Bits Bucket And Craigslist Finds For August 2, 2006
Please post off-topic ideas, links and Craigslist finds here!
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Didn’t see this posted yesterday, so here goes… Boston/Massachusetts crashing.
Single-family home sales hit 11-year state low for second quarter
By Associated Press
Tuesday, August 1, 2006 - Updated: 02:25 PM EST
BOSTON - The slump in Massachusetts’ housing market deepened in the second quarter as single-family home sales dropped to their lowest level in 11 years and prices dipped, a firm that tracks real estate transactions said Tuesday. ”
‘‘That slowdown, though, is a market correction, leading to a soft landing and not a plummet in prices,” said Timothy Warren, CEO of The Warren Group.
http://business.bostonherald.com/realestateNews/view.bg?articleid=150964
…add Timmy to the list of Realty Clowns who should be prosecuted under the RICO act.
Warren is more of a journalist, and one who profits whether the market goes up or down. His publication is for insiders only, and makes money from ad revenue to insiders, not the general public.
I am at a loss to explain how he gets it so wrong, however.
He probably owns a home and has a HELOC.
BeaConst, any comments? How are your Boston-area investments doing these days?
Yeah - give us an update on how things are faring on Beacon Street in Beantown.
And be sure to let us know what your PhD buddies/co-workers think, too!
Esp. the geniuses you converse with who know so-o-o-o much more about the housing market than we bubbleheads!
OT - I just noticed the pun in your blog handle…
Went from sounding distinguished to - well, you know..
I live in Vienna, VA 22180. Lot’s more for sale signs in the last week and lots more for rent signs also.
The plot thickens.
Boston area inventory surging. MLS listings climbing rapidly on the North Shore, and you see signs everywhere. Nothing selling, sellers complaining, still haven’t exited the denial stage yet, but it’s coming. It’s looking far worse than I had expected at this point. We’ll be in full-on death plunge mode by October at this rate.
Cue the Realty Clowns complaining about the hot weather keeping buyers away. It’s not the prices or anything.
-
We need to see CAPITULATION by Sellers. The act of surrendering or giving up. Surrender.
We are far from that stage IMO. Maybe another 24 Months.
You may be right in some areas. However, when that first big drop in price becomes the “new comp”……..well, in the really most over priced areas the prices drops will come very fast IMHO.
Chris
I’d have to disagree. No way these sellers have the means to hold out much longer. I believe a lot of these guys are hanging on to the pipe dream that says some how, some way this thing turns around. I’m hearing stories lately of a lot of these folks just barely making it this summer. I think we start to see the dam break when August, the last big selling month of the summer, flies by and nothing changes. The idea of trying to ride the winter out in the shape they’re in will make them capitulate. Plus, we haven’t even began to see the lay offs soon to come in the construction and RE industry. I think the perfect storm really gets rolling this winter. I believe recession in the bag for ‘07 as well.
Slow winter selling season will kill them. Interest payments accrue every month of the year. I’m sure some flippers are in disbelief of that concept though.
Lots not Lot’s. Ugh. Coffee really hasn’t set in yet.
We know what you meant. I think we have some spelling Nazi’s on this blog that need to relax.
who need to relax.
that was just for fun
Seeing alot more FSBO signs around Ventura lately. Also, FSBO with the price of home on the sign, 2 homes in one block. Prices for these 2 were 518,000 and 515,000 near Ventura College.
Yes and those stupid yellow signs on every corner that look handwritten advertising “I buy houses” and a national toll free number. I assume the $515 & $518s were below the college. The houses above are/were a lot more expensive.
Yes, the FSBO homes were below the college. Homes above the college are not selling and are reducing prices. I’m in E. Ventura off Kimball and there are ALOT of homes for sale that have been for sale for some time now that have even been reduced.
You can almost see my house (I live at the extreme west end of Camarillo). I have clients in that area, Baylor St. below and off of Foothill above, etc. The demographics are such that I would expect a lot of stickiness. By that I mean so many of those homes are owned by people 75 years old who’ve lived there 40 years that the supply is essentially only a small subset of the total homes there. These people are paying $85/month in taxes and anoyther $100 in utilities. They aren’t going to move into a condo with $400 monthly fees. And when they do “move on” for whatever reason their kids or grandkids will inhierit the cost basis. This particular market may freeze up but it won’t crash outright.
I was looking through Ziprealty for Camarillo prices and found one listed yesterday 3/2 with large lot, 9,000 sq. ft. for 499,000. Zillow has this home zestimate at 656,000. WOW!!! Can’t wait to see what transpires during the next few months. Everything seems to be speeding up.
I’ll check that Shirley St listing out. There’s got to be something wrong with it.
