The Housing Bubble

Adding significantly to fall index puts in this morning rally.

Watch for the Fed to Pause
By Tony Crescenzi
RealMoney.com Contributor
8/4/2006 9:42 AM EDT
URL: http://www.thestreet.com/p/rmoney/tcrescenziblog/10301789.html

The employment report seals the deal on a pause in the Fed’s interest rate hikes; a continuation of the trend would spell the end of hikes for the current cycle. For four months, job growth has averaged just 112,000 a month, a level that would drive the jobless rate upward over time, given that the labor force grows roughly 150,000 per month.

The jobless rate might already be on an upward trac, having risen to 4.8% in July from a five-year low of 4.6% in June. While fitting with the Federal Reserve’s forecast for a rise in the jobless rate, the current pace of job growth could drive the jobless rate over 5% earlier than the end of 2007, as the Fed is currently forecasting. This is a clear basis for a pause on top of an already-strong case.

The current pace of economic growth is desirable given that it is what is necessary to wring the economy of inflation pressures. It normally takes at least two quarters of subpar growth to begin to whittle inflation pressures downward. With today’s data, and in combination with a plethora of other data, it seems that a second quarter of subpar growth is now at hand.

While this is good news for equity investors, if the sub-par growth continues into future quarters without any sign of change, profit concerns could begin to replace the ebullience of the end of the Fed’s interest rate hikes.

OK, say the Fed is “one and done”. The refrain from the real estate/mortgage lending community has been Buy/Refi now before rates go up. Say the Fed holds at 5.5%, and you’re a buyer. You gonna buy now while rates are still “historically low”, or you gonna hold out hoping they go back down? Expect the real estate crowd to say “you can always refi later when rates go down” etc. etc. ad naseum. Maybe the Fed will go into a protracted hold period while the FB’s slowly fall off the tree, and the buyer’s are in “wait and see” mode.

The Fed will pause. The bond market is already forecasting rate cuts. Bye bye dollar…hello, gold.

BB will chose to save the FB’s
the dollar will be toast
WEEEEEEEEEEEEE I’m bullish

Guess I’m the perma-bear on this one. With Australia, Europe and the UK just having raised their rates, I don’t think it’s possible for BB to take a pass. This talk in the media, nervously giving all the reasons why a hike isn’t necessary, seems to me much the same rhetoric we’ve heared before each of the last two hikes.

Further, Ben needs to create a persona. Right now, he looks like Gentle Ben — a bad ID for the daunting job ahead, if he plans to keep it. He needs to buy some cigars and practice scowling and finger-pointing up at the gods of Congress.

I think a .25 increase is coming and would not be totally shocked if a .50 stake were whipped out from under the cape.

How long until “SHTF” registers on Google Trends? Maybe another 9 months?

Treasuries Look Expensive
By Tony Crescenzi
RealMoney.com Contributor
8/4/2006 10:11 AM EDT
URL: http://www.thestreet.com/p/rmoney/tcrescenziblog/10301798.html

Recent economic data, combined with today’s payroll report, weigh heavily against the need for additional interest rate hikes. They do not yet, however, provide a basis for an interest rate cut. As I said earlier, the current rate of growth is actually desirable and this will continue to be the case for a little longer. A speeding up of growth would be premature; inflation would accelerate.

With this in mind, I find the Treasury market a bit pricey at the moment, as yields have fallen below the funds rate by amounts that tend to occur only when an interest rate cut is near. In fact, if the 10-year were to fall to 4.75%, it would be 50 basis points below the funds rate, something that tends to occur only when an interest rate cut is imminent. Because it’s not, a further decline in Treasury yields looks unsustainable. It’s rare enough for Treasuries to be below the fed funds rate; this is only the fourth time in 16 years that the 10-year has dipped below the funds rate. On all other occasions, an interest rate cut was delivered within six months.

While an interest rate cut might occur within six months, a cut is not imminent, which is what is needed to justify a 10-year Treasury at a spread of 50 basis points below the fed funds rate.

