Bits Bucket And Craigslist Finds For August 8, 2006
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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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Any thoughts about what the Fed is likely to do today. Are interest rate hikes over? Market seems to think so.
Simmssays..Piss Off Your Woman
http://www.americaninventorspot.com/relationship_advice
There will be a hike.
While I’m a housing bear, it doesn’t matter what the FED does, it is however important for psychology.
I think I may attract some ire for this, but I’m convinced they will sink the dollar and pause.
I am torn, but will tip my hat to the 25 BP hike.
Opps, I was wrong. Looks like a pause.
I think .25 bp is going to happen…… can’t wait to hear the realtors whine about this one.
people in my office are 100% convinced the Fed will pause, which is why I’m betting on a hike.
BB will prove himself to be a dove who chirps like a hawk. If he pauses…he will forever be bendover ben in my mind.
I hope he raises…but think he may not.
I agree with you Polo Bear. He talks a big game but does he have the balls to go through with it? I have always said, if he wants credibility (and to keep his job) he needs to be a lot like Volcker. I think they pause and come out with some BS rhetoric on watching inflation but being more concerned about a slowing economy (see housing bubble burst).
The important thing is that it will make NO difference in the RE market. Either they stop and talk tough or raise & say they are on pause. No big deal either way IMHO.
Having said that, my guess is raise & pause.
BUT, no pause in the flood of money. M2 is on the rise big time. One can only guess what M3 would be if they still published it.
“it will make NO difference in the RE market”
I AGREE.
I agree there will be no effect on real estate. I am guessing a pause but am hoping for a hike.
Not good news for those that are expecting a pause as this morning the labor costs shot up, but productivity did not. This is one of the indicators that the fed hates to see. They do not like it when companies have to pay more for the same amount of work, as that implies inflation.
Yes, but there is a feedback lag of 6-18 months of Fed increases. It’s not the increase, but the rate of increase that would concern them.
The big deal is going to be the comments included with the announcement. The market, as of lately, has already priced in a pause. If we have a pause, followed by some very hawkish comments by the Fed, the market could get beat up pretty bad, especially considering some of the data over this last week which shows that, although the economy is slowing, inflation is still out of hand. A pause, followed by hawkish statements, would signal to the market that a pause is just that, a pause, and that we’d be due for more hikes before the end of the year. Uncertainty would rule again, and the market hates that. If the Fed really wanted to rally the market, they would raise 25bps and then announce they were through for the year. The bond market would love that, as well as stocks.
The comment was “some inflation risks remain”. I am starting to bet on a pause on the next meeting again but it’s too early to tell.
A 0.25 bps increase after 17 straight would have little real effect on the level of interest rates, bringing them to a level which may still be too low to remove the high alcohol content from the punch bowl which has fueled rampant speculation in emerging markets, housing, and precious metals. Core inflation appears to be above the level the Fed is supposedly targeting, so if a credible commitment to an inflation targeting regime is the goal, then they should tighten.
But I actually expect them to conveniently forget about that plan, and focus instead on signs of economic slowing in order to justify a pause. I also expect the meeting minutes to contain cheap talk about a plan to vigilantly monitor economic conditions, and hold options open for another rate hike up the road. Meanwhile, Wall Street will party like it’s 1999 again…
Perfectly stated.
I truly love the high alcohol content…more more I’m still not satisfied!
Yippee - we get 151 proof inflation.
“MARKET SNAPSHOT
U.S. stocks turn lower after Fed decision
Market players unnerved by the fact that one FOMC member dissented
By Leslie Wines, MarketWatch
Last Update: 3:24 PM ET Aug 8, 2006
NEW YORK (MarketWatch) — U.S. stocks were lower late in Tuesday’s session, after the Federal Reserve, as expected, took a break from its steady stream of quarter-point interest-rate increases but left open the possibility of another rate increase as early as next month.
Analysts said investors were also unsettled by the fact that the decision was not unanimous, with one Federal Open Market Committee member voting for another hike.”
I seem to have been right on all counts except for the market rally. Perhaps the markets are less focused on the stimulative effect of the pause, which was already priced in, and preoccupied with consternation over whatever factors led the Fed to pause?
Did someone forget to turn on the plunge protection machine after today’s Fed meeting announcement? It would have been a good day to have owned some homebuilder puts…
http://tinyurl.com/fzeuw
Too bad there have been many bad days in the last couple weeks! Still today was a good day and it looks like txchick had some decent timing after all.
Not kidding on those bad days, feep. I did expect the HBs to rally today (and then to decline over the next few months). It’s why I’ve held on, but it’s been painful.
netbank ntbk is out with earnings/losses!
highlight:Heightened Mortgage Repurchase Activity. Our indirect conforming and non-conforming mortgage operations experienced markedly higher repurchase requests on loans previously delivered to investors. Provision expense within our Financial Intermediary segment totaled $20.3 million this quarter, an increase of $13.2 million from last quarter.
the mbs are rolling home!
from germany jmf
http://www.immobilienblasen.blogspot.com/
By repurchase do they mean that the MBS they were issuing had to be bought back from the investors who bought them? Or are the investors stuck with the MBS, but because they paid the guarantee premium the bank had to pay the interest? What’s exactly happening here? I feel this is the exact behavior that will cause lender tightening–not the FED raises.
repurchase means that the loans defaulted before the required seasoning period, usually 12 months, although there are alot of loans missing the first payment (read fraud) these days.
although there are alot of loans missing the first payment (read fraud)
That’s just amazing. boulderbo, are you in the banking industry? If the loan defaults at 12months + 1 week (day, hour etc), does the invest get left holding the bag?
whoops: “invest” -> “investor”. Need more coffee.
Yep, it is a form of self insurance. Esentially a money back gaurantee. “Hey, I bought this crummy income stream from you 3 months ago and now it doesn’t work.”
Yep. Can’t wait to see the big boys’ annual report for 2006. I think the repurchases will be up by an order of magnitude. Hard to swallow that kind of loss.
