B4 The Bell Tuezleday

[Guest yobob1]

Place keeper opening - carry on. Bears have the ball but the bulls are going for an open field tackle. Silver traded over $7 most of the night but is getting slapped hard in London.

[Guest yobob1]

In violation to Doc's wishes I am going to repost some large chunks of an article because it shows why I think housing is in for a major implosion almost regardless of interest rates. Some notes will be added in red.

 

Home Market Boom Showing Some Strain (free easy registration required)

 

First-time buyers ? vital to the market's overall stability ? made up just 30.6% of home purchasers in California last year, the lowest rate since the California Assn. of Realtors began tracking the data in 1981. First-time buyers provide the foundation for the rest of the market, because their purchases make it easier for existing homeowners to move up. In other words house swapping amongst existing owners makes the housing market more like the stock market and less like a sound investment

 

Together, these indicators suggest slower gains in sales and prices.

 

"We're piling on more and more layers of risk in the housing market," said G.U. Krueger, director of economic research at Institutional Housing Partners, a real estate venture capital firm in Irvine. "The question is, how long can this go on, and what will happen when interest rates rise?"

 

Most experts don't expect anything close to a downturn of the magnitude seen in the first half of the 1990s, when massive aerospace layoffs and overbuilding resulted in prices plunging 23% in Los Angeles County. Then again most people don't see the bus that hits them either. Consensus is "safe" and usually wrong

 

Most economists predict that home prices in the region will continue to grow at a healthy rate for the foreseeable future, although at a slower pace than the double-digit percentage gains seen in each of the last few years. Again that ever dangerous word "most".

 

 

What's more, foreclosures and defaults remain under control. And mortgage rates have actually declined in recent weeks to the lowest levels since last summer. They only remain under control until the sales rates decline slightly at which time the defaults start becoming a larger and larger percentage of the existing portfolio. Considering the extremes in finance employed to obtain housing by people who shouldn't qualify for a used car loan, the coming wave of defaults is going to be huge."

 

I don't see anything that frightens me or makes me very worried at this point," said Lenny McNeill, a senior vice president at Washington Mutual who oversees residential lending in California and other Western states. This guy is either on drugs, has already embezzled millions and is planning on leaving for South America real soon, or suffers from severe cranial-rectal insertion.

 

 

Either way, the outlook points to an emerging slowdown in sales and building activity. Both have been major economic stimulants, especially in Southern California, where the housing market has far outpaced the rest of the nation. Bad news bubba. It's not just California or New York or Florida - it's everywhere. The potential job losses with even a half hearted slowdown is enormous. Just think about everything that goes into a house and all of the jobs that go along with it.

 

Even as manufacturing and other industries have cut back in recent years, construction and other sectors tied to real estate, such as mortgage banking, lumberyards and home-improvement retailers, have added tens of thousands of jobs. Many consumers, meanwhile, have tapped their rising home equities for cash to support their hearty spending, adding further fuel to the economy in the Southland and elsewhere in the nation.

 

Anecdotal evidence suggests that the current frenzied pace can't be sustained.

 

Glenda Estrada, a 29-year-old schoolteacher in Downey, recently bought her first home. After a three-month search that included several fixer-uppers, she settled on a 900-square-foot home on a busy street in Lakewood. The house cost her $295,000.

 

With her stellar credit, she got in with no money down. But even with a low adjustable rate of 4.5% and a financing plan in which she is paying only interest, Estrada's monthly payment soaks up half her income. Look at this. interest only, adjustable rate loan at 4.5% and still it is eating up half her income. People doing this kind of loan are road-kill, but then so are most of the recent buyers. They will be saddled with debt far exceding the value of the collateral. Can you say, walk away?

 

The big mitigating factor in all this is cheap financing. After ticking up in late summer and early fall, U.S. mortgage rates have since headed back down to near a decade low, spurring more purchase activity. The average 30-year fixed-rate mortgage is 5.59%, compared to an average adjustable rate of 3.47% for a one-year ARM.

 

Federal Reserve Chairman Alan Greenspan recently questioned the wisdom of homeowners sticking with traditional fixed-rate mortgages. He suggested that consumers might be better off if lenders offered more alternatives.Funny nobody ever questions his "wisdom". More alternatives???? Like buy one get one free with no money down, no payments for 10 years, zero percent interest and best of all you don't even need an income. Just how fricking stupid can this get? Whomever is ending up holding the bag on all of these "safe" mortgage bonds is in for a very rude surprise.

