Bits Bucket And Craigslist Finds For September 4, 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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Name:Ben Jones
Location:Northern Arizona, United States
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Goodness, Ben…
Please don’t tell me you’re waking up right now.
Hope you have a terrific day off!
Happy day off and thanks again Ben!
And speaking of days off, it’s day-off 27 and counting for ny times RE “blog”:
http://walkthrough.nytimes.com/
well if they can’t say anything nice about RE….
Speaking of which - I believe I saw a promo a couple weeks ago about the NYT starting a slick new weekly real estate/housing supplement magazine (perhaps to be part of the Sunday magazine). Seems a bit “late to the game” in terms of jumping in just when the market turns.
Anyone else see that promo?
I guess the NYT didn’t get the memo, huh?
For anyone prone to ‘jumping in,’ THIS might be just the guy they’re looking for:
http://sacramento.craigslist.org/rfs/202833081.html
He sincerely hopes you DO jump in, and soon. Please?
I like the way he says “OK Area”. An “OK Area” in Sacremento means your chance of getting shot when you take a walk down the street is only 1 in 4.
This guy is toast. I admire his honesty, but that’s about all. With a little luck, not only will he lose all the houses, but face charges for falsifying financial documents.
Here’s to Ben and a great time on his one measly day off. If everyone in this country were as dedicated and hard-working as Ben Jones, we’d be twice as rich as the Japanese.
Who’s to say we aren’t [Americans being twice as rich as Japanese]?
If you think cost of living in the bubbled R.E. USA is bad, you should check out Japan: even though R.E. is down a lot there, it’s far from affordable relative to the US. As my coworker pointed out, a US$20 bill is equal to Y10,000 note [current exchange rate makes this is worth US$85], when it comes to day-to-day spending. This was at the peak of Japanese bubble [1990] but, as far as I know, it is still true today [last time I visited Japan was in 2001 but my parents were there last year and my sister was there earlier this year].
“As my coworker pointed out, a US$20 bill is equal to Y10,000 note [current exchange rate makes this is worth US$85], when it comes to day-to-day spending.”
Wow! Maybe I oughta take my savings and move to Japan.
No, you’d be worse off if you take your money to Japan. Exchange rate will give you Y2,340 per US$20. You’ll need to make up the diffs of Y7,660 (another $65) to live the same lifestyle there as in the US.
OK. Glad you pointed that out. I had my bags all packed.
Having lived in Japan for 10 years, I will tell you flat out that they are in much better financial position than Americans. Many Americans would be hard pressed to come up with $1,000 cash on the spot in case of Emergency.
Japanese could probably scrape together close to $50,000 from years of o-toshi-dama and graduation gifts, etc.
My experience was life in Japan was overall cheaper and better. No car necessary. Saved big money right there. No tipping necessary. Another savings. Very few rip off artists. Huge savings. Lots of neighborhood festivals and things throughout year that build community and are essentially free.
Don’t completely disagree with you, but I don’t think life in Japan is necessarily any cheaper than in the US. No car necessary but taxies, buses, rail - all WAY more than the US. Fewer ripoff artists (really? I could debate you on this one) but even if true, the high cost of merchandise (food, electronics, furniture, durable goods) there more than makes up for that. No tipping necessary, but pretty much mandatory twice/yearly expensive gift giving. Even when receiving gifts, you have to go and get a ‘thank-you’ gift in return. The required level of necessary societal lubricants cost a lot of money. In case you’re wondering, I lived in Japan for a number of years (can speak, read, write) and my wife is first-generation Japanese.
Oh come on, Danny — my expression was what is called “pap.” It was just feel-good talk meant truthfully to fawn all over Ben’s hard work and my good fortune because of it. It had nothing to do with Japan in reality.
I wonder about the “glut” of houses. If the numbers we are given have not been cooked, there is far more housing in this country than there are “family units-of any makeup” to inhabit them. I wonder how the free market is going to reconcile this? At this point the waste in volved in tearing down half-completed houses is intolerable,yet in many cases, smart people will make the case that from a strictly dollars& cents standpoint, the destruction of these resources is the “only” logical alternative.
The “free market” wins again………
One a side note, In a 1945 issue of Popular Science Magazine I just bought, there was an article about how to “Close up your Summer Cabin for the Winter” It was full of tips about storage and cleaning, so as to limit damage from animals and the occasional vandal. What struck me was the underlaying assumptions involved. 1. Many subscribers could use this information. 2. That the ‘average’ subscriber could afford to HAVE a Summer Cabin.3. That animals were a bigger threat than vandals.
Even now, I mourn for that country. I wish that we could still luve in it, for all it’s faults. It was, in many ways, a better, more civilized place.
I say knowing that America, circa 1945, was not by any means perfect. Just that for all our electronic toys, our world today is not as pleasant, or as desirable a place to live.
Perhaps, THAT is what so many of us seek, in our homes today.
Another striking underlying assumption is that readers would have a summer “cabin” …. not a 3,000+ square foot luxury “second home”, with granite countertops, Viking appliances, spa, rainforest shower, master bath the size of a cabin, etc…. Back then it was probably an 800 sq. ft. cottage without heat or a/c and an outhouse in the back. But it was by the lake or in the mountains, and it was wonderful!
As Ben is taking a day off today, I got an idea…
Since we’ve been getting soooo much more traffic on this blog recently, I’m finding it much harder trying to keep up with all the posts. Wondering what our gracious host, Ben, and all the posters here thought about having one day off per week (maybe Saturday or Sunday?) so we could review threads/posts we couldn’t get to during the week (not to mention spend time with our familes, get some work done, etc.). We could have one “bits bucket” thread for the day where we could post relevant articles which might be published that day.
Thoughts?
Amazing the difference between this blog now and what it was like in the beginning when I used to refresh every couple of hours to see if anyone had posted on any of the threads. Often, we wouldn’t see a new post for hours.
Thank you, Ben, for keeping up this blog so all of the HBB addicts could get their fix!!!!!
I don’t know how Ben does this. It’s a lot of work. Maybe he should consider having someone else take the wheel from time to time. A lot of really good people hang around here. Anyway keep up the good work, Ben.
Please use the “donate” button on the right hand side of the page to keep this blog alive and well.
