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Someone Is Going To Be Left Holding The Bag

A report from the Wall Street Journal. “A long rally in the housing market stumbled in 2018 and looks poised to slow further. ‘Suddenly the light turned off in the second half of the year, with sales tumbling down and inventory rising,’ said Lawrence Yun, chief economist at the National Association of Realtors.”

“Other developments that weighed on the market are likely to persist, or even worsen, economists said. A record drop in foreign purchases hurt markets in Florida, California, Seattle and New York. Those buyers, who have been put off by higher prices and increasing global tensions, show little sign of coming back.”

“Mortgage lenders are reporting the lowest purchase mortgage demand expectations in the five-year history of Fannie Mae’s survey of mortgage lender sentiment, a signal of bumpy times ahead for the mortgage industry. ‘We think 2017 will be the peak of this cycle’ for home-price increases, said Doug Duncan, chief economist at Fannie Mae.”

“‘My best guess is the housing market really comes into a soft landing. That’s the best-case scenario,’ said Ralph McLaughlin, deputy chief economist at CoreLogic Inc. But, Mr. McLaughlin cautioned, that best-case scenario depends on whether buyers and sellers start to panic as the market continues to slow, especially given how fresh the memories of the 2008 crash are.”

“‘Markets often follow animal spirits or psychology,’ he said. ‘Sometimes a soft landing is perceived as a crash.'”

The San Francisco Chronicle in California. “Three major banks have stopped offering mortgages for homes at the former Hunters Point Naval Shipyard, an extraordinary move likely to complicate the already troubled effort by the city and developers to transform 500 acres of waterfront in San Francisco.”

“The banks, Wells Fargo, Chase and Citi, all confirmed to The Chronicle that they are not providing loans to any buyers at the San Francisco Shipyard development at the moment. They cited reasons related to unresolved questions about the safety of the land where mega-developer Lennar Corp. has built about 450 homes and is planning thousands more.”

“Real estate and economics experts said the decision by the three banks is exceptionally rare and reflects an atmosphere of uncertainty about the shipyard and its future. The move might affect current shipyard homeowners as well as potential buyers, they said, because if banks aren’t lending, people wanting to buy might have to pay in cash, and people wanting to sell could struggle to unload their properties.”

“‘If you freeze financing on that — wow,’ said Denis DeSaix, a real estate appraiser and incoming president of the Northern California chapter of the Appraisal Institute. Depending on the extent of any contamination and the difficulty of removing whatever hazards exist, ‘It could be a ghost town there for a while.'”

“Chris Thornberg, founding partner of Beacon Economics, said the banks’ move could cause serious ripple effects, possibly making it more difficult to pay off construction loans, upsetting the development’s investors and potentially leading to more lawsuits.”

“‘If the banks aren’t lending to people to buy these homes, then everything else falls apart,’ Thornberg said. ‘Basically all hell breaks loose.'”

“Shipyard condos have been designed and pitched as a relatively affordable solution for first-time homebuyers, with some condos previously selling from around $560,000. ‘We’re not talking about high-tech millionaires,’ said Patrick Carlisle, chief Bay Area market analyst for Compass. ‘We’re talking about people buying their first homes, or looking to stay in the city. If they can’t get a loan, it’s over. They can’t buy.'”

“‘In the end, it is mortgage loans that are going to cover this project,’ Thornberg said. ‘And if those aren’t being made, then someone is going to be left holding the bag.'”

“One of the plaintiffs, Salustiano Ribeiro, said he bought a condo at the shipyard last summer and has since grown worried about his health after learning of fraud that occurred in the shipyard cleanup.”

“Ribeiro worries that until all questions are fully answered about Parcel A and what went wrong with the wider shipyard cleanup, he will have a hard time trying to sell his home. ‘I feel stuck in the moment,’ he said. ‘I just want to get out of here.'”

