Friday, July 20, 2007

Snaith: 'I didn't anticipate the severity of the sub-prime issue'

Another for the "surprised expert" category. From the Stockton Record:

California's economy is headed for a soft landing, not a recessionary crash, according to the latest forecast [pdf] from University of the Pacific's Business Forecasting Center.

"To say we're going downhill is a fair characterization, but we're not going off a cliff," said Sean Snaith, consultant to Pacific's Forecasting Center and director of University of Central Florida's Institute for Economic Competitiveness.

Slumping conditions in the state's housing market and energy price volatility are contributing to the downturn...Defaults on sub-prime loans, which are mortgages made to borrowers with poor credit ratings, are magnifying the problem, particularly in the Stockton-San Joaquin County area, Snaith said.

"I didn't anticipate the severity of the sub-prime issue," he said. More borrowers than he thought jumped at loans touting low interest rates and monthly payments....
From the Sacramento Bee (hat tip Gwyn):
Weighed down by the housing sector, the job markets in California and Sacramento nearly ground to a halt last month. The Sacramento-area unemployment rate jumped four-tenths of a point in June to 5.2 percent, the Employment Development Department reported Friday. Although the region added 200 construction jobs, financial-services payrolls shrank by 1,300 - a reflection of cutbacks in real estate and mortgage lending.
From the Associated Press (via Forbes):
It was supposed to be contained slump, but there's no avoiding it any more: The housing sector's woes are spreading, squeezing makers of everything from the fireplace to the kitchen sink.

The market's two-year meltdown has already claimed a number of obvious victims, from the homebuilders who overextended themselves trying to satisfy unsustainable demand, to aggressive lenders who scuttled vetting procedures to cash in on commissions - but the recent round of earnings reports indicates the turmoil is more widespread than people first expected.
...
As the housing slump spreads to a wider swath of the economy, economists and industry groups that long claimed the turmoil would be contained are warning otherwise.

[Sacramento Bee] newspaper publisher McClatchy Co. reported a 9.5 percent decline in second-quarter profits Thursday....McClatchy attributed the weaker results largely to a severe decline in real estate advertising in two of its key markets, California and Florida, where the housing market had been booming.

Gary Pruitt, McClatchy's CEO, said in a statement that advertising revenues were down 17.8 percent in those two markets in the second quarter, with auto and employment advertising falling in tandem with real estate advertising given the importance of the housing sector to those economies.
From the Sacramento Bee:
The McClatchy Co.'s latest earnings show the Sacramento-based publisher is still feeling the impact of a one-two punch: the newspaper industry's overall advertising slump and a housing market downturn that's slammed two of McClatchy's biggest markets.
...
The downturn mainly reflected a significant drop in ad sales, especially at McClatchy's California and Florida papers. Nearly three-quarters of the drop in ad revenue came from those two states, which are suffering from real estate woes. Real estate advertising was down 32 percent in California and Florida, causing a spillover effect that depressed other ad categories.
Also from The Bee:
Dallas-based auction giant Hudson & Marshall says it's expecting about 1,000 people Sunday for its first foreclosure auction here of 175 houses...What's attracting the auctioneers -- and buyers: More than 4,000 bank repossessions so far this year in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties, according to Foreclosures.com of Fair Oaks. That's roughly twice last year's total of 2,082 bank repossessions.

13 comments:

lexi said...

"I didn't anticipate the severity of the sub-prime issue," he said.

And that's where he loses all credibility in my book. We're not
as dumb as they wish we were!

Patient Renter said...

"Snaith: 'I didn't anticipate the severity of the sub-prime issue' "

Ironically, I perfectly predicted the severity of Snaith's lack of housing insight.

Diggin Deeper said...
This comment has been removed by the author.
Diggin Deeper said...

As far as Snatih and other academic real estate wizards are concerned, they are usually far removed from the playing field and have a laundery list of industry paid subscribers. They know where there paychecks come from and how to keep the money in constant flow to their institutions. They are data dependent tending to use past results as the basis for future predictions. It was easy enough when a normal boom/bust cycle occurred. This market has proven anything but normal.

Not one of these paid clairvoyants saw the subprime/alt-A problem as a national one. They saw pockets of distress, but they said it was spread out enough that it wouldn't hurt the overall economy. Funny, the market mavens and govt. financial gurus said the same thing. Read Bernanke's transcripts this week, he's beginning to buckle, too.

Now through the initial wave of mortgage resets, foreclosures in this country are pushing close to 1 million... affecting 3-4 million people on average. Does anyone really believe that 3-4 million people plus additional million(s) coming into the picture within the next two years won't affect the overall economy?

RMB said...

I'd make some comments, but these just speak for themselves. The really scary thing is the number of San Joaquin city councils who took this guy's word as gospel and then went out and spent money based on those predictions. Stockton 130+ million into downtown. Lodi 6+ million into downtown. Tracy, manteca and Lathrop, growing to where they are going to need to spend money downtown. Such a waste on the backs of the taxpayers. Just keep ponying up that 50% every pay period.

Perfect Storm said...

I didn't anticipate the severity of the sub-prime issue," he said. More borrowers than he thought jumped at loans touting low interest rates and monthly payments....

Wasn't this public information, so he basis his opinions on tarot (pronouced tarrow)cards and crystal balls.

This guy needs to be in a carnival side show.

cole said...

Snaith is quite rational and his comments well thought out, apt and to the point!

He correctly analyzed the intensity of the Stockton and Turlock Markets by correctly deducing the numerous positive and dynamic elements that the Central Valley possess that are lacking in Palo Alto, Pacific Heights, Mill Valley and Menlo Park! Snaith deduced that the flow of population from the Bay would engulf and aggrandize Stockton making it the "Paris" of the Valley.

Doubters here, and there just "don't know the territory"

Perfect Storm said...

aggrandize Stockton making it the "Paris" of the Valley.

(transitive) To make great; to enlarge; to increase; as, to aggrandize our conceptions, authority, distress.
(transitive) To make great or greater in power, rank, honor, or wealth; applied to persons, countries, etc.
(transitive) To make appear great or greater; to exalt.
(intransitive) To increase or become great.
Retrieved from "http://en.wiktionary.org/wiki/aggrandize"

Paris of the valley, I would have never thought.

lexi said...
This comment has been removed by the author.
lexi said...

He correctly analyzed the intensity of the Stockton and Turlock Markets by correctly deducing the numerous positive and dynamic elements that the Central Valley possess that are lacking in Palo Alto, Pacific Heights, Mill Valley and Menlo Park! Snaith deduced that the flow of population from the Bay would engulf and aggrandize Stockton making it the "Paris" of the Valley.

Doubters here, and there just "don't know the territory"


hahahaha! Good one! I had to
read it twice to get you are joking.

Gwynster said...

OK I'm just not getting this
http://tinyurl.com/2btgu2
out of this
http://tinyurl.com/27wy4c

rocklin renter said...

Gwyn -

He meant Paris TEXAS! ;)

Good post Cole. Funny stuff!

Gwynster said...

bahahaha that went right over my head >; )

good one, though I have a soft spot for Paris, TX because of the Wim Wenders film.