Bits Bucket And Craigslist Finds For August 30, 2006
Please post off-topic ideas, links and Craigslist finds here!
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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U.S. WEEKLY MORTGAGE APPLICATIONS FALL 0.9%
WASHINGTON (MarketWatch) — The number of applications for mortgages dropped 0.9% last week as interest rates bounced off a five-month low, the Mortgage Bankers Association reported Wednesday.
The number of applications for home purchases fell 1.6% to the lowest number since November 2003.
Applications for refinancing an existing loan inched higher to a five-month high.
Applications are down 22.4% from a year earlier — a reflection of the weaker real-estate market.
Loans to refinance existing mortgages accounted for 41.5% of total applications last week, up from 40.6% the week earlier. It’s the highest share for refinancings since February.
Adjustable-rate mortgage applications increased to 26.8% of total loans, up slightly from 26.4% the previous week
graphs etc on http://calculatedrisk.blogspot.com/
maybe posted befor but this could lead to further pain
A band of five government regulating agencies led by the Comptroller of the Currency, appear likely in the next 60 days or so to pour cold water on the hot–and lucrative–nontraditional mortgage loan market adored by banks and mortgage brokers. These include the popular, but deadly interest only and pay-option adjustable rate, in which borrowers decide each month how much to repay.
http://immobilienblasen.blogspot.com/2006/08/regulierung-subprime.html
‘”Tightening underwriting guidelines and requiring delivery of excessive disclosures to consumers may stifle innovative product development before we have evidence that these products are actually detrimental to either consumers or the financial institutions that offer them,” Cindy Manzetti, chief credit officer of Fifth Third Bancorp (nasdaq: FITB - news - people ), wrote recently to regulators. Manzetti’s letter did point out that her bank does not offer pay-option mortgage products.’
So I guess Cindy needs to wait until the next couple of years, when we get to see first-hand how billions upon billions of dollars in resets sink many non-wealthy households, who inappropriately used these exotic loans to purchase unaffordable homes, then subsequently treated home equity gains as a third income source, into bankruptcy. I guess Cindy and many others in her industry who see no risk yet are fooled by randomness.
I am curious whether anyone sees a potential “fix” to the situation through govt intervention? One thought that comes to mind is that if the Fed could engineer the right kind of soft landing, as the resets would not be as painful in the case that interest rates at reset time were no higher than when the loan was issued? But this sounds quite a bit like a respiking of the punchbowl, with the attendant encouragement of gambling activity in home purchases, home flips and other gambling activities which brought about the bubble and the conundrum to begin with. In other words, this would have the combined effect of pushing back the day of reckoning and making it worse when it ultimately occurs…
P.S. Es ist sehr frueh hier auf morgen in Portland Oregon…
ps:
it is typical.
as always this guidelines/rules comes way too late when all the damage is already done.
it will be importend how the rules put into action or if the powerfull lobby can /avoid/dodge this (as it seems is very often the reality).
So your question is can the Fed manage to keep interest rates perpetually low? I doubt it.
From the Financial Times
The myth of central banks and inflation
“…what happens if the winds of globalisation turn? What if a combination of economic and political problems leads to a sharp slowdown in China? What if security checks in the wake of a terrorist attack lead to a sustained pause in the expansion of global trade? What if a slowdown in trend growth exacerbates the fiscal problems that most countries are already going to face as their populations age? Or, more immediately, what if there is a disorderly unwinding of the oversized US current account deficit? Having built up public expectations about their ability to deliver high growth and low inflation simultaneously, central bankers might have a hard time explaining what went wrong.
Perhaps central banks will get lucky and not have to face any severe problems for another couple of decades but, unfortunately, that is not likely. Thus, there is some urgency in the need for central banks to take greater pains to avoid taking too much credit for upside performance…”
By Kenneth Rogoff
Published: August 29 2006
http://tinyurl.com/mm95h
New York university economics professor Nouriel Roubini goes as far as to say that: “Every possible indicator of the housing sector that has been coming out in the last few weeks…suggests that the housing market is in free fall.” He reckons that “this may end up being the biggest housing bust in the last 75 years” - in other words, since the Great Depression.
US consumers have been relying on the housing market to fund their debt-fuelled spending. A housing bust of these proportions would be “enough to trigger a US recession…expect the great recession of 2007 to be much nastier, deeper and more protracted than the 2001 recession.”
But stock markets are still hoping against hope that the Federal Reserve will pull a rabbit out of its hat, just as Alan Greenspan always seemed to do. Although the consumer confidence data battered US markets in early trading yesterday, the Dow and the S&P 500 both closed higher. The mood swing came after minutes from this month’s Fed meeting showed that the bankers decided to keep rates on hold because they expect US economic growth to slow down.
The trouble is that the way Greenspan kept the US economy afloat after the tech bubble burst was by inflating a newer, bigger bubble, the US housing bubble. But now that the US housing bubble is bursting, it’s hard to see how you could find another, bigger bubble to cushion the impact - after all, there are few other assets that are owned by such a significant portion of the population.
Besides, the US is now facing rising inflation, which makes the interest rate decision a much tougher call than in Greenspan’s day. The Fed minutes also indicated that the bankers are keeping their options open, and many still believe further rate hikes will be needed. In fact, Mr Bernanke’s fellow central bankers are among those who think that the Fed is going too soft on inflation.
The Bank of England’s own Charles Bean had a dig at US monetary policy at the central bankers’ annual trip to Jackson Hole in the States over the weekend. He argued - much as we do here at Money Week - that using core inflation, which excludes fuel and food costs, makes no sense and understates the real rise in living costs. The Fed of course is fond of this core measure for that very reason.
But Mr Bean points out that high oil prices are at least in part due to rising demand from China. One of the reasons that Chinese demand is rising is because the Chinese are building so many factories, which then produce cheap goods, which they then ship back to the West, and the US in particular.
On the one hand, these cheap goods push down inflation. On the other hand, Chinese demand is pushing up fuel costs. One goes hand in hand with the other. But the ‘core’ inflation measure conveniently ignores the higher fuel prices, but includes the lower consumer goods prices, giving a measure of inflation that is ‘lop-sided’, as Martin Hutchinson puts it on Breakingviews.com. And that means interest rates are set too low. This is obvious when you look at real interest rates, which are adjusted for inflation. US real rates are sitting at just 0.5% in the States, if you use the headline inflation rate of 4.8% rather than the core rate of 3.1%. That compares to 2.35% in the UK.
It’s not surprising that Mr Bean is annoyed. According to Credit Suisse, the US is responsible for the pick-up in global inflation since 2002. “US domestic price pressures are threatening to put an end to a global disinflationary process that has been a constant trend in the global economy since the ‘90s.”
