ArnoldCountry

How Far to a Housing Bottom?

Only time will tell... regardless, it is not the bottom that is the problem but the period of time we will be at bottom. Historically, that has been for several years. It does seem like we are getting to that bottom. It just seems the perception that once we hit bottom good times return. That is far from the truth. Stagnation is just as bad.

Mortgage Delinquencies Continue to Climb, Watch Out for Other Loans

"While it may be true that borrowers did not understand them, they really didn't take the time to do so"

I worked in a major bank who provided those and have a law degree and MBA. I was brought a TIL to examine when I was first hired on an Option ARM that was the payment was to be fixed for a 5 year term but the TIL showed the payment changing at 33 months. It took me about 4 hours and excel spreadsheets to figure out that the loan was resetting at 110% due to the high margin. No one, not even funders or the Account Execs were able to figure that out. It was such a major revelation, I put on an emergency training "clarification" for all staff that handled those products, funders, account execs, loan officers, etc. (it took a couple of weeks) to explain what was going on. Reaction? I did not know that was one... other was... gee, if I tell my customers the truth, they would never take this loan.

I will never accept that consumers, of average education, can ever understand the complexities of an option arms just by reading the documents... it took some doing on my part.

Time To Cover Those Housing Shorts

Mr. Hui, well done and fairlly accurate. I will take a risk (not) and call a bottom of sorts... sales have bottomed. I think if you look at the number of housing sales per month over the last several months have stabilized. The folks in real estate, adjusting for typical market adjustment months coming from September to March, can pretty much count on the sales that are taking place today is at bottom. With that said, nothing in that statement should be implying the real estate market has bottomed. Foreclosures are still on the rise and the shadow inventory (homes not on MLS) is huge. The laws of supply and demand are still increasing supply and (now) flat demand. I agree that it will become more difficult to short this market. Regardless of the credit supply, demand, interest rates, once the price hit a debt service plateu equal to rents, even lenders would be better off start renting property than to sell it at a further loss and turn it into a performing asset. I would imagine that even shifting home purchases (reo's) into some sort of alternative investment vehicle may make more sense than to further discount the property.

Breaking Down the Case-Shiller Index

Many of the sales taking place at the low end of the market are not new entrants to the market but speculators... we are not at a true market, even at the bottom. New homebuyers are not really entering yet.

Housing: Barron's Calls a Bottom

No offense, but this is just a pipe dream. The problems have not even begun yet. The litigation machine is just getting warmed up. I know that I am involved in approximately 10 new lawsuit filings per month as we finalized a more standardized template to address hybrid mortgage products. My prediction? (of which I am no body) We have just entered a full fledged housing depression and things are about to get a whole lot worse.

I just drove around a relatively new neighborhood in the Sacramento, CA region (2005) and was shocked. In this pocket of nice homes that sold for 500k, 2 houses for sale but 8 houses had bad front yards and had the infamous Notice of Trustee Sale posted on the front door. I would say this neighborhood has about 50 homes in it. In effect, this is what I was worried about. Inventory is not going down, people have thrown in the towel.

Many many homeowners owe more than the property is worth even with putting 20% down and have resetting loans and have given up. We will never solve this problem as long as everyone is focused on getting to a bottom. A 300 billion package does not make a dent. I think we have about a 2 trillion dollar problem.