Those Were the Days
I do not cover the housing sales and price numbers much anymore because we all already know how they are going to go. I still get a kick that after 2 years of terrible number, the pundits still try to get excited about rising sales going into the spring and summer. Barry Ritholtz highlights the silliness of this idea here.
What caught my attention today was the statements by National Association of Realtors (NAR) chief Larry Yun who basically was whining that appraisals are now having some basis in reality, and this is problematic come loan closing time (via Clusterstock):
"Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting a loan."...
"Lenders are using appraisers who may not be familiar with a neighborhood, or who compare traditional homes with distressed and discounted sales,” [Yun} said. “In the past month, stories of appraisal problems have been snowballing from across the country with many contracts falling through at the last moment. There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected."
Of course Mr Yun and his predecessor David Lereah had no issue when appraisal fraud was showing 25% price gains in 3 months during the bubble. Those appraisals were in no way "faulty", just the more recent ones that show home prices are falling.
It is like the line form the intro song to the classic TV show "All in the Family" where they finish "Those were the days!!" Oh to have a free hand in appraisals! That was a good time. It speaks volumes about our current lack of any real ability to feel anything that Mr. Yun both said this out loud and was then not asked to step down. I have Mr. Ritholtz's new book "Bailout Nation" on tap for reading tonight and tomorrow and I hope to have a quick review up later in the week.
Jesse's Cafe Follow Up
Last post I linked to an article that I wish I had written. The post at Jesse's Cafe Americain really fleshed out that inflation and deflation are in fact choices by a government in a fiat system.
Of course this discussion is very heated right now, and I imagine Jesse got quite a bit of input on the piece, as I do when I write about this topic. Jesse must have had quite a bit of feedback because there is a follow up story today that even further develops the thesis. As was the case yesterday, you really should read the whole thing. (Side note: Stagflationary Mark, Jesse sees the risk of Stagflation as very high. No word on Negflation however, but only those in "the know" really have that on their plate!)
Another forward looking fellow is Ilargi at The Automatic Earth. In his last post I think Ilargi offers up some advice that should be taken into consideration, especially as the "green shoot" bombardment has mellowed quite a bit:
The mortally wounded banks that play healthy with the help of the government will get to do so even more if Obama's regulatory reforms plans are accepted. But it's just the most expensive exercise in futility the world has ever known. Not that that comes as a surprise to you anymore, I’m sure. The losses will keep on piling on, and they will come from all sides. Credit cards defaults, commercial real estate, which is plunging at a 30-50% clip as we speak, and has much further downward to go, speculative corporate bonds that are closing in on a 10% default rate,
The World Bank, meanwhile, wants the rich world to cough up $1 trillion to help the poor in other countries. Don't worry, they don't really believe it either. The rich world will have more than enough poor of its own to take care of. Please don't you believe that it will.
And don't believe that there will be a recovery any time soon. Make your decisions based on the assumption that there'll be no recovery for at least a generation. That will save you a lot of hardship.
Makes you think all the world's a sunny day, doesn't it?
If indeed the current crisis is the largest debt debacle in history ( I believe it is) then truer words have never been spoken.
Gold Sales on Tap Because it is Useless
Word out today the the US Congress has passed a bill (link via Mish's site) which included the US approval for the IMF to sell some 400 tons of gold. The IMF is the second leading gold holder with a marker of 3217 tons of gold valued at around 100 Billion dollars.
Mish has some thoughts on the sale:
Some may think that the IMF dumping gold is part of the vast conspiracy to suppress the price of gold. Instead, I propose the IMF sale of gold is sheer stupidity on the part of the IMF. However, given that I do not like the IMF or its meddling, I am glad they are doing it.
Reasons To Cheer IMF Gold Sales
1) If the IMF wants to dump gold in favor of paper assets diminishing in value over time, it's fine by me. I hope they dump it all. It will reduce the amount of meddling they can do down the road.
2) IMF gold sales are a bull market phenomenon. The UK dumping gold at $250 marked the bottom.
3) China is a possible recipient of the gold. If the real reason for this move is to allow China to get rid of some US dollars or treasuries in return for gold I view that as good thing.
Bretton Woods II is coming to an end. That we know. What we do not know is the timeframe or the replacement. However, China may need to accumulate gold for whatever the next agreement might be. IMF gold sales may be a small step down that path.
Gold is consolidating recent gains now. Bear in mind that March to August is generally a seasonally unfavorable period. That is not a prediction of a further pullback, although it is likely. Further consolidation is a good thing that will add fuel for the next leg higher.
I agree on all points though I would say that the FED has on many occasions stated in various minutes and other sources that the price of gold is taken into consideration by them in regards to inflation expectations. When you consider that the FED has now gone "whole hog" along with the Treasury in regards to overt market manipulations, it is no stretch to think they would target gold as well. This is not conspiracy theory, just a logical step forward.
Thinking about Mish's observation that the IMF gold dump "...will reduce the amount of meddling they can do down the road." really got the wheels turning.