In other words, by going easy on the rate hikes, the US is making other central bankers‘ jobs harder. “An overly accommodative Fed has flooded the world with dollars,” adds Martin Hutchison. “That makes it more difficult for other central bankers to control inflation; interest rates have to rise further and economic activity is choked off.”
With the inflation threat much greater now, it will be far harder for the US to justify cutting interest rates to see off recession, without foreign holders of US dollars concluding that the country is just trying to inflate its way out of its debts.
To be fair to Mr Bernanke, it’s not entirely his fault - he‘s in trouble whatever he does with interest rates. The seeds for the 2007 recession were sown a long time ago, under his predecessor, the man some called the ‘Maestro‘. We reckon that posterity will come up with a few more, less flattering names for Mr Greenspan once the housing bubble has detonated.
We’re in trouble if “Mr. Bean” is smarter than Mr Bernanke.
So your question is can the Fed manage to keep interest rates perpetually low? I doubt it.
I think the question was “I am curious whether anyone sees a potential “fix” to the situation through govt intervention?”
There are many options open to a government that wishes to intervene. Some subtle and others not so subtle.
You can affect the supply side by placing a moratorium ( as currenly being proposed in the UK) on new building. Larger more flexible builders could then survive by being offerred contracts to build public buildings instead of houses while smaller purely homebuilders would fall by the wayside. Realtors could then say “they are not building any more houses so get in before the price goes up”.
The government could buy up apartment blocks and use them as subsidized low income homes. Where people are already living in some of the properties with upside down mortgages they could be bought out under the “Emininent Domain” law. Others could just be demolished to make way for other projects which were deemed to be in the public interest.
They could buy apartment blocks or houses and use them like the UK government (I think an article was posted on here last week but I can’t find it) to subsidize government employee housing under an equity partnership scheme.
They could increase demand by giving amnesty to illegal immigrants like they did in 1996 (wasn’t that about the time the property market upturn began and credit policy started to become more relaxed?).
They could remove cotrolled rent restrictions making it easier for landlords to inrease rents and justify higher property prices.
They could introduce a loan scheme like the “Evergreen” one introduced in the UK this week where you can pass your mortgage down to your children when they inherit the property. In effect the capital is never repaid, only the interest.
They could talk the market up stating that “the government is not prepared to see a housing crisis in this country and would step in as a last resort, buying up assets, if things got too bad”. Taking any fear out of the market.
They could write off negative equity debt in the same way they do with thirld world debt. Provide guarantees to banks etc etc etc.
There is virtually no limit to what the government could do, but the question remains (referred to on my previous posting) why would the government want to influence the situation?
There will be net gainers and losers at the end of all of this. History tends to support the fact that the top 10% who own 70% of the wealth in this country do very nicely out of wealth redistribution. The rich get richer while the poor get poorer.
Since most of the people with power and infulence are rich it doesn’t bode well for rest.
I am curious whether anyone sees a potential “fix” to the situation through govt intervention?
Firstly , you need to establish whether the government;
believes there is a problem
wants to fix the problem
deliberately created the problem
There is very little evidence to date suggesting the government is overly concerned about housing. There have been no “irrational exuberance” comments, little in the way of “jawboning” and it was Alan Greenspan that recommend buyers should use ARM’s rather than fixed rate mortgages, which seemed rather odd at the time.
All of which suggests that everything is going according to plan. Maybe we are just not aware of the plan.
‘”Tightening underwriting guidelines and requiring delivery of excessive disclosures to consumers may stifle innovative product development …”
I’m shocked to hear this from 5/3 Bank. They are headquarted here in Cincinnati, and widely viewed to be one of the most conservative banks around (the do not offer neg amort loans). If the highly conservative banks are calling for no controls on lending, then what does that say for the rest of the industry?
Excellent post - I have been wondering when the gov regulators are finally going to get a clue that these funny loans are going to lead to a long term disaster.
The industry-types keep offering assurances that these loans have done just fine in previous cycles. They neglect to mention that it is different this time, thanks to a deregulation juggernaut run amok leading to a complete abandonment of lending standards and the ability of anyone who can breath to get just about any kind of loan they wish.
Further, they also like to point out that there are no problems yet, and therefore it is unlikely there will ever be any problems. But we have already seen skyrocketing loan default rates off a very low base in the markets where exotics were most prevalent, and now that home prices are falling, we can expect these numbers to keep growing for the foreseeable future.
“They neglect to mention that it is different this time, ”
And before these loans were made in a high and dropping interest rate environment, but the new influx of these loans began in a super low interest rate environment.
Amazing how little details like long-term interest rate trends somehow are omitted from these analyses…
Should also consider the group of people taking these loans :
Then: I expect a decline in interest rates so it is a good strategy to take an ARM. When IR reach a lower level, I will refinance with a long term fixed. A financially savy crowd.
Now: What is the lowest payment I can get and where do I sign? A relatively clueless crowd.
Now you know why World was sold to Wachovia. A truly brilliant move.
I work at World Savings, on their web site. Wachovia claims there will be jobs for all for at least a year or two. But I don’t believe that for a second…just waiting for the other shoe to drop.
Another thought: I am wondering whether the political will exists to pre-emptively enact guidelines on exotic loans, as it may be sufficient from a CYA standpoint for many of those who suggested this regulatory solution to have merely said so. Now when the inevitable bust occurs, they can point to the fact that they warned about what would happen and proposed that measures be taken to fix the problem ahead of time. Actually going the next step and putting regulations into effect runs the risk of making the hard landing underway even harder.
I would expect congress to attempt to pass a law that enacts tighter credit standards and protect lenders from lawsuits.
Actually going the next step and putting regulations into effect runs the risk of making the hard landing underway even harder.Agreed. Best not to touch a thing until the dust settles.
I just posted alluding to this on the last message thread. My opinion is that the FED will cease rasining rates for a good while , and a massive campaign undertaken to get the hammerheads to refi into fixed rate mortgages. Fixed rates will be ‘encouraged’ for new buyers , and refi’s alike - even if it means a disconnect - raising standards for new buyers and lowering standards to get ARM holders into the new fixed loans. The Fed is simply not going to let the RE market collapse and hurt the banks if they can help it. After doing all they can to soften the blow here, they will resume raising rates to combat the inflation that should inevitably follow the explosion in money supply seen during ‘bubbles’ tenure as ‘maestro’.
Impossible. A fruitless effort, if attempted.
Agreed.
With the inflation threat much greater now, it will be far harder for the US to justify cutting interest rates to see off recession, without foreign holders of US dollars concluding that the country is just trying to inflate its way out of its debts.
See complete article above on government inflation figures are underreported from David Cee
In the last three weeks I have made good money with puts on the following lenders: CORS, LEND, FMT and CFC.
