Taking Great Comfort In The Triumph Of Rationality
It’s Friday desk clearing time for this blogger. “The mulish housing market will bedevil us for another year or so, a pair of economists predicted. ‘Sellers are having trouble getting over the fact that they can’t get 10 percent appreciation anymore, and buyers are looking for deals at $50,000 or $100,000 off asking price,’ said Dennis Winters, chief of the Office of Economic Advisors for the Wisconsin Department of Workforce Development. ‘In my neighborhood, they’re lopping $30,000 off asking price. That’s 10 percent.’”
“For the first time in more than a decade, Palm Beach County’s taxable value is expected to drop next year by 5.4 percent, according to preliminary estimates. But Mayor Lois Frankel said she saw a silver lining.”
“‘I think that it’s better to have more realistic prices,’ she said. ‘The cost of housing has been too high. Maybe we’ll get some reality here.’”
“No doubt about it, the pace of new home building in Central Oregon, as in the nation, has sagged badly this year. People who sell cars, furniture, and other expensive items that would be expected to feel pain in a weakening housing economy say business has been fine this year, if not as easy as it was when houses were selling like iced drinks on a hot day.”
“For Bill Moseley, president of a software company, weakening in real estate prices is good news.”
“‘The builders, I understand their frustration, and their importance to the economy. But to someone who is in manufacturing and production, like we are, high housing values are not in our interest,’ Moseley said. ‘It puts too much pressure on wages. Our customers don’t care what it costs to buy houses in Bend. We have to keep that in mind.’”
“Prices for high end homes in China’s capital have been bouncing to record new levels all year, even with dramatically fewer transactions, rental prices flat and many new units empty. Some showrooms have fallen dead quiet.”
“And the euphoria is running particularly high as the Beijing Olympics approach, analysts said. ‘Market growth is the rule here,’ noted Anna Kalifa, the head of research for Jones Lang LaSalle in Beijing. ‘It’s just a question of more or less.’”
“For the first time the Reserve Bank named pockets of Australia, particularly in western Sydney, where it believed households were under financial stress. A Reserve Bank analysis points to regions in NSW, Victoria and Queensland where mortgage payments are consuming more than 30 per cent of household income.”
“‘A disproportionately large number of borrowers in this part of Sydney took out investment housing loans around the peak of the house price cycle,’ the Reserve Bank says.”
“A substantial erosion in housing affordability over the past few years combined with a surge in new listings has started to bring the Calgary housing market back down to earth, says a TD Bank Financial Group report.”
“‘Notably, in Vancouver and Calgary, a substantial erosion in housing affordability over the past few years has started to weigh on demand. This development, combined with a surge in new listings, has started to bring those markets back down to earth,’ says the TD report authored by economist Pascal Gauthier.”
“The report says the ‘main corrective force’ currently at work in Canada’s hottest markets - Calgary, Edmonton and Vancouver - is affordability.”
“Sales of new homes in the United States sank to their lowest level in nearly a decade last month. There is now an eight-month supply of newly built homes, twice the backlog there was when the market was booming. The median sales price was $225,700 last month, down 7.5 per cent from a year ago.”
“The full impact of the credit crunch hadn’t even hit the mortgage market in August, suggesting further declines in the months ahead, said economist Ian Shepherdson. ‘People don’t like borrowing to buy depreciating assets, and lenders don’t like to lend on them either,’ he said. ‘Housing is nowhere near bottom.’”
“Eyewitness News has uncovered an amazing case that involves a victimized grandmother in San Diego, a failing Los Angeles loan company and a Las Vegas man who doesn’t care who he hurts.”
“‘I’m struggling right now,’ said Paul Mangione. He is about to lose his house to foreclosure. ‘I was ready to flip out. That’s why my walls look like this,’ Mangione says he went nuts and took a crowbar to the walls.”
“The former head of the US Federal Reserve has denied that regulators failed to foresee the problems which caused the global credit crunch. Alan Greenspan said they had not acted on concerns about complex and risky financial deals because only very wealthy people invested in them.”
“‘Hedge funds, who are presumably the largest culprit of all of this, are organisations in the US in which wealthy investors invest, Greenspan said. ‘I must admit that I do not have considerable concern about their net worth going from 40 million to five million, which in many cases is what’s happened.’”
“Back in the 17th Century in the Netherlands, there was a mass rage for, of all things, tulip bulbs. Prices got bid way up, and speculators jumped in to bid them up higher still. But eventually the market fizzled and prices plunged.”
“If I had been one of the people who invested in flowers during the frenzy, I would have felt bad to lose my money. But I like to imagine I would also have taken great comfort in seeing the triumph of rationality.”
“Back in 2005, you could hardly hear a word about real estate without wondering who repealed the law of gravity. At the peak last year, home prices in this country were up 134 percent over the previous decade. They are not rising anymore.”
“In truth, the great majority of us will be better off in the long run if the housing bubble has finally burst. Most homeowners, after all, don’t face foreclosure even if their houses are suddenly worth less than before. Not until they sell will they take a hit. But even then, the pain should usually be mostly theoretical.”
“Of course, speculators who sunk money into second homes and investment properties figuring they could flip them in a year or two for a handsome profit will also get the short end of the stick. But that’s why it’s called speculation, not certainty. No one said they couldn’t buy Treasury bills.”
“Like many events in a dynamic capitalist economy, the overdue cooling of an absurdly overheated housing market will inflict some pain. But that doesn’t make it a bad thing.”
Another great week for building a housing bubble consensus! My thanks to those who support this blog. Please check back this weekend for news, your market observations and topic.
Thanks for having us…
“‘I’m struggling right now,’ said Paul Mangione. He is about to lose his house to foreclosure. ‘I was ready to flip out. That’s why my walls look like this,’ Mangione says he went nuts and took a crowbar to the walls.”