I’d be willing to do it. I’m just larnin’ my way around this blogging thing but I’m going to start my own blog in a week or 10 days, as soon as I get it set up. It’s going to be called “Broke is the New Black” and will be about the coming recession and how it affects people in all income strata, with my usual snarky commentary. We’ll see how it goes.
Please email me when you get your blog going! Also, I’d be glad to help you tweak your template (html code, tips & tricks).
Delilah
DC Housing Bubble Blues
delilahboyd@dcemail.com
I will. I need that help.
Hi txchick57,
That’s great news. Blogging is fun. My foster dog was a big-time blogger — he made nearly 300 posts in the year that I had him. (I kept him after he was diagnosed with degenerative myelopathy and then had to set him free last October.) There are so many wonderful tools that can be used for blogs — Ben doesn’t use them as he is too busy just posting and keeping up with the news — but you can add video, photos, podcasts, delicious tabs, traffic counters, blogrolls, and lots, lots more. I’m planning to start a new blog soon too — on the topic of the positive effects from spaying and neutering of pets.
I think the K.I.S.S method that Ben uses is underrated and anything more would just detract from the message.
That’s my thought too. There is so much good news out there to chew on. I’m going to comment a bit but I like the way Ben runs this one. What I think doesn’t really matter that much. What does matter is that the PTB will deny there is a recession right up to the day they have to join the line at the soup kitchen. Even though we are not officially in a recession, I have seen and heard enough anecdotal evidence that many are in their own personal recession.
Better have good troll filters for VAIN_vestor.
Let us know, TxChick. I’m sure whatever you do will be fun to be a part of.
BTW, love your blog title! LOL’d
Yeaaaa….. I love reading your posts, and that’s a topic I’m very interested in. Keep us “posted”.
“It’s going to be called “Broke is the New Black”…with my usual snarky commentary.”
Sounds like a great idea, Txchick. One of the things I’ve noticed on this blog is that although ethnicity and generational angst make frequent appearances, we transcend socioeconomics in our common disgust at the existence of the housing bubble.
And I’m glad to hear that you’re going to continue being “snarky.” That’s what I enjoy most about your posts.
Snark on, girl!
Don’t you mean the coming depression? Ka-poom!
Love your posts… can’t wait to see your blog (although I’ll be damned if I know where I’ll find the time).
Looking forward to that…
I was on the road last week (Columbia Basin — WA) making service calls, a nice break from the office. Observed many vehicles on the road’s edge sporting “FOR SALE” signs, and the number is rapidly growing. New home construction at $80/sqft is frantic as builders have winter weather only 45-days away. The retiring Seattle/Tacoma equity locusts buy before construction has finished while local’s children who marry are being squeezed. No doubt about it, a demographic wave of “haves v. have-nots” is underway, even out here in “the sticks.”
Funny thread. Plus, the bandit sign guy got nothing for his efforts
http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=1337073
The people on that message board are mean!
(I like this board because everyone’s so nice!)
But it’s really hard to have sympathy for someone who enteres a hare-brained scheme (and probably wansn’t truthful on the mortgage application) hoping to “get rich selling real estate.”
From today’s Boston Herald:
Labor daze: Median hourly wages plunge in Bay State
Boston Herald Health & Medical Reporter
Monday, September 4, 2006
Median hourly wages dropped more in Massachusetts in two years than in any other state, according to a new Labor Day report, and critics say that spells trouble for Gov. Mitt Romney as he campaigns for his next job - commander in chief.
Working for less
On the skid$
“We are talking about a guy who came into the office saying he’d be the ‘CEO’ and be in every boardroom across the world and all I’ve seen is companies leave,” said P.J. O’Sullivan, a Democratic political consultant in Quincy.
The median hourly wage in Massachusetts, adjusted for inflation, dropped nearly 5 percent between 2003 and 2005 - $17.19 per hour to $16.35 per hour - the steepest drop in the nation during that time, according the State of Working Massachusetts report by the Massachusetts Budget and Policy Center.
Democrats blasted Romney yesterday for failing to deliver jobs and higher wages in Massachusetts as he eyes a White House run.
“This will unfortunately for him be another grade on the report card that shows utter failure,” O’Sullivan said.
Cyndi Roy, communications director for the state Democratic Party, said the report is damaging to Romney’s national profile.
“The evidence is clear. He’s failed as a leader in Massachusetts,” she said. “If he can’t lead Massachusetts in the right direction, I certainly wouldn’t be comfortable putting him in charge of moving the country in the right direction.”
But Eric Fehrnstrom, Romney’s spokesman, pointed out that Massachusetts residents have an average household income of $57,184, which is 19 percent higher than the national average.
“When Gov. Romney took office, the state budget was out of control and we were losing thousands of jobs every month,” Fehrnstrom said. “Today, thanks to Mitt Romney’s leadership, the budget is balanced, the unemployment rate is lower and we are creating thousands of jobs every month.”
Economist Alan Clayton Matthews said the most troubling trend is the growing income gap between the haves and have-nots. Massachusetts has the 11th highest wage inequality ratio of all 50 states, according to the report.
“We are one of the places where inequality is increasing the most,” said Matthews, a professor of public policy at the University of Massachusetts at Boston.
http://news.bostonherald.com/localRegional/view.bg?articleid=155822
Yeah, real nice. Wages in Massachusetts actually going down but plenty of Kool-Aid drinking Realty Martians still walking around saying “the downturn is only temporary! Real estate will go back up! Always does!” Yep, tons of middle class people with falling wages will sit around in their $500,000 just reaping in the appreciation… nobody will work anymore, why bother! They ain’t paying! Just sit in your house and get rich.
F’ing morons. Massachusetts is doomed.
$500,000 houses…
Mass. is doomed? We are all doomed. This is just the leading edge of a national trend.
Thanks, I feel a lot better now.
Be sure and take a look at this whole thread, including the letter reproduced part way down:
http://www.itulip.com/forums/showthread.php?t=397
Good Grief! Those corporate banking sharks set the trap by encouraging otherwise unqualified buyers to take risky loans. Then at the downside of the bubble they take on fellow sharks (pooling the money) and buy back those houses for pennies on the dollar. That’s one thing I fear - that it will encourage people to elect politicians who offer big government for the solution and an end to what’s left of capitalism.
