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Posts Tagged ‘CNBC’

[Appraiser Pressure Archives] CNBC Clip from 4-5-05

March 15, 2008 | 10:50 pm | Public |

To all readers of Matrix, I am sorry to pelt you with so many appraiser posts right now, but the issue, in many ways, is the smoking gun of the mortgage/credit crisis we are now in the middle of.

Here is a CNBC video clip by Jane Wells back in April 5, 2005 which was based on my claim that about 75% of appraisals are inflated. She cited the widely quoted October Research Report that indicated that appraisers were under pressure – 55% claimed that they were regularly inflated. I thought it was conservative.

My main point was that those in charge of ordering appraisals had a vested interest, personally (a commission), in the outcome of the appraisal. Simply making it illegal to pressure appraisers won’t solve the problem (that bill never passed as one of the bill sponsors went to jail for…you guessed it…taking bribes).

After the segment aired back in 2005, there wasn’t much reaction because no one seemed to understand, appreciate or believe the scope of the problem with appraisers within the mortgage process.

It was a very frustrating time for me personally, because I could see what was happening and there didn’t seem to be a solution….and three months later, became a blogger so I could vent.

When you listen to Jane Wells in the piece now with the perspective of the last 9 months of events, appraisals are more important than a seemingly trivial piece of the mortgage process, the conventional wisdom in 2005.


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[In The Media] CNBC Power Lunch Clip for 1-25-08

January 25, 2008 | 10:12 pm | Public |

I got a last second call from CNBC to provide commentary on the stimulus plan, specifically how and increase in conforming loan limits for both the GSE’s and FHA helps housing, if at all.

To view the clip.

The key point with the expansion of the loan limits is the potential increase in availability of mortgage products in higher priced home markets. Right now the east and west coasts have less representation in conforming loan pools because their price points are much higher. For example, the cost of living, specifically to housing in San Jose, CA is 5x as much as Cleveland, OH. This proposal could spread the access around. However, it also has the effect of restricting access in lower priced markets because the portfolio caps the GSEs abide by aren’t on the agenda to be raised. That limits the effectiveness of the expansion of loan limits (if you believe Fannie Mae and Freddie Mac can be receive adequate oversight).

OFHEO raises legitimate concerns about oversight of the GSE’s and the higher potential for risk. However, OFHEO was asleep at the switch when FNMA had accounting issues a few years back so I am not convinced OFHEO would be able to understand what changes would be needed to better oversee GSE actions. Also, any stimulus plan form needs to be implemented quickly or not at all. Government is not known for being nimble.

Interestingly, Diane Olick, who was interviewed in the above clip, mentions (via Housing Doom) that the Fannie Mae home page has changed in the past 2 years to reflect a different mission. I wonder if OFHEO understands what that change means?

The rate actions by the Fed this week and this expansion of loan limits, if passed, seem to push us in the right direction (symbolically and politically), in finding a solution to the weakening economyt. Much of the solution is correction and letting time go by.

In reality, its all about credit. So far, the symbolism in these gestures would go toward restoring confidence, but I suspect there is a long way to go.


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Better Than Coffee: Stimulating Discussion About Stimulus

January 25, 2008 | 12:44 pm |

The White House and the House agreed to a $150B plan to reinvigorate the economy, which because of the housing market slide, may either be in a recession or about to enter one.

Democratic and Republican congressional leaders reached a tentative deal Thursday on tax rebates of $300 to $1,200 per family and business tax cuts to jolt the slumping economy.

Its not a done deal, however, since the Senate still has to approve the measure and Senate Democrats are talking about tacking on additional items which could slow down its approval, but the speed at which the House approved may influence the Senate’s speed to approve as well.

Actually, the speed at which this was approved was annointed as a new sign of bi-partisan cooperation. The rebate elements and newfound cooperation are because its an election year and people vote with their wallets. I had fleeting thoughts that they know something we don’t know which prompted the quick action. I’ll try to keep those feelings in check as this unfolds.

Yesterday I participated in a roundtable discussion that addressed the impact of the stimulus package. The take away was that the rebate component was an important gesture, albeit political, but won’t be enough to prevent recession or further weakness. After all, the total stimulus plan represents about 1% of the US economy. Since 70% of the economy is consumer generated, the rebates are seen as a way to prime the pump. Whether its spent or saved, its a plus but a very small one at best. For a sense of Deja Vu, go here.