I am recently bought and plan to buy more 07′ in the money ($40) puts on NDE (IndyMac) and FHN (First Horizon Nation). These stocks were down hard Friday and Tuesday (yesterday) and did not recover after the Fed minutes were announced. The mortgage lenders are experiencing lower originations, reduced margins (due to the yield curve) and increased defaults. This warning caused FHN to gap down, despite good earnings for last quarter. Their problems are only beginning, as all of these issues will get much worse than they are predicting, even if regulators don’t require tighter loan standards.
What is “put”? Is it the same as selling short?
I shorted CFC a few weeks ago.
A put is an option. Look up options online if you don’t know what they are.
I’m re-posting this from yesterday’s Bits Bucket (in case anyone wants more info on the impending OCC lending guidance):
Bad news on the mortgage lending standards front. I’ve been checking the OCC’s (Office of the Comptroller of the Currency) website regularly for their new lending guidance — which was rumored to be due out this summer. There seems to be a preview of the (apparently) weak guidance to come in a paper posted today:
http://www.occ.gov/wp2006-1.htm
It’s a study/report on the effect of various subprime mortgage lending products in the Chicago metropolitan area. The upshot, as far as my not super-close reading of it went, is that while no-doc and low-doc loans “unambiguously” create a much higher likelihood of defaults and foreclosure, the agency does not want to severely restrict or prohibit such loans. Instead, they want lenders to be more careful with their underwriting (whatever that means).
One annoying thing about the report that jumped out at me is the period primarily studied — 1999 to 2003. The fact that this was a boom period for the housing market is not considered a mitigating factor. Nevermind that this was a rosy time for home prices: The author concludes that ARMs, balloon payment products, and various other tricky types of mortgages pose no real problems for subprime borrowers. Well of course they didn’t then, if prices were going up. But, uh, what if they flatten or go down? An obvious question, you’d think.
very interesting thread from the people in the trenches:
http://forum.brokeroutpost.com/loans/forum/2/56148.htm
That is interesting. Tough noogies to all those FB’s. Time to learn the downside of excessive risk and leverage. Lord knows, I’ve endured it a time or two in the stock market and nobody cried for me, nor did I expect them to.
Yes, txchk, but you didn’t have to live in your stock portfolio!
I read down the mortgage broker thread, about fifteen posts, and wanted to just fold my arms on my desk and lay my head down. 100% financing…not for the average Joe homebuyer…what happened to the American consumer? In my mid 30s I began to wonder why courses on finance are not mandatory in our public schools…Especially for women.
I guess the trade off is we have a generation of sexperts who can roll a mean condom on a cucumber. Who needs a population of financial wizards, anyway?
Here is a sample of the raging debate taking place on the brokeroutpost forum:
Originally posted by shead
“Anyway you look at it, the market has tightened and borrowers like the one I have in Colorado, coming off a 2/28 next month and facing a 5% increase in rate are the victims.”
(Another poster’s response)
Victims?Of whom exactly are they victimts (sic)? The word victim implies that there is a victimizer.
I think that whoever recommended their current loan to them two years ago is guilty. Or perhaps, god forbid, your clients themselves are responsible for their own plight?
Why didn’t they pay .75 more for a fixed rate two years ago?
Your client didn’t invest in an annuity, he invested in real estate with other people’s money.
Promised rates of return are available on certificates of deposit, not real estate. In a free market, values decrease as demand decreases.
a bit of finger pointing, wouldn’t you say, eh? and they don’t even know that now our readers see them complaining, too.
That’s what I was going to say. Victims my ass! They were all fat and happy thinking they could flip off to a GF fopr 30-40% right about now. Tough shit.
If they are facing a 5% increase then they must have had a teaser negative rate for the first two years, so they must have realized they would be facing a big jump at the reset.
Good find…Book marked it!
Right now it looks like they’re beginning detox. Me thinks they’ll need methadone for their clients before it’s all over.
Nice post;….I aprticularly liked Anthony2325 comments towards the end of the thread….
This sh$% is funny!
Two of my favorites :
“Anyway you look at it, the market has tightened and borrowers like the one I have in Colorado, coming off a 2/28 next month and facing a 5% increase in rate are the victims. Also, doing 100% financing is coming back to bite them.
I must have had 10 calls this month with this scenario.”
“Victims?Of whom exactly are they victimts? The word victim implies that there is a victimizer.
I think that whoever recommended their current loan to them two years ago is guilty. Or perhaps, god forbid, your clients themselves are responsible for their own plight?
Why didn’t they pay .75 more for a fixed rate two years ago?
Your client didn’t invest in an annuity, he invested in real estate with other people’s money.
Promised rates of return are available on certificates of deposit, not real estate. In a free market, values decrease as demand decreases.”
Actually, youre a bit off on this. To some extent people are being victimized. Think about what a re transaction is in this context - it’s a financial investment. Do you think you could go to your broker and buy a mutual fund and have him say, contrary to the evidence, that the price of this invesment will never go down and get away with it? No, I think not. Yet, that’s exactly what any jackbutt that goes and gets a re license can do to you, or any of these moronic mortgage brokers. They are unregulated, and they told people exactly what they wanted to hear. Granted, it was up to people to some extent to understand the terms of the loan, and that they were going to have to pay more, etc, but the roi on these investments was mismarketed, and that is criminal.
Great site — bookmarked it also — thanks. Like several others, I thought the “Victim” post was outstanding. It will be fun to follow the “outpost” over the coming months.
A link posted yesterday led to the following piece, with some devastating graphs, indicating this is the worst housing market in 35 years:
http://www.safehaven.com/article-5766.htm
Sorry if the link has been posted before. Otherwise, definitely worth a read!
And of course, this will support endless speculation in Dallas residential RE by the geniuses from out of state. Not.
New arrivals fuel sharp drop in N. Texas incomes
Experts say influx of low-wage workers cuts adjusted pay 10%
12:13 AM CDT on Wednesday, August 30, 2006
By PAULA LAVIGNE / The Dallas Morning News
Layoffs, foreclosures, rising debt and other bad news about the economy would naturally put a damper on household earnings in North Texas.
But economic experts say the biggest reason for a six-year slump in median household income has been the migration of more low-income people into the region.
Figures released Tuesday from the U.S. Census Bureau show that from 1999 to 2005, the median household income in the Dallas-Fort Worth area fell 10 percent when adjusted for inflation.
The trend was the same in Texas and nationwide, but incomes fell harder in the Dallas-Fort Worth area.
DallasNews.com/Extra
See all the numbers from the U.S. Census Bureau
For many areas across the U.S., Tuesday’s mid-decade estimates provided the first local figures on median household income since the 2000 census. Economic information from the American Community Survey covered all areas with at least 65,000 people.
For the D-FW area, median household income in 2005 was $49,740. In 1999, it was $55,545, ($47,418 in unadjusted 1999 dollars).
