"Working for you. Not for profit."
Sunday, May 27, 2007
Friday, May 25, 2007
Roll me over!
From Yahoo, we have American Express to let cardholders charge mortgage payments.
In what is considered to be a first for the credit card and mortgage industries, American Express on Wednesday said it will now allow cardholders with any of its charge or credit cards and a prime loan from American Home Mortgage to charge their mortgage payments and earn reward points for doing so.
Rolling over a secured loan at a lower rate into an unsecured loan at a higher rate.
Why not? Let's just keep rolling over debt at higher and higher rates, and we never have to pay it back. Yeah, baby! That's the ticket.
Screw this! I wanna get to the point where I can pay my Mastercard with my Mastercard.
In what is considered to be a first for the credit card and mortgage industries, American Express on Wednesday said it will now allow cardholders with any of its charge or credit cards and a prime loan from American Home Mortgage to charge their mortgage payments and earn reward points for doing so.
Rolling over a secured loan at a lower rate into an unsecured loan at a higher rate.
Why not? Let's just keep rolling over debt at higher and higher rates, and we never have to pay it back. Yeah, baby! That's the ticket.
Screw this! I wanna get to the point where I can pay my Mastercard with my Mastercard.
Bitching about balance sheets
This is somewhat of a pet peeve; something that drives me crazy so don't bring it up or I might just pop you one!
I go nuts when people say they can borrow against the "equity" in whatever they financed.
Folks, remember the accounting equation:
assets = liabilities + equity
That means that "equity" is on the liabilities side of the balance sheet, and you can't borrow against a liability.
Put in other words, the "equity" has already been "spent" because it's a claim of the shareholders against assets. The only way to raise more money is to sell off some assets, or take on more debt (presumably by putting down assets as collateral.)
This is not idle semantic hair-splitting, or a nose-picking contest.
If even one home owner understood this, they would've been more careful about "liberating their equity".
I go nuts when people say they can borrow against the "equity" in whatever they financed.
Folks, remember the accounting equation:
That means that "equity" is on the liabilities side of the balance sheet, and you can't borrow against a liability.
Put in other words, the "equity" has already been "spent" because it's a claim of the shareholders against assets. The only way to raise more money is to sell off some assets, or take on more debt (presumably by putting down assets as collateral.)
This is not idle semantic hair-splitting, or a nose-picking contest.
If even one home owner understood this, they would've been more careful about "liberating their equity".
Thursday, May 24, 2007
Meet the Flippers
From Yahoo! via Money magazine, we have Retirement interrupted.
Such perfect afternoons are exactly what Steve, 61, and Carol, 60, had in mind when they retired to Florida from Virginia two years ago. But those days are rare. Instead, the Daimlers spend most of their time consumed with selling two investment properties they bought shortly after the move - holding open houses, distributing fliers, cold-calling realtors and catering to prospective buyers.
A more typical day: On a midweek afternoon, Carol got a call from a prospect who said he and his wife were just outside one of the houses and wanted to see the interior. The only hitch: The house is an hour's drive from where the Daimlers live. The caller said he'd wait, so Carol and Steve jumped in the car. But by the time they arrived, the phantom buyers had disappeared - the frantic trip was a bust.
To this day, the properties remain unsold, draining nearly $6,000 a month from the Daimlers' dwindling retirement kitty. The couple had thought the properties would help finance the lovely new life they planned to lead in Florida.
To supplement their retirement savings of $260,000, they figured they'd buy fixer-upper homes to renovate, then sell at a profit in the state's hot housing market. "We thought we'd make $100,000 without batting an eye," says Carol.
But when the housing bubble burst, so did their dreams of a real-estate funded retirement. The properties have been on the market for nine months without a serious offer, and the carrying costs are killer: The Daimlers pay more than $65,000 a year on their mortgages (including loans for their primary residence and a vacation house in North Carolina), plus tens of thousands more for property taxes, insurance and maintenance.
The couple are pulling out $15,000 a month from savings to cover their expenses, and they've already run through more than half of their nest egg. The irony: On paper they seem to be in great shape, with a net worth of $1.6 million.
Money is so tight that Carol has stopped filling prescriptions for her cholesterol medicine. Steve says he has no choice but to go back to work. "The financial pressure is too great," he says.
In the early 1990's they sold one of the houses and used the proceeds to build a vacation home in the Outer Banks. Current estimated value: $900,000.
Michael Cirino, a financial planner with Lincoln Financial Group in Jacksonville, Fla., urges the Daimlers to sell their beach house in the Outer Banks. Probable net: $650,000. But while Steve is open to the idea, Carol is reluctant. "I have an emotional attachment to that home," she says, "and I don't want to make any more fast decisions."
One thing hasn't changed: The Daimlers remain staunch believers in real estate. "If the financial pressure was off, we'd still look for opportunities to invest," says Steve. "For now, though, we just don't have the means to hang on."
They're in their 60's.
They thought they would make an "easy" $100,000.
They're bleeding $15,000 a month from their "dwindling retirement kitty".
They've run through half their "nest egg".
She prefers her vacation home to her cholesterol medicine. Looks like her heart is in the right place.
Their theoretical worth is $1.6M. It's theoretical because things ain't worth shit until you sell them.
They call them "investments". Now, I understand investments as something that produces increasing amounts of positive "free cash flow". However, what the fuck do I know? I probably need to drink the New Era Kool-Aid™.
However, they remain "staunch believers in real estate".
Hope springs eternal!
Such perfect afternoons are exactly what Steve, 61, and Carol, 60, had in mind when they retired to Florida from Virginia two years ago. But those days are rare. Instead, the Daimlers spend most of their time consumed with selling two investment properties they bought shortly after the move - holding open houses, distributing fliers, cold-calling realtors and catering to prospective buyers.
A more typical day: On a midweek afternoon, Carol got a call from a prospect who said he and his wife were just outside one of the houses and wanted to see the interior. The only hitch: The house is an hour's drive from where the Daimlers live. The caller said he'd wait, so Carol and Steve jumped in the car. But by the time they arrived, the phantom buyers had disappeared - the frantic trip was a bust.
To this day, the properties remain unsold, draining nearly $6,000 a month from the Daimlers' dwindling retirement kitty. The couple had thought the properties would help finance the lovely new life they planned to lead in Florida.
To supplement their retirement savings of $260,000, they figured they'd buy fixer-upper homes to renovate, then sell at a profit in the state's hot housing market. "We thought we'd make $100,000 without batting an eye," says Carol.
But when the housing bubble burst, so did their dreams of a real-estate funded retirement. The properties have been on the market for nine months without a serious offer, and the carrying costs are killer: The Daimlers pay more than $65,000 a year on their mortgages (including loans for their primary residence and a vacation house in North Carolina), plus tens of thousands more for property taxes, insurance and maintenance.