This Post Has 95 Comments
  1. ‘Suddenly the light turned off in the second half of the year, with sales tumbling down and inventory rising,’ said Lawrence Yun’

    The good old “light switch” comparison. Congratulations Larry, first!

    ‘In the end, it is mortgage loans that are going to cover this project,’ Thornberg said. ‘And if those aren’t being made, then someone is going to be left holding the bag.’

    Click!

    1. “Those buyers, who have been put off by higher prices and increasing global tensions, show little sign of coming back.”

      Do home buyers really consider global tensions?

      1. “Mr. Yun said strong underlying demand, especially from millennials who were unable to buy homes when the market was frenzied, will help keep the market relatively flat next year.”

        Strong underlying demand from broke a$$ millennials? LMFAO

        1. Certainly there must be some price point where buying homes would pencil out for Millennials. It just so happens that this price point is alot lower than recent sale prices…alot!

        2. poor suckers unless their parents who got burned can get to them first and guide them not to drink from the crook estate faucet.

      2. No, but global tensions certainly can roil the housing market, for example by making all-cash foreign investors, who until recently were chasing up the market, spontaneously vanish.

  2. ‘My best guess is the housing market really comes into a soft landing. That’s the best-case scenario,’ said Ralph McLaughlin’

    If you look at history, even recent history like Sydney, you’ll see soft landings for manias are wishful thinking. It just gets worser and worser.

    ‘But, Mr. McLaughlin cautioned, that best-case scenario depends on whether buyers and sellers start to panic as the market continues to slow, especially given how fresh the memories of the 2008 crash are’

    Potential buyers aren’t panicked Ralph. Sellers however?

    ‘Markets often follow animal spirits or psychology’

    Speculative markets maybe. You know, I seem to remember a day when shacks were for living and not day trading and phony fix and flip reality shows. It’s the distant past, I know.

    1. Ask Angelo Mozilo about his “50 years in this business I have never seen a soft landing”.

      You’d think this joker UHS would use a different analogy besides “soft landing”

        1. My family became very irate a few years ago when I led them to that spot while we were vacationing in Arizona. But it was worth withstanding their ire for the CR8R photos I was able to take.

    2. >‘Markets often follow animal spirits or psychology’

      ‘Animal spirits’ work to the downside, too, Ralph.

    3. Panic or no panic, mortgage rates are higher, so emotions aside fewer people qualify. Or did I miss the 50% raise everyone else has apparently received.

      1. It’s hard to distinguish between how-much-a-month buyers’ willingness to buy versus they’re-not-going-to-just-give-it-away sellers’ willingness to accept a lower amount than they would have been able to sell for a year ago. But the fact is that higher mortgage rates have a direct, predictable effect of reducing demand, in the sense of reducing the purchase budget constraint of every prospective buyer who needs to use a mortgage loan to finance the purchase, assuming no 50% pay raise. Whether sellers are willing to acknowledge or act on it, the consequence of higher mortage rates predicted by undergraduate-level economic analysis is a lurch of the demand curve to the left, and a resulting drop in the equilibrium price.

  3. ‘We think 2017 will be the peak of this cycle’ for home-price increases, said Doug Duncan, chief economist at Fannie Mae’

    That’s why you make the big bucks Doug.

    But it highlights a good point. I was finding reports about price reductions, etc, long ago. Way before Redfin “broke” the news. This bubble popped a while back, starting with certain cities and markets like luxury. But it popped more than a year ago. The media just ignored it. And the REIC just covered it up as long as possible.

    1. To be fair, the chief economist at Fannie Mae probably doesn’t make “big bucks.” My guess is that’s it’s around $180-200K. Yes it’s a lot, but not compared to an equivalent private sector job.

      1. My guess is that’s it’s around $180-200K. Yes it’s a lot, but not compared to an equivalent private sector job.”

        Probably can’t outsource the workforce and pay himself the savings in Stock RSU’s. Bummer

      2. the idea is that you hold a presigous job at a govt agency …. then parley it to private sector job (maybe rinse/repeat twice) … and then for your last 15 working years as a university to get the really good benefits.