Next thing will happen is people will start takeing crowbars to realtors and lenders.It all turning out like we predicted.
You’ve got to read that whole story, it is unbestinkinglieveable.
“We gotta make sure that nobody finds out because she don’t know about it. He’s been leading me along all this time. I says I just need the deal done. I don’t care what you do,” said Mangione.”
Oh, yeah, the Mora guy? Back to Mexico, apparently.
“I says — he says”
What a bunch of Clark County NV wise guys at work here!
You can’t make this stuff up. We don’t need entertainment writers anymore - this is better than anything they could come up with. If Juliet died of a heart attack because of the stress, this would so be a Law & Order.
Nice article you wrote Ben up above called, “Taking Great Comfort in the Triumph Of Rationality.”
I don’t know about other people ,but it was starting to drive me nuts how high the prices were going, along with all the excess building that was going on .What to do with millions of homes/condos sitting vacant ?
“What to do with millions of homes/condos sitting vacant ?”
The govt could bulldoze them, which would create jobs and reduce the excess supply. (Maybe I should not suggest this, out of fear that someone will miss my sarcastic intentions?)
Ever been down under?
One given in any ‘burb in Mexico, is there will be legions of buildings in some failed stage of construction~
Welcome to Estados Unidos de America
“The govt could bulldoze them, which would create jobs and reduce the excess supply.”
Would that constitute as making more land??
They’ve done it before. Its better to destroy than have an instant gang slum. Don’t let that worry you. Its going to happen.
But for every home they destroy, 3 to 5 will be rented. Time is on our side.
I am worried about jobs. Not today, but in 18 months… this will continue to happen fast (as in noticeable change every quarter). And its going to take years to adapt to the job changes.
Got popcorn?
Neil
P/B - G/S:
“The govt could bulldoze them, which would create jobs and reduce the excess supply. (Maybe I should not suggest this, out of fear that someone will miss my sarcastic intentions?)”
lol; or, How about moving these house to India or China as exports? Those countries seem to have all the jobs. (Maybe we could lessen the trade imbalance that way.)
~Misstrial
Hahahahaha………..why not……..they already have been sold the toxic waste
Quote:
#####
“What to do with millions of homes/condos sitting vacant ?”
The govt could bulldoze them, which would create jobs and reduce the excess supply. (Maybe I should not suggest this, out of fear that someone will miss my sarcastic intentions?)
#####
Sell them cheap like a nickel on a dollar and somebody like me will buy the abode to live in. I can buy a four bedroom home now for $125K in California and I am ready to move there if the government or the builder is willing to let the house goes at that price to me. I have CASH !!!
consider them (2.6 million vacant units) an anchor to the US and world economy.
Or your tax dollars at work - Read earlier this year that City of Cleveland was paying to fix up ad maintain abandoned houses so that they didn’t drag down whole neighborhoods. So even if we didn’t join the limbo line, we still end up paying. I’d rather be paying for someone’s healthcare - at least I’m protected from people wandering the streets while germ ridden.
Triumph of Rationality over what?
I propose “Triumph of Rationality over Mendacity.”
Prof. Bear’s italics must die.
“the triumph of rationality.”
A great note to end the week. And with that I finally pony up and send in a contribution –Thanks Ben — and challenge my fellow back-sliders to do the same. It’s just a few mouse clicks away…
I did the same.
; )
Eat The Rich!
“‘Hedge funds, who are presumably the largest culprit of all of this, are organisations in the US in which wealthy investors invest, Greenspan said. ‘I must admit that I do not have considerable concern about their net worth going from 40 million to five million, which in many cases is what’s happened.’”
They’ve robbed the middles class blind the past few decades and there’s not much left worth stealing. Now they’re turning on their own.
Did Greenspan really say that? Now, I don’t care if their net worth is plummeting (it is), but rather the impact. For example, its going to be tough to sell a business jet in a few years.
And its no wonder (to me) that BMW is doing a major reorganization.
Love mine, but in reality they are lease cars now. (The repairs add up.) Cest la vie.
Got popcorn?
Neil
It’s funny to hear AG dump on the hedgies, given his fervent devotion during his active years to making sure the stock market always went up.
Greenie works for Deutshbank and he wants to sell his book, so anything he says now is bs. As a matter of fact, most of what he said before was bs.
If he doesn’t care what happens to hedge funds then why bother cutting the rates??
A US hedgefund bought a German bicycle manufacturer, dismantled the firm, etc, and now the laid off workers, all 89 of them, have occupied the premises, trying to dismantle the hedgefund deal.
I just watched Bill Moyers’ interview with John Bogle of Vanguard, who said that the problem with the current system of “capitalism” is that it takes far more value from the society than it contributes. The money managers benefit, but not the company or the customers. Hedge fund managers are nothing more than parasites. Another piece of artwork for Henry Kravis, boo-yah! I agree with Bogle, there’s no corporate accountability. No long term view. As Bogle said, it is unsustainable.
Excellent post, palmie.
imo, many of these “money managers” fit the profile of a psychopath.
Read “Snakes in Suits, When Psychopaths Go To Work” by Babiak & Hare, PhDs.
~Misstrial
Go Germans! Kick the wealthy corporate rapists off the premises!
Actually, it sounds a bit more complex than that…
That’s why I’m worried about my friend’s nice job working at Hawker Beachcraft. He’s in debt up to his ass, and I’m thinking that his job will disappear, and it won’t be too good for him because who buys a business jet in a recession.
the smug- WI should chop some heads
Dennis Winters, chief of the Office of Economic Advisors for the Wisconsin Department of Workforce Development.
You’ve heard of the “Prisoner’s Dilemma”, but have you heard of a “Stag Hunt”? Slate brings up the issue of trust being the basis for successful economies…and that it’s easy to lose it.
http://www.slate.com/id/2174706/
IQ and The Wealth of Nations is the book to read on this subject. The article is just another slate mental jerk, albeit the article is not completely off base. They just miss the forest for the trees.