This is good stuff jmf….Thanks for bringing it to the blog…
this is fantastic stuff. I’d love to read more about buybacks and, finally, when they quit buying at all.
These two annoying clowns have been advertising pretty regularly on the TV here in the Boston area.
http://www.soldin70days.com
They claimed they will buy the house from you if they cannot sell it in 70 days.
The last time I saw this type of gimmicks was during the last RE bust in the early 1990’s.
I am sure the “guaranteed price” is a low ball price.
The interesting thing is most of the listings posted on their website is sold.
Hmm, I wonder if all the listings are actually their…
I wonder how these two CONvince buyers to fork over the moneyfor an overpriced POS in one of the most overpriced, and declining markets in the US. Who knows, they could be Beaconst for all we know; although they do not look smart enough to have a ged…
Neighbor is a realtor in neighboring area. Small NYC Northern suburb. Pearl River , NY. Now says she has MLS of 82 single family houses on the market. Says until this year she never saw more than 30 or so. Oy! They are not moving. Says they’re mostly 10-20% over realistic market . Gonna get a lot worse says she.
Three different ’senior housing’ developments planned in the immediate area. Many residents are retirees who’ve been here since the late 60’s , 70’s and are tired of mainaining home and paying the ever-escalating taxes. Want to dump their bi-level for 600k and buy a nice single level semi-attached in the new Hovnanian community or whatever (I don’t feel all that bad for these folks though , their sense of entitlement is dumfounding). So 300 or so new senior living units coming out next year or two supposedly and , of course the Silver Panther-AARPers gonna make sure than the town council gives local residents preference of buying in , and what ya got? Another couple hundred Capes and Raised ranches dumped on the market in the next year or two. Oh brother.
My mom said the recent AARP newsletter had a bit about the housing bubble!
This thing is really gaining steam.
Ironically, this week the Discory Channel was running a special on the overloaded train that crashed into San Bernardino a couple of years ago.
It was moving so fast that the brakes melted the steel and the train accelerated to its eventual demise taking out a couple of unoccpied homes.
Unfortunately, the 70% of the nation is on the train and it ain’t gonna be pretty.
My parents are planning on going into a senior community in 2007/2008. (The model home was just finished.) What I’m wondering is this - these communities are not cheap. If the area real estate market corrects signficantly, would these communities as well? And if my parents bought now, but the home isn’t ready until 2008 - are they stuck with whatever the price is now (even if the surrounding area takes a hypothetical 25% or more haircut)?
eastcoaster-you might want to ask the builder about a price guarantee if your folks put down a deposit well in advance of construction. I know that D.R. Horton is offering this at some locations in CA. Basically, when your closing date comes they will give you the unit at the current pricing if it has dropped during buildout. They know the game is up and they will have alot of unhappy homeowners if they did not offer this “protection.”
Rockland County has been benefiting from people fleeing NYC prices. From what I understand some people are more than willing to pay upwards of $700 thousand for a 4-bed, 2 bath, 30 yr old bi-level as they would pay that much for a 2 bedroom co-op in Manhattan.
First of many
Blow is struck against bankruptcy law
11:26 PM CDT on Sunday, August 6, 2006
Consumer attorneys have scored a significant victory against the new bankruptcy law.
A federal judge in Dallas ruled recently that a provision of the law is unconstitutional because it prevents lawyers from giving their best advice to clients in financial distress.
Critics of the Bankruptcy Abuse Prevention and Consumer Protection Act say the law, which went into effect last fall, caters to the credit card industry while putting unnecessary and harsh burdens on consumers who legitimately need relief from crushing debt loads.
Susan B. Hersh, a Dallas bankruptcy attorney, filed suit to challenge a provision of the law that forbids an attorney from advising a client to take on additional debt before a bankruptcy filing.
The provision was intended to discourage unscrupulous bankruptcy filers from taking on debt with the expectation that it will be erased in the bankruptcy case.
U.S. District Judge David C. Godbey ruled the provision “was facially unconstitutional.”
“Rather than changing the system to close the loopholes or penalize those who take on such debt, Congress … enacted a prophylactic rule, banning the bankruptcy attorneys from advising their clients to take on additional debts ‘in contemplation’ of bankruptcy,” Judge Godbey said.
“Without addressing all the complexities of the bankruptcy law, it seems quite possible that sometimes taking on more debt could be the most financially prudent option for someone considering bankruptcy.”
Examples include refinancing a loan to get a lower interest rate and getting a car loan so a debtor has the means of getting to a job, Judge Godbey said. Thus, the provision in the law prevents lawyers from “advising clients to take actions that are lawful” and “unconstitutionally restricts Hersh’s speech,” the judge ruled.
Ms. Hersh said in an interview that the provision in the law is such an “arcane restriction on the attorney-client relationship that it was just absurd.”
‘Like a thief’
Overall, the bankruptcy law “made everybody out to being a crook, liar and thief,” Ms. Hersh said.
“It treats everybody almost like a criminal when the majority are just unfortunate,” Ms. Hersh said. “What they need to be able to do is to move on so they can rejoin the economy and the credit industry.”
The provision was overly broad, said Howard Marc Spector, Ms. Hersh’s attorney.
As a lawyer, he said, “They’re paying me to draw these fine legal distinctions. But in this particular situation, there is no distinction. All advice regarding borrowing is illegal.”
And the provision was unnecessary to boot, he said.
“The law says you can’t discharge debts procured through fraud,” he said.
Formal ruling pending
Judge Godbey hasn’t issued a final judgment in the case, so for now the law is technically still in effect, the lawyers said. And even when there is a final judgment, the federal government can appeal.
“It is obviously a ruling that’s still under review, and we’ve not made any determination of what our next step will be,” Justice Department spokesman Charles Miller said.
Meanwhile, the Connecticut Bar Association and the National Association of Consumer Bankruptcy Attorneys have filed a lawsuit challenging the same provision that Ms. Hersh did.
