George McDuffee

that gave AAA ratings to the synthetic structured residential mortgage [and commercial mortgage, student loan, and credit card receivable] backed collateralized debt obligations that provided the foundation for the spontaneous combustion currently burning the global credit "house of cards" to the ground.

Without knowing their methodology, sources of data, and objectives it is difficult to evaluate the validity of their conclusions, although these seem plausible. Note that the particular methodology used is not right or wrong, but may be better or worse for the particular use you wish to make of the data.

There is not a uniform national real estate market, and different conditions exist in different areas of the country. Indeed in many rural areas there was no [or very little] run-up or boom in residential housing and there very little "bust," albeit financing has gotten somewhat more difficult, although still available from the many solvent local and regional banks for qualified borrowers.

A possibly more accepted residential value metric is Case-Shiller.

or equivalent required to pen]

also see

FWIW -- an additional drop of "only" 10% in aggregate residential house prices seems far too low given the 18 month supply of new houses in many areas, the huge run-up in values in many "hot" urban areas, tightening lending terms, and probability of a serious recession or economic contraction. I think your estimate of 15-20% is far more likely, however even this may be low.

It should also be noted, despite repeated administration, banking and media claims to the contrary, an active market exists for the residential mortgage backed CDOs. The problem is that this market is rating the values of these derivatives at 15 to 60 cents on the dollar. ==>The market that does not exist is the one that prices these CDOs at face/nominal value.

--------------- You may well be right. California is the "poster child" for the housing bubble.

In the LA metro statistical area, the median house sale price was

10X!!!!! the median family income. Either the median family income increases by 4X or the house prices drop by 3/4s. In the long term, it's as simple as that.

Unka' George [George McDuffee]

------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).

-------------- Wall Street has long known "trees don't grow to the sky."

What were these builders and bankers thinking? What were they smoking?

Other factors are the absolute size of the units, e.g several hundred thousand dollars each, and the fact these are "fixed" and cannot be moved from areas of surplus/low prices to areas of shortage/higher prices. Also housing is a very perishable item, a month's rent or a month's loss of interest on the capital invested can never be recaptured.

By contrast the farm price support program is a piece of cake. Perhaps the US government can buy up the surplus houses, or can issue "house stamps" like food stamps......

Unka' George [George McDuffee]

------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).

The builders are thinking they have to catch the wave while they can. Two of my friends caught that wave and made a bundle. As for the bankers, we've heard that story here numerous times.

'Dunno. I suspect that the market will soak up those excess houses sooner or later. Some people will take a bath. That's life.

-- Ed Huntress

The bail out plan explained by Forest Gump.......... Sort of explains it in basic terms that we can all understand

Forrest Gump Explains Mortgage Backed Securities

Mortgage Backed Securities are like boxes of chocolates. Criminals on Wall Street stole a few chocolates from the boxes and replaced them with turds. Their criminal buddies at Standard & Poor rated these boxes AAA Investment Grade chocolates. These boxes were then sold all over the world to investors.

Eventually somebody bites into a turd and discovers the crime. Suddenly nobody trusts American chocolates anymore worldwide.

Hank Paulson now wants the American taxpayers to buy up and hold all these boxes of turd-infested chocolates for $700 billion dollars until the market for turds returns to normal.

Meanwhile, Hank's buddies, the Wall Street criminals who stole all the good chocolates are not being investigated, arrested, or indicted.

Mama always said: "Sniff the chocolates first, Forrest."

cavelamb himself wrote: (...)

Thanks Richard. I think I understand now.

Crooked is as crooked does.

--Winston

On Tue, 21 Oct 2008 10:46:12 -0700, the infamous Gunner Asch scrawled the following:

My property tax bill was delivered today. Surprise! It's higher than last year, and last year, during the first year of the housing drop, it was higher than the year before. Go figure! GDMFSOBs.

Hurrah! So we're down to 19,989,000 now, are we?

-- "Politics is the art of looking for trouble, finding it whether it exists or not, diagnosing it incorrectly, and applying the wrong remedy." -- Ernest Benn

Forest Gump would likely notice that Henry Waxman isn't going to investigage fannie and fredie until after the election. Guy is usually hot to trot on corruption. Smells like another turd in the chocolate box to me.