If you’re a glutton for punishment, here’s Maryann Haggerty today at 1:00 in the Wash. Post, taking your real estate questions.

http://tinyurl.com/en8lr

Washington Post Real Estate editor is chatting online today at 1 EST, if anyone’s interested. Chats are usually entertaining!
http://www.washingtonpost.com/wp-dyn/content/discussion/2006/07/21/DI2006072101250.html

In response to an article about unaffordable housing in Bozeman, MT, I posted a comment referencing the housing bubble. The author’s reply to me seems to amount to “it’s different here.” Her reply is below. But is it possible that mountain resort-type locations will always be unaffordable? Think Jackson Hole, WY.

By the way, a HBB field agent around Bozeman calculated that about 1 in 33 homes in the Bozeman area are now for sale. Unlike Jackson Hole (surrounded by National Forests and a National Park), there are miles and miles of buildable land west and north.

The original article is about “Inclusionary Housing.” I bet Cote loves it already!

New West Bozeman article

Marcia says:
I’ll give you one word in return: decades. That’s how persistent Bozeman’s inadequacy of affordable housing has been. It has remained true in profoundly varying market conditions and was evident right before the bubble started expanding (at the beginning of this long growth cycle, when the city first studied and considered IH in 1994 and decided to try other approaches first). I agree with you there are signs of market softening and prices beginning to adjust, but prices would have to plummet spectacularly for home ownership to be in the price range of average workforce wages. And Bozeman shows every sign of continuing to be popular, to attract new residents because of its amazing setting, etc. Typical predictions are that its growth cycle may not always continue at the current record pace and may vacillate some but that Bozeman will continue to grow at a significant rate for many years. That will continue to put upward pressure on housing prices, even if occasional adjustments occur. Affordable housing is a nearly constant issue for growing communities, and it’s why so many in similar circumstances to Bozeman have adopted IH. After 27 years of addressing housing issues in Bozeman, I do not believe the need will cease, though the program target will doubtless need occasional adjustment as conditions change. And any practical alternatives for addressing our persistent affordability challenge certainly deserve attention, but Bozeman needs a mechanism to ensure steady, reliable creation of affordable housing along with higher-end housing as the community grows. IH in other communities meets that goal more effectively than any other approaches anyone has been able to identify so far.

I’m still laughing about this one: http://www.wtop.com/?nid=104&sid=869914 It seems that many of the new homeowners are so absolutely clueless about home ownership that when repairmen are finally called, they find “doors hung upside down. … more than one sliding pocket door that won’t open because someone nailed a picture on the wall and into the door” One homeowner tried to “spackle over wallpaper” and ultimately just tried to sand and smooth it so “nobody would notice.” Is anyone here surprised? Probably not, but I was laughing aloud and the whole office wanted to know what was so funny. Wait till these clowns try to sell their “investment!”

http://losangeles.craigslist.org/lgb/rfs/187454354.html

LOL…would you buy a house from this guy? Clearly he never got hooked on phonics…

GREAT OPPPORTUNITY, A DUPLEX OF EACH UNIT WITH, 2 BEDROOMS AND 1 BATH,GARAGE FOR 2 CARS,IN A VERY QUIET NEIGHBORNHOOD OF LONG BEACH, SALE OWNER TO OWNER, OWNER OFFER TO PAY SOME CLOSING COST , OR EITHER MAY PAY UP TO $10,000.00 DOLLARS FOR CLOSING COST, WE OFFER 100% FINANCING , EASY TO QUALIFY
AND IF YOU HAVE 10% DOWN PAYMENT WE CAN GET YOU A VERY LOW MONTHLY PAYMENT,

WE CAN GET YOU THERE IN LESS THE 30 DAYS, OWNER WANT TO MAKE THIS TRANSACTION QUICKLY AS ASAP. OWNER IS DESPERATE, PLEASE BE SERIUS ON THIS TRANSACTION

IF YOU ARE INTEREST PLEASE CONTACT

CIMAX HOME MORTGAGE INC
ASK FOR PABLO RODRIGUEZ
or e-mail at pablo.cimaxinc@yahoo.com
562-251-0139
VOICE MAIL 310-878-4758

This may be the proverbial final straw for some folks around the country. Already happening in the Inland Empire (CA.)
BTW, did they think cooling a 3000+sq home would be cheap?

