No Cheer For Housing Bulls From Goldman Which Goes Negative On House Prices

Tyler Durden's picture

Goldman recently confirmed it has lost the magic touch when it joined the momentum brigade in anticipating a blow out 600,000 NFP number, revising its prior estimate by +100,000 on Thursday, even as the real NFP came out as a miserable dud 24 hours later. Which is why we urge readers to take the following note from Goldman's Sven Jari Stehn, even though conceptually we are in full agreement with its message, with a big grain of salt: "Despite normalization of valuations, we expect excess supply, high delinquencies and the fading boost from housing policies to push down house prices somewhat further in 2010 and 2011." And just like earlier we pointed out the discrepancy between the opinions of two BofA strategists on the EURUSD, and the huge implications from this divergence, so here we observe the inconsistency between Sven's bearish view on the oh so critical to the US economy housing segment, and David Kostin's hope for an S&P at 1,250 by the end of the year (and 1,300 by June 30).

From Goldman US Economics Analyst: 10/22 - House Prices Have Not Bottomed Yet June 4, 2010

US Economics Analyst

  • Following their sharp earlier decline, house prices have stabilized since early 2009 and valuations have returned to “normal” levels. But at the same time, temporary boosts from government housing policies are fading and the housing market remains plagued by excess supply and high—and apparently still rising—mortgage delinquencies.
  • To gauge what these opposing forces might imply for future house prices, we construct a model for a panel of 20 metro areas. Our results show that house price dynamics are explained by (1) price momentum, (2) price/rent valuations, (3) the change in mortgage delinquencies, (4) the mortgage rate, (5) excess supply and (6) temporary factors, including the government housing policies.
  • Given the excess supply in the housing market and rising delinquencies, our model suggests that the composite 20-city Case-Shiller index will fall by 3% over the next year and another 1% over the following year.
  • Our model projects the biggest price declines in Las Vegas, Seattle and Portland, due to high homeowner vacancy rates and/or rising mortgage delinquencies. Conversely, we expect modest house price gains in Cleveland, Minneapolis, San Diego and San Francisco.

House Prices Have Not Bottomed Yet

Following their earlier collapse, house prices appear caught in a cross current. On the one hand, there are indications that prices may have bottomed. While alternative house price indices differ in details, they generally show that house prices have stabilized since early 2009 (Exhibit 1). Second, measures of valuation appear to be back in “normal” territory (Exhibit 2). The Case-Shiller price/rent ratio—which stood nearly 25% above its long-run value in early 2006—is now broadly in line with its historical average. Housing affordability—measured as the percent of income spent on mortgage principal and interest—has also improved noticeably during this period.
Other indicators, however, point to further house price declines.  First, much of the stabilization of house prices since early 2009 appears due to government housing policies, including (1) the homebuyer tax credit, (2) the Fed’s purchase of mortgage-backed securities and (3) temporary mortgage modifications through the Obama administration’s Home Affordable Mortgage Program. We have estimated that these housing policies have temporarily boosted house prices by around 5%.  Second, the housing market remains plagued by enormous excess supply (Exhibit 3). Despite recent improvements, both the homeowner vacancy rate and the months’ supply of single-family homes for sale remain well above historical levels. Third, the mortgage market remains troubled. Mortgage delinquencies have continued to rise from their already elevated levels (Exhibit 3).

Given these cross currents, how should we expect house prices to develop over the next one or two years? Our working assumption has been for a renewed 5% drop in the national Case-Shiller index between end-2009 and end-2010, and we already saw a 1.3% decline in the first quarter.  In this comment we present results from a new house price model suggesting that the remaining decline could stretch out over a somewhat longer time period.  Specifically, the model points to declines of 3% over the next year and another 1% over the following year as excess supply and rising mortgage delinquencies take their toll.

