Bits Bucket And Craigslist Finds For September 22, 2006
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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here is a have a interview with eays al greenspan
on housing, hedge funds/before the latest bust :-), savings rate, gold commodities, china
http://immobilienblasen.blogspot.com/2006/09/interview-with-alan-greenspan.html
George Palous:
Mish, I know that you have been following the troubles in the restaurant biz. Here are a couple anecdotes for you.
I had to meet with an associate for lunch across town so we agreed to meet at an intersection where we knew that there were a number of chain restaurants. We agreed to meet at the Olive Garden. (Love their salads.)
We got there and the Olive Garden was closed down, shuttered and the sign removed. Next door there was supposed to be a Cracker Barrel, well the last time I looked there was one. No Cracker Barrel, no building, just an empty lot. We drove over to the Coyote Grill, closed. Finally found the TGI Friday’s was open. I’m not a fan for Friday’s but when you are hungry you take what you can get. You would expect that Friday’s would be packed on the lunch hour since the three local competitors were closed. But there was plenty of room and quick service. My associate knew the hostess who said that there were a lot of patrons coming in from the other restaurants but it was still slow.
This is a busy intersection right off the freeway exit near plenty of office buildings. Prime location. These restaurants have been in business for at least a decade. They are well-capitalized national chain restaurants. That they all closed in such a short period says a lot about the state of the industry.
PS: Just went past a freshly closed Outback Steak House. Once again, it was in a prime location on the freeway in an affluent suburb.
—–
In a related industry. The Minnesota nightclub business is in freefall. I am a part-time weekend warrior with a guitar and I know this industry pretty well. The nightclub industry has been in a long slow decline since the 1980s as a result of raising the drinking age, aggressive DUI enforcement, and poor demographics. But the change in business over the last year has been shocking. Patronage appears to have dropped dramatically all over the cities. Many of the area’s most venerable watering holes are now in bankruptcy. Many are closing permanently. A new smoking ban was just introduced in St Paul and Minneapolis city limits that has devastated the urban nightclub scene. But things are not much better in the suburbs.
Now we are starting to see a phenomenon that I never expected: Lower drink prices. Not everywhere, but in many places. They start in the form of aggressive drink specials. $2 on a weeknight or $1 Tuesday drink and sink. Then bar owners see that cheaper drinks really do increase traffic, so they lower the everyday price. I think that we are seeing the beginnings of a price war. Unheard of in this business.
There is a new trendy mega-nightclub that features national musical acts. I know some of the people who run the place so I often get complimentary tickets for shows. Over the summer I got free tickets for Cheap Trick, Pat Benatar, and Head East. I thought that I was a real V.I.P. until I found out that most of the audience also got comp tickets, and the place still wasn’t full for any of the shows. These are big-name national acts that should be able to easily fill a thousand seat club, particularly with free admission. This shows not only how weak the nightclub industry is, but also the concert biz.
Consumers in this part of the country seem to be cutting out a lot of discretionary entertainment. Nightclubs and restaurants may be the early warning signs of a more severe downturn to come. What’s next? Sports?
Sincerely
George J. Paulos
http://www.freebuck.com
this a from mish
http://globaleconomicanalysis.blogspot.com/2006/09/more-anecdotes.html
looks like the slowdown is happening really fast
What’s the chances of the market spinning the “slow down” into an interest rate cut that sets off a false rally?
Your Bernanke put scenario is already priced in. The pundits on marketwatch.com (e.g. Kellner) have already concluded the Fed is done tightening, and there is a tacit assumption that if the economy stumbles next year, then Bernanke will stick to the script and follow the Greenspan recipe for pumping in liquidity.
In that case if the market continues to decline in the future (such as today as of 10:30 am) it is sending the message that the rate cuts that are factored in will not be adequate.