HEAT WAVE; INLAND RESIDENTS SIMMER OVER HIGHER ELECTRIC BILLS//Cost of keeping cool now due and payable

MARY BENDER AND LESLIE BERKMAN
1536 words
11:23 am, 08/03/2006
The Press-Enterprise(Internal Content)
English

Aug. 2, 2006 — Inland residents who sweated through July’s triple-digit swelter now have swoon-worthy electric bills - some for several hundred dollars - to ponder.

Skyrocketing energy bills because of the heat storm’s record energy demand, coupled with rate increases, have sparked outrage and worry among Southern California Edison customers who wonder if conservation alone can bring them relief.

Reno Fontana, 53, of Rancho Mirage, said Edison billed him $1,005 for June 15 to July 14. “I was stunned and in disbelief. I didn’t know it was possible to go to four digits. What are we to do?” he said.

For the same period last year, his bill was $345.

“It is both because of the rate increases and heat that forced us to leave on the air conditioning 24 hours a day,” Fontana said. “It is like the perfect energy storm.”

To afford the bills, Fontana said he and his wife will have to change their lifestyle this summer, eliminating dinners out and weekend trips to the beach.

Edison spokesman Tom Boyd said the utility’s customer service agents received 13,919 bill inquiries in July, more than double the figure from July 2005. Customers primarily asked why was their bill so high, whether there was a billing or meter error, and what they could do to lower their bills.

“With increasing gasoline prices and energy bills, it is putting a stranglehold on your finances,” said Joanne Dopp, of Rancho Cucamonga. Last August, 2005’s hottest month, the family’s electric bill was $440, she said. Although they used less power last month, Edison told her their July bill will be $946, Dopp said.

In an effort to reduce electric use, Dopp said she drained the family spa, raised the air conditioning thermostat to 78 degrees and turned down the refrigerator temperature. She said she’ll probably empty and unplug a second refrigerator in the garage.

Eastvale resident Jane Anderson lives in a 3,400-squarefoot, two-story house. This month, her Edison bill was $738, a jump from the previous month’s total of $493.

Anderson fears her next bill - which will encompass July’s heat wave, when the mercury soared over 100 degrees on several days - could approach $1,000.

“A lot of people are saying they’re going to have to sell (their house), because they can’t afford it,” she said.

At a recent community meeting in Eastvale, residents asked a Southern California Edison representative if the utility could recalculate the “baseline” level on their bills - the modest allotment of daily and monthly electricity usage offered at the cheapest rate. Residents contended the baseline assigned for their community - in northwestern Riverside County - wasn’t realistic based on the Inland Empire’s arid climate, especially for homes in the 3,000-square-foot range.

“The baseline is absurdly low. I have complained for years on ours, and I’ve had (Edison) come out and check the meter,” Anderson said. “I just couldn’t figure out why (the bill) would constantly be high.”

BASELINE RATE VARIES

Jim Schichtl, Edison’s manager of rate design, said the baseline is intended to provide households only with enough electricity to meet basic necessities such as lighting and refrigerating food.

The baseline is figured at between 60 percent and 70 percent of the average electric consumption of homes and is approved by the California Public Utilities Commission, Schichtl said.

The baseline also takes into account climate differences within Edison’s territory, Schichtl said. Residential customers receiving basic service in Mira Loma, using no more than 15.4 kilowatt hours per day, can qualify for the lowest baseline rate. Households in Palm Desert can qualify even if their daily power use is as much as 47.6 kilowatt hours per day.

Schichtl said because average bills within each climate region are calculated every three years, the baseline is adjusted to reflect changes in lifestyles, such as preferences for consumer electronics.

Edison has 1.24 million residential customers in Riverside and San Bernardino counties.

Calimesa resident Heidi Johnston saw her bill - for mid-June to mid-July - skyrocket. She was charged $199 the previous cycle, and $495 for the current bill.

“I called the electric company the next day. I said: `Do you want to tell me why my bill (more than) doubled from last month?’ I was probably his 200th call,” Johnston said.

The Johnstons’ baseline allocation for the most recent billing period was 508 kilowatt hours, and the family used 2,047 kilowatt hours of electricity.