Modeling House Prices

Our house price model is constructed as follows. First, we choose to model house prices at the metro area level. Most house price models have focused on forecasting aggregate prices at the national level, as more data with longer time series are available.   However, we believe that the housing market is characterized by sufficient regional variation to warrant a more disaggregated approach. Exhibit 4, for example, shows very different house price developments in the three largest US metropolitan areas.

Second, we decide to focus on the Case-Shiller house price index. Of the three most prominent house price indices, the Federal Housing Finance Agency (FHFA) index is least desirable as it covers only transactions involving agency-backed mortgages and our previous statistical work has shown that the Case-Shiller index is the better index at the regional level, containing more useful information for future house price appreciation.  While the Loan Performance house price index (excluding distressed sales) is desirable in principle, too short a history is available at the metro level to build a panel model.

We therefore construct a quarterly model of the Case-Shiller house price indexes for a panel of the 20 largest US metropolitan areas for the period spanning from 1997Q1 until 2010Q1. Whenever possible we use data at the metro area level; when insufficient data are available we either proxy the metro-area variable with the corresponding state data (for existing home sales and mortgage delinquencies) or use national data when no state-level data are available (for months’ supply of houses for sale and the mortgage rate).

Our model explains current house price appreciation by past price changes and a number of lagged explanatory variables.   Although this approach does not allow for rich quarter-to-quarter dynamics, it permits us to forecast future house prices with current values of the explanatory variables without the need to project data at the metro-area level. We run separate models to project house prices four and eight quarters ahead. To allow for structural differences in house price dynamics across metro areas, we include fixed effects in our panel.

In selecting our specification we aim for a model that describes house prices well both before and after the collapse of the bubble. When estimated for the full sample until 2010, our model does a decent job at capturing the turning point in 2006. However, the model is less successful at predicting the 2006 house price decline when estimated with data through 2005.

Key House Price Determinants

We identify six house price determinants (Exhibit 5):

1. Persistence. Lagged house price appreciation is statistically significant with a sizable coefficient, confirming the existence of short-term momentum in house prices. All else equal, a 1% price decrease over four quarters is typically followed by another ½% fall one year later.

2. Price/rent valuation. We find a strongly negative effect from “overvaluation” on future house prices. All else equal, a 1 percentage point increase in the price/rent ratio lowers house prices by 0.2% after four quarters and by a full percentage point eight quarters later.

3. Excess supply. A one-percentage point increase in the homeowner vacancy rate lowers house prices by 1.8% four quarters later (and 5.4% after eight quarters), while a one-point increase in the months’ supply of homes for sale lowers house prices by 1.4% four quarters later. A higher volume of existing home sales raises prices, as excess supply is reduced.
4. Mortgage delinquencies. Rising delinquencies have a negative effect, lowering house prices by 3.2% after four quarters and 5% after eight quarters for a one percentage point increase in the delinquency rate.

5. Mortgage rates. Higher borrowing costs also have significantly negative effects on house prices, lowering prices by 1.7% after four quarters for every 100 basis points of nominal mortgage rate increases.

6. Temporary factors. To control for the effects of the housing components of the fiscal stimulus bill, we include dummy variables for the period from 2009Q2 to 2010Q1, which suggest that housing policies—including the homebuyer tax credit—have provided substantial support to house prices during this period (details not shown).

Prices Have Not Bottomed Yet

Given the excess supply in the housing market and rising delinquencies, our model suggests that the composite 20-city Case-Shiller index will fall by about 3% over the next year and another 1% over the following year. This projection is weaker than the current consensus forecast of a 0.4% drop in the national Case-Shiller index in 2010 followed by a  1.6% increase in 2011.

We predict the largest house price declines for Las Vegas, Seattle and Portland (Exhibit 6).  While high home vacancy rates and steeply rising delinquencies are expected to push down prices in all three areas, some interesting differences emerge. Price declines in Las Vegas are projected to be front loaded, as negative price momentum and excess supply lead to near-term price declines, before valuation undershoots sufficiently to push up prices. For Seattle and Portland, the model projects back-loaded price declines as house prices currently look overvalued.