“Bypass the headache and hassle of building new. You will feel right at home in this 3 bedroom, 1 bath rancher with finished basement and detached 1 car garage. Still time to pick carpets and colors. See it you’ll love it. Just like new construction.” http://tinyurl.com/nm75k
Ok, since when is a 56 year old house “just like new construction”?…
“Ok, since when is a 56 year old house “just like new construction”?…
When the new construction sucks so profusely that it isn’t any better than a 56 year old home. Actually, they probably worded that wrong. Should have been “Better than new construction”, which I think is probably the closer ot the truth.
Lead article from Colorado Springs Gazette:
Home building plunges
“We are paying the price for borrowing buyers from the future,” said Dave Bamberger of Bamberger & Associates, a local economic research firm. “The pool of buyers is smaller now, because many who would have bought now, instead bought in the last year or two.”
Ends with the standard
“The market should correct itself fairly quickly — probably in about three or four months — once the excess inventory is absorbed,” McDonald said. “We still have an extraordinarily healthy housing market. It is still a very good time to buy a home.”
Add him to the list of Realty Clown/Pimps who will hopefully land in cuffs. They’re gonna need to build a few more dorms at Leavenworth at this rate. How come newspapers never print any quotes from people who say “the market is doomed and it’s a bad time to buy”? They aren’t hard to find. I guess he can share a room with the editor of this rag.
“The market should correct itself fairly quickly — probably in about three or four months — once the excess inventory is absorbed,” McDonald said.
It’s August. I see parents at the neighborhood schools registering their kids for school which starts later this month. The “hot” summer selling season that never was is just about over. These kinds of lies about all the unsold inventory getting snapped up over the fall and winter don’t make sense.
IMHO, the next big psychological milestone in the housing bubble burst will be Labor Day which is the “unofficial” end of summer.
YUP…..Then, down hill from there….Once Thanksgiving arrives, reality will set in….
Completely agree. I posted above that August is that last thread of hope for the ‘06 selling season. We all know what the outcome will be. But these pathetic folks will hold out to the end hoping. It’s like praying for a miracle when your team is down 12 runs and its the bottom of the ninth with two outs. No way your team pulls it off, just as its impossible to even come close to putting a dent in this inventory glut the nation has on its hands before the ‘06 selling season comes to an ends. Reality does indeed set in this fall. People start heading for the exits in mass because the last out will have been recorded.
Reading this series of posts, it occured to me the Christmas shopping season can be a bloodbath for retailers who rely on strong Q4 numbers.
No HELOC money left to p#ss away by the bucketload.
IMHO this could mark the beginning of the ‘07 recession
“could???”
It absolutely *IS* how a recession starts. Pay close attention. It could help you again the next time a bull market ends.
Don’t you think it will actually start right about now, as in: “It’s August already and there have been NO offers on our house, and we have to be in the new one before school starts in September!!! Dammit, Suzanne, you said you knew about this stuff!!!”
It may START now, but it doesn’t COMPLETE until the last shred of hope is gone.
This will be slow slow slow.
We have, I think, a new quote to signify stages of the bubble peak, right after “it’s a new paradigm,” which is: “it’s a buyers market!”
It’s a fool’s market, be you buyer or seller.
treasury bill auction results from yesterday:
28 day - IR 5.212%
91 day - IR 5.108%
182 day - IR 5.174%
So, what does that tell us? Well, thats 3.8 bps spread between fed funds and the 28 day, the normal spread over the past few months trends closer to 40 bps spread. It would “suggest” to me that a few people really really really see a 50 bps hike on Aug 8 FOMC. Additionally, it means the yield curve is really really inverted, normally the 28 day Tbill yields below the 3 mo and 6 mo (i presume there’s a premium attached to it because you can use it as collateral in certain trades). So when the 1 mo, 3 mo and 6 mo are all beyond the 10 year and 30 year? That’s not too hot in my books. While I am rooting for Ben Bernanke to be the 2nd coming of Paul Volcker, such action could only result in deflation then, the way it looks to me.
After hearing BB’s testimony, it was clear to me that a pause would be their next move. The likelihood of deflationary spiral arising from a crisis of confidence is too great a risk.
“The International Harry Schultz Letter’s portfolio has gained up 94.9% over the past 12 months according to the Hulbert Financial Digest, vs. 9.8% for the dividend-reinvested Dow Jones Wilshire 5000.”
