It Was Cheap Money That Took Prices Up
A weekend topic starting with Silicon Beat in California. “Housing economist Lawrence Yun got everyone’s attention Thursday — he talked about bubbles in his address to the 27th Annual Convention and Expo of the Santa Clara County Association of Realtors. His assessments were largely reassuring. Given the tight supply of existing homes and the failure of local governments to incite construction of new homes, he said, prices will probably remain up in the stratosphere. In other words, the bubble — if you want to call it that — will not burst. In any event, the upward trajectory of home prices is already hurting the region: ‘The smartest people in American are all here in San Jose,’ he said, warning that that may not always be the case. More and more, he said, tech companies ‘will flee’ the area and go to more affordable regions of the country.”
“Bottom line: Expanding companies here, and recruiting talent to move here, is going to be ever more of a problem given the cost of housing. ‘Unless you can convince the local officials’ to clear the way for the construction of large numbers of new homes, Yun warned, ‘people will think about working in other localities.’”
“Yun, however, did get into a few of the shadowy scenarios that could undermine his predictions. For one, if hiring were to take a dive in the Bay Area — if the gravy train were to stop at Facebook and Google — well, then those prices would tumble.”
The Mercury News in California. “For the second straight month, the Bay Area lost thousands of jobs in September, making it the worst month for employment locally since February 2010. The lack of affordable places for workers to live appears to have hobbled the region’s ability to fill jobs as briskly as in prior years. ‘Housing is the chain on the dog that is chasing a squirrel,’ said Christopher Thornberg, principal economist and founding partner with Beacon Economics. ‘Once that chain runs out, it yanks the dog back.’”
“The September losses, combined with 2,400 job losses reported by the EDD for August, paint an unsettling picture and lend credence to the assessment from a growing number of experts that the Bay Area’s job growth has begun to slow dramatically. ‘The slowdown is real,’ said Stephen Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy. ‘There were times this year we thought that job losses here and there were just temporary. But the slowdown is a fact. It’s happening.’”
“Some are finding the current job market tough. Steve Satariano, a San Jose resident and experienced worker in the information technology sector, said it appears tech employers frequently inquire about an applicant, but the interest doesn’t always lead to a job interview and almost never results in a full-time job with benefits. Now, his jobs consist of contract work and temporary projects. ‘Things were a lot better in the tech industry a few years ago,’ Satariano said, ‘and a lot of the job offers are for work in Sacramento or Los Angeles, but I don’t want to relocate. I’ve lived my whole life here in the South Bay.’”
‘The vicious housing market has made it tough to find decent living circumstances, he said. Satariano is sharing housing with roommates. ‘Growing up in Silicon Valley, I never pictured this for myself,’ Satariano said. ‘I always thought that if I went into the tech industry, I could create a prosperous future for myself. But who wants to commute six hours a day? You should be able to afford a place to live near where you have to work.’”
From Seattle Magazine in Washington. “As a branch manager for Caliber Home Loans, Trevor Bennett, who ranks in the top 1% of mortgage originators in the US, says success in Seattle requires products that cater to the local real estate microclimate. ‘Not all mortgages are created equal, so a nationalized policy will overlook opportunities in the local market. As a non-bank, portfolio lender, we underwrite our own loans and are able to serve a wider range of needs.’”
“Bennett points to several innovative approaches to serving the Seattle-area borrower which are unique to Caliber Home Loans. Underwriting with Restricted Stock Unit (RSU) Income: ‘Stock rewards paid by employers like Microsoft and Amazon have had a major impact of the income and wealth in our city and is a significant factor in our housing market. Caliber Home Loans have re-written the rules for how we underwrite loans in order to account for RSU income for loan qualification in these markets.’”
“So, if it’s quicker and easier to qualify for a mortgage today, and the local housing market is rising faster than any other city in the US – does this mean we’re headed back to a bubble like we had a decade ago?”
“Market pundits don’t think so. Seattle Times reporter Mike Rosenberg admits he is most frequently asked about the stability of the market in Seattle, and says the 13-percent growth rate we’ve seen in the last year has ‘to moderate at some point,’ but that it’s key to recognize that the factors present during the recession simply don’t exist in Seattle: ‘people are paying mortgages on time’ and ‘putting down big down payments,’ not to mention the impact the ever-growing tech industry is having on the region’s economy. ‘Amazon alone is enough to make the city’s economy among the strongest in the country,’ he added.”
From the St Catherines Standard in Canada. “Government initiatives to cool the housing market are starting to have an impact, but Niagara Association of Realtors president Randy Mulder fears any more interference will go too far. ‘A slowdown in Toronto has a residual effect in Niagara, for sure,’ Mulder said.”
“It’s reflected in real estate sales published for September, when house sales dropped across Niagara by nearly 36 per cent compared to a year earlier. He said both the federal and provincial governments have introduced initiatives to reduce escalating housing prices, including a new federal government plan announced earlier this week to add ‘a stress test to’ new mortgage applications.”
“Realtors across the country are concerned that the federal government might extend that same stress test to people who have down payments of 20 per cent or more. ‘That will have an even more adverse effect on the strength of the market,’ Mulder said.”
“The government, he added, needs to give the initiatives already in place the opportunity to have their intended effect before adding new ones. ‘Let’s let them have the effect and see if they’re doing what you hoped they would do before we throw another layer of baggage on it,’ he said. As an alternative, Mulder suggested increasing the number of houses being built to also drive up housing inventory as an alternative way of reducing the costs of housing.”
“‘Supply and demand is the key to the market,’ he said. ‘We need more supply, that’s all there is to it. Across Niagara, we need more supply.’ It seems as though upper-tier governments ‘don’t want to have a slowdown, they want to kill the market.’”
“Despite significant increases in real estate prices during the past few years, Mulder said there’s still “a bit of a shock from people who come from the GTA and say, ‘Really, I can get that big house for $450,000 or $500,000?’”
From CBC News in Canada. “New guidelines were introduced for mortgage lenders this week, and among the rules, a stress test for uninsured borrowers was introduced. David Gray of the Calgary Eyeopener spoke to Garth Turner, a former Conservative MP who writes about finance and real estate on the blog greaterfool.ca. Q: Now there’s a stress test. What’s this all about?”
“A: It’s pretty simple. What the regulator is trying to do is protect the banks, not really do anything for real estate buyers. The trouble really emerged last year when they brought in a stress test for first-time buyers to make sure they could afford higher interest rates. Well it was a pretty serious stress test — and a lot of people didn’t want to take it. So instead of getting insured mortgages, which meant they had to have the test, they found a 20 per cent deposit [downpayment], which meant they could avoid it.”
“A lot of people got the deposits from the Bank of Mom, or a sub prime lender — so it didn’t really mean they had the financial means. So they got around the test! All of a sudden, the banks realized, oh my god, we’ve got all these mortgage borrowers now who aren’t that great financial risks, and we don’t have their mortgages insured.”
“Q: What did they do? A: The bank regulator took action, in saying, you know what? The way around this is, everybody is going to have to take this [financial stress] test. And David, it’s a pretty serious one. It means mortgages are basically going to five per cent, effective January 1, and never going below that. The irony is we’re going from 2 per cent mortgages last April to five per cent in January, and we’ve never seen an increase like that. Ever. So it’s going to have an impact.”
“Q: What’s the downside? A: The trouble on the buyer’s side is that it’s going to mean less credit, because when people have to qualify at a much higher rate, well, people now don’t qualify for as much borrowing. So it’s estimated a family with 20 per cent to put down, that [once] might have been able to buy a home for $725,000, now will only be qualified to buy one at $570,000 — so that’s a serious, serious drop.”
“Now the laws of supply and demand being what they are, if that’s where people qualify, then the price of homes is probably going to drift down to that new level. After all, it was cheap money that took those prices up. So when money gets more expensive, prices come down.”
“Q: The message to them [uninsured homebuyers] is your money’s not good enough for us? From the banks? Is that really what they’re saying? A: Sort of. We care more about your ability to carry this home, not the fact that you plunked a bunch of money down. It really doesn’t matter how big a downpayment anyone has now. It’s all about the ability to carry.”
‘Given the tight supply of existing homes and the failure of local governments to incite construction of new homes, he said, prices will probably remain up in the stratosphere.’
Oh, high prices are a problem, let’s build more and bring prices down!
Then oh no, prices are down!
‘The government, he added, needs to give the initiatives already in place the opportunity to have their intended effect before adding new ones. ‘Let’s let them have the effect and see if they’re doing what you hoped they would do before we throw another layer of baggage on it,’ he said.’
‘As an alternative, Mulder suggested increasing the number of houses being built to also drive up housing inventory as an alternative way of reducing the costs of housing.’
“‘Supply and demand is the key to the market,’ he said. ‘We need more supply, that’s all there is to it. Across Niagara, we need more supply.’ It seems as though upper-tier governments ‘don’t want to have a slowdown, they want to kill the market.’
Let’s look at this again:
‘As an alternative, Mulder suggested increasing the number of houses being built to also drive up housing inventory as an alternative way of reducing the costs of housing’
This is the BS the industry serves up time and again. We can’t begin to cut into lending, instead let’s talk about supply and demand year after year. Then, lo and behold, a little tax or increase in standards and pow, on the floor it goes.
I mean Jeebus, if shack prices are too high, let’s quit listening to these people who are shoveling money in their pockets. Overbuilding results in recession too, might as well stop this nonsense now.
“Then oh no, prices are down.”
Bingo! The game is to increase inventory AND to increase prices.
There are two steps to endufing profitability that are involved here:
Step 1: Totally dumb-down the population to the point that they will any and all “reality” that is presented to them.
Step 2: Profit.
endufing = enduring
they will any = they will accept any
I thought you were creating a new banker word:
endufing = dumbing down the population to the point where it is ridiculously easy to profit from the fake reality that you present to them
People make stupid decisions when they get emotional and their brain is flooded with Endurfins.
LOL!
Like they have to do anything to dumb them down!
The truth is out there!
heh, good catch.
‘Yun, however, did get into a few of the shadowy scenarios that could undermine his predictions. For one, if hiring were to take a dive in the Bay Area — if the gravy train were to stop at Facebook and Google — well, then those prices would tumble’
I know we kid about the silicon valley snake-oil, but it’s serious:
‘In the Wall Street Journal today, Eliot Brown breaks down the business cult of WeWork, a company that rents out office space, but somehow pretends it is in the tech business, not the real estate business. Here is something to consider when thinking about how smart all those zillionaire tech investors are. As you read this (bolding ours), keep in mind that WeWork is currently valued at $20 billion: Others in the real-estate industry and some Silicon Valley investors say the company’s well-crafted image belies the mundane nature of its business. IWG PLC, an office-leasing company with a business model similar to WeWork’s, manages five times the square footage and has about one-eighth the market value.’
‘Boston Properties Inc., the country’s largest publicly traded office landlord, owns five times the square footage that WeWork manages and has a market capitalization of $19 billion.’
‘So the WeWork math is: (Small office company)+ (Free tequila tastings)= HUGE OFFICE COMPANY.’
It’s all jokes and zingers til someone losses and eye.
‘The residents of a luxury waterside apartment block want to ban rental firms like Airbnb, booking.com and A Space in the City – saying unruly guests have caused thousands of pounds worth of damage. Homeowners say visitors using short-term let companies have urinated in hallways, vomited on the stairs and even defecated in lifts.’
‘Global giant Airbnb said there was no evidence their guests were to blame for the complaints – and pointed out that other companies were also renting out apartments at the block. Residents have complained that families are woken by stag and hen parties at all hours of the night and have found condoms strewn across gardens.’
‘Gareth Griffiths said: “We have had all kinds of issues with properties. We’ve had holes punched in the walls in communal areas which have to be repaired.”
‘He continued: “They come all nights of the week and come back being sick and making a lot of noise, shouting and swearing, as they walk through the complex. We see large groups of people arriving with trolley suitcases and then they will drink before going out into town. Then in the early hours of the morning, up to 5am, they will come back totally smashed out of their brains causing a lot of noise and shouting and swearing. They then go back into the apartments making more noise”.
‘Two brothers, aged 78 and 76, told how they moved to the block in 2006 when they retired, but say the building was now a “living hell”. One said: “Both my brother and I moved to Century Wharf in 2006, looking forward to a nice retirement life here instead of what we have found. It has been a living hell, with both of us being in poor health and financially not able to pick up sticks and move. We will have to endure the misery if nothing can be done.”
‘In their petition the council residents say management company Warwick Estates are breaching planning rules by allowing the rooms to be used for other use than residential.’
‘But a spokesman for Cardiff Council said no breaches had taken place. A spokesman said: “There are no planning restrictions relating to renting properties in Century Wharf on a short term basis, or ‘spot rent’ as it is often referred to. These matters relate to the lease agreement that is signed by the person buying a property when they sign their lease agreement with their solicitor. The management company manage these properties and are responsible for ensuring that lease holders adhere to the terms of their lease. So this issue is a matter for the management company alone.”
Pets.com rises again!
‘(Small office company)+ (Free tequila tastings)= HUGE OFFICE COMPANY.’