The model projects the largest house price appreciation in Cleveland, Minneapolis, San Diego and San Francisco. None of these areas suffers from sharply rising delinquency rates or high vacancy rates (except Cleveland). In addition, house prices in Cleveland appear undervalued and San Diego/San Francisco benefit from positive price momentum.

Our conclusion: Despite normalization of valuations, we expect excess supply, high delinquencies and the fading boost from housing policies to push down house prices somewhat further in 2010 and 2011.

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williambanzai7's picture

Except in Manhattan...

I need more asshats's picture

Except everywhere. Never before in history has there been a bigger concentration of supply in the hands of so few.

Prices will only fall if all of that supply is put into the marketplace at a pace that exceeds demand for it, and that is not going to happen.

Ask any attorney who practices in the art, banks have stopped foreclosing and not because the delinquencies have made their books whole. Delinquencies get free rent if they promise to make the house look lived in. The sham continues unabated.

clotario's picture

In Manhattan & environs there is an enormous suppltyof homes and condos/co-ops held in wait for prices to return to "normal" (2005 levels). A sign that this isn't going to happen will force the owners to rethink their math and dump the places. This is what should have happened a few years ago, but had been delayed by the govt's actions nand yet further record wall st. bonuses.
As soon as people remember that 20% year-over-year price increases are far from the norm and will not return, prices will plummet.

Cheeky Bastard's picture

Goldman guys are full of shit.

ABX.HE.AAA family and ABX.HE.PENAAA family have been indicating for more than a month now that the problem in housing is anything but over. And, furthermore, the same conclusion which Goldman just derived could have been also derived if one just threw a quick glance and observed the constant rise of deltas on both contract basis and net notional basis for the aforementioned index families.

ABX.HE.AAA has lost [average of families] 20% in just one month, while deltas concerning ABX.HE.PENAAA are closer to those one can see in a sovereign than in an index. But, whatever, they can rely on the macroeconomic analysis; they are months behind the derivatives market. 

Our conclusion: Despite normalization of valuations, we expect excess supply, high delinquencies and the fading boost from housing policies to push down house prices somewhat further in 2010 and 2011.


Well, yes, but they fail to mention that the deterioration in RE prices will continue far beyond 2011 since no one is willing to buy [except the FED] the foreclosed shit on BBS [mark-to-model= illiquidity] and that inventory will remain on the market for years, also helping in keeping the prices down.

And if the FED thinks that it can inflate the value by engaging in QE-II it is sadly mistake. The distribution of liquidity will not be high enough for RE prices to rise. Not even close. Plus, there is that little connection between availability of credit for small business and rising RE prices. You cant have rising RE prices without credit lines to small business. The opposite may or may not be true. 

In short, GS presented a far more rosier picture than it is. ABX.HE.AAA witnessed a greater deterioration of its price, in a shorter time period then it did in 07 and 08. That tells you many things; none of which was said in this report.

Nihilarian's picture

All these asinine reports are based on prior week market action and forward week's outlook. I find more insight in fortune cookies and more clarity in the reflection off Jim Cramer's cranium.

Cheeky Bastard's picture

I just love the way they use models [read, predicting stuff using equations that  did not, are not and will not work]. You can not counter-act the market movements by using models, nor can you efficiently trade the market using models. It is impossible. Also there is this little treat in the report:

Specifically, the model points to declines of 3% over the next year and another 1% over the following year as excess supply and rising mortgage delinquencies take their toll.


I would bet them right now that those percentages will be higher; but Goldman will not take the other side of that trade since its not a market maker nor does it have an allocated farm of supercomputers on that exchange.

Kataphraktos's picture

Right on the money there, Cheeky. Imagine this: a homebuyer looks at this report and say, "Meh. 3% ain't so bad. If I find my dream home, I might as well buy it now, waiting a year or two to save 3% isn't worth it, especially since I will spend that time wasting money on rent*." Predicting down 3% and seeing down 10-20% makes you just as wrong as predicting down 3% and seeing up 10-20%.