I read the article, and I would say the analogy is somewhat fallacious. His analogy assumes that there are actaully stags and rabbits to be found. In the case of banks and fractional reserve lending, people are realizing that there is not enough to go around, and some will realize that there is no stag, and there is no hare. Each note has collateral of some sort. In a fair number of cases, the collateral is another note. Unfortunatley, a lot of that collateral is worth less than the face value of the note. Other than that, it is something interesting to ponder.
An actual economist…
Fancy that?
“The full impact of the credit crunch hadn’t even hit the mortgage market in August, suggesting further declines in the months ahead, said economist Ian Shepherdson. ‘People don’t like borrowing to buy depreciating assets, and lenders don’t like to lend on them either,’ he said. ‘Housing is nowhere near bottom.’”
Premise 1: People don’t like to borrow to buy depreciating assets, and lenders don’t like to lend on them.
Premise 2: U.S. housing is a depreciating asset class.
Conclusion: Only people who can pay cash are buying now, as nobody wants to borrow or lend money for a housing purchase.
Okay, a question. On the balance sheet, an automobile is viewed as an asset. And, boy, do cars depreciate. So, why are people so unconcerned about taking out loans to buy them?
“So, why are people so unconcerned about taking out loans to buy them?”
The value of beneficial services of car ownership (like being able to drive where you want when you want without paying a rental car fee) matches the depreciation.
Unlike the value of the service flow on owning a home purchased last year for $1.3m which is currently valued at $1.2m, which I presume is less than $100,000, as I know where I could rent such a home nearby where we live for under $5000/mo ($60,000/year).
Trying to predict economic theory based on 100% rational behavior from consumers is risky. Many people are more stupid than rational. (I, for one, have never financed a car in my life, and I’m 45.) Too many people care only about monthly payments over true cost.
Of course, there are some cases where financing or leasing a car makes some sense, but only if it’s going to be 100% for business, and you need a nice new car to drive clients around in, etc.
Well argued.
I would add that for males who are still in courting mode, owning a nice car may also have tangible benefits which aren’t recorded on the balance sheet.
Nothing makes up for a comb-over or a rug, no matter what wheels u be sportin’
rotfl
Say what you will about practical cars, but after grad school, my dating prospects improved tremendously when I bought a “Yuppie car.”
But now I’m married, back to practical (when this one wears out).
Got popcorn?
Neil
“I would add that for males who are still in courting mode, owning a nice car may also have tangible benefits which aren’t recorded on the balance sheet.”
Lease a Lexus and lay lots of lovely ladies?
“Lease a Lexus and lay lots of lovely ladies?”
I only dated girls whose favorite color was John Deere green! Saved a lot of money that way.
Why bother getting stuck with a gold-digger? If you drive a sensible car, you’ll scare away the shallower ones, a good plan in my book.
Hear hear! I say toss rational expectations theory into the dustbin of failed ideas (sorry Professor Lucas) and develop an economics of stupidity — unless you have the luxury of living in a govt subsidized, thick-walled ivory tower where theory need never face up to the harsh light of real-world behavior.
Sort of like “trickle down theory.” Maybe looks like it should work on paper, but in the real world - none of the goods seem to ever trickle down.
I myself swear by the PT Barnum school of economics…
I can’t completely agree with you. We bought a new car in July (only the second one in way too many years) after looking at the used car market pretty seriously. Turned out I could buy the car I wanted for used car prices. Got a fantastic Mazda3 from a straight dealer at a really, really good price. We financed half of the price, although we were going to pay cash, because Mazda was financing at 1.9%. Since my money is in a deposit account paying 8.4%, I’m making money on the deal. I just couldn’t take the logical step and finance the whole thing, that felt uncomfortable. So there’s a counter example to your arguement. It did make sense to finance even though it wasn’t a car for business.
Steve, where the heck did you find a deposit account paying 8.4%? A lot of us would like to know about that! (Is it Icelandic krona? Brazilian reals? Slobovian rubbles?)
I think the big problem is the view of a house (or a car) as an asset. From a financial standpoint, unless you plan to sell the house and are using leverage to increase your potential return, the house is a place to live. You need a place to live, although you can purchase or rent. You also need transportation, but there are more options that an auto purchase. The bottom line: These are only assets in the eyes of an accountant. An investor sees houses and autos as necessary uses of capital, but generally nonperforming uses.
For many people, having a car is the only way to get to work, school or going anywhere. Unless you live in a large city, taking the bus or walking is not practical. It takes me 7 minutes to drive to work. It would take me 45 minutes by bus. Instead of 75 minutes commuting per week, I would waste 225 minutes per week (nearly 4 hours). If you factor in shopping and school, I wouldn’t have time to do anything except wait for the bus and sit on the bus. The depreciation is well worth it.
As for buying a house, it isn’t a necessity anywhere. People can choose to rent for a much lower price in many areas. I suppose you can rent or lease a car too, but it is actually much more expensive and restrictive than purchasing a car.
Just pure conjecture, but it probably has to do with the purchase price. Plus, most don’t buy multiple cars with the speculation that they will rise in price.
I could imagine that if Congress passed legislation allowing tax deductions for interest payments on cars (creating a sort of legalized, competitive, monopoly for the car industry), we may see a temporary distortion to the otherwise accepted notion that cars depreciate in value.
However, there would also have to more legislation to limit the amount of cars produced since they can be turned out quite rapidly to take advantage of any short term spike in demand. Perhaps something similar to zoning restrictions. It is amazing what centralized planning can do when one sets their mind to it. Voila. Cars suddenly appear to appreciate.
This used to be the case! I’m old enough to remember when all interest payments were deductable! This included credt-card interest, etc. This was abolished in the 80s, and I think it was a good idea.
I’d also support eliminating the mortgage interest deduction! All it does is make house prices higher.
