Simon Says

This is a funny video, and the performance is better than those of 90% of the American Idol contestants. Not breathy, nasal, or pitchy. They took the song and made it their own. I think one million percent that this video is going to Hollywood. Thanks for the link Russ Dogg.

Bernanke sees more house price drops

Reuters – March 04, 2008

Bernanke:

"In this environment, principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure" than reducing interest rates on troubled home loans, he said.

Ok, so who gets the loan reduction? Everybody in the country with a mortgage? Only the people who are upside down? Only the people who can’t afford to pay? Only the people who are upside down, and can’t afford to pay? How about people whose houses have not decreased in value, but who took out negative amortization loans with no downpayment? I picture a class action suit with millions of people suing every lender who arbitrarily chooses certain groups of people to bless with equity, while holding the rest to their contracts. I also see share holders suing for the same reason. And I see a future where nobody wants to put any money down because the less they have in their houses, the better off they are. Take out Home Equity Lines of Credit and spend the equity on trinkets as quickly as possible, because when the music stops, you don’t want to be the sucker with equity in your home.

The government has no answers. This is scary. This looks like a solution that might be forwarded by some halfwit citizen who is interviewed on the street by the talking head on the nightly news. The government would do the country a great service by not making really stupid suggestions. As a matter of fact the government would do the country a great service if the message was “you got yourself into this, you get yourself out,” the same message that any decent parent tries to teach his kids. The Fed could still supply liquity to prevent unnecessary bank runs, but that’s it. Stop making the problem worse by sowing confusion and false hope. The way it is being handled, this problem could be the end of the US as a world leader.

News of March 03, 2008

Sorry I’m under the weather. The bug finally got me. Here is some of the news of today.

Bloomberg - U.S. Stocks Drop, Led by Financials; JPMorgan, Citigroup Fall

Fortune - Margin calls thrash Thornburg again

Reuters - Buffett says U.S. in recession, stocks not cheap
"By any common sense definition, we are in a recession," Buffett said. "Business is slowing down. We have retail stores in candy, home furnishings and jewelry. Across the board, I'm seeing a significant slowdown."

Reuters - Housing crisis puts off first-time buyers
The good part of the popping bubble is that some people will actually learn that gambling with their home and mortgage is bad.

Short The Banks

The Let It Sink way is going to become The Way. It doesn’t take a lot of examination or thought to realize that walking away from an upside down house is going to become the norm. After decades of having pro-business economics and Darwinian capitalism shoved down their throats, Americans have finally figured out that it can finally benefit them somehow. In this case, if they look at their mortgages in the same way that the banks do, which is as amoral business agreements, then rather than beating themselves up about obligations and failure, they will do a little bit of math and dump the houses right in the bank’s lap. This is absolutely going to destroy many banks in the US and around the world. They have always depended on people acting out of moral obligation, while the banks themselves acted out of pure self interest. Now that the playing field is being equalized, many banks will die. Good riddance.

Today’s New York Times has an entertaining article about how the ridiculous loans that banks originated to boost their profits in the short term have made walking away all the more attractive to home owners.

“Facing Default, Some Walk Out on New Homes,” (NYTimes - John Leland – Feb 29, 2008)

Signs of Intelligent Life in America?

Not in the US Government, which plans to write every American a check to give him/her $600 of his/her own money back. What a really dumb idea.

But the public might be getting a clue. According to an LATimes/Bloomberg poll put out on February 27, 2008, only 18% of those polled plan to spend the money. The rest will put it into savings or use it to pay down debt. On an individual level, this is the right thing to do. But the government had assumed that the American public would act like a bunch of drunken sailors on shore leave (the way they’ve been acting for the last 10 years) and squander the money as quickly as possible. This shocking unprecedented common sense frugality will have the effect of making useless the entire check writing exercise, because if people don’t immediately throw the money away on junk, there won’t be any economic stimulus.

Sacramento Home Foreclosures Equal Home Sales

The number of homes sold in the area surrounding Sacramento was almost the same as the number of homes foreclosed upon in January 2008 according to “Foreclosure grip tightens in region” in the Feb 15^th Sacramento Bee.