We all know this fucker's going down double digits each year for the next two years. And Manhattan bulls: There's a bear with a sawed-off lupara in your very near future. The wolves are running out of sheep upon which to feast, and will be eyeing each other in the coming months: politicians and bankers, ECB and the Fed, they'll all be clawing at each other for meat now that the middle class lies in ruins and the underclass sharpens the tines on their pichforks.

I see growing armies of street performers and beggars. I see more empty storefronts. I see stores and restaurants closing within months of launch without having paid a single month's rent.

2010 is the last hurrah for Manhattan.

*Ha! I always love that line.

Cheeky Bastard's picture


"But, but ..... my probabilistic distribution model shows that this BBB- tranche of 50 equally weighted components has a probability of default of only 0.0000063%. Why did my trading desk just lose 10 billion holding this bitch."

Something like that, ditto. And also remeber when they said that the housing prices can never go down on a national level.


Their models suck, and if they manage to book a profit using those models, they book it solely by coincidence and nothing else.

jeff montanye's picture

speaking of housing prices going down 3% this year and possibly 1% next, a prime water front hamptons palace (i.e. where gatsby or daisy lived) sold for a nominal $1 million in 1929.  in 1942 it sold for a nominal $25,000.  but it's different this time.

Groucho's picture

you're right about the models. they are the main source of all current economic problems. ecomomists construct them as an alternative to taking a common sense look at the world. look at all of the risk quant models that said housing would increase forever. impossible, but if the model says it's so...

nassim taleb said that the first thing that should be done is eliminate every university course in econometrics and modeling. you'd do just as well scratching through chicken guts or tea leaves.

bob_dabolina's picture

"ABX.HE.AAA family and ABX.HE.PENAAA family have been indicating for more than a month now that the problem in housing is anything but over."

Thats just a bunch of fucking letters.

I travel across the country and talk to people of all different classes. They have been telling me the problem in housing has been far from over since 2007.

This isn't some kind of science.

Cheeky Bastard's picture

I agree its not, but since I live 10 000 miles from The Glorious State of USA I cant really go out an talk to people in the aforementioned Glorious State of USA to get the realistic picture of RE market. I need to use representative samples; or in this case "a bunch of fucking letters" indexes.

bob_dabolina's picture

Since you have enough money to trade in "a bunch of fucking letters" indexes, your time and money might be spent better by taking a vacation over here and talking to the people who are losing their homes.

It'll save you a bunch of time instead of looking at a crock of shit that is way behind the curve.

MsCreant's picture

Chill bob, Cheeky's cool. He is on our side. No need to be ugly. 

bob_dabolina's picture

I wasn't bashin' Cheeky babe.

It irritates me that this upper echelon finance has become so opaque.

Life used to be so much more simple. Why are people gambling with the lively hoods of other peoples lives?

Why should the price of homes in my neighborhood be something people are gambling with across the world?

Cheeky Bastard's picture

I'm not betting on anyone losing their home and I'm not trading those indexes. And even if I did, I would only take a position. I have no influence on whether someone defaults on their mortgage. None whatsoever. If you can exploit the greed, stupidity and ignorance of other people do it; they would do the same to you if the opportunity presents itself to them. 

The Merchant of Venice's picture

"Why should the price of homes in my neighborhood be something people are gambling with across the world?"

Because the banking system we can see, and somewhat follow, craves debt.  It dies without it.

The real crooks are your elected officials signing contracts they know they won't have the revenue to cover.  They might be your neighbors.  Go pee on their fence and leave a note that they should thank you for not leaving behind a pile of your debt instrument number 2.

Cheeky Bastard's picture

No thank you. I like it here.