Now THAT’s how you short sell the housing bubble . . .
I can’t help but think some of these investors are grossly underestimating the downside and will get royally burned themselves.
Also worthy of a read
http://www.itulip.com/newdepression.htm
TX Chick -
Looks like you’re taking the bubble day off to catch up on itulip!
I’d like to speak with you off blog - would you contact me at cinclus10 at yahoo dot com?
Txchick57,
Thanks for the link and my continuing education in “history in the making”! Excellent observation about how the middle class and below are compensating their paychecks with additional income from Aunt Asset & Uncle Equity.
2nd try.
make sure you read this piece on the bubble in ireland.
was already mentionen here last week. but for everyone who missed this it is a must read
http://www.washingtonpost.com/wp-dyn/content/article/2006/09/01/AR2006090101814.html
sounds really like the us in the summer of 2005
My sister and brother in law in Dublin are a two income family (both IT professionals) and found that houses were already out of their reach 5 years ago. Now they are just out of sight. Median prices twice the US price and incomes still 1/3 or more below US incomes - wheres the sense in that.
Landowners think they are geniuses and talk about the country “coming of age” and “maturing”. The reality is that Ireland joined the EU monetary union and discovered their interest rates were set in stagnant Germany and France, utterly inappropriate for Ireland with its 8-10% annual GDP growth. The galloping inflation results in the highest prices in Europe. Continental Europeans are gobsmacked to visit Ireland and find restaurants, taxis etc 50% or 100% more expensive than at home.
the point with the ecb is the key to this level of bubble. a irish notenbank would have / should have raised rates double the actual level years ago. same problem in spain. the reason is indees that germany,france, italy were flatlining.
i visit ireland last year and was shoked that the normal things like food etc were so extrem espensive. the same kind of basket in the same chain aldi cost you 20-30% more.
http://immobilienblasen.blogspot.com/2006/09/irland-ireland.html
Sure. I think you can safely say that in most of Europe rates are WAY behind the level of inflation and money supply growth. Many EU countries have money supply growing at far over 10% yoy. And unlike Ireland, in most of the EU wages are not growing that much. This is one of the problems of having a central bank with one rate for all countries, while all these countries have their own fiscal and economic systems.
the article does not mention it, but I guess much of this boom has to do with the huge flood of EEC money streaming into Ireland over the last 10, 15 years or so. And lately there are plenty of newcomers at the bottom of the pyramid to keep the game going for some more years.
Dutch prices increased even more over the last 10 years and that bubble is still growing too. Around 1990 the most expensive homes in my city cost +/- 150K euro, and the cheapest homes 25-30K. Now there are plenty of 1.5-2M euro homes for sale (the same homes as in 1990, there is hardly anytning new built in this price range), and for 150K you can barely buy a POS apartment or tiny starter home in very bad condition.
went out to look at some new homes in Sussex, NJ. Toll Brothers division they are going to finish selling. Price with upgrades is around $450,000. Looked at tax records and most people paid $490,000 to $510,000 even 2 years ago.
Either people put in every upgrade available or Toll Brothers cut prices on the last 13 homes.
“Price with upgrades is around $450,000.”
why buy now that prices have just begun to fall? the 2008 price will likely be $250,000.
they have a bunch of quick delivery homes and you can still get some upgrades, but others are already going to be built because of permits, etc.
what’s funny is that Beazer Homes is selling mcmansions 15 minutes away for less money and townhomes for a lot less another 15 minutes away. and they look as good as toll brothers. didn’t get a chance to go there though.
get this though, property taxes are around $10,000 there in the middle of no where in sussex county. my nextel didn’t have a signal there either.
Beazer Homes is based in Atlanta. They have traditionally targeted the entry-level buyer. I’m not as familiar with Toll Brothers, but I think that maybe they are not entry level?
Toll Brothers markets themselves as luxury homes. in reality they get some of the worst ratings from JD Power and use the same materials as everyone else. And everything is an upgrade of course. Their strength is they have the best floorplans i have seen. they can take 2000 square feet and make it seem like a lot more.
A friend of our family was once employed by the Toll Brothers. He was, shall we say, less than impressed with their commitment to quality home construction. In fact, he coined his own Toll Brothers motto, which my mother is fond of repeating:
Guaranteed For 5 Years. Then They Fall Apart.
U-Haul Stats for today - 26 foot truck - pickup Sept 11
White Plains NY to Atlanta GA - $3605
Atlanta GA to White Plains NY - $322
Boston MA to Atlanta GA - $3141
Atlanta GA to Boston MA - $390
West Palm Beach FL to Atlanta GA - $776
Atlanta GA to West Palm Beach FL - $495
I see Fla, Mich, North East license plates everywhere. However, even with this inward migration the real estate market has slowed considerably since July 4. I wonder what jobs all of these people are going to get? There has been a “mini-NY” trend here since Sept 11 (financial services companies opening up offices or expanding) … but this is not NYC for sure.
Even here, where there really hasn’t been bubble price appreciation and all of this in migration, we will see declines. Particularly outside the Perimeter. Over building (like Austin 1980s) is occuring. Plus people seem to be waiting more. Though sales do continue and inventory seems to have levelled off.
I’d say 30-50% hit outside the perimeter over the next 3-4 years, depending on location. 15-40% hit inside the perimeter depending on location. Location, supply constraint, and neighborhood quality will be a key factor as well for how well a house value holds up. Generalizations for cities are a bit misleading.
If it hits this hard here, what will the N.E. and other bubble markets look like? The only saving grace for some of these other markets is less building and somewhat constrained supply.
Army No. Va.
I agree with your “outside the perimeter” prediction. That’s the thing about Atlanta. There’s always more land outside the Perimeter…until you hit Chattanooga, that is.
Properties inside the Perimeter have traditionally held their value better than those outside the Perimeter during past down-turns, and I don’t see why this one should be any different. Today’s hot outer market is tomorrow’s has-been. Inside should do better, as you point out.
What do people here think about CDs?
