Lies and Damned Lies

Chart: Housing Boom Across Different Price Tiers

Your link is broken, you accidently included an additional http. For those who are interested the actual link is
research.stlouisfed.or...

But this is exactly the data that I was looking for.
Does anyone know if such work has been done using Case-Shiller?

Commercial Mortgages and Mortgage Resets to Trigger Next U.S. Downleg

Honestly.. I don't think resets for Option-ARMs are that big of a deal. As I recall they are based on some percentage + prime, and prime is at 0.25% right now. A historic low.

So no..resets won't trigger another wave of foreclosures. In fact, resets might be a GOOD thing for Option-ARM mortgages.

The biggest problem will be recasts - where negative amortization payment plans are forced into amortizing payment plans on Option-ARMs. This happens, I believe, every 5 years which means we will see the beginning of this in 2010 throughout 2012.

My bet is that the current administration or the banks themselves will remove that 5-year recast point and only shift Option-ARMs from neg. am payments to full amortizing payments if and only if the principal of the mortgage grows to be greater than 126% of the original mortgage principal.

According to Wells-Fargo predictions (which has been cross checked in another SA article) - this will happen sometime in 2016.
By that time residential housing will hopefully have stabilized and someone, somewhere will have found a solution to prevent the second coming.

As for commercial real-estate..well that's an entirely different beast.
I wonder.... how much more of this can the U.S take?

-Jason

MathStar's Moves Don't Add Up

I saw MathStar's demise coming about 3 years ago when I created benchmarking apps for their FPOA.
The device was PAINFUL to use. Each object had an instruction stack that was about 8 instructions deep..that's it. Oh - and place-and-route was done by hand. On FPGAs (somehwat..sorta similar to an FPOA) place-and-route is done using synthetic annealing(i.e not by hand)

I'm not saying that the device was worthless - but what I am saying is that it was incredibly painful for developers to do anything meaningful on it.

..so you'll have to forgive me when I wonder why ANY company would want to purchase MathStar.

Foreclosures Surge, Sun Rises in the East

to harp...
I don't think it's the resets that will be a problem, it's the recasts that will be NASTY.

Delinquent Mortgages Are Soaring; Foreclosures Aren't

Interesting observation but I would suggest that the actual backlog is
[Properties that are delinquent]-[Properties sold in a short-sale situation]=[Foreclosure backlog]

Foreclosure, without a doubt, is an expensive and lengthy process. By allowing a delinquent owner squat on the property banks are allowed to time-shift the loss into the future (spreading the pain instead of sinking the ship).

Benefits for the bank:
*Home "owner" maintains the property. Saving the banks money.
*Avoidance of expensive legal fees.
*Able to time-shift losses into the future.
*Hires an agent and lists the property are a short-sale. Short-sales, in general, sell for more than a foreclosure.

Benefits for the owner:
*Lots of extra cash each month.
*Credit is not impacted as much.

Benefits for the potential buyer:
*A discount in comparison to normal sales.
*Property tends to be in much better shape than a foreclosure.

So what exactly is the incentive for a bank to seize a property? They would lose more money regardless of what happens.
They'd have to pay for the maintenance of the property, the court fees, be forced to recognize losses NOW and still will have no income from the property.

Few Green Shoots Expected in the Bond Market

but at least when the Option ARM resets happen borrower's will be able to lock in lower rates and result in a lower probability of defaults?.....maybe?..am I being too optimistic?

Google Drops a Nuclear Bomb on Microsoft. And It's Made of Chrome.

> It remains to be seen if Google understands that. And I'm still >a bit skeptical of how much can be done with "cloud computing".
> Storing data yes, but how long do you think it will be before I can
> create a simple animation (Flash) and sophisticated composite >graphics (After Effects) and then edit these into HDV video (Final >Cut) and > render that into a Quicktime movie using software >that is running from a remote computer connected via the >Internet? For this stuff, my Mac Quad Core isn't as fast as I >would like.

It's all about targeting your audience. Google isn't designing this OS for video editing enthusiasts or those of us who enjoy rendering 3d scenes. Google is targeting this OS for 95% of the computer users out there who only check their E-mail, view photos, videos and do some light word processing.
That's where Google Chrome and Google Docs come into play. Google was smart enough to develop their "killer apps" before releasing their OS.

It's all very interesting - back in the 70's and 80's computing resources were expensive. Expert users were given cheap dummy terminals (thin clients) which only served as an interface to the incredibly expensive mainframe in the server room.
In the 90's computing became incredibly cheap. Every user was given more resources then they ever needed.
In the 2000's computing again shifted - now we're seeing more and more people using laptops where size and power are key attributes.
This is where the Google OS fits. A customized OS which supports the core functions needed by the average laptop user.

Housing Bust: Some Markets Steadying as Others Increasingly Suffer

Personally I've been struggling with how a majority of world class economists envision price stabilization by the end of 2010. These calls for bottom have been made despite the Credit Suisse (and Business week) charts showing that a sizable (50bn+?) amount of Option-ARM recasts will happen in late '09 until late '10/early '11.
The recasts will mean that those paying negative amortizing payments will now suddenly be paying amortizing payments. This easily increases their monthly payments by at least 50%.
The end result, which will be felt approximately 90 days after the first spike of recasts, will be short sales flooding the market. 180 days after that there will be foreclosures flooding the market.

