I don’t think the sharp appreciation of the yen got nearly enough attention today.  If the carry trade continues to un-wind then today was only the beginning.
It’s too bad they don’t issue paper t-bills any more.  I’d be sniffing them right now.

IMO, the weakening of the US dollar is part of the equation moving forward. The only way we can get wage inflation to prop up real estate values would be to devalue the dollar. If the value of the dollar remains high, any pressure to increase wages will result in more overseas outsourcing: wage arbitrage. The only way we can raise wages and not lose the jobs overseas is to devalue our currency so the overseas move is not less expensive. Since an increase in wages is about the only way to keep real estate prices high, a devaluation of the dollar is likely. imports will be more expensive, and overseas travel will be more expensive, but if you stay home and buy American, everything will be OK.

Did someone say "Everbank?"

New trouble at New Century – late financial report
"On Thursday, it announced it was cutting 300 jobs, about 4 percent of its employees, including 124 in Irvine."

Sub-prime lending is one of the biggest industries and employers in Orange County, and in Irvine in particular. The implosion of sub-prime will hurt home prices.

IrvineRenter - do you know where you can find statistics that show what are the major industries that make up the employment make-up in Orange County?  I have been searching google but am coming up empty.

mino2126,

Try this site: California Employment  Development  Department

Check out this PDF: Santa Ana-Anaheim-Irvine Metro Div Current Month Labor Force

I found this little gem: "Financial activities noted the largest year-over decrease with a loss of 1,900 jobs. This is the seventh consecutive month of year over decline."

IrvineRenter...good stuff thanks for the links.&nbsp; However, I wonder why such the uptick in Real Estate, wish we had their diff.&nbsp;&nbsp; I can’t wait to compare Q1 ‘06 to Q1 ‘07.<br />

New Century faces criminal probe, dropping another 25% in after-hours trading.

http://www.marketwatch.com/news/story/new-century-says-faces-criminal/story.aspx?guid={C13DE0D3-528C-4CD1-BAE0-73BD1FC7D8F5}&siteid=yhoo&dist=yhoo

Thanks irvinerenter that is much easier to use and read than having to go through the BLS site. I will have to put that one in my favorites.

So ...  um… Fremont. 

According to Housing Wire, regarding the cease and desist / consent decree: "The order also would charge Fremont with marketing adjustable-rate loans in an ‘unsafe and unsound’ manner, and that the lender had operated in violation of recent inter-agency guidance on subprime lending programs."

Looking at that, I’m thinking that the recent "guidance" that was put out by the OCC, et al, is considered less as guidance and more of an enforceable rule - and that it will be enforced.  Bring on the carnage. 

Would that be the same "guidance" that we got all a-flutter over late last year?

You betcha.

Hubby and I were speculating last night that the FDIC got involved because Fremont has deposits that are insured by the FDIC, and that they would rather crack the whip than have to pay depositors if the bank became distressed.

I was under the impression the guidance was a toothless tiger. If there is actually going to be enforcement, wow! The loans outlawed by that guidance are the only things propping up the market out here. Buyers are going to be pretty scarce come summer.

No end to housing slump in sight
When will the slump end?
"Observers of the housing market are extremely cautious about predicting when it might hit bottom. They cite several reasons for their caution, including falling prices in many—but not all—markets, an oversupply of new homes and condos, the rising cost of money and the shrinking of easy credit due to the imploding subprime lending market.
Leo Kamp, the head of investment strategy at TIAA-CREF, doesn’t expect home prices or sales to start picking up until next year. Other analysts expect a turnaround to take even longer. Kamp urges consumers to examine the federal government’s latest housing figures for their own local and regional markets because the numbers vary widely.
In some markets—Florida, parts of California, Las Vegas, parts of New England and the Boston-New York-Washington corridor—prices became so inflated in recent years that homes grew unattainable, causing a severe slowdown in sales and a backlog of available houses."

IR,

Hubby works for a bank and its regulating entity (not FDIC but one of the other signatories to the mortgage guidance) has put out various "guidance" over the years.  Woe unto them if they don’t follow such guidance. 