Ultimately, Mr. Spector said, he hopes consumers can “go back to their bankruptcy lawyer, and rather than getting some double talk about what the bankruptcy lawyer can tell them to do, they can rely on the fact that their lawyer can give them all of the answers to their problems, not just part of the answers.”
E-mail pyip@dallasnews.com
I expected something akin to this, I also expect a change in the BK law to allow Tax Liens to be eliminated by BK. With 10% of the people who bought houses in the last 3 years projected to go into foreclosure (see FDIC - Scenarios for A Recession), that is an incredible number of voters subjected to indentured servitude by current BK laws. Good post TX
animal sybol of 06
the mini stag
http://biz.yahoo.com/ap/060808/economy.html?.v=4
While out yesterday I saw several homes that had sat at least 6 mos, 1 close to a year, sporting “Sold” signs. Again, low end homes in rental neighborhoods.
Getstucco, I thought you might like this:
http://www.safehaven.com/article-5675.htm
“Debt cannot pay off debt. Only Honest Money pays off debt. The world is starting to understand that debt is not the way to a free and unencumbered life. Debt is a yoke that chains one down to a life of servitude to the man - rather than the freedom occasioned by the accumulation of one’s honest savings as wealth. The fruits of one’s labor.”
Bottom line, our system of fiat money, fractional reserve banking, parabolic increases in credit (debt) and the reality of compound interest eventually collide in a great financial collapse.
The always classic:
“Debt never sleeps.”
it took me a lot of thinking to get my brain around the fact that dollars are just debt and gold and silver are the only(well, just about) means of final payment.
You’ll reach an even higher knowledge when you’ll realize that gold & silver is also debt.
Ok, I bite. Explain and enlighten us.
I agree.
The problem with Gold/Silver is that they, like Fiat money, are only “worth” something because people believe they are a store of value.
Like Fiat money.
The only difference between them is that Gold/Silver are harder to extract from the Earth.
But gold and silver have few uses except Jewelry to the “common” man.
I know some people who were living in Argentina a few yrs ago. their currency crashed. Nobody took Gold and Silver as payment.
That said, if you had gold and silver, then they held their value (as a hedge) and could be converted to other currencies during that crisis.
But this may not always be an option. Look at history. Gold can be and has been confiscated and made illegal.
I like many people, keep gold and silver as a hedge. But mainly as a diversification hedge.
If our currency truly crashes so that we need gold and silver to make financial transactions, then you likely be unable to use it, as society will crumble.
just some thoughts.
clouseau
If our currency truly crashes so that we need gold and silver to make financial transactions, then you likely be unable to use it, as society will crumble.
So, to sum up:
To hedge against cash losing value, buy Gold/Silver.
To hedge against Gold/Silver losing value, buy ammo.
I’ve been wanting to setup an earthquake kit for awhile. Haven’t gotten around to it (bad Daddy!) but I guess it would work for a economic crisis kit as well. Water/food/ and yes, I suppose a little ammo. Primarily for trading though.
By all means, hold on to those Federal Reserve Notes. Maybe Max can explain how PM’s are debt, since you can’t.
House Inspector, what other fiat currency would you suggest in the event of a dollar crash? Confiscation? A small percentage of private gold was actually confiscated in 1933, most was hidden. As a successful entreprenuer, and debt-free saver, this speech helps to articulate my belief in gold as a store of wealth and a defense against theft by inflation and monetary manipulation as well as other ills of our society.
http://www.safehaven.com/article-5239.htm
“Gold is not money”
Sean Corrigan
May 18, 2006
An Excerpt:
“Reluctantly, I cannot fail to conclude that we are on a path toward ever less personal liberty and to ever greater violations of the sacred rights of private property.
Thus we are on a path where genuine entrepreneurialism and the creation of real wealth are very much hampered.
It is a path whose weary milestones are scored with the wasteful disincentives of welfarism and which is misleadingly signposted with the daubings of post-modernist voodoo, its billboards shrieking the slogans of group victimhood and emblazoned with demands for the suppression of the individual.
It is a path whose crumbling paving stones are being overrun by the toxic, green shoots of that shrill new Inquisition which is today’s cult of environmentalism.
It is a path that echoes to the cadenced tramp of men marching out to fight yet another vain war in the hope of postponing, by feats of arms, the impending decline of our present suzerains.
This is also, by necessity, a path to monetary adulteration and to a creeping corruption of body and soul.
It is a path beside which Atlas may, indeed, be seen to shrug.
In such a world, it is likely to be the case that people will, from time to time, seek to acquire holdings of a relatively scarce, high value-by-weight, easily fungible, liquid, storable, real asset as an alternative to their holdings of a much less scarce, eroding value paper asset, such as comprises today’s money.
In such a world, gold may therefore command a higher price than it did in more innocent times when the side effects of our ongoing decline were less severe and when the prospect of our fall was much easier to ignore.
If you hold that this kind of dread and defensiveness explains at least part of the metal’s rising price, it is hardly a cause for universal rejoicing. For, though it is understandable that gold’s long-suffering believers now feel gloriously vindicated, we must temper our present glee with the thought that the rally being enjoyed may be no more than a waypoint on our road to a self-imposed and wholly unnecessary ruin.”
Fred Hooper,
gold & silver (if interpreted as monetary units) are also debt because of the time value of money. As soon as your gold & silver enters the economy, it will be lent to extract the time value.
On of the ways it was accomplished in the days of the gold standard is banks issuing notes against a fraction of the gold reserves, “payable” in gold. Today, it’s pretty much the same, except the reserves are made of soft currency.
A discussion of monetary theory? Nah, to little time, to much to discuss. Gold is plainly not debt. Yeah, I was taught by the modern school of economics and finance, but the programmer logic in me always said “something does not compute” when it came to compound interest and the time value of money.
Maybe you’ll find these interesting:
http://www.safehaven.com/article-5661.htm
Antal E. Fekete writes regarding the Real Bills Doctrine, “No funding and no financing is involved. The bill is not a collateral security. It is simply a receipt for goods of a stated quantity and quality that has been delivered.”