And why the hell would I want to talk to Americans who went over their head into debt and now all of the sudden cant pay for it? Makes no sense. Why dont some of the Yanks hop on the plane and come to Greece or Romania or Ukraine and talk to the people who are losing there jobs there ?


Yeah, thats what i thought. Its only the Americans and the USA that matters. Fuck all the rest. Am I right .... Bob? 


dnarby's picture

I'm not happy with the job losses in other countries, but I admit to wanting my neighbors to have jobs more than the good people in Greece, Romania or the Ukraine.

Mainly because I don't live next next door to people in Greece, Romania or the Ukraine.

Cheeky Bastard's picture

Read what bob wrote. I didn't pull this comment out of my ass. It was a response to him.

bob_dabolina's picture

I understand the pain of people domestic and abroad. I understand the problem is not one that is isolated to the United States. However, I happen to be an American and as such I am particular to the pain being felt domestically.

I think finance has been taken to a point where it has become burden on people around the world. There used to be a day when the person who gave you a mortgage had a personal relationship with you. It evolved into a point where my mortgage was sliced and sold to a bank, who sold it to a hedge fund, who sold it to Iceland, who sold it back to a hedge fund.

I think the entire global financial system has become too reckless and it upsets me.

Sqworl's picture


hope this doesn't pass as this e-mail claims... secondly, i wonder how it affects condos? if true, it will help finance Gore's divorce!

Don't want to be bothered with "Political stuff?"   You'd better read this one. It will come as a huge shock to you if you aren't informed as to what Obama is up to, and it has already passed one hurdle.  It will take very little now to put it into actual law!!  

So you think you live in a free country. Boy have you got a surprise coming.

A License Required for your HOUSE?

If you own your home you really need to check this out. At the end of this email is the Google link to verify.  If the country thinks the housing market is depressed now, wait until everyone sees this. No one will be buying homes in the future.

We encourage you to read the provisions of the Cap and Trade Bill that has passed the House of Representatives and are being considered by the Senate. We are ready to join the next march on Washington! This Congress and their "experts" are truly out to destroy the middle class of the U.S.A.

A License will be required for your longer just for cars and mobile homes....Thinking about selling your house?  Take a look at H.R. 2454  (Cap and Trade bill).  This is unbelievable!  Home owners take note and tell your friends and relatives who are home owners!

Beginning one year after enactment of the Cap and Trade Act, you won't be able to sell your home unless you retrofit it to comply with the energy and water efficiency standards of this  "Cap & Trade" bill, passed by the House of Representatives. If it is also passed by the Senate, 
it will be the largest tax increase any of us has ever experienced.   The Congressional Budget Office (supposedly non-partisan) estimates that in just a few years the average cost to every family of four will be $6,800 per year. No one is excluded.  However, once the lower classes feel the pinch in their wallets, you can be sure that these voters will get a tax refund (even if they pay no taxes at all) to offset this new cost. Thus, you Mr. And Mrs. Middle Class have to pay even more since additional tax dollars will be needed to bail out everyone else.

But wait. This awful bill (that no one in Congress has actually read) has many more surprises in it. Probably the worst one is this: A year from now you won't be able to sell your house without some bureaucrat's OK. Yes, you read that right.