The data covered Amador, El Dorado, Nevada, Placer, Sacramento, Yolo, and Yuba Counties. In that area there were 1,815 home sales closed and 1,782 homes foreclosed upon. The article goes on to say that in Sacramento County, median home prices have returned to June 2003 levels.

For combined new and existing homes the median price has tanked thusly:

-- Sacramento County’s median price was down 26.8% from January 2007, and is down 34.6% from its high in August 2005;

-- Placer County’s median price was down 14.9% from a year ago, and 31.4% from its peak in August 2005;

-- El Dorado and Nevada Counties were down 9% since January 2007;

-- Yolo County was down 21.2% from January 2007;

-- Yuba County was down 17.1% from January 2007.

I hope my readers are rapidly learning that gambling is bad. Stocks, real estate, interest rates, the US and world economies, hair length, everything moves in cycles. Never never use adjustable rate mortgages to buy a house, or you are gambling. If rates drop, you can always refinance. If rates go up, you are safe. If you can’t afford a 30 year fixed mortgage, then you can’t afford to buy a house. That’s it. There are no exceptions. If you do anything else then you are playing Russian Roulette.

Sacramento is going to be one heck of an experiment by the time this is over, because anyone who is upside down to the tune of 20% to 30% should walk away.

Bad News and Bad Reporting

LATimes (Feb25, 2008 from AP) – “Sales of existing homes hit a 9-year low nationally.”

This story has both bad news and bad reporting. Nationally, home sales dropped to their lowest levels since 1999, and prices declined for the 5^th month in a row according to the National Association of Realtors. Sales dropped .4% last month (it does not say if that was from the previous month or the previous year), and the median price dropped to $201,100, down 4.6% from a year ago (it does not tell us how much it fell from the previous month or from the peak).

Today’s Wall Street Journal clarifies the LATimes’ sloppy reporting for us. The WSJ tells us:

Home resales fell to a 4.89 million annual rate, a 0.4% decrease from December's revised 4.91 million annual pace, the National Association of Realtors said Monday. Originally, the NAR estimated sales at 4.89 million in December.

and

The median home price was $201,100 in January, down 4.6% from $210,900 in January 2007. The median price in December was $207,000.

That’s better, but we still don’t know how much the price has fallen from the peak or when that peak was – just because the year-over-year price has fallen 5 times doesn’t mean that the peak was 5 months ago. The month to month changes may have been falling for more than 5 months.

One more nugget from the WSJ:

Inventories of homes increased 5.5% at the end of January to 4.19 million available for sale, which represented a 10.3-month supply at the current sales pace. There was a 9.7-month supply at the end of December, revised from a previously estimated 9.6 months.

That means that in one month, the inventory of homes increased by .6 months. At this rate of growth there should be a full year’s supply of homes on the market by the end of April. Mind you, the inventory in California is over 14 months already.

Looking to a third source, we go to Reuters (“U.S. existing home sales slip and prices tumble”) only to fail in our attempt to find the peak, and have another mystery added as follows:

The national median home price fell to $201,100 from $210,900 a year earlier, the NAR said. The price of the median single-family home was $198,700 in January, the lowest since $197,700 reported in January 2005.

OK. What is the difference between a home and a single-family home? We don’t know because they don’t tell us. Let’s keep looking for the peak.

Bloomberg (U.S. Economy: Existing Home Sales Decline to Nine-Year Low) clears up some of the Reuters mystery here:

The median sales price fell 4.6 percent to $201,100 from January 2007. The median cost of a single-family home decreased 5.1 percent to $198,700, while that of condominiums and co-ops fell 1 percent to $220,400.

But still no peak.

Detroit Free Press – no peak;

Silicon Valley / San Jose Business Journal – no peak;

Chicago Sun-Times – no peak;

People Magazine - George Clooney's Oscar Date Night with Sarah Larson;

Financial Times – no peak;

Money/CNN – no peak;

New York Times – no peak;

The Irish Times – no peak;

Providence Business News (Rhode Island) – no peak;

National Association of Realtors (press release) – no peak!

Now it’s clear. The NAR didn’t spoon feed the info to the reporters so no news source in America bothered to report the full story. Am I the only person on Earth who wants to know how much prices have fallen from their high point?