The new information revealed the following trends locally:
•In Dallas County, the median household income fell 16 percent. Suburbs such as Garland, Irving, and Mesquite saw their incomes decline between 10 percent and 20 percent as well.
•Household income in Collin County dropped almost 15 percent. Collin County also lost its status as one of the 10 highest-income counties in the nation.
•Among the wealthy suburbs of Allen, Frisco, McKinney and Plano, declines in household income ranged from 6.2 percent (McKinney) to 22.4 percent (Plano).
Breakouts of various demographic groups in the D-FW area show that median household income fell steeper for Hispanics (19.6 percent to $33,493) and Asians (11.4 percent to $55,771) than the regional average. Incomes for blacks fell 9.5 percent to $34,388. White, non-Hispanic residents’ median household incomes were down 4.2 percent to $61,151.
Also Online
Making less in D/FW (.pdf)
Income declines (.pdf)
A drop in formerly high-income areas doesn’t mean that individual incomes in the region are suffering, although many people have certainly experienced stagnant wages, said Pia Orrenius, a senior economist with the Federal Reserve Bank of Dallas.
More likely, she said, the decline stems from more low-income people moving into the area – both immigrants and others who moved from other regions and states.
Poverty rates up
Changes in poverty rates, also released Tuesday, reflect some of that shift. The percentage of people in the D-FW area living in poverty rose from 10.8 percent in 2000 to 13 percent in 2005.
“The type of people we’re drawing into North Texas are less educated,” Ms. Orrenius said. Job growth is strong, she said, but many expanding sectors are hiring for lower-skill positions.
Bernard Weinstein, director of the Center for Economic Development at the University of North Texas, had similar theories.
“The lion’s share of population growth in this region is going to be among immigrants and low- to moderate-income minorities,” he said.
If the region continues to provide workers who haven’t graduated from high school or gone to college, then the workforce is going to respond with more low-wage jobs, he said.
“It certainly drives home the need to invest more heavily in education,” he said.
Layoffs hit the area hard in 2001 and 2002, and they are partly to blame for the decline in household incomes. But Mr. Weinstein said it’s unlikely that a flood of underpaid, overeducated workers – refugees from the high-tech bust – are dragging down the area’s average incomes.
“People who are well educated and easily trained, they find better things to do,” he said.
The decline in incomes might mean a change in status, a drop in the rankings or a kick to the ego of some areas, but it’s not necessarily a bad thing for the economy, said Ms. Orrenius of the Federal Reserve.
“It’s a bad thing if you follow the same person over time because he’s becoming poorer,” she said. She said that if growth and jobs are bringing lower-income people into a higher-income area, “that’s a good thing. That’s what you expect the economy to do.”
Effect on economy
In several areas of the economy, the lower median income seems to be offset by the overall population growth, said Brad Shanklin, president of the Plano Chamber of Commerce. Spending hasn’t slowed, city sales tax revenues are up, and area malls – including the high-end Shops at Willow Bend – are seeing more shoppers, he said.
Mr. Shanklin said he also sees the drop in incomes as the natural balancing of a high-growth area.
High-wage jobs from Electronic Data Systems and J.C. Penney helped the area grow quickly with high-income families, he said. The layoffs and economic slowdown tempered some of that, but so did the need to expand the service sector, he said.
“We didn’t have the ancillary structure in Plano – the retail, the veterinarians, the dry cleaners, grocery stores and flower shops,” he said.
The introduction of more low-wage earners poses a problem for urban and suburban areas trying to provide services such as health care, education and housing for people who can’t afford them.
Of Collin County’s social service providers, Mr. Shanklin said: “In a lot of areas, they’re very ready. In some areas, they’re not as ready as they should be. As the demand grows, and our diversity grows, and our demographics grow in Collin County, we’ll see those stepping up.”
In Dallas, service providers have already felt the crunch.
Jay Dunn, a manager at Stewpot, said that six years ago, the homeless ministry served about 300 free lunches per day. Now, the downtown Dallas kitchen dishes out about 550 meals during a typical lunch hour.
“The numbers are moving in the wrong direction,” he said.
Central Dallas Ministries is a nonprofit group that tries to fill the gap between what working families bring home and what they need to survive. Executive director Larry James said that gap is widening.
From May to July of last year, about 8,000 families walked through the resource center’s doors, he said. Over the same period this year, 13,000 sought help.
“It isn’t that people aren’t working or that they’re not willing to work,” he said. “It’s that they’re not earning enough.”
The rising cost of housing, food, gasoline and utilities drains the pocketbooks of people who can afford it least, he said. When wages dive as expenses climb, more families are pushed into poverty.
“The economy is certainly a big factor in all this. … It pushes everything down,” Mr. Dunn said. “If somebody was making $50,000 a year, and now he’s making $35,000 a year, what happens to the guy who was making $35,000 a year?”
That would explain why the 4/3/pool house we sold in Far North Dallas for $185k in 1985 was on the market for just $180k in 2004. Not an anomaly; other houses in the neighborhood were being offered at similar prices.
Did Dallas RE prices drop off a cliff at some point, or has that market just been flat for all those years?
Dallas is divided into North of LBJ and South
South appreciated quite well. North is a very hard sell despite what the cheerleaders try to say. Once you hit the Collin County line, forget it. Money goes there to die.
“Once you hit the Collin County line, forget it. Money goes there to die.”
Added to my most-memorable blog quoted doc.
Mass Foreclosure numbers are out:
For July,
1 person got a foreclosure notice for every 4.4 homes sold.
My guess is that come Oct/Nov, it will be 1 foreclosure for every 2.5 homes sold.
MSNBC.com headline today:
“Summer crime wave hits Washington, Seattle, Indianapolis, other U.S. cities”
Fun With Dick and Jane, right?
THat one has a very revealing moment as far as bubbles go.
when that guy loses his job and comes home, they discuss their financial situation, — a true FB moment
Ok guys, this is stretching it. I know it’s fun and games to point at everything and say “hey look, more evidence of a bubble”. But that article includes references about increases in crime from 2004 to 2005. This has absolutely nothing to do with a RE bubble of any kind. If crime were to increase, it would be after the bubble, not in anticipation. Please reign your enthusiasm back in to acceptable levels :\
Did anyone happen to see the new Bravo reality show, Million Dollar Listing. It was like a car accident. I couldn’t look away.
I did! I blogged about the bimbo real estate agent being rude to the bimbo buyer on my blog this morning. OK, the bimbo buyer did have the biggest boobs on the planet, but there was no need for the bimbo RE agent to get so snippy, considering that she hadn’t even advertised the open house.
Psst! I posted pics of the bimbos, too.
I don’t know which of the two bimbos is more disgusting. This isn’t the place for it, but I’d like to see all women like that corralled somewhere and shot.
