Bits Bucket And Craigslist Finds For September 2, 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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I went to great clips yesterday…While I was waiting, I heard a young female cutter telling her customer that home prices will come
down and she is waiting to buy…Does this mean we are at the bottom.
I think what she was saying is………..she’s not going to get a housing hair-cut
Smart young lady.
No matter how bad a haircut you take it will eventually grow back. In the meantime invest in hats.
Depends on how fast you pull your hair out.
Robert- My haircutter charges me a finders fee.
Do you mean that not all hairdressers are real estate investors on the side? Or is she just trying to time her entry into the investing market?
Hopefully she doesn’t do “flips”. Get it? Hairdresser, flips? Never mind.
Uh-oh. Another old person alert.
Not so much as you might think. Of course to a teenager forty might seem old.
lol. Hell, a 25 year old seems old to a teenager.
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About 9 months ago, my barber told me that she and her blue collar husband had heard about “all of these people making easy money flipping properties” and that they were “looking for a way to get into it.” Immediately after she said it, I simply smiled and chuckled to myself as I realized that I had just had my personal “Joe Kennedy/Shoeshine Boy/Market Top” moment.
http://piggington.com/a_new_low_for_the_bullish_propaganda_mill
OH…MY…GOD…!!!
Even better while surfing yesterday at the Huntington Beach pier, two surfers talking.
One loudly, advising the other to not buy any RE for 2-3 years.
I smiled.
I was talking to a friend who is going through a divorce yesterday. She’s happy they didn’t have any property to settle (so am I), but would still like to buy a house one day. I suggested that she wait 2 to 3 years, as well. She replied that that is exactly the schedule she is on.
I, too, smiled.
BayQT~
And on the opposite side, got mine cut in Placentia (the OC) about 2 wks ago. Woman (early 50’s?) telling me she was getting her stuff packed up. Was getting her RE license and moving to LV, where she had arranged to work with another agent/broker. One who had 20! houses.
Forecast— squall line on the horizon, approaching fast….wait, OH SHIT…we’re headed into a CAT 5++.
The more I hear, the more painful this looks, whether you’re in or out.
Is this a big part of the net outmigration from CA? Realtors, mortgage brokers, escrow agents, and such?
I know a hairdresser who bought a 550K 2 BR condo conversion in Little Italy section of San Diego last year. She is really shearing herself without without scissors
A good friend has been the local lawyer for the last 30 years. He hasn’t closed a home this entire summer. But he’s not worried about business. From his experience, what follows real estate booms are divorce booms. Couples’ finances go to hell and the marriages don’t survive.
In his mind, this pushes RE even lower, divorcing couples are forced to sell and don’t have the option of waiting for better offers.
This could be another sad result.
I’ve been to 4 yard sales in my neighborhood this summer (Capitol Hill), where the For Sale signs and the bickering couples (No, that’s mine! You’re not selling it, damn it!) seem to support your point.
Heavy sigh.
In his mind, this pushes RE even lower, divorcing couples are forced to sell and don’t have the option of waiting for better offers.
Don’t they then have to rent or buy 2 places, increasing demand? If we all got divorced there wouldn’t be enough houses in the country to accommodate everyone.
Divorced people would be going from McMansions to 1 bedroom apartments, or small homes. It’s not automatic that they go to the same space or even half the space.
I agree entirely.
This would have the effect of causing the top end of the market to crash more quickly whilst stabilizing the lower end.
I disagree about the lower end:
you will have people move into relatives and friends homes rather than to new spaces [apartment, etc.]. I can see the lower end crashing just as much as the higher end.
Actually, since its the financial distress created by the high end home, I do believe that the high end will drop faster than the low end. On the other hand, I agree with DannyHSDad, there will be a huge influx of people either renting rooms from friends or moving back in with relatives.
In effect freeing up the high end and doing very little on the low end.
2007 is going to be ugly. Have no doubts about it.
Neil
Living with friends and relatives is ok in the short term but most people will eventually want to get a place of their own. It’s not a long term solution.
Since there are more people able to afford houses at the lower end than the upper end of the price curve, the top end normally falls further and faster. I don’t think there has ever been a housing correction that disproves this but maybe it’ll be different this time.
History does support your contention that the upper end of the market falls harder and faster.
An example would be the ASUwest2’s comment in regards the lady that was moving to LV to be an investor. If her friend has small units (1 - 2 br’s) he/she may survive this. They can find plenty of recent immigrants working in the casinos and/or burger joints who can keep him/her afloat, even if the properties are upside-down (although the option ARM’s may still do the person in). However, if the person is like most idiot R.E. agents in LV, the person probably bought $400,000 + homes in places like Redrock and will be trying to rent them out for $3000 a month to cover the adjusting ARM’s. Trust me there are whole developments in that area that were purchased by R.E. agents for flips, that are still vacant. In this case the person is toast and the prices in that neighborhood will drop pretty quick.
I lived in LV a year ago, and in mid 2004, my wife an I were looking at POS Pulte homes in Redrock. The salesperson told my wife “this will be the new Irvine”. My wife replied “I grew up in O.C. and this ain’t Irvine. There’s no beach, no nearby mountains, just miles of desert, and low wages”. They were selling those homes for above $600K for less than 2,000sqft. I felt it my duty to inform the new salesgirl (in private) who was a fellow USC alum, that she should get out and find a real job before its too late.
The interesting thing is that my landlord’s property manager (also an USC alum) was building three homes in Redrock for $700,000 each. I tried to tell him that he was making a mistake, but he said he was an experienced broker and that investor loan money would continue to come in from China and keep the easy financing going. I am going to LV soon and I will survey the damage. I am sure this idiot will be bankrupt soon.
One other thing, when we moved into the townhouse we were leasing, I pulled all docs from title co. Turns out the owners (our landlords) had purchased the property just a year earlier with a World Savings option ARM. I calculated that they were already upside-down by $200 a month, and the ARM hadn’t even adjusted yet. But they were told R.E. always goes up in value…
So back to the original question, whether higher priced homes fall faster. Well just look around at all of the formally “educated” (not street educated) people with degrees from good schools, out becoming R.E. investors. And they are buying in the upper price range. Everyone knows you make your money off the working class, they have the most stable income levels (doens’t go up much but they can ususally get another $10 to $15 hr job). Its the people temporarily making $80,000 to $150,000 in some sort of sales job that are the most susceptible to economic changes. Thus homes in those price ranges usually are affected the greatest.
The job number just came out and think about how many people you know are in an industry that sells some product or service that is not a staple (i.e. milk and cheerios). Those people are getting laid off by the thousands (Intel, Dell, Ford, GM, the list goes on and on).