The caveat (there always is a caveat) is that if you have enough money to make required major upgrades to your home, then you can sell it. But, if not, then forget it. Even pre-fabricated homes ("mobile homes") are included. In effect, this bill prevents you from selling your home without the permission of the EPA administrator.
  To get this permission, you will have to have the energy efficiency of your home measured. Then the government will tell you what your new energy efficiency requirement is and you will be required to make modifications to your home under the retrofit provisions of this Act, to comply with the new energy and water efficiency requirements.   Then you will have to get your home measured again and get a license (called a "label" in the Act) that must be posted on your property to show what your efficiency rating is; sort of like the Energy Star efficiency rating label on your refrigerator or air conditioner. If you don't get a high enough rating, you can't sell.    And, the EPA administrator is authorized to raise the standards every year, even above the automatic energy efficiency increases built into the Act. The EPA administrator, appointed by the President, will run the Cap & Trade program  (AKA the "American Clean Energy and Security Act of 2009") and is authorized to make any future changes to the regulations and standards he/she alone determines to be in the government's best interest. Requirements are set low initially so the bill will pass Congress. Then the Administrator can set new standards every year.
The Act itself contains annual required increases in energy efficiency for private and commercial residences and buildings. However, the EPA administrator can set higher standards at any time. Sect. 202 - Building Retrofit Program mandates a national retrofit program to increase the energy efficiency of all existing homes across America. 
  Beginning one year after enactment of the Act, you won't be able to sell your home unless you retrofit it to comply with its energy and water efficiency standards. You had better sell soon, because the standards will be raised each year and will be really hard (expen$ive) to meet in a few years. Oh, goody!   The Act allows the government to give you a grant of several thousand dollars to comply with the retrofit program requirements IF you meet certain energy efficiency levels. But, wait, the State can set additional requirements on who qualifies to receive the grants. You should expect requirements such as "can't have an income of more than $50K per year", "home selling price can't be more than $125K", or anything else to target the upper middle class (that includes YOU?) and prevent you from qualifying for the grants.    Most of us won't get a dime and will have to pay the entire cost of the retrofit out of our own pockets. More transfer of wealth, more "change you can believe in." Sect. 204 - Building Energy Performance Labeling Program establishes a labeling program that for each individual residence will identify the achieved energy efficiency performance for "at least 90 percent of the residential market within 5 years after the date of the enactment of this Act."

This means that within 5 years 90% of all residential homes in the U.S. must be measured and labeled. The EPA administrator will get $50M each year to enforce the labeling program. The Secretary of the Department of Energy will get an additional $20M each year to help the EPA. Some of this money will, of course, be spent on coming up with tougher standards each year...

Oh, the label will be like a license for your car. You will be required to post the label in a conspicuous location in your home and will not be allowed to sell your home without having this label. And, just like your car license, you will probably be required to get a new label every so often - maybe every year.
  But, the government estimates the cost of measuring the energy efficiency of your home should only cost about $200 each time. Remember what they said about the auto smog inspections when they first started: that in California? It would only cost $15. That was when the program started. Now the cost is about $50 for the inspection and certificate.    Expect the same from the home labeling program. Sect. 304 - Greater Energy Efficiency in Building Codes establishes new energy efficiency guidelines for the National Building Code and mandates at 304(d) that one year after enactment of this Act, all state and local jurisdictions must adopt the National Building Code energy efficiency provisions or must obtain a certification from the federal government that their state and/or local codes have been brought into full compliance with the National Building Code energy efficiency standards.

CHECK OUT a few of the sites; 

Cap and Trade: A License Required for your Home http://www.nachi. org/forum/ f14/cap-and- trade-license- required- your-home- 44750/
HR2454 American Clean Energy & Security Act:   http://www.govtrack .us/congress/ bill.xpd? bill=h111- 2454 Cap & Trade A license required for your home: Cap and trade is a license to cheat and steal:
http://www.sfexamin columns/oped_ contributors/ Cap-and-trade- is-a-license- to-cheat- and-steal- 45371937. html
Cap and Trade: A License Required for your Home:
Thinking about selling you House? Look at HR 2454: search?hl= en&source=hp&ie=ISO-8859- 1&q=A+License+ required+ for+your+ home-+Cap+ and+Trade&btnG=Google+ Search

MsCreant's picture

Stunning. As if we weren't fucked enough...

Sqworl's picture

Sheeple: this is for your own good, as you are incapabable of managing your own money!!!  Besides, there nowhere to invest it.  My advise is to take out pay the penalties and run...

Sqworl's picture

Wait till they take our 401k's...:-(

RF's picture

Urban legend. Hit the last link and scroll to Snopes.

long-shorty's picture

"Beginning one year after enactment of the Act, you won't be able to sell your home unless you retrofit it to comply with its energy and water efficiency standards."