Unfortunately, the Greenspan printing presses are already primed with ink and ready to go. He has no choice. Greenspan has painted the US economy into a corner. I know Bernanke is now in change of those presses but a massive liquidity injection is already baked into the cake. There isn’t a chance that we can get out of this financial mess any other way. Unfortunately, any short term actions the Fed takes, like pumping more dollars into the system, is simply putting off the day of reckoning. As we now know, the US dollar is quoted as being “faith based” (not religious but faith in the US) but a trip to Europe will tell you how much “faith” the world has in the US dollar. Not much. We can only hope the Iranians fail to get their oil bourse up and running and dump the US dollar and replace it with the Euro. If you think the dollar is in bad shape now - watch out if that happens.
In my honest opinion, the US government cannot print and spend enough to fix this situation. Current federal budget is 2.7T and that’s on shaky grounds. People are becoming hesitant to buy bonds, etc. You push too far, you have no bond purchasers and you have to just flat out print gobs of money, destroying your economy in the process. What was residential mortgage issuance in 2005? Nearly 2T I believe. Compound that with HELOCs/etc which I don’t believe fall into this and the federal budget would have to balloon 100% in a single year to completely replace that.
WALL STREET OCTOBER 1929
Even as the market convulsed on Black Thursday, October 24, 1929 and on Black Tuesday, October 29 - the New York Times wrote: “Rally at close cheers brokers, bankers optimistic”.
In an editorial on October 26, it blasted rabid speculators and compliant analysts: “We shall hear considerably less in the future of those newly invented conceptions of finance which revised the principles of political economy with a view solely to fitting the stock market’s vagaries.” But it ended thus: “(The Federal Reserve has) insured the soundness of the business situation when the speculative markets went on the rocks.”
Compare this to Alan Greenspan Congressional testimony this summer: “While bubbles that burst are scarcely benign, the consequences need not be catastrophic for the economy … (The Depression was brought on by) ensuing failures of policy.”
…Is a similar crash on the cards? This cannot be ruled out. The 1990’s resembled the 1920’s in more than one way. Are we ready for a recurrence of 1929? About as we were prepared in 1928. Human nature - the prime mover behind market meltdowns - seemed not to have changed that much in these intervening seven decades.
Will a stock market crash, should it happen, be followed by another “Great Depression”? It depends which kind of crash. The short term puncturing of a temporary bubble - e.g., in 1962 and 1987 - is usually divorced from other economic fundamentals. But a major correction to a lasting bull market invariably leads to recession or worse.”
http://tinyurl.com/mwwu3
(Consumers in this part of the country seem to be cutting out a lot of discretionary entertainment. Nightclubs and restaurants may be the early warning signs of a more severe downturn to come.)
I worked as a busboy-dishwasher-cook at a small family restaurant chain for many years in high school/college. The owner told me that he saw a boom and recession before anyone else — his sales were affected instantly by the slightest change in the economy.
I know Greenspan was a fan of real-time business indicators, given that government data takes a while to be collected and tabulated. He looked at cardboard/shipping for goods. Perhaps people are still buying goods, but have stopped buying discretionary services.
Very interesting observations.
we had a posting on boxes earlier this week
very weak
‘a busboy-dishwasher-cook ‘
You were a circus attraction those days!
I once heard from a gate-keeper at a hotel that he could see
the state of the economy on the condition of businessmen’s shoes. Should be one of the first expenses to cut in bad economy.
In the Ahwatukee area of Phoenix on Saturday nights, sometimes the chain restaurants (e.g. Red Lobster) are packed and there’s a 50 minute wait, like last Saturday. Other times we can go right in. We find that Ahwatukee people love to eat. IHOP in the morning at breakfast can be a 30 minute wait on Saturday or Sunday if you get there at 9:30. Mimi’s cafe has bad service by the careless young snobs - we boycotted that one since they stiffed us on Mother’s Day, and that is usually a long wait. Nello’s restaurant is usually nearly packed, and it was like that Sunday night, but we got a table right away. Phoenix is the 5th largest city in the U.S. At least this part of Phoenix has no noticeable drop off in dining out.
“At least this part of Phoenix has no noticeable drop off in dining out.”