Sounds good , we could let the builders scavenge the corral site for silicon for caulk and stuff. Melt down the bling too ,if it’s real which I doubt.
They look like Mickey’s ears!
Those RE agents made used car salesmen look good.
That realtor was on another real estate show about 11/2 years ago . She was buying a house in California ,(maybe they just all look the same ).At the time my take was the realtor was a want-to-be actress who couldn’t make it in show biz so she was selling real estate . Guess she finally make it to the big screen .My question is …..Do these people get paid for filming their real estate transactions ?
I worked for my region’s biggest RE company during the height of the boom - not as a Realtor, but as a graphics support in the Marketing dept. We used to browse local publications and see whole page ads taken out by these Real Estate Divas…they truly were legends in their own minds. It was as if they became the story, not the property they were selling. The tipping point came when we were instructed to include a GlamourKitty type shot of a selling agent on the Builder’s sign that would be placed on the lot of a multimillion $$ estate…not a lawn sign, but those specially constructed, custom lettered big jobs. That’s when we knew we were inhabiting a parallel universe of Real Estate Mania androids.
On a side note, to anyone in SoCal: is it legally required for female California residents to have breast implants? I’m afraid that I will not even be allowed to visit the state unless I augment.
What about the heavy set bald RE agent wearing the pimp hats? What’s the deal with that?
Well, there is a great old saying,”You can’t polish a horse turd”.
I thought the phrase was “you can’t shine sh!t”.
Two quotes from the video clip of the open house:
“You’re the only people who have showed up.”
“We realized that they weren’t even interested in buying.”
Multifamily Executive magazine has an article about what might happen to failed condo developments.
http://www.multifamilyexecutive.com/industry-news.asp?sectionID=542&articleID=346811
There’s opportunity in fractured condos, but headaches could follow.
Source: MULTIFAMILY EXECUTIVE MAGAZINEPublication date: 2006-08-15
“If you’ve read any newspapers or business journals in formerly hot condo markets across the country, you’ll know that condo developers, converters, investors, and the real estate agents selling these properties probably aren’t too happy. Sales have slowed and values are stagnant.”
“But the condo downturn hasn’t upset everyone. Renters from the condos that have been converted are now looking for places to live. That puts apartment owners in a great position. Now some apartment managers are also looking at ways to take advantage of the downturn by exploring management opportunities in the fractured condos. ‘A lot of people are looking at this business niche because there are so many of them [condo units] out there.’”
“We’re already seeing foreclosures staring to hit…A lot of people that thought they were the investors of the day and got in on all of this crazy financing with zero principal and interest-only loans that will adjust in a couple of years or balloon aren’t renting out their units for what they thought they could. I think a lot of those folks will be left with their pants down in their deal.”
“That creates an opportunity for managers to go to lenders and market themselves. WRH is already talking to banks about these units. ‘We’re gearing up towards marketing to lending institutions that we think will end up with a lot of these in receivership…We are just getting ready to do a marketing campaign for them. We haven’t done it, but it’s something that we’re talking heavily about.”
Sign of the times: Crime is up for the first time in years in many parts of nation — and it’ll get worse as more homeowners go bankrupt and RE related businesses, that provided many nonskilled jobs, shut their doors. Future homebuyers, take heed, and take care about the nabe you choose to buy in at “the bottom”:
http://www.msnbc.msn.com/id/14137625/
Gee, wonder why? Hey Bruin, you lurking out there? Here’s your “indigents”:
http://tinyurl.com/l4aqe
http://tinyurl.com/fw93g
Unless you are dead this post by Hooper should send a chill down your spine….
Those articles are fear-mongering trash with absolutely no useful facts to back up their claims. The first one cites a bunch of numbers for immigrant sex offenders but then fails to compare it to the rates for legal residents. People wishing to instill fear in others will always manufacture articles like that no matter what they have to do to get the data they want.
Agreed–and the WorldNutDaily is notoriously unreliable.
I like the ad for the Nukalert personal radiation monitor and alarm! By the time it goes off I’m dead.
Wow….hey my skin head buddy Karl says them brown people is scary…be afriad.
World Daily Net, You are kidding me right.
This is like stormfront telling me that “Jews is bad”
Race hate makes you stooopid. “THE MAN*” is pushing your buttons so he can pick your pocket clean, so keep on hating on the brown people, as America is sold to the chinese and “THE MAN*” sends the profits to the Caymans.
* THE MAN is white, republican, and incorporated.
World Net Daily is an online tabloid, nothing more
How come you havent signed up to kill brown people in Iraq?
It may come down which cities have the best police departments. In affluent areas such as Manhattenbeach, malibue, beverly Hills,Glendale, to cite just afew locales, their PO’s seem to be on the mark. The deteriorating cities are often where Law enforcement is weak. Compton,s PD, before they were taken over by the Sheriff dept, was a bad, corrupt inefficient agency. Ditto for lynwood PD.
The last line of defence for any city against the criminal elements and anarchy is it’s PD. That is why all your city halls have the PD located next to them.
Heard on the local news that the hollywood Police station was shot at by as yet unknown elements. That is as close to a deteriorating anarchic situation as you could want in a community. This indicates that the crininal elements are gaining the upper hand in that police precinct.
Where you have a situation such as occurs in large parts of the LA central innor areas where the gangs and hoodlums outnumber and outgun the PD then you have problems. This occurred during the LA riots in 1992, when the LAPD was on the defensive and all citizens were on their own. That is a s ggod a reason to support gun -ownership rights for Law-abiding Citizens, and to crack down on further open illegal immigration, which unfortunately allows a sognificant % of outright hardened criminals to sneak in unscreened into the US.
Sorry if this has been posted - anyone notice that the number of listings nationally on ziprealty.com took a sudden jump the last couple of days? It had been on a slow climb - about 500-1,000 new listings per day, but within the last 3 days it went up 27,000 listings. Any thoughts as to why? Maybe Zip has changed how they get their numbers, e.g. added in some sellers assistance agency’s numbers (e.g. help-u-sell)?
That was my thought. Another source for them must have suddenly come into the system.
NAHB trying to strong-arm the FED???
http://www.Bakersfieldbubble.blogpsot.com
bakersfieldbubble.blogspot.com
Uh, crispy…
Me thinks your link has been hijacked by the Christian Condo Coalition Cyberspace Strike Team.
http://bakersfieldbubble.blogspot.com/ works
THANKS!!!
Praise the Lord!!
From p. C1 of today’s WSJ:
Long&Short / By Jesse Eisinger
Mortgage Market Begins to See Cracks As Subprime-Loan Problems Emerge
First the housing bubble deflates. Then come the credit problems.
As home sales have fallen and borrowing costs have edged higher, the mortgage business has slowed down. The big question is whether credit-quality deteriorates. While custormers have been able to pay off loans in high numbers for years, the markets are seeing the first glimmerings of problems among customers with poor credit.