I am not an expert but this will be my third downturn and every time I have learned more from others’ mistakes. As others have mentioned, most people under 40 dont know squat, especially when it comes to investing (see dot com bubble). I am just now going to turn 40 and I have learned quite a bit from this blog. As I get older, and become more well-read, I realize that I know less than I thought I did. This blog has reinforced a lot of my thoughts on investing, personal finance, trying to show off to your neghbors when you dont have sh*t, etc.
Hopefully more people will tune in before they get royally screwed, I doubt it, but you never know…
I hear you. I’m 10 years older than you and just when you think you’ve seen it all along comes another wave of stupidity greater than the last.
Second that. 50 myself.
I have made plenty of mistakes in business decisions, investments decisions, ect, ect. AM a middle baby boomer who has twice in my life have been in the stratosphere as far as making big bucks, having it all, and seeing it float away. Went BK in 1986, killed mw as far as getting credit for 10 ys but still acomplished quite a bit( Backpacking all over the Sierras, getting a college degree,ect.)
It is my believe that successful folks who want to acheive financial success do so thru starting some kind of business, and sticking thru it. Not thru the emphereal phony ponzi-scheme called RE investing(thou a relative few make out quite well. the vast majority end up failures).
I had a chance early in my life to really make it big time in the Fast food business, but had a spectacluar fall. Fell hard but as it happed when i was young i was able to bounce back. No problem;I have since lived life to the fullest extent possible, traveled, camped and hiked all over California, traveled down to Mexico and Cmerica
Am 50 and already have launched or been a partner in 3 business operations, been a franchise manager, trained several hundred workers in the food service sector.
It’s true that in a normal market the high end can crash faster and further than the low end. But in the current bubble, the low end has another set of troubles that will cause it to crash faster and farther.
The sub prime loans, stated income loans and loose lensing practices allowed low end buyers to ‘get into the market). Many of these folks do not have the ability to withstand the coming shocks. This will trash the low end.
Enterpreneurial lighbulb going on: How `bout picking up a bunch of those soon-to-be-dirt-cheap travel trailers/5th wheels, plopping them onto vacant parcels and renting them to the coming “down-and-outers”? Can you say “Grapes Of Wrath–II”?
Anyone see/hear the recent Katrina-revisited stories in the MSM? Cheap trailer ghettos with crackheads pounding on your door at all hours trying to sell everything from DVD players to their wives. [real story from NPR]
Post-divorce sucks. Bentheredonethat. From cushy apartment with wifey to sleeping on an air mattress in a basement bedroom of a duplex shared with four other guys. Swell!!!
Its funny (in a sad way) that you mentioned Grapes of Wrath, because my wife and I were discussing the cmoing doom and she metnioned that very book/movie. Its looking more and more like that is where we are headed…
I think divorces will cause the “middle” of the market to crash. But the true high-end…the stuff even an over-leveraged average joe couldn’t finance…might hold steady. After all, they’re probably owned by all the executives who made their killing in this market and got out a YEAR AGO!
And the current income reports indicate that the income gap between have and have-mots are widening. The money is flowing up to the houses on the hill.
” Comment by Bill in Phoenix
2006-09-02 06:06:49
Divorced people would be going from McMansions to 1 bedroom apartments, or small homes. It’s not automatic that they go to the same space or even half the space”
In fact a divorce is most like a BK… A division of assets and debts…. then pay the Lawyers etc. After that you can start over with ZERO or Less than zero.
Arn’t we better than halfway there now with divorce rates greater than 50%. I wonder if that has been in part responsible for the condo craze?
Post-bubble growth industries:
- divorce law
- bankruptcy law and processing
- real estate auctions
- credit counseling
- collection services
- repossession services
- pawn shops
With no house payments, no spouse, maybe no job (or lower-paying one) how `bout going “long” on honky-tonks, liquor stores and Top Ramein??
I think the real windfall will be in the underground.
Almost forgot . . . bike shops. [As in bi-cy-cle. As in peddle-yo-@$$ down to the unemployment line!]
another one: temporary storage; it has been booming for some time already in the Netherlands already because some people are forced to the sidelines. There must be plenty of demand once we get all those double-income foreclosures.
During economic downturns auto repair and body shops do well because folks will hang on to their old jalopies longer during bad times. Thrift shops and 99 cents stores will be be booming as well.
“In his mind, this pushes RE even lower, divorcing couples are forced to sell and don’t have the option of waiting for better offers.”
In a lending environment where everyone (including single moms) can get a loan to buy almost any kind of house they want, divorce could be good for housing demand, as the unhappy former couple now represents demand for two homes instead of one.
indeed, this increases the number of people who can get a risk-free loan because they don’t have any money of their own to spend. So as long as credit is as easy as ever this should push up the prices at the bottom end of the market (or maybe even the higher end? if you can get any loan you want you might as well take the most expensive home available …).
That’s an interesting point. It happened in the dot.com bust too in Silicon Valley. Losing your company is stressful as losing your house.
I couldn’t understand the neighbors’ spending habits two years ago. They splurged on every conceivable option on their McMansion, then landscaped it to the max. Then their kids came over and started talking about their new pool.
Two years later, the kids’ swingset is broken and on the ground, and there is a gaping hole and piles of sand, rocks, and equipment. They are divorced, and the mother is getting fined by the association for the mess in the yard. (The pool company deal fell apart).
sad
It’s amazing how things turn south when you least expect them.
I also think that when older folks who leave their homes for good (nursing home, death), their kids (or whomever) are likely to sell their homes quickly and not hold out for some imagined “top dollar”. Another source of comps being priced at the margins.
“Two years later, the kids’ swingset is broken and on the ground, and there is a gaping hole and piles of sand, rocks, and equipment. They are divorced, and the mother is getting fined by the association for the mess in the yard. (The pool company deal fell apart).”
And by these statements, I’m guessing that “she” wanted to keep the house. Bad move. Too many women put themselves in a HUGE mess because they want the house. When I went through my divorce several years ago, I DIDN’T want the family home. I was an at-home Mom and had to start at the bottom in the work force. I KNEW it would have been bad although I was getting both spousal and child support. I did the math and adding utility bills, phone, food, misc, car expenses, etc, etc, it was a no-brainer. I opted to sell the condo that we owned and take the proceeds to buy my own property, which is the one I have mentioned here (in Newport News). Women need to really do their homework to figure out what is REALLY the better deal. I am SO much better off having passed on the house, and I feel great about my life.
BayQT~
you guys are going to get a good laugh when you see donald trump’s former apprentice on fox news, telling everyone what tremendous buyers market we have right now. and she’s in west palm beach. (trying to sell trump’s mansion)
When last I saw that moron, she was “investing” in Las Vegas condos (circa spring 2005)
Wonder how that’s worked out for her?
Trump was on the Financial Entertainment network yesterday announcing that he wouldn’t be bidding on the 11,000 post WW-II apts on 18 acresin NYC. Wasn’t a good time and too many speculators he said.
