Countrywide Down (Finally!)
Like I mentioned in March, CFC finally has began to crack. I tried unsuccessfully to short it a few times and then I missed the big decline!
Insiders have been dumping for quite a while now, so they pretty much now what was coming. Even if they claim that the housing slump was unexpected. Kind of strange considering that I’ve been expecting a housing decline for 2 years now, especially in Southern California.
The housing slump in SoCal is far from over. Prices have dropped 10-30% and I expect another 20-30% drop over the next few years. If we see a large contraction in liquidity, it might be more severe. There’s talk that the cheap money for the private-equity buyouts is drying up. Mortgages have become more difficult to get. The 100% financing for broke, jobless borrowers with lousy credit has completely disappeared. Countrywide stated that the delinquencies in Alt-A and Prime mortgages has been much higher than expected. Could the availability of these loans also dry up?
I sold naked calls on August iShares Dow Jones US Real Estate (IYR) on Monday. I would’ve made more money if I had bought puts instead, but I still did okay. The calls are almost worthless and I can buy them back to close out the position for 70% less than I paid. I’ll be keeping a close eye on CFC and other home-builder stocks to see if there are any other shorting opportunities in future.
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July 27th, 2007 at 1:37 pm
I’m pretty sure you’re just making up those numbers or you’re generalizing your small, undesireable home area for a very large one. Here in LA, prices are holding up fine for good properties. In my neighborhood, homes are still selling for profit. They’re taking longer to seel, but they’re selling. Of course, I live in the Hollywood Hills, so the area is in demand.
If you’re not making up those numbers, you’re area must just be in very low demand. Are you talking crappy condo conversions in Riverside or something?
By the way, I’m not in denial about my investments or anything – I rent a suite in a private home. So, I’m completely objective.
July 27th, 2007 at 2:44 pm
I actually in a very nice condo in San Diego.
Condo conversions were the first to drop.
Just because your neighborhood hasn’t dropped yet doesn’t mean that it won’t.
Prices at the higher end are stickier than at the low end. most wealthy owners don’t need to sell, so if they don’t get their price many will refuse to sell.
If you think I’m making up these numbers, you having been following any news at all. You probably spend your time watch those stupid reality shows!
Well, keep on renting. I’m sure you’ll actually be able to afford a place of your own in a few years.
BTW, I rent too. In fact I rent my own place back that I sold for 20% more 2 years ago at the peak. Does that make me more objective than you?
July 27th, 2007 at 2:51 pm
That makes you MUCH less objective – people by nature always look for the data that support their decisions. You’re filtering only data that seem to prove you were “right.”
Now I understand your arguments. It all makes sense now.
July 27th, 2007 at 3:01 pm
I’ve bought over 20 properties in 4 different states. And someone who rents a room in someone else’s house is the real estate expert????
gimme a break.