Twist is off today

August 2008
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By twist

I don’t do this very often, but every now and then I do take a day away from the computer and take care of other things. Today is one of those days.

Feel free to use this as an open thread.

Have a great day everyone.

Twist.

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wcvarones says:

August 12th, 2008 at 7:48 am

Greenspan’s Body Count hits 40.

John M. says:

August 12th, 2008 at 1:02 pm

twist -

I found this link at Implode-O-Meter. The author is asserting that we’re looking at a multi-year surge in defaults of prime, conforming mortgages. Just for starters, that would kill F&F’s market caps many times over. Which is why there is a steady drum beat about a turnaround at the end of ‘08: the GSEs simply can’t hold on any longer unless that happens.

“The next wave of mortgage defaults: More borrowers with good credit are defaulting on their home loans, and that’s going to make it even harder for the staggering housing market to recover”, by Les Christie, CNN Money, August 12, 2008.

h.pylori2 says:

August 12th, 2008 at 3:19 pm

To John M. (#2)

I have read your posts and believe you are dead on but here’s what I don’t get…who is buying and who is lending the money today that keeps housing prices relatively flat? In Denver, there has been almost no price depreciation (that I can find) and housing prices remain staggeringly high.

As an example, I can afford, at 3x income, a $420k house. So I earn well above the average Denver worker’s wage, which would allow me to live in neighborhoods that are adjacent to major streets and have bums and drug users cruising the alleys…seems odd with high mortgage rates, tighter credit, and increasing inflation. FWIW, I love Denver and will most likely never leave.

Thanks

John M. says:

August 12th, 2008 at 3:59 pm

heartburn -

“The ship hung in the air in exactly the same way that a brick doesn’t.”

I have no idea why the price declines are so agonizingly slow, except that perhaps the institutions holding REO fear that dumping their houses on the market will result in price discovery that would cause their assets to plunge, not to mention even more defaults as more homeowners sense they are upside-down.

Obviously the “free market” isn’t really working in this case. I think house prices are being kept artificially high while institutions await a miracle (or a bailout), but I don’t really have evidence for this.

agnostic says:

August 12th, 2008 at 4:21 pm

John (#4) -

More like would cause their executives’ pay packages to plunge (sorry, I’m still on that jag). Negative carry is cheaper than 20% writedowns?

agnostic says:

August 12th, 2008 at 4:23 pm

Twist -

Inquiring minds want to know if you are spending the day rousting (or roasting) the tenants in your backyard. Presumably they have trashed the place; have you experienced a positive return?

John M. says:

August 12th, 2008 at 4:28 pm

Further #3 -

Tanta has an important post today on the Alt-A wave that is taking over from the subprime wave. There is a good comment in that article’s comment thread that addresses the issue we’re discussing here.

“Subprime and Alt-A: The End of One Crisis and the Beginning of Another”, by Tanta, Calculated Risk, August 12, 2008.

Andy writes:
Tanta,
Here in the Sacramento area there are many newer subdivisions with high volumes of homes that are obviously abandoned, many of which have been abandoned for quite some time. Many of these neighborhoods are full of homes that sold in the $700K to $1m+ range (like the subdivision I currently live in). While many of them have for sale signs on them, a good 30 to 40% haven’t had a for sale sign on them for months, some for up to 1 year. Some of the REOs that are “For Sale” are priced very ridiculously high for the current market. Ex: $645K for a home where a comparable REO in the same neighborhood just sold for $405K.

Is this a way to keep banks from realizing losses if they keep pretending these homes are worth something close to the paper they’re holding?
Andy | 08.12.08 – 5:33 pm

Richcinaz says:

August 12th, 2008 at 4:30 pm

I keep thinking the banks have their head’s stuck in the sand because they only service the loan. And don’t the banks have to book the loss once it’s goes REO. Then it’s a matter of wether the bank is solvent or not.

h.pylori2 says:

August 12th, 2008 at 5:52 pm

John M. #7 – Interestingly from the same site different story, dunno why high foreclosures drive up prices:

Joe writes:
“these are low end areas with high foreclosure rates and high demand for housing”

This describes Denver to a T — and it probably also describes why there has been a pretty marked increase in home prices over the past 4-5 months (more than can be explained by seasonal factors).

Housing Doom

“He who defends everything defends nothing.” – Frederick the Great

Twist is off today