I’m about 60% in cash — half of that in 3 month bank CDs and the other half in Schwab Advantage. With all this talk about banks failing I’m getting worried (and yeah, I spread it around so that it is all FDIC insured). Would T-bills be safer? What about the Schwab Advantage? There doesn’t seem to be any safe haven anymore.
T-bills are safer than CDs. Moreover, states cannot tax the interest on T-bills, but certainly tax the interest on CDs. I have a few CDs, I buy $1000 worth at a time. But now I’m into T-bills and buy a $1000 T-bill (3 month usually) once a month. Sometimes I also buy a Treasury note for diversification. Since I have trailing stops on my individual stocks, and they are usually 10%, I am willing to risk the 10% loss for potential gain the next few months. I am mostly into dividend stocks. My banks - I have BAC paying over 4% yield and NYB yielding over 6%. If I keep 90%, it stays in cash and I move it over to Vanguard Prime Reserve Money Market. Someone correct me if I’m wrong, but Treasuries do not have a maximum FDIC. The US gubment favors its creditors first. Has to keep a promise or we are toast. CDs, money markets, and savings accounts have the $100,000 maximum FDIC. So you have to spread several hundreds of Thousands of dollars around and manage a bunch of different accounts (and pay state taxes on gains).
Why are T-bills safer than CDs?
Should add: I have my CDs in CDARS. Is this unsafe?
Because the banking system will fail just slightly ahead of the government repudiating it’s debt.
LOL! Well, you have a point. I guess that since each of my CDs is at different banks, I’ll have to keep an eye on the government.
The govt does not repudiate its debt. It can always print more or tax more if needed.
And since you put it that way, the government can always print more $, that is a very good reason for choosing T-bills over CDs, and also over municipal bonds, which are not tax free. Let’s say (God Forbid) the towell heads detonate a nuke in one American city. First, since federal reserve banks are in twelve different parts of the U.S., a jab with a needle will not cripple the US Dollar. Second, the sleeping giant will awaken. The kid gloves treatment toward Islam, per se, will be removed and we will no longer stay out of mosques and allow them to be used to store weapons or secure terrorists. We will nuke back.
Meanwhile, Your bonds, notes, and bills are safe in such events. Terrorism cannot and will not bring down the United States. Only a government led effort (China, for example), could possibly bring down America. So Treasuries are very safe. CDs are taxed at the state level. That’s my only problem with them. I don’t worry about FDIC because my bank accounts amount to a combined total under $100k.
The govt does not repudiate its debt. It can always print more or tax more if needed.
Oh, if it were only that simple.
Meanwhile, Your bonds, notes, and bills are safe in such events.
Of course, you’re toast in a systemic financial crisis, the likes of which can occur due to any number of highly plausible circumstances.
For example, a derivatives-led “credit event” precipitates an LTCM disaster x1000. The Fed, seeking to prevent a total meltdown, immediately suspends all redemptions and severely restricts banking & market activity for an indefinite period of time. Ultimately the government makes everyone whole in nominal terms; however, during the suspension they devalued your holdings by 50+% in order to “socialize the losses”.
Yup. I’ve been moving the 401ks I help with into Tbills
Tx Chick, do you do that with Treasury Direct??
alternatively there are mutual funds that are short term treasurys only. Fidelity comes to mind FDLXX I believe. Vanguard and others have them as well. The fees are pretty low but certainly a bit more than if you went treasury direct but you also gain a bit more flexibility when/if you want to exchange back into cash with the mutual funds.
Fidelity allows you to participate in treasury auctions for free and holds them in your Fidelity account. This saves having to open and maintain a Treasury Direct account.
Bill, last time I checked the yield curve has inverted for T-bills, also. You get a better rate for 4-week than you do for 3-months!
Right on! I’m going to be getting into 14 day and 28 day T-bills on my next few purchases at Treasury Direct. More of a good thing is good (that’s the American way)!
couple of points: because of the lack of taxing by the state, t-bills yield less than cd’s. all money markets are not fdic insured. if you buy cd’s at a retail brokerage firm, you can buy from many different banks in one account.
Try again:
Here a couple stories since Ben is enjoying his well deserved day of:
http://heraldtribune.com/apps/pbcs.dll/article?AID=/20060904/BUSINESS/609040516/1448
http://www.sun-sentinel.com/business/columnists/sfl-ybrealraf04sep04,0,3211720.column
http://realestate.msn.com/buying/Articlebusweek.aspx?cp-documentid=808749
The Herald-Tribune article highlights the story of a young repairman for Verizon who bought a home for $326,000. Not nearly as egregious as other examples provided on this forum, but it still makes me shake my head.
“Ali Alshalkmi is a Tampa businessman who bought 10 homes at a total cost of about $3 million for himself and members of his extended family. He deposited $200,000 with Jade last year.”
——————————————————————–
This guy is either extremely generous or lying on the loan docs.
His family name is almost certainly misspelled (the second “l” is wrong or in the wrong place or vowels are missing). Possibly Saudi, or the ‘hood, in which case he plausibly could pull it off.
Canada is different:
http://www.theglobeandmail.com/servlet/story/RTGAM.20060903.whousing0903/BNStory/Business/home
“Economist Clement Gignac of National Bank Financial Inc. in Montreal argued that the price boom in oil and other commodities may keep Canada from following the United States into a recession.”
Err… if the price boom in oil and other commodities is directly tied in with the global housing bubble, doesn’t that imply that commodity prices will fall as the bubble pops?
Good catch: take a look at:
http://www.futuresource.com/quotes/quotes.jsp?s=CL
The investors believe that the “peak oil” will occur about a year from now.
FYI: For those who believe the peak will occur in 2011 or 2012, now is the time to buy since those futures are lower than today’s quotes at $67 and $66, respectively. I’ve read someone touting $150 per barrel around that time, so a 123% return in 5 or 6 years seems like a “in the bag” investment…
DannyHSDad,
Maybe you are unaware that the Middle East countries stopped reporting their production more than twenty years ago. Investing in oil exploration and drilling in the Middle East is a crapshoot these days. Matthew Simmons, therefore took a different tactic and analysed hundreds of SPE reports (Society of Petroleum Engineers) on the oil industry based in the Arab nations. By reading and studying them, and based on his 30 years experience in the industry, and also since Mr. Simmons knows the stages of life (and death) of a typical oil field, he was able to come up with his ideas that Saudi Arabia is at its peak. Mr. Simmons also noted that since the Arab nations do not report their statistics on their oil fields, that is the reason why oil investing in the Middle East has turned into a crap shoot - futures. Ask yourself what do futures investors really know about the amount of oil left? Did they read the SPE reports that Mr. Simmons read? Doubtful. The references to those reports are all in print in the back of “Twilight in the Desert.”
