Property Meltdown

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Property Meltdown

Postby Pixel8r » Thu Dec 10, 2009 10:09 pm

U.S. Foreclosures to Reach 3.9 Million in Second Record Year

Dec. 10 (Bloomberg) -- Foreclosure filings in the U.S. will reach a record for the second consecutive year with 3.9 million notices sent to homeowners in default, RealtyTrac Inc. said.

This year’s filings will surpass 2008’s total of 3.2 million as record unemployment and price erosion batter the housing market, the Irvine, California-based company said.

"We are a long way from a recovery," John Quigley, economics professor at the University of California, Berkeley, said in an interview. "You can’t start to see improvement in the housing market until after unemployment peaks."

Foreclosure filings exceeded 300,000 for the ninth straight month in November, RealtyTrac said today. A weak labor market and tight credit are "formidable headwinds" for the economy, Federal Reserve Chairman Ben S. Bernanke said in a Dec. 7 speech in Washington. The 7.2 million jobs lost since the recession began in December 2007 are the most of any postwar economic slump, Labor Department data show. Unemployment, at 10 percent last month, won’t peak until the first quarter, Quigley said.

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Re: US Property Meltdown

Postby markinspain » Thu Dec 10, 2009 10:13 pm

I think the commercial real estate crash will be worse than the private one.

Incidently, I wonder what the rate of foreclosures (US) and repossessions (UK) would have been like if interest rates hadn't come down so far?
People say, "Don't you miss it, Mark?" I say, "What, England? Nah. f**king place. It's a dump. Don't make me laugh. Grey, grimy, sooty. What a sh*t hole. What a toilet. Every **** with a long face shuffling about, moaning, all worried. No thanks, not for me." They say, "What's it like, then, Spain?" And I'll say, "It's hot. Hot. Oh, it's f**king hot. Too hot? Not for me, I love it."
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Re: US Property Meltdown

Postby Pixel8r » Thu Dec 10, 2009 10:15 pm

The Coming Wave Of Debt Defaults
Sam Rovit and David Sweig, 12.08.09, 05:29 PM EST
The worst is not yet past. Be prepared.

The trouble in the commercial real estate markets is getting ugly, as the precarious situation of Dubai World has made all too clear.

Expect many more unpleasant situations like that one. Speculative-grade debt issuers are bracing for the default rate to hit 12% to 14% by the end of 2009, according to our projections at Bain & Company. The last time the U.S. economy experienced default rates of that magnitude was 28 years ago. The current long-term average default rate is 4.5%; as recently as 2007, it was just under 1%. These failures are not limited to small or marginal firms; they are happening at large companies with at least $100 million in assets, and have, after all, already hit legendary businesses like General Motors, Lehman Brothers ( LEHMQ - news - people ) and General Growth Properties ( GGP - news - people ).

What's significant is not just that big, high-profile companies have defaulted--by missing a payment, making a distressed exchange with lenders to buy time or filing for bankruptcy--but that virtually every sector of the U.S. economy has been touched, including automotive, home building, industrial products, entertainment, media and financial services. Now watch for commercial real estate.


Meanwhile a big chunk of recent defaults remain disasters waiting to happen, since they've been papered over by "extend and pretend" refinancings, amendments and waivers. About a third of those defaults have resulted in distressed exchanges, and only about a quarter have led to actual bankruptcy filings. This reflects the natural desire among issuers to buy time and fight another day, and the strong preference among lenders to avoid a loss or the hassle of taking control.

Delay, however, can't fix the underlying problem of a weak balance sheet. The cost of postponement is likely to be more debt or higher rates, which makes the ultimate challenge even greater. In the past, management teams could often avoid the day of reckoning by refinancing, but the combination of recession and evaporating credit has made much less credit available.

As if that weren't stressful enough, a big new wave of maturities is coming due, at least $200 billion in commercial real estate senior bank loans and commercial mortgage-backed securities in the next 24 months. Thanks to the boom in leveraged deals of the early 2000s, we will see a 50% increase in speculative grade debt coming due next year, and a doubling the year after.

