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Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
6,957 posts, read 22,315,772 times
Reputation: 6471
So we have the following folks/reports cited in the article; Let's dissect the article a bit in rough order.
Put on you're critical thinking caps here folks;
S&P's Case/Shiller index; an index of the 20 biggest housing markets in the US not the entire US by any means and an index that didn't even exist before the year 2000 which would have been the start of the latest run up in prices.
An Economist for Merrill Lynch; A company that took a 12 Billion (something big like that) dollar hit to it's mortgage backed securities portfolio.
A guy from Chase; another company that took a giant hit
Shiller himself; a "long-time housing bear"
Zillow; Now there's a paragon of accuracy. A website that can tell me how much my home has gone up or down in value on a monthly basis and gives me a range on my home from $250K to $400K (hey I only lost $500 in the last 30 days).
A nice little anecdotal story about one family in Vegas that used a refi to pay off student loans and Medicine? Oh yeah, and Other things If they have an 11% interest rate now, what kind of loan did they get?
Goldman Sachs; Hmmm another Wall Street success story when it comes to mortgage backed securities.
A paragraph that lets us know that prices aren't going to fall uniformly. That's nice! Refer to your economists quotes that tell us by what percentage prices are going to fall.
Shiller again reinforcing his point but dramatically stating he can'tForecast home prices because of the lawyers. His index is based on facts, not forecasts and is necessarily a historical view.
A point about new home construction as opposed to all home sales, new and resales.
Another Zillow reference. I do love the unbiased phrase "willful optimism" though. Gee maybe people aren't listening to the economists as much as they should be.
A single episode of dumping a property by Deutsche Bank. Very apocryphal. A joint venture between a big homebuilder and our friends at Morgan Stanley.
Next we have a nice paragraph about FNMA and FDMC and the whole sub-prime miasma, which again features another Wall Street wonder UBS. Oh look FNMA and FDMC are still in business and now have an even greater market share than they did before. Tightening standards and increasing fees. Those crazy guys! "implicit backing of the US Government?" Really?
Now we come to the real yellow journalism; "Thirty-year conventional fixed-rate mortgages failed to fall after the Fed's two January rate cuts, averaging 5.5% on Jan. 30." Dude they were 6 1/8% on Jan 10th before the rate cuts. Did you know that 30 year rates don't move as fast as ten year rates or 5 year rates?
Then we get another bear story from (dare I say it?) another economist who predicted in 1989 that by this time housing prices would fall 47% AFTER INFLATION OOPS! of course this little boo boo is written off by say that maybe the guy was just premature. The really cool part is where all of us baby boomers have had at least one foot planted in the ground.
It does get better, because in the next paragraph we get introduced to another visionary, Peter Schiff. he thinks "Americans are going to have their credit cards taken away from them by the lenders. "We're going to turn the American economy into a cash economy." It's OK, he got all this from his father, a noted tax evasion advocate.
We get to the end of our tale by the author letting us know is probably too late for the government to help us; "The other big Washington initiative, to crack down on loose lending practices, could be ineffective and even counterproductive, because it's making loan funding less available right when it's needed most." Oh I see, so Schiff's comments about a cash economy are what? Wrong?
Believe me, I'm not exceptionally polyandrous about the housing market and I really don't care which economist gets quoted, especially NAR's. One has to realize that these economists are paid pretty good money by these organizations and they better damn well toe the line for the corporate hand that feeds them (sorry for the mixed metaphor) This Business Week article set off to prove a position pre-ordained by it's author and did very well at it. Fox News should be envious
So we have the following folks/reports cited in the article; Let's dissect the article a bit in rough order.
Put on you're critical thinking caps here folks;
S&P's Case/Shiller index; an index of the 20 biggest housing markets in the US not the entire US by any means and an index that didn't even exist before the year 2000 which would have been the start of the latest run up in prices.
So, I assume you have data which shows the next largest 30-50 markets going up in price by 7-10% last year to balance out the Case-Shiller numbers, correct?
Quote:
An Economist for Merrill Lynch; A company that took a 12 Billion (something big like that) dollar hit to it's mortgage backed securities portfolio.
A guy from Chase; another company that took a giant hit
Quote:
Goldman Sachs; Hmmm another Wall Street success story when it comes to mortgage backed securities.
Can you name 2 big financial companies which haven't taken a "giant hit" this quarter? The total writeoffs are in the 125 billion range - there's lots of pain to go around. The fact that these banks and lenders are taking "big hits" is kind of the point - the mortgage market is a complete and total mess.
Quote:
Shiller himself; a "long-time housing bear"
At least he has facts to back his claims up.
Quote:
A point about new home construction as opposed to all home sales, new and resales.
You have to build new homes before you can sell them. New home construction slowing is yet another indicator that builders are dying off due to the imploding RE bubble.