After checking with 14 sources, I leave to get my son from daycare, without an answer.

Subprimes Blowing Up Early

Subprimes are terrible because when their adjustable rates adjust, the bootstrap borrowers who could barely afford the starting teaser rates really can’t afford the post- adjustment rates. At least that has been the logic thus far. Now it seems that due to our old economic nemeses Moral Hazard and The Agency Problem, these loans were so shaky to begin with that they are blowing up even before the rates reset. The requirements for borrowing were so lax that many of these borrowers are not even able to afford the teaser rates. That’s nice. I’m going to write my Congresswoman and demand that she bail out these lenders and preserve the giant bonuses for the executives that caused this disaster! Won’t somebody throw a benefit concert or start a charity? Bank-Aide would be a nice name.

CNN/Money.com reports in “Subprime loans defaulting even before resets,” (Les Christie, February 20 2008):

For instance, in both 2006 and 2007, well over 40 percent of subprime borrowers were awarded mortgages with either little or no documentation of their ability to pay. With these so-called "liar loans," borrowers did not have to show proof of either earnings or assets.

And even when borrowers did go on the record about their earning power, it didn't bode well. Both 2006 and 2007 saw a large proportion of loans with high debt-to-income ratios (DTI), which indicates the percentage of gross income required to pay debt. In 2007 subprime originations, the DTI hit 42.1 percent, up from 41.1 percent in 2006. Borrowers were simply taking on more debt that they could afford.

But surely these lenders, as sophisticated as the biggest financial institutions in the United States of America are, should have had some warning that there was trouble on the horizon?!

Read on:

By late 2006, lenders knew that the housing market was heading south. Foreclosure filings took off during the third quarter that year, up 43 percent from 12 months earlier, according to RealtyTrac, the online marketer of foreclosure properties. And home prices began to drop.

But instead of cutting back on risky loans, lenders kept lending. Why?

"Because investors continued to buy the loans," said Doug Duncan, chief economist of the Mortgage Bankers Association.

Despite their quality, subprime mortgages were as profitable as any other for lenders like Countrywide and Wells Fargo, who were able to quickly securitize the loans and sell them in the secondary market. The loans sold easily because they carried the promise of high yields.

"As long as you could sell the loan, you made the deal," Duncan said.

Lenders needed the fees that these loans generated because their finances were weakening. Their cost of borrowing money was rising, while competitive pressures were keeping mortgage interest rates low.

"By 2006 many lenders were running into red ink," said Youngblood.

So, they revved up lending to increase short-term profits. And, to outside analysts, there appeared to be nothing wrong with loan quality.

"There were very few overt changes in industry underwriting guidelines," said Youngblood. What did change, he said, was that lenders made more exceptions to their standard practices, approving people with poor work histories or insufficient proof of income.

"These exceptions generally amounted to no more than 5 percent [of subprime loans] before 2006," said Youngblood, "but they represented the majority of these loans issued in 2006 and 2007."

The reason for that shift: Lenders depended on independent mortgage brokers for much of their business, and brokers pushed them to approve subprime loans because they delivered big profits for the brokers.

"Lenders felt they had to take the loans to preserve their access [to the rest of the loan pool]," he said. They accepted some risky subprime loans so that the brokers would also send them safer prime and Alt-A loans.

Of course that's a bet that went bad. And it's likely to get worse as resets for ARMs issued in 2006 and 2007 kick in this year.

And now the LetItSink Soap Box:

Business in America is very big on fighting regulation and wanting the market to police itself when things are going well. Then they cry like little babies when things go badly. Now things are bad and this country needs to deliver a big generous dose of tough love to BofA, Countrywide, Citibank, and all the rest of them. If they vanish, good riddance. If we can brush aside the constitution when it is convenient for the president, then I think we could have some nice kangaroo court antics for the officers of these companies. Let's plan a Perp-Walk Parade to the gallows. FDIC will take care of depositors, and let the vultures take care of the rest.

Up to 50% off on DR Horton Homes in the "Arb-Hood"

Prices Offered Up to 50% Off During D.R. Horton's 'UnAuction' Sale - February 16 and 23 Only!