 

But in Southern California, the question isn't whether there are enough homeowners going with ARMs, but whether there are too many.

 

During the last 12 months, the share of home purchases from San Diego to Ventura financed with ARMs has nearly doubled to 57.1% in January, according to research firm DataQuick Information Systems. That's almost double the percentage nationwide. These people arena't doing this because they expect rates to drop. In fact they aren't even thinking at all. The mortgage industry is promoting any and all means to keep the party going. But the party will end, and very soon. These ARM's by themselves could be problematic, but the over-riding issue will still be loans that are underwater.

 

Although Southern Californians historically have been more familiar and comfortable with alternative financing plans, the recent increase has alarmed some anal cysts. The last time the percentage of ARMs increased so sharply in the region was in 1994, but that was triggered by a jump in long-term rates that significantly widened the spread between average ARMs and fixed-rate mortgages. This time around, the spread hasn't expanded.

 

Furthermore, the fact that many more buyers are using ARMs when fixed-rate mortgages are so cheap means that buyers are stretching and in some cases overextending themselves.

 

"The data does indicate that more buyers are skating toward thinner ice, absolutely," DataQuick anal cyst John Karevoll said.

 

Amy Crew Cutts, deputy chief economist at mortgage financing giant Freddie Mac, doesn't view the shift to ARMs by itself as a danger sign. In part, she and loan officers say, it reflects consumer belief that many won't be in their home longer than seven years. Yeah like how fast will the lender throw them out on the street when they can't pay the mortgage. If things get tough folks, just buy a house with nothing down, don't make any payments and live rent free for a year while they figure out they can't convert you and finally have to foreclose.

 

Tom Swanson, Wells Fargo Bank's regional sales manager for residential lending in Los Angeles, says that although the five-year, interest-only ARM is the most popular, others are electing one-month and one-year ARMs. One month ARMs??? Are these idiots playing Russian finance roulette, or what?

 

With some banks, borrowers can choose to pay even less than interest payments each month, which increases the amount of the mortgage. Yeah that's a real good idea.

 

When rates rise, buyers can compensate by shifting to ARMs, economist Krueger said.

 

"The problem is that we have already done this and there might not be much left to shift," he said. "What happens when interest rates rise and people need to have that option? ? I'm not concerned about defaults, but I'm more concerned about what happens to transactions when that happens." And that folks is the home boom in a nutshell. It's all about volume of transactions. As that volume fades it will reverse spiral. Couple it with some other "bad things" and all of a sudden we're in a depression that will make the 1930s look like a cake walk - without the cake

[Hiding Bear]

Tanks Yobob. When the real estate market crashes, it will have a more profound negative effect on the economy than any stock market crash we've experienced in the US.

 

The real estate industry has adopted a permenent bubble mentality, which as we know, no bubble can last forever. Even though I think in the long run the US $ is toast within 20 years, housing won't be an inflation hedge to those shaken out along the way in the next RE downturn.

 

More on the Argentina default coming today (I think the IMF will give in at the last minute):

 

Argentina Threatening to Default on Payment to I.M.F.

http://www.nytimes.com/2004/03/09/business...9argentina.html

[Guest]

"Amy Crew Cutts, deputy chief economist at mortgage financing giant Freddie Mac"

 

Amy Crew Cutts? You really couldn't make that one up.

 

Haircut anyone?

[soylentgreen]

The only way to "save" real estate is to reach a level of inflation high enough to cover lower real prices in R.E, i.e, with a 5% inflation rate, if real estate increases about 3% per year, the owner is kept out of negative equity.

This will be achieved by A)debauching the dollar and B)pegging long term rates at very low leveles, with the help of foreing central banks. Inflationary shocks like the increase in the price of oil, or china revaluing the yuan will be dismissed as "temporary". Some sort of credit rationing will be needed in certain places, thus the current trend to re-regulate the GSEs. In any case, real estate is certainly too big to fail.

 

Signed: The Matrix

[machinehead]

"Amy Crew Cutts, deputy chief economist at mortgage financing giant Freddie Mac"

 

Amy Crew Cutts?  You really couldn't make that one up.

