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« December 2006 | | February 2007 » January 31, 2007 Mortgage & Loan: Banks See Recession Due To Housing Failures
While most of the business press has been consumed with the "not news" that is Maria Bartiromo's cozy relationship with Citigroup execs, Marketwatch is thankfully finding some spare time to look into a much more serious story...namely that the CEO of one of the world's largest financial groups thinks that a recession may be coming, due not least to the failures of the subprime lending market:
So check it--now that foreclosures are on the rise and people are defaulting on loans in greater and greater numbers, Chase is doing the full-tilt boogie out of the subprime sector as fast as its stubby legs can carry it. Calculated Risk finds further evidence of tighter lending standards on the horizon as well: JPMorgan said in the presentation that "loss severities" in subprime mortgages have started increasing, and that delinquencies of subprime loans originated last year are higher than the 2005 and 2004 vintages were at a comparable age. So, tighter credit means less lending, which means diminished portfolio returns, which leads to less in the way of capital for investment, which means less hiring, which means fewer jobs....which means a recession? Posted at 12:28 PM | TrackBack January 29, 2007 Buying & Selling: David Lereah Put On Notice
"See this guy right over my head? He's ON NOTICE!!!!!!!!!!" In what may be the most pointed attack yet on the blatant shilling tactics of David Lereah, CBS Marketwatch has a month-by-month breakdown of the "chief economist's" market outlook: January 2006 April 2006 CenterBlue from D.C. pointed this little gem out to me, and I have to quote his own priceless commentary: In fact it continues to be a horrendous time to buy property (unless you plan on staying there at least a decade) given the gross over-valuations, huge overhangs of inventory, and more property waiting to come onto the market from millions of over-extended users of exotic loans that are now facing foreclosure. The realtors don’t care about that though, they are getting desperate and they need people to buy houses so they can keep getting paid. Word life, as they say. Posted at 12:44 PM | TrackBack January 25, 2007 Buying & Selling: California Defaults On The Rise
California is often seen as the bellwether for real estate trends--as prices go up there, so too may they for other parts of the country. And just as true, when foreclosures and defaults rise there, everyone gets worried: Default notices jumped 145% in the last three months of 2006, accelerating a trend that began in late 2005 as home sales started to cool. It was the largest number of default notices in any three-month period since 1998. Calculated Risk analysed the DataQuick numbers, and found little reason for comfort: 2006 had the highest number of NODs since 1998. And it now appears 2007 will see record or near record NODs. Despite some comments in the article, this is very much a reason to worry, as Kevin Drum notes, the national foreclosure rate is matching the previous housing bubble bust of the early '90s. And with the much-anticipated "hitting bottom" still very far away, and thousands of ARMs ready to reset throughout 2007, there is every possibility that this bust will surpass the previous one by a huge margin in terms of sheer economic damage. Posted at 03:16 PM | TrackBack January 24, 2007 Buying & Selling: Looking For Realtor Stories
As you may have noticed, we here at Housing.Com have recently been covering tales of realtors' reactions to changes in the MLS system. (See here, for instance.) Now I'm looking for comment or ideas from fellow bloggers, readers, writers, etc. Here's what I'm asking: Do you have a tale about a realtor's bad business practices? Did a shady agent's actions cause you to back out of a deal or lose out on the best value for your home? Alternatively, what about a good realtor? Someone who played fair and helped you get the best bang for your buck? Leave me a link in the comments, or send your stories to blog@housing.com. We want to hear your tales of REALTOR terror and triumph! Posted at 02:31 PM | TrackBack Buying & Selling: $335K for 77 Square Feet
That's the price for this rather cozy little abode, located in the heart of London. As the article notes, the price is an example of "location, location, location" taken to the absolute extreme: At more than $4,340 a square foot, the mortgage buys a spot within walking distance of tony stores like Harrods and London's iconic Hyde Park. Originally conceived as a maid's room, the apartment at 18 Cadogan Place hasn't been used for years and is littered with trash bags and crumbling paint...The sale of this dark, mildewy room illustrates the astronomical rise in property values across London, which in the past year has seen average residential property prices increase 22.4 percent, to about $703,000, according to figures released Monday by Rightmove, which tracks the British property market. If nothing else, this is a good reminder that the epidemic of soaring property values--and corresponding lack of affordability--is not confined to the borders of the U.S. alone. I understand that David, aka Bubble Meter, is going on vacation. Maybe he can look into the bubbiliciousness of merry olde Englande while he's overseas. :) Posted at 02:06 PM | TrackBack January 23, 2007 Credit & Debt: Judge Refuses To Block Nardelli Payout