Ideologically, I have always opposed the mortgage deduction. One of the reasons I lend my money on mortgages is, it helps me to overcome my anger about the mortgage deduction. I become a beneficiary of the mortgage deduction, since my clientele think they are “saving” a bunch of money when they take out high-interest loans to buy their trailer-park lots. Probably half of my clientele don’t even itemize deductions anyway. Some don’t even file income tax returns (they told me). Yet the aura of the mortgage deduction enables me to set rates that greatly exceed most commonly-available savings plans … except I DO want to know about Steve’s 8.4% deposit account (see above).
Also, in the US, the mortgage deduction starts to phase out with incomes over $150K. So it really only helps to raise the prices on the bottom and provide another obstacle to affortability.
I’ve always been opposed to the Mortgage Deduction, even during the period of time when I benefited from it.
“I was ready to flip out. That’s why my walls look like this,” Mangione says he went nuts and took a crowbar to the walls.”
What a jerk. It’s not my fault. Whaaaa. American Psycho.
When foreclosures first started spiking I predicted on this blog that we would see an increase in rage-related incidents out there, especially in already highly unfriendly/stressed-out commuter hells like LA. It’s coming true. It’s not just FB’s either, it’s depressed RE agents, loan officers, auto salespersons, etc.
There is a little shard of evidence that the denial stage of housing bubble grief is giving way to the anger stage. Watch out for road rage on your evening commute.
I know it’s grim, but I have a $5 bet that the 45 year-old woman who did the 175 ft death jump from the Sunshine Skyway this morning had a real estate job.
What makes it more interesting is the 2nd suicide attempt at the same time. 85/yr woman who couldn’t jump, so she waded into the water to drown. The first jumper caused them to find the old lady.
It’s not worth jumping, whether over foreclosure, bankruptcy or a lost real estate job.
Lines for a Grave-Stone
by Edna St. Vincent Millay
Man alive, that mournst thy lot,
Desiring what thou hast not got,
Money, beauty, love, what not;
Deeming it blesseder to be
A rotted man, than live to see
So rude a sky as covers thee;
Deeming thyself of all unblest
And wretched souls the wretchedest,
Longing to die and be at rest;
Know: that however grim the fate
Which sent thee forth to meditate
Upon my enviable state,
Here lieth one who would resign
Gladly his lot, to shoulder thine.
Give me thy coat; get into mine.
This guy was a willing participant in a shady scheme that defrauded a grandmother. Trashing his walls doesn’t make him a victim. He should be publicly flogged, then thrown in the slammer.
Did you watch the video associated with the article…Grandma just got a foreclosure on her credit report, looking at the documents I don’t see how an underwriter let that slide. Usually they make you do an ammendment when the name is incorrect. But it looked like she had 5 different variations of her name and no one stopped to question that. Crazy…
“It is by going down into the abyss that we recover the treasures of life. Where you stumble, there lies your treasure.”
Joseph Campbell
is this the first time Joseph Campbell has been quoted here?
Did you hear about netbank?
WASHINGTON (AP) — NetBank Inc., an online bank with $2.5 billion in assets, was shut down by the government on Friday because of an excessive level of mortgage defaults.
It was the largest savings and loan failure since the tail end of the industry’s crisis more than 14 years ago. Federal regulators appointed the Federal Deposit Insurance Corp. as a receiver for Alpharetta, Ga.-based NetBank.
dont panic, but if you do, panic first.
http://biz.yahoo.com/ap/070928/netbank_closure.html?.v=14
Yeah! We posted a bunch of stuff at the bottom of Bits thread. It’s really close to home. No real coverage on the evening news just a 10 second by the way. It was great timing: On a Friday night, end of quarter, after markets close. SOBs!
Its always a Friday night after the market closes. That’s how the FDIC works. The end of the quarter was a nice touch.
What will be more interesting is when multiple fail in a month.
Got popcorn?
Neil
How are Emigrant and ING doing?
I’m not sure about Emigrant Bank, but I think ING is one of the largest banks in the world.
Funny you’d ask…
ING Direct steps in as US bank collapses
By Ben White in New York
Published: September 28 2007 21:06 | Last updated: September 29 2007 00:09
ING Direct, a subsidiary of the Dutch financial group, is to take over the customers and insured deposits of NetBank, an online lender with $2.5bn (£1.2bn) in assets that was shut down on Friday by the US government following losses on subprime mortgages and other loans.
The closure marks the largest US bank failure since the end of the savings and loan crisis in the early 1990s.
It also underscores the ongoing impact of the US mortgage crisis, which has destabilised banks around the world, including Northern Rock in the UK.
ING said it would take on about $1.5bn in deposits insured by the Federal Deposit Insurance Corporation. It said it had paid about $15m to acquire the deposits. ING will also acquire $724m in assets from NetBank, which filed for bankruptcy protection.
http://www.ft.com/cms/s/0/b58d03ee-6dfc-11dc-b8ab-0000779fd2ac.html
Ill give you an update about how fast the economy has turned in Oregon.
In 60 days, sales have fallen in excess, are you ready, 60% (we are a service business)
Receivables lagging, 20% of total receivables is 90 days overdue, 25% is 60 days, and 50% is current.
I’ve been prospecting the membership list of an organization I belong to. Am comparing my printed list with the online database — it’s on the group’s website — and am amazed at the number of members-who-are-no-longer-members.
Could just be a periodic membership list-cleaning, but I can’t help thinking that some belt-tightening is afoot. Some of these no-longer-members are big names around town.
the banking failures have started, the slowing economy is not just a statistic on the news, its a daily report of my companies sales right in my face, its not foreclosure in FLA or CA….its down the street from my house…. I am realtively young, mid 30’s, NEVER, I MEAN NEVER has the economic turn been so fast and so aggressive in my working life.
This is gonna be a tough one. I admit that I’m pretty rattled already.