“Schultz’s macro analysis continues to be dark: “The world is on a knife edge between inflation, which often suddenly gets out of control when it passes point X, and deflation, when monetary liquidity suddenly falls behind the X-factor point to keep economies afloat (or triggered by a major debt default or by stock market implosions, e.g. South east Asia markets a few years ago). Being wrongly invested when a “flation-tsunami” hits, can (and often does) slash a portfolio’s value by 40% in 72 hours.” ”
PETER BRIMELOW
Schultz suspects market manipulation
I have been of the mind that we were headed toward an inflationary (perhaps hyper-) situation, but I must admit that the analysis above resounded as the greatest likelihood. I know many here have argued deflation vs. inflation, but it seems apparent to me that the wave could break in either direction. In any case it does not bode well for us to be in such an imbalanced, precarious position.
Yesterday an obscure economic newspaper in a 3rd worlkd country was analyzing the options available to BB on the next meeting. Inflation is running rampant right now, but it is not the “good” inflation where incomes tend to keep up, but more like the “bad” inflation where products go up, but salaries stay put forcing people deeper into debt. They came to the conclusion that no matter what he does, the dollar is royally screwed. They expect a big event in ‘07 that will affect all international markets. For those of you who can read spanish, I can post the link. Bear in mind that they are absolutely neutral, as they have nothing to gain, unlike our own MSM with elections coming up in Nov.
BTW, I believe that the fed hates salary inflation, as that is counted towards CPI and they tend to do everything in their power to controll it. They have been rather successfull with it in the last 5 years, as salaries have not kept up with even the slightest inflation. Sucks to have to work to pay for less stuff.
In economics, everybody has something to gain. “Big event” is pretty vague.
Yes, indeed, they have to gain security that their products will have a market in the US next year. IF the us gets a sniffle, then the world gets avian flu.
If we go into a consumer driver recession next year, the world will tailspin into a depression. Very few countries out there can operate completely on their own, without selling products abroad. That is specially true of China and India, that are highly dependant on exports to the US (china, crap products, India, crap tech support.)
Yeah, it seems a safe bet that the U.S. is headed for a consumer driven recession, and you are probably in a better position than I to guess the impact on foreign economies. I see no other option or way out of it. Or maybe something worse, but AT LEAST a consumer driven recession.
I agree with a recession/depression(?)and possible world wide economic collapse. But it will not be because of US consumers or lack of US consumers. US consumers are broke and have been for a while. The average US consumer spent 6% more than they made last year. Although our savings rate improved last month from a negative 1.6% to a negative 1.5%, the rest of the worlds economies are expanding dramatically. And without the US China is projected toexpand at 11%.
July 26 – Bloomberg (John Liu): “China will overtake Japan to become the third-biggest market for U.S. exports this year if current growth levels continue, U.S. Under Secretary of Commerce Franklin Lavin said… U.S. exports to China rose 36.5 percent from a year earlier during the first five months of 2006…”
July 28 – Bloomberg (Jianguo Jiang): “China’s economy is forecast to grow 11 percent in the third quarter from a year earlier, the China Securities Journal said, citing a research institute affiliated with the government’s top planning agency.”
July 26 – Bloomberg (Vicki Kwong): “Shanghai, Shenzhen and China’s other ports handled 22 percent more containers in the first half, as rising exports from the world’s fourth-largest economy boosted demand. The nation’s major sea and river ports handled 42.1 million 20-foot containers in the first six months of the year…”
July 26 – MarketNewsInternational: “Chinese Premier Wen Jiabao reiterated Wednesday earlier government pledges to curb lending activities and fixed-asset investment in a bid to keep the economy from overheating and said that ‘comprehensive measures’ will be introduced to tackle excess liquidity in the banking system.”
July 24– Bloomberg (Nipa Piboontanasawat): “China’s retail sales rose at a slower pace in June from the previous month, the National Bureau of Statistics said… Sales rose 13.9 percent last month to $75.7 billion from a year earlier, after climbing 14.2 percent in May.”
July 27– Bloomberg (Nerys Avery): “China’s credit rating was raised one level by Standard & Poor’s after the government improved bank finances and clamped down on lending to cool the world’s fastest-growing major economy. S&P raised its long-term foreign and local currency rating to A from A-, citing ‘persistent efforts to strengthen the banking sector’ and the economy’s ‘excellent growth prospects
The growth in the US is being used to support the deficit.
Please post the link.
Here it is.
http://tinyurl.com/hwfev
Should we start setting the odds on what the Fed does with the rates?
That would be fun. I’m guessing they’ll pause.
Such threads are always very interesting here, and bring out a lot of bright minds. Definitely time for another one.
I like to think of this blog as sort of a “virtual watercooler” for those of us who are of like mind. (I find myself “hanging around the watercooler” way more than I should, but it beats hell out of the American Idol forums) I wish there were some way we could do a virtual “office pool” of some sort, except instead of lottery tickets and football games, we’d be looking at moves by the Fed, or whatever. With a slice going to the “house”, (the blog). I’m sure it is illegal, but it would be kind of fun.