The couple are pulling out $15,000 a month from savings to cover their expenses, and they've already run through more than half of their nest egg. The irony: On paper they seem to be in great shape, with a net worth of $1.6 million.
Money is so tight that Carol has stopped filling prescriptions for her cholesterol medicine. Steve says he has no choice but to go back to work. "The financial pressure is too great," he says.
In the early 1990's they sold one of the houses and used the proceeds to build a vacation home in the Outer Banks. Current estimated value: $900,000.
Michael Cirino, a financial planner with Lincoln Financial Group in Jacksonville, Fla., urges the Daimlers to sell their beach house in the Outer Banks. Probable net: $650,000. But while Steve is open to the idea, Carol is reluctant. "I have an emotional attachment to that home," she says, "and I don't want to make any more fast decisions."
One thing hasn't changed: The Daimlers remain staunch believers in real estate. "If the financial pressure was off, we'd still look for opportunities to invest," says Steve. "For now, though, we just don't have the means to hang on."
They're in their 60's.
They thought they would make an "easy" $100,000.
They're bleeding $15,000 a month from their "dwindling retirement kitty".
They've run through half their "nest egg".
She prefers her vacation home to her cholesterol medicine. Looks like her heart is in the right place.
Their theoretical worth is $1.6M. It's theoretical because things ain't worth shit until you sell them.
They call them "investments". Now, I understand investments as something that produces increasing amounts of positive "free cash flow". However, what the fuck do I know? I probably need to drink the New Era Kool-Aid™.
However, they remain "staunch believers in real estate".
Hope springs eternal!
Saturday, May 19, 2007
Cents, percents, and lack of sense
A reader has contributed a stunning article from CNN on: 4 gas-saving myths.
Removing excess weight from your car can also help save you gas. The Department of Energy estimates that drivers can save anywhere between 3 and 6 cents a gallon (assuming gas prices of $2.97 a gallon) just by removing those golf clubs and other unnecessary weight from your trunk.
"Hello, Bob! I don't have my golf clubs today in the back of my trunk so please make my gas 3 to 6 cents cheaper."
I think the study was probably something of the nature that you save 1 to 2 percent in fuel efficiency if your car were less heavy. Certainly within the realm of the possible.
However, cents or no sense, I think we can all agree that the journalist is a few cents short on the dollar.
Removing excess weight from your car can also help save you gas. The Department of Energy estimates that drivers can save anywhere between 3 and 6 cents a gallon (assuming gas prices of $2.97 a gallon) just by removing those golf clubs and other unnecessary weight from your trunk.
"Hello, Bob! I don't have my golf clubs today in the back of my trunk so please make my gas 3 to 6 cents cheaper."
I think the study was probably something of the nature that you save 1 to 2 percent in fuel efficiency if your car were less heavy. Certainly within the realm of the possible.
However, cents or no sense, I think we can all agree that the journalist is a few cents short on the dollar.
Thursday, May 17, 2007
A History Lesson on Interest Rates
There is a 19th century saying attributed to Walter Bagehot, an early journalist for The Economist: "John Bull can stand many things, but he can't stand 2%."
In order to understand this, rewind the clock, and think back to the 19th century when the British were bankers to the world. On a gold standard, there was no meaningful inflation so nominal interest rates were the same as real interest rates.
Interest rates are determined by the credit-worthiness of the borrower. In other words, they incorporate the risk that the counter-party will default on the debt. It goes without saying that when you had a longish period of prosperity, and no forward looking prospect of war, famine or distress, people gazed on the future with infinite complacency and interest rates dropped.
Whenever rates plunged down to below 2%, a speculative frenzy would break out because people relied on the income produced by their investments to fund their lifestyle.
Time after time, people rushed into speculative investments which promised the illusion of larger returns, and each time they were burnt, and the episode ended badly in a brutal deflation.
Please note very clearly that this has nothing to do with the gold standard as long as we think in real rates not nominal ones. The only thing a gold standard does is exarcebate a deflation.
Also note carefully that the "central banks" in a fiat currency world cannot really "mop up" after the fact because all they are doing is screwing the lender in favor of the borrower, or vice versa -- this is never ever going to change the basic economic fact that the speculative object was never worth the price paid for it. (Once again, you don't need a gold standard as long as you think in real terms not nominal terms.)
Most importantly, if the speculative money has flown into multiple channels, there's no mechanism to preserve every single one of those prices in nominal terms. You can at best favor some over others, and while this is totally arbitrary, they must all collapse in real terms (as pointed out above because they were never truly worth what people paid for them.)
It should be obvious to any student of history what happened when the Federal Reserve slashed the rate down to 1% in 2003, effectively driving the real rate into negative territory.
In order to understand this, rewind the clock, and think back to the 19th century when the British were bankers to the world. On a gold standard, there was no meaningful inflation so nominal interest rates were the same as real interest rates.
Interest rates are determined by the credit-worthiness of the borrower. In other words, they incorporate the risk that the counter-party will default on the debt. It goes without saying that when you had a longish period of prosperity, and no forward looking prospect of war, famine or distress, people gazed on the future with infinite complacency and interest rates dropped.
Whenever rates plunged down to below 2%, a speculative frenzy would break out because people relied on the income produced by their investments to fund their lifestyle.
Time after time, people rushed into speculative investments which promised the illusion of larger returns, and each time they were burnt, and the episode ended badly in a brutal deflation.
Please note very clearly that this has nothing to do with the gold standard as long as we think in real rates not nominal ones. The only thing a gold standard does is exarcebate a deflation.
Also note carefully that the "central banks" in a fiat currency world cannot really "mop up" after the fact because all they are doing is screwing the lender in favor of the borrower, or vice versa -- this is never ever going to change the basic economic fact that the speculative object was never worth the price paid for it. (Once again, you don't need a gold standard as long as you think in real terms not nominal terms.)
Most importantly, if the speculative money has flown into multiple channels, there's no mechanism to preserve every single one of those prices in nominal terms. You can at best favor some over others, and while this is totally arbitrary, they must all collapse in real terms (as pointed out above because they were never truly worth what people paid for them.)
It should be obvious to any student of history what happened when the Federal Reserve slashed the rate down to 1% in 2003, effectively driving the real rate into negative territory.
Staggering Insight
From eFinanceDirectory.com: 60 Percent of Liar Loan Applicants Exaggerate Income.
The use of stated income loans, or liar loans as they are known throughout the industry, has increased exponentially over the last few years. Analysts at Credit Suisse Group say that liar loans account for 46 percent of the subprime mortgage loans being granted to borrowers.
Liar loans do not require borrowers to prove their income to qualify for a mortgage loan; borrowers merely state what they do and how much they earn doing it on the application.