Additional note from the husband:  Some guidance is more important than others, and failure to comply may result in 1) more controls to put in place, 2) increased capital reserve requirements, 3) cease and desist and finally 4) closed down.

Countrywide stops no-money-down lending
http://money.cnn.com/2007/03/09/real_estate/countrywide.reut/index.htm?postversion=2007030917
Wow.  This should have at least a modest impact on prospective buyers…

I don’t get it.  100% products are still on page 2 of CWC’s CA rate sheet, effective March 06.  Maybe we’ll get a new sheet over the weekend?

Stricter lending seen barring 1 mln US home buyers

"This implies a purchase contraction of 1.1 million borrowers," said Westhoff who was speaking at Bear Stearns mortgage conference here. "That’s a non-trivial number."

The buyer pool just got a whole lot smaller.l:reuters.com:20070309:MTFH54939_2007-03-09_23-28-11_N09240590&type=comktNews&rpc=44

OC is about 1% of the US population. 1% of 1.1 million is 11 thousand. Total OC home sales in 2006 were 35728.
Non-trivial indeed.

irvinerenter - The link isn’t working for me or is there a link? What’s funny is Bear hasn’t tightened up their lending standards all that much. They still do 100% stated but with higher FICO scores. I’ve been thinking about how much this could be a problem. It isn’t just the subprime loans that may have problems it could be the easy underwriting standards that disappear that could be in trouble. The lenders have automated underwriting and you would just upload the application and you could get an approval that would not require income documentation. What happens to the borrowers who were expecting the same thing when it comes to refi? I believe that this is going to be a much bigger problem than what is being talked about. Add the fact that the appraisal comes in lower than expected and we could see a huge crunch. I just had dinner with someone who is an operations manager for a mortgage broker who told me that the lenders have been hacking appraisals. One was appraised at $540k but the lender hacked it down to $380k. Of course I question the appraiser but still they are looking a lot closer at the values. This is going to get very interesting in the next few months.

graphix,

I think it is working now.

I don’t know about you, but I have never seen a credit crunch come on so quickly. Reminds me of those ABX charts that were all over the net last month. I think a lot of people are putting their heads in the sand thinking "this is all the worse it is going to get." I have never seen one make only a minor correction. I watched the one in the late 80’s in commercial lending when they went from 100% cash out financing based on a buyer proforma (which means totally exaggerated) to 30% down and independent market studies. As you know, the collapse of that bubble lead to the S&L crisis and a government bailout.

I don’t know how much credit will tighten, but I suspect we will get back to 20% down and conventional loans. The exotic products will still be out there, but the interest rates will be so high as to make them unusable. Did you see the post at OC Fliptrack where he was comparing the rate sheets? The exotic product interest rates jumped dramatically. These will likely go even higher because the defaults rates will increase even more. Once the true risk is priced in to these products, they will be very expensive. You might as well buy your house on a credit card.

For something a little closer to home:

Loan turmoil closes doors for buyers

"Sharon Lewis is facing a 50% hike in the payment on her adjustable-rate mortgage next month.

This week, she discovered she can’t qualify for a new loan with payments that she could afford.

And although she’s willing to sell the West Hills home she’s owned for two years, she has been told it won’t fetch what she paid for it. "I have to laugh to keep from bawling," the 30-something Lewis said.

Her situation is becoming increasingly common across the country amid the implosion of the business of sub-prime mortgages — loans for people with less-than-perfect credit or no credit histories.

Many would-be home buyers, and homeowners who want to refinance, are finding that virtually overnight their status has changed: They no longer are eligible for the kind of easy-credit loans that helped millions of people join the ranks of property owners during the housing boom."

How many times will this story play out over the next several years?