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Re: US Property Meltdown

Postby grumpy-old-man » Fri Dec 11, 2009 8:00 am

markinspain wrote:I think the commercial real estate crash will be worse than the private one.

Incidently, I wonder what the rate of foreclosures (US) and repossessions (UK) would have been like if interest rates hadn't come down so far?


yes, I keep saying this to Mrs GOM & others. I think people are prolonging the agony & virtually just renting their bank owned property for another 2 years. I do think rates will stay low for a good few years though. The property prices will crash even with low rates due to the huge dept per person in all other areas & massive unemployment anyway Mark.
iirc these are your thoughts also ? wrt UK & US (especially the UK though, highest debt per person in the western world)
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Re: US Property Meltdown

Postby markinspain » Fri Dec 11, 2009 9:33 am

grumpy-old-man wrote:
yes, I keep saying this to Mrs GOM & others. I think people are prolonging the agony & virtually just renting their bank owned property for another 2 years. I do think rates will stay low for a good few years though. The property prices will crash even with low rates due to the huge dept per person in all other areas & massive unemployment anyway Mark.
iirc these are your thoughts also ? wrt UK & US (especially the UK though, highest debt per person in the western world)


Yes, the UK government controlled banks have given people a 'stay of execution' until after the election. I wonder what will happen when the 'new lot' open up the books and find out just how bad things really are?

In the meantime, the low rates have a two fold advantage for the banks, not having to repo and using the carry trade to invest taxpayers money elsewhere to rebuild their balance sheets.

I can't see houseprices really moving up or down much until interest rates eventually rise. Until then, the only movement in the market will be for forced sellers and cash buyers.
People say, "Don't you miss it, Mark?" I say, "What, England? Nah. f**king place. It's a dump. Don't make me laugh. Grey, grimy, sooty. What a sh*t hole. What a toilet. Every **** with a long face shuffling about, moaning, all worried. No thanks, not for me." They say, "What's it like, then, Spain?" And I'll say, "It's hot. Hot. Oh, it's f**king hot. Too hot? Not for me, I love it."
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Re: US & UK Property Meltdown

Postby fwiw » Fri Dec 11, 2009 9:41 am

Interesting article here, although would have thought PM's would have got a mention:

http://www.ft.com/cms/s/0/742025ee-e5b4 ... ck_check=1

Poorest half of UK owns just 9% of wealth
By Simon Briscoe, Statistics Editor

Published: December 10 2009 17:55 | Last updated: December 10 2009 17:55

Official figures have for the first time quantified the extent of the wealth gap in the country – the least well-off half of households own just 9 per cent of the wealth – and shown that many households were poorly placed to endure the recession.

The Office for National Statistics survey, released on Thursday, shows that household wealth, estimated at £9,000bn, is dominated by pensions and property assets, each accounting for two-fifths of the total. The other components, financial wealth and physical wealth – such as cars and antiques – each accounted for one-ninth of the total.
There is no SPOON deflation.
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Re: US & UK Property Meltdown

Postby igglepiggle » Fri Dec 11, 2009 9:56 am

markinspain wrote:I can't see houseprices really moving up or down much until interest rates eventually rise. Until then, the only movement in the market will be for forced sellers and cash buyers.

I'm not convinced there is going to be much of a crash in nominal UK house prices.

There are few remaining players in the mortgage market and they have such a dominant position, and cartelism seems to be actively encouraged, and liquidity provision from BoE seems just about unlimited. They can pretty much control the residential housing market.
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Re: US & UK Property Meltdown

Postby Pixel8r » Fri Dec 11, 2009 10:03 am

igglepiggle wrote:
markinspain wrote:I can't see houseprices really moving up or down much until interest rates eventually rise. Until then, the only movement in the market will be for forced sellers and cash buyers.

I'm not convinced there is going to be much of a crash in nominal UK house prices.