It’s the only thing the common folk can do here.
Exactly! Eating out is a sport in these suburban sprawl cities. There is no real sense of neighborhood, so going to Red Lobster passes as connection. They build subdivisions miles from anywhere, plop down a couple of big box stores and half a dozen chain eateries, and it creates these pockets of retail industry.
“There is no real sense of neighborhood”.
You got that right, unless you want to spend your free time in a bar! Anti-smoking nazis will kill that too. Not dog friendly either. Can’t wait to leave after 28 years.
And lo, Russ Winter nails it again:
Friday, September 22, 2006
The Sickness Care Perp
http://www.xanga.com/russwinter
Indeed, eating out is hazardous to your health and your budget.
Oh yeah. Out of kindness toward fat Americans, I did not mention that well over half the customers of Red Lobster are significantly obese. The wierd thing is that at Nello’s the next evening, I did not notice as many obese people. What’s up with that? The Red Lobster biscuits? That article on Russ’s site is a winner. It’s amazing how many fat people there are these days. I was a fat boy from the age of 5 to 17 and worked my behind off by exercising two hours per day in the summer before my senior year in high school. 30 years later still working it off and in very good shape. Swimmer’s bod 165 lbs and skinny legs on 5′11″. Proud to be able to not pant while going up stairways at 47!
“There is a new trendy mega-nightclub that features national musical acts. I know some of the people who run the place so I often get complimentary tickets for shows. Over the summer I got free tickets for Cheap Trick, Pat Benatar, and Head East. I thought that I was a real V.I.P. until I found out that most of the audience also got comp tickets, and the place still wasn’t full for any of the shows. These are big-name national acts that should be able to easily fill a thousand seat club, particularly with free admission. This shows not only how weak the nightclub industry is, but also the concert biz.”
Is this place the Myth in Maplewood? I KNEW that place was destined for doom, and I couldn’t believe the snow job the owner pulled on our city council. He had them believing that it’d pull in tons of business by featuring national acts. Dude, this is **suburbia**! You can’t book a venue that size with national acts at big-buck prices and earn a profit. Not here. Never could, never will. Maybe in Minneapolis. Maybe in Stillwater or Somerset, where all the partying goes on. But not in the home neighborhood of the settled-down nuclear family types.
Frankly, I’ve been praying for it to fail ever since our council fell all over themselves to grant the permits and liquor license. They’ve been pushing to expand our liquor licenses to draw more bars and nightclubs. I don’t want the drunks and associated crime in _my_ home town, thankyouverymuch.
Went to a hair salon last night, and the esthetician I see said she thinks we’re in a recession because her traffic is way down. I told her that it’s worse–we have stagflation according to the sign on her mirror that said she had to raise her prices because of the cost of materials.
On another note, I did convince her to make an argument at court on her divorce that she should not have to pay half of an unrealized gain in home equity to her husband until the housing market cools off or she moves.
Does your “esthetician” flip houses as a sideline? (Mine does
)
Does she have a green card?
I’m getting way too old. What the f*!# is an “esthetician”! (Pause) I just asked my wife and she told me it’s the person who handles skin problems (she thinks) in beauty salons. I suppose it’s someone who used to be a beauty salon worker who charged $10 and now, as an “esthetician”, charges $20. The world is drowning in b.s.
“What the f*!# is an “esthetician”!”
Body waxers. They’ll polish you smooth as a billiard ball with a little hot wax and some screaming. They do it on men, too.
The porn industry has had a lot of influence on fashion trends. . .
Nah, she doesn’t to my knowledge.
Mike, there’s a lot of b.s. in the world, I agree, but at least she produces a service that people are willing to pay for!
jmf,
Thanks for your posts (and to Mish, also)!
I’ve been looking for a consumer slowdown for over two years. Sometimes, it looks like things have slowed WAY down in a very quick manner, but then, things pick back up. I posted sometime in late winter about stores closing in virtually empty malls. Later in the spring, more stores are open and people are back to shopping.