That reminds me of the receptions I used to sometimes crash in the Berkeley Computer Science department circa 2000. Recruiters from Silly Valley would come in to campus to throw lavish soirees for prospective tech firm hires, just before the dot com crash.
’somehow pretends it is in the tech business, not the real estate business. Here is something to consider when thinking about how smart all those zillionaire tech investors are. As you read this (bolding ours), keep in mind that WeWork is currently valued at $20 billion…IWG PLC, an office-leasing company with a business model similar to WeWork’s, manages five times the square footage and has about one-eighth the market value.’
‘Boston Properties Inc., the country’s largest publicly traded office landlord, owns five times the square footage that WeWork manages and has a market capitalization of $19 billion.’
It’s funny but these are billions! So how does that work? Arbitrary number of shares, times corresponding last round of funding - voila! 20 big ones. Free tequila all around! Now, how are we gonna make money?
Arbitrary number of shares, times corresponding last round of funding - voila! 20 big ones.
It’s not really about “arbitrary number of shares”, Ben—it’s about what fraction of company ownership they had to give up to bring in the $1B of cash for equity.
From the last round, raising $4.4B, they must have given up a bit over 20% to have that suggest a $20B valuation. Who cares how many shares it takes to represent 20% ownership?
Does that value make any sense? H-e-double-hockey-sticks NO!
I can’t want for them to IPO, so that I can short them into the ground. Sounds like they have a LONG LONG way to fall when reality sets in.
All wars are banker’s wars; are all bubbles banker’s bubbles?
want==wait
Like We Works Cos, Blue Apron is another one of those stocks whose business model is on shaky ground.
Shares of serviced office group IWG (LSE: IWG) fell by more than 30% this morning after the group — previously known as Regus — issued a major profit warning.
http://www.fool.co.uk/investing/2017/10/19/is-iwg-plc-a-buy-after-falling-30-today/
Blue Apron has already taken it in the shorts (pun intended). Amazon acquiring Whole Foods put a hole in their business model of scaling to dominate the fresh-meals-to-cook delivery market.
Pets.com, blueApe, Scamazon, Freakbook….. It’s one failure after another.
“owns five times the square footage that WeWork manages”
Subtle, but important point…one company OWNS property, WeWork LEASES their space and then effectively subleases that space to individuals…month to month.
Owning space>Leasing then subleasing space.
I don’t understand how WeWork is assumed to have such high value. It makes no sense to me.
Does your ownership inequality hold up in a commercial real estate crash?
It all depends. WeWork leases space on a long-term basis (5 to 10-year commitments), but turns around and only requires one-month commitments from their subtenants.
Their revenue is soft as butter, and their obligations are hard as ice. At least with ownership, you have a fighting chance to find another occupant. If WeWork loses revenue, their rental obligations will drain them dry.
Whether ownership is better in a crash all depends on whether WeWork survives, where the properties are located, and how the owners have leveraged the asset.
We have looked at a couple of WeWork investments (buying the building and then improving for a WeWork lease). We declined on the basis that the improvements were specialized (couldn’t necessarily re-use them for the next tenant), and even with a one-year security deposit to cover the downtime if the tenant left, we couldn’t get comfortable with the prospect of needing to deal with the re-tenanting of the particular buildings presented to us.
Others in the real-estate industry and some Silicon Valley investors say the company’s well-crafted image belies the mundane nature of its business.
This is the dot com bubble all over again. Mundane businesses masquerading as “tech”
‘Boston Properties Inc., the country’s largest publicly traded office landlord, owns five times the square footage that WeWork manages and has a market capitalization of $19 billion.’
Tesla is a perfect example of this. A car manufacturer pretending to be a tech company in SV, even though 90%+ of their revenue comes from selling cars. Their market cap is ~$58B, higher than Ford’s and Nissan’s. Yet Ford sells ~30x more vehicles in a year than Tesla, is profitable, and at its current stock price pays almost a 5% dividend.
Except for the fact that Tesla is different than a car manufacturing company. They are also an energy company and and energy storage company.
Tesla’s valuation only makes any kind of sense if you believe they can monetize other aspects of the car. If Tesla can create a successful autonomous ride sharing network, then the valuation could easily make sense. Obviously that is a big if since they are just barely starting the ramp up to the model 3.
How much did you spend in fuel last year? If Tesla can achieve scale with the model 3 and vertical integration (e.g. they own the solar panels and the batteries at their charging stations), then they can create an entire eco-system and have residual revenue. They want to own the platform (e.g. the car) and then sell entertainment (e.g. music, video, news). Tesla is angling to be the car provider and provide the gas! Selling cars is a one-and-done transaction. But Tesla bulls see Tesla not just as a car company but more of a mobility company and and energy company. It aspires to be quite different than a pure auto manufacturing company. They also announced a deal today to sell the insurance. That would be an interesting potential revenue source.
We’ll see if Tesla can deliver on its promises. Musk is known for overpromising and underdelivering.
Tesla fires hundreds as Model 3 electric car production drags
Nathan Bomey, USA TODAY Published 12:48 p.m. ET Oct. 15, 2017 | Updated 8:24 a.m. ET Oct. 16, 2017
Tesla’s given us a glimpse of its latest Model 3, and it’s packed with slick improvements. The sensational ride handles itself quite well on all types of terrain. The interior matches Tesla’s exceptional style. USA TODAY
Tesla has reportedly fired hundreds of employees amid signs that the company is off to a slow start in manufacturing its crucial Model 3 electric car.
The Palo Alto, Calif.-based automaker and tech company dismissed several hundred workers, according to multiple reports, including an initial story by the Mercury News. Reuters also reported the news.
The dismissals occurred after what Tesla described as “an annual performance review” of its more than 33,000 employees. The company did not provide specifics.
But the firings reportedly included engineers, managers, salespeople and factory employees.
The move comes as Tesla is aiming to rapidly expand production of its new mass-market Model 3. CEO Elon Musk had said the company would be making 5,000 cars per week by the end of the year, but that goal appears to be in jeopardy amid early stumbles.
…
Not necessarily a bad thing since rumors are that some of those let go were among the highest paid. For all those who worry about fiscal profligacy at Tesla, this ought to be a positive signal. Again, we’ll know more about the success of the Model 3 roll-out in 12 months. Still early days.
Space-X is far more interesting than Tesla, IMHO…they have accomplished something that is unprecedented…landing and re-using the booster rocket used to launch stuff into high orbit.
The is big value there since they can drive costs so low.
Tesla is a car using generally ubiquitous battery technology.
Let’s see how they do once ALL major manufacturers come out with with 100% electric vehicles (BMW, VW, etc…..
From what I understand, Tesla is mainly about marketing, not about developing special technology that others do not have.
“…not about developing special technology that others do not have.”
Have you taken a ride in one of their high-end models? After having done so myself, I have to say that the car was unlike any other I ever rode in. In fact, this is one of the reasons my BIL bought it. So I’m not sure what you mean by ’special technology’, but I can beyond a doubt that Tesla the car maker has shaken off the Detroit malaise that turned America from a leader in automobile design into a laggard.
Have you taken a ride in one of their high-end models?
Yes. My partner has one–I’ve taken quite a number of rides (one even long enough that we needed to stop to get a recharge).
What I mean by “no special technology” is that there is no special battery technology that they are using (kind of a big deal), and their electric motors are nothing groundbreaking.
What people like is how the whole experience is put together. That said, I think it is a mistake to believe that others (BMW, Mercedes, etc.) can’t come up with something similar.
Where the Tesla falls down is on things that other automakers have been doing for decades. My partner has not been impressed with fit/finish of his Tesla (rattles, funny noises, etc.), nor has he been impressed with their customer service to address such nagging issues (for a high-end auto manufacturer).
Don’t get me wrong, he enjoys the car, and drives it to work most days (he has other cars that need to stretch their wheels from time to time)–and likes driving it.
This is why I was surprised when he was slightly negative when I asked him whether he would buy another. I think he would like to see what EVs other major luxury manufacturers produce. He generally believes that if you pay a premium price for a premium product, and you should not have nagging issues, or problems addressing those issues.
A Prenzler Digital Media survey found that of 296 Tesla owners (mostly Model S – 93%, and 7% Model X), 92% of them would buy another Tesla – a result which is up from 81% noted in 2013.
Your partner must be one of the 7%.
Car experiences are subjective, but the data show overwhelming satisfaction from owners. That is one of the most important metrics.
https://insideevs.com/survey-92-of-tesla-owners-will-buy-tesla-again-55-to-purchase-a-model-3/
BTW, I just posted with a link (that will take a while)–Waymo uses Radar in conjunction with Lidar.
Tesla providing insurance will be interesting, since the cars are much safer than most.
since the cars are much safer than most.
How so?
Macbeth has a question for you down below. Answer it truthfully.
“…since the cars are much safer than most.”
How so? And does the illusion of increased safety encourage reckless behavior?
I only ask this because my BIL was kind enough to give me a ride in his new Tesla last night. It was the first time I ever experienced going over 💯 mph upon entering the freeway. And my BIL regaled me with an account of racing someone who was driving an Audi at speeds over 130 mph. It’s all very safe, because he has a radar detector to avoid speeding tickets.
Model S Sets New NHTSA Vehicle Safety Score Record. Palo Alto, CA — Independent testing by the National Highway Traffic Safety Administration (NHTSA) has awarded the Tesla Model S a 5-star safety rating, not just overall, but in every subcategory without exception.
Aug 19, 2013
lol@jinglebiscuits
Earlier today, the National Highway Traffic Safety Administration published a detailed report absolving Tesla of fault in a May 2016 crash. That incident saw a Tesla under the control of semi-autonomous Autopilot software run into the side of a truck trailer, which subsequently saw critics freak out about the unsafe deployment of beta software to the nation’s roads.
Not only did the NHTSA report absolve Tesla of any blame in the accident, but analysis and testing of the Autopilot system found that across Tesla’s fleet, the deployment of Autopilot reduced accidents by around 40 percent. Sorry, humans: we’re all bad at driving, and even the first generation of trial software is better at paying attention than your brain on Red Bull.
http://bgr.com/2017/01/19/tesla-autopilot-crash-safety-statistics-report-nhtsa/
Sounds hideous. All we need are cars that further anesthetize mankind to all others things in life.
Wee.
Ride sharing networks = opportunity for government to hike taxes through the roof. And, I have no interest in getting taxed per mile.
I spent at most $1200 in fuel during the past year. More likely about $1000. How does that compare with the extra cost to own a Tesla? Not very favorably, I’d bet.
Additionally, I LIKE to drive. Sitting my butt in a self-driving vehicle is akin to being locked in a cage at the zoo. No thanks.
My BIL obviously bought his Tesla because he likes to drive. However, he informed me during our ride that his vehicle is fully equipped to be self-driving, once testing is completed. He is fully convinced that accident rates will decrease, once human error is taken out of the driving equation. I didn’t bother pointing out the error in his logic, which is that humans are the ones who are developing the self-driving technology.
The “error” is in his wishful thinking, not in his logic.
We do think different on this point. My father has a Tesla and I’ve driven in it. It’s unlike any other vehicle I’ve ever driven it. It was amazing, and enjoyable. I’m a believer. Call me a fanboy, but I won’t buy any other car. I don’t doubt that other auto manufacturers can mass produce EVs to rival Tesla, nor do I think they have the best self-driving tech.
I like Tesla because I buy into their vision. Ultimately I don’t care though if it is Tesla, GM, VW, or any other auto maker that succeeds making the ICE conversion to EVs.
I only mention fuel issue because IF (and again, this is an if) Tesla does succeed in having mass adoption of EVs and they have several million EVs on the roads, then they also have the opportunity to have re-occurring revenue from monetizing the charging. And they can capture the energy from their solar panels and store it with their batteries. The vision is highly compelling. They are far ahead, but GM is closing fast. It is that scenario (and I agree with others that their revenue right now is just producing cars) that makes the stock what it is. It is future potential, that is inherently unproven and untested, that explains the sky high valuation. It may not pan out, in which case we would expect the stock to drop dramatically.
Tesla=failure just like solar, amazon, facebook.
Interesting cluster of failure you’ve highlighted. I’m not sure how you’ve arrived at “failure” for any one of these items.
Are these really “failures” or simply things you just don’t like? It makes me think of how some presidents I know label things “fake news” when what they really mean is “I don’t like this stuff.”
They’re “really failures”.
Tesla’s problem will be when it needs to compete head to head with major auto manufacturers for other EVs. Their margins will be squeezed, and their multiple will fall back down to earth.
Ultimately when it comes down to it, if people can pay less for a similar car, they will.
Agreed. Tesla has a significant head start. They certainly have first-movers advantage, especially with their charging network and their battery plant. But other auto makers has Tesla in their sights.
A very good response, One to Many. Thanks for taking the time to type it all out.
You’re a fan boi, and I am not. It colors both of our thinking.
I’m not impressed with self driving cars. I like making decisions for myself. Additionally, being chauffeured around would drive me nuts - boredom! And some of us, like me, cannot read in moving vehicles without puking. Then what? Look out the window every minute? Talk all day on the phone? To whom, and about what?