So did Mr. Simmons buy up all the oil futures? Seems like now is the time to buy! [Or is he releasing his share of the futures and profiting already?]
Presumably, the Saudi’s know what is being produced in their fields. So I have a hunch that they do quite well in the futures market.
But the Saudis are not gamblers. They are the only ones who do not sell on the spot market, limiting their sales to long-term contracts.
both warren buffet and i believe that oil at $150/barrel is entirely reasonable. warren thinks it will be within 2 years. i think maybe 5 years.
So, how much oil futures did you buy up? You can get 2 years futures for under $74. A 102% return in 2 years.
Or do you not really believe?
i don’t need to buy futures to express my well-informed opinion — any more than anyone else on this blog.
i can understand why the prospect of peak oil and dramatically increased gas prices (whatever the short-term fluctuations) gives some people a bit of gas. did you just buy a few new hummers???
I was just asking tongue-in-cheek.
As for cars, I only own a Ford Expedition, which I bought cashing out on oil exploration company’s stock options, many moons ago. My only regret is cashing out rather than buying something cheap and used and hanging on to the stocks to take advantage of the peak oil hype….
i think the coming recession/depression will certainly help to mask and muddy the reality of peak oil’s arrival. but there’s lots of evidence that those big saudi fields are in decline, and that opec no longer no longer has a safety valve to open in the case of shortages — whatever their immediate cause (lack of refining capacity, political/terrorist events, etc.). as far as profiting directly from escalating prices of all oil-based products, taking precautions to radically reducing commuting (no hummers!) and heating costs (no mcmansions!) are probably the 2 most obvious ways.
“For those who believe the peak will occur in 2011 or 2012…”
no, i suspect peak has already occurred, sometime in the last year. but it will take another 2 or 3 years to recognize it since it can only be established in hindsight
Common myth. Most usage is “baked into the cake”; it’ll plateau for a while, but it seldom drops. Any price drop will be short term due to liquidity issues, not actual supply and demand.
Promising New Oil Find in Gulf of Mexico
Oil Companies Say Promising Tests May Suggest Significant Gulf of Mexico Discovery
best quote: could boost U.S. oil and gas reserves by as much as 50 percent
A little incentive will go a long ways in creating ever greater reserves. I’ll believe in “Peak Oil” when they start reducing proven reserves year after year. Until then, in my mind, it’s a hype to keep oil prices or oil related stocks higher.
tj & the bear writes: “it’ll plateau for a while, but it seldom drops. Any price drop will be short term due to liquidity issues, not actual supply and demand.” Didn’t we learn from the dotcom bubble and housing bubble that “seldom drops” is mere hype? Or are the commodity prices “really different”? [where have we heard that phrase before?]
Hi all!
Real estate $$$ transacted reports are posted for August for the LAX South Bay area. Enjoy!
South Bay Beaches Bubble Blog
Well I’m watching 90277 (Redondo Beach) and 90254 (Hermosa Beach). Her blog listing is ambiguous. I guess she assumes readers would say the percentage drops are Y-O-Y drops in sales, as opposed to price. But she does not explicitly say that. There is a big difference. I always demand exact language, since I’m an engineer, anyway. I share a rental in 90254. My roommate and I are both patiently waiting for the pop. He will buy in Hermosa Beach, while I will buy near the Esplanade in Redondo Beach / Hollywood Riviera. The area has the best climate in the United States, and I lived there for 3 years, but am mostly now in Phoenix.
You need to read the detailed explanation at South Bay Real Estate Market Conditions. This is not sales volume or average sales price, it is total dollar volume transacted, which I consider a measure of how well the real estate industry is doing. Feel free to email me if you still have questions.
bearmaster–thx, interesting info. Most of all was the red flag on listings by out of area realtors. Hadn’t really thought about it before, but would agree that it is a possible foreclosure/deed in lieu indicator. Alternatively, could be an out of area realtor that bought their own product.
As we progress down the backside of this mess, I can easily see it turn into all-foreclosures. Good catch, thx
Lived on the alley, one block north of the pier in ‘61 after graduation from USC. Great times, great girls, then moved to Bakersfield to make my fortune. Went back two times since. NO thanks.
Looks like this guy found an underserved market in CA:
Most Houses in Marijuana Raids Sold by One Real Estate Agent
Written for the web by George Warren, Reporter
Pot House Realtor Kevin Parker
A single real estate agent working in a Bay Area office negotiated the sale of 16 of the 21 “pot houses” raided in Sacramento County, records show.
Real estate sales records compiled by MetroList, Inc. show Kevin Parker (shown above) of Prudential California Realty in Antioch acted as the buyer’s agent in 16 transactions involving multiple individuals.
Parker’s Web page lists him as the Antioch office’s top producer of 2005 and rookie of the year in 2004.
All 16 of the homes purchased through Parker in Elk Grove and Sacramento were among the 21 houses raided by the Drug Enforcement Administration over the course of several weeks in August and September. All had been converted into indoor marijuana growing operations. Drug agents believe the drug ring is linked to San Francisco’s Chinatown.
Contacted by News10, Parker said he was “shocked” to learn of the raids. “I had no idea the homes were being used in that manner,” he said.
All of the transactions analyzed by News10 involved “no money down” financing.
Parker would not say how the buyers came to him or who brokered the loans. He said he had not been contacted by investigators.
Parker currently has two properties listed for sale: a home in Suisun City and a former bar in Sacramento.
The former bar on Rio Linda Blvd. is now boarded up and is listed for sale at $215,000. The two partners listed in property records are Elton Yi Chen and Goon Chu Chau, among the owners of the raided pot houses.