There are few remaining players in the mortgage market and they have such a dominant position, and cartelism seems to be actively encouraged, and liquidity provision from BoE seems just about unlimited. They can pretty much control the residential housing market.

But what do you think will happen when inflation starts to pick up? I think inflation will start to pick up soon, starting in the 1st quarter of 2010 with the VAT increase. Then interest rates will have to start rising at some point and the BTL crowd, who have been spared from this meltdown so far, will find themselves in deep trouble.

IMO the over leveraged BTLer's will suffer at some point during this crisis. Currently they are laughing with their 0.5% trackers and loads of people looking to rent.

I guess there might not be that much of a change in nominal prices, but when you price in gold things will be very different.
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Re: US & UK Property Meltdown

Postby igglepiggle » Fri Dec 11, 2009 10:34 am

Pixel8r wrote:But what do you think will happen when inflation starts to pick up? I think inflation will start to pick up soon, starting in the 1st quarter of 2010 with the VAT increase.

High inflation is the government/banks get out of jail free card, I think they will continue to encourage it for some time, while spouting utter rubbish about we all have to make sacrifices to combat the wage price spiral.
Pixel8r wrote:Then interest rates will have to start rising at some point and the BTL crowd, who have been spared from this meltdown so far, will find themselves in deep trouble.

IMO the over leveraged BTLer's will suffer at some point during this crisis. Currently they are laughing with their 0.5% trackers and loads of people looking to rent.

It's certainly possible the government will raise rates sharply at some point, but I'm not seeing much desire anywhere to defend the currency. Also rather than releasing a flood of repo'd homes onto the market, in a high inflation environment with ridiculous liquidity provision the banks may elect just to wipe out the investor's equity keep the asset and set up their own rental business. I seem to recall seeing an article about how one of the big banks was engaged in aquiring an established rentals agency business for this purpose, but cannot remember where.
Pixel8r wrote:I guess there might not be that much of a change in nominal prices, but when you price in gold things will be very different.

That underpins the strategy I'm pursuing.
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Re: US & UK Property Meltdown

Postby LRYMSH » Fri Dec 11, 2009 11:55 am

get ready for the next wave

Image

and yes commercial usually falls quicker

and dont forget the private equity/(debt) bubble
Government is the great fiction, through which everybody endeavors to live at the expense of everybody else. -- Frederic Bastiat
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Re: US & UK Property Meltdown

Postby grumpy-old-man » Fri Dec 11, 2009 2:45 pm

Pixel8r wrote:But what do you think will happen when inflation starts to pick up? I think inflation will start to pick up soon, starting in the 1st quarter of 2010 with the VAT increase. Then interest rates will have to start rising at some point and the BTL crowd, who have been spared from this meltdown so far, will find themselves in deep trouble.

IMO the over leveraged BTLer's will suffer at some point during this crisis. Currently they are laughing with their 0.5% trackers and loads of people looking to rent.

I guess there might not be that much of a change in nominal prices, but when you price in gold things will be very different.


I agree.
I am looking forward to Krusty Allslap & Flip Spender's new show:

leverage, leverage, leverage ;)

actually I c0cked up with that attempt at wit, it should have been:

deleverage, deleverage, deleverage
Last edited by grumpy-old-man on Fri Dec 11, 2009 2:55 pm, edited 3 times in total.
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Re: US & UK Property Meltdown

Postby grumpy-old-man » Fri Dec 11, 2009 2:47 pm

LRYMSH wrote:get ready for the next wave


people also forget we have our own UK NINJA's & boy are they worth more than the US one's. :o :lol:
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Re: US & UK Property Meltdown

Postby Pixel8r » Mon Dec 14, 2009 1:05 pm

grumpy-old-man wrote:people also forget we have our own UK NINJA's & boy are they worth more than the US one's. :o :lol:

I wish the UK had the same system as in the states, seems a lot fairer.