Other residents of the 480-unit mobile home community, Plantation on the Lake, fared much worse - and, on top of that, many are retired and living on fixed incomes, she said.

“Fortunately I work, so one way or another I’ll get my bills paid,” said Johnston, 47, who owns a flower shop in Calimesa. “But I live in a senior citizen park, and these seniors don’t have that kind of money. How are they going to pay this bill?”

EXTREME CONSERVATION TACTIC

The Joslyn Senior Center of the Cove Communities in Palm Desert has had to bear the increased electricity rates along with its clients.

The June bill at the center was $4,522, a huge leap from the $2,843 the nonprofit group paid in June 2005.

“That just about knocked me off my chair when I opened that bill up,” said Peter Rittenhouse, the group’s executive director.

To save energy, the center closes a third of the building for most of the summer and keeps the thermostat there near 90 degrees. The temperature in the occupied part of the building is usually set at 78 degrees. Fans whiz overhead.

Rittenhouse worried that if rates increase again next summer, he may be forced to close the center on summer weekends to save money.

Tom Hall, a PUC spokesman, said the reason for establishing electric rates in tiers that ascend with electricity consumption was to motivate households to practice conservation.

This year, Edison’s average residential rate has increased 13.4 percent because of rising natural gas prices. It also has approval for another rate hike averaging 6 percent for residential customers to finance improvement of its distribution and transmission system.

Because of the pain their customers are feeling from the current heat storm, Edison asked the Public Utilities Commission to defer the new rate increase from August until November. While awaiting PUC action, the utility said it is shelving the rate increase.

SOLAR ENERGY INTEREST UP

The Dopp and Fontana households plan to dodge future rate increases by investing in solar electric systems. Fontana said he and his wife will pay $75,000 for a system that he figures will pay for itself in utility bill savings within six years, after which they won’t be bothered by Edison rate hikes.

“We are drawing a line in the sand and that is it,” Fontana said. “I refuse to do this anymore.”

Solar contractors said rising electric rates have boosted business because it is easier to justify the initial expense of solar installations.

“The higher the rates go, the quicker they pay for themselves,” said Max Balchowsky, owner of Solar Electric Energy Systems in Palm Springs. For about the past eight weeks, he said, he has been getting six to eight calls a day from prospective customers. He said previously he got only about a half-dozen calls a month.

Eastvale residents Erik and Brandalyn Taylor say that until this summer, their electric bills were no more than $200 for their two-story, 2,400-square-foot house. But this month, their Edison bill was $602. With children ages 6, 3 and 1 - and, since last summer, a swimming pool - they’ve never come close to their maximum baseline energy allocation of 15.4 kilowatt hours a day. Their latest bill showed average daily consumption at 77.7 kilowatt hours, Taylor said.

The family signed up for an Edison program that shuts off their air conditioning at certain times, in exchange for a rebate.

“When they built the house, we had ceiling fans put in most of the rooms,” Taylor said. “Two years ago, we tinted (the windows) in the back of the house, which gets most of the sun.”

Next summer, they hope to have a patio cover built to keep the downstairs rooms cooler - and their bills lower. * * *

Staff writer David Olson contributed to this story. * * *

RESIDENTIAL ELECTRIC RATES

Southern California Edison rates are based on levels of usage in relation to a baseline rate per kilowatt hour.

Up to the baseline: 11.8 CENTS

1 to 30 percent over baseline: 13.7 CENTS

Rates on the upper tiers increase in November

31 to 100 percent over baseline: 22.3 CENTS TO 22.8 CENTS

101 percent to 200 percent more than baseline: 31.2 CENTS TO 35.5 CENTS

A fifth tier will be added:

For usage of 201 percent over baseline the rate will be: 48.2 CENTS

SOURCE: SOUTHERN CALIFORNIA EDISON * * *

Leading Indicators point to possible recession:

http://www.chartoftheday.com/20060804.htm?T

Interesting HB stock action today. HOV was way down after hours on a serious earnings warning and then was up at the open today. I decided to buy more 30 strike puts at 10:00 am and the stock is already down $1.50 from the time that I purchased the puts. I also bought more WCI puts, as I expect that their earnings will be grim next week and will only get worse during the fall. I have a few Aug, many Sept and December WCI puts and a few of the March 07

I agree that index puts may be a good options, but I am still buying puts mostly on leveraged banks, lenders and especially builders. They have had a good bounce during the last two weeks, so a fed pause is should be priced in, especially if the fed still keeps open the option for raised in the fall, which they surely must unless a recession appears around the corner

A little odd:
http://washingtondc.craigslist.org/nva/rfs/190002110.html

Assessed value is 760k.