"I had a dream, I had an awesome dream"..Lionel Richie "Say You, Say Me"
I too have had a dream, but this was a waking dream, so the sleeper has awoken! (obscure reference)
The Dump Gold It's Worthless Campaign
I would like to invite the entire blogosphere and the mainstream media to get as negative on gold as possible. You can use charts, scare tactics, hand puppets or whatever you like but spread the word that gold is useless. Even worse it is worthless. Sell now, sell all you can. I would ask the holders of gold (physical, or however) to go along and keep all the cash you get, it comes into play in a moment.
After a protracted campaign which should scare the countries of the world (well maybe not the Asian nations, they do love their gold) into dumping their reserves, I would hope to hit a downside target of say $5-$15 dollars an ounce. You do not want to know what silver will be at that point! And now here is stage two...
Goldbugs unite. Deflation callers join hands with the inflation dreamers. Any and all that would see a return to real economics and real responsibility can get on board.
Then we buy it all. Every single ounce. Everything.
The dollar amount required certainly could be attained, well maybe not every single ounce, but the vast share. Then all we have to do is watch the fiat currencies collapse and then WE will have the power! It's simple. It's beautiful!
I just cannot get around how we go about convincing everyone to first sell all their gold, then want it back later. Petty details I say. Who is with me?
For more fun with gold, consider this Onion News Network clip,
US To Trade Gold Reserves For Cash Through Cash4Gold.com:
Funny in a uncomfortable because it is so true sort of way.
Have a good night.
If you want to read a thoroughly enjoyable evisceration of a Nobel Prize economist, here it is.
ReplyDeletehttp://mises.org/story/3530
Bubbles, bubbles, everywhere, and all of them to pop.
Did Krugman cause the housing bubble? No, but Greenspan did. Krugman merely advocated the economic policies Greenspan employed.
Neo-Keynesianism is a morally corrupt and intellectually bankrupt economic philosophy. So, the obvious solution to its total discrediting is, we need more of it!
Sheesh, the whole world has gone completely insane.
Anyway, you're right about appraisals, GYC. I've done literally hundreds of historical price opinions over the last five years for a mortgage insurance company, questioning the appraisal at the time of sale. I have yet to come across one that did not way overvalue the house by using improper comparables.
It's fraud. They're using comparable prices to justify loans on overpriced homes. What they are not using is comparable homes to provide an accurate fair market value.
There were a couple of interesting posts on this exact topic this morning, over at Naked Capitalism and The Big Picture. The National Association of Mortgage Brokers and the National Association of Realtors are both lobbying against appraisal reform, as if either could do anything else.
Full disclosure: I am a dues paying member of NAR, but only because its required for licensing. I hate them. And their economist is an idiot.
The problem with appraisals is this. The appraiser does not have to sell the house. So he has little or no incentive to provide a valuation based on what a willing buyer would reasonably pay. He works for the lender, and his job is to justify the loan by whatever means necessary.
This is the corruption in the system that fueled the housing bubble. Appraisers using faux comps to justify exhorbitant loans on overpriced homes. Not to mention the mortgage brokers, who are unlicensed and unregulated, and the lenders, who were making any and all loans just so they could securitize and sell them. Oh, and the ratings agencies who gleefully placed AAA on all of this toxic crap.
If you want to know the fair market value of your home, ask a real estate broker with at least ten years experience. She will perform a market analysis, look at the history of the subdivision, find comparable sales and listings, and provide you with a fairly accurate price for which your house can sell. Of course, she's not going to do all that for free, only if you sign a listing agreement. Her motivation is to sell the house, because she only gets paid a commission when the house actually sells and the deal closes. So she's certainly not going to overvalue or overprice the house, because if she did it wouldn't sell, and she'd be out the marketing, advertising and showing costs, with nothing in return.
Not like an appraiser, who get paid a fee whether the house sells or not.
The reason why appraisals are coming in low has nothing to do with the new rules or the suggestion that appraisers are killing loans. It's because, in this distressed market, there are not comparables available to justify loan amounts on overpriced homes.
Every seller thinks his house is worth more than it really is. Every buyer thinks he can get his dream home cheap. Try negotiating that deal.
WASHINGTON, June 24 (Reuters) - The Federal Reserve sought to hide its extensive involvement and concerns about Bank of America Corp's (BAC.N) acquisition of Merrill Lynch amid the latter's worsening financial condition, a top Republican congressman said on Wednesday.
ReplyDelete"The committee has already learned that Ben Bernanke and the Federal Reserve made inappropriate threats to fire Bank of America management unless they went ahead with the 'shotgun wedding' that was the Merrill Lynch acquisition," Rep. Darrell Issa of the House Oversight and Government Reform Committee said in a statement released to Reuters.
"The Federal Reserve also engaged in a cover-up and deliberately hid concerns and pertinent details regarding the merger from other federal regulatory agencies," the statement said.
The committee has obtained a number of emails and documents from the U.S. central bank about its behind-the-scenes role in the merger, according to sources familiar with documents.
http://tinyurl.com/lweje2
Benny, Hank and Timmy need to be in a cell with Bubba the Booty bandit.
Kevin
Given the huge interest in this topic I`ll be cranking up some more pointers on how to tackle this issue ,
ReplyDelete