That's right ladies and gentlemen. Follow the above link to the DR Horton press release.

These homes are in Kern, Ventura, Riverside, San Bernardino and Imperial counties in Southern California. The communities include:

• Bakersfield
• Channel Island Harbor
• Adelanto
• Victorville
• Chino
• Temecula
• Indio
• Desert Hot Springs
• Palm Desert

The sale includes homes in 23 neighborhoods. If you were planning to buy a similar home to the one you live in now, and walk away from your current home, plan faster. But if you can't cover all the bases that fast, don't despair. There will be more sales.

So this means that, in at least 23 neighborhoods spanning all of Southern California, prices will have fallen 50% as soon as the first house is sold at that discount. It also means that if you live in or near any of these communities, your house is probably worth 1/2 of what it was very recently.

I hate the term “jingle mail”. It is horrible. It is a noun that is forced to be a verb. But I do know that any term I coin cannot be any worse. So secure in that knowledge, I hereby coin the term “Arb-hood”, which is short for Arbitrage Neighborhood. An arbitrage opportunity is one where a person can buy an asset and immediately sell it for more than he paid. In this case, an Arb-hood is a neighborhood where people can buy new homes for much less than they owe on their current homes, and can therefore walk away for a profit. This is made possible by plummeting prices and developer desperation (PPDD - I'm coining acronyms too.)

If you live in an Arb-hood, you should look into buying a new home, and walking away from your old one. Have a lawyer go over your existing loan docs to make sure the lender cannot come after you for anything but the house. If everything looks good, and you make the move, you should save a ton on your mortgage.

30 Days Hath Your Lender

The country’s biggest lenders have come up with a plan to give certain borrowers who are in trouble an extra 30 days to work things out.

The Arizona Republic ("Ariz. banks join ‘Lifeline’ to aid homeowners" – Feb13, 2008) reports that:

(Six large home-loan lenders have) joined a White House effort to add breathing room for all types of homeowners facing foreclosure, not just people with risky subprime loans.

The initiative, dubbed Project Lifeline, will offer a 30-day foreclosure reprieve while the lenders intensify their efforts to contact troubled borrowers in hopes of working out payment solutions.

Several hundred thousand borrowers could be affected nationally.

Bank of America, Chase, Citigroup, Countrywide Financial, Washington Mutual and Wells Fargo will reach out to homeowners 90 days or more overdue on payments, provided they haven't filed for bankruptcy, don't have a foreclosure date within the next 30 days, haven't vacated the property and haven't used their loans to fund a vacation home or investment property.

The article goes on to say:

Some Arizona observers question how effective the latest initiative will be.

"I still see pretty significant pressure into summer" on bankruptcies and foreclosures, said Chris Bayley, a partner at Phoenix law firm Snell & Wilmer, citing the slowing economy and slumping real-estate market as overriding factors.

"These programs are like window dressings or Band-Aids that might not stem the flow."

Steve Williams, a principal at Scottsdale bank management-consultant firm Cornerstone Advisors, also labeled the plan as window dressing.

"The fundamental issue is that many Americans have bought too much house and too much car," he said. "Their home values, mortgage rates and personal cash flow are so out of whack that 30 days won't make a big difference."

I have to agree with those who question the point of this. If this 30 days helps you, then fantastic, you’re off the hook. But this seems to have been written by the administrations’ speech writers who produce lots of nice words without an ounce of logic behind them. For example, this plan will allegedly allow lenders to have more time to contact borrowers before they are forced to foreclose? Yet, in every case that I have read about, it is the borrowers who have had no luck contacting or negotiating with lenders, not the other way around. It is beyond absurd to think that the bank, who holds the mortgage on a borrower’s house, and therefore must have his address, is not able to figure out how to get in touch with him. Furthermore, isn’t it part of the foreclosure process that the lender notify the borrower of the situation?

As with the failed Big Bank initiative of a couple months ago to shore up the collapsing subprime market by essentially keeping bad mortgaged backed securities off of the market to fraudulently hide their real market value, this initiative seems like lenders trying to help themselves while taking credit for going the extra mile.

