Headlines...

NEW -> Contingent Buyer Assistance Program
<p>This will scare you.</p>

<p>Any easing in Jumbo rates is because banks are betting against the farm that investors will start buying these loans again. It is all or nothing. Banks are raising capital right now with silly high interest rates so they can "temporarily fund loans and hold them on their own balance sheet. They are doing this on the sole premise that the secondary market will open up again, at which point they can then sell the loans. They have no other choice other than to originate no loans and make no profit.</p>

<p> </p>
 
<p>Between awgee, lendingmaestro, and IR's posts I feel like I'm watching Financial Pictionary. When added to the news, and blogs like Calculated Risk, it becomes obvious the world is playing a game of Financial Jenga.</p>

<p>Keep up the good work.</p>
 
<p>Awgee.. . my post was actually directed at the mean-spirited Irvinerenter (who by the way is single-handly dragging down the real estate market in the O.C.) </p>

<p>BTW: I love Jenga and pictionary but Taboo and Trivia Pursuit my favorite. </p>
 
IC - All the realtors I run into say it is the media which is blowing things out of proportion. According to them, prices are not falling in ________. It is just the mediaand now is a great time to buy. I don't think the realtors know IR, but if they did, I am sure it would be his fault too.
 
With IHB having a greater effect on the economy than the global credit markets, Zovall ought to run for president. Clearly, he is the alter ego of <a href="http://www.youtube.com/watch?v=z86zW8z8hsc">the hypno toad</a>.
 
<p>Welcome back Eva. . .hope you had a good vacation</p>

<p>I would vote for Zovall for president if Steven Colbert had not announced his candidacy yesterday.</p>

<p><a href="http://www.yahoo.com/s/709656">www.yahoo.com/s/709656</a></p>
 
<p class="textBodyBlack">"One of these things is not like the others,


One of these things just doesn't belong,


Can you tell which thing is not like the others


By the time I finish my song?





Did you guess which thing was not like the others?


Did you guess which thing just doesn't belong?


If you guessed this one is not like the others,


Then you're absolutely...right!"</p>

<p class="textBodyBlack">Sesame Street: <em>One of these things is not like the others</em>


</p>

<p class="textBodyBlack">"U.S. home construction starts fell in September to their lowest level in more than 14 years, while consumer prices rose at the sharpest rate in four months, separate reports showed on Wednesday. </p>

<p class="textBodyBlack">Weak housing data boosted U.S. government bond prices and the U.S. dollar slipped versus euro and yen...</p>



<p>U.S. stocks were still expected to open higher with investors more focused on healthy corporate profit reports." </p>

<p><a href="http://www.cnbc.com/id/21341833">www.cnbc.com/id/21341833</a></p>
 
But Galitski, the Costa Mesa agent, expects the market to bottom out in the next few months. "I've been getting more contacts from buyers in the last mont than in the last six months", he said. "Buyers on the sidelines may see record-low sales and price drops as signals that the bottom is near", he said. "I think they're saying, 'We're getting close now, It's time to get back into the market.'"
 
<p>Awgee... Galitski may be right... I mean it may bottom out in 18-24 months.</p>

<p>My favorite quotes from the OC Reg article:</p>

<p>"Those are the affluent neighborhoods in Orange County, so these people didn't indulge in the (exotic loan) craziness nearly to the extant that others did," said Walter Hahn, an Irvine real estate consultant. </p>

<p>Lenders issued 496 jumbo loans in September, down from 1,024 in August. "It's a huge drop, and it impacts Orange County more than other counties...because a higher portion of those loans are there, "Karevoll said (Dataquick guy). "The lenders turned the spigot off for those loans."</p>

<p>"Rick Gorman gave up trying to sell an <strong>investment</strong> property in Rossmoor after failing to get a single offer in three months, even after dropping the price from $950,000 to $899,000...'We decided there was no sense <strong>in giving it away</strong>," said Gorman, 52, a marine surveyor. 'The real estate market will come back at some period....(We'll) wait it out." (Yeah, good luck with that)</p>

<p> </p>
 
<p>It bugs me how you've got ppl saying "this is bad, there's no end in sight" and yet at the same time others say "yeah, no problem, this will all bottom out in 6-12 months." What's up with that?





And about the buyers thinking there's a bottom because sales are at record lows and prices are dropping, that's similar to the absurd logic some RE people are trying to employ that says since the declines recently roughly matched what they were at the end of the last correction, we must be at or near the bottom. Sheer ridiculousness. </p>
 
Just because something happened before, doesn't mean it will happen again in the same way. So a past bottom is one datum of information which means practically nothing at present. Like a coin toss the previous 10 heads and tails records have nothing to do with your next

coint toss.



We are in uncharted waters.
 
Great, scathing article by Seth Jayson over at fool.com that rails Hank Paulson. Only problem may be that the points are too darn logical for some of the ppl in Washington to take real notice.





<a href="http://www.fool.com/investing/general/2007/10/16/more-housing-hanky-panky.aspx">http://www.fool.com/investing/general/2007/10/16/more-housing-hanky-panky.aspx</a>





"Now, Paulson -- like all the other politicians in Washington -- is scrambling for a way to fix the mess without any pain for anyone. Obviously, this is absurd. Billions of dollars in fictional equity were created via the housing Ponzi scheme, and these guys are dead set on preserving as much of it as possible, no matter what the cost."





"Now, Paulson says lenders should work with home owners to refinance these overpriced houses before the interest rates reset and they can no longer afford them. Surely, he knows that the funding for those loans was provided <em>only on the condition</em> that they would someday reset at rates that make medieval usurers look kind."





Many more gems in this thing...
 
I think Seth almost has it right... the loans were provided on terms that would practically guarantee an early payoff via re-fi or sale, turning a 30-yr loan into a 1-, 2-, or 3-yr loan. As long as prices were rising and sales were quick, that plan works very well. When it doesn't...
 
Nude, Tanta sums it up nicely when she says that people were essentaily buying houses with borrower-underwritten bridge loans. Lenders were lending short while pretending to lend long.
 
<img height="345" alt="Photo" width="260" border="0" src="http://d.yimg.com/us.yimg.com/p/ap/20071017/capt.e33f51f93a0a4547a2d1a697b1d5cfa8.housing_starts_gfx646.jpg?x=260&y=345&sig=.ah6JAJgq.hb95C6il7rOw--" />
 
<p>I just caught a talking head on MSNBC talking about housing starts. His statement was housing starts typically fall 50% from peak during the down cycle of real estate and that there was plenty of pain still to come since we're only off 25-30%.</p>

<p> </p>

<p> </p>
 
<p>I do not understand why the wall street people pretend that the mortgage thing is so difficult to understand, The whole 1 or 2 or 3 year ARMs loan is nothing more than people buying houses on margin. This is no different than when people bought stock in the 1920s by putting down 5 or 10 percent of the the price of the stock. Works well when the stock market goes up but look out when stocks come down. </p>
 
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