I think they’ll go up another 25 bps and pause in August. That is not what I hope, but is what I think.
I think they will raise 25bps on August 8th, but come out with a statement basically saying that a pause is coming next .
>I think they will raise 25bps on August 8th, but come out with a statement basically saying that a pause is coming next .
Agreed. I also predict a big stock market rally that day too.
I think they will pause in August, basically saying, “The economy is slowing and we do not want to risk over-tightening. We will pause at this juncture to observe the lagging effects of the rate increases of the past two years. We do worry, however, that inflation is at the high end of the acceptable range and will not hesitate to continue tightening if we feel it is necessary.”
They might even mention something about getting together ahead of the next scheduled meeting if necessary, if the data indicates inflation is increasing at an unacceptable rate.
Agreed, that’s what I think will happen. Personally, at this point, I don’t feel strongly either way- whether they pause, or raise .25. I might even be favoring a pause in the interest of slowing the magnitude of the impending collapse.
>I might even be favoring a pause in the interest of slowing the magnitude of the impending collapse.
Nah. I’m hoping for QUICK, VICIOUS, AND VIOLENT.
Aw, c’mon… unless you are living in a bunker in Montana, such is going to trickle through the economy and effect all of us ya know… : )
If mortgages had been counted in the CPI, we’ve had close to hyperinflation the last few years….at least in the housing sector. Let this baby fall. Get it over with! Raise that rate!!!
Considering how much homeowners are leverage in ARM’s, much of will reset in ‘07 (1 trillion from what I hear) and ‘08 (not sure of the $, anyone know?). How much can the Fed raise rates to fight inflation over the next 2-2 1/2 years without putting to much stress on the homeowner?
Most of the resets are tied to either the LIBOR (london) or to US T Bills, The fed funds are short term money generally used to indicate the Prime rate which would change HELOCs.
I have said that the Fed should raise rates by 50 basis points to suggest the Fed is serious about inflation. Of 24 direct Fed banks surveyed, 22 responded, 8 felt there should be a 50 basis point increase, 14 felt there should be a 25 basis point increase (source WSJ). If the Fed pauses the US will have lost international credibility with inflation fighting and the dollar will be burned. I hope we have a 50 basis point increase, I suspect it will be another 25 basis increase.
Energy, metals and markets will rally strongly on hints and news of a pause. Australia raised a quarter this morning and they’re sounding hawkish. Dollar got killed yesterday and today. Can they really afford not to raise?
I thought a 50 basis point hike was a great idea back in spring 2005. Now it would be serious, but at that point it could have prevented a lot of the problems we are seeing now.
Hell even a 75 basis point hike would have seemed timely in August 2005.
A magnificent listing for a most marvelous investment.
http://www.willisallen.com/066031102
Backstory: Del Mar realtor purchases city-deeded affordable housing unit in Solano Beach for $90K in 2004, somehow circumventing income restrictions of
oops, I cut myself off. The owner-realtor listed the ‘low income’ unit in April 2006 for $640K, now reduced to $425K - $475K. Guess they’re having trouble finding an Iraqi war widow supporting a bunch of kids or a couple living on SSI who can stretch their $24K per yr into that kind of loan even with IO-neg-am, etc.
And from the only living room window (sliders), you have a lovely view of the…wall 5 feet away. Can we say, “depressing”?
That is the definition of insanity. If you buy this overpriced turd for $475k, you can rent it out to some poor schlub for no more than $792.50 per month. Talk about an investment property! Woohoo!!
Craven Moorehead said:
add Timmy to the list of Realty Clowns who should be prosecuted under the RICO act.
We need to hang the stupid sign on these guys when they say something like that…Like comedian Bill Engvalls routine:
THE STUPID SIGN
Stupid people should have to wear signs that just say, “I’m Stupid.” That way you wouldn’t rely on them, would you? You wouldn’t ask them anything. It would be like, “Excuse me…oops…never mind, didn’t see your sign.”
It’s like before my wife and I moved. Our house was full of boxes and there was a U-Haul truck in our driveway. My neighbor comes over and says, “Hey, you moving?” “Nope. We just pack our stuff up once or twice a week to see how many boxes it takes. Here’s your sign.”
A couple of months ago I went fishing with a buddy of mine, we pulled his boat into the dock, I lifted up this big ol’ stringer of bass and this idiot on the dock goes, “Hey, y’all catch all them fish?” “Nope. Talked ‘em into giving up. Here’s your sign.”
You have made my point but not a stupid sign.
A stylized FB sign would be better.
Or….how about, “I am a Master of Stating the Bleedin’ Obvious”…
I went down to Bakersfield Sunday-Monday. My SIL who only has a swamp cooler told me that her PG&E bill was $200 a month. I want to know what is happening in other parts of the country with this heat wave especially on the east coast.