Please email me at LetItSink@gmail.com if you know of homeowners who have been helped by this program. I would like to follow their stories and see how it works. Somehow I don’t expect to be flooded with letters.

Housing Crash Taking a Toll

The daughter of Bruce Toll, the Vice Chairman and co-founder of Toll Brothers, might be a person who knows what is going on in the housing market. So it is interesting to see that she is bailing on the purchase of a condo from Toll Brothers.

Reuter, In a Feb11, 2008 article entitled, “Toll relative walks away from new condo – filing,” says:

Luxury builder Toll Brothers Inc, hurt as many buyers to try to get out of contracts for new homes amid falling prices, says a member of its founding family is trying to walk away from an agreement to buy a new condominium.

The daughter of Vice Chairman and co-founder Bruce Toll informed the company last month that she and her husband "did not intend to make settlement" on a $2.47 million home they had previously agreed to purchase, the company said in a regulatory filing.

Toll Brothers went on to say that it intends to pursue its rights under the agreement of sale with Toll's daughter, Wendy Topkis.

A company spokesman was not immediately available for comment on the filing, which was made public on Friday.

The company, hard hit by the U.S. real estate slump, said last week that it sees no signs of improvement in the depressed housing market. It estimated a 22 percent drop in home-building revenue for its fiscal first quarter, ended Jan. 31.

You don’t often get “insider information” like this. If the other facts haven’t convinced you of the direction of the market, this might.

Mortgage Rates are Down, But Most Don’t Qualify Anymore

In this Feb08, 2008, CNNMoney tells us “Refinancing: Only for the privileged few.”

The good news: mortgage rates are down. The bad news: it's much harder to qualify for a refinanced loan these days.

What's more, the borrowers who need to refinance the most - because their adjustable rate mortgages (ARMs) are resetting to higher interest rates - are among those having the most trouble winning approvals.

"I'm turning away about 60% to 75% of the clients who come to me for a refi," said Bob Moulton, president of Americana Mortgage Group on Long Island, N.Y. "Some don't have enough equity and others have bad credit scores."

During the boom years, lenders approved most anyone with a pulse. Not so today. Mortgage brokers recognize this and are now being very selective about the clients whose applications they choose to submit to the likes of Wells Fargo or Bank of America.

If an applicant has poor credit, or a home whose value is rapidly deteriorating, they're just not going to bother.

The article goes on to say:

Consider a homeowner who bought in Miami a year ago with 20% down. Home prices have fallen 15% there in the past year, wiping out three-quarters of the equity. Lenders, who want collateral that's worth more than the value of the loan, are wary about having so little cushion. If they have to repossess and resell the house, they're on the hook for a big loss.

"No lender would take that deal," said Marc Savitt, president of the National Association of Mortgage Brokers. "It's a lot different from two years ago."

The bar has also been raised for credit scores when it comes to refinancing, according to Grabel. And sometimes, it's not a matter of whether someone can get refinancing but at what price.

"Those with high credit scores are getting very good rates, but the lenders have heightened the requirements to qualify," said Grabel. Instead of a score of 680 for the best rate, a borrower might need 700 now.

So as home prices fall, the amount of equity, or collateral, that people have in their homes falls, which makes it harder to refinance. And much like Paris Hilton, the lenders have gone from acting like drunken whores to acting like angels. As such, they will no longer lend to the people they lent to before. Having hooked these people on bad loans, the banks have gone through rehab and left the junkie/borrowers out to dry. These borrowers should now decide whether it’s time for them to go cold turkey, and walk away from their bottomless, un-refinancable loans.

No Good News for Feb 05, 2008

Is this the Russian version?

Today the Dow dropped 370 points. Here are the details.

Dow Plunges on Survey of Business – New York Times
“This is an indication for the first time that the bulk of the economy is contracting,” said Joshua Shapiro, chief United States economist at MFR. “It is sending people into recession panic mode here.”

Las Vegas Tops Foreclosure List – CNNMoney
Unlike depressed Midwestern cities, the 89131 (Las Vegas zip code) is prosperous, with strong employment and income levels well that are above average for the state. The foreclosure problems in Las Vegas stem from the unaffordable terms of the mortgages themselves, rather than from local economic conditions.