  4. “‘My best guess is the housing market really comes into a soft landing. That’s the best-case scenario,’ said Ralph McLaughlin, deputy chief economist at CoreLogic Inc.

    The parallels between the happy talk by these REIC shills who get paid the big bucks to spin and prevaricate and what we heard back when Housing Bubble 1.0 was bursting are uncanny. Only this time around there’s no excuse for listening to a word these REIC dissemblers or the MSM parrots on their shoulder have to say on the subject.

    1. I always wonder, when reading these quotes, were this UHSs apart of the 2007/2008 calamity? Did they get their Expert License afterwards? We’re they even in this country when it happened?

  5. ‘Suddenly the light turned off in the second half of the year, with sales tumbling down and inventory rising,’ said Lawrence Yun, chief economist at the National Association of Realtors.”

    “Other developments that weighed on the market are likely to persist, or even worsen, economists said. A record drop in foreign purchases hurt markets in Florida, California, Seattle and New York. Those buyers, who have been put off by higher prices and increasing global tensions, show little sign of coming back.”

    Funny it took 6 months for them to acknowledge this…

    1. A record drop in foreign purchases hurt markets in Florida, California, Seattle and New York. Those buyers, who have been put off by higher prices and increasing global tensions, show little sign of coming back.”

      What about my feng shui ? And lucky 8 ?

      1. Won’t help the Chinese gov has clamped down. It is much harder to get $$ out of the country than before. No $$ no West Coast real estate.

    1. “I expect to see prices continue to go up,” Schafer says, “just not crazy double digits. I think we’ll be in a healthier 6 to 8 percent range.”

      Expectations can be a real joykill

      “From Schafer’s perspective, this rebalancing is having a positive impact on real-estate transactions. In recent weeks, she has even seen sellers taking contingency contracts (agreements that allow a buyer to back out of a sale if their own house doesn’t sell). “Anecdotally, I would say that buyers are less panicked,” she says. “Some of the crazy stuff we’ve seen is calming down. Sellers are still getting good prices, but buyers aren’t feeling like they have to put all their chips on the table.”

      Of course they aren’t panicked. Back out at any point speculation buying. A wonderful thing for potential FBs

      “Thinking of buying or selling in the new year? Schafer suggests getting prepared for an early start: “We used to see things pick up in the spring, but now, once the Super Bowl is done, I start getting calls from buyers and sellers looking to get a jump on things.”

      Oh the super bowl is the reason everyone’s waiting to buy…

      Even in the midst of a cool down, Denver’s housing market still promises to keep us on our toes.“

      There’s no sitting down while in the line at the soup kitchen Mr Schafer.

      1. 6-8%? It’s a house, not the S&P 500. Houses are supposed to appreciate with inflation, 2-4%/year. (FYI my house has appreciated at about 2.8%/year.)

        1. “Houses are supposed to appreciate with inflation, 2-4%/year. (FYI my house has appreciated at about 2.8%/year.)”

          But all that sweet leverage …

        2. Right, and my house has appreciated by 100% in the last 6 years. Hmm does regression to mean mean anything? Parties over.

      2. “I expect to see prices continue to go up,” Schafer says, “just not crazy double digits. I think we’ll be in a healthier 6 to 8 percent range.”

        That is almost exactly some long-haired guy at CNBC told at the start of 2008 – that it will be back to a more “normal” market, with “just” low single-digit annual price gains…. 🙂

  6. “‘If the banks aren’t lending to people to buy these homes, then everything else falls apart,’ Thornberg said. ‘Basically all hell breaks loose.’”

    But the fundamentals…

    1. “In the end, it is mortgage loans that are going to cover this project,” Thornberg said. “And if those aren’t being made, then someone is going to be left holding the bag.”

      And if the mortgage loans are being made then the buyers are left holding the bag. Chris Thornberg is a tool for the REIC.