The idea of a expanding the OFHEO size restriction on conforming loans from $417,000 to $625,000 is a good thing, I believe, as well as doubling FHA loan limits from $367,000 to $729,750.

The California Association of Realtors has been saying that the conforming loan limit restriction is an impediment to economic recovery and I probably agree with them with some caveats. The existing conforming loan limit set by OFHEO seems to be arbitrary, simply because it doesn’t float with the housing market. When housing prices slipped, OFHEO kept the loan limit unchanged. The coastal markets, where housing prices are significantly higher, is disproportionately penalized by OFHEO restrictions.

By expanding the loan limits to be more consistent with local housing markets in higher priced areas, the availability of credit, may be expanded and that would help with refi and sales activity which could temper foreclosure actions and temper the slow down in transactions.

My concern is that there would be more risk placed on the GSE’s (Fannie and Freddie) and thats OFHEO’s concern as well. Congress forced portfolio size restrictions on the GSE’s in light of their accounting problems and I have yet to find whether this issue was addressed in the package. In other words, will more loans actually fall under this change or would there simply be a reallocation of mortgage types.

Media Appearance: I’ll be on CNBC Power Lunch at about 12:30 today on a panel discussion covering this issue.

UPDATE: As far as I can tell, the portfolio caps on the GSE’s are not being expanded, which significantly mutes the benefit of expanding the loan limit because it will result in the spreading around of loans taking from lower priced markets and moving availability to higher priced markets. Hopefully the Senate version will expand them.


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[In The Media] CNBC Squawk Box and Bloomberg On The Economy Clips for 11-30-07

December 1, 2007 | 2:51 pm | | Public |

My new venture Radar Logic released the September 2007 RPX Monthly Housing Market Report on Friday at 9 AM.

Mark Haines & Erin Burnett, hosts of CNBCs Squawk Box interviewed me at the New York Stock Exchange about the release of the report. Its a tight fit on the balcony, overlooking the exchange with about a dozen people within about 6 feet of me off camera. I have been interviewed by each of them from a remote location but this was the first time I have met them in person. A lot of cheering and yelling was going on behind me on the floor of the exchange.

CNBC Squawk Box Interview

Kathleen Hays, who hosts one the leading news programs On The Economy, and who is one of my favorite anchors at Bloomberg, interviewed me regarding our report release. She is a moderator at this monday’s OTS’ National Housing Forum.

I was joined by Nicolas Retsinas, Director of Harvard’s Joint Center for Housing Studies. I did a split screen with Nicholas once before on another program and have always enjoyed his insights.

Bloomberg On The Economy Interview

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[Crunch Report] 3Q 2007 Manhattan Market Overview

October 2, 2007 | 11:23 pm | | Radio |

The 3Q 2007 Manhattan Market Overview [pretty version will be posted later this week] that I author for Prudential Douglas Elliman was released today. The report is prepared in the same manner as in quarters past but in association with Radar Logic, where i am the director of research.

The numbers were released and my summary of their interpretation were provided to the media for the coverage today. The actual data and charts will be available later this week as well.

More than a year ago, I began posting the links of the coverage of each report to see how each media outlet reports the market using the exact same data. I find it to be an interesting process.

This list of articles is presented basically when I found them. I also include some duplicate news feeds because I like to see what regions are interested in the story – I place those near the bottom because of the repetition. I’ll keep adding links through the end of the week.

The Link List

Manhattan Home Prices Rise 2.3% on Luxury Condo Sales [Bloomberg]
Home Prices Buck Trend, for Now [New York Times]
Manhattan continues to buck U.S. housing trend [Reuters]
Manhattan housing boom continues [CNN/Money]
Manhattan apartment market prices hit record high [New York Daily News]
Manhattan Apartment Prices Soar, Bucking the Trend [CNBC]
MANHATTAN CONDOS $KYROCKET [New York Post]
Manhattan Housing Market Still Sturdy, For Now [TheStreet.com]
Manhattan housing market still healthy [The Real Deal]
No City For the Young [The Real Estate/New York Observer]
Manhattan real estate bubble hasn’t burst [Newsday]
Your Morning Credit Crunch: Manhattan Stays Bullish [Curbed]
Manhattan real estate sales, prices still climbing [Inman News]
Pre-Credit Crunch Apartment Prices Increase Real Estate [New York Sun]
NYC Real Estate Prices Strong – For Now [Gothamist]
No Surprises In Manhattan Real Estate Poll [NY Press]
Manhattan housing prices in record high [Construction Digital, UK]

Radio and TV clips

[October 2, 2007] CNBC

[October 2, 2007] Bloomberg Television

[October 2, 2007] NY1 News

[October 2, 2007] Bloomberg Radio


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Staking Revisionist Mortgage Market History Yields Different Tomatoes

August 21, 2007 | 7:49 am | |

My son planted about 30 tomato plants in our garden this year so needless to say, I am now full of tomatoes.