I've been poking around and have done some serious reading myself and I am under the distinct impression that our government is putting forth some serious effort into converting these 30 year Option ARMs into 40 year fixed rates with ridiculously low interest rates (2%?).
Banks are anxious to play along, another wave of mortgage defaults will likely wipe out all banks with substantial exposure to securitized mortgages.
Let's not also forget about the Feds plan on buying 200bn(?) worth of MBS over next several months. Sounds to me that the Fed plans on reducing the bank's exposure to this inevitable Option-ARM tsunami while at the same time increasing the Fed's ability to modify the mortgage terms in favor of borrowers.

And that's the only way I can figure out why anyone would call bottom in '09/'10. It's simply because these Option-ARMs will be converted into ridiculously favorable 30/40 fixed rates and the Fed will buy 200bn worth of MBS so that it has the power to do this.

That's my educated guess.

What Will Prompt a Housing Recovery?

Good observation. I've been trying to reconcile how a bottom could possibly be in when there will be a steady supply of foreclosures in the next 2-3 years (due to the recast of Option ARMs).

You answered my question nicely, the government and bankers will simply create artificial shortages to stabilize prices.
The real estate business seems to be filled with crooks. What a nasty business it is.

The Assault on Ethical Home Appraisals

> I have seen appraisals below current building cost. Building cost
> including labor costs have dropped. Current building cost, which
> can be obtained from the National Association of Home Builders, Should
> have a weightier influence on appraisals than they do now. Historical
> sale prices are a lagging valuation considering the fire sale pricing
> of homes in the recent past.
Are you saying that the floor value of an asset is determined by how much you put into it? So by that logic I could buy a single share of X and I should be entitled to sell it for X or higher?

The value of an asset is determined by how much the market is willing to pay for it. That's it. There is no such thing as a floor when it comes to "things" being traded on the free market.

I've looked at appraisal notes and the basis of an appraisal is a comparative market analysis (surprise , THEY DO HAVE access to MLS). This base price is then modified by features of the house, renovations, damage etc. But in the end the starting point is what other homes in the area have sold for lately.

Why Housing Storm May Not Be Over

I simply just don't understand. How can anyone be calling for a bottom when we haven't seen the crest of Option ARM recasts yet?
Do they know something I don't know? Will these bad loans simply go away? Has no one else seen the scary graph that Business week put out where recasts due to the negative amortization limit being reached will begin in the next 3-5 months?

I'm trying to hold off my decision to buy a home simply because I believe that there will be another drop in home prices. The trickle-down effect of unemployment (people try to hold onto their homes as long as they possibly can) combined with the option arm recasts will definitely drop home prices down another 20%...and why would I buy a home now when I know that there is a good chance that it'll lose 20% of its value over the next year?

Existing Home Sales Rise: Good News, But Don't Get Carried Away

<<If we can save the polar bears by shipping them to the South Pole to eat penguins, then we can save the housing market, by bringing in (take your pick) Aryans, Iranians, Ukranians, Palestinians,Orangemen from Ulster, etc..>>

Wow so you're suggesting that we import demand? Why not? We import everything else!

Existing Home Sales Rise: Good News, But Don't Get Carried Away

I agree that this is not the bottom.
What we've been seeing for the last few months is the effects of the Foreclosure moratorium, which expired in March. We'll continue getting decreased foreclosure activity until August/September at which point a flood-gate of foreclosures will hit the market.

You should already be seeing a glut of short-sales slamming the market, that's definitely what I'm seeing in the Tampa, Florida area.

When (not if) rates hike up further, the 8k carrot expires, unemployment stays high and when the 2010 Option-ARM recast tsunami begins we will again see house prices plunge. As a guess I'd say we have another solid 20-25% to fall in the bubble areas, that'll put us around early 2000 late 90's prices.

As hard as I try I can not see how anyone could possibly stop the 2010 Option-ARM recast from destroying a fantastic amount of wealth.
I also don't see how the fed can hold 30-year fixed rates under 6% for long.

More Option ARM Falsehoods: Interest Rates Are Not the Issue

What a nightmare but this scenario seems to only take place if the borrower's mortgage is a negative amortizing option ARM. Those who have amortizing payments don't seem to be of much concern.

Is there any data out there showing us how many option ARMs are in the negative amortizing class?
If possible this sounds like horrible news for the banks and not so great news for those entering the housing market.
Really hard to get a good deal on a house when the loan on it is double or triple the value of the home.

Interest Rates Are Only High When Compared with Six Months Ago

But does anyone ever really _have_ to buy a house? When interest rates rise , monthly payments for a given house rise and renting makes more and more sense.

When you rent you gain the freedom of mobility, you're able to capitalize on career opportunities that demand a move.

When you buy you lose that freedom but, presumably, part of your monthly payment is converted into a hard asset (which happens to incur maintenance cost).

Higher monthly payments always makes renting seem like a better idea. The motivation of making a quick buck by flipping houses is no longer there - if anything ,there is a fear that house values will continue to fall.