Housing Doom Housing Bubble Blog

A nation that forgets its past is doomed to repeat it. - Churchill

September 7th, 2007

Mozilo’s Explanation of Countrywide Layoffs

This has to be some kind of record for us- we’ve never had this many posts in one day.  Just when I was about to call it quits for the evening though, I  was forwarded a copy of a letter issued by Angelo Mozillo Chairman of Countrywide Financial and Dave Sambol, President,  explaining all the layoffs at Countrywide Financial today.  Here’s the most relevant excerpt.  The letter in its entirety follows for those hardcore types who can’t read enough about CFC:

As has always been the case in previous cycles when the market has shifted and our volumes and related revenues fell, we need to again adjust our organization by scaling back our operations and reducing our cost structure accordingly.  Unfortunately, the only way to accomplish this is to make significant reductions in our workforce which we estimate to range between 10,000-12,000 employees (which includes reductions that we have already made).  As of July 31, Countrywide employed more than 61,000 people.  The areas primarily affected will be our production divisions, and the general and administrative support areas of the Company.  Areas which we do not expect to be materially impacted by workforce reductions include our banking operations, our insurance businesses and our loan servicing operations, each of which are expected to continue growing in both the short-term and long-term.  As noted above, the distributed retail unit of our Consumer Markets Division will continue to aggressively grow its sales force while adjusting its expense structure to the new reality of the marketplace.

 

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September 7th, 2007

Economic Cycles — Surely We Must Be Nuts!

Reader Mike Folkerth, the King of Simple and Humorous Economist extraordinaire, just launched the following article over the wall here at Doom Castle. Stand by to be enlightened about what has been happening to us all during the housing bubble. The story is straightforward, scary, surprising, and — all too often — uproariously funny.

UPDATE: Author profile at bottom of post

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Economic Cycles — Surely We Must Be Nuts!
Mike Folkerth [1]

While predicting the exact time that nearly any modern economy will experience ups and downs is difficult, yet defining the reason for these fluctuations can be reduced to simple terms. In a country that practices free enterprise, such as the U.S., production is not closely linked to demand. In other words, no one is keeping score.

In our private lives we purchase goods according to demand and anticipated consumption. For instance, we buy only enough bread to consume over the period that the bread will remain fresh. The bread company on the other hand is not nearly as conservative. The bread delivery person who placed the bread on the super-market shelf comes in each day and removes the now day or two old bread and replaces it with fresh. Much of the bread being removed is then discarded. The same arrangement applies to nearly all perishable consumables.

As individuals, we also purchase clothing, furniture, appliances, transportation, tools, spare parts, and so on, to meet the needs of our immediate and near-future requirements.

Industry doesn’t keep score nearly as well as the individual consumer. Competition and the absolute necessity for business growth push the envelope of production beyond natural and fluid consumption rates. This has never been truer than in our current “instant society.”

Inventory levels must constantly remain sufficient for instant order filling. Combine the need for growth and the expectation of “on the shelf availability,” and it equals over-production and waste. Recovery for the cost factor of this designed-waste is then necessarily counteracted by higher prices on all goods and services.

Products that will never be consumed, and that eventually will be discarded, are produced in huge quantities to meet the new rules of supply and competition. In short, supply, competition, the necessity of growth, and the expectation of instant fulfillment, have trumped the fundamental rule of supply and demand.

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September 7th, 2007

Buyer Must Be Prequalified by XXX Lender

M has asked me to keep the identifying details out, as this came from the private "Realtor Comments" on this Phoenix East Valley listing.  We thought we’d bring this one to your attention though:

REALTOR REMARKS: ALL BUYERS MUST BE PRE-QUALIFIED BY XXX HOME LOANS  PRIOR TO SUBMITTAL OF PURCHASE OFFER. CONTACT…..

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September 7th, 2007

Op-Ed Friday: “There is no Dirk Dastardly Down at the Bank”

It’s Op-Ed Friday, and while we’ve been hearing about bailouts, we’re also hearing about tough love:

In contrast to years past, there is no Dirk Dastardly down at the bank looking to swindle the widow out of the family farm. The banks do not want to own the assets that they themselves took as collateral for their loans—ever.

The correct federal response to this should be, "Too bad. You broke it, you bought it." Let the realtors, bankers, Wall Street sharpies, and—yes—the borrowers fight it out amongst themselves. Somewhere there is a market-clearing price for these assets.

 

"Babies" by Oc-Ed

We’re willing to discuss just about anything housing related, so feel free to load us up with your links, stories, suggestions and insights.

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September 7th, 2007

Be a “Landlord” with All of the Profit and None of the Overhead

If you want to make money off of rental properties without actually owning one, aren’t squimish about breaking laws, and aren’t burdened with a code of ethics, there’s a scam out of San Diego you might be interested in:

It begins with a team of people using untraceable cell phones.

The group searched the Multiple Listing Service used by realtors, selecting vacant, high-end homes for sale.They then cut and pasted pictures of the homes into a rental ad on the Craigslist Web site along with their cell phone numbers.

The group would spend one day setting up deals and the next days collecting money.

A reporter from Channel 10, Kevin LaChapelle, reported his conversation with one of the scammers:

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September 7th, 2007

I guess it’s all in your point of view….

I couldn’t help but notice these two different points of view on the Phoenix market  yesterday:

From Catherine Reagor in the Arizona Republic:

No one is calling for the Valley’s housing market to crash as it did in the late 1980s.

From Doug Duncan of the Mortgage Bankers Association, quoted in Yahoo Finance:

The worsening performance [in mortgage delinquencies] was driven by two factors — heavy job losses in the Midwest states of Ohio, Michigan and Indiana and the collapse of previously booming housing markets in California, Florida, Nevada and Airzona.

So no one is predicting the Valley’s market to crash, as it has already collapsed?  Or do we assume that the rest of the Arizona has collapsed, leaving Phoenix crash-proof?

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