An April 2006 Mortgage Asset Research Institute study found that 60 percent of applicants who apply for liar loans exaggerate their income by more than 50 percent.
People lied on "stated income" loans? Get out! That's impossible.
Now, let's read the article critically.
60% of applicants exaggerated income by more than 50%.
What about the remaining 40% of applicants?
Chances are they exaggerated their income too but they were relatively less criminal in that they didn't exaggerate their income by more than 50%.
So it looks like most of these people with "liar loans" have exaggerated their income.
What's the probability that they can pay back the loan?
Hmmmm....
The use of stated income loans, or liar loans as they are known throughout the industry, has increased exponentially over the last few years. Analysts at Credit Suisse Group say that liar loans account for 46 percent of the subprime mortgage loans being granted to borrowers.
Liar loans do not require borrowers to prove their income to qualify for a mortgage loan; borrowers merely state what they do and how much they earn doing it on the application.
An April 2006 Mortgage Asset Research Institute study found that 60 percent of applicants who apply for liar loans exaggerate their income by more than 50 percent.
People lied on "stated income" loans? Get out! That's impossible.
Now, let's read the article critically.
60% of applicants exaggerated income by more than 50%.
What about the remaining 40% of applicants?
Chances are they exaggerated their income too but they were relatively less criminal in that they didn't exaggerate their income by more than 50%.
So it looks like most of these people with "liar loans" have exaggerated their income.
What's the probability that they can pay back the loan?
Hmmmm....
The Cookie Jar Excuse
From the Mercury News, we have More homeowners struggle with mortgages they can't afford.
Sarah Portales wants to keep paying her mortgage on time, but she's got a problem. Her monthly payments are $3,500 and her income is slightly less than that. All the efforts this San Jose custodial supervisor has made to find a way to refinance her loan into something she can afford have so far led nowhere.
A custodial supervisor at San Jose State University, Portales bought her first home, on San Jose's East Side, in October 2005. She paid about $589,000, according to public records.
"I was ignorant; I didn't know how it all worked," said Portales, 48, a single parent who also lives with and cares for her 83-year-old mother.
Ignorant, eh?
Who would've guessed that taken on a loan for more than you can repay would get you into trouble? What exactly made you think that buying a $589K on a $40K salary was a good idea?
You're not ignorant; you're functionally illiterate, and a fuckin' retard to boot!
Now, that you've been caught with your hand in the cookie jar, the best excuse you can make is that you were ignorant?
C'mon, lady! How about the Martians made me do it? Throw in an anal probe story, and you might even get a book deal out of it.
Sarah Portales wants to keep paying her mortgage on time, but she's got a problem. Her monthly payments are $3,500 and her income is slightly less than that. All the efforts this San Jose custodial supervisor has made to find a way to refinance her loan into something she can afford have so far led nowhere.
A custodial supervisor at San Jose State University, Portales bought her first home, on San Jose's East Side, in October 2005. She paid about $589,000, according to public records.
"I was ignorant; I didn't know how it all worked," said Portales, 48, a single parent who also lives with and cares for her 83-year-old mother.
Ignorant, eh?
Who would've guessed that taken on a loan for more than you can repay would get you into trouble? What exactly made you think that buying a $589K on a $40K salary was a good idea?
You're not ignorant; you're functionally illiterate, and a fuckin' retard to boot!
Now, that you've been caught with your hand in the cookie jar, the best excuse you can make is that you were ignorant?
C'mon, lady! How about the Martians made me do it? Throw in an anal probe story, and you might even get a book deal out of it.
Wednesday, May 16, 2007
The Bond Disaster Loometh
From Bloomberg, we have Junk Bonds May Repeat Crash of 2002 on LBO Credits.
More than half of the junk bonds sold this year were used to pay for leveraged buyouts and mergers and acquisitions, according to Barclays Capital. Money is so easy to come by that for the first time some investors agreed to let borrowers choose to make interest payments in cash or in additional bonds.
Univision Communications Inc., the Los Angeles-based Spanish-language broadcaster, and real estate broker Realogy Corp. of Parsippany, New Jersey, financed their takeovers in part with so-called toggle bonds that give the issuer the option to pay interest with more bonds.
Univision sold $1.5 billion of toggle notes on March 1 that are rated B3 by Moody's and CCC+ by S&P. The notes pay cash interest of 9.75 percent and a pay-in-kind coupon rate of 10.5 percent.
Realogy sold $550 million of the securities on April 5 with an 11 percent cash coupon and an 11.75 percent rate if paid in extra notes. They are rated Caa1 by Moody's and B- by S&P.
There have been 10 sales of toggle bonds this year, amounting to $5.14 billion, the most ever, according to S&P's Leveraged Commentary and Data unit. There were five sales totaling $4.05 billion completed in November and December of last year. Before that, only luxury retailer Neiman Marcus Group had issued the securities, in September 2005.
I hope readers can understand the lunacy of this correctly.
If these companies can't make the payment, they'll issue more bonds, and that will be the payment. And if they can't service that, they'll issue even more bonds, and those bonds will be the payment.
And what happens when (and it's always when) the market chokes, and won't accept any more bonds?
The answer is obvious.
You'd have to be an absolute moron to fund these bonds, and yet investors have funded them. There's going to be a lot of bloodletting in the next 5-10 years.
More than half of the junk bonds sold this year were used to pay for leveraged buyouts and mergers and acquisitions, according to Barclays Capital. Money is so easy to come by that for the first time some investors agreed to let borrowers choose to make interest payments in cash or in additional bonds.
Univision Communications Inc., the Los Angeles-based Spanish-language broadcaster, and real estate broker Realogy Corp. of Parsippany, New Jersey, financed their takeovers in part with so-called toggle bonds that give the issuer the option to pay interest with more bonds.
Univision sold $1.5 billion of toggle notes on March 1 that are rated B3 by Moody's and CCC+ by S&P. The notes pay cash interest of 9.75 percent and a pay-in-kind coupon rate of 10.5 percent.
Realogy sold $550 million of the securities on April 5 with an 11 percent cash coupon and an 11.75 percent rate if paid in extra notes. They are rated Caa1 by Moody's and B- by S&P.
There have been 10 sales of toggle bonds this year, amounting to $5.14 billion, the most ever, according to S&P's Leveraged Commentary and Data unit. There were five sales totaling $4.05 billion completed in November and December of last year. Before that, only luxury retailer Neiman Marcus Group had issued the securities, in September 2005.
I hope readers can understand the lunacy of this correctly.
If these companies can't make the payment, they'll issue more bonds, and that will be the payment. And if they can't service that, they'll issue even more bonds, and those bonds will be the payment.
And what happens when (and it's always when) the market chokes, and won't accept any more bonds?
The answer is obvious.
You'd have to be an absolute moron to fund these bonds, and yet investors have funded them. There's going to be a lot of bloodletting in the next 5-10 years.