A friend runs a sightseeing business and bought a bigger better bus to attract more clientelle, and this summer his business went down about 40%, from last year…
time to Get Small
jungle_man,
Keeping my fingers crossed that you can keep your job.
I was in Michigan during the 1970s and Pittsburgh during the 1980s. Those were some tough times, let me tell you.
But those were the times when I learned to be frugal and resourceful. I couldn’t spend my way out of problems — I had to think my way out.
Good preparation for now.
I hate to day it, jungleman, but it is time to pull out the resume and put together a few versions - one for your current indusrty, one if you try to move to a closely related one, and one functional resume (concentrating on skill sets) in case things go further south.
And some very generic networking.
When I went through my 9/11 related lay off, they gave me a few months of outplacement assistance. The counselors told us the old metric was that about 50% on jobs were gotten through networking. The new metric was that over 2/3’s were. Who knows what it will be this time?
Polly, did you see the NLJ story posted in the bits bucket? I love that stuff!
hang in there buddy and keep a cool head - always an asset in traumatic times
You ain’[t seen nothing yet. Wait until the unemployment rate reaches the double digits (like it did when I was about your age, during the mid-seventies). Things, I’m afraid, are going to get much worse.
How long before john q. public gets a whiff of how very wrong things are?
WOW!
Further, on the notice they say depositors are only covered up to $100K per account.
I was told by my bank it was $100K per depositer (meaning joint is covered up to $200K). If this isn”t the case, I’ve got to move my $$ quick.
I wonder if my mattress is thick enough??
You are correct. I have my money in a money market with LFCU. I checked with the bank manager who I made verify with corporate as to exactly how much I could be FDIC insured for. It is $100K per depositer. This also extends to actual Beneficiaries. So it’s actually 100K per depositer.
The frightening part is that I called the hotline number for Netbank to verify this and the woman from THE FDIC swore up and down that it was only $100K per account.
So folks, remember, if your bank goes bust, you are going to be appealing to former DMV employees to get your money back. I’m sure they are REALLY sympathetic to people with accounts exceeding $100K.
Your in luck, I just opend a new bank. I have a place for that money of yours!!
FDIC has reserves of approximately 1.6% (according to their own website) of their outstanding obligations. This bank failure will absorb some of that. The numbers are reserves of 49 billion for obligations of 3 trilllion. I don’t think this will be the biggest, or the last to fail.
Anybody know about the outfit that insures brokerage accounts? Is it $1M per account or per depositor? ML may be Too Big To Fail, but then again … Northern Rock …
It’s only up to $100,000 cash on account, up to $500,000 if some of your securities are missing. They are most definitely per customer. (That’s the word they use: customer)
http://www.sipc.org
Thanks, I will be taking some action in response to this.
WOW, is right! Sales down 60% and about 1/2 of the A/R past due is down right scary.
Are you dealing with Joe 6 Pack or are you more Business to Business?
Like I said before I am in North Western PA, which hasn’t had much of a run-up in housing prices, but prices have still gone up and people who shouldn’t have gotten loans got them. I can tell people are hurting at Property tax time, due to the number of ATVs and other toys for sale at the end of driveways.
I’ll be the first to admit that even though I am single and make well over the median household income for my area, I am finding it harder and harder to save money due to an increase in gas, food and other things in contrast to a rather stagnant income.
Many of my friends from college, high school and work feel the same way. We aren’t poor people. We work for large corporations with pretty decent incomes for the area, but still find it difficult to save like we have in the past. I can only imagine what a lot of the other people in my small town must be going through that have children, and make half of what I make in a year.
I guess that tells me that my much more minor increase in non-performing AR is not going to go away.
My brother and his wife live in Portland, All I hear is that the prices of homes are still “going up”
What type of service buisness is this?
jungle is obviously a 9 to 5er:
in reality, they probably have significant wirte downs sittin in AR, already overstated. not much downside risk from tax perspective.
Sales is another matter, when the monthly new business doe not match the old business, say to the tune of 60% this is part of the “shock” that the FED saw coming.
Most likely has a short term credit line in a million dollar business.
50-100k at the “banking window” till after the new year.
So, the wheels are not off, just wobbly.
On a brighter note, the market should touch new highs, giving more options to upside covering from downside risk players. However;
the financials crashing is not a good sign. The style and delivery of the netbank closure was STEALTH banking failure. The 110Million that got caught…….oi. Thats gonna leave a mark, and does not bode well for confidence in the system.
I am wondering if we will see banking lines lined up around the blocks in the urban centers. Most likely no, but the perception of the Northern Rock run will come in to play.
I have read others on this blog writing about cashing 401ks….that is telling me the market has downside risk, heavy and hard. The volatility will return, more banks will go down. How does factor into the plan?
It really is deflation this time, and the inflation cant take in urgency do to the fixed incomes, thats long bonds going lower…….into the liquidity trap….dangerous games are afoot.
At this point Im thinking that other external triggers a gonna shake the dirivative mountains, and that is gonna be the tiger by the tail.
I guess i’m a NINJWA
No income, no job, with assets (retired)
“If I had been one of the people who invested in flowers during the frenzy, I would have felt bad to lose my money. But I like to imagine I would also have taken great comfort in seeing the triumph of rationality.”
The triumph of rationality = HBB’s revenge
“Every aspect of Western culture needs a new code of ethics - a rational ethics - as a precondition of rebirth.”
Ayn Rand
What about the company securing the loan, Best Rate Funding? It’s a hour’s drive from San Diego but Best Rate Funding’s phone number no longer works and the eighth floor office in Santa Ana is shut down. A security guard says they closed up shop a month-and-a-half ago, around the same time Mora evaporated into thin air. A person answering his phone said he’s in Mexico.
