John Ryskamp

Homebuilders: Time to Short Again?

I hate to tell you this but "shadow inventory" no longer serves as an indicator. Why not? Because people AREN'T paying their mortgages and the banks AREN'T foreclosing. Shadow inventory is foreclosed homes kept off the market. But this is an entirely new category of housing: "limbo" housing. It's VERY difficult to get hands around this, because the banks don't talk about it.

Nevertheless, I can report (I'm in the Bay Area) that the concept is spreading to commercial real estate: no payments on notes and NO foreclosure.

Where's it coming from? Washington. They don't want ANY more losses on bank books. Most community banks invested in CRE, and if that goes into foreclosure 2000 banks will fail. Can't have that.

So look for a new stimulus bill--prboably around $2 trillion in February 2010. This will simply be more fingers in the dike--no new fundamental premises here, just a continuation of the privatizing of gains and the socializing of losses.

However, it DOES mean you should think 19 times before buying a home, because the Federal Government is once again fiddling around with the statistics.

How much limbo housing is there. Someone I know who works in repo at Wells said simply, "A lot."

Housing Risk Factor: Keep an Eye out for December Data

"Home prices and mortgage rates are so much lower now than they were a year ago that investing in a new home is a very tempting proposition."

You must be a shill for the real estate industry. Why would anyone want to buy an asset which declines in value the day after it is purchased? Answer that one, stupid!