Using Veritas to Construct the "Per…

29-04-2017 Hits:85852 BoomBustBlog Reggie Middleton

Using Veritas to Construct the "Perfect" Digital Investment Portfolio" & How to Value "Hard to Value" tokens, Pt 1

The golden grail of investing is to find that investable asset that provides the greatest reward with the least risk. Alas, despite how commonsensical that precept seems to be, many...

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The Veritas 2017 Token Offering Summary …

15-04-2017 Hits:80065 BoomBustBlog Reggie Middleton

The Veritas 2017 Token Offering Summary Available For Download and Sharing

The Veritas Offering Summary is now available for download, which packs all the information about Veritas in a single page. A step by step guide to purchasing Veritas can be downloaded here.

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What Happens When the Fund Fee Fight Hit…

10-04-2017 Hits:79926 BoomBustBlog Reggie Middleton

What Happens When the Fund Fee Fight Hits the Blockchain

A hedge fund recently made news by securitizing its LP units as Ethereum-based tokens and selling them as tradeable (thereby liquid) assets. This brings technology to the VC industry that...

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Veritaseum: The ICO That's Ushering in t…

07-04-2017 Hits:84408 BoomBustBlog Reggie Middleton

Veritaseum: The ICO That's Ushering in the Era of P2P Capital Markets

Veritaseum is in the process of building peer-to-peer capital markets that enable financial and value market participants to deal directly with each other on a counterparty risk-free basis in lieu...

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This Is Ground Zero for the 2017 Veritas…

03-04-2017 Hits:80944 BoomBustBlog Reggie Middleton

This Is Ground Zero for the 2017 Veritas Offering. Are You Ready to Get Your Key to the P2P Capital Markets?

This is the link to the Veritas Crowdsale landing page. Here is where you will be able to buy the Veritas ICO when it is launched in mid-April. Below, please...

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What is the Value Proposition For Verita…

01-04-2017 Hits:83184 BoomBustBlog Reggie Middleton

What is the Value Proposition For Veritas, Veritaseum's Software Token?

 A YouTube commenter asked a very good question that we will like to take some time to answer. The question was, verbatim: I've watched your video and gone through the slides. The exchange...

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This Real Estate Bubble, Like Some Relat…

28-03-2017 Hits:54196 BoomBustBlog Reggie Middleton

This Real Estate Bubble, Like Some Relationships, Is Complicated...

CNBC reports US home prices rise 5.9 percent to 31-month high in January according to S&P CoreLogic Case-Shiller. This puts the 20 city index close to an all time high, including...

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Bloomberg Chimes In With My Warnings As …

28-03-2017 Hits:82329 BoomBustBlog Reggie Middleton

Bloomberg Chimes In With My Warnings As Landlords Offer First Time Ever Concessions to Retail Renters

Over the last quarter I've been warning about the significant weakness in retailers and the retail real estate that most occupy (links supplied below). Now, Bloomberg reports: Manhattan Landlords Are Offering...

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Our Apple Analysis This Week - This Comp…

27-03-2017 Hits:82171 BoomBustBlog Reggie Middleton

Our Apple Analysis This Week - This Company Is Not What Most Think It IS

We will releasing our Apple forensic analysis and valuation this week for subscribers (click here to subscribe - lowest tier is the same as a Netflix subscription). As can be...

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The Country's First Newly Elected Lame D…

27-03-2017 Hits:82040 BoomBustBlog Reggie Middleton

The Country's First Newly Elected Lame Duck President Will Cause Massive Reversal Of Speculative Gains

Note: Subscribers should reference  the paywall material here for stocks that should give a good risk/reward scenario for bearish trades. The Trump administration's legislative outlook is effectively a political desert, with...

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Sears Finally Throws In The Towel Exactl…

22-03-2017 Hits:88087 BoomBustBlog Reggie Middleton

Sears Finally Throws In The Towel Exactly When I Predicted "has ‘substantial doubt’ about its future"

My prediction of Sears collapsing once interest rates started ticking upwards was absolutely on point.

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The Transformation of Television in Amer…

21-03-2017 Hits:85947 BoomBustBlog Reggie Middleton

The Transformation of Television in America and Worldwide

TV has changed more in the past 10 years than it has since it's inception nearly 100 years ago This change is profound, and the primary benefactors look and act...

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Looking back to October of last year, I warned of the banks and REOs competing with homebuilders and existing homeowners in pushing housing inventory onto the sales market at highly discounted prices. From my post on

Bubble, Banks and Builders:

Below is a list of bank REOs. A REO (Real Estate Owned) is property that a banking (or banking related) institution is forced to hold when a loan that they either issued, purchased, or became legally responsible for was foreclosed on and the property held for collateral was taken back . Generally speaking, an increasing REO inventory indicates increasing foreclosure activity. Foreclosures are very bad for bank balance sheets and performance. REOs are worst. If the bank cannot reclaim its full principle, back interest, and expenses from the sale of the REO, the amount not reclaimed is a complete loss. In order to move REOs quickly, banks are willing to take a loss by:

  • reducing the price of the REO below that of the P&I outstanding,
  • offer preferental (below market or flexible term) pricing on loans to the buyer of the REO, usually profesional investors or first time homebuyers,
  • and other such concessions.