NNMORTG;….Are you out there ?? I am in Reno for 5 days…I went South and looked @ some Lennar, K & B and some other smaller builders…I am going to look @ PULTE/Del Webb today….Any real soft housing tract’s you can recomend ??…I would like to drive through and take a look…Thanks…

Stucco, try this one. Heh heh heh

http://www.sfomag.com/homefeaturedetail.asp?ID=464411369&MonthNameID=August&YearID=2004

We hear from brokers, real estate agents, and appraisers — any underwriters out there willing to post about their experiences? They are the most crucial part of the approval process & yet they’re never heard from

Anybody from the Portland area on here? I’ve been hearing from a friend up there that new condo’s, etc. are going up like made, things are selling briskly, no slow down, etc. I think she was implying my bubble talk was hot air. I looked at the median price tracker and although Portand’s prices are steadily climbing upwards, so is their inventory. Anyone have first hand knowledge? Many thanks.

Via Fatwallet: Free $5,000 IKEA gift card with the purchase of a condo!

http://www.fatwallet.com/t/52/640251/

MOTIVATED SELLER IN CHICAGO!!!

http://www.ziprealty.com/buy_a_home/logged_in/search/my_home_detail.jsp?listing_num=06140838&property_type=CONDO&mls=mls_chicago&cKey=mw1z3472&source=MLSNI

34% price reduction after only 81 days on the market.

From Kauai:
Real estate market peaked, expert says
http://www.kauaiworld.com/articles/2006/08/04/news/news02.txt
Catch this stanford educated dumb ass describe the obligatory permanent plateau after the peak as a “tranquil phase”.
Economists suck.

i just received my SoCal Edison Electic Bill, Yikes !! i live in a one story home, 1400 sq ft. My bill during the summer is generally $60 max, average is around $40 for the hear. Last month’s bill was over $100. July’s bill was over $200 !!! WOW !
I’m glad i rent and can pay 50% less than what it would cost to mortgage this joint, i can’t imagine how tough it’s going to be for those in SoCal who are fighting to pay a fat mortage, then fill up the fat tank in their SUV, and pay to fill up their “fat” house with cool air.
Yikes

hear = year

People are going to crap their pants this week when they get their utility bills, i guarantee it !!!

Read about He bought this house in 07/30/2004: $798,000 - so he is losing everyday.

Fixer-Uppers Can Be Dreams or Money Pits:

http://biz.yahoo.com/weekend/fixup_1.html

As cynical as I’ve become, it takes a lot to make my jaw drop. Check out this post…. Wow. Just…. Wow….

http://www.foreclosureforum.com/mb/messages/18243.html

All there. Appraisal fraud, greedy flipper, clueless newbies, declining market. And the scary thing, is how much more of this is out there to be found???

Housing Bust links.

#38 Of Bubbles Past: A Chronological Listing of News Headlines from the Last Housing Bubble in Southern California

Home Prices Do Fall - A Look At The Collapse Of The 1980s Real Estate Bubble(Northern New Jersey Real Estate Bubble)

Housing bubble correction could be severe

#35 ALL BOOMS BUST!

#9 Housing bubble’s burst could cost 1 million jobs and cause a recession, experts say

#16 Global credit ocean dries up

It’s RIP for the housing boom By Bill Fleckenstein

#31 I Want My Bubble Back!

Straight talk on what the Fed has wrought By Bill Fleckenstein

Bubbles caused by cheap cash menace world economy

Feds say that banks’ futures tied too closely to real estate

The economy’s next time down has begun Bill Fleckenstein

Lowering the Boom? Speculators Gone Mild

#21 As real estate market cools, ‘buys’ return

Mortgage lenders grapple with deflating housing bubble

For-sale signs multiply across U.S.

