We'll See Failures & Dumb Bankers
"Billionaire investor Warren Buffett said Friday the economy continues to be in a recession, by his definition, and will continue to be for at least several more months."
"During a live appearance on CNBC, Buffett said ripples of the credit crunch are continuing to cause problems in financial businesses and the economy. "
"Earlier this year he said a financial crisis reveals which players have been "swimming naked," because the tide goes out. That picture has worsened along with the crisis."
'"We found out that Wall Street has been kind of a nudist beach," said Buffett, who is chairman and chief executive of Berkshire Hathaway Inc., which is based in Omaha."
"Buffett said it's likely more banks will fail, especially in areas where there was a real estate bubble and the bank got heavily involved in the housing market."
"Sales of previously owned U.S. homes ticked higher in July thanks to lower prices, but record inventory suggested the battered housing market is unlikely to recover soon, a trade group report showed on Monday."
"The median national home price declined 7.1 percent from a year ago to $212,400 and the inventory of homes for sale rose to 4.67 million which would take 11.2 months to clear at the current sales pace. That matched a record set in April."
'"What we'll see is failures where the bankers were dumb in what they did," Buffett said."
"The median price, (in California), dropped 40.3 percent to $350,760, the biggest decline since the Realtors began tracking the market."
"In the Bay Area, the median sank 21.2 percent to $663,190."
"Additional waves of foreclosures are likely, because thousands of alternative-documentation loans and other exotic mortgages are scheduled to reset to higher monthly payments in the coming months, said Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University in Orange. In addition, sales haven't increased enough yet to substantially reduce the high inventory across the state."
"There were 124,487 active listings in California last month, down 5.4 percent from 131,569 a year ago."
"Adibi doesn't expect the market to stabilize for at least another year."
"Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley, had a more bearish take on Monday's numbers."
"It doesn't reflect a recovering housing market; it reflects a broken housing market," he said. "It's a reflection of the fact that foreclosed homes are being liquidated at very low prices."
"Indeed, San Diego research firm MDA DataQuick reported that 44.8 percent of all the transactions in July were foreclosure resales, up from 7.6 percent a year ago. The trade group didn't provide a statewide figure, but Appleton-Young said it exceeded 50 percent in certain areas."
"Rosen believes that investors, not actual intended occupants, are buying up many if not most of the distressed properties in the hardest hit areas. That will do little to stabilize the markets in those areas, especially if prices fall further and foreclosures continue to climb, he said."
"The median price in Sonoma County dropped to $399,000, down 30.6 percent from a year ago, driven by sales of foreclosure and distressed properties."
"Nationwide, despite the third monthly sales increase this year, the number of unsold single-family homes and condominiums rose to 4.67 million, the highest number since 1968, when the Realtors group started tracking the data."
"Until the inventory level is reduced to more normal levels, analysts say, the housing slump is likely to persist. The inventory level is being driven higher by a massive wave of mortgage foreclosures."
"Between 33 percent and 40 percent of sales activity is coming from foreclosures or other distressed properties, estimated Lawrence Yun, chief economist at the Realtors group."