That’s to be expected. But there are signs that problems will emerge among higher-quality borrowers over the next several months.
Almost as if they are following a script, the mortgage companies that cater to those with poor credit — so-called subprime customers — see trouble first, and they’re already warning about emerging credit troubles.
Last week, H&R Block, the big tax preparer, alerted Wall Street that its Option One Mortgage unit, which focuses on the subprime market, would have to set aside about $60 million, or 19 cents a share, because borrowers were falling behind on their payments.
—————————————————————————-
P.S. Could someone who understands please explain what that Option One ad on this blog means — in particular, what is the intended message behind the boxes labelled “one month’s salary” and “three month’s salary” juxtaposed against a photo of a large, shiny rock?
I assumed it to mean the DIC (Diamon Industrial Complex) places ads with the comment that your ring should cost 3 months salary, while a option one mortgage only takes one months salalry?
I had a different interpretation, which was something like “Get an Option One Mortgage, then tap out either one or three month’s worth of salary in housing ATM cash to pay for your wife’s new diamond ring.” But I was not sure if that was the message…
My take is that the ads for diamonds are, as I recall from the TV spots, “Make three months salary last forever” by buying some overpriced jewelry. My take on that ad her is they bring in the diamond with two check boxes–one month’s salary and three months salary. The 3 months is supposed to be how much the rock costs, but they check the 1 month box, meaning that using their Option One ARM is the way to make one months salary last forever, by buying a home with it. I wonder if anyone really believes that BS. Bastards.
Maybe you are correct. Anyway, too bad that many will learn this notion of “forever” lasts only a couple of years until foreclosure time.
A new-business idea — leasing diamonds.
Diamonds would be difficult to repo.
Inflationary pressures building? The economy has been growing faster this year than what the Fed views as the sustainable rate of noninflationary growth. I wonder how this news will affect Wall Street’s assessment of the probability the Fed will stand pat…
——————————————————————————-
ECONOMIC REPORT
GDP revised up to 2.9% in second quarter
Wages, salaries revised to show much faster growth
ECONOMIC REPORT
GDP revised up to 2.9% in second quarter
Wages, salaries revised to show much faster growth
By Rex Nutting, MarketWatch
Last Update: 9:11 AM ET Aug 30, 2006
WASHINGTON (MarketWatch) — The U.S. economy was stronger than originally thought in the first half of the year, with growth in wages and salaries a third higher than the previous estimates, the Commerce Department reported Wednesday.
Real gross domestic product for the second quarter was revised to 2.9% annualized from the earlier estimate of 2.5%, the government said. The economy grew 5.6% in the first quarter.
Here is a link: http://tinyurl.com/pa6jf
Hi GS, I saw these two opinions this morning and thought you might find them interesting:
from the New York Times
Downward Mobility
“Even the best number from yesterday’s Census Bureau report for 2005 is bad news for most Americans. It shows that median income rose 1.1 percent last year, to $46,326, the first increase since it peaked in 1999. But the entire increase is attributable to the 23 million households headed by someone over age 65. So the gain is likely from investment income and Social Security, not wages and salaries…For the other 91 million households, the median dropped, by half a percent, or $275…In all, median income for the under-65 group was $2,000 lower in 2005 than in 2001, when the last recession bottomed out…”
http://tinyurl.com/e7h32
and from The International Herald Tribune
Reprint from the NYT
The falling paycheck
…The New York Times reported on Monday, the economic expansion that began in late 2001 is on track to become the first since World War II that fails to offer a sustained lift to the real wages of most American workers. Although the U.S. economy has grown and productivity has been strong, American employees have not shared in the wealth they’ve helped to create. Wages and salaries now make up the lowest proportion of the economy since the government began keeping records in 1947, while corporate profits have climbed to their highest share since the 1960s.
Until recently, the decline in real wages has been masked in large part by the housing boom that allowed many Americans to borrow and spend, even as their pay was squeezed.”
http://tinyurl.com/j9czh
well, the treasuries broke the stops to the downside today so if there are any inflationairy pressures building, the FED still seems to be in full control and able to fool the whole Wall Street crowd into thinking the opposite …
http://www.financialsense.com/fsu/editorials/sutton/2006/0829.html
The TOL seismometer is registering a magnitude 6+ quake this morning…
http://tinyurl.com/kx8en
2,500 new homes to be built in Anaheim Hills, (Orange County) CA. As if there isn’t enough gridlock on the 91 freeway, and, nothing’s selling in all of OC anyway. Who do they expect to sell all these homes to? In addition to that, we can of course expect the prices to be anywhere from $500,000 to $2,000,000 and such:
http://www.ocregister.com/ocregister/homepage/abox/article_1259119.php
” 2,500 new homes to be built in Anaheim Hills, (Orange County) CA. As if there isn’t enough gridlock on the 91 freeway, and, nothing’s selling in all of OC anyway. Who do they expect to sell all these homes to? In addition to that, we can of course expect the prices to be anywhere from $500,000 to $2,000,000 and such:”
That new development will be built past weir canyon near the 241 , probably south of the 91 fwy. You are correct, they will be priced near the average for East Anaheim/Anaheim Hills SFH’s at around $600,000 and up. This will be a super mega -master planned community typical of the one’s you see in East Anahein,Yorba Linda, South OC.
You are also correct that this will not improve the 91 fwy commute, but Residential Home developers do not take such inconveniences into consideration! What should really be done is for the county/state/caltrans to take over/scrap the Toll road system for the 91 and the 241 fwys. The 91 gets worse each day/year as more developments spring up all over the IE/SW riversid county. They have talked about boring a tunnel thru the Cleveland Nf and creating another fwy route from riverside to OC but this is just talk and even if implemented would be a 10-15 yr massive project.
Pay up to $7.75 now one way. It will rise as more are sdded. Who gets to pay for the needed, expensive tunnel?
Don’t need to use it but I am in the OC. Am I f@#cked??
2nd try.
Commercial Construction is Booming (from the street.com)
Commercial construction activity is currently very strong. This is evident in the revision to the “structures” component of the gross domestic product, which was revised this morning to show an annualized gain of 22.2% in the second quarter instead of the 12.7% gain that was previously reported. The gain was the largest since 1994 and the second-largest of the past 25 years.
The data underscore the notion that gains in commercial construction activity will help to mitigate weakness in residential construction. The dollar gain in commercial construction was $13.3 billion, which helped to largely offset a $15.8 billion decline in residential construction.
The commercial construction sector has lagged significantly during the current economic expansion, with activity still well below the peak set in 2000. The current rebound in commercial construction activity is hence in its early stages and will probably continue for many more quarters, given the recent uptick in rental demand.
lokks like a bubble.
here is one statistic
This year, about 47 million square feet of new office space is expected to be completed, up 30% from last year, according to Reis. Next year, office completions are projected to increase 37% to 65 million square feet, which signals strong demand for wallboard suppliers
http://immobilienblasen.blogspot.com/2006/08/what-about-commercial-real-estate.html
A report from near-desert and supposedly non-bubbly Billings, MT.
