“We Are Experiencing Home Price Depreciation Almost Like Never Before, With the Exception of the Great Depression”
July 25th, 2007Via: Bloomberg:
The U.S. stock market tumbled the most in four months after Countrywide Financial Corp.’s earnings prompted concern the housing crisis is spreading.
Shares of homebuilders sank to their lowest since 2003 and financial companies dropped after Countrywide, the largest U.S. mortgage lender, said more borrowers are falling behind on home- equity loan payments. DuPont Co., the third-biggest U.S. chemical maker, posted its steepest decline in two years after sliding home sales cut demand for paint and countertops.
The retreat accelerated after Countrywide Chief Executive Officer Angelo Mozilo said “difficult” conditions caused by subprime mortgage defaults may persist, and demand is unlikely to rebound until 2009. The Dow Jones Industrial Average plunged 226 points, sparking a sell-off from Brazil to Canada.
…
Countrywide slumped $3.56, or 10 percent, to $30.50 for the steepest drop in the S&P 500 and its biggest decline since October 2004. The lender said second-quarter net income was 81 cents a share compared with $1.15 a share a year earlier. It was expected to earn 90 cents, the average of 13 analyst estimates compiled by Bloomberg.
`Almost Like Never Before’
“We are experiencing home price depreciation almost like never before, with the exception of the Great Depression,” CEO Mozilo said of the housing slump during a three-hour conference call with investors.
Other financial firms dropped. JPMorgan Chase & Co., the third-biggest U.S. bank, lost $1.81 to $45.34, reaching the lowest price since September 2006. Citigroup Inc., the largest U.S. bank, fell $1.55 to $49.31.
Countrywide is preparing for an increase in missed payments in prime loans, or those granted to borrowers with good credit histories. In the second-quarter, overdue payments cut profits by $388 million. The company set aside almost five times as much money for loan losses this quarter compared with a year earlier. Of the $292.9 million earmarked to cover losses, $181 million is related to prime home-equity loans.
There are those who profit from these sharp drops. The ones who “see” it coming are set up to short sell. They make a bundle.
I’m up to my ears in confusion about all of this. You will all probably write me further off as a nutcake when I give you this link to read. He’s been spot on. What to make of of this I dunno. Interesting anyways (at least to me).
Merriman also wrote (before it happened) about the Dow drop earlier this year quite correctly.
http://www.stariq.com/MarketWeek.HTM
You aren’t half as confused as Mr Merriman appears to be, Eileen.
Do yourself a favour and avoid his pitch for his book and I can’t see anyone in the US profiting from their decline, at least not the true patriots.
Some would forward the view that you have been played for suckers, with all of your assets squandered to line the pockets of a few big Players, who will now lose all that they have salted away abroad, because all it needs if for the Game to Change for them to be left high and dry.
The wiser Players will train and receive expert instruction in the New Game in order to stand any Chance of Success. Without IT, they have only two hopes….. No Hope and Bob Hope but that is the Price to Pay for the Dope they are peddling.
amanfromMars Yea verily, it wasn’t the book pitch its this from the Merriman article.- On July 27, Venus will reverse its apparent direction through the heavens from 2 degrees of Virgo. Within 12 trading days of Venus turning retrograde, the U.S. stock market has had a 78% correlation to primary or greater cycles from which prices reversed substantially.”
So he is saying 78% percent of the time this planetary arrangement occurs there is a market correction.
And so there it goes.
I’m getting to this discussion at little late–as I just had an epiphany.
A number of years ago, my ex and I purchased a house. I was somewhat surprised that one of the clauses in the loan papers specified that, should we default on the loan, the seller remained liable to pay off the mortgage.
More recently, I happened to mention this clause to a banker. He told me that all mortgage loans contain such a clause. When you sell your house, there is no absolute guarantee that the bank won’t come after for any deficiency, should your buyer end up in foreclosure.
This makes me wonder: A lot of people sold their homes for a tidy profit while the real estate market climbed into the stratosphere. A lot of other people were out there flipping homes as fast as they could rehab them and arrange exotic financing to move on to the next one–making a tidy profit each time they flipped a home. Over a period of a couple of years, a man in my town moved four times–rehabbing, cashing in, and moving on to the next one. (The guy was my daughter’s boyfriend’s father. Seemed like every time I drove the lad home, he was a a new address.)
I wonder if the sellers–and “flippers”–of the past few years aren’t looking down the barrel of a loaded gun. It seems clear to me that, if the banks were to go after the sellers after their buyers were foreclosed on, it would be for the full amount of the deficiency–that is, the banks would demand, not the balance of the seller’s original loan, but the balance owed on the buyer’s purchase price.
If this actually happened, the “flippers” would be in deep shit–owing the full selling price on a series of overpriced homes.
Anyone have any information on this?
I have personally never heard of a bank going after the seller for the deficiency, if their buyer ultimately defaulted. But, in the past, there was no need to. The homes generally appreciated and ultimately sold, so there was presumably no deficiency for the banks to go gunning for.