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Funny how Bull Trump has now suddenly changed his tune.
“Watch what they do not what they say.”
“…donald trump’s former apprentice…”
Does he resemble Groucho (”You can even get stucco…”) Marx?
Hey, in case you didn’t see thursday’s paper, ‘The Donald Fired Carolyn’ which means that she is now free to write a mulitmillion tell all book.
So how do we profit on this ‘divorce boom’ thats going to happen? Do we write a book called ‘Are you missing out on the Divorce Boom’?
There’s serious money to be made here. Think about it, all the wifes can cash out on their husbands equity.
-X
start a dating service.
I can see it now:
“Sarah, meet Ed. Ed is 6′ with blue eyes. He works in marketing. Ed is equity positive. Ed rents a downtown apartment for $1,100 a months leaving him plenty of disposable income for dinner and vacations…”
Actually, that sounds like me, although I don’t work in marketing, or downtown and my name’s not Ed. I have all sorts of disposable income for dinner and vacations. But I am not into that. Was ripped off by a golddigger one too many times, so it’s going to take awhile for me to trust again. The only other way is to not publicly state my income or net worth and to to not look upper income. These message boards are anonymous and I don’t intend to meet a woman on these boards, so I have no qualms of reporting my NW ($700,000, and no real estate).
My dad made a lot more money than you, Bill, and yet he managed to find 3 very nice wives (!!) Too bad he wasn’t so good at staying with the first two and split after 10-12 years. In spite of how that sounds, I really loved my dad. His third wife nursed him through cancer until he died, and we are still fond of her. Good luck!! It can be done.
How I do it, is that I tell them I have the money……and that they aren’t going to get it. Next in line please.
This is interesting. I am female and have had a little bit of trouble with men wanting my money!
I live very frugally…but I managed to get a small apartment building in 1995…at the very bottom of the RE for this area. Because of this, others think I am rich! I am not, though. I really don’t have a big income but I do have property.
What do you think of this? My ex, who ruined his owned finances…at one point wanted to marry me. Since I was used to be independent all my life I told him finances would have to be separate. He said “that’s not enough intimacy for me”! Oh brother. Work on my building for 10 years and then you can have a say…he never lifted a finger.
Anyway, how I hope to solve this is to keep my investments and principle SEPARATE. However, if I have extra and if my spouse does not, I do not paying more here and there or sharing…I just refuse to put my financial life in the hands of another. What do you think?
Sounds about right to me. I don’t even trust “trustworthy” folks. I’m a New Yorker. I’ve seen it all. I don’t trust anyone. At least, not completely. Sad, but true.
Reagan said, “Trust, but verify”.
Bill, Bill from Phoenix is that you? I knew I recognized you by your writing style and net worth…
LOL.
Damn, Bill, I was gonna break the news to my husband this weekend that I’d met “the real one” on the HB blog
You’ll have a lot better luck if you hang with women your own age. Not that I’m saying you go chick hunting but I can tell you one thing, as a reasonably attractive 40ish woman (who still gets hit on occasionally), a guy’s net worth would be the last thing on my mind. As long as he can support himself and is not bringing uncomfortable obligations to the table, I could care less what he makes or what he has.
Hopefully, Bill is not one of those guys who complains that women “are only after his money” while he insists only 20 year old models are “good enough” for him.
People, be reasonable. Remember, when he is 92, she’ll be a reasonably attractive 40ish woman (who still gets hit on occasionally).
I know, that’s how I feel TX chik! I am so used to living simply and dealing with my own finances, I don’t need a man who has expensive tastes. I do not want a sponge that does not contribute, however. Big difference. A man has to give something…if he can’t contribute financially then in other ways. Of course, this goes for women, too.
One time after hearing I had a small apartment building, a guy said “wanna marry”? You know, I have that but it does not make me home free. I have a mortgage, I have responsibilities, I have a budget. It amazes me the assumptions people make.
Yes, TXChix, maybe the men who are getting burned by “golddiggers” are choosing very young women..in that case…you deserve it!
“Yes, TXChix, maybe the men who are getting burned by “golddiggers” are choosing very young women..in that case…you deserve it! ”
She was my age (47 - the golddigger). I don’t really care about age. My recent girlfriends have been in their 50s, and they looked good (to me). A wild Brazilian, followed by an Asian, who happened to also nickel and dime me, although claiming to have a net worth of $600,000 (a year ago). The Brazilian lied to the border patrol on the American side of Tijuana and told them she and I were engaged and living together. That was that! I dumped her, but at least she did not ask for material things. I look very young and am told I look to be in my early 30s. It’s partly genetics and partly that I lived a very regimented fitness life (fitness is first). So looks are very important to me. If I worked hard for my looks, I may as well expect that in a woman.
Sorry Bill, looks are ok. For the long haul, brains count. Anytime.
Been there, done that.
Davey,
Agree with that, but will add that integrity and consideration are tie for #1, IMHO.
All people lose thier looks over time. Best to look at what you’ll have after kids and time do their thing to a person’s appearance. We all make choices. Most of the people I know who have marital troubles are those who married for looks, money or “reputation”/social status.
Marry your best friend, one who you love **as a person** and who you’d like to hang out with more than anyone else in the world. Both should be generous with each other to a fault. A good marriage rocks!
Agree with that, but will add that integrity and consideration are tie for #1, IMHO.
All people lose thier looks over time.Oh, that’s just something that ugly people say….
Straight people are so gullible!
Sorry to hear that, buddy! You need a better bullshit meter.
or gaydar?
At some point, your not going to want to work every single day.
Perhaps, now that this is unwinding, you might want to go back and organize the best past posts under categories that correspond with different aspects of this thing, so a latecomer can flip through:
The real estate brokers.
The flippers.
The desperate first-time buyers.
The HELOC high livers.
The mortgage bankers.
The appraisers.
The homebuilders.
The business associations.
The secondary market for mortgates.
Federal Reserve policy.
The financial regulators.
The mainstream media.
The economists — bulls and bears.
The consumer economy, pumped up by real estate.
Foreign real estate bubbles.
The late 1980s real estate bubble.
Bubbles in other other assets, similarities and differences.
Personal conflicts caused by the bubble, and the bust.
Gosh, there are so many aspects of this it’s mindblowing.
I don’t think this is undwinding and will play the same tune. I think this will become worse and new themes in this burst will occur. For instance, we’ll see the end of cheap oil and a new era of ever increasing oil prices in a few years. The Middle East oil output is projected to be 3/4 in 2012 compared to the amount of barrels it produces now. Cantarell in Mexico has declining production now. Oil prices going up while housing prices going down will turn exurban real estate (expensive “now” gated communities) into meth lab areas where white trash bleeding gum skinny people will prepare their drugs for white people. It will be ugly.