Self driving cars may be great for addicts - those who cannot put their phones down for one second, and those who must be constantly entertained.
I also am very skeptical about an auto manufacturer insuring its own vehicles. Sounds like a very bad idea.
It also sounds like a way to force everyone to the manufacturer for repairs, all at significant markup.
“Independent testing by the National Highway Traffic Safety Administration (NHTSA)…”
The safety of the Tesla under standard testing conditions could be fantastic, and yet the car might nonetheless prove a road hazard if those who purchase them have a propensity to drive at 130 mph on US freeways.
Thoughtful response, I appreciate it. Again, here our views diverge significantly. I look forward to the day when I can outsource driving. I would much rather read, watch a Netflix show, sleep, or catch up with friends or family. Also, I’m an ER nurse and I know the stats about deadly vehicles are. We worry about terrorism, but we should really worry about driving. So many distracted drivers, drunk drivers, fatigued drivers, and just poor drivers. Something like 90% of accidents are caused by humans. Good self-driving AI has the potential to dramatically decrease fatalities.
But why talk about Tesla and self-driving on a housing forum? I see self-driving as the catalyst that will pop many housing market bubbles. I read a very sad article in NYT entitled “The Rise of the Extreme Commuter” a few months ago. The old mantra “drive until you can afford it” is what is in play once again. Quality of life is terrible, and health too, when daily commutes increase. And yet city and urban hubs are where the high paying jobs are. So we are stuck right now. AI has the potential to allow commuters access to higher paying jobs without sacrificing their quality of life. It also unlocks a huge swath of land (one major input cost of construction) to feasible development.
MIT seems to agree with my hypothesis on this:
https://www.bloomberg.com/news/articles/2017-10-17/driverless-cars-bring-visions-of-building-boom-suburban-sprawl
“Also, I’m an ER nurse and I know the stats about deadly vehicles are. We worry about terrorism, but we should really worry about driving. So many distracted drivers, drunk drivers, fatigued drivers, and just poor drivers.”
The fact that robotic drivers or thrill seekers like my BIL* won’t control the steering wheel does seem promising. However, I suspect drunk people who use Tesla’s will inadvertently figure out some other way to turn them into killing machines, self-driving technology notwithstanding.
* My BIL is a very capable driver. What worries me is not his driving skills at speeds over 💯 mph, but rather the reaction of other drivers to the sight of an approaching car driving more than twice their speed. German drivers are accustomed to it, but not Americans.
Except for the fact that Tesla is different than a car manufacturing company. They are also an energy company and and energy storage company.
As I pointed out, by far the bulk of their revenue comes from automotive sales. Stationary battery storage is a low-margin business and dominated by other companies. Tesla will make as much profit from energy storage as they do from selling electric vehicles.
You know who else was also an “energy company”? Enron.
“If Tesla can create a successful autonomous ride sharing network, then the valuation could easily make sense.”
Where is the barrier to entry that will make this valuation so profitable?
“If Tesla can achieve scale with the model 3 and vertical integration (e.g. they own the solar panels and the batteries at their charging stations), then they can create an entire eco-system and have residual revenue.”
Sounds like a monopoly business model, not to suggest this isn’t legal in America.
The real money is in creating an ride sharing platform powered by AI and self-driving. Uber, in spite of all its deplorable founder’s behavior, has much more upside than the automakers. The one-and-done selling of a vehicle does not have near the potential of becoming a mobility company. GM understands this which is why they have partnered with Lyft and are developing their own self-driving Chevy Bolts (all-electric vehicles).
From what I understand Waymo (Google) is pretty far ahead in terms of driverless technology.
It would not surprise me one bit if Waymo ends up being the driverless brains behind lots of different cars (including self-driving fleets).
My understanding is that Tesla’s self-driving features are based on a radar system, which is far less precise than the Lidar that is being used by Waymo (and is the subject of their litigation against Uber–who allegedly was also attempting to use Lidar).
Remember on Google’s board is Alan Mulally (former CEO of Ford–a rather successful CEO), so they aren’t pretending that Detroit doesn’t exist. They are going to try to work with existing manufacturers rather than become one themselves.
I run with former Ford auto execs. As much as I want to love Ford, they are tragically behind in the auto race now when it comes to self-driving and EVs. I agree that Waymo is very advanced, but commercializing it is another matter. Amazon is eating Google’s lunch when it comes to personal assistants (Amazon’s Alexa/Echo/Dot vs. Google Home).
As for which tech is superior (lidar vs. computer vision), that is a much debated point here. Lidar doesn’t work well in fog or other heavy precipitation, so it’s sort of a matter of debate. I don’t have a dog in the fight (not a Tesla owner, nor do I own stock), but I think that Tesla is far ahead of the other car manufacturers.
Amazon is eating Google’s lunch when it comes to personal assistants (Amazon’s Alexa/Echo/Dot vs. Google Home).
I don’t see how this has anything to do with autonomous driving.
The CA Disengagement Report is particularly interesting:
https://www.dmv.ca.gov/portal/dmv/detail/vr/autonomous/disengagement_report_2016
In 2016, 4 Teslas drove about 500 miles autonomously, and had about 170 disengagements.
In 2016, Waymo drove about 635,000 miles autonomously, and had 124 disengagements.
The year before, they drove 424,000 miles with 341 disengagements.
This article seems to think that Tesla is far behind GM/Ford, etc.
https://www.wired.com/2017/04/detroit-stomping-silicon-valley-self-driving-car-race/
However, the article seems to put a lot of weight on company’s ability to bring a car to market, which makes it amazing that Waymo is still ahead of Tesla. The article notes that Waymo “scores top marks” for it’s technology….if any manufacturer wants to license their tech, they would be far ahead of the game.
I noted above, Waymo uses radar and lidar in their system.
I agree with you that Waymo is ahead of Tesla with their AI. In fact, by all accounts the best car on the market right now for self-driving is Cadillac’s new “super cruise.”
http://www.autoguide.com/auto-news/2017/10/does-cadillac-s-super-cruise-self-driving-technology-actually-work-.html
My point about Amazon’s echo vs. Google Home was that a company can win in the lab and still lose in the market. One might argue that the AI in powering Google Home should be better than what Amazon can build. It may be premature to declare the winner, but I think Amazon will have won here because of their strategy. They got their first and opened their platform up to developers. The price was right too.
The question will be whether Tesla’s is sufficient to get the job done. I don’t see Waymo’s tech being used by any company right now. Sure, they can license it, but let’s see it in action? Elon is famous for over-promising, but I drove my dad’s Tesla for hours from Vegas to So Cal on auto-pilot and it barely needed to touch the steering wheel. It was magical and life changing. It’s certainly not at L5 automation, but it might get there. Even if Google’s tech it is superior, they may still lose the battle.
Housing my good friends.
Neptune Beach, FL Housing Prices Crater 8% YOY
http://www.movoto.com/neptune-beach-fl/market-trends/
‘Experiential retail is touted by many as an antidote to the disruption wrought by the internet and e-commerce. But some of that retail isn’t providing much of an experience.’
“Amazon’s a great example. They put almost every bookstore out of business and then they opened up a bookstore in Time Warner Center and it’s horrible,” Colliers International’s Brad Mendelson said at the Real Estate Board of New York’s member’s luncheon.’
“Amazon said, ‘You have to see our store at Columbus Circle. It’s a real experiential store,’” Madison Capital managing partner Richard Wagman added. “I walked into the store and I was like, ‘Actually, it’s kind of a shitty Barnes & Noble.’”
What does “experiential” mean? Sounds like a made-up word to me. B&N has backtracked on their model, i.e., the comfy chairs, etc. Sis works for B&N - people would treat the joint like a library, especially students. Pulled a book off the shelf once to find some idiot had underlined and written notes in it. And don’t get me started on the coffee-stains everywhere! So anyways, they pulled the chairs out and covered the outlets so that laptops cannot be charged. Sheesh, it’s a book STORE, not a free library.
That’s like saying it’s kind of like getting a burger at a shitty McDonalds…
Experiential = rock climbing wall and an aquarium or two with jazz playing in the background. And a fake/electric fireplace - cant forget that!
‘New strategies such as pop-up shops and experiential stores may not be enough to bring the city’s lagging retail market back to its 2015 peak, an expert said Wednesday at a panel discussion hosted by the Real Estate Board of New York.’
‘Rents are on the decline in some of the city’s choicest corridors, dragged down by stubbornly high vacancy rates. In recent years prices had been inflated by flashy flagship stores that overpaid for space in service of branding, according to Colliers International Vice Chairman Brad Mendelson. Landlords still chasing those rents are finding the math does not work.’
“I’m not sure [rents] will ever see the levels they were at,” he said. “There’s only so many people who want to lose money.”
A comment:
“What a surprise!!! High rents, high sales taxes, high real estate taxes, 15$ minimum wage, regulations of work hour schedules, ever increasing utility charges, onerous fines assessed against small businesses, thousands of locations outside of NYC where a brick and mortar retailers have a chance to make a buck and NYS remains the 49th (out of 50) least friendly business friendly places to do business in America.”
“The mayor, governor and city council members are bereft of any business experience yet continue to meddle into affairs about which they know nothing. Mr. Cuomo has spent well over 1.5 billion dollars of our money upstate (and downstate) to juice the economy and produce jobs. His efforts have been an utter failure. The NYC City Council and the Mayor have no clue about basic market principals nor demonstrate any desire to learn. Patronage coupled with ignorance guarantees failure.”
“Vacancies begat vacancies. When stores are empty, restaurants go under as do suppliers, vendors and small landlords. Until NYC/NYS becomes remotely competitive with most of the rest of America the death spiral will continue. The very people who are surprised by this and/or have helped cause this situation, think nothing of buying from Amazon and other e commerce retailers. These hypocrites are hastening economic suicide.”
“From CNBC:
Forget Fifth Avenue and Beverley Hills — retailers can find just as good of a location in cheaper corridors today, a new report from commercial real estate firm Jones Lang LaSalle (JLL) has found. “We know that sometimes retailers want that prime main-and-main location, but just don’t have the budget,” Naveen Jaggi, president of retail brokerage at JLL, said in a statement. “So, we’ve looked at nine core U.S. cities to find more affordable areas for retailer expansion.”
“JLL’s first ever “City Retail” report highlights the top 10 U.S. shopping districts, calculated according to rent price per square foot. They all boast growing populations of working millennials, rising food scenes and a healthy mixture of up-and-coming retailers and traditional brands.”
“Again, CNBC:
For between 50 - 115$ per sq ft. rent the top ten locations for retailers are: Three areas in San Fran, two in Chicago, DC, Miami, Palo Alto, Seattle and #1 is the Market East area of Philadelphia where retail rents are about 50$ a foot and the area has a growth rate of 25%.”
Mr. Cuomo has spent well over 1.5 billion dollars of our money upstate (and downstate) to juice the economy and produce jobs.
I wonder how much Amazon will be able to extort from the “winner” of it’s 2nd HQ sweepstakes? I’m almost certain that the victor will get to fully pay for the new HQ and any needed infrastructure and exempt Amazon from taxes for at least a decade, if not longer. And in the end Amazon will only hire a fraction of the number promised, and at lower wages than promised.
Camden? Good Lord.
“Camden? Good Lord.”
+1 No schitt… insanity.
What does “experiential” mean?
I think it’s a fancy way of saying that you can examine the product in a store before buying it.
It also can include non-product related offerings:cooking classes, pony rides, bungy trampoline….. experiences that excite and attract you….which you cannot get from Amazon on line.
‘The September losses, combined with 2,400 job losses reported by the EDD for August, paint an unsettling picture and lend credence to the assessment from a growing number of experts that the Bay Area’s job growth has begun to slow dramatically. ‘The slowdown is real,’ said Stephen Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy. ‘There were times this year we thought that job losses here and there were just temporary. But the slowdown is a fact. It’s happening.’
Sounds like it’s gone in reverse Steve, not slowed down. Maybe a tequila tasting will help.
Oracle fired 2000+ from its Santa Clara campus on Sept 1, and HP Enterprise will be firing 5000+, many of which will be in the Bay Area.
A big chunk of those 2400 fired in August we from Oracle too, which gutted its Storage division at the time.
Be nice when this whole cloud computing nonsense goes up in smoke. Yes, its got some worth but nowhere near the hype or the market cap of some of these unicorns. Maybe I’ll start a website like the old F*cked Company - call it Dead Unicorns. Gonna need fuel to implement this great idea - maybe a grilled cheeze sammich - gourmet of course! And to complement the experience, a tall glass of what-fking-ever from my juicero machine!
Now the serious people chime in. NPR:
‘The risk of a real estate bubble in top global cities has increased significantly in the past five years, according to an annual report by UBS Wealth Management.’
‘The study found that Toronto is in the riskiest territory, with Stockholm, Munich, Vancouver, Sydney, London and Hong Kong close behind it. Housing prices in each of those cities rose by almost 50 percent on average since 2011, while those in other major cities climbed by about 15 percent, according to the report.’
