Busy day in real estate, we have:
- The pending home sales index falling to 84.6, the lowest number since its creation in 2001. Home sales are down 21.4% year over year.
- We have the IMF estimating that the US real estate meltdown will cost $945 billion. Looks like we will hit the trillion dollar mark, because we haven’t hit bottom. (Just to pat myself on the back, I said “trillions” in July of 2007).
- In the UK, we are seeing a decline in house prices too, only for them this is the second time around (see here and here)
- It looks like the Bank of England may be forced to slash rates in order to keep the housing from dropping too sharply.
- Se are seeing short sales, where the house is sold for less than the principal owed skyrocketing.
- For example, In Las Vegas, More than half of Las Vegas home sales in March were foreclosures or short sales.
Of course with any of these situations, you will inevitably find the highly placed moron, and today’s is Morgan Stanley CEO John Mack, who is saying that he thinks that the credit crunch is, “in the final innings”. If you have money in Morgan, get it out now.
Why am I so certain about this? Because the Fed auctioned another $50 billion banks in their “crap for cash” program, which has now “auctioned” $310 billion to banks for their worthless mortgage paper.
If that doesn’t convince you, how about GMAC looking down the barrel of a ratings cut, which means that people who might want to buy a car will find it even more difficult to get a loan to do so.
Of course, Mack thinks that things are looking up because private equity firm TPG just put $7 billion into WaMu, which implies to him that private equity is on its way to a comeback.
Nope….Dead cat bounce. WaMu’s only virtue is that it’s better, and only a bit better, than Countrywide.
For an idea of how badly things are going, note that First Marblehead is at risk of imploding. Note that FM is a student-loan services provider. It should basically be impossible for them to lose money.
This is federally guaranteed, and cannot be discharged through bankruptcy, but given that their insurer, The Education Resources Institute Inc., just filed for bankruptcy, all bets are off.