Banks Take Losses on Short Sales as Foreclosures Soar
By John Gittelsohn and Margaret Collins

Dec. 4 (Bloomberg) — Drew Schlosser tried for two years to sell his three-bedroom Punta Gorda, Florida, waterfront condominium for less than he owed on its two mortgages. The deal only went through last month when Wells Fargo & Co. agreed to take a $165,000 loss on the loans.

Even after he had an offer of $155,000 for the property, it took five months for the San Francisco-based lender to approve the purchase, a so-called short sale, in which the bank accepts less than the balance owed on a property.

Schlosser said earlier offers had fallen through as bidders lost faith the bank would take less than the $320,000 in two mortgages.

“It was just kind of a mess,” said Schlosser, 31, a market research company director living in Estero, Florida. “You really have to get buyers who are patient.”

Banks are beginning to go along with short sales in increasing numbers, three years into a U.S. housing slump that pushed the economy into a recession and cut resale values by 30 percent from the peak in July 2006. Short sales almost tripled to 40,000 in the first six months of 2009 from the same period a year earlier. Yet for each short sale, there were 25 foreclosures started or completed in the first half of this year, according to data from the Office of Thrift Supervision and the Office of the Comptroller of the Currency.

“It’s really finally dawning on banks that they’re better off with a short sale,” said Richard Green, director of the Lusk Center for Real Estate at the University of Southern California in Los Angeles. “I think banks were in denial.”
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Re: US & UK Property Meltdown

Postby igglepiggle » Mon Dec 14, 2009 2:35 pm

grumpy-old-man wrote:
LRYMSH wrote:get ready for the next wave


people also forget we have our own UK NINJA's & boy are they worth more than the US one's. :o :lol:

But we don't have non-recourse loans, and we do have a very supportive tax policy for home ownership. Also our housing benefit system is very supportive of BTL. Not an endorsement on my part, simply a statement of fact as I see them.
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Re: US & UK Property Meltdown

Postby Pixel8r » Wed Dec 23, 2009 10:46 pm

November new home sales sink 11 percent
New home sales fall 11 pct. in Nov. to lowest level since April; housing recovery still shaky

WASHINGTON (AP) -- Sales of new homes plunged unexpectedly last month to the lowest level since April, a sign the housing market recovery will be rocky and heavily dependent on the generosity of Uncle Sam.

The 11 percent slump from October's pace shows that consumers are taking their time following an extension of a deadline for first-time buyers to qualify for a tax credit. The incentive was set to expire at the end of November, but Congress pushed back the date to April 30 and expanded the program to include current homeowners who relocate.

"They don't have to act today," said David Crowe, chief economist at the National Association of Home Builders, who called the results "pretty awful."

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Re: US & UK Property Meltdown

Postby markinspain » Tue Dec 29, 2009 8:45 am

Doesn't look like things are really getting better in the US.

'No, folks, that's not the reason. The reason sales fell is that they're still falling everywhere. What's happening in the "existing home" sales numbers is that foreclosure sharks are taking a bite here and there, in many cases generating double counts in the "existing home sale" category, never mind the alleged data source in the first place. But even the NAR acknowledges that 33% of existing home sales were foreclosures, not actual organic "meeting of the minds" transactions. Take those out and existing home sales didn't rise 7.4%, they instead did their best imitation of a cliff-dive, with organic sales being a mere 4.38 million units (annualized), which is a mid-to-late 1990s print (and then again around the 1978 time frame).'

more...

http://seekingalpha.com/article/179841- ... sb_popular

P.S. Here's a link within the link to some amazing figures...

http://mhanson.com/blog
People say, "Don't you miss it, Mark?" I say, "What, England? Nah. f**king place. It's a dump. Don't make me laugh. Grey, grimy, sooty. What a sh*t hole. What a toilet. Every **** with a long face shuffling about, moaning, all worried. No thanks, not for me." They say, "What's it like, then, Spain?" And I'll say, "It's hot. Hot. Oh, it's f**king hot. Too hot? Not for me, I love it."
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Re: US & UK Property Meltdown

Postby Pixel8r » Wed Dec 30, 2009 2:17 pm

Article on seeking alpha about Fannie and Freddie and the state of the US market. Has some interesting statistics towards the end of the article;

Fannie / Freddie - What Does Treasury Know?