‘But are these markets so overvalued that there’s risk of a bubble? Although the study uses the word “bubble” to describe some of these markets, it does not mean that cities in high-risk territory are in “danger of imploding,” says Jonathan Woloshin, one of the authors of the report.’
‘Though none of the at-risk cities is in the United States, San Francisco and Los Angeles are considered overvalued because “both rents and home prices have outpaced income. So there is an absolute affordability issue here,” Woloshin tells Here & Now’s Jeremy Hobson.’
‘Still, Woloshin says many U.S. cities are benefiting from this global real estate boom. “There are a couple of things that are different this time,” compared with the last housing bubble 10 years ago, he says: “No. 1, the quality of underwriting in terms of mortgage lending is much better, [and] No. 2, interest rates are significantly lower than in the last cycle.”
‘As Related Companies CEO Jeff Blau told Hobson last month, hot real estate markets in cities like New York and San Francisco are supported by strong job growth, particularly in the tech industry. The company’s current project in the Hudson Yards area of Manhattan is the largest private mixed-use real estate development in U.S. history.’
“What’s driving a lot of that in both of those cities are tech jobs, and technology companies,” he says. “If you look at the job creation in that sector and … the diversification beyond financial services, that’s what’s really kinda driving this economy.”
‘Woloshin also agrees that low interest rates play a significant role in rising housing prices because they make it cheaper to get a mortgage. “In the United States the median existing-home price is about $260,000,” which is not very high, he says. “But when you start to move to some of these cities where the median home price is a couple million dollars, that makes a huge difference.”
‘While the report shows some cities are at risk of a bubble, Woloshin argues the UBS data reflect the positive state of the global economy. “Obviously there’s never a perfect all-clear, but this is about as good a globally coordinated recovery as we’ve seen in quite some time,” he says.’
Click! And that’s a wrap, over to you Amy.
““In the United States the median existing-home price is about $260,000,” which is not very high”
– said by a pompous ass at NPR
Defund NPR. Fire them all. Let this ass get a job in the private sector.
‘‘Still, Woloshin says many U.S. cities are benefiting from this global real estate boom. “There are a couple of things that are different this time,” compared with the last housing bubble 10 years ago, he says’
October 21, 2007
The Recordnet reports from California. “Months have passed since the days when dozens of homes at a time were going up in any given subdivision in San Joaquin County. These days, the typical new-home development looks as if it’s nearly in hibernation as the housing market steps into the third straight year of decline. The latest new-home figures show that quarterly sales have fallen to the lowest of this decade, according to the Gregory Group in Folsom.”
“A total of 421 new homes were sold countywide in the third quarter, down by almost two-thirds from the third quarter of 2004, near the top of the housing boom. Divided among 89 projects, that translates to about one home sold on average every three weeks at each development.”
“The average selling price also has declined steadily from a high of nearly $554,000 two years ago to about $468,000.”
“‘They’re getting body-slammed right now, frankly,’ said Greg Paquin, president of the Gregory Group.”
“‘Valley new-home construction sites are ghost towns,’ said Shane Hart, VP for Stockton-based Grupe Co. Incentives have increased steadily since the beginning of the year, while traffic and sales have continued to slow, he said. Grupe has offered as much as $150,000 in incentives per home, yet sales have become so slow that construction was halted at three developments in Stockton, Waterford and Tulare.”
“Florsheim Homes has come up with a marketing strategy to try to move a few remaining ‘close-out’ homes in two longtime projects - three homes in Turlock and seven in Ceres. Through next weekend, the company is staging a ‘Name Your Price’ sale, hoping to attract the same type of bargain hunters who show up for auctions.”
“Joe Anfuso, CEO of Stockton-based Florsheim Homes, has been a critic of developers who continued building in the slow market as the resulting large supply of unsold houses forced all builders to slash prices.”
“But construction activity has been pared dramatically in the past few months, as it should have, leaving builders still with the challenge of selling off standing homes, he said.”
“Anfuso said there’s no minimum price set. ‘You get to the point of how long do you want this to last?’ he said.”
“KB Home is working on about 60 homes in its Riverbend development in Stockton, making it one of the company’s busiest projects, said Kevin Kimball, senior VP of the company’s Central Valley region.”
“‘KB’s sales strategy is to be extremely price competitive, he said, with pricing down probably between $80,000 and $100,000 from a year ago. (For example, a 1,600-square-foot, three-bedroom/two bath home there carried at a starting price of $269,418.)”
“Paquin said there’s more bad news on the horizon for new-home builders, who in recent months offered such low prices and incentives that they even drew buyers from the existing-home market.”
“The flood of foreclosures is attracting the attention of bargain hunters and forcing existing-home prices down so much that those homes are getting more attention from potential buyers, he said.”
The Daily News. “‘Hey, it’s Mr. Doom and Gloom,’ Robert shouted from his stool on Wednesday when I dropped by a local restaurant. ‘You’re killing me.’”
“He was referring to two stories I wrote for that morning’s paper, one that noted foreclosures were getting to be a relatively good deal in this sour real estate market and the other about home sales hitting a more than 20-year low.”
“Robert has an interest in a Chatsworth home he’s trying to sell, and the market isn’t cooperating.”
“When this month ends, it marks the two-year anniversary of the start of the current downturn, at least here in the San Fernando Valley. In October 2005, home sales in the Valley fell an annual 16.1 percent to their lowest level for that month in five years.”
“That month, 998 previously owned single-family homes changed owners, according to the Southland Regional Association of Realtors. And sales have been falling on an annual basis ever since. ‘For Sale’ signs have become yard ornaments.”
“‘Properties will sit on the market longer, and that’s not a bad thing (for buyers),’ said Tom Carnahan, owner of Carnahan & Associates in Woodland Hills.”
“Foreclosures are sprouting up across the Valley, and some are priced about 20 percent under their last selling price. There is also going to be a big foreclosure auction this weekend at the Los Angeles Convention Center. There are 135 properties on the block from Los Angeles and Orange counties and the Inland Empire.”
“Of those, 38 are from the San Fernando, Santa Clarita, Antelope, Simi and Conejo valleys.”
“Two years ago, Jim Ezell was president of the Realtors group and had been in the business for 30 years, so he’s seen up and down markets. ‘I would not write an obituary for the booming seller’s market just yet,’ he said at the time.”
“You can probably make the case now that the market has a terminal illness. That’s what the numbers that are already out for September suggest. This week will bring more proof.”
The Union Tribune. “Builder Michael Pattinson may be spitting into the wind. In an industry where price cutting of new homes is increasingly taking hold, he remains firmly against using the marketing tactic.”
“‘It is the large public home builders that have led the discounting program. I think it’s wrong,’ he said. ‘They’ve hurt markets across the whole country.’”
“By cutting prices, Pattinson said, ‘you wipe out the equity previous customers have put into their new homes they bought earlier. Consumer confidence is lost.’”
“In an interview, he was asked how the market will look next year. ‘I think it will be a lot like it is today because the public builder discounting will continue and I think it will leave consumers on the sidelines.’ he replied.”
“‘This is the big problem with discounting: You push more people out of the market than you bring into the market. There will be one or two people who will say, ‘Yeah, I’ll buy that deal.’ But there will be a lot of people who say to themselves, ‘If they are dropping it $50,000 today, what are they going to be dropping it to next month or next year?’ he said.”
“The fourth quarter of the year had hardly begun Oct. 1 when home builders and industry experts wrote it off as a disappointment and gloomily predicted 2008 won’t be much better.”
“Industry consultant Jeff Meyers, a veteran watcher of the building industry with offices in Orange County, said buyers will be able to get 10 percent to 15 percent discounts off asking prices at certain projects. But they must be ready to close escrow without contingencies to meet the end of builders’ fiscal years.”
“Meyers said the availability of deals also depends on whether it’s a private company – which can take its time to sell at target prices, and a public company, with shareholders and analysts demanding greater profits every quarter. Judging by recent sales campaigns, it’s the public companies that are desperate to sell, even at a loss.”
“‘You’ve got to go back to the early 1980s when it was that bad – and it took four years to work that off,’ securities analyst Jeffrey Laverty told the Builders Magazine. ‘I don’t agree that there’s a turnaround in sight. It’s ugly out there.’”
“In short, the rose-colored glasses so many builders wear in this risky business have been replaced by bifocals, as optimism gives way to realism and executives retrench.”
“Paul Tryon, CEO of the San Diego Building Industry Association, said local builders knew back in July and August, when the credit crunch spooked investors and buyers, that 2007 would end up as a bummer.”
“‘I think there was more optimism for 2008 until the latter part of the summer,’ he said. ‘Then, traffic was down, sales were down, cancellations were up and people who put deposits in were electing to stay on the sidelines.’”
“For Mike Railey, hope outweighed fear as he closed escrow early this month on a $1.4 million, 1,500-square-foot penthouse at The Legend, Bosa Development’s 180-unit condo tower next to Petco Park.”
“He and his wife and their two sons live in a modest home in Del Mar that carries a negative-amortization loan. As a mortgage broker, Railey knows the risks of a loan on which the balance grows if you don’t pay enough per month.”
“‘I’m scared right now; I’m struggling a bit,’ he said.”
“Now the family faces an additional $6,100 monthly payment for the mortgage, taxes and homeowner fees for the downtown unit. He briefly considered backing out of the purchase until Bosa told him he could risk losing his 15 percent down payment.”
“‘I barely make enough to survive, but with my real estate I can hang in there,’ he said.”
“He hopes to lease the unit out for the time being and bank on an invention he’s marketing.”
“Jim Abbott, whose downtown office is helping the Railey family deal with its high-priced penthouse, said so far most builders are reluctant to cut. ‘Do they become like Steve Jobs with the iPhone and go back and give everybody a credit? What do you do as a developer? They’re in a very tough situation,’ Abbott said. ‘You could almost feel sorry for one.’”
“Since hitting a peak of $518,000 in November 2005, the median price of a home sold in San Diego County has tumbled to $470,000 as of last month, according to DataQuick.”
“Over the past couple of years, sales of expensive homes in areas such as Rancho Santa Fe, Coronado and Del Mar have skewed the median price upward, disguising the sluggish sales and declining prices in much of the rest of the county.”
“The least-expensive neighborhoods have been particularly hard hit, because so many low-income borrowers are going into default.”
“Last month, the median prices of homes sold in National City, San Ysidro, Linda Vista and northern Chula Vista were all off by more than 25 percent from their prices in September 2006. Prices in Golden Hill were down 35 percent.”
“‘The high-end sales that were propping up the median were taken away in September,’ said Rich Toscano, a financial adviser with Pacific Capital Associates in Del Mar.”
“The Case-Shiller Index shows that San Diego home prices fell 7.8 percent between November 2005 and July 2007, the most recent data available. After adjusting for inflation, San Diego homes have lost roughly 13 percent of their value since July 2005, Toscano said.”
“San Diego real estate broker Robert Schwartz said the median is also overstated because it does not reflect the incentives that home sellers are giving buyers. A home in San Carlos sold for $480,000, but only after the owner gave $14,400 in concessions to the buyer. Another San Carlos home sold for $385,000, not including $10,000 in concessions. A $360,000 home in Mission Valley also included $10,000 in concessions.”
“‘Those are all homes that I personally know about,’ Schwartz said.”
http://thehousingbubbleblog.com/?p=3607
October 21, 2007
The Columbian reports from Washington. “If you think you’re seeing more ‘For Sale’ signs around Clark County, you’re right. The inventory of homes for sale here is the highest in at least five years, according to new figures. A year of sluggish sales contributed to a 12-month inventory of new and pre-owned homes on the market in September, the biggest backlog since records started being kept in 2002, according to RMLS.”
“‘Buyers are in no hurry,’ said Mike Lamb, an associate broker with ‘in Vancouver. ‘Their expectation is that prices will go down.’”
“Sellers are waiting it out as well, and some are ‘holding onto a false sense of appreciation that may not be justified in this market,’ said Kathy Rylander, also an associate broker.”
“New homes account for much of the excess inventory, a situation that has caused a dramatic slowdown in new home building. ‘Builders are having a rational reaction to the marketplace,’ Lamb said. ‘As things slow down, they’re building fewer homes. We’re going to have to work the inventory down.’”
“Home construction represents a $350 million piece of the local economy and supports several thousand jobs in construction and related services.”
“The sector barely kept up with demand two years ago. ‘Now, we’re fighting for every sale out there,’ said Matt Lewis, acquisition and planning manager for Vancouver-based Pacific Lifestyle Homes.”
The News Tribune from Washington. “If there is any doubt that today’s Pierce County housing market is one fit for buyers, check out these offers: A $5,000 furniture gift card on North Tacoma condominiums selling for $249,900 to $342,900. A $15,000 bonus in a gated community of houses in Parkland. A 2005 Honda Civic with a three-bedroom West Tacoma house priced at $549,500. A $15,000 shopping spree at Posh Home with a two-bedroom downtown Tacoma condo.”
“Such an atmosphere differs considerably from just two or three years ago, when buyers competed with multiple offers, were outbid, and sellers declined to make concessions they now readily make.”
