Housing Doom

I think almost by definition we’re … I mean I would say W, because I think in the US anyway we’ll still see a 3 1/2 percent growth number in the 3rd quarter, which will be reported next week, and maybe a 3 percent number in the 4th quarter …

Doom Transcripts: Index & Guide

I do believe we have a winner.¹

Housing Doom is pleased to present a fifth selection from our under-construction transcript of the American Enterprise Institute’s October 22, 2009 event "The Deflating Bubble, Part VI: The Lessons of the Bubble and Crisis".²

The event site has a number of resources, including an audio and video of the proceedings. There is as yet no official transcript.

This is the presentation by AEI Visiting Scholar John Makin

John Makin: [0:54:19] So I’m going to say that so far what we’ve heard is, it’s the lessons of the — having deflated and about to reflate bubble. And that’s a little different than the idea that the bubbles burst and it’s past us.

But, you know, I’ve taken the charge here quite literally — What are the lessons of the bubble? And I think we’ve heard that it may not be the only bubble that we’re getting, but I … The main lesson of the bubble in the US in a sentence is "You’ve got to be Too Big to Fail," because then you get bailed out.

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Final risk. The increasing asset prices we’ve seen since March for everything: global equities; in US, equities; EM [emerging market] asset classes; commodity; credit; everything around the world is driven by one factor.

Doom Transcripts: Index & Guide

The penultimate risk was merely the prospect of World War III breaking out.  Fortunately Nouriel was running overtime so Alex had to cut him short just before he got to the scary bit

UPDATE (11/6): Here’s Nouriel’s Nov 4th expansion on the idea

Housing Doom is pleased to present a fourth selection from our under-construction transcript of the American Enterprise Institute’s October 22, 2009 event "The Deflating Bubble, Part VI: The Lessons of the Bubble and Crisis".¹

The event site has a number of resources, including an audio and video of the proceedings. There is as yet no official transcript.

Dr. Doom was batting cleanup …

Nouriel Roubini: [0:37:03] OK. Tom spoke about housing and mortgages. What Chris spoke about — the banks. So I’ll try to speak about the economy and what’s going to happen to the economy looking ahead.

We’ve had the most severe recession and financial crisis since the Great Depression. Given the monetary and fiscal stimulus and the backstopping of the financial system now we’re close to the bottom, at least on a temporary basis.

And now the debate is, of course, on what’s going to happen — the shape of the recovery. Given what has happened in the markets I would say the markets are pricing now a V-shaped recovery with rapid return to potential growth, and that’s even what the macro forecasters’ consensus is.

There is a second view, which is the one I share, is that this recovery is going to be at best an anaemic, subpar, below trend, with growth well below trend for the next couple of years, much as in the US, but also in advanced economies. So more like a U-shaped recovery. That’s also the view of the IMF and the one of those folks at PIMCO who are talking about A New Normal.

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It’s Friday, and while vacancies are supposed to be down from the first quarter, it looks like they are headed up again:

Oct. 29 (Bloomberg) — About 18.8 million homes stood empty in the U.S. during the third quarter as banks seized properties from delinquent borrowers and new home sales fell in September.

The number of vacant properties, including foreclosures, residences for sale and vacation homes, rose from 18.4 million a year earlier and 18.7 million in the second quarter, the U.S. Census Bureau said in a report today. The record high was in the first quarter, when 18.95 million homes were vacant. The homeownership rate, meaning households that own their own residence, stood at 67.6 percent.

The reporter must have needed a positive comment- this seems to be the happy thought de jour:

“We are bumping along the bottom of the housing market,” said James Lockhart, vice chairman of WL Ross & Co. and the former director of the Federal Housing Finance Agency. “There is the potential for another swing down.”

Somehow that reminds me of Robert Toll’s famous "dancing on the bottom" comment back in 2006- we all know how well that one worked out.

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The Fed’s own MBS holdings slid by just $2.802 billion, while foreign central banks sold off a bit more MBS than that. Meanwhile, cenbanks bought a good amount of treasuries. Altogether a pretty ho-hum week on the US obligations front.

This week’s Reuters report¹ settled down significantly after last week’s excitement. The report was, as usual, based on the weekly update from the NY Fed’s H.4.1 table site.² Here is Doom’s updated CSV version³ of the agencies and treasuries foreign central bank holdings data set.

The treasuries buy was a healthy $8.651 billion, but last week’s splurge had been over $20 billion higher.

Agencies have resumed their steady march down, dropping a significant $3.788 billion.

The net change of US obligations was just $4.863 billion. About twice that amount on a regular basis would be better.

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I apologize to whoever sent me this excellent video right after Frontline did it.  Thank goodness M sent it to me again.  Sure, it’s nearly an hour long, but you won’t waste your time.

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Oct. 29 (Bloomberg) — The U.S. economy returned to growth in the third quarter after a yearlong contraction as government incentives spurred consumers to spend more on homes and cars. - BL¹

A month and a half ago I confidently predicted that the equity markets would be collapsed by yesterday.  Obviously wrong.  What I failed to enter into my calculations was a world where Google’s top biz story could have the above lead paragraph and just about nobody would see the least little bit wrong with it.

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When no one calls to see a vacant listing for awhile, some agents don’t bother stopping by.  This can be the result: [Thanks L!]

A recent scam reported in the Phoenix area involves tenants moving into a pending short sale listing. The surprised listing agent contacted the owner who had not rented the property to anyone. The tenants (two women with two children) were physically moving in and had turned on utilities in their name. The sign and the lock box were removed, and all locks were re-keyed. 