Put down the doobie, dude!
From the Arizona Republic, we have Residents turning houses into vacation homes.
Some people tour Europe.
Some lie about on beaches in Hawaii or Thailand.
And then there are others who want to unwind in a stucco house near the end of a cul-de-sac in Pinal County.
Some Johnson Ranch residents might see their houses as average, everyday homes in an average, everyday subdivision. But to people coming from other parts of the country, it's a vacation in paradise.
Some homeowners in Pinal County are turning their investments into vacation homes. They're investing in high thread-count sheets, stocking refrigerators with continental breakfasts and renting to visitors who stay for a few days or weeks.
Pinal County?!? You're comparing Pinal County to Paris, Rome, Hawaii or Thailand?
BWAAA HAHAHAHA HAHAHAHAAAA!!!
Some people tour Europe.
Some lie about on beaches in Hawaii or Thailand.
And then there are others who want to unwind in a stucco house near the end of a cul-de-sac in Pinal County.
Some Johnson Ranch residents might see their houses as average, everyday homes in an average, everyday subdivision. But to people coming from other parts of the country, it's a vacation in paradise.
Some homeowners in Pinal County are turning their investments into vacation homes. They're investing in high thread-count sheets, stocking refrigerators with continental breakfasts and renting to visitors who stay for a few days or weeks.
Pinal County?!? You're comparing Pinal County to Paris, Rome, Hawaii or Thailand?
BWAAA HAHAHAHA HAHAHAHAAAA!!!
Tuesday, May 15, 2007
Why Certain Kinds of Liberalism are Doomed to Fail
From the Providence Journal, we have a "heartrending" story: Reed's bill would assist homeowners facing mortgage foreclosures.
A death in the family, a divorce or even a big jump in property taxes are among the situations which could qualify homeowners for mortgage assistance under a new bill to provide $615 million in foreclosure-prevention assistance filed yesterday by U.S. Sen. Jack Reed.
The Home Ownership Protection Enhancement Act of 2007 would expand the eligibility requirements — and available funds — for homeowners who cannot make their monthly mortgage payments to include all low- and moderate-income homeowners, as well as those with higher incomes who face a serious financial setback.
The homeowners are people such as Aida Maria Jansen, 77, who got a no-down-payment loan less than a year ago to buy a $250,000 house that she cannot afford.
“I didn’t even have a job,” she said at the news conference. “They told me my payments would be $1,200 a month and to get a roommate.”
Aida’s mortgage was actually two loans which totaled about $2,000 a month. Last year, Jansen earned $11,212, according to her tax returns.
“I have money for two more payments and them I’m totally broke,” Jansen said after the hearing. “In nine months I’ve paid $18,000 on that house…I’m exhausting everything.”
Jansen, who has visited a food pantry twice in the last two months, said she is in the process of applying with the state to adopt a child so that she can get some extra income to pay her mortgage. “They pay about $102 a week,” she said.
Jansen said that she never should have qualified for the loan. “They all ripped me off,” she said. “They put double my income to get this mortgage.”
Let's analyze the facts.
She's 77.
She bought a $250K house.
She didn't have a job, and got a mortgage.
She had payments totalling $24K a year, and her income was $11K.
"They" made her sign the contract. (She didn't mention what kind of gun "they" used.)
She's going to adopt a child at age 77 so that she can get $102/week from the state.
To quote Oscar Wilde, "you'd have to have a heart of stone not to laugh."
A death in the family, a divorce or even a big jump in property taxes are among the situations which could qualify homeowners for mortgage assistance under a new bill to provide $615 million in foreclosure-prevention assistance filed yesterday by U.S. Sen. Jack Reed.
The Home Ownership Protection Enhancement Act of 2007 would expand the eligibility requirements — and available funds — for homeowners who cannot make their monthly mortgage payments to include all low- and moderate-income homeowners, as well as those with higher incomes who face a serious financial setback.
The homeowners are people such as Aida Maria Jansen, 77, who got a no-down-payment loan less than a year ago to buy a $250,000 house that she cannot afford.
“I didn’t even have a job,” she said at the news conference. “They told me my payments would be $1,200 a month and to get a roommate.”
Aida’s mortgage was actually two loans which totaled about $2,000 a month. Last year, Jansen earned $11,212, according to her tax returns.
“I have money for two more payments and them I’m totally broke,” Jansen said after the hearing. “In nine months I’ve paid $18,000 on that house…I’m exhausting everything.”
Jansen, who has visited a food pantry twice in the last two months, said she is in the process of applying with the state to adopt a child so that she can get some extra income to pay her mortgage. “They pay about $102 a week,” she said.
Jansen said that she never should have qualified for the loan. “They all ripped me off,” she said. “They put double my income to get this mortgage.”
Let's analyze the facts.
She's 77.
She bought a $250K house.
She didn't have a job, and got a mortgage.
She had payments totalling $24K a year, and her income was $11K.
"They" made her sign the contract. (She didn't mention what kind of gun "they" used.)
She's going to adopt a child at age 77 so that she can get $102/week from the state.
To quote Oscar Wilde, "you'd have to have a heart of stone not to laugh."
How to take care of your Money Tree
From MSN.com, we have Mortgage brokers cashed in on U.S. housing bounty.
Money may not grow on trees but for a while it seemed to grow on houses, and Colleen Moorhead knew exactly where to turn when she needed to harvest some cash.
With a few phone calls, broker Joyce DeAngelo could put Moorhead and her husband into a new mortgage and cut them a check. They used more than $100,000 in cash they netted from the refinancing for living expenses and renovations.
Between 2001 and 2006, the Moorheads refinanced their three-bedroom San Diego home at least nine times, county records show.
This is such a beautiful little tale for children.
Kids, if you plant yourself a house, the house will soon sprout dollar bills, and then you can harvest some cash. If you water the house, and make sure it stays alive, you can keep harvesting cash all your life.
Looks like the Moorheads didn't take care of their money tree. The tree died after only nine harvests.
Kids, always make sure to water your house, and you too can live happily ever after.
Money may not grow on trees but for a while it seemed to grow on houses, and Colleen Moorhead knew exactly where to turn when she needed to harvest some cash.
With a few phone calls, broker Joyce DeAngelo could put Moorhead and her husband into a new mortgage and cut them a check. They used more than $100,000 in cash they netted from the refinancing for living expenses and renovations.
Between 2001 and 2006, the Moorheads refinanced their three-bedroom San Diego home at least nine times, county records show.
This is such a beautiful little tale for children.
Kids, if you plant yourself a house, the house will soon sprout dollar bills, and then you can harvest some cash. If you water the house, and make sure it stays alive, you can keep harvesting cash all your life.
Looks like the Moorheads didn't take care of their money tree. The tree died after only nine harvests.