“In September, 2,107 new Pierce County homes were for sale, a 26 percent increase over the same month a year ago, according to Northwest MLS.”
“New-home builders are pushing buyer incentives to stand out from the subdivision crowd, said Tom McCollum, a real estate agent selling homes at Stoney Ridge, a 39-house development in Frederickson. Buyers there are eligible for a $20,000 incentive.”
“‘The market has obviously changed, and there’s a lot of standing inventory,’ McCollum said.”
“Parkland subdivision AutumnWood opened for sale last year and added a $15,000 buyer bonus in August. ‘As the market has turned we have to come up with new and better ideas to motivate the buyer,’ said agent John L. Scott.”
“Builders and developers typically are reluctant to lower prices in favor of incentives. A reduction in price comes directly off the bottom line, whereas an upgrade, such as crown molding or an entertainment system, could cost the builder less, said Glenn Crellin, at Washington State University.”
“‘It makes it look like they’re contributing more than might really be the case,’ he said. ‘It’s a marketing ploy.’”
“Plus, lowering the price on one new house in a subdivision could impact the prices on subsequent sales and the value of nearby homes. ‘If they’re offering homes for sale for less than previous purchasers paid, they get a lot of negative reaction from folks who recently moved into their neighborhood,’ Crellin said.”
“David Groff listed his West Tacoma house more than a month ago and added a 2005 Honda Accord as a bonus a few weeks later. His 3,000-square-foot home, with a view, is priced at $549,500.”
“‘The house has a lot to offer, but there are obviously a lot of houses for sale,’ he said. ‘The car idea was just some kind of tangible thing you can see and feel more than a cash bonus.’”
“Bob Mortimer added a 1954 Cadillac to the sale of his Gig Harbor home after several months of no buyers. His four-bedroom house – now at $849,000, down from $895,000 – has been for sale for nearly a year.”
“‘I thought it might be a fun thing to do to offer it with the house instead of lowering the price again,’ Mortimer said.”
“Bill Riley, an owner of Gateway Real Estate, said he raised the price of a house in Puyallup by $15,000 recently and added a Harley-Davidson motorcycle to the listing. ‘Sometimes things like that capture a person’s attention. It didn’t work. We did it for three weeks. We dropped the price back down,’ he said.”
“Other real estate agents tell their clients to avoid incentives in favor of discounting the price on a listing. Buyers, said Windermere agent Mike Tinder, want a good price. Plus, today’s home shoppers respond to price reductions, because they can use money saved from lower house payments to pay off credit card debt, he said.”
“‘I think giving away a car is a bit silly. I think cash is king,’ he said.”
The Bellingham Herald from Washington. “Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University, said much of Western Washington has returned to a situation where neither buyer nor seller has the upper hand, which may feel strange to some after five years of a hot real estate market.”
“‘The level of activity is down a bit across the state and supply is up, but prices are still holding up reasonably well,’ Crellin said. ‘It’s really turned into a balanced market, or slightly into a buyers’ market.’”
“‘My guess is that for the first time in at least five years, home prices will end up about the same as the previous year,’ said said Gragg Miller of Coldwell Banker Miller-Arnason.. ‘It shouldn’t come as a surprise. The market had been appreciating too quickly and a break was needed.’”
“Through three quarters of this year, the number of homes sold for less than $350,000 is down sharply. At the same time, sales of homes more than $500,000 are up sharply, already surpassing 2006 levels.”
“There are several explanations for the drop in sales for first-time homebuyers. ‘I think of it as the great psych-out factor that’s taking place for buyers (in that price range),’ said real estate agent Ken Gustafson. ‘There is a wait-and-see attitude, where some people are holding back, waiting to see what happens next. It’s interesting because there are many more choices and good loan products out there.’”
“‘Right now some are convinced that what’s happening nationally is happening here, but we don’t see those signs. Once they realize that, demand will increase,’ Crellin said.”
“‘The increased interest from Canadians has really taken place in the last few weeks when their dollar reached parity,’ agent Mike Kent said. ‘Vancouver (B.C.) area home prices are so high right now that Whatcom County looks like a bargain in comparison.’”
“Earlier this month Janna Denney closed on a two-bedroom condominium on Northwest Drive. It was her first real estate purchase. Even though Denney is 22, she was confident about being able to qualify for a loan because she has been working for five years. She was able to get prequalified last spring.”
“‘I felt pretty lucky, because I was qualified before all the news about tightening credit happened,’ Denney said. When she found the unit she wanted, Denney made an offer that was immediately accepted. She’s moved in now and happy with her unit, which was converted from an apartment.”
“‘This place has all-new appliances and they did a great job renovating it,’ said Denney, who paid less than $200,000. ‘On the inside it feels like a brand new condo unit, but with a usedunit price.’”
The Oregonian. “Clark County’s housing market showed signs in September of slowing more than the rest of the Portland area, according to data released Wednesday.”
“The county had a greater inventory, needed more days to sell and had a steeper drop in closed sales compared with the area that includes Clackamas, Columbia, Multnomah, Washington and Yamhill counties.”
“At the rate homes were selling in September, it would take about 12 months to sell all of them. A year earlier, inventory was at 6.4 months. In September 2005, it was 2.6 months.”
“Closed sales dropped nearly 42 percent and pending sales fell about 30 percent.”
The Bend Bulletin from Oregon. “Mortgage defaults have continued to rise through the third quarter in Deschutes County as an increasing number of homeowners struggle to make their payments, county records indicate.”
“‘There is turmoil, some turmoil,’ as Ball Janik LLP bankruptcy and foreclosure attorney Jeff Gardner put it for a crowd of 45 local bankers at a seminar in Bend on Thursday.”
“Ball Janick’s attorneys are representing banking clients in foreclosure cases simultaneously in Washington state, Idaho and Oregon this summer, Gardner said, the first time he’s seen that in 10 years of practice. The cases have all involved residential builders working throughout the full range of the housing market — condominiums, subdivisions and high-end homes.”
“Gardner said he smells nothing in the air to indicate that the banking climate is about to melt down to anything like the high-interest crisis of the early 1980s, the agricultural collapse of the mid-1980s, or the real estate slowdown of the late 1980s and early 1990s.”
“The sky is not falling,’ Gardner said. ‘Banks are not necessarily going out of business.’”
“Despite the housing downturn, said Tom Bourdage, West Coast Bank’s VP for commercial loans said the potential effect of loan failures of all types on the local banking industry won’t be as dire as some think.”
“‘A lot of it is perception,’ Bourdage said. ‘It’s not as bad as it seems.’”
“Bend-based Bank of the Cascades reported that its nonperforming loans rose to around $21 million in the quarter, or about 0.89 percent of total assets, largely due to trouble among some Boise, Idaho, housing projects.”
“The Central Oregon MLS listed about 35 homes this week as ‘distressed,’ said broker Ruben Garmyn. The bulk of them are banks trying for a ’short sale.’”
“Most of the homes were owned by investors who bought too high and have walked away, Garmyn said. He expects it to rise higher through the winter as failed investors and contractors give up.”
“‘There’s going to be so many good deals on the market, it’s just incredible,’ Garmyn said. ‘You need to buy them now when everybody is sitting on the fence and doesn’t want to buy ’em.’”
Business Week reports on Oregon. “In the late 1990s, Bend became one of those sleepy mountain towns, like Bozeman, Mont., and Coeur d’Alene, Idaho, that started popping up on ‘Best Places to Retire’ lists. Construction boomed, the population doubled (to 75,000)—and so did housing prices.”
“But the influx of Californians, which contributed to the real estate boom, has slowed to a trickle. Just 106 single-family homes were sold in September—two-thirds fewer than in the same month in 2005. The town now has a 15-month inventory of homes for sale. ‘There’s a slump in the market, no question,’ says appraiser Michael Caba.”
“The best deals are in high-end homes that developers built on speculation. Bill Berger, who runs the local office of Hasson Company Realtors, has watched the asking price of one new 2,700-square-foot house sink from $579,000 in February to $439,000 now.”
“‘Prices got too high,’ he says. ‘Now they are coming back to reality.’”
http://thehousingbubbleblog.com/?p=3606
October 21, 2007
The Palm Beach Post reports from Florida. “So many had something to gain from the mortgage bubble, says Bill Davis, past president of the Florida Association of Mortgage Brokers’ Palm Beach County region, and many of those people went about their business winking and nodding. ‘It’s everybody,’ he says. ‘The Federal Reserve participated, the big lenders played a part, the credit ratings agencies had a part, so did hedge funds and borrowers, appraisers.’”
“The local results: In the six months ending July 1 of this year alone, more than $1 billion in mortgages defaulted in Palm Beach County and along the Treasure Coast.”
“‘I had a guy who called me who owns 70 homes,’ says Stuart broker Michael Morgan. ‘I know a lady who owns 16. It’s the room of 1,000 doughnuts. How many can you eat? Two? Three? Well, how many houses can you live in?’”
“If everybody gets to be guilty of something, though, ex-Federal Reserve chief Alan Greenspan gets to be a little guiltier than most. Critics draw a straight line from the number-crunching wizard to front-yard foreclosure signs.”
“Mr. Greenspan slashed interest rates deeply and often: 11 times in 2001 alone. Says mortgage broker Davis: ‘It was effectively free money.’ Mr. Greenspan said in a recent 60 Minutes interview that he ‘didn’t really get’ how subprime loans could wreak havoc on the economy until last year.”
The Tampa Tribune from Florida. “Vacant homes with ‘For Sale’ signs on lawns and ‘For Rent’ signs taped to windows line the block. Neighbors have vanished, some loading moving vans in the middle of the night. New neighborhoods such as Carriage Pointe, where speculators bought homes several at a clip and homeowners stretched their budgets with creative financing, are particularly hard-hit.”
“‘No one has ever lived in those two homes across the street. This is not where I wanted to live,’ said Greg Gibbons, who has a view of several empty houses.”
“As many as 69 percent of the 381 homes in Carriage Pointe are owned by people who don’t live there, county officials estimate. This year, 31 of the homes have slipped into foreclosure, and many other homes are heading that way. Some investors drastically cut rents.”
“The builder seems to realize the home-buying boom is over. The phone number at the sales office is disconnected.”
“Of the 21 homes sold through Greg Armstrong’s Coldwell Banker office last month, 12 had been foreclosed on by lenders. ‘I’ve been in this business for 17 years, and I’ve never seen the bank be the No. 1 seller,’ said Armstrong, president-elect of the West Pasco Board of Realtors.”
“Homeowners who want to move or those seeking to avoid foreclosure by selling can’t compete, he said. And every time a lender cuts prices dramatically to move a home, values in the neighborhood go down, he said. ‘Lenders can afford to go much lower in price than homeowners can,’ Armstrong said. ‘The banks don’t want all these homes, so they’ll sell them for whatever they need to.’”
“That’s part of the reason Brianne and Robert Thompson have decided to file for bankruptcy and walk away from their first home, a three-bedroom in New Port Richey. ‘We hate to just let this house go,’ Brianne Thompson said. ‘We love it, but we can’t do this anymore.’”
The News Journal from Florida. “One Internet site reported there were 100 foreclosed or bank-owned properties in Daytona Beach and 135 in Palm Coast as of Oct. 12. Several area brokers contacted said they have departments devoted solely to selling such properties.”
“Ray Rivela, of Century 21 A.H. Stone here, said the foreclosure department in his office is working seven days a week just to keep up with the growing number of foreclosed homes.”
“Member Sharon Barbaro said the agency listed a REO property in Palm Coast that had originally sold for about $300,000. ‘I sold it for $200,000,’ she said, which was very close to what the bank wanted for the never-occupied house.”
The Orlando Sentinel from Florida. “An entire downtown redevelopment project in Eustis has come to a halt. Condos are on hold at Park Towers in Uptown Altamonte. In Winter Springs, where buyers have defaulted on contracts for town homes, nearly all development in the town center ‘is on hold until the market returns,’ City Manager Ron McLemore said. ‘It is not a pretty picture.’”
“Michael Allen bought a three-bedroom town home in the $300,000s last year. Despite the ‘available’ signs outside many neighboring units at Jesup’s Reserve, Allen still thinks he and his wife made a smart investment.”
“‘I think this community is going to take off,’ he said.”
From Jacksonville.com. “The owner of Paradise Key needs a clever way to sell the 62 homes on South Beach Parkway and Jacksonville Drive. By the time Bestcon Homes President Paul Nichols acquired the land and got the zoning and building permits, the housing market had tanked.”
“‘We’re hunkering down,’ Nichols said. ‘We’re trying to get through this.’”
“Under the new taxing formula, ‘it’s essentially letting growth pay for itself,’ said City Planning Director Steve Lindorff , referring to police and fire services that will be available to new homes or businesses. But with the decline in the housing market, ‘We won’t see those numbers going forward,’ he said.”
The St Petersburg Times from Florida. “Depressed sales of construction materials, home improvements and furnishings triggered by Florida’s burst housing bubble have started spreading to a drop in other types of consumer spending.”
“In fact, unless the state’s economy perks up in the next few months, Florida will report its first decrease in annual sales tax collections since the 1992 recession.”