See Russ Winters site/post yesterday, with kwh rates by state.
http://www.xanga.com/russwinter
He’s on top of lots stuff pretty fast.
Way to go MA. Second highest after Hawaii, and with a heatwave, no sales, and those RE agents needing their AC for those open houses, with all the opening and closing of doors…
Should make for interesting Electrical bills.
Me, I have never seen an electrical bill over $50. Heating for around 180 a month for gas in Winter.
Russ runs a great blog, updated daily. Should be on everyone’s list for daily bubblehead news.
I got my highest electric bill ever a couple of weeks ago. $335 for a 1,600 sq ft house in Phoenix.
$475 last month for me! My new bill for the most recent heat wave (110-112 degrees) should arrive in another week or so. UGH. I would bet $550 or so.
Ummm, I don’t pay for heat (included in rent). My AC (we’re in a heatwave here, duh) runs just a tad over $100 a month with both units going full 24/7 (cats in the house, i turn it down a bit when I goto work but just to 76).
Check this out from today’s San Diego Union Tribune:
http://www.signonsandiego.com/news/business/20060802-9999-1b2condo.html
The condo conversions, which have been advertising extensively on local television, have apparently been fudging the square footage - and have a class-action on their hands.
Sorry, not today’s paper - just the U-T’s website from today.
Oops, maybe it is in the paper. I suck.
Okay, listen to my instructions carefully:
Put.Your hands. Down.
Step away. From. The coffee.Mug.
I read the paper before I saw your warning. Nearly spilled the coffee. My favorite is
“I’m trying to make this an investment, and now when I sell it later, I’ll have to sell it at a lower price,” said Parane, a clinical laboratory scientist. “I feel like I’m being defrauded.”
…just imagine, you can’t even make a condo investment without having to actually go there and see how big it is….
Anyway, the fun is starting now. Everybody suing everybody. Hallmark of the “nothing is my fault” baby-boomers.
Read the whole thing! She’s 39, and paid $343K for a 643 s.f. 4th floor condo as a rental. Just another dumb-shit GenX’r know it all? Not that I’d make stupid intergenerational blanket stereotypes of any GenX, GenY or BB. Most people are just plain, uh, stupid victims.
That doesn’t mollify Angeli Parane, 39, who said she’s worried she’ll lose money on the one-bedroom condo she purchased in September because she’ll have to disclose a unit size smaller than the 643 square feet she believed she was purchasing.
She paid $343,000 for the fourth-floor, upgraded condo, which she is now renting out.
“I’m trying to make this an investment, and now when I sell it later, I’ll have to sell it at a lower price,” said Parane, a clinical laboratory scientist. “I feel like I’m being defrauded.”
Prices have already dropped on these crummy shoeboxes as the developer has been trying to get rid of them. Ms. Parane doesn’t even know how far in the hole she already is.
As an example, a quick look on ZipRealty showed one listing there that someone is trying to unload. It has been marked down $80K over the past 2 months.
39… right. She’s probably been 39 since 2002! (Just kidding) I guess I was laughing so hard I didn’t get all the details. Why do these people think they are entitled to earn $50-100k in 6 months doing nothing? And the whole concept that a condo is priced per sq.ft. and bought and sold like it was some commodity with a fixed (make that ever increasing) $/sq.ft?
I can just hear them whining about the injustice they have been subjected to.
The reason the RE agent owns it is because there is no restriction on the Ownership, but the resident. The occupant must meet those guidelines, and on top of that the deed restictions run out in 55 years!. That means that you can buy this turkey for 430K and rent it out at a max 792.50 per month for 55 years per deed restrictions? Where do I sign up to get 10 of these?
this comment was supposed to be for mrquoi’s RE owned apartment.
Imagine that fraud in real estate. When prices fall people will get nasty and start to point fingers and sue.
This story sounds like a latter-day version of Florida swamp land sales in the 1920s. Note to out-of-town investors: Don’t ever buy sight unseen (or floor space unmeasured)…
I think that BB and Congress have gotten the message that they need to start acting faster. “The House approved an ambitious overhaul of the nation’s pension laws late Friday, hoping to prolong the traditional employer-based pension plans relied upon by millions while also promoting new savings options and protecting the government from future taxpayer bailouts.”
Question: Is it too little too late?
Having a pension that went to the PBGC this year where I lost 40% of my pension & having followed this closely now for several years, I can assure you the following is true.
It’s way too little, way too late!
Chris
“and protecting the government from future taxpayer bailouts.”
Small quibble, but it should be: “protecting the taxpayer from future government bailouts.”
Way too little, way too late. There is nothing that’s going to bail the politicians out of the hot seat or the American people out of a seriously hard-learned lesson in financial basics. The train has left the station, it’s heading down the mountain and the brakes are already burned out. No matter how it stops now it ain’t gonna be pretty.