One of the things that have come out of all the upheaval in the mortgage markets has been the frequency and clarity of explanations as to what happened and how the markets got into this predicament. Hindsight is 20/20 so they say. It was not long ago that people were scratching their heads about how prices can rise at an expotentially higher rate than income for a seemingly indefinite period of time.

It was all about the Benjamins mortgages and how easily the payments could be managed. Downpayment became monthly payment in the dialog between buyers and lenders. Lenders reduced underwriting requirements to bare bones, appraisers were encouraged to become form fillers. The lending community came up with mortgage products to stimulate transactions and Wall Street responded, creating a labrynth of tranches designed to move risk around to the right places…except investors ulitmately figured out that few on Wall Street really understood the risk. And then the world changed.

As Jim Grant wrote in Time Magazine (special thanks to “the man who wears shirts that look like graph paper.”):

That is the way great ideas end, not with a bang, not with a whimper, but through reductio ad absurdum. You know investment bankers are not satisfied until every good idea is driven into the ground like a tomato stake.

Here’s a few recent summaries of what happened over this period of mortgage excess that I found particularly interesting.

How Missed Signs Contributed to a Mortgage Meltdown [New York Times] with a very cool chart. Things were moving so quickly but we should have seen it coming.

As far back as 2001, advocates for low-income homeowners had argued that mortgage providers were making loans to borrowers without regard to their ability to repay. Many could not even scrape together the money for a down payment and were being approved with little or no documentation of their income or assets.

In December, the first subprime lenders started failing as more borrowers began falling behind on payments, often shortly after they received the loans.

Reaping What You Sow: Hedge Fund and Housing Bubble Edition [Huffington Post]. This article suggests that a Fed rate cut represents help for the wealthy and not the masses.

Last week we got to watch as the markets went wild with the realization they were over leveraged on bad debt, until Bernanke rode in with a huge bailout, answering a question (and settling some bets) on whether he was an inflation fighter, or an inflationist (he’s an inflationist, and he has now proved it.)

Bloody and Bloodier – The subprime-lending crisis is worse than you think, and could crush financial and real-estate markets for years. [New York Magazine]. Besides sharing dentists, I can empathize with Jim Cramer’s pain as of late. Barron’s Magazine dedicated its cover story to analyzing how wrong his advice has been in his CNBC show Mad Money in the article: Shorting Cramer.

You’re losing money right now. This very minute. You’re losing money if you own an apartment. You’re losing money if you own a country home. You’re losing money if you own a stock or bond mutual fund. You’re losing money if you have a pension plan. You’re probably losing money here or there, you’re probably losing money everywhere (except maybe from your savings account and wallet). But this is no Dr. Seuss story. It’s more of a John Steinbeck tale, and we are the victims, a new generation of Tom Joads, and it’s the damn bankermen who broke us. No, there won’t be a police officer to investigate, and the government, at least this federal government, won’t save us.

Panic on Wall Street [Salon]. It starts with an obligatory blame Greenspan bent but goes deeper.

There is a standard explanation included as a paragraph in almost every story attempting to explain the current turmoil. It goes like this: Anxious to goose the U.S. economy out of its dot-com-bust doldrums, Alan Greenspan and the Federal Reserve Bank lowered interest rates to rock bottom in 2001. The resulting flood of cheap money encouraged an orgy of borrowing at every level of the U.S. and world economies. Whether you wanted to buy a house or a multibillion-dollar conglomerate, lenders were your best friends, falling over themselves to offer you whatever amount of capital you desired — and charging low, low rates of interest. Cheap money led to a growing complacency about risk. If you ran into trouble, you could just refinance your house, or borrow a few billion more dollars today to pay off the billions you might owe tomorrow.