“‘We have not reported decreased sales tax collections since post-9/11, but that was not as deep or lasted as long as this time,’ said Frank Williams, an economist at the state Office of Economic and Demographic Research.”
“‘How long it lasts depends on how much of a hangover Florida has to overcome (in overpriced real estate) from the housing market and subprime lending problems,’ said Sean Snaith, an economist with the University of Central Florida. ‘We’ve got the dry mouth and headache, but it’s clear they will last well into 2008.’”
The News Press from Florida. “Lee County’s unemployment rate climbed to 5.2 percent in September as a stalled real estate market continues to cost jobs in construction and related businesses.”
“Unincorporated Lee County, which includes Bonita Springs and Fort Myers Beach, issued 76 construction permits for single-family homes in September, compared to 458 a year ago. Cape Coral recorded a record low of 29, compared to 176 permits last year.”
“Joa Wright moved to Fort Myers from Fort Lauderdale about six weeks ago. She said she had been working as a receptionist at a law firm and hoped to find similar work here. ‘I can’t find anything because so many people who had been in real estate are taking other jobs,’ Wright said. ‘At this point, I will do anything. I’ll scrub floors if I have to.’”
“Craig Feinberg, a career development supervisor, said he is seeing stacks of applications from out of work real estate agents, mortgage brokers and real estate attorneys. ‘They are saying they don’t ever want to be in this position again,’ Feinberg said. ‘They want a career in something they can have some control over.’”
“Jay Cremins, an out-of-work mortgage broker, said he watched his earnings dry up as the market slowed, but he waited too long to make a change. ‘I’m stubborn, so I didn’t give up,’ Cremins said. ‘I should have because now I’m in trouble.’”
“About 80 real estate brokers from Bonita Springs and Estero jammed a conference room at Keller Williams Elite Realty Monday night to hear attack plans from the area’s top producers and mega agents.”
“‘We had to close it off. We couldn’t take any more people,’ said Sue Ellen Mathers, a licensed real estate professional. ‘I think what we’re seeing now are people who loved a house that wasn’t in their price range, buying that house and then taking a small loss on their current home. What they’ll do is make it up later when they sell their new one. It’s a great time to buy.’”
The Naples News from Florida. “A campaign being rolled out by area builders and developers encourages potential buyers to reinterpret the negative news they’ve been hearing about the local housing market.”
“Sliding prices? Affordability. Record inventories? Broad selection.”
“The ‘Buy Now!’ campaign also offers reminders of Southwest Florida’s steady growth, its enviable climate and its many beaches. Low mortgage rates and the area’s increasingly diverse economy are features mentioned in the campaign as well.”
“Donations from local companies tied to the building trade bumped the budget up to $150,000, said JoAnn Orr, VP of the Lee Building Industry Association. Additional buy-in from the media in the way of reduced advertising costs and in-kind donations of services by a handful of local public relations firms makes ‘Buy Now!’ the equivalent of a $500,000 campaign, she said.”
”We all understand that reporters have to report the news, but bad press has shaken the confidence of people to go out and spend their money,’ Orr said.”
The News & Observer from North Carolina. “Construction crews, plumbers, furniture and appliance salesman, and even real estate schools in the Triangle are starting to feel the pinch from the housing market slowdown.”
“Gary Celey, owner of Celey’s Quality Plumbing in Benson, has laid off 10 employees and cut prices 5 percent. ‘Material costs are up, labor costs are up, but [national builders] … don’t want to pay it,’ said Celey.”
“Last year, the company installed plumbing in 4,000 homes from Chapel Hill to Holly Springs, mostly for large national builders. This year, Celey expects he will work in 500 fewer homes. ‘It’s the worst it’s ever been; margins are smaller,’ he said. ‘I’ve got to re-evaluate how I do business.’”
The Memphis Daily News from Tennessee. “Matthews Brothers Homebuilders is facing more trouble with nine new foreclosures filed against the company by InSouth Bank. The properties are scheduled to be sold Nov. 9 at the Shelby County Courthouse.”
“An additional 29 foreclosures, published in today’s issue of The Daily News, have been filed by First Tennessee Bank. Don Glays, executive director of the Memphis Area Home Builders Association, said he believes the housing slump is driven by attitudes.”
“‘What is the single most significant factor that’s affecting the downturn in today’s market?’ and I think it’s consumer confidence,’ he said. ‘Our builders and the real estate agents that are talking to consumers are finding out that consumers really don’t know the truth about buying a new home,. They are coming in with a jaded opinion of the new home industry, because of the national media.’”
“‘Now, are some builders struggling? You bet they are. There are some builders who … didn’t heed the warnings about a downturn in the economy and housing industry, because, to be honest, in 2004 and 2005, there was some overbuilding going on to meet demands,’ Glays said.”
“In 2006, Shelby County saw 4,312 home starts and 3,992 new home sales, according to Chandler Reports. That’s a difference of 320. However, in previous years, far more home starts were recorded than new home sales. In 2005, the difference was 754; in 2004 it was 1,627.”
The Tennessean. “Some of Middle Tennessee’s largest banks are seeing their loans sour as the mortgage industry has crumbled across the country, which could continue to make it harder for homebuyers and builders to get loans.”
“On Thursday, First Tennessee’s parent company said it lost $14.2 million in the most recent quarter, in part because so many mortgages and home construction loans are going bad.”
“First Horizon’s mortgage losses nearly tripled in the third quarter to $45.8 million. CEO Jerry Baker said a lot of the bank’s mortgage-related losses were in Florida, California, Arizona and Nevada, states where home prices had soared and then crashed.”
“Investors are worried about the potential impact of the problems on the economy as a whole, that an increase in the number of bad loans is a sign of greater problems down the road.”
“‘There’s a cockroach theory,’ said Jeff Davis, an analyst at FTN Midwest Securities, which is owned by First Horizon. ‘If I see one or two cockroaches, how many more cockroaches are there? Investors are wondering if they’re only seeing the tip of the iceberg.’”
http://thehousingbubbleblog.com/?p=3605
It took 5 more years to get to the bottom: 2012.
The problem is the actual trough or bottom is 1999 prices. Housing prices have a long way to fall. A very long way to fall.
Calabasas, CA Housing Prices Crater 8% YOY
http://www.movoto.com/calabasas-ca/market-trends/
“1999 prices…”
Too generous. The housing price/easy credit bubble goes back to before 1980.
If the “Cheap credit” goes away everything but cash will be in freefall and whistle past “1999″.
“Markets say the ECB is done, their box is empty,” Vasiliauskas, who heads Lithuania’s central bank. “But we are magic people. Each time we take something and give to the markets — a rabbit out of the hat.”
http://www.zerohedge.com/news/2016-05-11/central-banker-officially-loses-it-we-are-magic-people
The housing price/easy credit bubble goes back to before 1980.
There was nothing “easy” about money in the 80’s. Prime rate was regularly 8%+, and hit 20% in 1980.
That’s correct. And it’s also when there was inflation. There hasn’t been inflation in 20 years or more.
“Prime rate was regularly 8%+, and hit 20% in 1980…”
Yeah, I had a mortgage at 17% in ‘78. Yet the Great Credit Expansion had begun.
“Yet the Great Credit Expansion had begun.”
Courtesy of Ronald “Mommy?!” Reagan liberalizing formerly strict credit. Deregulation.
2008 from a investing web site
Thu Oct 09, 2008 6:09 pm
I have been retired for 10 years. I am one who has said over and over again. Stay the course. Look for the long term. Yeah, sure. That’s fine until today. Today did it. I am just starting to be scared so that I won’t tell my wife what happened today…stocks down…bonds down…I’m down. Our retirement funds are sucking down the drain. I lost today alone a year’s worth of normal distributions for expenses. I keep thinking tomorrow will be a turn around. I have said that for 30 days.
I am 25% capitulating tomorrow, maybe 50% to money markets….maybe all.
I’m thinking about moving to cash again for my retirement accounts and 529s. Last time I did this was in 2007. Public markets feel stretched, and people seem to be completely throwing caution to the wind.
That’s never a good sign.
“You can probably make the case now that the market has a terminal illness. That’s what the numbers that are already out for September suggest. This week will bring more proof.”
The illness is irrational exuberance, and the onset was circa 1996.
I’m surprised this article is still on the web:
Netscape IPO draws lots of laughs
Published on August 15, 1995.
http://adage.com/article/news/netscape-ipo-draws-lots-laughs/3/
“Netscape Finance got a call the morning after the IPO. An investor wanted to know when the dividend checks were being mailed out.”
‘On August 9, 1995, Netscape made an extremely successful IPO. The stock was set to be offered at US$14 per share, but a last-minute decision doubled the initial offering to US$28 per share. The stock’s value soared to US$75 during the first day of trading, nearly a record for first-day gain. The stock closed at US$58.25, which gave Netscape a market value of US$2.9 billion. While it was unusual for a company to go public prior to becoming profitable, Netscape’s revenues had, in fact, doubled every quarter in 1995.[24] The success of this IPO subsequently inspired the use of the term “Netscape moment” to describe a high-visibility IPO that signals the dawn of a new industry.’
https://en.wikipedia.org/wiki/Netscape
This IPO was the first real WTF moment for me. They wanted to raise a few million and took in $2 B. Now we have money losing TV dinner companies raising much more than that.
And another:
‘Loss-making German meal kit delivery group HelloFresh is offering shares worth up to 357 million euros ($421 million) in its stock market flotation, the company said on Sunday. HelloFresh is planning to sell up to about 31 million new shares including an overallotment option for 9 to 11.50 euros apiece, implying a valuation of the company up to 1.5 billion euros excluding debt.’
‘HelloFresh, majority owned by German ecommerce investor Rocket Internet, decided to go ahead with its renewed listing despite a 50 percent decline in shares in U.S. rival Blue Apron since the group’s June IPO.’
https://www.reuters.com/article/hellofresh-ipo/meal-box-firm-hellofresh-sets-ipo-price-range-idUSASM000F4Q
This IPO was the first real WTF moment for me.
I don’t recall when my first WTF moment happened, but I remember what it was…I ran into an old classmate at 24-Hour fitness, and he said that companies no longer needed earnings, just revenues…I said “huh?”
Peak WTF was at a “garage.com” meeting where the company was pitching on “eyeballs”, no revenue model at all. And they said “once you get eyeballs, that’s all you need”. We assumed that he meant to go public.
The craziness of it was the timing between my first WTF moment, and peak WTF…it was only like 2 or 3 years.
Questioning the status quo can lead to innovative business models. Using tech can create new business models. The problem that I see with these meal kit companies is essentially highlighted in this WSJ article:
“Meal kits promised to make cooking easy enough that people would actually do it. But Americans don’t want to cook and never really have”
https://www.wsj.com/articles/the-problem-with-meal-kits-1501860563
Fast casual is being embraced and the chain sit-down restaurants (e.g. Applebees and Buffalo Wild Wings) are being shunned. But I don’t meal delivery solutions as really taking market share. Now, if I saw a company that used robot to perfect a few recipes at a very good price point (since human labor is eliminated) using locally sourced ingredients, that might be innovative. Shipping prepped food in cardboard boxes, not so much.
“But Americans don’t want to cook and never really have.”
I suspect the reality is more complicated. Both my wife and I are quite capable of cooking food that tastes good, but to keep our four lovely children in shoes plus pay our income taxes, we collectively work enough hours to squeeze out the time for cooking that was readily available in traditional middle class households.
Yes, you hit the nail on the head. This is our dilemma exactly. It’s not that we aren’t capable, nor do we like to cook, it’s that work (and commuting back and forth) has crowded out this. This is why, as the WSJ article rightly points out, eating out has become the norm, not just on the weekends but constantly throughout the week.
Defund NPR.
I think that’s a done deal. If you listen to an NPR station, you will hear commercials. They just aren’t obnoxious like the ads on commercial radio. They also have a ton of pledge drives.
Yesterday I listened to a piece on NPR about the fires in California. They wound their way around to where it is Trump’s fault.
Like Obama before him, Trump drives the tides, the trade winds, and the movements of the heavenly bodies, at least according to some MSM accounts.
“Yesterday I listened to a piece on NPR about the fires in California. They wound their way around to where it is Trump’s fault.”
How the hell did they do that?
I’d be glad to tell you if I understood it.
Their sponsors, including the National Association of Realtors, create conflicts of interest in objective reporting.
Public unions are pure evil.
++++
Judge Calls NYPD’s Handling Of Precarious Civil Forfeiture Database ‘Insane’
Gothamist - Emma Whitford - Oct 19, 2017
In the middle of the night in March of 2012, NYPD officers burst into the Bronx home of Gerald Bryan, ransacking his belongings, tearing out light fixtures, punching through walls, and confiscating $4,800 in cash. Bryan, 42, was taken into custody on suspected felony drug distribution, as the police continued their warrantless search. Over a year later, Bryan’s case was dropped. When he went to retrieve his $4,800, he was told it was too late: the money had been deposited into the NYPD’s pension fund.