Here is a list of the top 100 zip codes for foreclosures.

Recession is here – economists – CNNMoney
Economists took the latest report as a sign that problems are no longer restricted to just housing and manufacturing. "We're definitely seeing conditions spread to more parts of the economy. The big drop in business activity, that's a huge red flag," said Gus Faucher, director of macroeconomics for Moody's Economy.com. Faucher said his firm now believes the economy is in a recession but he believes it's possible that growth will resume in the second half of this year.

Down payments just got bigger

I AM AN AMERICAN - BIGGER IS BETTER!!!

If you like Escalades, McMansions, SuperSized fries, and think bigger is better, then you are in luck. Down payments just got bigger! In this February 3, 2008 LA Times article we learn that banks have grown weary of finding themselves losing their shirts on loans that are larger than the homes that secure them. Countrywide is increasing downpayments from 5% to 10% of the purchase price in many areas.

Mortgage and real estate brokers whine that it's just not fair. Apparently they still think mortgages with really tiny down payments are a really good idea. Hey brokers, why don't you put your money where your mouth is. If it's a good time to buy, and you know better than the lenders that tiny down payments are a good idea, then why don't you counter sign for them? That would be Win-Win, wouldn't it? Unless you're lying, and you think house prices are going to fall more, and you just want to stuff your wallets at everyone else's expense.

It’s Like They’re Reading My Mind

About 6 hours ago I posted that banks do what is good for them, and they don’t care about you. As if to help me prove my point, we now have an article in the LA Times that was put on it’s site 2-½ hours ago entitled “Trying to tap into home equity? We'll see.” This article tells us that Countrywide has sent letters to 122,000 customers telling them that they can no longer tap into their home equity lines of credit (HELOCs) because the values of their homes have decreased too much.

No warning letters Countrywide? No heads up? No, “Hey loyal customer, you might want to consider that you are going to need to find new sources of cash soon”? Gee whiz, that’s rather cold and businesslike.

The article goes on to say:

The move by Countrywide, the nation's largest mortgage company, is part of a pullback by lenders nationwide on home equity loans, which are often used to finance home improvements and consumer spending. Such loans, also known as second mortgages, were widely available until six months ago, when delinquencies and foreclosures began to soar. Now, with new evidence of sinking home values, many lenders are requiring that homeowners maintain a much larger percentage of equity in their homes as a cushion against financial problems.

The tightening of credit could help limit the effectiveness of interest-rate cuts by the Federal Reserve and an effort by Congress and the White House to put more money in the hands of Americans via tax rebates and other economic measures.

Lessons learned from this post:

a) The Bank is not your friend

b) The Bank is very worried about falling home prices

c) The Man (Fed + President + Congress) can’t do much to stop this train wreck.

“Brownie, you're doing a heckuva job!”

I know nobody remembers any of the previous housing crashes, so let’s stretch our memories back to 2005. Remember when, during hurricane Katrina, President Bush praised the incompetent former horse show organizer whom he put in charge of FEMA with the immortal words, “Brownie, you're doing a heckuva job”? As they were doing their back slapping and press conferences, people were drowning in their attics for lack of any sensible federal response from the federal agency whose sole purpose was to help people in disasters.

Well I have a plan. When our “hard workin’” president says, “Bernanke, you’re doing a heckuva job,” I’m cashing in all of my worthless dollars for the relative stability of the Argentine Peso, and I’m heading south.

My tone has a bit of doom and gloom because I just read an interesting article online by Fortune, entitled “It’s going to be much worse,” where former partner of George Soros, Jim Rogers, says, "Bernanke is printing huge amounts of money. He's out of control and the Fed is out of control. We are probably going to have one of the worst recessions we've had since the Second World War. It's not a good scene."

As we’re all painfully aware, the Baby Boomers were born after WWII when every adult in the country decided simultaneously to create the most Spoiled Generation ever. That means that Jim Rogers is predicting the worst economic crisis in the Baby Boomers' lives. Gee, I hope none of them panic and start selling their tanking real estate and stock portfolios all at once.

It's Worse Than That...