But if it makes you happy, the data (from the NAR, no less) show that both new and used sales numbers are awful as well.
Sales of new homes fell last year by 26 percent, the steepest drop since records began in 1963, the Commerce Department said.
Last week, the National Association of Realtors reported that sales of previously owned single-family homes, a large portion of the overall housing market, dropped the most on an annual basis in 25 years. And the median price of those homes fell for the first time in at least four decades.
Lots of positive news if you just ignore the housing starts and focus on sales, yes indeed. I don't see the point of your objection.
Quote:
Next we have a nice paragraph about FNMA and FDMC and the whole sub-prime miasma, which again features another Wall Street wonder UBS. Oh look FNMA and FDMC are still in business and now have an even greater market share than they did before.
Freddie is doing so great that they cut their dividend in half. Fannie's doing better, they just cut by 30%. I guess that's what happen when you have to write off billions in bad loans.
And they have a greater market share because their competition keeps going bankrupt, again because the whole mortgage business is in shambles. I'm not sure why this is a positive for the RE market.
Quote:
Tightening standards and increasing fees. Those crazy guys! "implicit backing of the US Government?" Really?
What is your point here exactly? You alternate between attacking the source while ignoring their argument and bringing up irrelevant details while ignoring the big picture. I don't see how that's supposed to be thought provoking.
Quote:
Now we come to the real yellow journalism; "Thirty-year conventional fixed-rate mortgages failed to fall after the Fed's two January rate cuts, averaging 5.5% on Jan. 30." Dude they were 6 1/8% on Jan 10th before the rate cuts. Did you know that 30 year rates don't move as fast as ten year rates or 5 year rates?
What were the rates before the Jan cuts, say on 1/20 or so? What have they done in the past week or so?
Quote:
That was fun.
If you say so. I guess I don't find countless ad hominems and red herrings all that entertaining. I'd prefer someone actually address the data and statistics and show how the article is wrong.
DMenscha is a Realtor still in denial. Not sure why Realtors are short sighted, because they would be the first beneficiaries of a huge crash. If prices cliffdived tommorow, inventory would start moving again and you would get paid your commissions. If not, things will just stay flat. A flat market with hardly any activity is not good for buyers, sellers, realtors, mortgage brokers and all of us indirectly affected.
Quote:
Originally Posted by DMenscha
Believe me, I'm not exceptionally polyandrous about the housing market
was that a typo? Polyandry is to have more than one spouse at the same time.
DMenscha is a Realtor still in denial. Not sure why Realtors are short sighted, because they would be the first beneficiaries of a huge crash. If prices cliffdived tommorow, inventory would start moving again and you would get paid your commissions. If not, things will just stay flat. A flat market with hardly any activity is not good for buyers, sellers, realtors, mortgage brokers and all of us indirectly affected.
was that a typo? Polyandry is to have more than one spouse at the same time.
Polyandry is to have more than one husband at one time.
Polygamy is to have more than one husband or wife at one time.
(I had to go look it up. It was not ingrained in my memory bank)
If you say so. I guess I don't find countless ad hominems and red herrings all that entertaining. I'd prefer someone actually address the data and statistics and show how the article is wrong.
Excellent rebuttal! I love to see that there are still people out there who understand the science of logical arguments.
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
6,957 posts, read 22,315,772 times
Reputation: 6471
LOL I'm embarrassed at the polyandrous word, I meant Pollyanndrish, (looking through rose colored glasses) and I didn't carefully examine the suggested spell check word. I'll have to go to my OED and find out if it's been included as a word yet.
Quote:
Originally Posted by KCfromNC
So, I assume you have data which shows the next largest 30-50 markets going up in price by 7-10% last year to balance out the Case-Shiller numbers, correct?
My point is that real estate markets around the country are different and to use just the top 20 markets paints a picture which may be less than accurate. My market has been affected as well but not like others. I can tell you we're on track to do 75% more volume this year than last year, but it's just another anecdote and wouldn't be any more relevant than the ones in the article
Can you name 2 big financial companies which haven't taken a "giant hit" this quarter? The total writeoffs are in the 125 billion range - there's lots of pain to go around. The fact that these banks and lenders are taking "big hits" is kind of the point - the mortgage market is a complete and total mess.
My point here is that Wall Street is responsible for creating a portion of this mess by collaterallizing shaky mortgage products. If their economists were such shining stars they should have predicted the consequences of the Investment banks actions
At least he has facts to back his claims up.
His facts are great when he uses the historical record, when he makes predictions, he's just another guy with an opinion.
You have to build new homes before you can sell them. New home construction slowing is yet another indicator that builders are dying off due to the imploding RE bubble.
But if it makes you happy, the data (from the NAR, no less) show that both new and used sales numbers are awful as well.