Speaking of pensions, given the big 401(K) push into equities and the currently intact revival of a widely-held belief that stock prices can stay on a permanently high plateau forever, it sure seems like the government has a strong motive to prop up the stock market indefinitely, or else see a huge swath of retirement savings drop off the face of the earth, which might not sit well with seniors who have a high propensity to vote.
My basic question is whether the government can prop up the market indefinitely, or is there a limit to manipulation?
In my opinion the government has not been propping up the market. I don’t know whether they have been trying to prop it up or think they have propped it up, but the reality is that they don’t have the power to keep it up. The market has been propped up by the same thing that got it up so high in the first place: social bubble attitude or social mood. We have experienced the longest stock mania in history, so long that the first stage of the correction has taken 6 years as opposed to months for the first stage of the 1929-1932 correction. You can’t expect all those years of optimism to be overcome without a serious struggle on the part of the bulls, can you? A year from now I doubt that anyone will believe that the government has the power to prop up the market.
The only way the government can prop up the stock market is to buy stocks. Or mandate prices. Well they are not legislating prices so if indeed they are proping up stock values, then they are buying them. That stops when they run out of money. But it’s the government… they can keep printing money as needed to buy stocks. Then, of course, you have inflation, and deflation of stocks real worth. But yes given these facts I think the government can permanently maintain the current price of stocks market if it were willing to devalue the dollar in the process. That is kind of scary, now that you got me thinking about it.
Remember at the top of the market they were talking about “investing” the Social Security funds in stocks? Thank God they didn’t do that. If they did something similar they might be able to have some effect for a while on the stock market, but what excuse do you think they can use for buying stocks now, and what money do you think they are going to use to do it?
Here’s something I ran into which I thought was interesting. Lenders don’t HAVE to foreclose, if they don’t want to, like perhaps if they stand to lose 100k or 200k from doing so.
If they want to, they can sue the FB instead for payment of deficient loans. Better to foreclose is the FB is bled dry, but if there are some assets or future earning potential, I figure it might be worth 10k in legal expenses to sue them instead. The article is from Texas, but might have more relevancy in “non-recourse” states like California.
I just thought of this the other day when I saw a HELOC payment for a hypothetical $500,000 loan went up $275/month. it still pays to rent now, rent is still most likely going up but not as fast as someone’s ARM payments or what they are adding to their neg-am loan. it still pays to rent since many would have to take a risky loan to get a home.
the shadow inventory of homes is just around the corner, all those repartments seem to be coming online. maybe SFH homes rented out by floppers are next.
My family and I attended the SD Padres ballgame at Petco Park yesterday evening, for the first time since last summer. Comparing year-to-year, I had two housing bubble observations:
1) Last summer, there were many more large billboards promoting housing bubble companies (e.g., KB Homes) which had mysteriously disappeared as of last night. I only saw two small signs for the housing-industrial complex — one for Centex and one for a lender.
2) The many large excavations around Petco Park last summer have morphed into five-or-so half-built luxury condominium towers as of now, prompting one of my sons to ask, “Are those big cranes always there?” Given the shortage of luxury condos around downtown SD, it is really great to see so much new supply coming online.
My brother who works in the RE industry as an analyst at the corporate level said over the weekend that there is currently 10 years worth of supply at current volumes in the downtown SD condo market with another 2 years worth of supply coming on line this month. They expect 40-60% to be turned into apartments.
Why am I not surprised? A 12 year supply when they are done??? I bet it makes all those investors in $800K luxury condos feel pretty great to know that similar properties will soon be repartmentized, and rented out for a low fraction of the carrying cost of luxury condo…
Um, no. That is a 12 year supply by the end of this month. (August) No idea on the supply level by the time everything is built.
what does anyone think about the idea that a pause in interest rate hikes will just further slacken the potential buyers’ enthusiasm since “interest rates [will have] have stopped rising, so even less rush to buy.
steady interest rates and falling prices = “let’s hurry up and wait”
Given how much things have slowed already, home sale-wise, you might well be right. If the Fed pauses this month, it’s not like potential buyers are going to suddenly say, “Gee, now’s the time to buy, whereas it just didn’t feel right two months ago.” I believe we’ve reached a point in the housing market where interest rates aren’t really the key issue: House prices and lending standards (slowly tightening) are.
i agree. “better buy before interest rates rise any further!” is one more false meme in this whole ponzi scheme, right up there with “r.e. only goes up!”
Looks like the long bond is back:
Treasury announces it will double 30-year bond auctions
By Martin Crutsinger
ASSOCIATED PRESS
08/02/2006
x WASHINGTON (AP) — The Treasury Department, which brought back the 30-year bond earlier this year to help handle a soaring federal debt burden, announced Wednesday that it will double the number of auctions for the popular security next year.
