Pressure on Home Prices ?

One of the themes TBP has developed over the years was that of the Slow-Motion-Slow-Down: As rates ticked higher, home sales would slow, refis and MEW would decrease, inventory would build, and prices would come down. Add to that the ARM resets and increasing foreclosures, and you have the formula for:

1. Decreased Consumer Spending
2. Falling Home Prices
3. Economic Slowing

Whether or not this causes an actual recession is yet to be determined, but the statistical odds of one occurring keep moving higher. Even the runaway Chinese Markets will eventually be impacted by the slowing US consumer.

In today’s WSJ is an article that sums up how all of these elements combine: Mortgage Woes Force Banks To Take Hits to Sell Homes:

"An auction of nearly 100 foreclosed homes
here Saturday showed that mortgage lenders are having to accept huge
discounts in some cases to unload such properties.

A surge of foreclosures over the past year or so has
left lenders struggling to sell a growing backlog of homes. Rather than
relying on real-estate agents, the usual practice, some are turning to
large-scale auctions to speed up the sale process.

Real Estate Disposition Corp., the Irvine, Calif.,
company that organized Saturday’s auction of lender-owned homes, plans
similar sales May 19 in Los Angeles and May 20 in Riverside, Calif.

At the San Diego sale, houses and condos typically
sold for about 30% below the previous sale or appraisal prices. In a
few cases, the discounts were around 50%

A four-bedroom home in Oceanside, Calif., attracted a
high bid of $495,000 at the auction, 33% below the sale price recorded
in November 2005
for the property. One condo in San Diego sold for
$120,000, less than half of its previous value.

This raises a wealth of issues, including the absurd Appraisal Inflation we have mentioned in the past. 

How might this resolve itself? As foreclosures continue to surge higher, lenders-in-possession will find themselves with an increasing number of homes. Indeed, so many so, that the only solution has becomne large scale auctions — 100 or so prpoerties at a time. As you can imagine, the impact of so much supply hitting the market all at once means that buyers can be quite picky, and bidders are free to low ball.

The net result, as seen above, are enormous price decreases from the loan amount, appraised value, or recent selling price.




Mortgage Woes Force Banks To Take Hits to Sell Homes
WSJ, May 14, 2007; Page A2

Category: Credit, Economy, Psychology, Real Estate

Mother’s Day Linkfest, Part Deux

Category: Weblogs

How to Fail As a Trader in 10 Easy Steps

Category: Apprenticed Investor, Psychology, Trading

Mother’s Day Weekend Linkfest! (Part I)

Category: Weblogs

WSJ Market Data

Category: Financial Press, Markets, Web/Tech

Friday Night Jazz: Gerry Mulligan

Paraiso_2About 10 years ago, while window shopping in Sag Harbor (the least offensive of the Hamptons), I hear this fabulous music wafting out the door of a small shop.

Turns out it was Gerry Mulligan‘s CD, Paraiso-Jazz Brazil. An eye opener. Clean, cool recording of lovely Latin melodies, all the while overlaid with this dry, reedy saxophone that infused the music with a flavorful sophistication.

Mulligan_chetbakerThat was Gerry Mulligan’s sound.  NPR radio observed that Mulligan was "the most influential baritone saxophonist in jazz." But Mulligan was more than that — he was a
commanding composer, an innovative musician, someone who pushed boundaries, yet remained accessible and enjoyable to listen to.

His history of playing with other key Jazz greats is rather astounding: He worked with Miles Davis‘ on the historic Birth of the Cool. He created a piano-less ensemble, with trumpeter Chet Baker.

Meets_monkHe cut albums with Thelonius Monk, Paul Desmond, Dave Brubeck, Stan Getz, Lionel Hampton, Ben Webster, Johnny Hodges, Judy Hollidaythe list of sidemen goes on and on.

Mulligan’s light and airy baritone saxophone was the epitome of the the "cool" jazz sound. Yet its amazing how easily he could interact with many other musical styles: Ben Webster’s blustery tenor (the epitome of a "warm" sound); Monk’s percussive, fractured piano rhythms and dissonant tunes; the sweet, subtle tension between Mulligan and Chet Baker.

M_plays_mYou can pretty much grab any random Mulligan album (I put up a decent selection here) and not be disappointed. You will see scattered around a broad selection of different styles, eras, and musical cohorts.

Are you a Brubeck fan? Monk? Chet Baker? Webster? Desmond? Grab anything, sit back and enjoy.


Mulligan became known for his writing and arranging skills in his teens. He wrote for Johnny Warrington’s radio band in 1944, and for Gene Krupa’s band two years later.

BerlinMulligan hit the big time when he became known for his work (writing, arranging, and soloing) on Miles Davis’ defining album, "Birth of the Cool." Gerry’s compositions for this album included "Jeru," "Godchild," and "Venus de Milo," all songs that would remain in his repertoire long after the initial success of the album had died down. (This album launched and aided several careers of important jazz figures).

Mulligan’s last record came out as one of his most beautiful. Lovely tunes, clever arrangements, and understated fabulous players mark his last recording (John Scofield and
Grover Washington, Jr. play on this).

DragonflySimply timeless music.

Mulligan Discography (massive PDF)

NYT Mulligan Obit

Mulligan Videos after the jump


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Category: Digital Media, Friday Night Jazz, Music

Corn Industry

Category: Commodities, Markets, Real Estate

Where Have S&P500 Returns Come From?

Category: Dividends, Investing, Markets

Commerce Retail Sales Data: Beware Gas Inflation

Category: Consumer Spending, Data Analysis, Economy, Energy, Retail

Why Are Stocks Falling?

Yesterday morning, Doug Kass gives us his short list of why stocks ought to take a stumble:

1. The price of gasoline rises to a new high, serving as the functional equivalent of a tax increase for the U.S. consumer.

2. Tech bellwether Cisco’s (CSCO) U.S. business enterprise is weak, and guidance for aggregate sequential revenue growth (of +4%) is disappointing.

3. Other tech companies like Novellus (NVLS) , Nokia (NOK) , SanDisk (SNDK) , Flextronics (FLEX) and Sanmina (SANM) disappointed. The much-heralded release of Vista has failed to meet expectations (and has led to a buildup in PC component parts). DRAM prices fall by nearly 70% to below cash production costs. Electronic Arts (ERTS) , Best Buy (BBY) and Circuit City (CC) guided lower, raising questions about the health of consumer electronics.

4. Multinationals offset end-market weakness in the U.S. by the effect of a weak U.S. dollar. More astonishingly, investors consider the foreign exchange gains as recurring.

5. The multiplier effect of the housing downturn hits many building materials companies like Mohawk Industries (MHK) , Home Depot (HD) and Graco (GGG) whiff, but rumors of private-equity deals bail investors out.

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Category: Economy, Investing, Markets, Trading