It would seem that deposed and embarrassed ex-Home Depot CEO Bob Nardelli at least gets to walk home with the golden egg: A Superior Court judge denied a request by a group of shareholders of The Home Depot to temporarily block the company from paying former Chief Executive Bob Nardelli any more of his $210 million severance package. This only tangentially relates to housing, but it does fit as a perfect example of how people who have been brainwashed into believing that investing into what seems like a sure thing--be it real estate or homebuilder stocks--and then lose everything while the puppet masters get away clean. Two more interesting perspectives on this issue. One, from the Australian, laments the growing trend towards opaque private equity firms right at the time when public firms and stocks are starting to tank (The article mentions Nardelli specifically): Managers should be stewards of their companies, not merely semi-detached financial engineers. To illustrate the difference, consider people who think "home" and those who think "house" about where they live, says Mark Goyder, director of the London-based think tank Tomorrow's Company.If you think "home" there is an assumption of continuity. "Money is spent that cannot be recovered in the event of an early sale but adds to the individual character of that home," he says. Excellent analogy, no? Also enjoy reading this piece from Morningstar on how to avoid failures like Nardelli's in the future. Posted at 12:21 PM | TrackBack January 19, 2007 Buying & Selling: Iowa City Opens The MLS
Here's another example of a regional realtor establishment realizing that they can't control the information flow anymore, so they might as well share it. The Iowa City Press Citizen tells the tale: The new Web site, www.IowaCityAreaMLS.com, lists more than 2,400 homes in the area that are for sale by the association's 440 members. The site is updated daily. I tested the site out, and it works very smoothly, including a security authentication feature and the ability to sort by highest and lowest prices. This is the type of thing realtors should've been doing long ago, but better late than never. Check out the site here. Posted at 05:46 PM | TrackBack January 17, 2007 Buying & Selling: Minnesota MLS Opens Its Doors
Yesterday I talked about efforts to diversify the real estate information flow, but it turned out that this was already happening in a few places. On Monday, the Inman News bloggers reported that Minnesota's MLSs were agreeing to share the wealth: A group of 14 Realtor associations, which represent 10 regional multiple listing service providers and the majority of for-sale property listings in the state, have created a data-sharing system (see Inman News article). The sharing agreement will reduce the need for real estate professionals working in the area to join several MLSs to serve their clients. As far as I know, this extension of data sharing is only for realtors and not for FSBOs and other competitors, so it's not much in the way of progress--but progress it is. Property Hype wonders if this may portend bigger changes on the horizon: With a Justice Department suit against NAR for its MLS policy, changes may be forced. Customers and many real estate business entrepreneurs alike want more access to home listing data, and MLS listings changes may provide that. Indeed. Rather than risk embarrassing details about shady, hierarchical, self-serving business practices coming to light, the industry is diversifying and standardizing to preempt oversight. Dalton's Arizona Homes also points out that this change benefits realtors who often suffer from the same lack of information buyers do: In truth, the MLS is a parochial being... If I want to see listings in any of these areas, I have to search as the public does - through agents’ sites or, if possible, through a public portal provided by the individual MLS.There also is Realtor.com which, as one my sellers discovered yesterday, provides just enough information to be remarkably useless to someone seriously searching for homes. 'Nuff said. :) Posted at 06:35 PM | TrackBack January 16, 2007 Mortgage & Loan: Realtors Control Information Flow Today's Washington Post has a front-page article about the extent to which Americans are observed and spied upon in the modern day. While this is chilling and thought-provoking in its own right, of particular interest is that the subject, Kitty Bernard, is a real estate agent--and that she indulges in some techno-spying of her own. Check it out: Bernard is not only trackable, but she is a tracker. She says it helps her be a better real estate agent. Through a Web-based notification service, she can see what homes her clients are interested in and copies of e-mails sent to new clients who register on her Web site, KittyBernard.com."I can e-mail them and say, 'I see you've been on my Web site.'