Final payment for goods and services were made by the end consumer in the form of gold or silver coin, as were adjustments for added value between producers and merchants. The bank was a clearinghouse.
Paper and electronic money are subject to the time value of money (no store of value), but metals are not:
http://www.gold-eagle.com/editorials_04/laird103104.html
Studying monetary theory is an interesting and financially necessary hobby. I don’t pretend to understand it all.
Max, I don’t wish to get into a big discussion of monetary theory, but gold is not “debt” and modern monetary systems today are not “pretty much the same” as they were in the days of the gold standard. Maybe you’ll find some of the following articles enlightening (obviously, I’m a fan of Fekete):
Time value of money has little to do with gold. Gold loses little over time, and can be lent with interest:
http://tinyurl.com/jc9ps
but a lot to do with paper/electronic money:
http://tinyurl.com/m4hlt
Fekete’s essays are hard reads but thought provoking:
http://tinyurl.com/4mxbp
Fractional Reserve Banking now and then:
http://tinyurl.com/gzjx8
You also might be interested in a debate on Smith’s Real Bills Doctrine:
http://tinyurl.com/ecpdt
http://tinyurl.com/hpxd6
Good luck!
Fred Hooper,
it’s really simple really, no need to discuss the monetary theory. “Time value of money” is simply willingness and ability for money to be lent/borrowed. Clearly, regardless of the underlying value of money (either gold or something else), the money will be lent and borrowed, thereby making gold just as “debt” as dollars. Banks make sure that any hard money (gold coins, cash dollar bills, etc) are expanded into debt.
Fekete makes a mistake “Final payment for goods and services were made by the end consumer in the form of gold or silver coin, as were adjustments for added value between producers and merchants. The bank was a clearinghouse.” - untrue. In the gold coin days, the banks issued notes on the fraction of the gold reserves, so they were not “just clearinghouses”.
Again, regarding the total amount of money in circulation, the fiat and the gold systems are “pretty much the same”: gold money (M1 dollars) enter the banking system as the reserve, of which each bank lends a portion of, thus making the total money supply M3 equal to M1/r, where r is the reserve requirement.
Fred Hooper,
in order to think in abstract terms about money, here is a hint - what is the Saudi riyal backed with? What is the “reserve backing” of such currency? Oil.
What about the Chinese renminbi? The reserve is the labor force.
A currency does not have to be based on gold as long as there is (and there usually is) something valuable a country produces that has to be exchanged for the currency (per legal tender).
Come on, abstract terms? I can’t redeem currency for anything. Redeem a renminbi for a laborer? Redeem a dollar for what? This is what is meant by “irredeemable currency”. I agree that a currency is a valid exchange mechanism (gold is not currency), but unfortunately, I can’t buy the proverbial tailored suit for $26, or a 2000 s.f. house in southern california for $50K. The exchange value of a dollar has fallen by 95% since the gold standard was illegally abandoned. Wait till they move the decimal point one digit to the left. I should have better explained Fekete’s comments regarding RBD as it was a hypothetical.
As for Time Value of Money, it means that the value of a dollar or income stream in the future is discounted at an arbitrary discount rate to today’s present value. A dollar in the future is worth less than a dollar today. It’s been a long time since I got a degree in finance, but I don’t remember anything regarding “willingness” to borrow or lend within that area of study.
Have a great day!
“Look at history. Gold can be and has been confiscated and made illegal.”
Gold has also been deliberately crashed by the US govt, and I believe they have the means to do it again if they see fit…
http://en.wikipedia.org/wiki/Black_Friday_(1869)
(Sorry to repeat this post so often, but there are so many gold bugs out there who seem to be missing out on this bit of wisdom…)
Bottom line, our system of fiat money, fractional reserve banking, parabolic increases in credit (debt) and the reality of compound interest eventually collide in a great financial collapse
Well then Fred;….I guess we better just go fishing….
I’m ready! Mill Pond festival in September?
What’s this;….Mill Pond festival in September?
http://www.inyo.org/millpond/
OK Fred;…..I will try to make it…
Or, it may mean that our country is going to need educated individuals to counter the untrue statements as to why this happened. If the folks who know let the misdeeds slide, then this was all for nothing. I said it in my first post on the blog. This housing debacle is the tip of an issue on a grand scale called economic well being by central planners, vice the people. For our sake, if you understand the issue, explain it over and over, if necessary, to those who don’t. Once people do understand this scheme in the banking industry, folks will not stand for it happening again.
Like someone else said yesterday, I’ve tried unsuccessfully many times with a pencil, paper, and basic math. Unfortunately, because folks have heard otherwise from people who do it for a living, they don’t believe me. Strange psychology indeed.
Forget it.
Humans are stupid. At least when they’re not busy being dishonest.
They will beg you to let them ruin themselves and then complain that you forced them to do it later. This is why politics is a joke in my opinion.
One more way for stupid boomers to get fleeced.
Before any boomers jump on me, there are a ton of boomers buying coastal RE in Mexico and Central America.
http://www.ocregister.com/ocregister/money/housing/article_1234444.php
It will end badly, I have met some of them, they move to Mexico and resent the locals for not speaking English.
The locals will bleed them dry and then send them packing for home.
Having lived in Latam for a number of years, I can tell you that it takes nothing at all for property rights there to be forfeit. I believe that with a new dictator du jour, that all of those coastal properties can be “nationalized” for the best interest of the nation and given to their friends, family, cronies, and mistresses. There is a valid reason why most of the Illegal Inmigrants in this country come precisely from those countries. There is no social protection net, and there is no legal protection net.
Well said, that is why it will end badly.
Particularly when the locals after they bled you dry can vote to change the laws and throw you out, afterall they have no more use for you.
I remember 5-6 years ago about a WSJ article covering all the dot-com paper millionaires who bought coastal property in Mexico, only to have a court rule that the person who sold it wasn’t legally entitled to sell the land and all the owners were ordered to vacate immediately. I wouldn’t consider buying land overseas without a solid, legal knowledge of the laws and history.