Please make a better effort to have some connection to reality, Sqworl. Your hystrionic post caused me to actually read some of the sections you cite in the bill, and, lo and behold, there is no such ridiculous language there. You're either deluded, or are copying and pasting from some deluded blogger.

Now I know that if something you post seems ridiculous, it probably is, so I don't need to waste my time looking it up.

Sqworl's picture

Sorry about your divorce Al...I know who's getting the Montecito Mansion!

jesus's picture

stop posting entire fucking articles in the comments. a sentence and a link is enough for people who are interested.


Muir's picture


"ABX.HE.AAA has lost [average of families] 20% in just one month, while deltas concerning ABX.HE.PENAAA are closer to those one can see in a sovereign than in an index. But, whatever, they can rely on the macroeconomic analysis; they are months behind the derivatives market."

Is that info publicly available?



From Markit I do not get that when I look at some series/

Cheeky Bastard's picture

Muir; sorry. I was talking about the May m-t-d data. That might have caused some confusion in my original post. Also, as you can see, I was not looking at sub-indexes but family average [also, sorry, should have formulated the original post better]. I think the monthly low for HE.AAA was something like -20% [value falling from 46 to 38.xx]. Usually I get this data via report which i receive after trading closes for the day. Also,as i have mentioned i only took into consideration Mays movements [didnt go longterm].

The deltas are derived from DTCC warehouse data [y-t-d value movements] and only HE.AAA-06 and PENAA-07-1 are relevant to what I was saying. Again sorry for the poor formulation of my initial post and the subsequent confusion it caused.


bob_dabolina's picture


This is what a college degree gets you....nothing. Just look at all the non-sense in this ZH article.

It takes this much analysis to figure out that shit is fucked up? They are just figuring this out now?

Bankers must not talk to the middle class very often.

*Exhibit #5 was my fav. R-squared my ass

Nihilarian's picture

It's very simple. All you need is to know slightly more than your audience, and you can just razzle and dazzle them with nonsense. It's the car mechanics' money making methods applied to financial analysis.

bob_dabolina's picture

The ABRA.CA.DABRA tranche is way overvalued.

Cheyenne's picture

It's the car mechanics' money making methods applied to financial analysis.


Prof Gulliver's picture

Geez, GS, do you get paid for this analysis? Anyone picking houses at random on Zillow over the past month, since the credit expired, would see prices falling just about every day on every house. You don't need a weatherman to know which way the wind blows.

jeff montanye's picture

it's something they did (and they're doing it again).

Nolsgrad's picture

Housing market in the coming years is gonna be fun to watch.

The Merchant of Venice's picture

Surely boomers can get another HELOC before Treasury steals their 401K.

Do it boomers.

Brett in Manhattan's picture

There's a reason the banks have record amounts of excess reserves.

The only people willing to borrow are the same ones who stiffed the banks the first time around.

MsCreant's picture

Are you suggesting a double insertion? Same as Merchant above you? This thing is a daisy chain (I didn't know what one of those was until I spent time on this site).

I see you're baaaack.

Brett in Manhattan's picture

I'm saying the banks aren't dumb enough to piss away the mulligan they just got courtesy of the treasury and the fed.


jeff montanye's picture

the evidence for your assertion is sparse.  yield levels on junk fell quite low (and spreads narrowed) until recently.  bonus extractions from equity increased substantially.  and the ding dongs fought regulation changes that would actually let them know which of their counterparties were money good and which weren't.  which is why the european contagion and concomitant financial lockup (deja vu fall of '08) is coming soon to a market near you.

Brett in Manhattan's picture

So, then why do the banks have record reserves? Why don't they lent the money out to homebuyers and get a real return?

Because they know they'll get stiffed via non-recourse loans.

Do you think it's as easy to get a loan, now, as it was before the shtf?