...If you're wondering how bad this is in the so-called "prime" loans the Mortgage Bankers Association lays it all out:

6.84% of prime loans are now delinquent (at least one payment behind but NOT in foreclosure) and 3.20% are in foreclosure. This means that almost 1 in 10 PRIME LOANS are either late or in foreclosure.

FHA loans are running close to 20% between delinquent and foreclosure-in-process. That's one in FIVE.

And of subprime loans, 41% are either delinquent or in foreclosure. Forty one percent...
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Re: US & UK Property Meltdown

Postby markinspain » Wed Dec 30, 2009 2:26 pm

Pixel8r wrote:Article on seeking alpha about Fannie and Freddie and the state of the US market. Has some interesting statistics towards the end of the article;

Fannie / Freddie - What Does Treasury Know?

...If you're wondering how bad this is in the so-called "prime" loans the Mortgage Bankers Association lays it all out:

6.84% of prime loans are now delinquent (at least one payment behind but NOT in foreclosure) and 3.20% are in foreclosure. This means that almost 1 in 10 PRIME LOANS are either late or in foreclosure.

FHA loans are running close to 20% between delinquent and foreclosure-in-process. That's one in FIVE.

And of subprime loans, 41% are either delinquent or in foreclosure. Forty one percent...


See my previous post Pixie! Keep up!
People say, "Don't you miss it, Mark?" I say, "What, England? Nah. f**king place. It's a dump. Don't make me laugh. Grey, grimy, sooty. What a sh*t hole. What a toilet. Every **** with a long face shuffling about, moaning, all worried. No thanks, not for me." They say, "What's it like, then, Spain?" And I'll say, "It's hot. Hot. Oh, it's f**king hot. Too hot? Not for me, I love it."
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Re: US & UK Property Meltdown

Postby fwiw » Wed Dec 30, 2009 5:47 pm

Not really sure that this video of Matt Taibi goes here, but does mention forclosure in US..

http://www.pbs.org/moyers/journal/12182009/watch.html

December 18, 2009


BILL MOYERS: Welcome to the Journal.

Something's not right here. One year after the great collapse of our financial system, Wall Street is back on top while our politicians dither. As for health care reform, you're about to be forced to buy insurance from companies whose stock is soaring, and that's just dandy with the White House.

Truth is, our capitol's being looted, republicans are acting like the town rowdies, the sheriff is firing blanks, and powerful Democrats in Congress are in cahoots with the gang that's pulling the heist. This is not capitalism at work. It's capital. Raw money, mounds of it, buying politicians and policy as if they were futures on the hog market.

Here to talk about all this are two journalists who don't pull their punches. Robert Kuttner is an economist who helped create and now co-edits the progressive magazine THE AMERICAN PROSPECT, and the author of the book OBAMA'S CHALLENGE, among others.

Also with me is Matt Taibbi, who covers politics for ROLLING STONE magazine where he is a contributing editor. He's made a name for himself writing in a no-holds-barred, often profane, but always informative and stimulating style that gets under the skin of the powerful. His most recent article is "Obama's Big Sellout," about the President's team of economic advisers and their Wall Street connections. It's been burning up the blogosphere. Welcome to both of you.
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Re: US & UK Property Meltdown

Postby Pixel8r » Mon Jan 04, 2010 9:47 pm

Pull the other one Ben it's got bells on.

Bernanke Says Low Rates Didn’t Cause Housing Bubble

Jan. 3 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said the central bank’s low interest rates didn’t cause the past decade’s housing bubble and that better regulation would have been more effective in limiting the boom.

"The best response to the housing bubble would have been regulatory, rather than monetary," Bernanke said today in remarks to the American Economic Association’s annual meeting in Atlanta. The Fed’s efforts to constrain the bubble were "too late or were insufficient," which means that regulatory actions "must be better and smarter," he said.
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