

Careful, they'll accuse of being a loon for daring to say that the market is unstable. Scary report. Thanks for sharing.

This section really caught my attention:

Analyzed another way, we take each piece of the general mortgage market and use conversations with industry contacts, recent tightening announced by lenders and expected legislative and regulatory actions, to estimate the proportion of each segment that could be eliminated by tighter lending standards. In our base case, we assume that 50% of the subprime market is at risk, taking originations back to 2003 levels, which would impact total purchase volume by 10%. Similarly, we estimate that 25% of Alt-A and 10% of prime loans would not be approved under tighter restrictions for various combinations of investor purchases, piggybacks, low down payments and low documentation, and the impending ripple effect down the entire housing market food chain. In aggregate, the total fallout of incremental originations would be 21% over the next one-to-two years. Related to speculation, investors' share of the market climbed to roughly 18% in 2005 and 2006 from an average of 7% from 1998-2001, implying that a return to the mean would remove 11% of housing demand. Combining the two yields a 25-35% reduction in peak housing production. This would likely be exacerbated by declining consumer confidence, investor demand falling below historical norms, the risk of a softening economy and supply pressures weighing on demand (all of which seem present today), suggesting at least a further 10% drop. Aggregating the various impacts would result in a 35-45% drop-off in new starts from the peak of 2.1 million homes to roughly 1.2-1.4 million, as compared to the 16% decrease thus far on a trailing twelve month basis. For comparison, starts during the last three downturns ending in 1991 (down 34%), 1982 (down 32%) and 1980 (down 37%) fell by an average of 34%. Expressed differently, if we assume that the full impact of mortgage lending tightening will be felt in 2007, all else equal, we would expect new home sales to fall roughly 20% from December’s seasonally adjusted rate of 1.123 million to an annual rate of 887,000 homes (236,000 reduction from tightening lending standards). Our new forecast of a 35-45% peak-to-trough decline in housing starts compares to our initial “back-of-the-envelope” estimate of 25% as discussed in our September 2006 report titled “Data Masks Grim Reality.” Given our forecast reduction, we are lowering our 2007 earnings estimates across our space. Please see our note also published today called “A Different Kind of Spring Selling Season: Reducing 2007 Estimates” for more details. Thus far, the group has recognized $3.9 billion of our estimated $10.5 billion of impairments expected via writedowns and option forfeitures with new order home prices falling 12% in 4Q06 from a 4Q05 peak. Our estimated writedown analysis was predicated on new home values falling back to 2003 levels, which would be a further 5.5% reduction from current levels. Given the incremental headwinds of reduced demand from liquidity tightening, and additional supply coming to the market in the form of REOs, buyers falling out of backlog and appraisal tightening, we remain confident in our initial estimates and would not be surprised to see prices come under even greater pressure than originally anticipated, therefore implying additional impairment risk beyond our estimates.

jefftheshark

To sum it all up:

A) Sometimes, when you extend credit to people who shouldn't get it, there is a good chance that you will not be repaid.

and:

B) Those with good credit will have their rates increased in order to cover those listed in "A".



So what else is new?

The Shark

__________________


(Thank you very much, Ladies and Germs; I'll be here through Saturday night, don't forget to tip your waitresses on the way out!)

conraddobler

I'll agree it's not a new concept, the only thing I'd maintain that's different about this is the size and scope of the correction.

In my opinion it's a perfect storm type scenario, where the excesses went so far so long that the shakeout will be brutal.

The market fixes all bubbles eventually, it's universal and it's financial law, the only question then is how big was it and how painful will the correction be?

This one is not your average bubble IMO, it's a once in a 100 year phenom IMO, maybe it's not and it's just relatively painful then it corrects but IMO again that's not what we're dealing with here.

__________________
At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide.

~Abraham Lincoln Lyceum Address

conraddobler

I distilled it down a little more, to me that paragraph contains the crucial reasoning behind this that the average person might not understand.

I've turned down about 9 people in the last two weeks that I could have helped before, I'm actually pretty busy just trying to help as many people into the fixed rate life boats as possible but the thing that is stunning to me is how fast these guidelines are rolling up and it's actually like people running across a bridge that's collapsing under them.

There's a flood trying to escape and a ton are not going to make it to the other side, these people's credit will be wrecked, any one persons pain isn't that important to the market as a whole but the sum total of all this will be greater IMO than it's parts just because of the cascade effect.

__________________
At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide.

~Abraham Lincoln Lyceum Address