billddrummer

Total Rating:
0 / 0

478 Comments

    • Thu Jul 10th 19:51 PM | Rating: 0 0
      Commented on:
      California Foreclosures Slowing? [Housing Tracker]
      Thanks, Judy!

      I greatly appreciate your comments.

      New statistics for the region show a rise in closings over June 2007 but a drop in the median home price. (This is the first time in over a year that closings rose year over year.) The decline in median price reflects several things, in my opinion:

      46% of the closings were either short sales or REOs sold by banks;

      The median home price, at $254,000, is now roughly equivalent to what the median income household can afford based on current mortgage loan qualifiying criteria;

      The market above $350,000 is slow, and above $500,000 is essentially dead;

      There's still more than a 5 year supply of listings in the $1,000,000+ category, despite three closings in the multi-million dollar range in June;

      Condo developers are petitioning local governments to convert the properties to rentals, even though there's a glut of rental units on the market;

      New condo conversions have stalled, as construction financing has evaporated.

      The bottom of the market has come into view. But there's another ticking time bomb that bears watching: Negative amortization ARMs that were written 3-5 years ago have deferred interest caps of between 115% and 120%, depending on the specifics of the loan. A typical neg am loan would require a borrower to pay a 'teaser' interest rate, sometimes as much as 4 points below the note rate. The difference is added to the loan balance until the cap is reached. Then, the new loan balance is fully amortized over the remaining loan term. As a result, payments can easily double.

      With declining home values, people who got these loans can't refinance because the loan balance exceeds what a lender would be willing to refinance, and sometimes is higher than the current value of the property. And many of those borrowers can't cope with a house payment that's double their original payment.

      I think we may see another round of defaults, as these loans become subject to the maximum caps. Many builders in this area pushed this program to allow people to get into their 'dream homes' with affordable payments. But now, the dream has become a pending nightmare.

      I believe these loans will be resetting in mid-2009. Just when the pundits claim that 'housing is in recovery.'

      Just a thought.
      View article »
    • Thu Jul 10th 18:56 PM | Rating: 0 0
      Commented on:
      Suburban Office Space Faltering [Housing Tracker]
      An update on my previous comment above:

      The bank is open. The building the bank is located in contains a vacant space next door to the bank branch. But there's a banner spanning the width of the bank sign facing the highway that gives the impression that the bank space is for lease.

      My error.
      View article »
    • Thu Jul 10th 12:11 PM | Rating: 0 0
      Commented on:
      California Foreclosures Slowing? [Housing Tracker]
      Hi Judy,

      Consistently excellent reporting, thanks.

      With the foreclosure surge slowing, the inventory overhang will be the next area that will need to be tackled. Another thing that's happening here in Northern NV is that good quality foreclosures are dampening demand for new homes, and crushing comparable sales figures for existing homes. And it's extending even to the custom home market in resort areas. One property I'm familiar with was appraised at $5.5 million 15 months ago. A new appraisal placed the value at $4.3 million, off 23%.

      There's still a ways to go before things stop falling, but at least the anvil appears to be getting lighter.
      View article »
    • Wed Jul 9th 12:26 PM | Rating: 0 0
      Commented on:
      Suburban Office Space Faltering [Housing Tracker]
      A new retail mall in a suburban area of Reno has over 2 million gross s.f. of space, and lots of vacancies even after opening nearly 2 years ago. One of the pads was taken by a commercial bank; it now has a for lease sign in the lobby. The bank was open less than 18 months.
      View article »
    • Mon Jul 7th 14:59 PM | Rating: 0 0
      Commented on:
      Commercial RE Slowdown Hits Vegas [Housing Tracker]
      Thanks, Tom, for the link and insights.
      View article »
    • Mon Jul 7th 14:52 PM | Rating: 0 0
      Commented on:
      Who Can Buy Circuit City AND Successfully Turn It Around?
      CC would be better off 50% smaller, with boutique stores catering to higher end shoppers. Let BBY be the big box CE retailer, while CC services the specialty side of the business.

      Trouble is, with the damage the brand has sustained over the past 3 years, who will believe it without wholesale management changes, not only at the top, but at the store manager level? Unless the company installs store GMs that understand the psyche of the affluent shopper, that proposal will fail too.

      What's clear is that the current operating platform isn't working at all, despite the compost spewed by upper management.
      View article »
    • Fri Jun 27th 13:09 PM | Rating: 0 0
      Commented on:
      Foreclosure Stimulus to Boost Tech's Four Horsemen
      I like the way you put this. And you correctly pointed out that the foreclosure process frees up monies that would ordinarily be spent on mortgage payments for at least 6 months, if not more.

      I'm personally familar with a case where the foreclosed homeowner was able to remain in the house through the 4 month default period, and an additional 9 months while the foreclosure process took place. Altogether, this homeowner lived rent-free for over a year. Multiply that by the number of borrowers, and you get a significant amount of revenue. Now, many people will continue to make payments on their installment obligations while letting the house go, figuring they'll rent at some point in the future. And those people could save enough for security and rent deposits relatively easily, since no mortgage payments are coming out of the monthly budget.