Six of the 21 homes were raided in Sacramento and Elk Grove Friday. All 21 pot houses discovered so far are in newer neighborhoods. The value of some of the homes exceeds a half million dollars. Neighbors said they rarely saw anybody in the homes.
“They were Asian males,” said Ludwig Fleming, who lives next door to one of the pot homes in Elk Grove. “Since they moved in close to a year ago, I probably saw them maybe three times.”
An Elk Grove police officer assisting federal agents said upscale neighborhoods offer a perfect setting for the marijuana growing operation. “They can hide it right in plain sight of normal citizens,” said officer Chris Trim.
As with the homes discovered earlier, the growers rigged elaborate irrigation and lighting systems, bypassing the SMUD meters to hide their extraordinary electrical usage.
In some cases, it appears they had abandoned the homes, leaving millions of dollars worth of marijuana plants to die. Drug agents speculate it may be the result of the earlier raids.
“It appears they walked away from these houses,” said DEA Special Agent Gordon Taylor. “Maybe they’re spooked.”
An analysis of property sales records by News10 shows many were purchased with no money down. Property records show thirteen different owners, some owning as many as three homes.
A number of loans came from Metrocities Mortgage of Sherman Oaks, California. A spokesman for the lender provided a statement saying no irregularities surfaced during the company’s normal fraud check process.
Five people were arrested early in the investigation, but Friday’s raids turned up no new suspects. Drug agents have so far seized more than 13,000 marijuana plants with an estimated street value exceeding $52 million. They say the investigation continues.
Homes Raided
# Elk Grove
9138 Brienne Way
8169 Pond Brook Way
9638 Little Harbor Way
8693 Nemea Way
9337 Maybeck Way
9451 Misty River Way
8700 Santa Ridge Circle
5513 Laguna Park Drive
9226 Bearint Way
9709 Summer Glen Way
6801 Castro Verde Way
9502 Mainline Drive
10244 Shoech Way
9833 Pipit Way
# Sacramento
380 Alcantar Circle
2904 N. Platte Way
2309 Marina Glen Way
9700 Tundra Swan Circle
170 Aviator Circle
2214 Catherwood Way
My humble post on subprime:
http://tinyurl.com/g2w36
mort,
ot, but i was thumbing through your blog. nicely done. have you checked out iceagenow.com? i think he is quite on the mark wrt so-called anthropogenic global warming scenario. in any case he explains quite clearly why in the northeast we are headed for an ice age.
Thanks, I’ll check it out.
Nice work. It’s a long time since I’ve seen a graph with a zero-line on the y-axis.
One thought, however. I can’t help feeling that for Real Estate average earnings is a better normalizer than CPI.
I don’t know if I read about this book on this blog or some other one, but I read A Short History of Financial Euphoria last night. It talks about all the bubbulicious periods in history. It was written in 1990, so way before this bubble, but one thing that it says is common to all bubbles is that people discover leverage like they’re financial geniuses, and think they’re the first ones to come up with it. Also every bubble in history was created by loose lending, and crashed when the banks tighten lending, causing a drop in prices, panic, and the effect of leverage on the way down. Another thing is that people get lucky on the way up, and mistake their good fortune with business smarts, and never get out in time. Also he said that it takes about 20 years for the lessons of the previous generations to be forgotten, so the last bust of late 80s, is going to be coming righ up in the late 2000s.
Like everyone else on this board has experienced, it’s tough to talk to your friends and relatives about the bubble, usually their response is “well i made 200k on my house, and you didn’t make anything”, or “you’re just jealous because you got left behind”, or house prices will never come down because of . At least now I can tell them to read this book by the Harvard economics professor, if they won’t listen to me.
Italics off.
yes stucco mentioned jkgalbraith’s famous tome on financial manias. but i would disagree that it takes only 20 years to TRULY forget the last mania: i think it takes a full two generations (see, ravi batra, kondriatieff cycle). that’s why we’re more probably all set up for another great depression, not merely a serious late 80’s recession.
As usual I’m probably the last to notice that Ben and this blog were mentioned in the back of Barrons. I apologize if this had already been posted.
“If you’re trying to buy or sell a home, chances are you’re taking the market’s pulse on a daily basis. For the rest of us, the Housing Bubble Blog (www.thehousingbubbleblog.com) might be a good place to start. Blogmaster Ben Jones posts several times daily, penning lengthy tomes with lots of links to regional and national housing-related stories. On Aug. 24, the day after the Commerce Department announced that existing-home sales were down 4.1% in July, Jones pulled in links to related stories from publications as varied as Fortune, the Reno Gazette-Journal and the Marco Island Sun-Times. These links take you to the full story.
Jones does a good job of spotlighting not just the major real-estate markets, but housing issues around the country. He offers illuminating anecdotes about a market seemingly in meltdown mode, such as the one about the woman who offered to throw in a Jeep Wrangler free with the purchase of her home at the asking price. The ploy didn’t work; she subsequently lowered the price. Then there’s the real-estate developer in Southwest Florida whose net income has fallen nearly 70% since 2005. The Housing Bubble Blog offers much of interest to real-estate specialists and non-specialists alike.”
I don’t read Barrons, so I hadn’t seen that. Congrats, Ben! And thanks for mentioning this, grubner.
I posted this yesterday in the bits bucket, but it was really late and I thought it was funny enough to warrant a repost. I want to know all the odd things you guys and gals do to affect the mood of the sheeple. If manias are psychological, I want to help accelerate things on the downslide if possible.
I was a real estate terrorist today. Every time I heard someone talking about real estate I made sure to make a snide remark to them about needing to hold out until after the crash. I wrote all over the real estate section in the waiting section at the Mimi’s Cafe–things like “Greenspan’s credit bubble will create a real estate depression”, “Debt is not wealth”, “The return of jingle mail.” I also put little write in signs in the photos of the homes for sale that said “Bank Owned.” Hehe it was awesome to lay it out and watch people pick it up while I was eating.
dude– grow up.
It takes all types. I admit my sophomoric humor might not jibe with all personalities!
Has anyone been taking pictures/filming in neighborhoods lately? An appraiser mentioned yesterday that they’d been confronted at houses before while taking photos for comps, and basically got out while the getting was good. I’ve been filming from my bike for a Lou Minatti-style market report, and got some mighty suspicious looks in a ritzy neighborhood. No one’s said anything yet, though. What should I say if they ask? That I’m an “amateur real estate market analyst” getting ready to show the world why their street is likely to crash and burn?