Kids, always make sure to water your house, and you too can live happily ever after.
Monday, May 14, 2007
The BOHICA Moment
From Bloomberg, we have two astounding statements from CEO's: Bank of America's Lewis Calls for Lending `Sanity'.
Bank of America Corp. Chief Executive Officer Ken Lewis said a so-called credit bubble is about to break after six years of historically low interest rates and relaxed lending criteria.
``We are close to a time when we'll look back and say we did some stupid things,'' Lewis said, speaking at a lunch at the Swiss-American Chamber of Commerce in Zurich. ``We need a little more sanity in a period in which everyone feels invincible and thinks this is different.''
Lewis's comments were preceded by some pessimism from Wells Fargo & Co. Chief Executive Officer Richard Kovacevich who said in December that ``I am not a forecaster of the future; I'm a historian. And history says this will blow up. It always has. And there will be some blood on the street.''
Bank of America Corp. Chief Executive Officer Ken Lewis said a so-called credit bubble is about to break after six years of historically low interest rates and relaxed lending criteria.
``We are close to a time when we'll look back and say we did some stupid things,'' Lewis said, speaking at a lunch at the Swiss-American Chamber of Commerce in Zurich. ``We need a little more sanity in a period in which everyone feels invincible and thinks this is different.''
Lewis's comments were preceded by some pessimism from Wells Fargo & Co. Chief Executive Officer Richard Kovacevich who said in December that ``I am not a forecaster of the future; I'm a historian. And history says this will blow up. It always has. And there will be some blood on the street.''
Sunday, May 13, 2007
Microeconomics in Action
From the Economist: To do with the price of fish.
This is a sensational article! It illustrates the free market in action perfectly. (It also illustrates what the author does on a daily basis.)
YOU are a fisherman off the coast of northern Kerala, a region in the south of India. Visiting your usual fishing ground, you bring in an unusually good catch of sardines. That means other fishermen in the area will probably have done well too, so there will be plenty of supply at the local beach market: prices will be low, and you may not even be able to sell your catch. Should you head for the usual market anyway, or should you go down the coast in the hope that fishermen in that area will not have done so well and your fish will fetch a better price? If you make the wrong choice you cannot visit another market because fuel is costly and each market is open for only a couple of hours before dawn—and it takes that long for your boat to putter from one to the next. Since fish are perishable, any that cannot be sold will have to be dumped into the sea.
This, in a nutshell, was the situation facing Kerala's fishermen until 1997. The result was far from ideal for both fishermen and their customers. In practice, fishermen chose to stick with their home markets all the time. This was wasteful because when a particular market is oversupplied, fish are thrown away, even though there may be buyers for them a little farther along the coast. On average, 5-8% of the total catch was wasted, says Robert Jensen, a development economist at Harvard University who has surveyed the price of sardines at 15 beach markets along Kerala's coast. On January 14th 1997, for example, 11 fishermen at Badagara beach ended up throwing away their catches, yet on that day there were 27 buyers at markets within 15km (about nine miles) who would have bought their fish. There were also wide variations in the price of sardines along the coast.
But starting in 1997 mobile phones were introduced in Kerala. Since coverage spread gradually, this provided an ideal way to gauge the effect of mobile phones on the fishermen's behaviour, the price of fish, and the amount of waste. For many years, anecdotes have abounded about the ways in which mobile phones promote more efficient markets and encourage economic activity. One particularly popular tale is that of the fisherman who is able to call several nearby markets from his boat to establish where his catch will fetch the highest price. Mr Jensen's paper* adds some numbers to the familiar stories and shows precisely how mobile phones support economic growth.
As phone coverage spread between 1997 and 2000, fishermen started to buy phones and use them to call coastal markets while still at sea. (The area of coverage reaches 20-25km off the coast.) Instead of selling their fish at beach auctions, the fishermen would call around to find the best price. Dividing the coast into three regions, Mr Jensen found that the proportion of fishermen who ventured beyond their home markets to sell their catches jumped from zero to around 35% as soon as coverage became available in each region. At that point, no fish were wasted and the variation in prices fell dramatically. By the end of the study coverage was available in all three regions. Waste had been eliminated and the “law of one price”—the idea that in an efficient market identical goods should cost the same—had come into effect, in the form of a single rate for sardines along the coast.
This more efficient market benefited everyone. Fishermen's profits rose by 8% on average and consumer prices fell by 4% on average. Higher profits meant the phones typically paid for themselves within two months. And the benefits are enduring, rather than one-off. All of this, says Mr Jensen, shows the importance of the free flow of information to ensure that markets work efficiently. “Information makes markets work, and markets improve welfare,” he concludes.
This is a sensational article! It illustrates the free market in action perfectly. (It also illustrates what the author does on a daily basis.)
YOU are a fisherman off the coast of northern Kerala, a region in the south of India. Visiting your usual fishing ground, you bring in an unusually good catch of sardines. That means other fishermen in the area will probably have done well too, so there will be plenty of supply at the local beach market: prices will be low, and you may not even be able to sell your catch. Should you head for the usual market anyway, or should you go down the coast in the hope that fishermen in that area will not have done so well and your fish will fetch a better price? If you make the wrong choice you cannot visit another market because fuel is costly and each market is open for only a couple of hours before dawn—and it takes that long for your boat to putter from one to the next. Since fish are perishable, any that cannot be sold will have to be dumped into the sea.
This, in a nutshell, was the situation facing Kerala's fishermen until 1997. The result was far from ideal for both fishermen and their customers. In practice, fishermen chose to stick with their home markets all the time. This was wasteful because when a particular market is oversupplied, fish are thrown away, even though there may be buyers for them a little farther along the coast. On average, 5-8% of the total catch was wasted, says Robert Jensen, a development economist at Harvard University who has surveyed the price of sardines at 15 beach markets along Kerala's coast. On January 14th 1997, for example, 11 fishermen at Badagara beach ended up throwing away their catches, yet on that day there were 27 buyers at markets within 15km (about nine miles) who would have bought their fish. There were also wide variations in the price of sardines along the coast.
But starting in 1997 mobile phones were introduced in Kerala. Since coverage spread gradually, this provided an ideal way to gauge the effect of mobile phones on the fishermen's behaviour, the price of fish, and the amount of waste. For many years, anecdotes have abounded about the ways in which mobile phones promote more efficient markets and encourage economic activity. One particularly popular tale is that of the fisherman who is able to call several nearby markets from his boat to establish where his catch will fetch the highest price. Mr Jensen's paper* adds some numbers to the familiar stories and shows precisely how mobile phones support economic growth.