    2. around $560,000. ‘We’re not talking about high-tech millionaires,’

      If you have a million bucks, should you blow over half of it on a crappy condo? He’s talking about debt-millionares I suppose.

  7. Well I am praying for home prices in California metro areas like San Diego and Sacramento to crash and drop 50% or more then I can buy for all cash.

    1. Well I am praying for home prices in California metro areas like San Diego and Sacramento to crash and drop 50% or more then I can buy for all cash.”

      the trick is too buy when everyones freaking out, you can do that and you can do OK. I’m waiting for the stock market to go down another 400 points and the freak out to spill out all over the media, then I buy. Easier said than done .

  8. Speaking of bagholders, who is going to step up as the Bitcoin bagholder, now that Megabank, Inc is tiptoeing out the exit door of the burning theater?

    Cryptocurrencies
    Wall Street Quietly Shelves Its Bitcoin Dreams
    Goldman Sachs, Morgan Stanley and many more built it. But they didn’t come.
    By Alastair Marsh
    December 22, 2018, 9:01 PM PST
    Photographer: Samuel Zeller. Photo Illustration: Tom Hall/Bloomberg

    Limbo—that’s where to find Wall Street when it comes to cryptocurrencies.

    Squeamish from the start about pursuing profits in one of the darker corners of finance, established firms this year slowed their already halting efforts to make a business out of Bitcoin mania. While none has thrown in the towel, and some continue to develop a trading infrastructure, most flinched as the value of virtual coins collapsed.

    https://www.bloomberg.com/news/articles/2018-12-23/wall-street-quietly-shelves-its-bitcoin-dreams

      1. They’re gamblin’ men, and it was the new thing to gamble on.

        It’s gonna be all over when somebody sets up a quantum computer to destroy the encryption. Somebody will buy the bitcoin trademark for 135 bucks on ebay, and that will be that.

        1. That sounds awesome…one last cataclysmic collapse to erase the bagHODLers’ imaginary currency HODLings from fantasy cyberspace…

          1. I own a Beanie Baby which I keep on top of a filing cabinet in my office as a memento of the perils of bubble investing. (I didn’t buy it, but received it as a white elephant gift long after the mania had ended.)

            At least Beanie Babies leave mania bagholders with a physical remnant of their investments. What will Bitcon HODLers have to show for their folly once the price goes to $0?

  9. Is this supposed to be reassuring?

    The Financial Times
    Opinion On Wall Street
    Markets are tumbling but it’s not time to panic yet
    The final, more volatile leg of the post-crisis bull run still has a way to go
    Robin Wigglesworth
    December 21, 2018

    In the history of financial markets, have so many bucks ever bought so little bang as America’s shareholder charity this year?

    US companies in the S&P 500 index bought back another $203.8bn worth of their own stock in the third quarter, a record amount, according to S&P Dow Jones indices data. That lifts the total this year to a record $536bn even before the last three months of 2018 are included. US companies have paid out another $336bn in dividends this year.

    Moreover, the buybacks this year have largely been financed by soaring corporate profits — boosted by President Donald Trump’s tax cuts — and repatriated savings from overseas, rather than increased borrowing.

    And yet, this tsunami of money, which will almost certainly exceed $1tn for the year as a whole, has produced a nearly 8 per cent decline for the S&P 500. Even when dividends are factored in, the index is down about 6 per cent for the year.

    How could such extraordinary corporate largesse result in such paltry returns?

    1. “US companies in the S&P 500 index bought back another $203.8bn worth of their own stock in the third quarter, a record amount, according to S&P Dow Jones indices data.

      How could such extraordinary corporate largesse result in such paltry returns?”

      I have a simple explanation: Yellen bucks have a strong natural inclination to seek a toetag home.