Americans can’t buy coastal RE in Mexico, can they? I thought they could only lease it.
Americans can buy coastal property in Mexico via bank trust (bank holds the title). It’s not a lease–it can be sold at will without the bank’s approval; if a Mexican national buys, they get title, otherwise it remains as a bank trust.
I’ll remember how stupid boomers are every time I drive by the trophy home purchased by the 20 somethings for full price. It’s their first home! It was purchased from a 30 something contractor who had to sell it. It was one of the most expensive homes in a town known for its estates. If boomers appear more stupid in numbers its only because they’re the ones holding all the equity. I believe human nature remains constant across all age groups.
It was one of the most expensive homes in a town known for its estates…
well, actually I was confusing that price with that of another acquaintance who has the 2nd highest price of all the listings in town. $770k is lower on the “fine homes” rung. Above mentioned home is $950k and is waterfront.
Should I try and save a friend who I went out on a date with from buying an overpriced condo?
You run the risk of being wrong and losing a friend , even though I doubt it. Maybe just point them to this blog and other contrarian opinion forums so they can research both sides of the story before buying anything??
Probably yes, as it is the right and humanitarian thing to do. Do you hope the relationship might progress? If so, I wouldn’t want to get into a legally binding arrangement with a debtholder having just bought an overpriced apartment.
Only if you predict a financial future with this person.
It’s a little hard to do that at this point in the game. I’ll mention it in passing and never bring it up again. The last time I got into this situation, I did wind up engaged to the girl who I suggested NOT purchase said vehicle and almost wound up paying for it.
“It is a fallacy that the “bubble” has burst. There is no bubble.” http://tinyurl.com/mkvwk
If I were a realtor, I’d be very careful not to make statements like this.
Yeah , I trust these people ” multiple interest rate increases - 17 so far this year.”
17 rate increases this year? Just shows how ill-educated and out of touch some real estate salesmen are.
PS - has this forum ever uncovered why real estate agents feel the need to plaster their photos all over everything? I see insurance salesamn doing it all the time now too. Imagine going to a doctor or lawyer and having him hand you a business card with his photo and a bunch of ballons or something on it? You’d run in the other direction.
Real estate and insurance agents work in a market with small or no entry barriers, doctors and lawyers don’t. Otherwise, also doctors and lawyers would spend more time on marketing and business cards.
Doctors and to a lesser extent Lawyers are needed in times of dire urgency. RE and Insurance Agents are not. You can live if you do not buy RE or Insurance. You will surely die if you do not have a triple bypass.
Good luck with your bypass without having insurance.
We need doctors more than many other services. We need the work of farmers even more. That doesn’t prevent prices for food decreasing if supply is increasing more than demand. In the case of doctors and lawyers the supply is restricted, with the justification of consumer protection but also by a large desire on the supplier’s side to keep the prices up.
You also forget the very small percentage of the population that is able to afford, not only economicaly, but also intellectually, a medical degree.
In MA if you have an emergency, by law you need to be stabilized, and taken care off, insurance or no insurance. You can bicker later about cost, but at the moment of ocurrence hospitals are under the obligation to treat you.
Insurance and RE can be bought without the “expert” advice of the respective “sages”.
If you need a bypass without insurance, there are excellent doctors in India. You can get one for around $15000 there including an extended hospital stay. That is doable without insurance- not fun- but doable. So, you can even lower those costs too now.
veniceguy, Thank you for giving pinch-a-penny part of my answer: There are plenty of intelectually gifted Indian doctors who would like to work for better salaries in the US. They are not tolerated here, of course, due to power of the American doctors who fear correctly decreased incomes. With construction workers, the US is less choosy and tolerates plenty of them to depress construction wages. Doctors’ and lawyers’ wages are artificially kept high.
Believe it or not, academic research shows that familiarity breads trust. In well-controlled experiments, individuals who have seen the face of an individual in the past (and know nothing else about him/her) end up ranking that person as more trustworthy than someone whose face they have not seen. RE agents are just taking advantage of this basic feature of human psychology to get strangers to trust them.
“There is no bubble. Properties in our area were climbing at unbelievable rates, 12 to 18% for the last three years.”
Unbelievable, indeed. If they had thought about which forces drove that unbelievable increase, they wouldn’t be so sure that there won’t be an unbelievable downturn, too: bubble and bust.
You gotta understand the Realty Times market reports. Realtors pay for the RT newletters and then are allowed to write local market reports. These folks work in a very small area of suburban Philadelphia and probably don’t have a clue what’s going on anywhere else. By and large, state licensing authorities consider it a violation of the license laws to “promise” a value increase on a property but look at things like this as “puffery”. If you want a good laugh, go to realtytimes.com, then click “Local Market Conditions” at the bottom, then pick your favorite market.
it’s the unwinding of the credit bubble and the housing bubble.
Restaurant chains blame high gas prices, economy for decline in customers
It’s about time people figured out that the $7 applebees dinner is on par with a $3 Publix deli sandwich, or a $1.50 homecooked meal. Fast-casual dining chains are a ripoff. This downturn will be bad because of the large numbers of said restauraunts constructed in the past few years near cookie-cutter subdivisions.
Have you been to the supermarket lately? Unless it’s a pot of rice I can’t imagine spending $1.50 on something homecooked. $5 minumum, which indeed is better than $15 minimum at Applebees. A sandwich and a coke at the coffee shop is setting me back close to $10 now.
From my most recent safeway ad.
1 lb pork shoulder roast $2
8 slices of bread $0.40 (whole loaf is $1.50)
a tbl spoon of soy sauce and red wine vinegar ($.20 ea)
a good couple of squirts of ketchup (25c)–I’m not even making you steal it from McDs.