Treasury officials said they will auction the 30-year bond on a quarterly basis in 2007, with the first auction scheduled for February.
Treasury also announced it would sell $10 billion of the 30-year bonds next week on Aug. 10. That auction follows the initial auction last February when $14 billion of the 30-year bonds were sold.
The 30-year bond was discontinued in 2001, when the government was running large budget surpluses and did not need to borrow as much as it had in previous years of high deficits.
And so ends the housing bubble. Note the year the 30-year was discontinued (2001 — beginning of the bubble, IMHO). And now, they brought it back, slowly, in 2006. Comes back in greater volume in 2007.
IMO, this entire credit bubble was created intentionally to boost corporate balance sheets at the expense of Joe Sixpack.
Hey does anyone work in downtown San Diego on here? GetStucco? Rich, etc?
I don’t but my husband does. And he’s an architect and very well informed on urban planning issues. Feel free to email me directly at lesliebd at gmail.com if I can help you in some way.
The visible hand of correlation strikes again, as Toll Bros and the DJIA average move in near-perfect lockstep (same story applies to other major home builder share prices). Does anyone besides me see problems with a rigged stock market? Like, for instance, the absence of a risk premium which is useful for delivering a price signal that properly reflects the risk / reward tradeoff along the efficient frontier that finance professors are fond of discussing?
http://tinyurl.com/zo7ps
Never attribute to malice that which can be attributed to stupidity.
When we told our mover that we sold and are renting now, he said most of his recent moves all around OC did the same thing. A few of the rental agents that we talked to said that rental rates have gone up in Irvine. It could be supply and demand - more renters pushing up rental prices. When REO supply ramps up in a two years, rent could go the other way.
I was in DC in November 2003 when the frenzy was still full on.
I saw a realtor sign on a house with a placard that instead of “SOLD”, said “TOO LATE!” Like they were rubbing your nose in it.
I’ve never seen one of those in LA, but I bet you don’t see them in DC anymore, either.
Read about Shea’s high-rise proposal withdrawn
Developer pulls plans to build a mixed-use hub on Fourth Street near the Santa Ana Freeway. .
Read about O.C. home prices and sales.
I don’t know if this has already been linked elsewhere. A Reuters item on the front page of USA Today:
Mortage demand lowest since 2002
Anyone here familiar enough with Japan’s economy to be able to describe what happened there during the 14-year deflation they just finished? I ask because I’d like to understand why deflation is so greatly feared as being so gosh-awful bad.
The simple problem is that with deflation, one of the most attractive investment choices is to sit on your cash and wait to buy your big ticket asset (house, car, boat, etc) later on for a lower price. More generally, during a period of deflation, when asset prices and consumer good prices are all falling, cash truly is king, as money stuffed under the matress earns a positive real return in terms of the goods you can purchase with it later on. This is great for savers, but not so good for companies that make their living by producing and selling goods and services (pretty much all companies, when you get down to it). A willingness to forestall purchases translates into a drop in demand for goods and services, and a drop in demand for goods and services results in a drop in labor demand, and a drop in labor demand results in a loss of jobs, leading to less consumer demand and more precautionary saving, and … You can see this cycle can get kind of vicious in a hurry.
What is worse, anyone who finds themselves owing money during a deflationary period (households and firms alike) finds the cost of making a fixed stream of future payments is *increasing* over time, as the nominal dollars in which the payments are denominated are rising in value; this is why debtors get crushed in a deflationary environment, and, given the record level of US household and high level of govt debt, why BB and other top economic leaders are petrified about the prospect of deflation. Note that while ARM holders would see their interest rates adjust downwards, a deflationary cycle in housing prices would nonetheless be devastating, as they would need to repay the nominal principle on their mortgages, even though home prices were falling, implying an increase in the real price of principle payments. You can see why the Fed might prefer to actually keep asset price inflation moving along, rather than face the awful screams of fools drowning in debt…
Getstucco — thanks. I suppose that is why I’ve been so sanguine about it — I’m sitting on all cash and zero debt, waiting for the right buy/time. I don’t remember seeing huge increases in the unemployment rate in Japan, as presumably would be the case in a depression. For me personally, deflation would seem to be a boon and just stagflation should bring push house prices well back toward the mean.
Keep in mind that the people who would be most hurt by deflation also happen to be in charge of the printing presses and have a very handy system for distributing all that newly minted money to people who can’t help but spend it. There are two exit senarios for a huge asset crash and you’re only prepared for one.