 

If a significant amount of REOs hits the market, they will compete directly with other sources of housing supply, namely homebuilders and existing homeowners looking to sell. REO can very deeply discounted, which makes them difficult to compete with on a pricing basis, and since they come with the blessing of a bank, tend to have a "deal you can't refuse" financing arrangement as well. Banks are willing to get these blights off of their balance sheets by any means necessary!

The list of institutions here is far from complete and is meant to represent only the REO and foreclosure inventory trend for a metropolitan area, not the absolute REO or foreclosure inventory in a market. Graphs are used to infer trends*.

Monthly Averages of REOs for Riverside, CA show a 2 and 1/2 times increase in REOs in just five months. Still not convinced of a problem? To give you an even clearer picture, here are the numbers for the last 10 weeks.

 

Image010

Do you see how steep this incline is, and how much it is increasing week by week? REOs have nearly doubled in the past 10 weeks. This is not an anecdotal blurb, look at the longer trend captured above. Things are getting very bad, very fast. Yet, banks like Citi, Washington Mutual, et. al. say that the worst is behind them. Someone should email them a copy of this blog.

Now its Bank vs. Builder vs. Homeowners - Who will win the race to the bottom of the profit ladder?

 and from part two of that series in October of last year -

Bubbles, Banks, and Builders, Pt. Deux:

Reprinted from 10/8/07 - In part two of my tabloid series, I will take a look at the major profit centers of the builders, and take a look at how the banks (who say the malaise is now behind them)  [This post was written 7 months ago, and notice the similarity in the bank's matra "the worst is now behind us" - it wasn't true then and its not true now. The worst will be behind us when real asset prices reach equilibrium and banks come clean with all inventory, marked to market and sold into a liquid and receptive market. That just 'ain't the case' right now, and it looks like it will not be the case any time soon!] that loaned them money are fairing in those areas. Remember, if home builders bought their land before the boom, their cost basis will tend to be relatively low. This is of little consolation to many builders since the fever hit nearly everybody during the boom, recognized by me as being from the 2nd half of '00 to '06.

Well, let's jump straight to the gist of the matter. The biggest money makers for the builders have now become the biggest busts. Funny, how bubbles work like that. If I am not mistaken, all of the big public guys bought a lot of land and developed hard in Las Vegas. How are the banks that lent to them and their clients fairing? Remember, these numbers are just for the last 10 weeks. I want to be clear to all how quickly I perceive things deteriorating. This is not just a short term trend, either. Look at the 5 month trend in part I of this series. The next reporting period, assuming we are all honest (which is not happening all that often these days), should be most revealing.

Builder Profit Center - Las Vegas

Hey, those who are long Countrywide, watch out below!!!

Washington DC Metro Area

As usual, CFC shareholders, look out below! But wait, the Indy Mac guys might just land on your head if you are not careful. These banks are booking large amounts of real estate that is worth less and less EACH WEEK.

Riverside, CA

As usual, those CFC guys should realize they are now in the housing business.

Atlanta, GA - Here I included the GSEs to show how deep the gov't agencies are in this mess. Places like Chi-town, the Motor City, and Atlanta are actually led by the GSEs, second only to Countrywide (of course) and probably the home builders.

Of course, there are more MSAs to cover, but I think you get the message. In two weeks, I will go into what I have calculated as the Bubble, Bank and Builder Bankruptcy Index (the BBBBI :-0). I will be working on a piece that will show at least one builder going bankrupt before the end of the earnings season. What does that mean? It means the banks will run on all of the other marginal builders, massive amounts of debt will get devalued (further), and land values will plummet even harder. This will make the not so marginal builders more marginal because there debt will be under more scrutiny and their inventory will be worth even less. This will then bounce back to the banks holding the REOs and the homeowners trying to sell.

In the meantime, over the next few posts I will share the dirt that I learned of the banking and building industry. It will make this stuff look like good news.

The reason why I reminisced, was the telling news blurb from CNBC today

 I want to bring your attention to a disturbing little sub-number in today’s quarterly foreclosure report from California-based RealtyTrac. RealtyTrac reports “foreclosure activity,” which covers default notices, auctions sale notices and bank repossessions.

The numbers were pretty nasty nationwide, as expected, with activity up 23 percent quarter to quarter and 112 percent year over year.

When you break down the sub-categories, however, you find that the number of bank-owned properties is rising faster than ever before. “Typically you’ll see about 20 percent of the foreclosure filings being bank-owned,” RealtyTrac’s Rick Sharga told me in an interview this morning. “We’re getting to a point now where it’s well over 1/3 and aiming at 40 percent, so that just suggests that a lot of these homes can’t even be sold to investors at auctions – because there’s just no equity in the properties.”

Sharga estimates that by the end of this year there will be over a million bank-owned homes in the market. To put that in perspective, there are about four million properties listed on the Multiple Listing Service, or MLS, so a quarter of the inventory would be bank-owned. The National Association of Realtors noted last week that in a casual survey they found 18 percent of the homes currently on the MLS are foreclosed homes.

It’s interesting to me that given all the programs supposedly helping folks in default and all the banks claiming that they are doing refi’s or “work-outs” or whatever, a growing number of homes are still going back to the bank.

 

  And finally, some food for thought from last year as well:  Would you buy Countrywide if all of its bad mortgages were magically wiped off the books?