Yet another mortage flim-flam man flees to Mexico after bilking Americans (a grandmother, through identity theft). Ain’t open borders great? Be sure to thank your Republicrat Senator or “Representative” for their failure to secure our borders or end the illegal-alien invasion.
Investors to Fed: Thanks for nothing
The reckless are getting relief from Bernanke while the prudent are paying the price, argues Fortune’s Allan Sloan.
http://money.cnn.com/2007/09/28/news/economy/sloan_bernanke.fortune/index.htm?postversion=2007092814
Savers got screwed, stock investors just another chance to unload their junk on J6PK on a fake market ralley
Allan Sloan is a terrific biz reporter. Newsweek was nuts to let him go.
He assumes that “the prudent” still have most or all of their money in US-dollar denominated instruments. That may be wrong.
“I’m Chevy Chase, and you’re not.”
Chevy Chase
http://tinyurl.com/3b7yoj
One poor grandma has identity theft, as Ben notes. Another grandma gets accosted by police for not watering lawn. Note: anyone in Orem UT, water your lawn or the police will come to arrest you. Especially if you are a grandma.
http://www.ksl.com/index.php?nid=148&sid=1444771
The most recent CA thread has 159 comments, so I would like to post this message here. I will be posting this info again this weekend.
ATTN CALIFORNIA RENTERS
If you have suspicions regarding a landlord who may not be reporting rental income on his/her property, please call this toll-free number to place an anonymous report. The more information you can give the better: CA State Franchise Tax Board Tax Fraud hotline: 800.840.3453
This also applies to property owners who are renting out individual rooms in their home.
Thank you.
~Misstrial
Glad to see this info. I have another question? Here in Salinas many so called ‘low income’ earners have moved into expensive property and I heard some people say that they are then renting out the property or portions of the property for more then the mortgage payment. Not only would they not report the income but are they in violation of constraints on the property usage? If there are constraints who is doing the annuaI review? I know if you purchase under CalVet you can’t rent out the property.
Reporting suspected tax fraud (as I posted above) to the California State Franchise Tax Board will get passed along to the appropriate agencies should there be an indication of the need for their review (i.e. CalVet).
And, if the landlord(s) are allegedly not reporting the rental income, as you posted, then by all means, report them
For example, the FTB shares info with the IRS. (I know this since I worked on a case where that was the result. Outcome: big fees and penalties for the offender [opposing party].)
A Notice from the State agency will result in an IRS investigation. I think that the VA would be notified as well in the situation you described.
As far as renting out property for more than the mortgage: a property owner (or mortgage holder) can ask any rent they want (except in rent-controlled areas which I do not think includes Salinas). However the landlord must abide by the CA Civil and Health & Safety Codes.
~Misstrial
I have another question. The new landlord keeps getting her mail sent here. We have been in the house for close to three months and I keep getting the “Oh, I don’t know what is going on I requested to have the Post Office redirect my mail.” Personally, I believe that she wants to maintain a continuity of primary residence so that she can get the tax break on the 250K appreciation cap. I KNOW that this is the real reason.
She keeps calling every four or five days wanting to know if there was any mail for her. I keep giving it to her. Yeah, I know I’m making it too easy.
Does anyone know of a good solution that doesn’t create animosity?
Next time your mail is being delivered ask your postal worker to stop delivering any mail not addressed to you or your family. They’re usually pretty good about stopping it fairly quickly (at least in my experience). Could be interesting when your LL realizes it but doesn’t know for certain why delivery has stopped - will probably confirm your suspicions one way or the other. As a rent paying tenant you shouldn’t have to deal with this if you don’t want to (esp if you think it’s part of a fraudulent scheme). Good luck
Agree with mags57. Also: DO NOT FORWARD ANY MAIL TO HER.
Best thing: Mark “DOES NOT LIVE HERE” on the outside of the envelope addressed to her, put the mail in another larger envelope and address it to the sender, affix postage and send it back. This way, her mail cannot be forwarded as a courtesy by the Post Office.
Do this especially for “official” mail: IRS, Motor Vehicles, voter registration, etc.
~Misstrial
Thanks for pointing out the fact that a land lord can charge more rent than the mortgage!!
Those evil land lords they just want to have some kind of return on their investment. What BA$TARD$
The low income homeowner got a government subsidized home loan. It is violation of the terms of the loan to rent out the property.
What you would like to get and what the market will pay you are two different things.
Is there anywhere in CA that returns even 50% of monthly expenses (mortgage, taxes, etc) in rent at current market prices?
What about reporting a loan broker who 3 years ago tried to get us to lie on a no doc refi application and suggested we get friends to write letters saying they emloyed us. We have nothing in writing - just the conversation before she threw us out when I asked if that wasn’t fraud. She said she doen’t do business with stupid people. No - we didn’t get caught in the bubble - we took back out our down payment from the refi and then sold and broke even this year. Took the money and bought in OH.
Not sure, is the broker an independent broker or is that person affiliated with a brokerage service/lending institution? You will need to call your State’s Attorney General to find out the reporting procedure.
If what you described happened to you, chances are this broker did it to others. Please report that person.
All the best to you.
~Misstrial
Cool!
I’ve often thought that an effective way to deal with illegal immigration would be to allow some type of tax deduction that can only be granted if the tenant puts down a legitimate TIN Number for their landlord on the tenant’s tax return.
Quote:
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I’ve often thought that an effective way to deal with illegal immigration would be to allow some type of tax deduction that can only be granted if the tenant puts down a legitimate TIN Number for their landlord on the tenant’s tax return.
#####
China and India are accepting applications right now for any illegal immigrants currently resided illegally in the land of the good old U.S.A. They can apply to be Chinese or Indian citizen at any time and the two country will be more than happy to accept these hard-working-trying-to-raise-a-family human beings !!!
Good read .