On the other hand, oil [futures] may be experiencing the bubble of dotcom and real estate bubble left overs.
As long as the oil [esp. the futures] stays high, there will be incentive to dig for more oil which will increase in oil product and reserves AND alternatives.
I read somewhere that world proven reserves have yet to decrease on year to year basis (countries and companies individually may have decreases but not the world on the whole). Chance of oil bubble [with those who hype about peak oil] is a strong possibility to me. [And I own oil related stocks: I'd love to see ever higher oil prices but I've seen the cycles of ups and downs over the past 18 years....]
Danny,
I am in your camp. I think the Peak Oil meme combined with temporarily high oil demand due to a global construction boom and speculative demand have pushed oil prices up to an unsustainable level, which will deflate with the coming construction slowdown.
There are some people who say 100 mb/d by 2020, others say 60. I happen to be a pessimist. Short-term prices could do anything.
Oil has had an unrelenting four year bull run. So a pullback to an intermediate bottom during the Y2007 recession, is justifiable. Doesn’t change the fundamental premisis behind peak oil, though. We gotta find more oil, and cut demand.
I generally buy peak oil.
However, I think the oil producers have at least one more cheap oil glut before their strategy stops working.
Not to mention the unwinding of the housing bubble and commodities will have deflationary impacts.
Sometime in my lifetime peak oil will hit ferociously, I just don’t think it is in the next 5 years.
BTW, I am in the energy business.
I generally buy Brave New World innovation that will find the post-fossil fuel energy regime, before the Peak Oil pricing sinks the World Order as we know it. Or at least more nuclear power plants. But I can understand why someone in the energy biz would like us to all buy the Peak Oil line, as their profits go up (much the same way as Toll Bros wanted us to think McMansions were worth $1m+).
Dba-I am a Republican, and do not think we should screw up ANWR. Would rather it be left in its pristine state for our children. The amount of oil is a drop in the bucket as compared to what is available on the world market.
Peak Oil is a bunch of nonsense. Most oil in the US is off limits due to laws and politics. There is oil in ANWR, Eatern Gulf of Mexico and the US Rocky Mountains alone have enough oil that can be made from shale at $40 a barrel to rival Saudi Arabia.
It’s just that every time we talk about opening up different areas to energy production the usuall gang of cry babies start up with the horror stories.
These reserves are all there, alright. The problem is production rates, timing and other issues (like skills and equipment availability). We’d be lucky to see 1 million bbl/day from oil sands and shale combined. And what energy source does one use to produce? Despite the fact there is 2 trillion bbls of it…it’s not really bbls…it’s more like the consistency of the tar pavement you drive your car on or coal.
The eastern GOM is mostly gas. Good luck with that oil shale.
I’m not too sure about “Peak Oil” either. What’s all this I’ve been reading about how Russia is doing deep well drilling and selling the technology to India? Anyone read about “abiotic oil” besides me?
Russia is #1 in oil production right now. Thinking geopolitically, it’s too bad we aren’t on the best of terms with Russia, eh? India is in Russia’s camp, too. Venezuela sure has no reason to like us (they’ve been taking on Russian planes and arms lately). China has been making multi-million dollar deals with Iran for their natural gas. I think China would be P-O’d at us if we bombed Iran anytime soon, donchathink?
I think the pointy heads in Washington better sharpen their pencils and think of better ways to protect our country and get us more energy independant.
Spot on, dba. ANWAR and Coastal California will be opened to drilling long before Peak Oil pricing lasts for very long. And the US auto fleet will become far more efficient, as Detroit will have to relearn the lessons of the 1970s again.
This will help, but will not come close to replacing imports. It won’t even replace depletion from Mexico, Saudi Arabia, et al. and their export capacity over time.
While I don’t believe in the doomer scenarios, there is enough evidence to say we will be in increasing trouble energy wise.
We are at peak oil pricing now. The peak will be/is marked by volatility (up and down).
The peak is not so bad…it’s the decline that is bad…just like in housing prices. Recession, depression, more drilling, better cars will help with fuel supply/demand balancing. Also abandoning many of those exurbs will help
(or turn them into sharecropper housing to farm the land).
But ANWR, Ca, and Fla will not allow us to run the USA in 2020 like we do today. In the mean time, there will be times where gas/energy is cheaper than now (in a depression) alternating with new highs (during the recoveries).
I don’t think Russia and the middle east are likely going to want to continue to send oil over here for paper dollars for much longer either. They are already working to create alternative markets…will take time to take hold. But where are we in a world with no significant export capacity or willingness to export to us next decade?
But remember - oil is always priced in US dollars.
The number of dollars in circulation directly affects the price of oil. China is sitting on a huge pile dollars with oil one of the few things to spend them on.
“But remember - oil is always priced in US dollars.”
Always so far.
Russia is not pricing its oil in dollars and they are the worlds largest exporter. Russia also is eliminating any dollar holdings and reports its liquidation every month. Iran is also divesting its dollars and has purchased a lot of gold. Norway and Sweden are getting rid of their dollars. China has been buying african oil assets with their dollars along with massive tracts in Brazil for agriculture.
Yikes!
It is impossible to constructively debate how much oil id down there, versus our projected needs, without stating oil in terms of x years’ known reserves. Since oil was discovered as useful, there has always been about 50 years’ known reserves. The reason is simple enough — there is insufficient financial payback to any oil company to spend the money today that would be needed to discover enough oil to cover expected needs more than 50 years out.
China and India are contemporary anomalies that logically would shrink the 50-year number, temporarily, just until ramped up exploration gets us back, once again, to that 50-year mark. Look at the increased production from Russia and consider how much of China’s vast land has not yet been explored.
Two buddies of mine are top-level geological engineers (their actual titles are fancier than that) — they search for oil. They tell me not to sweat it. They work for the largest oil company in the world. I sleep well.
Refining capacity in this country is grossly insufficient; NIMBYism keeps a lid on much of the oil deep below the Gulf of Mexico; reindeer are still considered, by people for whom I did not vote, to be more important than additional oil; nuclear power, which to my knowledge has not killed one person in the U.S., is grossly underutilized.
Whatever the wailing, it is largely a problem of our own making; burning all SUVs would be about as effective in dealing with it as wrapping your Big Bertha around an innocent tree. All this is IMHO, of course.