White House sees housing cooling gradually

Painful ARM twisting

New issue for homeowners: Inflated appraisals

#40 Condo Prices See Significant Drop(San Diego)

#37 The boomer bust

I posted this to yesterday’s CL thread by accident:
http://sandiego.craigslist.org/rfs/190209805.html
Trust me, its worth looking at. Sheer insanity!

After the crash, when the collective snake-oil hucksters of the NAR, appraisal industry, Freddy Mac/Freddy Mae, and mortage brokers have been sent packing, perhaps new, untainted, honorable institutions with reputable leaders will arise in their place. And, no doubt, we’ll see a flood of reforms and new laws (with actual enforcement) to curb the excesses that helped cause this bubble. The “voices in the wilderness” who foretold this disaster, and acted with integrity and foresight, will exert considerable influence in the New Era as sanity imposes itself.

As the FBs and disgraced NAR officials huddle around their hobo-camp trash can fires, roasting rat kabob and sharing tales of woe while passing the paper bag that holds the Ripple, thousands of new, fiscally-responsible homebuyers, who in the dark days of 2005-2006 had their Road to Damascus awakening after happening upon this site, will give silent thanks to Ben Jones.

And somewhere, amidst the blackened skeltons of unfinished condos and “luxury” condos converted to moderately-priced apartments, Suzanne will be leaning wearily on her corner lampost, adjusting her fishnet stockings as she plies her new trade, though she still seals the deal with a Hummer in the driveway.

Mogambo Guru has written an excellent recent analysis of Bernanke’s principal challenge (the need to fool everyone into believing he is fighting inflation so that he can stave off deflationary pressures…):

“Now we see the Bank of Bernanke’s strategy more clearly: it must crush inflationary expectations, while preparing to fight deflation as soon as it appears. When U.S. asset prices crack - that is, when stocks, bonds, and real estate begin to collapse - you will see another rush to cut rates.

It worked so well last time, from 2001-2004, it surprised us. Too bad it’s not the sort of trick you can pull over and over.”

And I agree — these fooling games the Fed is playing become increasingly predictable over time. Just ask any hedge fund manager. The problem is that with such predictability, it is no longer sound economic fundamentals that drive investment decisions, but rather gambling strategy based on anticipation of the Fed’s next market manipulation. Meanwhile, massive misallocation of capital proceeds unchecked in the real economy, as the effect of repeated and predictable bailouts is to undermine the price signal that provides indication of whether investments are worth the risk of undertaking them. If BB succeeds in propping up “the corpse” of a housing market as the Guru suggests he intends to, then we can expect the imbalances in the US economy to continue to grow, with a still uglier day of reckoning in store when the heir of Volcker eventually takes charge.

http://www.dailyreckoning.com/Issues/2006/DRUS071006.html

Update from Europe:
I posted a comment about 2 weeks ago highlighting several recent mainstream print articles in the UK that touted that real estate prices were going to continue to climb towards the sky for the next 10 years. Same old logic: “immigration”, “they aren’t making more land”, ad naseum.

Today, to my shock and horror, I see the headlines have changed.

___________________________________________________________
Britons are mortgaged to the hilt
By BECKY BARROW, Daily Mail 21:41pm 4th August 2006

…

You guys can take your shorts on the market through commodities. Problem is the timing has to be exactly right or say goodbye to all your play money. Can’t you see the system is set up so “little” guys like us get burned? I watched my dad in the 60s, 70s, and 80s burn up his money. Slow down and make money through wisdom.

Do you ever wonder who is dumb enough to pay big bucks for a refrigerator with a flat panel TV in it?

http://phoenix.craigslist.org/apa/183153125.html

OT, but a great read on energy which of course effects housing. Warning, kinda long.

http://www.energybulletin.net/18904.html

Had to post this: http://stlouis.craigslist.org/rfs/190369506.html

Who could resist a free ‘93 “camero”?

Looks like St. Louis might be in on the game (hopefully, I’d like to buy sometime in the near future). Granted 140k is chump change compared to what some of you guys are facing but the appreciation the past few years has still been out of control.