The tenants responded to a "For Rent" sign in the yard. They gave someone $1,800 as rent and signed a lease. While the short sale was able to close, the unfortunate victims of this scam were out $1,800 with no place to live.
 
This down economy encourages some people to take advantage of others.  Listing agents should check their vacant listings regularly and provide neighbors their contact information in case they observe any suspicious activity.

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Doom Transcripts: Index & Guide

Housing Doom is pleased to present a third selection from our under-construction transcript of the American Enterprise Institute’s October 22, 2009 event "The Deflating Bubble, Part VI: The Lessons of the Bubble and Crisis".¹

The event site has a number of resources, including an audio and video of the proceedings. There is as yet no official transcript.

This is the presentation by IRA co-founder Chris Whalen.  I see Nouriel on deck, but this one’s going to be a tough act to follow.

So this is what the commenters at Calculated Risk have been going on about …

Chris Whalen: [0:27:02] I’m going to talk a little bit about the industry because we’re in the middle of earnings season, and I apologize for not preparing something, but I’ve been reading bank earnings statements, so I will share some of my impressions of that. And then I want to talk a little bit about not only lessons, but some of the enduring trends that I see that have not been affected by the extensive bailout that the government has put together for our largest financial institutions.

In general, when you look at the industry you have to recall the words of Mr. Feinberg, and I don’t mean the guy who was in the newspaper today, I mean my friend Bob Feinberg in the back of the room, who predicted several years ago in an interview we published that the GSE would become the business model of choice for the United States.

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Doom Transcripts: Index & Guide

Housing Doom is pleased to present a second selection from our under-construction transcript of the American Enterprise Institute’s October 22, 2009 event "The Deflating Bubble, Part VI: The Lessons of the Bubble and Crisis".¹

The event site has a number of resources, including an audio and video of the proceedings. There is as yet no official transcript.

This is the presentation by UBS fixed income researcher Tom Zimmerman.  Tom’s the most moderate of AEI’s Six Bears but in my opinion the scariest, because he usually brings the hardest data to the table.

Tom Zimmerman: [0:11:43] Thanks a lot, Alex, it’s great to be here again. [slide 0²] What’s amazing about coming down here every 6 months is that I’m usually viewed as one of the more bearish people in my shop, and also when I speak at conferences around the country I’m usually sort of sitting on the bearish side of these discussions. But I come down here, [laughs] and I’m not … it’s a … I feel like I’m a raving bull about what’s going to happen in the world when you listen to some of these people talk. So anyway, that hasn’t changed, in the last 6 sessions, so …

We had lunch together today, and it’s exactly the same.

I see some green shoots here and there, but I think that it’s not something the other panelists see some real major problems down the road.

What I thought I’d do today is just continue some of the things I’ve talked about before in terms of the housing market, mortgage market. And then at the end talk about some of the lessons that we’ve learned from this bubble which isn’t over with yet, but we’ve learned some lessons or at least some take-aways from it.

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How’s this for a weird one? It is not uncommon to see sad stories where grandparents in 55+ communities end up with custody of grandchildren and have difficulty with HOAs and neighbors.  This time though, the community wants the little girl gone, but they don’t want the grandparents to drop the home price too much- they think it might hurt neighborhood home values.

A protracted battle to get a 6-year-old Florida girl to move out of a 55-plus community has dragged on, her grandmother says, because the housing market meltdown has made it impossible to sell her home.

Kimberly Broffman moved in to Judie and Jim Stottler’s Clearwater home when she was 6 months old in 2004, well before foreclosures started mounting in Florida. The move was only meant to be temporary — the rules of the retirement community state that anyone under 18 cannot live there longer than 60 days — but with the little girl’s mother in and out of jail and coping with a drug problem, a court awarded Ms. Stottler custody of her granddaughter. The local Homeowners Association insists the little girl must leave; Ms. Stottler says there is nowhere else for her to go, and they cannot afford to move unless the house sells.

“[The association doesn’t] live under a rock. They know the housing situation, they know the economy,” said Ms. Stottler, 62, while at work as a dietery assistant at an assisted living facility, where she earns $18,000 a year. “I’ve been trying to sell my home, but I can’t drag somebody off the street to buy it.”

Mr. Stottler, 54, is not working due to a disability.

Robert Eckard, the family’s lawyer, said the Stottlers do not plan to give up Kimberly. “There’s no where else to go except for foster care,” said Mr. Eckard, who took on the Stottler’s case pro bono after he saw it in the news. “My goal is to keep them together which they still are.”

It sounds like the Stottlers are willing to be aggressive in pricing their home. Even after dropping the price from $239,000 to $129,000 though, there was only one showing in nine months. You’d think that if the homeowners association was in a real hurry to have the little girl gone, they’d want Grandma to cut the price so she could sell, but no:

Ms. Stottler said she’s offered to bring the price down even further, but she said a lawyer for the Association discouraged her from going too low because it would bring down the value of the entire neighborhood.

I don’t know why the Stottlers would be taking advice like that from the HOA’s attorney.  Homes in the neighborhood are worth what people are willing to pay, and "discouraging" owners from pricing homes realistically won’t prop up home values. Clearwater is in the Tampa area, which has seen a 17% drop in the median price in the past year. Setting the price too high and waiting for someone to come along and pay it is not a good sales strategy.

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