This blogger has noticed that for at least one year, 95% of all data releases and economic news has included the phrase “worse than expected.” How is it possible that basically every forecaster, every CEO, every economist, every reporter, and every soothsayer of any sort is surprised by everything? Author (he uses much lengthier descriptive terms for himself) Nassim Taleb does not beat around the bush by stating that the entire idea of forecasting is bankrupt, and that the predictions of forecasters are so universally bad that nobody should ever do it again. I am starting to agree, except that it’s very entertaining to see the heads of all the gobbling turkeys turn simultaneously in reaction to every noise.

But I digress a bit from the actual “news” of the day:

“Economy much weaker than expected” – CNN/Money.com – Jan30, 2008 (“Gross domestic product slowed to a 0.6% growth rate in the fourth quarter… Economists surveyed by Briefing.com had forecast GDP would slow to a 1.2%.”)

“UBS Takes a $14 Billion Write-Off” – New York Times – Jan30, 2008 (“Once again this is a negative surprise,” said Andreas Weese, a banking analyst at UniCredit in Munich. “I had assumed additional losses, but not of this magnitude.”)

Since everything is worse than any of the experts expect, why don’t any of the experts take a wild leap of faith, put together their best guess, and then make it much worse. They might get jobs based on their brilliant market predicting abilities. Of course the only problem with that idea is that they already have jobs, and their current jobs pay them to make ridiculously optimistic forecasts, and then say things like “nobody expected,” and “even the experts couldn’t have predicted.” Ah, well. That’s why you come here for your news.

Coming next – What’s a Baby Boomer to do?

Going Once, Going Twice, Sold to Nobody!

Wow.
I have been pouring over housing related stories and data since very early in 2004. I can tell you that the popping of this bubble is much worse than the last one which was in the period of 1989-1994. I have read articles spanning the last 20 years, and I am still being surprised by this one.

Here is today's shock: The Modesto Bee, in a December 15, 2007 article entitled Bargain Houses Largely Unsold, reports that of 1336 properties put up for foreclosure auction in California's Modesto, Merced, and Stockton counties in Nov 2007, only 17 of them sold. To repeat, only 17 of 1336 properties sold at foreclosure auctions that month. This happened even though very large discounts were being given on the homes from what the lenders were owed.

Here are some examples:
A home in Merced on West 22nd Street with an outstanding mortgage of $279,785 was offered at $153,000. This discount of more than $124,000 was not enough to draw even a single bid.

"Also last month, a Manteca home on South Sonora Avenue that had an outstanding loan balance of $487,956 was offered for a starting bid of $331,500. No one bid." A $156,000 discount was not enough.

"An Oakdale home on Ranger Street sold new in 2006 for $610,000. It went into default with an outstanding loan balance of $530,892. Last month at the foreclosure auction, the starting price was $395,000. No one bid." This house was offered for over $215,000 less than what is sold for a year earlier, and nobody wanted it. If you live on that street, you should be considering walking away.

Send your stories or good links to LetItSink@gmail.com

Foreclosures Up, Up and Away

We have another good, if not happy, article on CNN/Money today - Foreclosures Spike - And Will Get Much Worse. If you are upside-down in your home, and you are thinking about walking away to save yourself a lot of money, start planning today. Start your search for a good real estate lawyer who can review your loan documents, inform you of your state's laws, and make sure you don't do anything wrong.

If you are at the point where you need a lawyer, drop me an email at LetItSink@gmail.com. I would like to hear about your experiences. And I am also interested in putting together a list of trusted experts to help you all make the right decision. Your house and loan went wrong once. Don't let it happen again.

First Annual Home Price Drop Ever

They said we couldn't do it. All those Realtors, and real estate agents brokers. They said there had never been a down year in housing prices, and therefore implied there never would be. Everyone know home prices only go up. Except for the '89-'94 bubble pop. And the '79-'80 bubble pop. And all those other bubble pops.

But now it's happened. Check out this article on CNN/Money: Homes See First Annual Price Drop on Record - Jan24, 2008.

I wonder what they say about people walking away from their terrible mortgages? Surely people will keep dumping money into a black hole. Won't they? Wouldn't you?