Not a Great Foundation for Optimism

Washington Post

Sunday, March 11, 2007; Page F02

Will the meltdown in the market for subprime mortgages spread to other forms of housing finance and trigger a housing credit crunch that will further depress sales and prices?
The official line from the industry, and the Federal Reserve, is that while this is a serious problem, it involves a small portion of the housing market, with no signs of spreading.
But others aren’t so sure.
These are, after all, the same people who denied there was ever a housing bubble, then denied there was a housing bust and, more recently, declared that the housing downturn had bottomed out.
Nor do the numbers fully support their optimism. While subprime mortgages—mortgages made to people with low credit scores—account for only 13 percent of outstanding mortgages, they make up 20 percent of the mortgages issued in the past several years. Other categories of mortgages that are almost as risky account for at least 20 percent more, and their default rates have also doubled.
Moreover, many of the recent "innovations" in subprime mortgages were also used by borrowers with good credit histories. These include interest-only mortgages that require no principal payment for 10 years; opt-out mortgages that let borrowers skip monthly payments; and piggyback loans that don’t require any money down.
By some estimates, nearly 40 percent of all recent mortgage loans have involved some form of this "risk-layering." One survey found that 29 percent of all new mortgages involved no deposit, while the average down payment by first-time buyers was a mere 2 percent.
Things probably would have worked out just fine for most of those borrowers if interest rates had remained steady and home prices kept rising. But they didn’t, and now the impact is rippling through financial markets.
So far, nearly three dozen mortgage lenders have been sold under duress, closed up shop or filed for bankruptcy. New Century Financial, whose 7,200 employees last year generated nearly $60 billion in new loans, last week stopped making loans after its major lenders cut off its credit.
It is as yet unclear how much big banks and hedge funds have lost in this process, but the sums could be large. Already General Motors has warned it may have to take a charge of almost $1 billion to cover bad mortgage loans at its mortgage subsidiary, while HSBC said its bad-debt costs rose 36 percent, to $10 billon.
It’s also not clear what may happen to the housing market as a result of all this financial turmoil. Goldman Sachs estimated that as a result of new, tighter lending standards in the subprime market alone, demand for new homes will fall by 200,000 units this year, 20 percent of last year’s volume. And CreditSights, a bond research firm, estimates that as many as 500,000 units could come onto the market as borrowers default and their homes are dumped back on the market.

Good stuff irvinerenter. I love how Fed member Susan Bies said "This is just the beginning." Too bad the rest of the Fed members think it won’t spread. According to Lansner’s article OC is in line with the national average at 18% of the mortgages are subprime and 1 in 5 bought in 2006 were subprime.
http://www.ocregister.com/ocregister/money/article_1614808.php
I would say a good guess at the REOs 70% that I have seen are subprime and I think I am being conservative. 

Is this the precursor to bankruptcy and a large number of local layoffs?

New Century Creditors Cut Funding
NEW YORK (AP) - New Century Financial Corp. said Monday all of its lenders have cut funding or announced their intent to halt financing after the subprime mortgage lender failed to make payments, pushing the company further toward bankruptcy.
"The company and its subsidiaries do not have sufficient liquidity to satisfy their outstanding repurchase obligations under the company’s existing financing arrangements," New Century said in a filing with the Securities and Exchange Commission.
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<xml src="http://news.moneycentral.msn.com/relevance/relatednews.axd?articleid=6598820" id="RAData"></xml>
New Century, which lends money to prospective home buyers who have poor credit histories, uses short-term borrowings to finance mortgage loan originations and purchases. The company said there is no guarantee it will receive additional financing.
"If the company and its subsidiaries are not able to satisfy their repurchase obligations, one or more of the company’s lenders may seek to liquidate the mortgage loans or other assets," New Century said.
The company received letters from Wall Street lenders including Bank of America, Goldman Sachs, Morgan Stanley and Citigroup, among others, alleging events of default.
Last Thursday, New Century said it stopped accepting all new loan applications because it was short on financing. The company faces a slew of investor lawsuits and an investigation by the U.S. Attorney’s Office for the Central District of California.
Its stock has been hammered by investors in recent weeks, falling from around $30 a month ago, to close Friday at $3.21 on the New York Stock Exchange. Shares plummeted $1.29, or 40.2 percent, to $1.92, in pre-market trading before trading was halted.