Less supply coming into the market is a positive thing in terms of price stability and would argue that the big drop in prices predicted by the economists isn't as bad as it is portrayed. I can't stand NAR, I don't think they do a good service to us in the business nor the public. Especially their economist.
Lots of positive news if you just ignore the housing starts and focus on sales, yes indeed. I don't see the point of your objection.
The point of my objection is that to take one segment of the market and make a conclusion about the entire market is disingenuous.
Freddie is doing so great that they cut their dividend in half. Fannie's doing better, they just cut by 30%. I guess that's what happen when you have to write off billions in bad loans.
Freddie and Fannie are still the major source of liquidity in the secondary mortgage market. The "crisis" is one of liquidity, which is why the Fed has been pumping money in to keep it liquid. Conforming loans haven''t been anywhere near as big a problem as the non-conforming ones.
And they have a greater market share because their competition keeps going bankrupt, again because the whole mortgage business is in shambles. I'm not sure why this is a positive for the RE market.
The whole mortgage business isn't in shambles, but there are certainly parts of it that are broken, if not beyond repair. The positive aspect for the real estate market is that the phony money will go away leaving us with a much more stable and less volatile market. I think we all would welcome that.
What is your point here exactly? You alternate between attacking the source while ignoring their argument and bringing up irrelevant details while ignoring the big picture. I don't see how that's supposed to be thought provoking.
It works for Rush Limbaugh & Bill O'Reilly
What were the rates before the Jan cuts, say on 1/20 or so? What have they done in the past week or so?
They fluctuate daily but the trend has been down since the Government has stepped in to lower bank rates.
If you say so. I guess I don't find countless ad hominems and red herrings all that entertaining. I'd prefer someone actually address the data and statistics and show how the article is wrong.
The old saw "figures lie and liars figure" comes to mind, the whole point of my original post was to point out the vested interest that all of the sources have in making their statements. The article struck me as not very objective.
K374's comment "Good read from BusinessWeek. 25-30% decline nationwide which means at least a 35-50% decline in Southern California for sure!" is to me an example of why such journalism is bogus. I note you didn't seem to have any problem with his speculation about housing prices.
I thought the article was very interesting. While I'm sure that there's data and "expert" opinions that support an opposing viewpoint, I did think there were many valid agruments made. This one on page 4 is interesting:
Harvard University economist N. Gregory Mankiw co-wrote a paper that was startlingly negative on housing. He and David N. Weil predicted that home prices would decline by 47% after inflation over the next 20 years, based on a shrinking pool of potential first-time buyers and an expectation that baby boomers as a group would spend less on housing as they grew older.
It could be that Mankiw and Weil were not so much wrong as premature. Although boomers have thwarted expectations by adding on rooms and second homes as they age, they won't thwart nature. "At some point, death or illness will cause baby boomers' houses to come onto the market," observed John Krainer, a senior economist at the Federal Reserve Bank of San Francisco, in an in-house publication in 2005. When the huge boomer generation shuffles off, the nation's housing needs will wane. That will create an oversupply unless builders see it coming and reduce construction. Judging from the recent overbuilding binge, though, their forecasting abilities leave a lot to be desired.
Since houses are not a disposable commodity with a 10-year life, then only an increase in a homebuying population can sustain all the new building starts we've seen in recent years (until 2007). I do feel the saturation point (on a national level) may have been reached. We keep hearing about "timid buyers waiting on the sidelines because they're scared of the current market"; however the current rental market is soft in most areas, meaning that we simply have an oversupply of homes nationwide. The only thing that would be a "quick fix" at this point is if interest rates got low enough that investors returned to the real estate market. But that's a Catch-22, because, of course, overzealous investors were part of the reason for overproduction and our current excess inventory.
...The only thing that would be a "quick fix" at this point is if interest rates got low enough that investors returned to the real estate market. But that's a Catch-22, because, of course, overzealous investors were part of the reason for overproduction and our current excess inventory...
There are a lot of investors entering the market now. They are chasing foreclosures. There are many seminars being held, at very high prices, to show people how to buy pre-foreclosures, and foreclosures. I was told that they are standing in line in California to buy them.
I was at the AZREIA meeting last month and there was a crowd of about 350, mostly new investors there to listen to a guy give what turned out to be a two hour infomercial on his software program for dealing with foreclosures and a big pitch to take his 3 day seminar.
He was showing testimonials on how people using his software would send out 50 offers automatically generated overnight, and wake up in the morning and found they had made $50,000 while they slept. Amazing
Yes the investors are back, and they're all new and green and the seminar operators are making a fortune with their pie in the sky schemes.
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This Business Week article set off to prove a position pre-ordained by it's author and did very well at it. Fox News should be envious 