How a raccoon caused me to become a homeless bum…

1) David Liarreah and Leslie Appleton Young are driving along a road at night
2) They are speeding to get to the next rah rah session to stem the tide in CA
3) As they round a bend in the road there in the middle of the road is a raccoon
4) LAY is driving and swerves to avoid the animal
5) They both die as the car runs into the granite countertop of a new McMansion
6) NAR loses its two biggest mouth pieces and nobody is there to spin the bubble burst
7) Without all the rah rah the news becomes more bearish on RE
House prices fall and people just walk away from their homes
9) Consumers stop spending
10) Layoffs
11) The stock market crashes and my 401K is just a fraction of what it was
12) FED starts stoking M3 and dollars become worthless
13) Foreign investors panic and pull out of U.S.
14) Banks start going bellyup
15) The bank where I have my 200K from the sale of my house goes bellyup
16) I am left with only 100k (insured by government) after the bank collapses
17) Government defaults on insuring money in collapsed banks (I lose my remaining 100K)
18) My company goes out of business
19) Company pension fund was maxed out in RE holdings and is gone
20) The government to up the “War on Terror” and cuts back SS payments
21) I get a small monthly SS check and a bit from the ruins of my 401K
22) But by now we have Argentina style hyperinflation and my dollars are used to stoke the fire in the refugee camp where I now live
23) My friend who bought gold coins to barter with is followed home and killed for his gold coins
24) Microsoft announces Vista service pack update 12….but by now nobody cares
25) Hillary Clinton wins the electon (5% turnout) and promises a “piece of bread and a cup of soup for all”

And all because of a dirty old raccoon……

The sweetest thing about this housing bubble crash is that after a lifetime of cushiness, the baby boomers are finally going to get their comeuppance. Hey boomers — you thought just b/c you were a homeowner you were going to have retirement handed to you on a silver platter, but you were WRONG. this whole housing bubble was just another way for the boomers to suck the life out of younger people. not that younger people weren’t gullible enough to fall for it — most of them were — .

in some ways I really want to be a homeowner, but with the rising property taxes, mediocre to lousy schools, and poisonous atmosphere of so many suburbs, i’m wondering if i’ll ever get the gumption to actually close on a home.

Brad Delong:

Either households will continue spending beyond all reason, or businesses will start boosting investment, or exports will start booming, or there will be a recession sometime in the next year. Figure the odds at 3 out of 10.

if our landlord says we have to move ASAP because the house is being reposessed, what are our rights? In terms of how long we can stay and try and find another place? Sometimes renting is not always best…

“But, the housing market depends on long rates, not short rates. Mortgages are long-term debt.”

You know, I used to think that…however, aren’t some of the big coastal areas’ prices dependent on an ever growing number of “exotic” loan products (Option-ARM, interest only, very low teaser rates)…and aren’t those exotics tied to short term rates? In other words, can’t Ben B. re-spike the punch bowl (with 151 even) by lowering short-term rates, lowering rates for Option-ARMs and I/O ARMs?

(Sorry for the double post, but I am truly interested in what effect a drop in short term rates could have to help those that use “extreme financing” to buy a house…and possibly prolong the bubble).

http://en.wikipedia.org/wiki/US_property_bubble

I was at a party yesterday where the conversation turned, naturally, to real estate. But the discussion was about additions (as everyone there - except me - was a homeowner). A couple who just moved into the neighborhood 6 months ago (read: bought at the peak - I kept my mouth shut on that) was comparing their home to another’s. New couple was lamenting that they don’t have the nice additions that old couple does and said they were going to take out a home loan to do so. Another couple (who moved in just a couple of years ago) also chimed in that they want to build on to be like everyone else. Note this couple’s home already has a 3-season room addition. They are also so far in debt, it’s frightening (would keep me awake every night if I were in their situation).

I was just shocked to hear it all. I said, “Is it just impossible for anyone to be satisfied with what they have in the present? I’d give my right arm to live in one of these homes - without any addition.” I was then raked over the coals about how these people have high expectations and lofty goals and how that’s a GOOD thing and to think otherwise would be settling. It made me want to vomit.