      I've heard anectdotal evidence that former homeowners have trouble qualifying for rental properties if a foreclosure appears on their credit reports. But if I were a lessor, I'd consider the (typically) lower rent vs. homeowner expenses (not only the mortgage, but taxes, insurance, maintenance and fees) and could make a reasonable case for allowing foreclosed homeowners to rent from me. The monthly outlay for renters is far lower than for homeowners, all things being equal.

      With a glut of properties for rent in this area, some landlords seem more willing to base a rental decision on a person's income rather than their credit.
      View article »
    • Fri Jun 27th 12:19 PM | Rating: 0 0
      Commented on:
      Housing Data Moderates [Housing Tracker]
      Hi Judy,

      Excellent collection of viewpoints, as usual. Speaks to the rate of decline slowing, which suggests an end to the slide in the housing market. (In my opinion, it will be about 4 more months before we see widespread firming in these statistics.)

      The next question is this: How long will it take to work down the inventory overhang? The Commerce Dept. article mentioned a 10.8 month supply of unsold product. What's not clear is whether that's a median figure or an average. Nevertheless, a 6-9 month supply is typically considered 'balanced' in most markets. Which suggests a ways to go in both lower prices and higher sales until that metric is reached.

      Another ticking bomb could be the volume of Alt-A and prime option ARM loans that will be resetting in the next 6-9 months. If patterns repeat (as they often do), there may be more foreclosures hitting the markets just as the currernt inventory gets worked down. And the cycle will start all over again.

      Meanwhile, prices may drop even more.

      View article »
    • Thu Jun 26th 12:06 PM | Rating: 0 0
      Commented on:
      Will Housing Bottom in 2010 or 2012?
      How do you determine "Supportable Demand Price" for a particular market?

      In my mind, it would depend on the median mortgage loan supportable by the median household income for that locale. And I agree with you that interest rates provide one of the variables, but I would also include availability of mortgage loan financing and prevailing unemployment rates.
      View article »
    • Thu Jun 26th 11:52 AM | Rating: 0 0
      Commented on:
      Case-Shiller Update: Some Month-to-Month Gains
      Excellent chart.
      It's instructive to see that the metro areas that appreciated the most slowly are the ones now showing some signs of life.

      Classic unsustainable bubble, played out over the entire country.
      View article »
    • Wed Jun 25th 18:01 PM | Rating: 0 0
      Commented on:
      Don’t Buy What Wall Street Is Selling
      Well said.
      View article »
    • Wed Jun 25th 14:55 PM | Rating: 0 0
      Commented on:
      Market Share Doesn’t Matter; GM Mortgages Its Future
      One of the problems with the U.S. automakers is the overhang of legacy costs that placed the companies at a competitive disadvantage for decades.

      Now, as Gumby pointed out, the legacy costs remaining will drop in 2009. But I don't believe that will be enough to allow the Big Three (or little three, since Toyota and Honda are grabbing market share) to begin making profits on smaller vehicles. In short, the cost structure put in place back in the 1970s has doomed the companies to continuing losses for the next two years.
      View article »
    • Tue Jun 24th 19:48 PM | Rating: 0 0
      Commented on:
      Whole Foods Market: Like Starbucks, Hit by Slowing Economy, Increased Competition
      Cristos,

      I look forward to visiting the new store. My office is within walking distance!
      View article »
    • Tue Jun 24th 19:34 PM | Rating: 0 0
      Commented on:
      No-Money-Down Mortgages: Still Not Dead
      Felix,

      Thanks for the link to the WSJ article. One of the interviewees noted that she was 'spending week to week just to live,' which begs the question "Well, how are you going to be able to afford a home with all of its associated costs? Things like HOA dues, taxes, insurance, maintenance, utilities, sewer, water, and possibly other things your landlord may have paid for when you were renting?"

      The time bomb is being reset. And this time the taxpayers will take the losses, not private banks.
      View article »
    • Tue Jun 24th 18:45 PM | Rating: 0 0
      Commented on:
      The Vultures Swoop in on Circuit City
      To HingeFire,

      See my previous posts on this thread. I agree with you, and think the winner of the bid will be someone other than BBI. My guess is a hedge fund that sees value in lease commitments on underperforming stores in good locations (refer to CompUsa's sale of 17 leases to BBY for reference). If BBI won out, they'd be less willing to jettison stores that don't perform. A hedge fund wouldn't have that limitation, in my view. Just close the ones that don't perform, sell off unnecessary assets (like the InterTan division, that hasn't done anything for years) and move on with life.

      Either way, Schoonover needs to clean out his office.
      View article »
Loading...
Symbols:
Authors:
Quick Links:
Contribute an Article Become a Seeking Alpha Contributor

Transcripts

More Transcripts»