Also , wouldn’t it be nice if the Feds asked the Builders to stop over buiding all their overpriced shitboxes .Since the Feds want to take the excess of the housing boom out of the hides of the taxpayers and all Americans in the form of inflation ,why not start asking the real players in this mess to do something .its pretty clear that the easy money caused the builders to overbuild and lead in the price increases .
Also I find it odd that Greenspan said that he wasn’t concerned about the rich people investing in Hedge Funds ,that funded loans . Well since this excess easy money provided by those rich people drove the prices of real estate up and created this excess demand and stupid building ,Greenspan should of been concerned .
Also ,isn’t a Fed Chairman suppose to be concerned about all money in the economy ,including rich people’s money? Also ,if it was the rich people that were the funders of this housing bubble nightmare ,than why a taxpayer bailout ? Am I all wet here or should I be pissed like I am .
I think the investors in these CDO’s deserve to lose the most. They were the enablers of this whole ponzi scheme. Chasing the returns on highly leveraged toxic loans is always a bad idea. I don’t buy the excuse that they were given AAA ratings. When you invest trillions of dollars, you should know every aspect of the SIVs you are buying. Perhaps some heads should be rolling at pension funds and banks.
The Chicago Tribune has opened up comments to their articles online. The attached article was referenced in Ben’s earlier post about the Chicago market. There is a realtor comment about the bust being entirely media driven. Anyone want to take him on?
http://www.chicagotribune.com/business/chi-fri_housing_0928sep28,0,4930306.story
I did:
Whenever you heard someone attacking the messenger, rather than the message, get VERY skeptical. It’s a classic mis-direction tactic, one that is now being used by the real estate industry.
Check the facts for yourself, instead. This housing “boom” had nothing to do with supply-and-demand; in fact, it was fueled by get-rich-quick speculation, kind of like a high-stakes Beanie-baby craze.
Find yourself a chart on-line which compares the price of homes to real incomes, and you’ll understand just how ridiculous things got to be.
It seemed crazy, how high prices got. It WAS crazy. It’s over now.
Much criticism has been laid at the feet of Alan Greenspan, but his latest excuse for the Fed’s Actions is perhaps even more reprehensible and irresponsible than anything he said or did as the second most powerful man in the world.
To imply glibly that the only ones who will suffer from this bubble bursting are wealthy hedge-fund investors is sickening, when we are confronted with stories every day about hard-working American families who are being bankrupted and financially ruined by the fact that they were enticed to buy homes they could never afford. Not to mention all of those who may lose their jobs due to an economic recession.
I must confess I now join the ranks of those who consider Alan Greenspan a criminal.
Yes ,I agree with you that Greenspan’s latest excuse is just not cutting it at all . Shouldn’t a Fed Chairman always be concerned about money supply and where it is coming from and how it affects the markets ?
When I look and listen to the guy I feel like I’m watching what it looks like when you sell your soul for power. Not pretty. Maybe I’m just imagining stuff - it’s hard to know someone via television.
At any rate, either he doesn’t know what he’s doing or he rationalizes everything to justify to himself what he’s done. Both explainations bite.
Vermonter,
I think you may have hit the nail on the head re your assessment of Greedpig. Either that or he is finally (and publicly) coming to grips with his errors and the enormity of the economic implications for the US and the world and as he is doing so, keeps gradually upping his chance of recession calls as he realizes in his pea brain the ‘blunder’ of it all.
One doesn’t need to study economics all your adult life to realize what has transpired. There are many folks on this blog, other internet articles, austrian economists, et al, who have been warning of the pernicious results of his policies.
If the person who hasn’t devoted their life to economics can use logic and reason to realize that what was done will result in a severe crisis, then one could infer that someone like Mr. Greenspan could not possibly know what he was creating. The question should be not the means, but what ends was he attempting to achieve.
The FED should NEVER have this sort of power over Americans and the American economy, nor should it ever become the tool of Wall Street and financial pigmen. Stick a fork in it, it’s done.
@Misstrial
So what is your point? Let’s all become snitches for an already corrupt and unaccountable State? Just bring on Stalin! What a joy that would be.
*ignores you*
~Misstrial
Wisconsin WILL feel the Frost upon the Housing Market Pumpkin this Fall..and a few more to Follow
The House Fairy has crashed and burned baby
Parts of Wisconsin will feel a housing bust..specifically Madison & Milwaukee Metros..the rest of WI where new construction homes can be bought for on average an affordable 160k won’t feel much of an effect…Wisconsinites are generally very financially conservative & didn’t buy into the whole sub-prime loan mess.
Eyewitness News has uncovered an amazing case that involves a victimized grandmother in San Diego, a failing Los Angeles loan company and a Las Vegas man who doesn’t care who he hurts.”
——————
What would you people here do if you found out your name and credit (via identity theft) was used to purchase houses … the ultimate slap in the face to a member of Ben’s housing bubble blog community?
I think this will be more common than you think … what actions could be taken if you were such a victim?
This topic has interested me for the last 4+ years I’ve been a bubble believer and would appreciate some savvy insight into what could be done if you are such a victim. I was thinking that you could sue escrow/title companies for not verifying the indentity of people involved in the transactions by doing public record searches … etrade asks many public record questions besides just social security/birthdate questions in order to wire funds out of your account.
Well, first thing I would do is file a police report in the jurisdiction that I lived in. Next, I would call up my good friend _________ of _________ Law Firm in Irvine and discuss a civil suit.
~Misstrial
I would also call my uncle’s good friend Guido, in New Jersey, and ask for a referral for an enforcer out here.
I already know someone this exact same thing has happened to, one of the guys on my husband’s hockey team.
Another guy on the team found out (after I did a little check on the net) that his little wifey sold the family home 9 months ago. I still haven’t found out whether she stashed the money or it went up her nose.
A comment from some gambler..excuse me “investor” from the san diego creative gamblers ($hit..I mean “investors”) site.