 

Haircut anyone?

Maybe it's a hint that we are to read this article as parody.

 

It sounds like something from The Onion, doesn't it?

 

Each paragraph more outlandish and laughable than the last one ...

[The End]

Neely is going to be stopped out of long positions,if he already hasn't, at the open. Can anyone tell me where the JUNE spx futures are?

[Guest]

Holy Crap Batman!

 

Something really smells today. Futures are way below fair value.

 

Maria was saying "We're expecting a higher open today on the back of strong guidance from TXN last night" - while all three futures arrows were red.

 

Then we hear Rick Santelli from the bond pits saying:

 

It looks like not only the January PPI numbers, but also the release of the February PPI numbers have been "CANCELED"

 

Then Mark Haines says:

 

"you may have noticed that we've removed the futures "bug" from the lower right corner of the screen due to a clock malfunction."

 

Somebody is pretty damn nervous for some reason.

 

Expect a wide range of technical malfunctions today.

[Hiding Bear]

Day 19 - Where is the PPI? :cry: :cry: :cry: "God only knows"

???????????????????

 

 

Outdated computers blamed for index delay

 

Financial Post - Canada; Mar 09, 2004

 

WASHINGTON - Outdated computers are partly to blame for the delayed release of the U.S. producer price index and only "God knows when" the data will be ready, a top anal cyst at the Bureau of Labor Statistics said yesterday. The U.S. Labor Department statistical agency has indefinitely delayed the release of the January and February PPI reports due to problems converting the data to a new industry classification system. The January PPI, which measures prices paid to farms, factories and refineries, was originally scheduled for release on Feb. 19. The February report was due to be released this coming Friday. The nearly three-week delay for the January report is unheard of in the government's statistics system. Some economists said they miss the wholesale price data, in part because it can offer early clues on profits and, by extension, hiring.

[Guest]

what a coincidence...all the futures arrows are now green...and Crapvision NOW HAS MAGICALLY FIXED ITS FUTURES BUG

[Guest]

Day 19 - Where is the PPI?  :cry:  :cry:  :cry: "God only knows"

???????????????????

 

 

Outdated computers blamed for index delay

 

Financial Post - Canada; Mar 09, 2004

 

WASHINGTON - Outdated computers are partly to blame for the delayed release of the U.S. producer price index and only "God knows when" the data will be ready, a top anal cyst at the Bureau of Labor Statistics said yesterday. The U.S. Labor Department statistical agency has indefinitely delayed the release of the January and February PPI reports due to problems converting the data to a new industry classification system. The January PPI, which measures prices paid to farms, factories and refineries, was originally scheduled for release on Feb. 19. The February report was due to be released this coming Friday. The nearly three-week delay for the January report is unheard of in the government's statistics system. Some economists said they miss the wholesale price data, in part because it can offer early clues on profits and, by extension, hiring.

Ameriturd:

 

I just lambasted a supervisor there to let him know that we are all hip to the morning slow down scam...which he admitted has happened most mornings for the past several days.

 

As for the PPI...

 

The smart money didn't get that way by being stupid, and the selling that is occurring now is partly due to the failure to release the PPI numbers. We're not the only ones who know something's up.

 

"The dog ate my homework" is a better excuse than outdated computers.

[zensmoke]

Great Stuff as always, Yobob!

[zensmoke]

Events today brought to you by the TREASURY DEPARTMENT:

 

U.S. Treasury Secretary John Snow speaks at America's Community Bankers Annual Government Affairs Conference, Washington, D.C., 9:30 a.m. (1430 GMT).

 

U.S. Treasury Under Secretary for Domestic Finance Brian Roseboro speaks before the Mortgage Bankers Association Annual Washington Leadership Conference, Washington, D.C., 10:50 a.m. (1550 GMT).

 

Treasury Department holds weekly sale of 4-week bills, about 1 p.m. (1800 GMT).

 

http://www.reuters.com/financeNewsArticle....storyID=4527119

[zensmoke]

 

Dollar Index Cash (NYBOT:DXY0)

[brian4]

Morning crew--70 minutes from the bell-open window-may the "force" be with us. There is some chicanery afoot that futures turnaround stunk someone put their foot on the gas pedal.