1/4 cup of sugar 10c is pushing it
water is free (will you give me the salt and pepper)
Roast the roast till nearly complete, then shred and simmer covered in water (enough to cover) vinegar, soy, ketchup and sugar (season to taste with salt and pepper)
Entree is $2.95 (you could spring for bbq sauce which might take it to $4)
Potatoes 1 lb 80c
Boil the potatoes serve with butter (25c 1/4 stick)
1 c frozen Broccoli or Cauliflour (I dunno these have been in my freezer for a while $1 seems conservative).
$2.05 for sides
$5 the extra dollar could buy a frozen fruit juice or a quart of milk (in a gallon).
$1.50 per person for 4. In this meal you get 1/4 lb of pork in a bbq pork sandwhich. Potatoes, broccoli
Dessert would take it to $2/person
cake mix $1
eggs this weekend 15c for two
oil 50c for all items
1.65 for dessert.
I think you could feed 4 with that, although it would be a ton of work and 1/4 lb of meat is a good sandwhich but can look a little small alone on a plate to some folks.
Prices were in the weekly flyer for Safeway or what I paid for the staples (eggs oil sugar). You couldn’t walk into the store with $6 but you could easily do two similar meals perhaps changing the meat or just roasting the pork.
I guess I stand corrected. Mmmmm, when are you inviting me over?
Bluto - that’s what I was getting at. The GF and I can eat at home for ~ $1.50 each the same meal that would cost $9 each at Applebees. Let’s take the ‘Club House Grill’ as an example
1/2 LB deli turkey - $1.75
1/2 LB deli ham - $2
Ore Ida french fries - $2
Loaf of bread $.85
Package of iced tea $1
I can make 3-4 sandwiches with all that meat. The per sandwich, fries, and drink cost is ~$1.50.
That is great news as the crowds will be thin for the 1-2 times per year I go to one of those places.
I don’t like waits in restaurants.
It seems like lately the waits are few. -
Gas prices are only partly to blame for the slowdown at national restaurant chains such as Scottsdale-based P.F. Chang’s China Bistro, Cheesecake Factory and Chili’s. Higher interest rates and the slowing economy are also worrisome to many consumers, who say the factors are affecting back-to-school spending and summer travel as well.
Great article. I have a PF Chang’s and Cheesecake Factory right across from each other in a nearby mall (Fashion Vall — San Diego). Those parking lots have been decidely thinner and there wasn’t any wait when I went one time recently. I had given up visiting these places becuse of the crowds in ‘04/’05. It’s over now baby!
Still Comfy at American Home
By Jonathan Moreland
RealMoney.com Contributor
8/8/2006 8:26 AM EDT
URL: http://www.thestreet.com/p/rmoney/financials/10302172.html
While most investors are betting the slowdown in the real estate market will continue, American Home Mortgage ( AHM) once again reminded investors last week that not all companies in the sector should be avoided or shorted.
American Home is an active mortgage REIT, which means that it originates mortgages as well as invests in mortgage-related instruments. It’s the largest originator organized as a REIT in the prime mortgage space, and origination generates the bulk of its sales. It also derives revenue from its investment portfolio and mortgage-servicing fees.
I first wrote about the stock three months ago, and it’s up 7% as of Friday. Important to that return — as well as to my continued bullish stance on the security — is its indicated yield, which is in the double-digit percentages as American Home continues increasing its payout.
Several positive trends continued from its solid first quarter through the second. Mortgage originations remain strong — they were up 12.9% from the first quarter to a record $14.9 billion. That stat probably surprises housing sector gloom-and-doomers — American Home once again increased its market share in an overall originations market that even the company expects to be down on a year-over-year basis. In this very competitive market, American Home’s option adjustable-rate mortgage products continue to be popular with homeowners.
As a result, second-quarter revenue increased 36.1% year over year (and 18.7% sequentially) to $276.8 million. Although net income also increased by double-digit percentages year over year, EPS was down. But that was expected, given the increased number of shares outstanding after last year’s secondary offering. The real news is that EPS of $1.37 handily beat analysts’ average estimate of $1.25.
With about half of American Home’s income regularly generated by the net interest margin earned on its $14.6 billion investment portfolio, increasing and improving the assets in that portfolio is a main focus for the company. To that end, American Home continues to replace mortgage-backed securities purchased from other entities with self-originated loans, which have a higher interest rate for American Home to harvest.
In the second quarter, American Home added $1.2 billion worth of self-originated loans to its portfolio, bringing that category of loans up to more than a third of its total portfolio. That percentage is expected to increase, as is the size of the portfolio itself.
Importantly, American continues to hedge against the risks to its portfolio that everyone seems to expect to play out someday soon.
The company strives for a duration-neutral portfolio (which theoretically makes it agnostic in terms of where interest rates are headed), and purchases mortgage insurance to protect against the extra credit losses most expect from option ARM customers. The company also said in its earnings press release that it has begun to hedge the value of its mortgage-servicing assets against the possibility of declining interest rates.
A representative of the company told me that they aren’t trying to game what the Federal Reserve will do, but that they thought that mortgage-servicing assets had merely reached a size significant enough to begin hedging.
Of course, not beginning to hedge the mortgage servicing assets would have been making a bet that rates would continue higher. To most equity-oriented investors like myself, it is this sort of decision — to hedge or not, how much to hedge and what instruments to use for such an endeavor — that makes a security like American Home inherently risky. With so many moving parts on the investment side, it just seems unlikely that there isn’t a chink in one of the theories or formulas used to make American Home’s investment portfolio duration neutral.
The more you dig in, however, the more American Home’s means of generating income looks sound. Even the mortgage-generation side of the business has some built-in hedges, and not just by virtue of the fact that American Home’s business is geographically diversified (and therefore not overly exposed to the most obviously overpriced regions for real estate), and almost 90% in “prime” mortgages.
In the second quarter, 49% of American Home’s loan originations came from new-home purchasers and 51% from refinancers. If rates continue to rise, it will likely correspond with a stronger economy that is also helping to prop up housing prices more than most expect. That means there will continue to be a decent amount of equity in most people’s homes to keep the refinancing business brisk.