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[In The Media] CNBC On The Money Clip for 8-13-07

August 13, 2007 | 11:56 pm | Public |

CNBC gave me a call this afternoon for this 7:30pm live appearance. Ilaina Jonas of Reuters wrote a story that got picked up by publications like the Washington Post and Eliot Brown of the New York Sun wrote a similar story about slipping high end market confidence. I thought Melissa Francis did a nice job with the interview.

To play the clip (better edited version coming).

This program was inspired by two highly successful Manhattan real estate brokers who indicated they have noticed a lower sense of urgency by purchasers of high end properties in recent weeks.

Thoughts:
* Its the middle of August.
* Three weeks of constant hammering about the mortgage markets would cause any market to pause and reflect.
* I suspect bonuses won’t be significantly affected until 2009, but thats not to say 2008 bonuses couldn’t be tempered, but they are still expected to be higher than last year.
* The dollar remains week and inventory continues to fall.
* Its the middle of August.
* If the mortgage market has impacted buyer confidence and its only been a few weeks, its kind of tough to make a universal assumption that the market is significantly different because buyers are taking longer – thats 3 weeks by definition.
* If any of the 3 main factors causing unprecedented demand: bonuses, weak dollar and solid economy/reasonable mortgage rates, change significantly, the market has the potential to show weakness
* Prices aren’t spiraling out of control in Manhattan like we saw in 2004. There is elevated demand offset by a high level of new development entering the market, keeping prices in check, except for the very high end of the market (They’re rising).
* Speaking from my own experience (with deliberate intent to spread willful anecdotes but without malice), my own appraisal company set a record for sales in our first half of August.
* Oh yeah, its the middle of August so lets take some time off to reflect.

From the who says real estate isn’t porn department: Melissa’s other interview today in addition to my friend Owen Thomas at Valleywag who was on the segment before me.


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[In The Media] MSNBC 8-6-07 clip

August 6, 2007 | 9:08 pm | Public |

Well, I got a call on Sunday evening from MSNBC to comment on the housing market today. There’s been significant focus on housing lately (actually for the past 5 years) given the upheaval in the mortgage arena.

I have done a bunch of CNBC spots but this was my first on MSNBC – a lot of fun (although they spelled my company name incorrectly).

To play the clip.

The premise: Is this a good time to buy? is a loaded question. Whether or not someone should buy depends on affordability, purpose (such as for investment or owner occupancy), as well as the length of holding period, among a slew of other reasons.

However, its a questions many people want an answer to.


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Givin’ Speeches About Mortgages And Housing: No Answers, Only Solutions

July 21, 2007 | 6:13 pm | |

On the same day last week, Wednesday to be precise, presentations touching on the housing market were given by two influential financial leaders: Fed Chairman Ben Bernanke and James B. Lockhart III, Director of OFHEO, which oversees Fannie Mae and Freddie Mac (GSE’s). Both are accomplished individuals whose jobs influence the housing market to a certain degree. I am not sure which one I would have liked to have heard in person so could only hope for a double header.

Fed Chairman Ben Bernanke (Its been a year and a half, so I feel like I can refer to the Fed Chair as Ben) spoke in front of Congress, before the Committee on Financial Services, U.S. House of Representatives. He is required by law to do this twice per year and I kind of feel sorry for him. I listened to his live testimony on CNBC and was struck by how smart he is and how weak most of the questions posed to him were. After 2 minutes of thank-you’s from each member of the committee, they asked him to explain things like core inflation and how he was going to protect subprime borrowers in the future. The media coverage of the testimony was extensive and rather than spending much of the time talking about the economy, the bulk of the questions from Congress was spent on protection of borrowers, the problems with hedge funds, lax underwriting and why didn’t the Fed see this coming. Bernanke’s macro perspective seemed a little out of sync with the questions posed. I was struck by his references to the housing market, which suggest more weakness to come:

The pace of home sales seems likely to remain sluggish for a time, partly as a result of some tightening in lending standards and the recent increase in mortgage interest rates. Sales should ultimately be supported by growth in income and employment as well as by mortgage rates that–despite the recent increase–remain fairly low relative to historical norms. However, even if demand stabilizes as we expect, the pace of construction will probably fall somewhat further as builders work down stocks of unsold new homes. Thus, declines in residential construction will likely continue to weigh on economic growth over coming quarters, although the magnitude of the drag on growth shoul

…and subprime, which was more dire:

For the most part, financial markets have remained supportive of economic growth. However, conditions in the subprime mortgage sector have deteriorated significantly, reflecting mounting delinquency rates on adjustable-rate loans. In recent weeks, we have also seen increased concerns among investors about credit risk on some other types of financial instruments.