...She logs on to Top Producer, Web-based software for real estate agents that allows Bernard to retrieve notes on her clients wherever she has access to the Internet. She can look up clients' birthdays and home-buying anniversaries, lending a personal touch to her service. I don't think real estate agents are any more inherently untrustworthy or trustworthy than any other occupation (though I'm sure many of my fellow bloggers might disagree :) ). But I'm sure it's extraordinarily tempting to do things like pocket listing when you have a closed, unmonitored system like the MLS with no oversight. As long as the NAR controls the information flow, the balance will always be tilted against the homeowner. Information is power. Breaking up the MLS and offering open listing services will disperse a lot of real estate establishment power. That power will flow to FSBOs, discount brokers, Web sellers, etc., but it'll flow to buyers and sellers most of all. And then, the next time Kitty Bernard e-mails you with a cheery note about your birthday, you can politely say, "Thank you! I just sold my house myself the other day, but I appreciate the note." :) Posted at 02:44 PM | TrackBack January 13, 2007 Buying & Selling: Regulating the Realtors
A source tipped me off to an article in the next Business Week regarding the latest realtor dirty tricks to boost sales in a dead market. This time it involves canceling old listing and immediately resoliciting them as new: With open houses as quiet as death lately in many parts of the country, sellers' agents are trying everything they can to make a sale, including sometimes tweaking the computerized data that potential buyers depend on. Fresh listings attract attention and can fetch higher prices because buyers are less likely to make lowball offers....When many homes in an area are re-listed as new, it skews the "average days on market" statistic, making the market look healthier than it really is. For sellers, refreshing a listing can also disguise the fact that the previous listing was at a higher price. Buyers often regard a price cut as a sign of weakness. The article also notes that the MLS, like so much of the real estate industry, is "self-regulating" and therefore lacking anything in the way of oversight to prevent deceptive buyer tactics like these. However, in the case of Simone, oversight presented itself in the form of an intrepid blogger who caught Simone's shenanigans and reported them. If the industry refuses to regulate itself, we'll do it ourselves and make sure these guys stay on notice. It's a new day now, and a level playing field--FSBOs, Web brokers, discount services, bloggers, you name it--and we're all out to ensure honest competition and real disclosure from this most traditional of "brick and mortar" businesses. Posted at 07:49 PM | TrackBack January 11, 2007 Home Improvement: Home Depot Sued To Block Ex-CEO Payout
The saga of deposed Home Depot CEO Robert Nardelli continues, as angry shareholders have filed a lawsuit to prevent his multimillion-dollar severance package from going through: "Nardelli's severance package is a final, indefensible step by the board of directors in wrongly over-compensating an unsuccessful chief executive," plaintiffs said in papers asking for a temporary restraining order. With homebuilder stocks underperforming overall, and Home Depot's worth sagging in particular, Nardelli's plundering of the treasure after six years of lackluster management is just obscene. And as Jonathan Berr points out, the Home Depot sales experience has been so negative that people will drive out of their way to go to Lowe's instead. In years to come, I wonder if people will look back on this as the tipping point for regulating CEO compensation, much as Enron was the bellwether for corporate accountability. Time will tell. Posted at 11:37 AM | TrackBack January 10, 2007 Buying & Selling: Homes Still Out of Reach for Most
Reuters reports that despite the vaunted claims of the market being geared to buyers, homes are still too expensive for most to buy: While the median home price in the 202 largest metropolitan areas declined 2 percent from a year ago to $248,000 in the third quarter of 2006, mortgage rates rose enough over the year that homes actually became less affordable as pay did not keep pace. "The real story is what happened to salaries," Lipman said. "Lower-paid occupations -- such as in retail, or home health workers -- their salaries went up only about 3 percent." It's as I've said many times now: This last housing bubble was a deliberate attempt to leverage greater corporate profit through increased consumer indebtedness. Home prices were pushed to the limit thanks to bottom-barrel interest rates and cheap money, and consumers were deliberately encouraged to buy beyond their means, using toxic mortgage instruments that they didn't