As phone coverage spread between 1997 and 2000, fishermen started to buy phones and use them to call coastal markets while still at sea. (The area of coverage reaches 20-25km off the coast.) Instead of selling their fish at beach auctions, the fishermen would call around to find the best price. Dividing the coast into three regions, Mr Jensen found that the proportion of fishermen who ventured beyond their home markets to sell their catches jumped from zero to around 35% as soon as coverage became available in each region. At that point, no fish were wasted and the variation in prices fell dramatically. By the end of the study coverage was available in all three regions. Waste had been eliminated and the “law of one price”—the idea that in an efficient market identical goods should cost the same—had come into effect, in the form of a single rate for sardines along the coast.
This more efficient market benefited everyone. Fishermen's profits rose by 8% on average and consumer prices fell by 4% on average. Higher profits meant the phones typically paid for themselves within two months. And the benefits are enduring, rather than one-off. All of this, says Mr Jensen, shows the importance of the free flow of information to ensure that markets work efficiently. “Information makes markets work, and markets improve welfare,” he concludes.
Wednesday, May 09, 2007
The Paris Hilton Approach to Real Estate
From Seattle PI, we have Home sales in city shoot up 14% in April.
Sahrah Marcantonio was pessimistic about the market, but didn't care.
"I think it's a bubble, we're at the peak of the bubble, and yet, I want a house now," she said. "It's for the long term."
Extraordinary, isn't it?
Sahrah Marcantonio was pessimistic about the market, but didn't care.
"I think it's a bubble, we're at the peak of the bubble, and yet, I want a house now," she said. "It's for the long term."
Extraordinary, isn't it?
Monday, May 07, 2007
Speculation in the South
The Chicago Tribune reports on speculation in South America: Nicaragua coast screams 'ground floor' to investors.
What second-home buyers yearn for in Central America is Costa Rica before the building boom. They want ocean views and unspoiled land, without the steep prices, crime and American fast-food chains. They want Panama before Donald Trump.
Adventurous Americans, Canadians and Europeans willing to dodge livestock and potholes for the two-hour car ride south from Managua to this sleepy fishing village on the west coast of Nicaragua are finding just that. Three-bedroom homes with unfettered views of shimmering bays and turquoise water start at $155,000, condos from $129,000. Undeveloped land with ocean views -- sites of a quarter-acre -- start at $35,000. Construction costs generally range from $55 to $75 per square foot. To investors, it simply screams "ground floor."
Nothing could deter Jan and Duane Sanow from purchasing land in Nicaragua. The Minnesota owners of a manufactured-home dealership, 50 and 49, respectively, had searched the coasts of Mexico and in Panama for an investment/vacation property for 10 years.
"We were always at the tail end of the development boom," Jan Sanow said. "This time, we're at the front end."
When their complex is completed -- at a construction cost of about $800,000 -- there will be a swimming pool, on-site laundry, air conditioning and gated parking. Just don't look for a grocery store. There's always the traveling vegetable vendor, however, and an al fresco restaurant down the beach. The two-bedroom condos, in 1,300 square feet, will sell for $275,000.
The Sanows say they're thrilled to have found a beachfront investment they can afford, a 45-minute drive north from Costa Rica's border. And they like to emphasize the positives. "There's a strong sense of community here," Jan said. "It's a great place for expats."
Fasten your seat belts, though. The 20-minute drive from San Juan del Sur south to Coco Beach winds along a spine-fusing dirt road. Plans call for that road, over the next few years, to become a paved coastal thoroughfare connecting Nicaragua and Costa Rica.
For now, the bumpy camino is festooned with a canopy of tropical trees that serve as a playground for howler monkeys and screeching parrots. Four-wheel-drive vehicles scramble around ox- and mule-drawn carts. New developments dot the way.
Nicaragua?!? You've got to be fucking joking!
This is one of the poorest countries in the West rivalled only by Honduras or Haiti.
And two-bedroom condos for $275K rivalling prices in Chicago? You've got to be fucking kidding me.
There's an old saying among investors (as opposed to speculators): "I'm not interested in the return ON my money; I'm more interested in the return OF my money."
In Nicaragua or Haiti, I'd be even more interested in making sure I came home with limbs, ears and fingers still intact. And heaven forbid if the government decides that the "extranjeros" are neo-colonialists, and need to be sent home.
What second-home buyers yearn for in Central America is Costa Rica before the building boom. They want ocean views and unspoiled land, without the steep prices, crime and American fast-food chains. They want Panama before Donald Trump.
Adventurous Americans, Canadians and Europeans willing to dodge livestock and potholes for the two-hour car ride south from Managua to this sleepy fishing village on the west coast of Nicaragua are finding just that. Three-bedroom homes with unfettered views of shimmering bays and turquoise water start at $155,000, condos from $129,000. Undeveloped land with ocean views -- sites of a quarter-acre -- start at $35,000. Construction costs generally range from $55 to $75 per square foot. To investors, it simply screams "ground floor."
Nothing could deter Jan and Duane Sanow from purchasing land in Nicaragua. The Minnesota owners of a manufactured-home dealership, 50 and 49, respectively, had searched the coasts of Mexico and in Panama for an investment/vacation property for 10 years.
"We were always at the tail end of the development boom," Jan Sanow said. "This time, we're at the front end."
When their complex is completed -- at a construction cost of about $800,000 -- there will be a swimming pool, on-site laundry, air conditioning and gated parking. Just don't look for a grocery store. There's always the traveling vegetable vendor, however, and an al fresco restaurant down the beach. The two-bedroom condos, in 1,300 square feet, will sell for $275,000.
The Sanows say they're thrilled to have found a beachfront investment they can afford, a 45-minute drive north from Costa Rica's border. And they like to emphasize the positives. "There's a strong sense of community here," Jan said. "It's a great place for expats."
Fasten your seat belts, though. The 20-minute drive from San Juan del Sur south to Coco Beach winds along a spine-fusing dirt road. Plans call for that road, over the next few years, to become a paved coastal thoroughfare connecting Nicaragua and Costa Rica.
For now, the bumpy camino is festooned with a canopy of tropical trees that serve as a playground for howler monkeys and screeching parrots. Four-wheel-drive vehicles scramble around ox- and mule-drawn carts. New developments dot the way.
Nicaragua?!? You've got to be fucking joking!
This is one of the poorest countries in the West rivalled only by Honduras or Haiti.
And two-bedroom condos for $275K rivalling prices in Chicago? You've got to be fucking kidding me.
There's an old saying among investors (as opposed to speculators): "I'm not interested in the return ON my money; I'm more interested in the return OF my money."
In Nicaragua or Haiti, I'd be even more interested in making sure I came home with limbs, ears and fingers still intact. And heaven forbid if the government decides that the "extranjeros" are neo-colonialists, and need to be sent home.
Friday, May 04, 2007
The other Zapato falls
From the Florida Sun-Sentinel, we have: Low-income families: Lenders steered us to high-risk mortgages we couldn't afford.