Is this a union thing, or a cop thing? Either way, it’s legalized theft.
http://www.mercurynews.com/2017/10/20/san-jose-san-francisco-oakland-job-losses-hammer-bay-area-employers-slash-thousands-of-jobs/
Tech companies shed 100 jobs in Santa Clara County
100? Oracle canned 2000 people at the Santa Clara campus alone. They fired so many people that they’re going to rent out some of the now empty buildings on the campus.
What this tells me is that the real total number for September was much higher than the 4700 reported in the article. I wouldn’t surprised if the real number was 10,000 or more.
From the Mercury News piece: “Housing is the chain on the dog that is chasing a squirrel,” said Christopher Thornberg, principal economist and founding partner with Beacon Economics. “Once that chain runs out, it yanks the dog back.”
I hate to be the bearer of bad news but do u all realize that the taxpayer is gonna be on the hook for all the QE money?
It will simply be added to the national debt as more bonds are sold to pay the principal back to the FED as bonds on their balance sheet mature and are not rolled over.
It will simply be added to the national debt as more bonds are sold to pay the principal back to the FED as bonds on their balance sheet mature and are not rolled over.
New bonds sold to generate funds to pay off old bonds: that generates zero new debt. Check your math.
you are correct. The sale of the new bonds will pay off the old ones. money will be pulled out of the economy and back to the FED. It is a ponzi scheme of robbing peter to pay paul.
“Housing economist Lawrence Yun got everyone’s attention Thursday — he talked about bubbles in his address to the 27th Annual Convention and Expo of the Santa Clara County Association of Realtors. His assessments were largely reassuring. Given the tight supply of existing homes and the failure of local governments to incite construction of new homes, he said, prices will probably remain up in the stratosphere.”
California housing prices have reached what looks like a permanently high plateau.
Realtors are liars.
Zillow no long shows median sold price. When you try to pull it up, it’s greyed out. What are they hiding?
Sears did this 100 years ago!
+++++
Now you can buy a small house on Amazon
The New York Post | October 20, 2017 | Leah Bitsky
Need a house? Just click your mouse three times and say “There’s no place like home.”
A building company is now selling actual houses on Amazon that anyone can purchase online–but they are not your average humble abode.
The tiny houses, sold by MODS International, are fashioned out of shipping containers and are each 320 square feet, according to Apartment Therapy. Despite their shortcomings, the homes seem rather luxurious inside.
Each residence comes fully furnished and includes a bedroom, shower, toilet, sink, kitchenette, and living area, according to the Amazon posting. The home is also fully insulated with AC and heat, and can be hooked up for plumbing, water and electric.
Unfortunately there is no free 2-day shipping deal as the home is not an Amazon Prime item, however the listing goes for a reasonable price of just $36,000.
however the listing goes for a reasonable price of just $36,000
How much does a mobile home cost?
Colorado,
Here’s a look at offerings from two companies among many:
https://factoryselectmobilehomes.com/double-wide-mobile-homes/
https://floridafactorydirect.com/
Amazon is a catalog company.
Perhaps Amazon can provide/build to old Craftsman specs?
I’d recommend doing a search on the NY Post article.
One of the top results is a series of comments on the company, from Free Republic. The comments include assessments from a former employee, as well as a separate recommendation to search for company reviews online.
One commenter refers the reader to the Wisconsin state court records web site. He asserts that the company under discussion is the defendant in numerous consumer lawsuits.
I would love the idea for my son, as some kind of low cost housing alternative out of LA Metro. He could live in his truck at the job site during the week. Cheap digs, avoid the daily commute. Or for myself, as an aging hippie’s artist colony abode in some Blue Ridge backwater. As long as I have a comfy in-town shipping container as well. Gotta have a home base for trips to the Kennedy Center during opera season, after all.
The idea of living in a shipping container and going to the opera gives me a righteous case of the chuckles. Not sure the Northern VA town fathers would be as amused.
Meet The Google Employee Living Out Of A Truck To Save On Rent
https://www.huffingtonpost.com/entry/google-employee-box-truck-parking-lot-rent_us_5628e98ae4b0aac0b8fbc7a4
Santa Rosa, today, in California
newspaper today says insurance companies are considering $160 a square foot for typical homes as replacement cost, and 600-830 for more expensive construction. That appears to be construction cost.
Who knows, I didn’t lose my home so I have no information directly from insurance company, but I have lots of insurance, if the insurance company has enough money to pay all of the losses in these big fires.
Sounds like the article was scripted by a developer, home cheapo or a realtor. You’re an an appraiser and should know the article is a puff piece.
From Forbes today:
[url=https://www.forbes.com/sites/joelkotkin/2017/10/19/rising-rents-us-housing-crisis/#1c0def731ef5]Rising Rents Are Stressing Out Tenants And Heightening America’s Housing Crisis[/url]
Joel Kotkin & Wendell Cox
The home-buying struggles of Americans, particularly millennials, have been well documented. Yet a recent study by Hunt.com found that the often-proposed “solution” of renting is not much of a panacea. Rents as a percentage of income, according to Zillow, are now at a historic high of 29.1%, compared with the 25.8% rate that prevailed from 1985 to 2000.
No surprise, then, that 58% of the 1,300 renters in the Hunt survey said they felt “stressed” about their rent, or that many respondents said they couldn’t save for future purchases like homes. Rather than the sunny freedom promised by those who promote a “rentership society,” most of those surveyed said that finding a convenient place with the amenities they required – for example, fitness rooms, places for pets and adequate space – was very difficult. Some renters have been forced to euthanize their pets, spend upwards of 50 days looking for a place or move farther from family and friends.
All of this is taking place at a time when the national vacancy rate has fallen to 7.3% (in the second quarter of 2017), from 11.1% in the third quarter of 2009. That trend has continued even with apartment construction in many areas, notably core cities, because the new buildings tend to be too expensive for most renters.
Please don’t post entire links.
My apologies. What I was trying to do was embed the URL as a hyperlink. I guess I don’t know the correct syntax, or maybe it isn’t supported the way I was trying to do it (or maybe only forum moderators have this privilege?).
Do you not want URLs posted on this forum? I see quite a few above.
URL’s are preferred so people can go to the source and read the whole thing if they want. Posting entire articles gets me in trouble, so I either clip them or delete.
Give the JoshuaTree extension a shot to help with links (and other markup). Works with Chrome and Firefox:
Chrome
Firefox
Have you considered developing an extension for the Seattle blog? There is just so much garbage on it it’s very difficult to read there.
Thanks. Added to my Chrome browser. And thanks to Ben for clarifying too!
Have you considered developing an extension for the Seattle blog?
I’ve not actually looked at/read it, to be honest (ironic since I’m in Seattle). I’d have to have a look, but it may largely “just work”.
Maybe a fun project over the holidays….
All of this is taking place at a time when the national vacancy rate has fallen to 7.3% (in the second quarter of 2017), from 11.1% in the third quarter of 2009. That trend has continued even with apartment construction in many areas, notably core cities, because the new buildings tend to be too expensive for most renters.
If new buildings are too expensive and people are not renting in them, the (real) vacancy rate has to be rising. But all of this data is self-reported by apartment managers, so it’s just more lies and puffery.
If new buildings are too expensive and people are not renting in them, the (real) vacancy rate has to be rising. But all of this data is self-reported by apartment managers, so it’s just more lies and puffery.
So, you think all apartment owners are somehow in a grand conspiracy to report lower vacancy than reality? If anything, they would have been incentivized to do so in 2009, since they needed the world to feel apartments were safe (so they could refinance, sell at a higher price, etc.). But then, the data showed 11% vacancy.
We have been building fewer housing units per year than necessary based on population growth and replacement of obsolete structures…a falling vacancy rate is what’s to be expected.
Don’t shoot the messenger because you don’t like the message.
With 25 million excess, empty and defaulted housing units out there, there isn’t much anyone can do or say about it other than lie. And the motives for lying about it are self-evident.
How many times must I repeat myself: It is 24,999,999 houses now. I bought one in 2010 when you first started posting that number, HA!
remember… Paying triple production cost and renting from the bank is never a good idea
Yes, and according to you, no one should buy a house until prices get levels seen in 1996!.
Nevermind people who did buy in 2010 and with their 15 year mortgages, will own free and clear in another 8 years.
Just keep waiting HA, that’s what you’re good at.
Hello my friend.
Austin, TX Housing Prices Crater 5% YOY
http://www.movoto.com/austin-tx/market-trends/
Are you going to continue to post under two monikers?
Where do suppose the additional 3,000,000 new people/year go to live in this country?
If there are not enough housing units being built, the vacancy goes down.
Where do suppose the additional 3,000,000 new people/year go to live in this country?
Babies with live with their parents (or at least wherever mom currently lives). Immigrants will double up with relatives and friends.
Yes, but there were also babies born 18-25 years ago that are currently graduating high school, college, trade schools, etc., and take net new jobs, as well as jobs from folks who retire and live in their paid-for house (like my folks).
Where do they live?
Maybe Canada will try to woe them since Bank of Montreal has concluded “the lack of young people to buy homes in the coming years could again push the housing market into a protracted slump.”
http://www.huffingtonpost.ca/2017/07/26/cmhc-housing-market-assessment-not-enough-young-canadians_a_23049544/
Where do they live?
Apparently a lot of them are either living with mom-n-dad, or are doubling or tripling up with roommates.
“….Apparently a lot of them are either living with mom-n-dad, or are doubling or tripling up with roommates…..”
Exactly. No one likes these conditions, so when more housing becomes available, they will occupy the units.
“all apartment owners are somehow in a grand conspiracy to report lower vacancy than reality?”
All this “one month, two months free” stuff is absolutely a conspiracy between rental property managers and owners to discount the price of units without lowering the headline price so they don’t get in trouble with their financiers or have their refi churn cycle messed up. So why wouldn’t vacancy rates also be fudged for the same reason?
Ben has posted articles that mention managers lying about vacancy rates recently. And some analysts have been comparing vacancy stats to lights on in new rental buildings at night and they don’t correlate. Tenants report living in half-empty buildings. And what about the shadow hotels these building managers are running by posting entire floors of rental apartments on AirBnB? All has been documented here over the last year.
If what you are saying is true, then major apartment owners should be showing less revenue and less income per apartment building–new supply SHOULD be impacting the results of their existing inventory.
HOWEVER, reporting on a “same store” basis, EQR was positive year on year through the end of June (revenue AND NOI) in every market EXCEPT NYC.
Despite NYC being down, same store NOI overall was up 1.7% year on year (including NYCs negative data). This is a cross section of 70,000 apartments units spread around the country.
Avalon Bay “Same Store” NOI was up 2.1% year on year through June 30th.
Unless you believe these REITs are committing fraud, the data does not bear out any decline in actual apartment rents–EXCEPT in one market…NYC.
And these are REITs that compete directly with all the luxury apartments that are being built. I’m willing to bet that owners of “B” and “C” apartments are showing stronger NOI growth—there is virtually no new competition at lower rent levels.
Yet rental rates and prices are falling, inventory is skyrocketing and demand is plummeting.
HA, is that you again? You should hire an analyst…..not the housing kind! HA.
It’s just me. Living in your empty skull, rent-free.
HA!
“Rents as a percentage of income, according to Zillow, are now at a historic high of 29.1%, compared with the 25.8% rate that prevailed from 1985 to 2000.”
Beats owning at 50% of income.
And this is why I harp on about self-driving, living in RVs, micro-housing, etc. There has to be some exogenous catalyst that will present some alternatives to the extortion that is the housing market, renting or buying. Otherwise, this charade of inflated prices (and rents) can go on for a while. We can all complain about how ridiculous it is, but until there is a reason for a change, it won’t change. There has to be viable alternatives to buying an overpriced place or renting an overpriced unit.
Considering demand is plummeting and prices falling because of falling demand, it seems like the market is handling things fairly well.
Emeryville, CA Housing Prices Crater 20% YOY
http://www.movoto.com/emeryville-ca/market-trends/
What have we learned this week?
For one, reverse mortgages are bad if you want to live your entire life in your house.
Those postings from 2007 help me remember that it’s groundhog day (again). The same rationalizations, the same ignoring the obvious.
If the housing bubble were a house, it would look beautiful on the surface. But on closer inspection, you could see that wallpaper was used to cover rotted walls and hardwood floors covered termite infested baseboards.
Under-priced, printed fiat transforms the mold of unserviceable debt into a glistening facade of wealth
Mexico joins legal fight against Texas sanctuary cities law
The Associated Press
Associated Press
October 21, 2017
NEW ORLEANS — Mexico has joined a legal battle against a Texas law cracking down on so-called sanctuary cities, one of the toughest of its kind in the U.S.
The Mexican government filed an amicus brief Thursday in a lawsuit brought by several major Texas cities challenging the law in federal appeals court in New Orleans.
The brief says the law forces Mexico to treat Texas differently than other states and interferes with diplomatic interests and ongoing negotiations on a range of bilateral issues.
http://nationalpost.com/pmn/news-pmn/mexico-joins-legal-fight-against-texas-sanctuary-cities-law
How Mexico treats illegals (and how come NO ONE calls them racists?):
Illegal entry into the country is equivalent to a felony punishable by two years’ imprisonment.