      1. All that money is it just gap down and gone or is it finding its way to cash ? Or both ?
        Higher interest rates its probably somwhat gone as its harder to re- borrow it into exsistance hedge fund style leaving the working man’s 401K down for some years. Not to mention pension funds, oh like CALPERS , good thing that “GAS” TAX didn’t get repealed.

        1. “…leaving the working man’s 401K down for some years.”

          It’s a given that the working man who followed the advice of the financial advisor that ran the company’s retirement workshop to “stay overweight in stocks, no matter what,” is currently suffering a bad case of 401(k) portfolio shrinkage.

    2. “US companies in the S&P 500 index bought back another $203.8bn worth of their own stock in the third quarter, a record amount, according to S&P Dow Jones indices data.”

      Third quarter? Bahahahahahahahaha … the big Wall Street decline began in the CURRENT quarter, the fourth quarter, you know, the quarter that follows the third quarter?

      Let us wait a bit to see what these buyback pukes have been up to in the current quarter.

  10. That disturbed dirt around the Hunters Point project looks nasty. I bet it smells like jet fuel… might even be flammable in spots.

    1. Years ago I had a repo in Hunters Point that I couldn’t find no matter the time of day or night. Near the address I had to slow and carefully drive around a stripped shell of a car out in the middle of the road with kids playing in/on it. After a fruitless week I decided to look at the stripped vehicle’s VIN, and there was my repo! The lender was elated as the insurance policy was going to make that account whole again.

  11. Do you feel reassured, or unnerved, when top financial policymakers announce that “it is all contained?”

    1. Treasury Department’s odd attempt to reassure investors may have just backfired
      By Mike Murphy
      Published: Dec 23, 2018 8:27 p.m. ET
      Tweet confirming banks have ‘ample liquidity’ harkens to financial crisis

      The U.S. Treasury Department raised eyebrows and jogged worrying memories of the financial crisis Sunday with a statement that Secretary Steve Mnuchin convened calls with the CEOs of six leading banks to confirm they had ample liquidity, in hopes of averting another Wall Street selloff Monday.

      But left unsaid: If he’s that worried, shouldn’t investors be as well?

    2. Stocks: How to Play Defense in a Bear Market
      Here are some things you can do right now to protect yourself as the stock market falls.
      Todd Campbell
      (TMFEBCapital)
      Dec 22, 2018 at 8:31AM

      The S&P 500 stock index is flirting with a bear market, but other stock indexes, including the NASDAQ 100, have already entered one. As of Dec. 21, the S&P 500 Index ETF (NYSEMKT:SPY) has fallen 16.4% from its peak closing price on Sept. 20, and the NASDAQ has dropped 23% from its peak close in August. The decline has damaged investors’ psyches, and sentiment is reeling in the face of growing uncertainty associated with political instability in Washington.

      There’s no telling where the market is heading from here. Are you prepared if stocks continue to drop? Here’s what you can do right now to protect against a bear market.

      How bad is bad?

  12. The peak is over and now old news.
    So what do you predict?
    I’m thinking between 90s type nowhere and 2008. Not as exciting but drawn out.

  13. Markets
    What’s Got Oil So Spooked? It’s the Economy, Stupid
    That, and some pretty unfounded skepticism on OPEC’s willingness to follow through with production cuts.
    By Julian Lee
    December 22, 2018, 10:00 PM PST
    A lot cheaper than expected. Photographer: Bloomberg/Bloomberg

    It wasn’t meant to be like this.

    Not only are oil prices down nearly 40 percent since early October, they’re below where they were when the OPEC+ group of producers began their first round of output cuts in January 2017.

    1. Stock market
      The Dow Had Its Worst Week in 10 Years. Here’s How the Grinch Stole the ‘Santa Claus Rally’
      By Kevin Kelleher
      December 21, 2018

      The Grinch, it seems, has not only stolen the Santa Claus rally, but left investors a lump of smoking coal.

      For much of the past three months, investors weathered week after week of volatile selloffs awaiting the year-end buying spree known as a “Santa rally.” Days before Christmas, however, stocks fell to new lows. The Dow Jones Industrial Average just ended its worst week since 2008, falling 7%.