I was biking yesterday doing some filming for a Lou Minatti-inspired clip I’m putting together. This was in an upscale subdivision that’s sprouted up in the last four years. Houses have been selling for around $400,000, and there are currently about 100 of them standing.
I was amazed when I went through. It looked like Queen Creek or one of the other crazy bubble areas! I took pictures, and there were 17 houses for sale. Nearly one in five. A dozen or so lots for sale too (scattered among the houses).
The best part is that the sub is starting on its second filing even with these signs of trouble. And there are at least two other upscale subs going in within a mile, all building like there’s no tomorrow. All these fancy houses in a place where median income is $35k.
I checked county records, and there appears to be NO speculator activity. Can anyone give me a clue here? Why on earth would these people be selling after so short a time? I’ve heard whispers that most people in the sub can’t afford their houses, so maybe it’s true. But I don’t think suicide loans are prevalent here at all.
You are witnessing bubblemania. You are probably wrong that their are no “Speculators” there. Every one of them says they are going to be “homeowners” to get the loan approved. The lies are rampant.
There are probably a lot of locals who bought with NO money Down Adjustables, who truly cannot afford the houses, but wanted the “15% in the bag” Minimum house inflation for NO Money invested.
Now, without the gains, with no money in the game, they are trying to walk away before the bills come due.
Problem is, everyone is on the same side of the trade.
This could be solved with a mass influx of additional “aliens” to fill up the houses with govt. money, but there are currently not enough to take up the slack.
Your neighborhood is TYPICAL of EVERYWHERE USA.
Hey Folks, I have been here a couple weeks reading and commenting so I’m not a poacher or troll — I am writing a piece on the housing bust will affect the auto industry, which is where I work to pay the rent.
If you have data and/or anecdotes on either people who bought one or more cars with HELOCs/REFIs or have had to sell them recently, let me know here or by e-mail at editor@carbuyersnotebook. I am looking for number of cars, brands — and this is interesting, whether you’ve seen offspring getting new rides from the RE ATM.
Also, feel free to repost this elsewhere, including on other/your blogs. When I write the piece, probably for the weekend, all the usual suspects will get linked, including this blog and a couple others I’ve been visiting.
This is one of the better informed commenter communities out there, with a lower tinfoil-hat-to-reality-ratio [TFHTR] than most. Thanks, Frank G.
Frank,
Try to get data on how many (or what percent of) car purchases were funded out of home equity loans. I would guess that the number would show a staggering increase from 1998 to the present.
Good luck! GS
I agree 100%, and don’t know how to backtrack the source of people’s funding — but I believe the #’s are going to be vefry distressing for my industry.
I checked county records, and there appears to be NO speculator activity. Can anyone give me a clue here?
How can you tell that? From their addresses?
Yes; I should have said “out of state” speculators like you would find in Arizona or Idaho. Can the listed mailing address be fraudulent? I’ve never seen any of these for rent, so I’m inclined to believe that they are locally owned.
Actually, I did find one with a California address and a two lots with LV addresses. But nothing large-scale.
You made me dig up an old newspaper article from a year ago. Interesting quotes. What do you think?
But some high-end buyers, like many moving into Ironwood, seem unfazed by rising interest rates. Pennington describes the clientele there as “diverse.” About one third are former Billings customers, about one third are new Billings customers and another third are people moving in from out of state.
“They’re coming from Connecticut, California, Texas, Nevada - all over,” he said.
Busy, but no Bubble
If you have data and/or anecdotes on either people who bought one or more cars with HELOCs/REFIs or have had to sell them recently, let me know here or by e-mail at editor@carbuyersnotebook. I am looking for number of cars, brands — and this is interesting, whether you’ve seen offspring getting new rides from the RE ATM.
I see a whole lot of late model monster SUVs in this somewhat upscale Texas suburb near Waco. When I drop my kids off at school my battered and dirty minivan doesn’t blend well with all the Expeditions, Escalades, and occasional Hummer.
But since we haven’t had that much real estate appreciation here and HELOCs aren’t that common here (I don’t think), I’m guessing that the great majority are bought through easy credit or leases from the auto industry. That’s a whole different subject, but I smell a looming disaster in the big car market too. People are soon going to start parking those Escalades and Hummers in the crummy parts of town with the keys in the ignition just to be rid of them.
Id be very interested in any data you can pull together on this. Im trying as well to estimate the extent that car buying was propped by cash out and heloc spending. If you could help, Id be in your debt. G
Mr. Jones,
May I recommend a topic on one of today’s WSJ articles? It notes that 4 out of the last 5 years salaries have not kept up with inflation:
http://online.wsj.com/article/SB115685774878148338.html?mod=home_whats_news_us
Median Household Income Rises 1.1%
Gap Between the Richest
And the Poorest Widens;
Middle Class Feels Squeezed
By ROBERT GUY MATTHEWS
August 30, 2006; Page A2
WASHINGTON — The median income of American households rose by an inflation-adjusted 1.1% last year after falling five years in a row, the Census Bureau said in its annual report on the well-being of Americans.
But the gap between the richest and poorest Americans widened last year, continuing a trend that dates to the early 1970s with a pause in the late 1990s. The top fifth of American households claimed 50.4% of all income last year, the largest slice since the Census Bureau started tracking the data in 1967.
UPDATE ON THE AMERICAN DREAM
[Chartbook] • Chartbook: The Census Bureau issued its annual snapshot measuring how well the typical American family is doing.
• U.S. Snapshot: Who’s Richest, Poorest
• Question of the Day: Should the widening gap between rich and poor be a significant issue in this year’s elections?
The new data, from telephone and in-person interviews with 114,384 households, come amid polling data that suggest concern about the economy among many middle-income Americans — an anxiety that Democrats hope to exploit in November’s congressional elections.
“There is nothing to celebrate here,” said Ron Haskins, a former Bush administration official now at the Brookings Institution. “A lot of the money goes to the top, and Republicans are forever playing defense on this. The people in the middle are feeling squeezed. If Democrats aren’t getting the best of the argument, they should be.”
Liberal-leaning analysts yesterday emphasized that despite a robust economy, the rich are getting richer while the poor are treading water. Conservative-leaning analysts emphasized that the median household income is up and the poverty rate is flat.
The Census Bureau said the number of Americans without health insurance rose by 1.4 million last year to 46.6 million, or 15.9% of the population. The poverty rate barely budged, falling to 12.6% from 12.7%, a change the bureau said isn’t statistically significant but is an early signal that the poverty rate is starting to level off after four years of increases. About 37 million Americans were living below the official poverty line in 2005. (See related article.)