“I read somewhere that world proven reserves have yet to decrease on year to year basis (countries and companies individually may have decreases but not the world on the whole). ”
I have read that the rate of new discoveries and quantities found in those discoveries is a fraction of the rate of increase of oil being used all over the world. China wants it, India wants it. They are not going to reverse their modernizing. They tasted materialism and they want what Fat lazy Americans took for granted for decades. Stay tuned and stick with T-bills, oil drilling stocks, and precious metals. This is going to be worse than the 70s. I was a teen back then and remember the gas lines. That’s going to be like a Sunday picnic compared to what we have ahead. Many of the optimists here are citing reports from economists, not from experienced people in the oil business. Matthew Simmons has over 30 years experience in oil investing and banking. Billionaire Richard Rainwater is convinced of the problem of world peak oil. There are a lot of educated discussions on http://www.theoildrum.com about this problem. Too many people chasing too few goods. That is price hike. We will never run out of oil. We will run out of inexpensive oil. No one answered the point I made earlier. They were just being blissful Pollyanas and denial makes the rest of the day seem sweet, doesn’t it?. Matt Simmons gave a presentation to the Department of Defense in Arlington, VA on June 20 and one chart showed he predicts by 2018 the oil output from the middle east nations will be HALF of what it is today. He says even if there are 4 North Sea-sized discoveries of new fields, it will be years before they came on line. If you debate that, then ask yourself how long it took to develop Prudhoe Bay before the first barrel was extracted? It was more than ten years.
good post. it’s a complicated subject, but the bottom line is: increasing demand and permanently, increasingly diminishing supply. and no perfect substitute in sight.
Market will take of care the problem of scarcity: as the prices increase, alternatives will get more and more attention. $100 per barrel or even $1,000 per barrel would change the economy drastically. Which would be a good thing for non-oil alternatives.
And great incentives for exploring for more oil with better imagination and technologies.
But I still believe that the current pricing is mere oil bubble masked as “peak oil.” Why? Take a history of the oil futures chart. It started climbing up the “peak” in early 2005, just before the R.E. bubble “peaked” in summer of 2005.
http://www.futuresource.com/quotes/quotes.jsp?s=CL
Note also the futures price of 2011 and 2012 (5 and 6 years from now), the prices are LOWER than today’s quotes. Which means, if peak oil was true, then those futures are bargains! On the contrary, investers think that oil prices are in a bubble and will subside soon…
Larry –
I think you may have provided Ben with a first draft of the chapter outline for his forthcoming book
dba- how much oil is there in ANWR? everyone says 6 months, maybe a little bit longer and that’s it. peak oil in the US arrived around 30 years ago. I see no reason why if a field or a nation can reach peak production, the world can’t. most of the places you cited have most likely been factored into the equation by people like matt simmon’s and company. and remember, it’s not strictly about reserves and whether they are untapped. it’s about how fast are the current fields depleting versus whether new discoveries can be discoverred and brought online in time to make up the different in declining production.
there is DEFINITELY something to peak oil theory. i agree with army no va and john law. i especially agree with, “In the mean time, there will be times where gas/energy is cheaper than now (in a depression) alternating with new highs (during the recoveries).”
i’ve been following the peak oil debate quite closely for the past year or so. i think the major sweet crude in saudi arabia has peaked. and much of the other stuff — tar sands, shale, etc. — is not nearly as useful for meeting future demand.
i would not be surprised by $150/barrel oil, $5-$6/gal gas within 5 years. and it will change EVERYTHING.
Peak oil production is not a theory - it either is or will be a fact. There is no debating that one day either in Dec 2005 or later, the world oil industry will produce the most oil it ever does in a single day. After that, it’s declining production…there can be no rational debate on this. The question is when and how fast the decline. Then there is - what to do about it.
The other thing that is fairly certain - we will not be running the USA the way we do now and personal mobility will decline for an increasing percent of the population.
it’s a theory in the same way as evolution is a theory — unless you subscribe to creationism or abiotic oil (produced endlessly by the earth), it’s a theory you can rely on.
and i think we did peak last year. the saudi fields are now in decline.
If you believe that, you can buy oil futures on Tuesday [or Monday if you have access to non-US futures market], of 2011 and 2012 (5 years and 6 years from now) at $67 and $66:
http://www.futuresource.com/quotes/quotes.jsp?s=CL
So, 6 years from now, you can profit at least 100% [not bad of a return, if you ask me] if you believe that $150 will be true.
Do you believe what you’ve typed and take action or just merely type and not really believe?
[note that the futures prices are curved like a bubble, with the peak predicted to be about 1 year from now.]
DannyHSDad,
I’ve already invested in oil stock, so yes, I’m putting my money where my words are. I don’t invest in futures of any kind though. Not for anything. I’m into Canadian oil exploration and drilling. However, I only have $2300 worth out of $100,000 in my brokerage. A big chunk of my brokerage is into the Vanguard Prime Money Market fund. I don’t speculate. I have an asset allocation plan of my own and hedge with T-bills, municipal bonds, savings bonds, money markets, 1 year CDs, gold bullion, and platinum bullion.
and it’s also largely about return on energy invested. if it takes 1 gal of oil expended to get 1 gal of oil returned, you are f**d — it doesn’t pay to extract it at all. and that is where we are headed, as opposed to the good old days when 1 gal expended returned 5 or 10 or 20 gals pumped.
In a lending environment where everyone (including single moms) can get a loan to buy almost any kind of house they want, divorce could be good for housing demand, as the unhappy former couple now represents demand for two homes instead of one.
I get what you are saying, but with the housing market and the economy going in the craper, banks will not loan to someone just because they are breathing.
I think you did not get my sarcasm. Sorry to be obtuse.
Heaven help us. Check out this on Ireland’s property boom in today’s Washington Post:
http://www.washingtonpost.com/wp-dyn/content/article/2006/09/01/AR2006090101814.html
I guess it’s 2005 in Ireland.
OK….For any of you that may be interested…I promised a update on the R/E market from Santa Clara California in September… (Santa Clara is in the center of Silicon Valley)…
Santa Clara is a community of roughly 100K people….A balanced market would have between 175-200 houses “For Sale”…just as a comparison, In the 1991 downturn there was approximatly 600 available…
In my last post on this (June) there was 65 homes available…That has now increased to a grand total of 104 …Homes sell for $500. per foot and up…”Anything that is in good location & condition can still bring multiple offers”…Everything else just takes longer to sell, but, still ultimaly sells….
I still consider it a sellers market without any upward push in pricing….Next update;….November….
Realtor.con (m) shows 112 sfrs with the cheapest $525k and $525/sf. The next cheapest is $650/sf. $750/sf being a common figure.
Fresh off the MLS Robert;….
00001 649641 CBPG 01 008/01/1 $1,499,999 07/Aug/06
00105 651208 RCIP 01 008/01/1 $525,000 4/Aug/06
Realtor.com likely behind on the pending sales post….