understand. Now we're seeing the results--stagnant markets, fearful buyers, frustrated sellers, subprime lenders dying, and foreclosures continuing to increase. Lipman's point about solving the problem (in addition to wage gains): "For the low- to moderate-income individuals that we're talking about, they're not going to be helped by marginal declines in home prices," Lipman said. "The only way to address the problem is to create more affordable units (homes) -- which may mean higher density units, townhouses and condos." And conveniently enough, there's still a ton of unsold condo inventory on the market that fills the bill. Once developers get their minds right and sellers drop prices, those units will move and people who've been priced out of the market can get in the game. I hope. (Image courtesy of The Affordable Housing Institute.) Posted at 12:48 PM | TrackBack January 05, 2007 Buying & Selling: Grant's Tomb
Last summer I talked about The Grant, which was being marketed as the new hotness in affordable DC condo living. Well, David is on the case, letting us know that the building is open for business. Now, as you can see, it's not the friendliest of affairs from the outside. (I've passed by this building many times, as I live in D.C.) And the fact that there're no pictures of the interiors--nor listings of the actual square footage--is definitely a warning bell. I'll be watching this property over the next few months to see if they drop prices on those units or flip back to rentals. ;) Posted at 04:26 PM | TrackBack Credit & Debt: What The Fed Fears
I meant to get to this a few days ago....The Federal Reserve may be telegraphing its intentions for its next meeting via well-placed news articles describing its concerns about the housing slump: The Fed held interest rates steady at the December session. But it also left the door open to a possible rate increase, if needed, to thwart inflation. However, one Fed member -- who was not identified in the minutes of the meeting -- thought the central bank should have held out the possibility of a rate cut as well. I wonder who this might be...certainly not Jeffrey Lacker, who has continually campaigned for higher rates, even in the face of sluggish job creation. Now that wages are on the rise, however, perhaps the governors are getting bolder about what they feel is worth risking. I think the Fed will continue to beat the inflation drum for the first few months of 2007, while they wait for the effects of the previous six months' economic trends to manifest themselves. Once all the losses from those unpaid ARMs and foreclosures start to hit, they might go for a rate cut to spur investment and new mortgage loans. Of course, that'll put us right back where we started, except that America's record level of consumer debt means that we're already too maxed out to seriously go for the gold. So what will happen? No one knows, but as long as the Fed's all-important "inflation-fighting credibility" is maintained, we should be fine. Right? Posted at 11:55 AM | TrackBack January 03, 2007 Home Improvement: Nardelli Resigns as Home Depot CEO
Holy crap, did I call this or what? Just yesterday I discussed Nardelli's bad business future, and today, he called it quits: ATLANTA - Bob Nardelli abruptly resigned Wednesday as chairman and chief executive of The Home Depot Inc. after a six-year tenure that saw the world's largest home improvement store chain post big profits but left investors disheartened by poor stock performance...Nardelli's sudden departure was stunning in that he told The Associated Press as recently as Sept. 1 that he had no intention of leaving, and a key director also said that the board was pleased with Nardelli despite the uproar by some investors. Seems to me that the shareholder revolt finally outweighed Nardelli's desire to be king of the mountain. What's sad is that even to the last, Nardelli is taking home huge cash money from Home Depot, while the company's stock continues to sag. In a very real way, the Nardelli saga has been emblematic of the housing bubble and bust...you have a guy draining the company of long-term equity and gains for his own personal profit, with the end result being frustrated consumers, stockholders, and employees who suffered as a result of his greed. Good riddance to bad rubbish. Posted at 11:55 AM | TrackBack January 02, 2007 Home Improvement: Robert Nardelli, Evil Mastermind
"Look upon my stocks, ye mighty, and despair..." In reading this Daily Kos entry about the comparison of Home Depot CEO Robert Nardelli to Stalin, I was blissfully reminded about some of my own favorite trips down Nardelli Lane, which you can read about here and here. I did a little digging around, and found out that Nardelli's performance as CEO is under review, with investors considering numerous alternatives, including private equity buyouts and more direct stockholder control. I'll happily file this under the "Karma is a bitch" folder any day of the week. Posted at 03:30 PM | TrackBack Go back |
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