Should there be a major bursting of the housing bubble, bye-bye to refinancers, but hello to new home buyers who find housing prices more rational.
Of course, there are scenarios where both types of originations suffer simultaneously. But mortgage REITs like American Home won’t be the only securities to suffer during such dire economic straights, and anyone that concerned shouldn’t look to be long anything.
American Home’s board of directors isn’t expecting a doomsday scenario. With management reiterating its guidance for the REIT to earn $4.85 to $5.15 a share for all of 2006, and the company’s book value increasing again last quarter, to $22.35 a share, the company OK’d yet another dividend increase beginning in October. At that time, the present payout of 96 cents per share is set to rise to $1.01. This makes the indicated yield on American Home a very attractive 11.33%.
With American Home trading at a forward multiple of just around 7, a double-digit indicated yield, and seemingly hedged as well as any firm in its business against interest-rate expectations, I believe this REIT is still a buy. The stock’s technicals also continue to look solid, and — oh yes — American Home’s insider profile remains positive following the institutional and executive purchases I outlined May 2.
Get your unit before they sell out…
http://yochicago.com/today/index.php/permalinks/2006/08/08/parkside-of-old-town-homes-get-unfortunate-visibility-in-cabrini-shooting-coverage_2445
Sad, but some people will never have a clue. There’s a home for sale across the street from me. It’s been for sale since last Thanksgiving. The owners moved out around December, as I recall. I made an offer several times but it was rejected because they told me they were under water and owed more than it appraised for. I guess they overpaid quite a bit. I assumed it would be for sale forever, or until they lowered the price, or it was foreclosed. Well, last night I saw some people wandering around the yard so I went over and talked to them. They said they were the new owners. Guess what? They paid full asking price and thought they got a h@ll of a deal. People really are pretty dumb, in general.
Where do you live?
Cheyenne, Wyoming
Where were THEY (the new owners) from?
I had this discussion with my friend last night, where he asked: if prices are too expensive in the Bay Area, then why don’t I buy a fixer-upper, or buy something in another state, or another county, where things are cheaper? My immediate instinct was to smack him for being stupid, but instead I patiently explained that, for the most part real estate is overvalued everywhere and even globally, and conceeded that it is probably more overvalued in some areas than others– but in any case it is still not a wise investment based on fundamentals.
“…buy a fixer-upper, or buy something in another state, or another county, where things are cheaper?”
I love that reasoning. That’s why we don’t have a bubble in Chicago. Our prices aren’t as high a California so there’s no bubble here……morons!
Patience - there will be plenty more on the market.
One question I have, being a renter and a prospective buyer in the next couple of years, is how does a buyer find out if he/she is being jerked around by a seller underwater? For example, you make an offer to purchase, the sellers accept, even though they don’t have the cash to bring to the table at closing, being underwater. A giant waste of time, ties up the buyers deposit, etc.
Maybe sellers should be pre-qualified before listing!
sh%*!
Why didn’t I buy that condo last year when I had the chance!!!
I missed out on the market - I’ll be priced out forever.
Last open house my wife and I decided to attend/taunt, I got the usual mindless mumbojumbo “priced out forever…” (we were the only ones in the place) I looked at the agent with my best poker face and said, “wow… and forever is a looong time”. She looked at me kind of wondering if I were some nutjob or the best thing that happened to her that day. Apparently she went the more optimistic route since she then proceeded to reinforce the concept of always rising home values and how she -might- be able to put in a good word for me with the owner to see if he would come down a few grand -winkwink, nudgenudge-
These people need to be put out of their misery
LOL! Realtors like that are such an easy target. You’d think their thought process could go beyond one level, especially since so many people rely on their advice regarding the most expensive puchase they’ll ever make. Scary stupid…
Remember, realtors in CA don’t even need a high school diploma to be licensed.
A developer wants to build an affordable planed community near Sun Valley in Idaho. While the goal is admirable, I bet any development likes this would be snapped up by investors unless the market returns to normal.
http://www.ktvb.com/news/localnews/stories/ktvbn-aug0706-spring_creek.1bd9bfd.html
bob kamikazi- lazy people don’t get rich
aren’t all his books about getting rich w/o working
Although totally from left field at this moment, I said a long time ago that I would let people know when I saw the first “”price reduced” sign in Venice, CA, at the core of speculator land. It wasn’t at the beach itself, but it was on Rose Ave/Beethoven at the edge of Venice, that I have seen my first price reduced sign in the area. Some houses do seem to be selling, but I have seen most sitting here since early spring.
It seems “bubble” is a term now being used for subjects other than real estate…
http://www.philly.com/mld/inquirer/15160639.htm
The interesting thing to me is - we’ve heard anti-bubble arguments about how they’re “not making anymore land” or the “population is growing so fast that home supply won’t be able to keep up with demand” - well if they’re anticipating fewer college students in the coming years, won’t that mean less future demand in markets such as real estate as well?
University enrollments are typically countercyclical to the economy. If we have a recession, I wouldn’t be surprised if we have higher enrollments.
Also expect a higher number going into military service.
The military has begun to meet its recruiting goals. The Army started exceding them a year ago much to everyones amazement.
They changed the target.
The point I’m trying (poorly) to make is that if they’re anticipating fewer college students, doesn’t that mean a smaller future population? Less people + More real estate = Lots more real estate.
I’ve heard the arguments that population is growing, but with people having fewer kids than in the past, is that really the case?
The majority of our population growth is coming from immigrants, primarily Latino Immigration.
Pause. It is official.
Ben stinks of dead fish, if ya know what I mean.
“BWAHAHAHAHA” was my reaction when I read this posting from the LA Craigslist RE section:
http://losangeles.craigslist.org/sfv/rfs/191598167.html
“COMPARABLES ARE FROM 1.1 MIL TO 1.5 MIL SERIOUS PARTIES ONLY. NO BROKERS. OWNER IS R.E. LICENSED”
Most excellent catch. If I were broker I would not wish to list this. Why waste time and money on a pipe dream.