Next cheapest is; 493. sq. ft…See here;…
008/SC BD 2 BA 1 LP:$635,000
SO: SA: FN: SD:21/Jul/06 CE:12/Sep/06
ZC:95050 CS:Fremont St. SF:1288/C
$750. a ft. is not very common at all…Just did a quick search of pendings and still find $500. to $530. per foot fairly consistant…
Makes me think Realtor.com data base is somewhat inaccurate…
I admit to just picking the middle page of the range and finding these examples that made me comment on sf pricing:
3495 PRUNERIDGE AV
1133 CROWLEY AV
I have no idea what those MLS codes are saying.
Couldn’t post it during the week but the Mercury News reported the Median income for Silicon Valley at around $70K. Think about that for a minute. The cheapest housing solutions (condos) are 7.5X times income. A low end house will be around 13X earnings.
So a condo costing $525K will cost you $2665 mo payment with a $105K down payment not including taxes or HOA fees. Thats already over half your $70K income on a conventional mortgage. Wages are not rising at even the inflation rate so we have a perfect scenerio for a major correction here.
Views from ground level in St. Pete/ Clearwater Beaches:
I take tours regularly by bicycle on Sand Key and surrounding islands. I believe you get a better perspective when you travel slowly through the neighborhoods.
In Indian Rocks, the area I was traveling had about 15% of all the houses there, either for SALE or for rent. Most were for sale, including waterfront and NEW waterfront townhouses that have been unsold for at least 6 months. There is something for sale on EVERY Block, and usually several on a block. There is also NEW townhouse construction.
This area is Old Florida with 50’s and 60’s small homes on the water that sold 15-20 years ago for 100-125k (waterfront), then worked there way up to 200-250k about 7-8 years back. Now, i think 600k is about “low end”. The brokers on the Island put up big signs when they have something under 600k, like it’s some kind of bargain (mostly newer CONDOs).
But the most telling sign of the bust occurring is a sign on one of the old waterfront houses about 1100 s.f.(lately these are being torn down for newer “luxury” houses) was a FOR SALE sign with the following:
“Contact SunTrust BANK”.
If housing is going so great, why couldn’t they just sell it to another anxious buyer before going into foreclosure??
You have to believe the buyer was underwater, and the hurricane missed us. Oh, for those of you unfamiliar with the Gulf Coast islands and coastline, most of the older homes are built at ground level. The elevation is about 5-7 feet above sealevel, so these are flood houses when a storm hits.
and now for something completely different…..
A word of thanks to Ben, Cote, Sunsetbeachguy, SoCalMtgGuy, txchic57, sm_landlord, and the other so thoughtful regulars here. Courtesy of the many analyses posted here in the past, I was able to help someone avoid the evil fate that awaits most potential FB’s (he decided it didn’t make any sense to buy). Hurrah for one that wasn’t a Greater Fool. Bonus karma points for y’all.
This little flipper is seriously delusional.
“…literally the finest place you will find in all of San Diego.”
How about just ugly and now priced to languish on the market?
And the County Assessor’s office says:
He thinks he is going to get $124-224K more than the $555 he paid just over two months ago in June for this 1484 sq ft 3/1 gold mine.
I wonder what granite countertops and laminate flooring taste like…
Mmmmm. Tastes like the little bubbles in my champagne.
http://tinyurl.com/husxg
Here’s another link to an interesting home. I have no idea where Throop is so I’m thinkin’ boonies. What caught my attention on this particular 2006-built multimillion dollar upstate home is that it doesn’t look like anything I’ve seen built around here. It looks like it was built to very specific tastes. So its for sale because????????…… I’m wondering if somebody’s dream home just became unaffordable.
Note: The web site has also got to be understating taxes. No way is anyone getting that place for that low in NY. I’d guess taxes s/b between $15-$25.
Looks like a place designed for a live-in driver. Reminds me a bit of the manor house in which the fake-rich bachelor courted the chicks. Doubt if my entire budget for shelter would cover the utilities for that place.
It is near Auburn, sort of between Rochester and Syracuse. Gnarly winters in the area for that much glazing. Industries are packing up from that area like crazy especially now that Kodak has waned from there. As robber baron palaces near the lakes go, it is actually rather modest, but the builder was probably just a mad borrower.
(Larry –I think you may have provided Ben with a first draft of the chapter outline for his forthcoming book )
I’ll buy it! It will sit on my bookcase next to Den of Thieves, When Genius Failed, Etc.
SD zip inventory = 23,153 and shrinking. To what extent is this due to
1) sales in excess of new listings
2) expired listings
3) disinformation designed to fool sheep into thinking the inventory glut is over
4) other?
Getstucco-Im my neighborhood, they are increasing with hardly any sales. The realtors are pissing and moaning about how bad the market is.
I feel soooooo bad for them:)
GS — have you checked numbers of listings for-rent in the same area? Do you have anything likee a snowbird season there?
Where I am, the minor decrease in for-sales has been offset by steady increases in for-rents. Of course, we are entering winter rental season, so I’m certain some of these sellers figure they’ll pull in some rental cash and try to sell again in the Spring, har, har, har.
I glance at the rental listings from time-to-time, as we rent a home, and may need to relocate on short notice. Generally I do not see any trend in rental prices taking shape — 4BR rentals in our area come on the market on a sporadic but consistent basis in the price range where we rent (~$2K/mo), but there is something intersting that I keep seeing repeatedly: the $3K/mo rental market. For instance, in 4S Ranch, a nearby McMansion tract development, rental units advertising ocean views (only 15 miles away!) often are listed for rent above $3K/mo ($36K/year), which to me sounds a bit like throwing money away on rent of luxury accomodations. I know there are folks around who are rolling in so much dough that they wouldn’t blink at paying this much in rent, but I believe the numbers of these types who rent are too small a portion of the overall population to absorb the number of high-end rentals I see listed.
I have two theories about what is going on here:
1) There are lots of speculators who thought they would make more on a McMansion than a luxury condo, who are now trying to rent out their 4S Ranch “investment” home for enough to cover their carrying cost. I suspect many of them are having a hard time finding occupants, but have no idea how to check this.
2) This time is different, because flippers have made incursions into quality segments which they would not have tampered with in previous cycles. Homes priced at the $1m price level traditionally would have been owner-occupied, as the type of folks who can afford such homes are wealthy, and can ride out the cycle as needed; what’s more, a $200K blip up or down in their wealth level is peanuts. This time, exotic loans have encouraged flippers to purchase at price levels where traditional (underwritten) lending would have shut them out, and now they are fantasizing that they will be able to rent for enough to cover their carrying costs until they make a killing on future appreciation. Too bad prices are moving against them, and the economy is slowing down, which tends to limit the number of incoming highly-compensated executives looking for temporary luxury housing.
I’m seeing more FSBO signs around coastal north county. There have been a few sold or sale pending signs too - to be expected at the end of summer. I expect a slight uptick in sales compared to last month, but things are basically dead. Inventory will still continue to creep up over the next few years, but the thing to track now is bankruptcy and foreclosure numbers at foreclosure.com IMO.