      According to Bespoke Investment, the S&P is on track to have its worst December since 1931, when it dropped 14.5%. The S&P 500 is down 11.4% so far this month. The Nasdaq 100 fell into bear-market territory Friday, down more than 20% from its August high. Six tech giants—Apple, Facebook, Amazon, Netflix, Alphabet, and Microsoft—have lost a collective $1.2 trillion in market cap, the Wall Street Journal said.

    2. Oh, the stock market’s drops are frightful,
      And the politics are spiteful.
      So as long as there’s fear to sow…
      Watch the market achieve a new low.

      1. The drop doesn’t show signs of stoppin’
        Mnuchin claims the markets floppin’
        House supply is blowin’ up I know
        It will grow, it will grow, it will grow

      2. Fear not! The president sent his munchkin around to the banks to assemble a plunge protection team to prop up the market, and is trying to fire that evil guy at the fed who keeps raising interest rates. We’re saved!

  14. Bonds
    Stocks Weren’t the Only Risky Assets Freaking Out After the Fed Hiked Rates
    By Alexandra Scaggs
    Dec. 20, 2018 7:00 a.m. ET

    A lot can happen in two hours.

    In the window between the Federal Reserve’s policy announcement and the close of trading, U.S. risk markets made their most violent single-session move in response to a rate increase since the central bank first started tightening policy in 2015.

    The S&P 500 closed 1.5% lower, the biggest stock-market move on the same day as a rate increase this cycle.

    The logic is simple: When central banks stop buying bonds, the yields on bonds rise, which provides investors a place to earn safe returns. And when global investors can earn yield without sending money into risky or foreign markets, they keep their cash at home. That leaves those markets vulnerable to sharp changes in mood among the investors who remain.

    That dynamic seems to have played out recently, as the European Central Bank stops buying new bonds and the Federal Reserve allows its bond portfolio to shrink by as much as $50 billion every month.

  15. The Wall Street stock market index futures are down again overnight, and there’s a shortened trading day today. Something tells me that Santa will be late this year, at least for those counting on a Santa Claus rally to erase the painful memory of the recent rout.

    1. Judging from the rapid pre-market fluctuations in the futures prices, there’s some wicked volatility on tap today.

    2. Investor’s Business Daily
      Stock Market Today
      Dow Jones Futures Fall Sharply: Government Shutdown, Trump-Powell Rumors In Focus

      ED CARSON 7:29 AM ET

      Dow Jones futures abruptly reversed sharply lower Monday morning, along with S&P 500 futures and Nasdaq futures, amid a U.S. government shutdown and concerns about Fed Chairman Jerome Powell. The Dow Jones and other indexes suffered huge losses last week, extending the stock market correction and Nasdaq entering a bear market. On Friday, Apple stock fell 3.9%, Facebook stock 6.3%, Amazon stock 5.7%, Netflix stock 5.45% and Google parent Alphabet (GOOGL) 3.2%. The government shutdown is set to last past Christmas. Meanwhile, Trump officials sought to reassure markets that President Donald Trump won’t fire Fed Chairman Powell following the latest Fed rate hike.

      Dow Jones Futures Today

      Dow Jones futures were 0.7% below fair value, reversing modest premarket gains in the last 45 minutes. S&P 500 futures lost 0.6%. Nasdaq 100 futures fell 0.4% after being up 0.7% vs. fair value just a few minutes earlier.

        1. This is a “Thriller” market!

          “The foulest stench is in the air
          The funk of forty thousand years
          And grisly ghouls from every tomb
          Are closing in to seal your doom
          And though you fight to stay alive
          Your body starts to shiver
          For no mere mortal can resist
          THE EVIL OF THE THRILLER!!!!!”

  16. 118 foreclosures total listings this morning here in Santa Cruz county. Up from 53 last month. Ouch!

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