Thread started by TexasTom (or maybe trying to sell the white elephants Tom)
“Can you beleive that guy on Good Morning America? A Blanket statement like “nobody in the county should buy a house until next year or they will lose money” is ludacris. Worse than him was the President of NAR saying there were still good areas like DETROIT!!!!!!!!! I dont know who was more uneducated on the subject. Cramer just lost huge points in my book, if he doesnt know all RE is local than he needs to refrain from commenting on real estate and stick to the stock market.”
Did Cramer The Clown really say that on TV?
Oh yea, Cramer really did say it.
As I noted before, I think the Realtors ™ aren’t advertising enough for him to care. If they don’t like it, they’ll have to get in line to file their concern. Way down from Viagra and probably after flowmax.
I’m a true believer in following the money. If you are buying reputation… cutting the payments doesn’t work. 
Got popcorn?
Neil
I was just looking at some archived Cramer snippets posted on youtube, showing the history of his comments on sub-prime and the housing issue.
Some might be tempted to call him a back-pedaling little weasel, but I never would, because I was raised to be polite to rich people.
“Ludacris??” LOL! I thought that was some hip hop clown.
That’s Texas for you. Great educational system we have here!
netbank -blink of an eye
http://finance.yahoo.com/q/cf?s=NTBK.PK
‘In Clark County, anyone can be added to a deed with no questions asked. Just put in the name, get a notary to sign off, and you have a new co-owner. And that’s exactly what Mangione did. So began a long and thorough process to use Juliet Al and Best Rate Funding to secure a loan. Any time Mangione questioned Mora, he says he got the same response.
“We gotta make sure that nobody finds out because she don’t know about it. He’s been leading me along all this time. I says I just need the deal done. I don’t care what you do,” said Mangione.’
Clark County NV = mortgage fraud magnet
short sale in my hood(22151)- looks like our first 2004 price coming up
wonder how zillow will adjust for that
The news continues to prove that this blog has been way ahead of the MSM curve.
Defaults on Insured Mortgages Increase 30 Percent
http://tinyurl.com/22pgd7
The report bolsters data that show the worst U.S. housing slump in 16 years may be getting deeper. Foreclosures set a record in the second quarter, according to the Mortgage Bankers Association, and last month lenders sent a record 108,716 notices of default, auction or repossession, RealtyTrac Inc. reported. Fannie Mae Chief Executive Officer Daniel Mudd said yesterday the weakness will last beyond 2008, increasing credit losses.
“These defaults are a lagging indicator, so they’re probably going to get worse from here,” said Michael Darda, economist at Greenwich, Connecticut-based equity trading firm MKM Partners LP.
These are the ads that are all over Craig’s List for condos in CA. 400K??? In Torrance??? They are still nowhere near reality here.
Wow…don’t miss this 2bed/2bath condo at this affordable price! This condo has new pergo floors, a brand new master bathroom, freshly painted throughout, shutter blinds, fireplace surrounded by new tile, new tile entry way, washer/dryer hookups in unit, 2 parking spaces, and all this for a little over $400k! Also a lower level unit so there is a patio in the front area as well as the rear. Take advantage of the wonderful Torrance Schools.
Stepson closed on a Fusion unit somewhere around here in April. I emailed articles and comments from this blog to no avail. At least I did make him go back and demand a bunch of concessions. He paid $479 for 2/2 and put 20% down. At least we were able to convince him to take a 30 year fixed and plan to stay there 5 to 7 years. The agony of it all.
Owe. You shoulda told him to go 100% financing. If ever there was a time to gamble with all bankster’s money, this is it. I hope you didn’t give him the DP.
Listings don’t equal selling prices. I, for one, have noticed a plethora of for rent listings in the wrong area (and I know they are not accidents). I flag every one of those SOB’s.
Does someone really think that while I’m searching for a rental on the Westside, I’m going to say, “hey honey, why don’t we lease option this place in Temecula instead!”. Gee, our commutes will only be, oh, 3 hours or so each way.
10 years ago I remember seeing ads for condos in Torrance for $80K. Guess I should have bought one then. If I had, I would be financially set. I lived and worked in Torrance for a few years. It was nice back in the mid 90s. Don’t know about the schools, was single then. Now older, married, and with kids. Wife is pregnant and due in Jan with #2. First daughter, too cute and fun.
*I was scanning craigslist’s ‘homes for sale’ postings in San Francisco and came across the wonderful listing below. I just had to share this gem with Ben and gang - enjoy:
$750000 Noe Valley Remodeled Edwardian Condo appraised at $860,000 (noe valley)
Reply to: hous-433825593@craigslist.org
Date: 2007-09-27, 1:08PM PDT
Here’s the deal. Within the next 6 months, my option arm loan will cap and I’ll lose my home. Will sell this beautiful 3 bedroom, 1 bath condo with gorgeous yard and side by side parking for my loan amount plus the prepay penalty.In exchange, I will live there rent free for the next 4 years. This neighborhood never goes down. HOA dues 150.00 Only 2 units.
* it’s NOT ok to contact this poster with services or other commercial interests
PostingID: 433825593
“For Bill Moseley, president of a software company, weakening in real estate prices is good news.”
“‘The builders, I understand their frustration, and their importance to the economy. But to someone who is in manufacturing and production, like we are, high housing values are not in our interest,’ Moseley said. ‘It puts too much pressure on wages. Our customers don’t care what it costs to buy houses in Bend. We have to keep that in mind.’”
Glad to see business leaders have stepped forward by saying high home prices have actually hurt the local economy.
One more bubble: Beijing. Maybe there are some Olympic-related factors, but the city really is upgrading everything at once in a dramatic fashion:
a href=”http://www.iht.com/articles/2007/09/26/properties/rebeijing.php”>
More on the Beijing real estate market at:
Click here
Summary: huge scale, lots of newly rich folks, Olympics on the way. Anti-flipper and anti-rental laws generally disregarded. The boom will last past the Olympics.