Tell’em your thinking of buying and are looking for prospects.
Not bad. Except that I’m young, riding a well-loved mountain bike and they might be able to guess that some of the homes are 40x my income. But with suicide loans, who’s counting?
Be careful. People probably think that your casing the neighborhood to do a burglary.
Good call, I didn’t think of that. Actually, most people seemed pretty friendly when I smiled and waved. They just looked a bit confused about what I was doing with the camera.
Plummeting?
http://www.unionleader.com/article.aspx?headline=State+revenues+off+by+6%25+for+August%3B+‘discretionary+income’+cited&articleId=5dbd0d8d-dd48-44be-92ed-c234c4250ba1
Just remember this when you are voting for the politicians who will pick your pockets. Feepness and I will be taking the day off. Now is the time to extract commitments to less government to feed — might not pan out, but a “commitment” is better than nothing at all.
Yester, I think, there someone posted the Businessweek map showing option mortgages. I remember a number of months ago, there was a map showing % of loans in ARMs, I believe. It was animated, so it showed 3 or 4 different years. Does anyone remember this? I think it might have been NYT or one of the big newspapers. Thanks if you can help.
ot
jboats of 2006
hemi powered grill
http://9.yahoo.com/
Hot chick.
Serendipitous. #7 on the list is “Tasty Cicada Recipies,” perfect for FBs.
Some have suggested getting out of the US dollar as they anticipate a crash. Besides precious metals, does the collective wisdom suggest any other currency to hold (e.g., using everbank foreign currency CDs)? I wonder why wouldn’t every other government be playing the same inflating game we have–so which currencies are relatively safer?
I just put some of my Roth money in the Rydex weakening dollar fund. Rydex has a lot of funds that allow you to be short in a retirement account.
Some funds track Swiss francs,others Australian dollars, neither of which is closely tied to US currency.
are these going into gov’t bonds on the far side? I don’t wanna get whacked in a widespread stock mkt decline.
I’ve spent enough time in Switzerland to learn that those people are shrewed, they never end up screwed, and in the end they come out smelling like a rose. Oh, those vunderful Sviss! They know how to beat the system. Swiss francs.
shrewd
I, married, am shrewed.
One very sensible/easy thing to do is simply to buy mutual funds that invest in foreign markets. Even very conservative money managers recommend a certain percentage in non-US markets.
I’m a Vanguard funds cultist, but I am disappointed with Vanguard’s choices of international funds. So I buy Dodge & Cox International. It’s a value fund and stays with stable countries. I intend to put somewhere from $1000 to $4000 in it every year or so with investments at different times of the year. I have a little bit of money in T Rowe Price New Asia. I’m debating on getting back into that a little at a time dollar cost averaging. It’s near a high, but then India and other ex-Japan Asian nations have different demographics (younger boomers) than the U.S. and they could grow more. They have a growing middle class that wants to have it all, just like Americans. Earlier this year I adjusted my allocation in my tax-deferred funds so that 20% to 25% of the $ are in international funds.
I use Dodge and Cox, too. They’re in the “Bob Brinker” model portfolio (I use a modified #3 to double weigh the 500 fund) I use.
Singapore Dollar is a good bet. As is the Malaysian Ringgit. But most banks have very large bid-offer spreads for Ringgit vis a vis the Singapore Dollar. Australian Dollar & Kiwi Dollar have huge current account deficits, so they don’t look that attractive in my opinion. A smart man also says the Norwegian Kroner looks good along with the Swiss Franc, but I think they’re a bit pricey. Other decent alternatives could be the Canadian Dollar (budget surpluses + positive correlation with Commodities) and gold (downside is that is doesn’t pay any interest).
n May of 2005 we bought a condominium on St. Pete Beach, Fla., for $885,000. Five months ago my wife and I lost our jobs in the travel industry. We immediately put our condo on the market and have lowered the price twice, finally to what we paid for it, even though our unit looks out over the Gulf of Mexico. While our purchase price was $885,000 our mortgage is an $878,000 adjustable rate at 4.75 percent. Last week we got a lowball offer of $795,000, which is the only offer we’ve had since we listed the unit. At first we thought the offer was a joke because shortly after we bought our unit, two other condos in our building just like ours sold for $1.1 million. Then we were shocked at the possibility we might have to take an $83,000 loss.
Now we are frightened that we may have to keep the unit making mortgage and interest payments and paying maintenance taxes and insurance until the market gets stronger. That would certainly bankrupt us because we can’t afford the $7,000 monthly costs. It’s killing us and the possibility of taking an $83,000 loss would wipe out all our savings, our two Individual Retirement Accounts and we’d still be about $18,000 short. We’ve read that the experts believe housing prices will increase this year between 3 percent and 7 percent. It seems that interest rates have stopped rising. So do you think when rates begin to fall again that the condominium market will get stronger? If so how long do you think it will take?
http://www.wilmingtonstar.com/apps/pbcs.dll/article?AID=/20060903/NEWS/609030355/1002/business
Very impressive response: He basically says, take your lumps now. Also interesting:
Common-sense valuations suggest that as of January the prices of most homes and condos were 40 percent to 50 percent too high.
Considering that this is the mass media, the message has certainly penetrated to where it will cause accelleration.
MLS 26142194 sums up everything that is wrong with current Seattle area prices.
Ft2=1240
Bed=3
Bath=1.75
1) 1996 price=$177K
2) 2006 “Fair Price” assuming 4% per year=$262K
3) Improvements=$25K (a guess)
4) 2006 “Total Fair Price”=$262K+$25K=$287K
Zillow Zestimate=$590K (Overpriced by 51%)
MLS List Price=$749K (Overpriced by 62%)
What am I missing here? This is a small crappy 1950’s rambler!!!
I’d say those prices are a bit “brazen”.
Wow , I had no idea Seattle went up that much , that’s crazy .
Seattle prices have gone berserk since ‘96 or ‘97. (Can’t remember which).