This morning was watching Antiques RoadShow on PBS, Channel 26 in Washington, DC. If you don’t know the show, appraisers travel around the country and people bring in their stuff to find what is it and its worth. There’s always a five or ten minute history segment about the host city. Today (don’t know whether the show was a repeat) the city was Miami. History segment was about the development of the beach (lots of dredging) and tourism in the 1920s, the REAL ESTATE bubble, speculators, and subsequent crash, as well as the big hurricane in 1930. But Miami came back. It took 20 years.
Actually, it didn’t come back till the 1980s with an influx of South American drug money. In the 70s, it was a ghost town, and the beaches were in ruin.
Yikes, one of the local power Realtors sent me a letter about courage quoting Teddy Roosevelt. This downturn is going to be a real trip.
One of my favorite Craigslist flippers posted something that made me laugh out loud more than his usual fixers. It seems that business is getting a tough for him while his properties are sitting on the market, so he’s now trying a different method. Instead, he’s advertising for a greater fool homebuyer to find and buy the house so that he can just do the highly marked up improvements for this fool without being stuck with yet another fixed-up property losing value. He’s bailing out of one place he has in La Jolla without even bothering to fix anything.
“Here’s what I usually do: I buy houses, I totally renovate them, and I sell them. There are a couple of problems, though. Because we don’t know who the eventual buyer will be, my designer and I tend to over extend the upgrading to make sure more people will find it interesting. (Which means I spend more than I should.) It also takes some time to find a buyer who’s looking for exactly what we’ve done. (Which means I lose even more.)
Therefore, if you and I cooperate as I suggested above, we’ll both win: I win because I won’t have to over-spend, and I won’t have to wait until a buyer comes along.”
What a great deal! Overspend on a house that is depreciating in value AND have this over leveraged flipper redecorate even more of your money away!
Here’s a flipper who whining about a nastygram from his realtor:
http://losangeles.craigslist.org/wst/rfs/201903712.html
Aww, poor little dumped flipper. He’s only been concealing the fact that he is listing flips on Craigslist, using and listing with another realtor, and this agent too. Now he’s also pointed himself out as the total idiot that he is.
I love the remarks by the realtor alluding to how tough the market has become and how this guy’s money is at risk. Looks like the flipper grossly underestimated the things a realtor with more time on his hands in the current market might do.
Realtor wins this round!
To many topics/posts that I missed, so my apologies if this has already been posted:
“Reply.com Site aids buyers in making unsolicited offers
Reply.com is a new real estate site that allows a buyer to make an unsolicited offer on a property. For $24.95, reply.com will create, prepare and priority mail an offer to a seller. The reply.com site provides estimated valuation information for properties in a manner similar to zillow.com. Reply.com offers are non-binding and serve as a means for connecting buyers and sellers without real estate agents.
This model works well for properties that are not currently on the market, as most listed properties would contractually require a broker commission payment regardless of who produces the buyer. Reply.com is an interesting concept and one that has the potential to catch on quickly once it gains critical mass and credibility in the marketplace.”
http://www.reply.com/
BayQT~
Interesting idea — I see that it is for homes and cars. Wonder if the initial model was for cars. Wonder if there is anyone (BayQT~?) who would join up and test it out? My first question is, what exactly gets sent to the homeowner we are attempting to woo into selling — is a contract valid in that state? What’s the deal with escrow checks, all that.
Can you report back with more? Thx.
Here ya go…a little more “meat” from Yahoo! Finance:
http://biz.yahoo.com/ap/060822/apfn_reply_com_relaunch.html?.v=1
BayQT~
For those of you who one read this week’s Business Week cover story on-line, it’s worth picking up the issue to see the photos they left out!
Some people I feel sorry for. I’m sure they were lied to by MB’s and they were discouraged from reading the fine print. (When I closed on my home, they grew very impatitient when we sat and read EVERYTHING! “it’s just standard” they said.)
But the people who had visions of being Donald Trump, I can’t feel sorry for. Donald Trump loses all his money and simply starts over again. He never whined that it wasn’t his fault!
Some people I feel sorry for. I’m sure they were lied to by MB’s and they were discouraged from reading the fine print. (When I closed on my home, they grew very impatitient when we sat and read EVERYTHING! “it’s just standard” they said.)
————————
Same experience here during the refi on our former home. P!ssed me off plenty.
For those who are unconfrontational (I love a little confrontation :)), I can see how many were duped into suicide loans. I want the lenders to burn way more than the “regular” buyers.
For all the techies on this board:
Silicon Valley ranks dead last in ranking of U.S. tech hubs
“Silicon Valley ranks dead last in an annual ranking of 12 U.S. technology hubs because of the region’s notoriously high housing costs, traffic congestion, high unemployment rate and other quality-of-life problems.”
“According to the newest survey by Silicon Valley Leadership Group, the nation’s top-ranked tech hub is North Carolina’s Raleigh-Durham area, which enjoys relatively affordable housing and a thriving job market.”
“San Jose-based SVLG ranked its home region last for the second straight year - a dubious distinction considering that last year’s list didn’t include expensive cities such as New York or cities with struggling urban cores such as Philadelphia and Chicago, all of which finished higher than Silicon Valley this year.”
But SV still comes out on top in VC money. Does anyone with feet on the ground in the Valley currently, think this that this is a solvable problem? Or is SV going to be nothing but finance guys and retired engineers in 10 years?
Also, is it now possible to convince top engineers to leave the Valley for jobs elsewhere?
Nonsense! I live in Sunnyvale:
1. “High Housing Costs” — My house was reasonably priced when I bought it back in ‘91
2. Traffic Congestion — Before I started working for myself (mostly from home), both of my jobs were in Sunnyvale or neighboring Cupertino. No traffic. My 10-year-old car has only 25K miles on it. I spent may hour a WEEK total in my car.
3. High unemployment rate — Neither of us have been unemployed one day since we moved here
4. Quality of life — Wonderful! I can walk to shopping, a nice park, etc. Very low crime rate.
At least Silly Valley still has high housing values.
Gs.
Is Silly Valley Different?
If so…….nice to see somewhere is
I was listening to a duo pimping local real estate and loans on a Phoenix radio station. They spend their time talking about a coming “run” on houses due to pent-up demand and related fiction. They chuckle at any newspaper article that mentions a slowdown.
At one point, the show had a real caller, some lady asking for their forecast/advice for her house in Johnson Ranch/Queen Creek. Most of you are probably familiar with this area, almost certainly ground zero for a Phoenix area housing crash. They started stuttering, asked her if she had their “off-air” number, and went to a station break. Apparently, the hold button was broken on their telephone, since they could not address her questions after the break.