The income of the median household — the one at the point at which half of the households have more and half have less income — was $46,326 in 2005, up from $45,817 the year before. Although the overall economy has grown 11.7% since the recessionary year of 2001, the income of the median household is down 0.5% in that period.
Moreover, earnings for full-time workers employed year-round dropped last year. The median man’s earnings declined 1.8% to $41,386 and the median woman’s earnings declined 1.3% to $31,855. The measure doesn’t include employer-provided health and similar noncash benefits.
Daniel Seybert of Newton Falls in northeastern Ohio counts himself among those not seeing the robust national economy in his household finances. “We have been regressing, with higher gas prices and I am paying a lot more in county and state property taxes,” said the 47-year-old Mr. Seybert, who earns about $43,000 a year after 28 years in a tire factory. “When I built my home in 1999, I paid $1,200 in property taxes. Now they are $2,400. That’s just money out of pocket.”
FROM CENSUS BUREAU
The interest on the home-equity loan on his two-story, three-bedroom colonial has risen 14 times. He has to work side jobs as a handyman to have “spending money.” And because he can’t afford a new car, he is driving a 1998 Pontiac Firebird with 135,000 miles. His wife, a bookkeeper for a trucking company, is about to lose her $22,000-a-year job because the company plans to leave the area.
While the median household income rose 1.1%, the average income of households in the bottom 20% rose just 0.6%. Within the top 20%, the gains were concentrated among the richest 5%. The Census Bureau’s income calculations include wages, interest, dividends and government cash benefits but exclude capital gains and noncash employee and government benefits. They also exclude the effect of taxes, which tend to narrow the gap between the rich and the poor, although less so as a result of the Bush administration’s tax cuts, according to some evidence.
[Updates on the American Dream]
The Census Bureau didn’t try to pinpoint the source of the widening income gap. But other data suggest that the richest households have benefited from growing performance-related pay, such as bonuses and stock options, and rising executive compensation generally. In addition, the economy lately has favored workers with more education and training while unskilled workers must increasingly compete with low-wage workers in poorer countries and immigrants.
Bruce D. Meyer, a professor at the University of Chicago’s Harris School of Public Policy Studies, said that the numbers are flawed. “Our official statistics are too gloomy,” he said. “The middle has been doing better than the numbers suggest.” Because the numbers don’t reflect other income such as food stamps, housing assistance, Medicaid, mortgage deduction and other kinds of wealth transfers, they make Americans look worse off than they really are, he argued.
But Greg Hinds, a 35-year-old maintenance mechanic for a paper company in Menasha, Wis., said he isn’t optimistic about prospering in coming years, because of increased health-care costs and no expected large increases in his salary. He and his wife earn about $70,000 annually and have two children, putting the family in the upper-middle-class range for the area. “I am personally holding my line at home with finances, but it is getting tough,” he said.
“Our health-care costs compared to five years ago have doubled,” he said. His share of health-insurance premiums rises next week to $52 a week from $19. He said he pays roughly $3,000 a year in deductibles and co-payments and expects that to rise.
The Census Bureau said much of the gains among middle-income households nationally came among foreign-born households. The median income of households headed by natives rose 0.2% to $46,897; among those foreign-born, the median income was up 3.3% to $42,040 with the strongest gains among naturalized citizens.
Median income grew strongest in the Northeast, up 2.9% to $50,882 last year, but dropped 0.4% in the Midwest, to $45,950, where the decline in manufacturing jobs continues to reduce earnings.
– Greg Ip contributed to this article.
Write to Robert Guy Matthews at robertguy.matthews@wsj.com
Interesting new development is happening in my area (souhern california/ventura). Obviously, if the bubble hasn’t actually burst it has started leaking air. In my area, property is selling but I think the current buyers are mostly greater fools. Anyhow, I’ve noticed 2 things in the past few weeks. If the realtorwhores sell a property, the SOLD sign they stick on the original FOR SALE sign is gigantic. Way bigger than the original For Sale sign. The only thing missing is a giant exclaimation mark!! Obviously, the realtorwhores are trying to convince passersby that property is still hot. However, that isn’t my main point. On my street, 2 houses came up for sale in the last 6 months. They didn’t sell. Prices were $650,000 and $625,000. Frankly, they are probably worth about $350,000 because rents in this area are around $1,800. However, the For Sale signs were taken down and FOR RENT signs were put up. After about 6 weeks, one property is still vacant. I think it was a flipper because the house was given a quick lick of paint and some minor fixing during the week after the previous owners moved out and then it was back on the market. The other house has now been rented………to three families!! This area is pretty white bread but these new occupants, complete with about 10 kids and several beat up vehicles, appear to come from south of the border. So, this looks like another twist to add to the unfolding bubble story. Desperate owners willing to do ANYTHING, including leasing to multiple familes who will occupy a single family dwelling, to cover their mortgage.
“The other house has now been rented………to three families!! This area is pretty white bread but these new occupants, complete with about 10 kids and several beat up vehicles, appear to come from south of the border. So, this looks like another twist to add to the unfolding bubble story. Desperate owners willing to do ANYTHING, including leasing to multiple familes who will occupy a single family dwelling, to cover their mortgage”
This is happening all over the greater LA/Scal housing Market, the renting of SFH’s to Tenants with Largw extended Families. There is a HUGH Population of available tenants in Scal?LA area. In my hood about 1 in 7 SFH’s are rented out, usually to the type of tenants you indicated. This is probably keeping the available Sfh’s for sale inventory in the greater LA area at a lower level than in other bubble regions. Look at ratio of for sale listing to population for LA county:it is about 1/200 0r 250.
NYT reports this morning that MetLife is putting Stuyvesant Town up for sale. For those who do not live in or near the Center of Universe, this is a rental complex with 110 buildings & over 11k units. Asking price $5 billion. I will be interested to see if a foreign buyer decides to put its dollars to work.
The other house has now been rented………to three families!! This area is pretty white bread but these new occupants, complete with about 10 kids and several beat up vehicles, appear to come from south of the border.
Well, most of the McMansions I see around here are large enough for 3 families and the lots they sit on are large enough for 3 houses so I guess that ultimately makes sense when you think about it!
You may have anticipated a future trend: McMansions carved up into triplexes or quadriplexes. This will really be great for the home equity gains of McMillionaire neighbors who thought buying a faux chateau meant that they had “arrived.”
Just like those old Victorians you see in college towns — they were once single family residences, and probably despised by the locals!
I see some disgruntled FB kicked over the RE flyer newspaper box out in front of work. Classic!
Momentum : If the consumers pull back, then the business world pulls back in a feedback loop. Where is the floor for the housing market and the economy in general if we get to a 10 or 15% unemployment rate?