joof

Desire for Safety Has Made the Financial World Risky

but they DID take too much risk, not only in the mis percived risk level of the investment, but in how they structured and levered the investments.

On its face an ABS or CMO isnt a bad investement, and is susceptible to legitimate risk assemsent based on its cash flows and credit charactersics. Most analysis didn't understand the fundamental housing market cycle, and understated risk - which led to too low risk premia. THEN as revealed by the market perfromance making mis rated ABS into misrated and intrisically levered CDO, CDOsquared, CDO to the fouth power etc. and then carrying those instruments on a fully levered balance sheet multiplies the risk.

They were wrong about risk levels and risk premia, and they paid for underpriced risk with excess leverage

SoCal Real Estate - Sales Up, But Prices Are Still Down

Volume is moving because price have come down.

Inventory is almost at stabilized levels ( 6-8 month supply) in many of the better sub markets. You hear anecdotal stories that the (few) good assets that hit the market ( i.e. not batted foreclosures in bad areas) have gotten multiple offers . Builders are beginning to shop for losts


Putting it another way if you take 2003 nominal prices and deflate them, or if you factor in income growth since 2003 against current nominal prices, you get ratios within the range of historical experience for S CA

Fence sitters may get shut out

SoCal Real Estate - Sales Up, But Prices Are Still Down

Volume is moving because price have come down.INventeory is almast at stabilzed levels ( 6-8 month supply) in many of the better sub markets. You hear anecodoatal stories that the (few) good assets that hit the marekt ( i.e. not batted foreclosures in bad areas) have gotten multiple offers


Putting it anther way if you take 2003 nominal prices and deflate them, or if you factor in income growth since 2003 aganins current prices, you get ratios within the range of historical

Fence sitters may get shut out

Stock vs. Bond Valuations

you should add a colored band for "periods of terror" ie credit crunches -- when people flee to treasuries and the normal spread behavior does not apply

For example....now

Housing: No Bottom Yet in Sight

The legitmate portion (93 to 1999/ 2001, take your pick) of the last housing recovery was driven by both normal cyclical factors and the effects of the 90s tech and manufacturing booms.
The latter drove eimployment and incomes. Plus , with the US fiscal policy during the 90s leading to lower interest rates financing stayed cheap.

We know what happened next - the Fed inflated the end of the boom into the illegitmate portion of the cycle (2001-04) through very lax regulatory and monetary policy.

Hard to imagine a repeat of the new industry fundamental economic performamance with the benign interest rate and fiscal policy environment of the 90s. No one is going to repeat the massive 90s PC roll out followed by the internet boom.

So something else will have to drive recovery- if there is one

Now's the Time to Buy Something

the writer of theis "piece" show go back on his meds and stay off the Internet

Top down= schizophrenic delusions

Hovnanian Chairman Shows the Midas Touch

Selling overvalued stock is NOT unethical

Buying undervalued stock is NOT unethical

Losing money is stoopid

Have Price Declines Solved Affordability Crisis? [Housing Tracker]

sure

everyone 'deserves' an affordable house in a better neighborhood like Torrance .. a premise which ignores the most elementary bases of real estate economoics

Prices are higher (affordlbity is lower) in better areas because of limited supply and heavier demand. People with more money bid those places up. People with less money have to go somewhere else

Service workers have to rent, share or commute. It will always be this way, everywhere, absent public housing subsidies

Household Assets Decreasing While Liabilities Are Increasing

Nominal prices have fallen by over 16% nationally, and more in many areas. Combined with some nominal and real household income growth and continuing relatively low interest rates has resulted in --- all but a handful of regions have returned to within the range normal affordability metrics . See studies by Nat City and others

Rents have risen in most regions ( in many case by above CPI) so the ratio of ownership to rental occupancy costs has narrowed to much closer to historical norms

Homeowner Equity at Post WWII Low

If you dig into the numbers ( at least the prior issuances of this data) you find that the % of owners with fully paid off mortgage or good LTV ratios hasn't changed that much. However the portion of people with high LTV (little to no equity; the new buyers of the past several years ) are much more levered. Hence, combined with value reducitons the average equity decline

we end up with two classes- the housed and comfortable, and the broke

John Hussman: Do Worse Credit Problems Lie Ahead?

because of changes to accounting regs related to limiting the scope of potential "cookie jar" reserving the banks have deferred reserving problems compared to with they would have done even 10 years ago. They can't reserve until the problems become apparent

More shoes will drop

Different Views on Housing Supply

many of the perma bears are fighting the last war- they imagine it is still 2005. Life HAS changed , and you had better be hip to the change if you actually want to buy in the down market . It won't last forever

Detailed data shows that both major trends described here are happening - 1. Builder inventory is clearing and production is low 2. Affordability has markedly increased almost everywhere and that has driven resale volume - largely due to the amount of distressed property on the market and continuing low mortgage rates .

After many months of denial the market is clearing . It will stay bad for awhile , but not indefinitely . Certainly the best stuff ( good locations, good quality and good price) has already been picked over and absorbed

The Home Start Numbers Are Not a Positive

there is a micro boom in new apartments in many markets. based on the normal business cycle for that porduct, that should end in about 18 months with a glut of newish units

Yield Curve Looks Like May 2003 Again

Steep yield curve can also mean hight inflation expectations

Three Senior Housing Stocks With 50%+ Upside - Barron's

demographics compelling..but few have the money to pay the rates


Effective demand much less than potential demand