Wes

Richard,

You did it again !

And your explanation of it passes the sniff test.

How do you do it?

Flash

I think a better approach might be to sort the boxes and throw the turds away, while sorting and re-packaging the chocolates which will someday be worth a bit more than he intends to pay for the boxes of mixed turds.

+

I dont know. However the For Sale signs are still up, though some have recently changed to For Rent...and still no takers. I suspect the owners have dispaired of selling, so are trying to make their monthly mortgage payment by renting them out...but given the long periods of time some are up...trying to rent them out for more than anyone can afford

Im seeing fewer and fewer motor homes and bigger travel trailers for sale on Craigslist (Im personally looking for a 25' travel trailer to replace the small piece of crap I live in during the week in So. Cal)...and fewer and fewer Vacancy signs on RV parks and mobile home parks that will accept such...Im guessing that those foreclosed out of their homes are moving into RVs and travel trailers. Or renting the homes the Illegals used to occupy...which has to be culture shock...moving out of a home only a few years old, to a piece of shit filled with roaches......

Ill ask some folks I know in the real estate business about some stats for my area.

Shrug

Gunner

Perfectly normal for your ever expanding local council with ratepayer expectations growing every year. My council rate account went up by 8.8% this year, more than double the inflation rate and, like yours, last year's was higher than the year before. Thank goodness I get a 50% age pensioner discount from the state government. Also received my drivers licence renewal yesterday, have to go and get a pretty picture taken at the licencing centre to be valid for the next 5 years, free for us old farts.

Alan

I'm not far from Gunner.

My neighbor's house sold for $375k three years ago, was foreclosed on two months ago, went on the market for $208K yesterday.

The last appraisal on my house was $368K. Four years ago. I'm afraid of what it might be now.

-Frank

You can try zillow.com. It is a very nicely done website.

According to it, my house is worth between 15% to 20% above what I paid for it 6 years ago. It is worth approximately 10-15% less than it would sell for 1-2 years ago.

Aw Shucks, Flash, t'wern't nothin', it just came to me, (via email).

Calculating Where Home Prices Will Land

A superbly well researched article. Another great one from NY times.

Thanks for the heads up.

Problem is that you can cherry pick most any value you like.

The long term rule of 2 to 2_1/2 X household earnings for the maximum house price, with [downward] adjustments for other debts such as automobile, student loan and credit card, still seems to be valid.

As I indicated in another post, examination of the available MSA [metro statistical area] data indicates that in many areas, mainly the bubble areas, a household would still have to be in the top 8th and in many cases the top 9th income deciles [top 20% and top 10%] of the region to afford even the median [1/2 sell for more, 1/2 sell for less] priced home.

As John and Ed have pointed out, when you have a consumer based economy, it is very foolish to cut the individual and family disposable real income, particularly when the consumers are already borrowed to the hilt, whether by lowering wages, cutting benefits or raising taxes and interest rates.

Unka' George [George McDuffee]

------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).

========== Looks like you nailed it in your area. [65% drop!!!!]

------------------- California Home Sales Revive, But Not Without Intense Pain By MICHAEL CORKERY and JONATHAN KARP LOS BANOS, Calif. -- In this California city, one of the hardest hit in the national housing crash, there's good news: Homes are starting to sell again.

Across hard-hit California, sales volumes rose 65% in September compared with a year ago, said MDA DataQuick, a San Diego-based real-estate information service. The bad news is that the latest round of sales is unleashing another round of pain in cities such as Los Banos, a commuter community in California's Central Valley. ==>With home prices already down 66% from their peak here,

Remember that Fitch is one of the 3 rating agencies that had been saying all along that Wall Street was entirely on a safe path, and there was no undue risk. They were being grilled on Capitol Hill yesterday and today over their failure to discern anything wrong in the investment market.

I'd be very leery of making any decisions based on utterances from such a clueless or corrupt outfit. (My guess is it is the latter.)

Jon