James B. Lockhart III, Director of OFHEO (Its been a year since he took over OFHEO and my rule of thumb for someone with roman numerals after their name is to avoid nicknames so I’ll refer to him as James) gave a year in review speech in Washington DC. He referred to unexpected challenges: housing and subprime. In other words, it was a surprise that the housing market is currently experiencing problems. How could an agency that deals with two large mortgage bemoths be in the dark about the housing market? However, he makes the observation that the GSE’s should be “fulfilling their mission of stabilizing the housing markets.” He refers to the “triple-witching” of the subprime market because of the tripling of subprime originations, the shift to non fully amortizing mortgages and the drop in lending standards. His emphasis was on subprime lending and how the GSE’s can help:

Despite the many problems in the subprime mortgage market it has made a positive contribution toward getting low-income individuals into their first homes. (#12)
Hopefully, the changes I have been talking about today will be continued to help place people into affordable housing without putting them and their neighborhoods into high- risk situations.

It is my belief that Fannie Mae and Freddie Mac can do even more to help in what is one of their key mission areas – affordable housing. It is also my belief that to do so they must be fully remediated with strong systems to address the credit issues in this sector and that they need a strong regulator to help ensure that they are healthy, well-managed companies.

To recap both speeches

We have both banking and mortgage oversight institutions caught unaware of the growing problems with subprime, we have a government agency responsible with the oversight of government sponsored enterprises (GSE’s) saying that it should be dissolved and a new oversight agency formed that would be more effective and we had lending standards drop sharply without reaction from regulators.

So I think I am impressed with everyone’s intentions of fixing things, but don’t we need to understand what went wrong? How can we fix it if we didn’t see it coming? I think Congress was really asking questions of Ben that it could have been answered by James. The whole thing is backwards.


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[List-o-links] 5-14-07 Subprime Cuts: Boiler Room, Bailout, Toll, FICO & IPO

May 15, 2007 | 9:18 am | Public |

With a bunch of USDA acronyms like FICO and IPO, 4-letter builder names and Boiler Room sales pitches, this cow has chewed more CUD than it can swallow.


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David Lereah Resigns, Spin Takes A Smoke

May 1, 2007 | 3:30 pm |

Its been a quite a 7-year ride for the National Association of Realtors and their Chief Economist David Lereah. That era is now over and he is resigning to take another position. I wish him well and I hope he reconsiders his modus operandi.

The US housing market went through the largest property boom in history and is now weakening. He did what he thought he was supposed to do: promote his trade organization through market statistics and commentary. Unfortunately, his style did not translate well when market conditions weakened. He became a cheerleader rather than an insight provider.
I met him in the green room before a CNBC appearance and he seemed like a nice guy, but almost apologetic to the optimism he was pitching. He didn’t seem to buy into the message either.

I saw the movie “Thank you for smoking” the other day and actually pictured Lereah in the staring role. See the movie and you’ll understand what I mean.

The blogosphere had a field day with the softballs that were served up on a regular basis (ie David Lereah Watch). Yet the spin never abated.

One thing I never got over through all this was the loss of opportunity for the NAR to gain credibility with consumers. Instead of spinning so blatently, NAR could have taken the torch and become the market leaders for real estate expertise. The old school of thought that if you say it often enough and loud enough, people start to believe prevailed.

The excess spin that was generated seemed to be fully embraced by a large portion of the NAR membership but really served to further distance the trade group from the public. The blogosphere provided a challenge to the old rules of publicity that the organization was not able to adapt to.

I hope the incoming chief economist has learned from this experience and will make changes in the way information is disseminated to the public. Hopefully its less self-serving.

NAR has a treasure trove a great information.

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[In The Media] CNBC Power Lunch Clip for 4-24-07

April 25, 2007 | 12:01 am | Public |

This was a split screen discussion on luxury foreclosures. Note my two titles in the video.

A few thoughts about auction properties:

  • The discount achieved is usually based on an unrealistic list price, suggesting a wildly large discount.
  • When a listing is sold through an auction, the discount, if any, is the result of a short marketing period. In other words, the property is exposed to a specific buyer for a very short period of time. The advantage to an auction sale is that sellers to whom “time is of the essence” get a reprieve and unload the property sooner. Its not a discount for the sake of a discount. They are essentially paying for a shorter marketing time.


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