I caught a few mentions here about enrollments down in many school districts this fall. Anyone have anecdotal or hard #s on this, especially in the bubble areas?
Kindergarten enrollments for my kids’ school are 15% under projections, and I’m hearing similar for other schools at the better-scoring/more expensive neighborhoods end of the spectrum. This in the no-bubble-who-us? heartland.
I don’t think people can be leaving both the coasts and the heartland at the same time. Hey, maybe I’m wrong.
Feepness: yes, the kids are disappearing to the same place that socks in your laundry go to…
I don’t know. This is just an errant, preliminary thought - and I realized right after posting that it’s premature, too; most schools aren’t even back in session - but I’ve read enough wonky articles about schools getting an enrollment shock in various locales, that I think it bears watching. As the public school environment deteriorates, are more parents pulling their kids and homeschooling? Is the fabled “California exodus” of families migrating to Tampa and points beyond? Does it go by zip codes - i.e. are a disproportionate # of keys being left on granite countertops vs. formica? (We know that serious depreciation will wreck property tax revenue across the board - but it would sure be a different animal if the early tax base damage fell disproportionately on more affluent areas.)
I don’t have too much of a guess here, but I’m fascinated by the demographics the way other folks hang on the latest home sales stats.
“I don’t think people can be leaving both the coasts and the heartland at the same time. Hey, maybe I’m wrong.”
unless they’re illegals heading home
It is a fact in Orange County, CA.
Huntington Beach and Fountain Valley school districts have been trying to sell elementary schools to developers.
The sale failed, i think it was Centex.
Shannon used to post here she can elaborate.
Looks like they converted the old county jail into a duplex (jailversion?)
http://boise.craigslist.org/rfs/191585875.html
Although they decided not to do anything about the rates this time, peak oil will effect other costs and prices will increase substantially. To counteract the higher cost of living, the rates will go up. I still think they will be 7.75% by the end of 2009. But I’m no economist.
Which one do you prefer:
“Home Sales To Hold Fairly Steady For Balance of Year:”
http://www.realtor.org/PublicAffairsWeb.nsf/Pages/AugustForecast06?
or
“NAR: Home Sales to Hold Stable for Balance of Year”
http://www.realtor.org/RMODaily.nsf/pages/News2006080801
BTW, on RealtyTimes they have a link to the
“National Association of Realtors”, except the link http://www.nar.org is not
what you thought it would be (or maybe there’s a hidden meaning here?)
http://realtytimes.com/rtapages/realestatecalendar.htm
(Click the “National Association of Realtors” link on “NAR Leadership Summit 2006″)
I’ve been wondering how many people might be unknowingly running afoul of the AMT. I did some preliminary checking, and it looks like for purposes of calculating AMT, a homeowner can only deduct interest on a loan (up to $1 million) for the amount used for purchasing, renovating, etc. But, they can’t get a deduction (for the AMT) on any equity that they “liberated” for toys or other non-qualified purposes. Considering the vast sums being borrowed through re-fis and HELOCs, it seems like at least some people are going to run into AMT problems, which could push them deeper into debt. I’m not that experienced in this area, so I would appreciate any thoughts from those with more knowledge of tax issues.
I’ve been loosely following this, and have posted about it before. I think there is the potential for some profit here. Perhaps we could get the word out. Additionally, as there are many here with real money, maybe an investment is in order? We need this to combat the Realtors stonghold on listings.
What do you all think about this? Could we help this guy out and spread the word? I believe with all the contacts here, we could easily get the qualified signatures to put this on the ballot. Also think we could offer to help with conventional advertising. Lots of talent here, and some with “Hollywood” connections???
—————————-
“Long-time nemesis of NAR, San Francisco anti-trust attorney David Barry has failed in his recent attempt to put an open-to-the-public statewide MLS on California’s November ballot. Barry had filed a ballot initiative with the California Attorney General Bill Lockyer, claiming that a public MLS would end the real estate industry’s monopoly on home listings.”
http://realtytimes.com/rtapages/20060804_barryinitiative.htm
Open MLS is the right idea, Barry is the wrong guy, doing it the wrong way.
All that is needed is for somebody (Google or Craigslist?) to do a comprehensive listing system, and everyone would use it.
Who says you need the cooperation of the realtor organizations?
Look at http://www.loopnet.com
They just put together a listing website for commercial prpoerties, and now everyone on it. They didn’t get the blessing of the commercial brokers - they just put together the right package and everyone started using it.
I’ll partner up on this - anybody else in?
Jim,
I’ve tossed around the idea for a while & have some good ideas for this (IMHO). Also willing to invest a fair amount if it looks really do-able.
If you want to work on this, let me know (I think you have my e-mail, if not, let me know).
Anyone else interested?
I’d be interested in hosting it - I’m bringing up some new content management software that needs some testing - it might be interesting to see how it works for this sort of application.
sm landlord,
email me at jim@jimklinge.com
People are reading way to much into this. Ben Bernanke is a gradualist. He has plenty of time to keep wringing out the dishcloth. The tough words were probably at least in part genuine threats, but it doesn’t matter. The bubble goose is cooked anyway, or at least some are hearing fat lady tones.
Was this posted yet?
http://msnbc.msn.com/id/14252223/
Look at the Las Vegas thread - the last one of the day.
HOLY MOLY! Look at this! I want it!
http://phoenix.craigslist.org/apa/191765653.html
Txchick
Your looking at 500-600 a month in utilities with a house that big.
Az houses have too many windows. Its so bright out in AZ all thoses windows are just annoying. People put dark screens on their windows in AZ. Especially west windows.
Wachovia bank was on the news tonight here (NoVa). They were interviewing a “senior suit ” who was talking about how you need to talk to a loan officer if you can’t make your payments. They can re-structure or refinance the loan if need be.
Somewhat surprising. Methinks someone is already concerned about defaults.
Stcamp