The only couple who I felt were worthy of feeling this way was old couple. They’ve lived there 10 years and every time they want something (an addition, a deck, a remodeled kitchen), they SAVE UP FIRST and then proceed. That’s totally cool with me. But to go further and further into debt to make your master bedroom bigger is just stupid IMO. Cripes all you do is sleep and have sex there.

Man I hope that 1997 values x 1.20 formula mentioned this weekend comes true. Guess what? I would actually be able to live in that neighborhood were that to be the case. And then I could start saving up for my peer-pressure addition.

Property here in Salinas is not going to change quickly overnight in spite of the increased listings, why? Because housing with 5 bedrooms is pending sales because multifamilies are being allowed to buy into the properties as ‘affordable housing’….you just put one family in and then the rest move in to make the payments. SFH neighborhoods look like apartment complexes. City doesn’t mind, they retain their tax base and when one family moves out another will move in.

Here is one for the “bucket”

The Best of Lowball!

The focus is on the Northern NJ market, but interesting to take a look at even if you aren’t from the area.

grim

This is funny. Check out the profession of this “employer”

http://fortlauderdale.craigslist.org/adg/186361323.html

As someone has occasionally pointed out here, the govt’s modus operandi these days seems to be, “Privatize profits, socialize risk.” A new FHA bill designed to increase the number of 100% financed buyers and increase FHA exposure to unaffordably-priced markets, seems to fit that description. Party on, dudes!
————————————————————————————————–
NATION’S HOUSING KENNETH HARNEY
House approves bill giving FHA new lease on life

August 6, 2006

WASHINGTON – Moderate-income home buyers got a big boost from Congress at the end of July, when the House voted 415-7 to approve a bill revitalizing the federal government’s biggest mortgage program – the Federal Housing Administration (FHA).

The bill, which now awaits Senate action, would allow the FHA to offer zero-down-payment loans for the first time, increase permissible mortgage amounts substantially in high-cost markets, and provide low-interest rates and consumer protections that are rarely available from “subprime” mortgage lenders.

http://www.signonsandiego.com/uniontrib/20060806/news_1h06harney.html

SD condo for sale in UTC. Only asking $55K below what they paid in 2004 for all 966 sq ft of it.

http://sandiego.craigslist.org/rfs/190756443.html

Purchased in July 2004 for $450K and now asking $395K with all the noise from I-5 you can stand to be thrown in for free. Newly built in 1986. Get yours now.

“Beatuiful Carmel Valley Home Vacant!!”
http://sandiego.craigslist.org/rfs/190756680.html

At least this seller is getting more realistic about getting out. He’s had to reduce his asking to $2K above what he paid for it in September 2005 according to the County Assessor’s office. This was a month ago on 7/5. Hurry, the realtor says it won’t last. Is it that the construction is that shoddy or maybe that price won’t be the last? I’m not sure what ‘beatuiful’ is all about, but I’m guessing the owner is taking a beating on this one.

Another Craigslist “SHORT SALE, NEED OFFER NOW!!!”
http://sandiego.craigslist.org/rfs/190749868.html

This little flipper flopped. Purchased in March of ‘05 for $530K and redecorated, but no takers it seems for this 1032 sq ft slice of paradise at $499K. They’re now asking $30K below what they paid for this albatross of a box.

The House passed a bill called “Expanding American Home-ownership Act of 2006″ (HR 5121).

It seeks to expand the upper limit on FHA loans and give 100% loans to people who can’t now afford because of rising home prices.

In just the past couple of months, we’ve heard NAR/Lereah pleading with Bernanke to keep interest rates low because they are affecting “price sensitive markets” (ie. home prices are coming down).

Then a couple weeks ago we heard legislators pleading with Bernake to “keep his eye on the housing market”. Which to me indicates that Legislators also are aware that the price of homes is coming down.

Therefore, call me cynical, but the timing of this Bill is very suspect.

It appears that the Gov. is in collusion to float the housing market by putting more and more people into homes they cannot afford without nutty loans.

The Bill goes before the Senate next.

I’ve tried to locate where to make comments on the US. gov site but haven’t figured out how to do it.

Petition anyone?