Document fraud is subject to fine and imprisonment; so is alien marriage fraud.
Evading deportation is a serious crime; illegal re-entry after deportation is punishable by ten years’ imprisonment.
Foreigners may be kicked out of the country without due process and the endless bites at the litigation apple that illegal aliens are afforded in our country
Law-enforcement officials at all levels — by national mandate — must cooperate to enforce immigration laws, including illegal-alien arrests and deportations.
The Mexican military is also required to assist in immigration-enforcement operations.
Native-born Mexicans are empowered to make citizens’ arrests of illegal aliens and turn them in to authorities.
A National Population Registry tracks and verifies the identity of every member of the population, who must carry a citizens’ identity card. Visitors who do not possess proper documents and identification are subject to arrest as illegal aliens.
http://www.nationalreview.com/article/229641/how-mexico-treats-illegal-aliens-michelle-malkin
How Mexico treats illegals (and how come NO ONE calls them racists?):
FWIW, Mexicans and Guatemalans are the same race: they are mostly mestizos.
I thought this was a good read regarding immigration:
The Issue That Could Lose The Next Election For Democrats
http://nymag.com/daily/intelligencer/2017/10/the-issue-that-could-lose-the-next-election-for-democrats.html
This article was highlighted by Steve Bannon in his address to CA GOP. Andrew Sullivan is a thoughtful writer in my opinion.
While Trump likes Yellen, he is giving other candidates for Fed chair a look.
Board of Governors of the Federal Reserve System
Trump indicates Taylor and Powell being considered for Fed chair
fastFT
October 20, 2017
by Sam Fleming
Donald Trump indicated that both John Taylor of Stanford University and Federal Reserve Board governor Jay Powell are under consideration for the position of Fed chair, while adding other candidates are in the running.
In an interview to be aired on Sunday by Fox Business, the president said that he had been interviewing a number of candidates and that “most people are saying it is down to two – Mr Taylor, Mr Powell.” He confirmed that he had also met Janet Yellen, the current chair, adding that “I really like her a lot”.
Mr Trump also held open the possibility of both Mr Powell and Mr Taylor being offered top posts. The position of vice chair of the Fed is open following the retirement of Stanley Fischer, while Ms Yellen’s term as chair ends in February. Sarah Sanders, the White House press secretary, said separately the possibility of Mr Powell and Mr Taylor both serving at the Fed in the top two slots was “certainly under consideration”.
Treasury Secretary Steven Mnuchin has been pushing for Mr Powell to get the post, while Mr Taylor is favoured by conservative lawmakers on Capitol Hill.
…
My preference is Taylor. I’ve always been fond of a rules-based approach.
That would be a sea change from Bernanke’s seat-of-the-pants pure discretion.
To be sure, but I do think Bernanke did as good as was to be expected given precariousness of the situation. I’m much more critical of Yellen who I think has been loath to normalize rates. Monetary policy should be counter-cyclical. We should have tightened far earlier in my view.
While I somewhat agree with your point on the timing of stimulus withdrawal, I am also sympathetic to Yellen’s plight. At what point do you withdraw methadone from an addict, fully aware that painful withdrawal symptoms will ensure? Might it not be more pleasant to simply maintain the clinically controlled drug habit indefinitely, than to have to face the pain of withdrawal?
I’m sure I typed “ensue”, not “ensure”. Hopefully the automatic systems which will soon regulate our Crash-freie (oops, meant to say “crash-free”) freeway system will be a lot smarter than my cellphone’s dumb autocorrect spell checker.
Maybe you have read, or are familiar with, Hayek’s “A Tiger By The Tail.” It seems to describe the dilemma we are facing. Funny you should mention methadone as an analogy, since managing withdrawals is part of what I do in practice. The answer, in my view, is that you have to titrate dosage down gradually, the rate reduction over time depends on the support system of the addict and his/her individual parameters (e.g., age, gender, psychosocial make-up, length of addiction, etc.). Many never ween themselves off. A lot of the success depends on the clinician as well and the medical supervision in place.
As to whether or not we should live in a world of permanent monetary distortions, I would submit that the long-term damage is worse than the pain of never withdrawing the stimulus. But I think the plan of gradually letting QE run off is right.
Then again, there is an argument to be had that addicts are essentially a lost cause; better to worry about the next generation and let the addicts have free supply of addictive medication lest they cause all sorts of crime and collateral damage trying to feed the habit. Not sure what implications that school of thought would have for monetary policy. Maybe move to a new country with a fresh start? Canada looks good to me right now.
“A Tiger By The Tail”
Will have to look into that book…thanks for the suggestion.
“…let the addicts have free supply of addictive medication lest they cause all sorts of crime and collateral damage trying to feed the habit. Not sure what implications that school of thought would have for monetary policy.”
By all appearances, you have nailed the Fed’s game plan.
“Funny you should mention methadone as an analogy, since managing withdrawals is part of what I do in practice.”
That sounds like a tough occupation, given the opioid crisis underway.
I had thought that my extended family was not part of the problem, but heard to the contrary this weekend that my niece has used heroin and is in rehab.
“I had thought that my extended family was not part of the problem, but heard to the contrary this weekend that my niece has used heroin and is in rehab.”
I have family too affected by the opioid crisis (heroin and pain killers). Thankfully my drug of choice is distance running!
I don’t think people really understand just how bad it is. This problem cuts across every socioeconomic group, race, demographic, political persuasion, etc. I often think historically about how the British empire decimated China by forcing them to accept the opium trade. Our congress has allowed our own companies to destroy our population.
“That sounds like a tough occupation, given the opioid crisis underway.”
The hardest on me is the babies that are born addicted. There are nights when I just sob like a baby when I see the hopelessness that some of these children are being born into.
A friend of mine lost his son to an OD. His path started with migraine headaches and prescribed opioid pain meds (which apparently aren’t very effective for headaches anyway).
Ended up addicted to heroin.
I’ve got three young kids…this stuff is scary.
Addiction happens to good people. God bless your friend and family. I hope he/she can find some solace through his grieving.
“Our congress has allowed our own companies to destroy our population.”
Yep, enter High-fructose corn syrup (HFCS).
I would look forward to Taylor wearing his California Raisin outfit for congress.
Hillsboro, OR Housing Prices Crater 5% YOY
http://www.movoto.com/hillsboro-or/market-trends/
Graduate of the Nick Cage Real Estate Investment School…
+++++
At Long Last, Celine Dion Finds Buyer for Jupiter Island Estate
The sale that went “on and on” will close after getting a $33.5 million price cut
Beckie Strum - April 27, 2017 - Mansion Global
Celine Dion has finally found a buyer for her resort-like, waterfront home in Jupiter Island, Florida, after waiting four years and cutting the price nearly in half.
The home has gone into contract and is expected to sell, co-listing agent Joseph Montanaro of Sotheby’s International Realty Quebec confirmed on Thursday. The South Florida estate—replete with several large pools, a lazy river and waterslides—is listed today for $38.5 million, down 47% from its price four years ago.
The French-Canadian pop star first put the lavish seaside home she built with her husband-manager, René Angélil, who died of throat cancer last year, on the market in 2013 for $72 million. But she struggled to sell the quirky dream home, which looks like nothing else on the block—or anywhere else for that matter.
In total, the 10,000-square-foot estate has 13 bedrooms and 14 bathrooms.
It’s back up! I do love the fist pump at the end though.
Maxine Waters vows I will go and take Trump out. Youtube deletes
https://www.youtube.com/watch?v=LLGVH6WUFww
The only problem is that Mike Pence could be worse.
https://www.newyorker.com/magazine/2017/10/23/the-danger-of-president-pence
Worse for you maybe.
Craxine Waters video taken down.
calamity DON has created 5 trillion in wealth for you minions !
I’ve heard of Calamity Jane before, but who is this Calamity Don of which you speak, and what has he done to make everything turn to gold?
Honest answers only please.
Without any help, do you think Maxine Waters could answer the question…
What are the three branches of government?
She must have some smart constituents.
Bahahahahahahahahaha …
Read the article and also read the comments. Great Stuff!
http://www.breitbart.com/big-government/2017/10/21/teacher-fired-throwing-x-rated-classroom-party-featuring-dildos/
The teacher made the fatal mistake of not being employed in California.
Denver(highland), CO Housing Prices Crater 16% YOY
https://www.zillow.com/highland-denver-co/home-values/
https://snag.gy/m5EzRB.jpg
Americans have more debt than ever
excerpt:
As of June, US households were more than half a trillion dollars deeper in debt than they were a year earlier, according to the latest figures from the Federal Reserve. Total household debt now totals $12.84 trillion — also, incidentally, around two-thirds of gross domestic product (GDP).
The proportion of overall debt that was delinquent in the second quarter was steady at 4.8%, but the New York Fed warned over transitions of credit card balances into delinquency, which “ticked up notably.”
This is one of the consequences of stimulus methadone without end, and one of the reasons to not expect the end of the extraordinary measures any time soon, if ever.
Somebody here used to call it something that sounded like a Nation of smoke brass Hoosiers.
McDonald’s and other restaurants are trying to appeal to millennial employees by offering daily paychecks
Chris Weller, provided by
Published 10:30 am, Saturday, October 21, 2017
McDonald’s, Outback Steakhouse, and several dozen other food and hospitality retailers are using daily paychecks as a means to give low-wage workers more flexibility with their finances.
“Basically, their life is real-time,” Barha told Business Insider. “Their communication is real-time. Their transportation is real-time, with Uber and Lyft. So this program really aligns with their real-time life and being in control of their whole life experience.”
http://www.businessinsider.com/restaurants-trying-to-appeal-to-millennials-with-daily-paychecks-2017-10
“We care more about your ability to carry this home, not the fact that you plunked a bunch of money down. It really doesn’t matter how big a downpayment anyone has now. It’s all about the ability to carry.”
Is this because the loans are federally guaranteed, so the banker gets made whole even if the loan goes sour?
Under the traditional (non-government guaranteed) loan, it seems like a hefty downpayment would have provided a form of loss insurance if a loan went into default and the bank had to collect and resell the collateral.
Fun facts about payday loans (as of 2016) …
The average payday loan borrower is in debt for five months of the year, spending an average of $520 in fees to repeatedly borrow $375.
The average fee at a storefront loan business is $55 per two weeks.
Payday loans are usually due in two weeks and are tied to the borrower’s pay cycle. Payday lenders have direct access to a borrower’s checking account on payday, electronically or with a postdated check. This ensures that the payday lender can collect from the borrower’s income before other lenders or bills are paid.
A borrower must have a checking account and income to get a payday loan. Average borrowers earn about $30,000 per year, and 58 percent have trouble meeting their monthly expenses.
Although payday loans are advertised as being helpful for unexpected or emergency expenses, 7 in 10 borrowers use them for regular, recurring expenses such as rent and utilities.
Auto title loans are similar to payday loans, except that the average loan is $1,000 and is secured by a borrower’s car title. Roughly 2.5 million Americans spend $3 billion on auto title loan fees each year.
Payday loans are available in 36 states, with annual percentage rates averaging 391 percent. The other states effectively prohibit these loans by capping rates at a low level or enforcing other laws.
Payday loans are unaffordable for most borrowers
The average payday loan requires a lump-sum repayment of $430 on the next payday, consuming 36 percent of an average borrower’s gross paycheck. However, research shows that most borrowers can afford no more than 5 percent while still covering basic expenses.
As a result, most borrowers renew or reborrow the loans. This explains why the CFPB found that 80 percent of payday loans are taken out within two weeks of repayment of a previous payday loan.
The payday lending business relies on extended indebtedness: three-quarters of payday loans go to those who take out 11 or more of the loans annually.
FWIW.
McDonald’s and other restaurants are trying to appeal to millennial employees by offering daily paychecks
Chris Weller, provided by
Published 10:30 am, Saturday, October 21, 2017
http://www.businessinsider.com/restaurants-trying-to-appeal-to-millennials-with-daily-paychecks-2017-10
Linky to my post about payday loans …
http://www.pewtrusts.org/en/research-and-analysis/fact-sheets/2016/01/payday-loan-facts-and-the-cfpbs-impact
Is the end of the gasoline-fueled internal combustion engine at hand?
Business
China Sends a Jolt Through Auto Industry With Plans for Electric Future
Auto makers will have to start manufacturing electric vehicles by 2019, after deadline was pushed back by one year
By Yoko Kubota in Beijing and Trefor Moss in Shanghai
Updated Sept. 28, 2017 11:40 a.m. ET
China will force auto makers to accelerate production of electric vehicles by 2019, a move that will ripple around the globe as the industry bends to the will of the world’s largest car market.
…
Business
Tesla’s China Reach May Exceed Its Grasp
Plan to expand from luxury end to mass market will run into lots of local traffic; tariff barrier likely to stay in place
By Trefor Moss
Oct. 23, 2017 8:44 a.m. ET
SHANGHAI—The Tesla Inc. brand is becoming popular in China. But the electric-car maker’s plan to establish a factory here raises the question, Is it popular enough?
…
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