It started with the Microsoft stock cash-outs. In 3 months, the price of a home in many Seattle neighborhoods had nearly doubled from 150-180K to 270-300 K. Bidding wars among the newly rich techies set it all off.
After that, prices just kept on rising, though not at the insane rate of that first summer.
The media in Seattle has apparently succeeded into fooling many people into thinking that prices have not bubbled here and that it is common or normal that this city should be filled with tons of 600K - million dollar properties.
I think this past year, at least in the upper ranges, has been as bad as that first summer 10 years ago. How else do you explain 450K homes selling for one million?
People who do not do their homework on pricing history before buying in Seattle could be in for a huge shock if we return to the mean.
We have been in an ever - expanding bubble here for ten years with an economy that does not support it.
Seattle is in the top 6 nationally for Neg Am and ARM loans. There is a reason for that.
Wow… that’s downright SoCal-esque. It’s a shame.. I was thinking of eventually moving back to Seattle one day.
txchicks57 must have 3 computers and a herd of elves helping her find all this stuff !
The only thing funnier than the predicament this clown is in is that he expects cash for his “equity” in these properties:
http://sacramento.craigslist.org/rfs/202833081.html
This isn’t too bad either
http://www.saintdiego.com/saint-diego/cms/cms.do?oid=fbd3fd18-8ad4-1029-87d4-0010dcca3771
Funny.
I am rolling! El Cajon is the Pakistan of San Diego!
Sunday, September 03, 2006
Adjustable Rate Mortgages and Behavioral Economics
At lunch at a Lincoln Land Institute conference in May, Bill Fischel said something quite interesting about the economics of mistakes in the presence of uncertainty. He argued that if you know that you are making a risky choice try to make the same choice as everybody else. Similar to moral hazard “too big to fail” arguments, his point was that if everybody makes the same mistake then Congress is more likely to ex-post step in and bail out these “victims”.
In this case, risk takers are in a no-lose situation. Consider this article here on signing up for a ARM mortgage loan. If interest rates stayed low and home prices soar, it is a good investment — if interest rates rise and now you face higher mortgage payments but everyone else does also, will your Congressional Representative offer legislation to protect you?
A behavioral economist would say that the “suckers have been suckered” by profit gouging sophisticated lenders. A chicago guy who pushes a rational expectations model might be slow to view the borrowers here as naive fools. Who is right has key public policy implications. What empirical test would allow researchers to disentagle the two hypotheses?
—————————————————————————————————
I suggest carefully inspecting Option ARM borrowers, to see if they are predominantly sharks, weasels, sheep or lemmings…
http://greeneconomics.blogspot.com/
This didn’t post before. For those watching the Chicago market, here is a link to an article about affordability in DuPage County
http://www.chicagotribune.com/news/local/chi-0609040075sep04,1,2309586.story?coll=chi-newslocal-hed
I was at a Labor Day party with my friends and colleagues at our university’s provost’s house. One of the new faculty hires was talking about making an offer on a house and I listened in intently, and when she said she was lowballing by 250k I beamed a big smile. We got to talking about the credit bubble and she mentioned she read a few blogs and when I said “Ben Jones” we gave each other a big high five. That was a funny but great moment.
“We got to talking about the credit bubble and she mentioned she read a few blogs and when I said “Ben Jones” we gave each other a big high five. That was a funny but great moment.”
Harbingers.
That was a funny but great moment.
———————
I’ll bet it was. Find out which name she uses?
If academics believe this is a great time to lowball and get a home for a steal, then that is a good contrarian signal that one should wait. Better to wait until professors are advising the less-educated among us that housing is too risky to buy.
Your “new hire” friend might be aware of Ben Jones and this fine site, but if she’s buying right now, even at a lowball price, she’s a fool.
While the Greater Fools have pretty much vanished, the Lesser Fools think think themselves clever for buying at a 5-10% discount over last year’s [peak] prices, seemingly oblivous to the fact that the real firesale fun won’t start until 2007 - 2008.
If a 250k lowball gets accepted, that would be a 2001 price and put it in the range of acceptable for this area. Unless you’re in the camp of depression, I’d say that’s a win.
From boom to blah in Bakersfield
————————————————————————————————-
Hot real estate market gets chilly in Bakersfield
Housing inventory quintuples as boomtown of 2005 returns to Earth
By Russ Britt, MarketWatch
Last Update: 12:01 AM ET Sep 5, 2006
BAKERSFIELD, Calif. (MarketWatch) — Just 12 months ago, this sun-baked Southern California city was one of the hottest real-estate markets in the country. With inventories at razor-thin levels, properties would sell in a matter of days, sometimes even hours, as multiple bids poured in on each home. “For Sale” signs were almost nowhere to be found.
Those days now are dust in Bakersfield’s gusty winds. The housing stock nearly has quintupled and prices are virtually flat when compared to last year’s levels. Home sale time-frames now are measured in months, not days.
“Yeah, we miss those times,” Darrell Muhammed, a local agent, said of last year’s market.
While average prices have yet to tumble, concern mounts that an ever-increasing housing inventory, coupled with coming hikes for variable rate mortgage holders, could send the market south in a hurry.
Trouble signs are everywhere. At Lennar Corp.’s Artisan/Terra Vista tract on the city’s west side, about 20 homes only a year old are back on the market.
They compete with dozens of other new houses Lennar is building in later phases of the same development, which agents say makes the older homes tougher to sell. Six of the resales are within view of each other on the same street.
“It’s very tough market,” said Joginder Gill, the agent trying to sell one of the six houses. “If you look at past history, it’s going to go way, way down.”
http://tinyurl.com/osxy6
Test for Ben and more bad news here:
http://money.cnn.com/2006/09/05/real_estate/Ofheo_home_prices/index.htm
Didn’t know where else to post this. Here’s a very funny thread about realtors(TM) and fake testomonials:
Do a web search for the term “Bryan & Yvonne Carpenter” and see what pops up (make sure you put it in quotation marks). Dozens of different agents quoting them on their testimonials page. All have the same comment from the “Carpenters” and several other people. Most of these sites are hosted by iHOUSE.
It’s pretty sad when an agent can’t or won’t get real clients to comment on their services.
Link to the thread (an agent message board) here.
Isn’t that illegal?