Brent Nyitray
Fairlington Blade
Let the mutherfuker burn!
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Kevin S. Willis
Michigoose
lmsinca
markinaustin
Arcanaut
novahockey
quarterback
ScottC
yellojktVital Statistics:
| Last | Change | Percent | |
| S&P Futures | 1387.6 | -1.3 | -0.09% |
| Eurostoxx Index | 2510.8 | -19.5 | -0.77% |
| Oil (WTI) | 105.76 | 0.4 | 0.39% |
| LIBOR | 0.4732 | -0.001 | -0.11% |
| US Dollar Index (DXY) | 79.483 | -0.253 | -0.32% |
| 10 Year Govt Bond Yield | 2.25% | -0.03% | |
| RPX Composite Real Estate Index | 169.74 | 0.0 |
Markets are flat this morning on a lack of news. Bonds and MBS continue to retrace their large move downward after the FOMC statement. New Home Sales are due at 10:00 am.
Radar Logic released their Monthly Housing Report yesterday, noting that price declines are slowing, but we are not at a bottom. Distressed sales declined 21.8%, although the settlement between the State AGs and the 5 big banks means that foreclosures are going to pick up again. Interestingly, while Radar Logic has the opinion that housing has yet to bottom, the Radar Logic futures indicate that real estate will stay flat in 2012 and 2013 and then start increasing. The RPX futures are very illiquid, so take what they say with a grain of salt, but still…
Bank of America is launching a pilot program for distressed homeowners, where they follow a Deed In Lieu process to turn over the title to the bank and then rent at sub-market rates for up to 3 years. Bank of America would then sell the properties to outside investors. Speaking of which, we should be hearing the results of the FHFA’s REO-to-Rental program soon. In my opinion, the government made it very difficult for investors to take a look, (you have to pay $250,000 just to find out basic information) which I found surprising.
In the “because I said so” category, Ben Bernake said the Fed’s easy monetary policy after the stock market bubble burst wasn’t responsible for the housing bubble.
As I noted yesterday, the homebuilders have quietly put in a huge rally since last fall. (Note to the business press: there are more stocks in the US than Apple) Is the move over? Perhaps. KB Homes reported disappointing Q1 earnings and the stock is down 14% pre-open.
Etch-a-Sketch-gate was actually market-moving, believe it or not. Yesterday, shares of little Ohio Art (NASDAQ – OART) more than doubled on the prospect that Democrats will be buying Etch-a-Sketches en masse as props for upcoming election. The stock trades by appointment and has a miniscule market cap ($8.6 million), but there you go.
Filed under: Morning Report |
All Things in Moderation 
Bernanke said the following:
1) He cited house price booms in foreign countries and said the size of the asset bubble was too large to be explained by changes in mortgage rates.
2) Also, home prices began to rise in the late 1990s, before the Fed lowered rates”.
3) the Fed “made mistakes in supervision and regulation
4) government policies to increase homeownership were not principally to blame for the housing bubble.
5) “In our supervision of bank and bank-holding companies we didn’t push hard enough on this issue of measuring your risks,” Bernanke said. “Another area where the Fed performed poorly was I think in consumer protection.”
So if one removes all the things he says didn’t cause it, it comes down to lack of knowledge by the consumer and protection of the consumer and shady loans? Really?
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Dave, I read #5 as pointing the finger at corporate entities who played pass-the-buck when it came to accurately assessing risk & the apparently incomprehensible concept that housing values might decline.
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Re #2: In the late 90s, the Fed had been so easy for so long that it was referred to as the “Greenspan Put.” House prices did start rising and became unmoored from historical valuation ranges in the 90s, just as the stock market bubble was going critical.
Liberal economists like Krugman are circling the wagons around the Fed’s culpability because they believe in the dual mandate. Bernake buys into it too. But you can’t ignore all of the bubbles that have inflated since then:
Oil (early 80s)
Gold (early 80s)
Junk Bonds (mid 80s)
Emerging Market Debt (late 80s)
MBS (early 90s)
Emerging Market Stocks and Bonds (late 90s)
US Stocks (late 90s)
US Residential Real Estate (mid 00s)
Perhaps the theory that you can keep interest rates as low as you dare as long as inflation (as measured by the consumer price index) remains in check is a recipe for asset bubbles.
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Brian, your right – that is another ‘reason’ he gives. That said, I think the banks who were making the loans were measuring their risks accurately…they were just able to pass them on to other entities. Is he saying that in the land where the American Dream, encouraged and promoted by the US Gov, is to own your own house, a home buyer who desperately wants a house/American Dream and a mortgage seller who wants/is being encouraged to loan, that everyone was not only unaware of the risks but that were the Fed to “push harder in measuring that risk” that this would have really mitigated the events that followed? Having bought my first house in 2002, seen the value shoot up, and then fall through the roof so to speak, I might have lucked out with the people i dealt with. But I never saw anything in my experience that relates to any of this. Yes, I bought a house in a sellers market and paid more than i should have. The key is I did not pay more than I could afford…even with the 2nd balloon mortgage i got in order to not have to pay PMI. Even if I was encouraged to, I would not have.
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Based on the bailouts, there literally was no risk. Luckily, they know their will be no next time
Wait… what?
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