Real estate insiders go bearish in blogs

[Chagi]

Quote from ralph00:

I don't know about the other stocks, but I did pick up some nly earlier this year. It is a mortgage stock in the sense that they buy MBS, but really, their fortunes are tied to the yield curve far more than the health of the housing industry. They got crushed in the past year w/the flat/inverted yield cuve, but I expect them to do well over the next few years as the yield curve steepens.

I wouldn't say nly is at a new high (it is probably about 40% beneath its alltime high). It certainly has had a nice rally the past few days, but, again, it is due to the steepening of the yield curve.

That's an interesting business model, I'll have to read up on them once my exams are done. I realize that this is one manner that banks make money (borrow at low rates, lend at high rates, profit on the spread), but it's kind of interesting that a publicly traded company would do this with MBSs specifically.

I also belive that they would be faced with something termed "extension risk" if yields were to rise, since capital tied up in MBS pools would be less likely to be prepayed (by mortgagors). My point is that increased yields may not be immediately followed by higher profitability.

 

[ralph00]

^^^ Very true. They face that risk as well. I'm confident they can handle it. Their managers have done well w/rising rates and w/falling rates. What they can't handle is a flat yield curve - no water into wine w/these guys.

 

[ech15]

thanks, that website was quiet informing.
i thought this was very interesting.
http://anotherfuckedborrower.blogspot.com/2005/12/are-we-there-yet-what-is-taking-soooo.html

"Here is where things get tricky. In 2006 there are approximately 335 billion dollars worth of ARMs that are set to adjust. Let's just assume that each loan set to adjust is for $500,000. That means 670,000 households are going to have 4 options: refi, sell, foreclose, or pay the higher payments.


Things get really tricky in 2007 as 1.2 TRILLION dollars of arms are set to adjust. That means 2,400,000 households have to pick one of those 4 options. (again, we all know that 500k is a high loan amount, but it will give us a 'low estimate' as the number of households that could be effected) Let's look at those 4 options a bit closer now..."


i liked to see the bubble pop. i'll be out of trading and fishing some free money in real estate market then. but i wonder if 2,400,000 household will be enough. i hope he tells where he gets his figure so i can check for 2008 -2010. it should be more interesting to see how much household adjust on more longer term basis. maybe there will be stacking affect.

Quote from Quark:

Check out http://www.housingbubblecasualty.com

I've been following this guy's blog for a couple months. He was a SoCal mortgage lender before recently taking a new job. It's clear he saw problems coming and actually took action based on his conviction that the boom is over. There's some great info on his site.