Stagflation would be terrrible for your cash horde, as it would annually reduce it’s real purchasing power while greatly limiting your ability to invest in anything that will keep ahead of inflation. The best strategy for stagflation is to buy hard assets (like homes) with a huge amount of fixed rate leverage and let inflation reduce the real terms of the payment stream. ie buying a home in 1975 with a 30 year fixed mortgage.
bluto,
I have previously mentioned that I will feel stupid if the gubmint prints themselves out, the way they tried to in the mid-1970s. If I were more motivated, then I would already have my hedge in place for scenario two (it’s not 1979 yet, but only 1970, and former academic Arthur Burns is running a very loose monetary policy)…
http://en.wikipedia.org/wiki/Arthur_F._Burns
One thing that stops me, though, is I don’t see how the Fed can inflate right at the moment without suffering dire consequences of lost credit rating with the foreign creditors who keep our consumption binge percolating. I don’t believe this dependence on foreign financing was nearly as crucial an issue in the mid-70s as it is now. The other thing is that the Fed has been blowing bubbles since 1987, at least, and gut instinct tells me that this unsustainable policy regime may have run its course after nineteen years…
” You can see why the Fed might prefer to actually keep asset price inflation moving along, rather than face the awful screams of fools drowning in debt… ”
Excellent stuff as usual GS. And now let’s hear from DeflationGuy… PS We need a Stagflation guy too.
Another aspect of deflation compared to inflation, from the government’s point of view is that if you have your money in an instrument that yields 8% while inflation is 6%, you have to pay taxes on the 6% even though it isn’t a gain in real terms. Deflation brings the oppostite– and increase in the value of your money, but the government can’t tax it!
Good point, Kim. Further, inflation is a stealth tax which is difficult if not impossible to levee in a deflationary spiral. So all told, the government takes direct (fiscal) and indirect (monetary) hits to its power to tax…
I went to San Diego over the weekend and there were for sale signs everywhere!!!! I did not see anyone at any of the open houses. Real estate is dead in San Diego.
Melody — a friend of mine just returned from a two-week visit to San Diego. She was at a home is Scripps Ranch. I told her about the blog posts and articles about SD real estate and she said she saw very few for-sale signs. Is Scripps not considered a part of San Diego? Anyway, I suggested she just track total active listings from week to week, if she doesn’t believe me.
“Everybody” just can’t wait to buy a house in Newport Beach! NOT!
http://cbs2.com/video (Los Angeles)
Seller goes to extremes
“It’s a buyers market. So one man decided to attract a buyer
in an unusual way: he’s giving round trip tickets to Hawaii.”
Whats really funny is that at the end of the piece, the sellers
decided to throw in $2500 in cash.. Maybe if they upped cash
rebate to $1 million? That would be more like it. OR (insert
drum roll here) a PRICE reduction? Oh, no. Can’t happen
in Newport, cause everyone is ’stinkin rich and wants to live here.
There were a number of factors that happened in the Japanese crash, some of which our economy doesn’t have to worry about, some of which we do.
1. Japan had the Yen pegged to the US dollar for quite a few years and then un-pegged it. It caused the currency to inflate signifcantly. This is why China is so fearful of revaluing their currency. (I presume)
2. Our loans are probably riskier and the way people are buying the mortgage back securities is exteremly unhealthy.
3. One of the loans that the Japanese came out with was the 100-year loan right before the crash. Sound familiar? We are one step away from that.
-Mark
I remember laughing at the announcement of 100-year loans. When you run out the amortization table, people had to be insane to buy House A with a 100-yr. versus House B at 90-95% of the price with a 30-yr. For that matter, I wonder why the sellers didn’t just take paper. Now that we’ve gone through our bubble, I believe that the people who were taking out those 100-yr. loans were essentially flippers who believed prices would not stop appreciating. It was the Japanese equivalent of an eternal I/O loan.
did anyone just hear the npr ‘the world’ puff piece about miami r.e…. about all the foreign buyers that were lapping up the “solid” luxury condos at a reliable “7%” yearly appreciation??? i almost fell out of my chair. next, it will be the insatiable appetite of extraterrestrials for florida r.e.
so much for ‘public’ radio. sad, very sad.
As I was watching the world news on one of the networks, a real estate commercial came on after the segment. I am not sure if I can mention the company so I’ll leave that out but this is what the commercial said:
“Now (company name) has more houses to choose from than ever before.” Well, at least they’re looking at their situation on the bright side.
New tactic at ziprealty? I see SD listings frozen in time as of 7/31/06. Maybe there were no new houses on the market on 8/1 and 8/2? Su-r-r-r-r-e; if you believe that then I have some swampland in Florida I would like you to consider buying from me. My hunch: zip is doing all they can to hide evidence that new listings are piling on to the market, which is a bit of a disincentive for buying right now…