Had a chance to read the new Business Week and to listen to their pod cast about the story on “toxic” Option ARM loands. A lot of emphasis on practise that home lenders can book the full amount due on an option ARM, even when the borrower is paying much less. This clearly does not make financial sense but follows “General Accepted Accounting Principles”. No doubt that investors and analysts will take a much closer look at the supposed earnings of CFC, WM, NDE and other lenders
Good read from one of the smartest guys and best person I know
http://tinyurl.com/gk8mp
Well it seemed to discuss problems but I guess the two Lobsteritas from Red Lobster have affected my absorption of what the author was saying what the solutions are. The author did not even say what will be good investments in the next 5 years. I’m disappointed.
The housing bubble has driven permabull site Marketwatch.com over the schizophrenic cliff. Current home page top story:
“Could bubble bust banks?
If a bursting housing bubble hits bank sector the effect could be devastating. Mortgage defaults could be a serious problem”
The next story down is no more upbeat:
“WEEKEND EDITION
Five ways to recession-proof your portfolio
In an economic downturn, the best offense is a good defense
By Jonathan Burton, MarketWatch
Last Update: 2:09 PM ET Sep 2, 2006
SAN FRANCISCO (MarketWatch) — The “R” word is being spoken louder.
The chance that the deepening housing downturn will drag the broader U.S. economy into recession is troubling more investors. With so many Americans borrowed to the hilt against their home equity, many investment strategists and economists are viewing the housing slump as the tipping point that sinks consumer spending at a time when U.S. businesses aren’t reaching for their checkbooks either.”
I’m happy that Pfizer an Unilever made it to Burton’s list of winners. I guess he does not like metals, and he recommended to stay out of commodities. The woman in the article said rates are going to go down. I would not count on that to happen. She did not give any basis to her statement. So T-bills look good, and they look better than notes. Short term is great. Most Americans are not saving, judging from what Russ Winter’s Xanga site has been posting. Not good - not good at all.
“The woman in the article said rates are going to go down. I would not count on that to happen.”
This is what I consider to be the sort of forecast most likely to occur, as it already has (have you taken a look at the broke-back yield curve lately?).
Certainly the longer rates have come down. I’m talking about the federal funds rate, specifically. It was unchanged last time the FOMC met. That article posted the other day about EU guy, Trichet? Said they will raise rates for sure in October and will put pressure on Bernanke to raise rates again.
This story seems to have received a great deal of play the past couple of days. Are the big hedge funds short enough now so they are asking their marketwatch.com minions to stampede the equity lemmings herd over the cliff?
———————————————————————————————
Housing casts shadow on prospects for banks
By Nick Godt, MarketWatch
Last Update: 7:00 AM ET Sep 2, 2006
NEW YORK (MarketWatch) — With the $10 trillion housing market weakening fast, in defiance of the assurances of most pundits just a year ago, investors are starting to question the confidence among banks about their ability to weather a housing downturn.
Just a few months ago, homebuilders, the National Association of Realtors and most Wall Street analysts were still predicting a soft-landing in housing, in the same reassuring way they used to say last year that housing would remain strong in 2006.
But after the freshest figures - which showed sales of new homes sales plunged 21.6% in July from the year earlier, inventories of unsold homes soared and prices fell - there is little debate that the housing market is stumbling much faster than most expected.
Similarly, conventional wisdom, at least as officially voiced by banks and Wall Street analysts, has so far held that banks’ earnings would be only modestly impacted as the mortgage business continued to soften.
But “this is the most inflated housing market in the post-war era,” said Paul Kasriel, chief economist at Northern Trust. “If we’re to have a severe recession in the housing market, it would seem to me that the banking system cannot escape significant losses.”
As signs of trouble have started to emerge among mortgage lenders, the market has started to reflect some of these concerns. The Philadelphia KBW Mortgage Finance Index (MFX : Last: 93.74+0.10+0.11%
4:03pm 09/01/2006) has now dropped 10% from its May highs and is down slightly for the year so far.
But, so far, banks have only seen modest drops over the past few weeks. The Philadelphia Bank Index (BKX :Last: 110.49+0.22+0.20%
4:01pm 09/01/2006) has lost less than 2% from its early August highs but is still up 7% on the year.
The potential for bad loans, which force banks to take a loss on their books, has been barely mentioned as credit quality has remained solid through the first half of 2006, according to most banks.
Thank You for posting this, hopefully this will take me off the tinfoil hat list.
Man when I read this I am really concerned. I have been a bear for a long time and I expected really bad things to occur as a result of this nonsense we have all witnessed but good lord I am afraid it is going to be life altering for us all.
The nuts will be wilding in the streets if this really plays out as a true meltdown. Banks busted, houses sitting vacant for years, auto industry tanking, oil prices sky high and all attendant users affected. Foreclosures on every block with values tanking as a result. Mortgages upside down in mass.
This is some heavy heavy stuff kids.
Widely anticipated disasters seldom prove to be as catastrophic as the lightning bolt which comes out of the clear blue sky and knocks the shoes off your feet.
Hey, I am back to blogging. To pick up on the gold digger discussion from yesterday:
A week ago today, I thought I was going to get a date with Ernesto here in Tampa. I guess he must have been reading this blog and learned that all the smart ladies rented u-hauls and moved from Florida up to North Carolina. I have to admit, that Ernesto is just the kind of guy that I am a magnet for; comes on real strong and creates a lot of economic devastation. It is really hard to protect ones self financially from Mr or Ms Wrong. Soliel’s comments above brought back memories of chapters in my Forrest Gump style life,
one of which, I would like to share, because it is really funny to me now and I hope you can learn from it too.
My ex and I started investing in off campus rental houses very young, in our early 20’s. We were lucky to be taken under the wings of those hard a$$, old time landlords-very different from what you see today on the infomercials. Anyway we did pretty well, in fact I wish that I still had that cash flow coming in today. Well as life would have it, I was called to active duty for Desert Storm. The military requires personnel who are called up, to designate a power of attn. for their financial affairs, so of course I gave power of att to the old, “ex love of my life”.
When it was all over and I was released, I had promised some fellow activees rides home from the airport in my big ole Buick(trunk can fit at least 3 duffle bags). Well who should show up all smiles in a brand new 2 seater sports car, you guessed it. I could barely fit my things into this car. Anyway, he had sold all the rentals and had bought among other things, this car that was depreciating by the minute more than I had ever made in an hour of work.
Now, if a guy is only interested in me after he sees my bottom line, then I know what I am getting into. And I don’t mean, a “bottom line”, extending from my low-rise jeans.
P.S. I am not rich, but there are a lot of crum bum men out there who make a career out of moving from one woman to another draining their assets, before they move on.
It’s a good think we have hairdressers around to give us insight as to what’s REALLY happening.
If you really want to get a good haircutting, say 40-50% off the top, buy a house now.