Housing Doom Housing Bubble Blog

HousingDoom once more has to offer a big hat tip to Blown Mortgage for this post, and sharing the details of a sobering email from Nautilus Capital- a "scratch and dent" broker.

See Blown Mortgage for the full text of the email, but here are some of the more worrisome excerpts:

Loan sale pricing is not going to improve in the foreseeable future; in fact, it will probably get worse. Unless you are prepared to hold the loans to maturity, our advice is to liquidate your inventory now. You may not like today’s pricing, but you will like tomorrow’s even less.

Separately, several recent events are having a significant adverse effect on loan pricing, of all credit grades. The bankruptcies of a number of large subprime lenders (the latest being Alliance Bancorp, last week) is well known, but what is not widely understood is that their portfolios are being dumped on the market in huge volumes by their creditors. Similarly, a pair of highly-leveraged mortgage hedge funds managed by Bear Stearns recently collapsed, causing near-total losses to their investors. Their portfolios are being liquidated, but the sales apparently are not going well; rumor has it that only a small portion has yet been sold, and at a significantly higher discount than anticipated.

These massive sales are depressing pricing across the board. Prices on the ABX indices (used by mortgage bond traders to manage risk) have declined severely in just the last week. The trend lines for the AAA and BBB- tranches (the highest and lowest risk grades, respectively) are shown in the graphs above. Note that the AAA line, which was stable for so long, has now collapsed. Investors in these highest-quality bonds, who once thought they were immune to credit quality issues in the underlying loans, are now not so sure. The BBB- tranche, which is necessary to support pricing for all the higher grades, is trading for half of what it was in January.

Bloomberg is reporting this afternoon:
Read the rest of this entry »

I don’t know if "celebrate" would be the right word, but it is of note that the Implode-O-Meter website has added their 100th lender to the list of "imploded" lenders with the addition of CIT Home Lending:

CIT Group, a major conglomerate lending and investment shop, is exiting the home lending business entirely, after taking an "unexpected" (hah!) loss of $127 million in the second quarter.

Read the rest of this entry »

According to Marketwatch this morning:

U.S. housing starts rose in June, beating analysts’ expectations, but building permits fell, pointing to a mixed housing picture last month.

The Commerce Department says of housing starts:

Privately-owned housing starts in June were at a seasonally adjusted annual rate of 1,467,000. This is 2.3 percent (±8.3%)* above the revised May estimate of 1,434,000, but is 19.4 percent (±5.9%) below the revised June 2006 rate of 1,819,000.

There are those who are feeling bullish on this data.

Sam Bullard, an economist at Wachovia, says the data may be a sign that housing starts are stabilizing. The annual starts level in June rose 2.3% from May.

"The pace of the fall seems to be moderating and potentially may be closer to the end than we think," Bullard says.

This was also viewed by traders as a positive sign for the U.S. dollar:

The dollar rose to session highs against the euro and yen on Wednesday after news that June housing starts were slightly higher than expected, a small sign the sector may be improving prospects for the economy.

With new home sales down reported as being down 15.8% YOY in May, I view June’s housing starts figures as neither a sign of improvement nor stability. As inventory remains at record levels, any increase in the production of new homes only serves to exacerbate the situation.

The Commerce Dept. indicated that permits showed a greater decline:
Read the rest of this entry »

According to a Reuter’s article yesterday by Nancy Leinfuss:

NEW YORK (Reuters) - Investor anxiety over the U.S. housing downturn is spreading to the highest-rated mortgage securities, upsetting the expectations of some that the crisis in the subprime bond market would be contained.

Weakening credit quality in the $575 billion U.S. subprime mortgage market is eroding the value of "AAA" securities, heightening anxiety among investors and raising the cost of insuring that debt against default.

While lower-rated "BBB" and "BBB-" securities are designed to take the first losses in a securitization structure, recent declines in "A" and higher that have a bigger cushion for losses suggest investors are bracing for a prolonged downturn in the housing market, analysts said.

Here’s the graph of that "eroding" AAA: [the black line]

Read the rest of this entry »