When a mortgage broker convinced Erik Zapata he could own a home, he quickly signed on the dotted line.
He and his girlfriend moved their two children out of a low-income housing project in Pompano Beach and settled into their new Coconut Creek condo.
But as the numbers on his monthly statements soared, Zapata found himself in a sinkhole of debt. He says he did not clearly understand what he signed: a deferred-interest loan that adds thousands of dollars in unpaid interest to his mortgage.
"The dream home becomes the nightmare," said Tino Diaz, a mortgage lender who is starting a Broward County chapter of the National Association of Hispanic Real Estate Professionals. "We need to raise Hispanics' level of homeownership. But if we're putting people into homes they can't afford, we're wrecking them. You have lenders out there saying, `If you're breathing and you've got a paycheck, let me give you a home.'"
Really?!?
I thought even the "paycheck" was optional; and wasn't there a dead homeless guy in Florida who had bought five houses? So it looks like breathing is optional too!
Of course, all of this is part of the Federal Reserve's glorious "democratization of credit".
Houses for everyone, says I, houses for everyone!
When a mortgage broker convinced Erik Zapata he could own a home, he quickly signed on the dotted line.
He and his girlfriend moved their two children out of a low-income housing project in Pompano Beach and settled into their new Coconut Creek condo.
But as the numbers on his monthly statements soared, Zapata found himself in a sinkhole of debt. He says he did not clearly understand what he signed: a deferred-interest loan that adds thousands of dollars in unpaid interest to his mortgage.
"The dream home becomes the nightmare," said Tino Diaz, a mortgage lender who is starting a Broward County chapter of the National Association of Hispanic Real Estate Professionals. "We need to raise Hispanics' level of homeownership. But if we're putting people into homes they can't afford, we're wrecking them. You have lenders out there saying, `If you're breathing and you've got a paycheck, let me give you a home.'"
Really?!?
I thought even the "paycheck" was optional; and wasn't there a dead homeless guy in Florida who had bought five houses? So it looks like breathing is optional too!
Of course, all of this is part of the Federal Reserve's glorious "democratization of credit".
Houses for everyone, says I, houses for everyone!
Strawberry Fields Forever
From Hollister, CA, we have a bucolic story: Minorities Hit Hard by Foreclosure Crunch.
Despite making only $14,000 a year, strawberry picker Alberto Ramirez managed to buy his own slice of the American Dream. But his Hollister home came with a hefty price tag - $720,000.
So how did Ramirez, the strawberry picker with an annual income of just $14,000, purchase a $720,000 home in Hollister without any money down?
He had help, for one thing. Although Alberto Ramirez was the only one to sign the purchase agreement and the only one named on the loan documents, he actually bought the house with his wife Rosa Ramirez, as well as their friends Jesus Martinez and his wife. However, even in a good month, the Ramirezes and Martinezes together don't earn much more than a combined $6,500, and their official monthly payments were around $5,200.
With their combined incomes, the Ramirezes and the Martinezes estimated that they could afford monthly payments of $3,000 - around 50 percent of their income. However, the Ramirezes said Rancho Grande real estate agent Maria Avila promised they could refinance their home in three to six months to an affordable rate; until then, Rosa Ramirez said, Avila said she would pay for whatever they couldn't afford.
Avila did supplement the mortgage payments on the Hollister home, paying about $2,200 per month for nine months.
But the refinance never happened, and Martinez said Avila stopped helping with the payments at the end of 2006. A notice of default has been filed on the home, but no foreclosure date has been set, and the Ramirezes and the Martinezes are hoping they can sell the house before they lose it in a repossession.
Cebrero said the Ramirezes' and Martinezes' situation is an unfortunate one, but he said Rancho Grande was only trying to help the two families buy the home they wanted.
"We feel we have done as much or more than we can do for these clients," he said.
I think Senator Dodd should be bailing out thesenose-pickers strawberry-pickers!
Alternately, the Mazzhole governor (or his equal in California) should allow them to postpone foreclosure for six months so that they can live in their $720K "dream" house on their $14K annual salary.
Why not? This is America. Everyone deserves to have a piece of the "American Dream". And if that means buying a $700K+ house on a $14K salary, I think the politicians should be enabling that option. In fact, it would be downright criminal if people making $14K are not allowed to buy $700K houses!
Why stop there?
Homeless? No problem. You get to "buy" in Malibu.
Make less than $10K a year? No problem. You get to "buy" in Malibu too.
No income, no job, no assets? No problem! There's a mansion in Malibu for you too.
Pull up a chair, folks. Pour yourself a whisky. There's a long way down to go!
Despite making only $14,000 a year, strawberry picker Alberto Ramirez managed to buy his own slice of the American Dream. But his Hollister home came with a hefty price tag - $720,000.
So how did Ramirez, the strawberry picker with an annual income of just $14,000, purchase a $720,000 home in Hollister without any money down?
He had help, for one thing. Although Alberto Ramirez was the only one to sign the purchase agreement and the only one named on the loan documents, he actually bought the house with his wife Rosa Ramirez, as well as their friends Jesus Martinez and his wife. However, even in a good month, the Ramirezes and Martinezes together don't earn much more than a combined $6,500, and their official monthly payments were around $5,200.
With their combined incomes, the Ramirezes and the Martinezes estimated that they could afford monthly payments of $3,000 - around 50 percent of their income. However, the Ramirezes said Rancho Grande real estate agent Maria Avila promised they could refinance their home in three to six months to an affordable rate; until then, Rosa Ramirez said, Avila said she would pay for whatever they couldn't afford.
Avila did supplement the mortgage payments on the Hollister home, paying about $2,200 per month for nine months.
But the refinance never happened, and Martinez said Avila stopped helping with the payments at the end of 2006. A notice of default has been filed on the home, but no foreclosure date has been set, and the Ramirezes and the Martinezes are hoping they can sell the house before they lose it in a repossession.
Cebrero said the Ramirezes' and Martinezes' situation is an unfortunate one, but he said Rancho Grande was only trying to help the two families buy the home they wanted.
"We feel we have done as much or more than we can do for these clients," he said.
I think Senator Dodd should be bailing out these
Alternately, the Mazzhole governor (or his equal in California) should allow them to postpone foreclosure for six months so that they can live in their $720K "dream" house on their $14K annual salary.
Why not? This is America. Everyone deserves to have a piece of the "American Dream". And if that means buying a $700K+ house on a $14K salary, I think the politicians should be enabling that option. In fact, it would be downright criminal if people making $14K are not allowed to buy $700K houses!
Why stop there?
Homeless? No problem. You get to "buy" in Malibu.
Make less than $10K a year? No problem. You get to "buy" in Malibu too.
No income, no job, no assets? No problem! There's a mansion in Malibu for you too.
Pull up a chair, folks. Pour yourself a whisky. There's a long way down to go!
Wednesday, May 02, 2007
Credit Contraction in Mazzhole-land
From the Boston Herald, we have Gov’s move may delay Mass. foreclosures.
Massachusetts has effectively become the first state in the nation to put a moratorium on foreclosures in the wake of a groundbreaking announcement by Gov. Deval Patrick yesterday, a top housing activist contends.
Patrick ordered state banking regulators to seek delays of up to two months in foreclosure proceedings against homeowners who have filed complaints with the Division of Banks.
Marks predicted that as many as 1,000 struggling homeowners working with his organization alone would soon be filing complaints with state regulators. There were roughly 20,000 foreclosure filings in the state last year amid an explosion in high-risk - and high interest rate - subprime mortgages.
This is one of the stupidest ideas ever.
Firstly, it makes a mockery of contract law (so expect a challenge in a court soon.)
Secondly, would you issue credit in this state if the contracts can retroactively be rescinded?
This means credit is going to contracting faster than the tightest, most fearful sphincter. And that's going to make a bad situation morph into a disaster.
Please remember that credit contraction is deflation.
Effectively, Mazzhole-land is voting itself out of the national mortgage market (just like New Jersey did with insurance in the 80's.)
“It is effectively a moratorium on foreclosures in Massachusetts,” said Marks, whose Jamaica Plain-based nonprofit has a nationwide network of offices. “It is a very big deal. We will bring the Massachusetts standard nationwide.”
Heaven forbid!
Massachusetts has effectively become the first state in the nation to put a moratorium on foreclosures in the wake of a groundbreaking announcement by Gov. Deval Patrick yesterday, a top housing activist contends.
Patrick ordered state banking regulators to seek delays of up to two months in foreclosure proceedings against homeowners who have filed complaints with the Division of Banks.
Marks predicted that as many as 1,000 struggling homeowners working with his organization alone would soon be filing complaints with state regulators. There were roughly 20,000 foreclosure filings in the state last year amid an explosion in high-risk - and high interest rate - subprime mortgages.
This is one of the stupidest ideas ever.
Firstly, it makes a mockery of contract law (so expect a challenge in a court soon.)
Secondly, would you issue credit in this state if the contracts can retroactively be rescinded?
This means credit is going to contracting faster than the tightest, most fearful sphincter. And that's going to make a bad situation morph into a disaster.
Please remember that credit contraction is deflation.
Effectively, Mazzhole-land is voting itself out of the national mortgage market (just like New Jersey did with insurance in the 80's.)
“It is effectively a moratorium on foreclosures in Massachusetts,” said Marks, whose Jamaica Plain-based nonprofit has a nationwide network of offices. “It is a very big deal. We will bring the Massachusetts standard nationwide.”
Heaven forbid!
Tuesday, May 01, 2007
Trendy Trends
From CBS Marketwatch, we have news on Centex: Mixed results for Centex Corp.
"We continue to balance our sales pace with margins, offering incentives in some neighborhoods and holding on price in others," said Cathy Smith, Centex's chief financial officer. Sales trends softened in March "as buyers became cautious due to the reports of subprime concerns and tighter lending standards."
She said the cancellation rate in the latest quarter was 34%, "which improved a few percentage points from the last two quarters but was still choppy within the quarter." The historical average for cancellations runs between about 20% to 25%, the CFO said.
"The main reason buyers are canceling remains the inability to secure financing or sell their existing homes," Smith said.
"Considering the lack of clear directional trends in the market, tighter mortgage lending standards, and soft results in March, we don't believe it's prudent to provide earnings guidance for fiscal 2008 at this time," she said.
(Ed: emphasis mine.)
How high does the cancellation rate (currently 34%) have to go about the historic norm (20-25%) before the directional trend becomes clear?
Can you say bullshit? I knew you could.
"We continue to balance our sales pace with margins, offering incentives in some neighborhoods and holding on price in others," said Cathy Smith, Centex's chief financial officer. Sales trends softened in March "as buyers became cautious due to the reports of subprime concerns and tighter lending standards."
She said the cancellation rate in the latest quarter was 34%, "which improved a few percentage points from the last two quarters but was still choppy within the quarter." The historical average for cancellations runs between about 20% to 25%, the CFO said.
"The main reason buyers are canceling remains the inability to secure financing or sell their existing homes," Smith said.
"Considering the lack of clear directional trends in the market, tighter mortgage lending standards, and soft results in March, we don't believe it's prudent to provide earnings guidance for fiscal 2008 at this time," she said.
(Ed: emphasis mine.)
How high does the cancellation rate (currently 34%) have to go about the historic norm (20-25%) before the directional trend becomes clear?
Can you say bullshit? I knew you could.
Adios, Amigo!
Reuters reports the exit of Mr. Diarrhoea, Gonorrhea, Liarreah in this article: Realtors' upbeat economist, Lereah, steps down.
The economist who prodded investors into the U.S. housing boom and has been skewered by bloggers during the bust is leaving a top real estate trade association, the group said Monday.
David Lereah, the author of 'Are You Missing the Real Estate Boom?', will leave the the National Association of Realtors' by the middle of next month after serving as the head economist for seven years, a spokesman said.
After leaving NAR, Lereah will become a senior executive at Move Inc., an online real estate service, said Lucien Salvant of the real estate agent trade group.
One blog, David Lereah Watch, cites passages from Lereah's books and his encouraging words about the housing market and asks him to "admit he cheerleaded this destructive housing bubble."
In October, Lereah said that he expected "sales activity to pick up early next year." In recent months, Lereah has pushed his expectations for recovery deeper into 2007 and has trimmed his forecast for home sales for the year.
Salvant said Lereah was traveling Monday and could not be reached but noted that the economist "works for the Realtors' association and people should not be surprised that he would take a Realtors' point of view."
Can you feel the love?
The economist who prodded investors into the U.S. housing boom and has been skewered by bloggers during the bust is leaving a top real estate trade association, the group said Monday.
David Lereah, the author of 'Are You Missing the Real Estate Boom?', will leave the the National Association of Realtors' by the middle of next month after serving as the head economist for seven years, a spokesman said.
After leaving NAR, Lereah will become a senior executive at Move Inc., an online real estate service, said Lucien Salvant of the real estate agent trade group.
One blog, David Lereah Watch, cites passages from Lereah's books and his encouraging words about the housing market and asks him to "admit he cheerleaded this destructive housing bubble."
In October, Lereah said that he expected "sales activity to pick up early next year." In recent months, Lereah has pushed his expectations for recovery deeper into 2007 and has trimmed his forecast for home sales for the year.
Salvant said Lereah was traveling Monday and could not be reached but noted that the economist "works for the Realtors' association and people should not be surprised that he would take a Realtors' point of view."
Can you feel the love?
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