Spending is still going strong here in North County San Diego. Keeping an eye out, though.
For now…
The age of the euphemism is upon us. Nothing is what it seems anymore. The old jokes about ’sanitation engineers’ have all come true in all walks of life. Esthetician, my ass. Another coming casualty of the housing mania.
BM
You’re correct about producing a service but I suspect this kind of stuff will be the first to take a hit when times get tough. I happen to be one those stupid people who doesn’t waste money. There isn’t a house in this area I couldn’t pay cash for and still have enough to live well for the next 15 or so years I have left if I’m lucky. I drive a 1995 vehicle and I go to the Chinese markets in downtown L.A once a year to buy clothing. $2 for a great t-shirt instead of $20 for a t-shirt with some dumb athletes name embossed on it or the name of some designer who should pay me for advertising his clothing. I buy 20 t-shirts to last me the year. Many of the people I know around here drive Lexus at $70,000, Range Rovers, $100,000 and go to spa’s at $1,500 a week. Their kids take tennis lessons, karate lessons and the kid simply has to say, “I wanna be a rock star,” and they buy the him a set of drums or a top of the line electric guitar which, in most cases, ends up in a cupboard after a few weeks. On the other hand, they don’t have (as my mother used to say) “a pot to piss in” because they have been sucking money out of their housing ATM’s for the last 6 years. Maybe I’m wrong. Maybe I should abandon my barber who charges $9 and search for a “follical engineer” who charges $30. This week, I actually heard a mother say to another mother, “Tyler just loves lobster. He has it at least 3 times a week.” Ever heard of ancient Rome and what happened to them?
a little bit provocative
Which is the worse thing to own right now — a heavily mortgaged house in a fast-cooling real estate market, or a hedge fund that just got burned in natural gas?
http://immobilienblasen.blogspot.com/2006/09/houses-hedge-funds-no-place-to-hide.html
That sounds a bit like comparing apples to oranges, given the difference in magnitudes. A better choice would be to compare the gas fund (Amaranth) to hedge funds which buy subprime MBS (e.g., Fannie Mae).
“Risk looks like it will be wreaking havoc for a while longer in housing, in hedge funds, and who knows where else. But this too shall pass. Without the palpable presence of risk, we might be in far more serious trouble — and not even know it.”
Interesting post. However, I would slightly reword your conclusion, to reflect the state of the world the conundrum has wrought:
“Without the palpable presence of risk, we are in serious trouble — and most do not even know it.”
The perfect answer to get the economy moving. Let’s have another war!
Always good to move the stock market, and the draft would sure open up the job market. The rumblings from DC are deafening.
I see that Army recruitment is way up. Well, yeah…they recently raised the enlistment age to 42 or better, as I recall. Three hots and a cot, just in time for increasing unemployment.
Too bad we can’t afford another war. But affordability concerns have not always historically stopped nations from bankrupting themselves (CCCP, for example).
How about Canada? Beautiful country, saves money on border protection, tons of natural resources, cheaper drugs, and tourism wouldn’t have to worry about the upcoming passport requirements reducing Canadian travel to the USA.
Guy on CNBC talking about flipping properties and claiming it ONLY represents about 4% of the entire US Housing market. Does he mean 4% of the housing sales volume , or of the total housing stock> Because ,if that is true wouldn’t that mean that there are close to 5 Million homes out there that were purchased with no intention of the buyer living in them?
I think it’s the latter!
Anyway, who buys a house to live in thosedays?
You can live in houses? Wow.
there’s an idea. I’ll have to think about that.
Makes me think about a conversation of the Monty Pythons ‘live at the Hollywood Bowl’.
Dressed like Wall Street yuppies they were trying to beat eachother on the subject whom of them lived the in the worst conditions.
All I remember was that it ended with one them saying he lived with a family of 6 in a used box of matches one some highway. Hilarious! Should like to see it again.
John that reminds me a commercial a couple years back (McDonals maybe?) - Group of 4 Old men sitting around a table talking about how hard they had it back in the day.
“I had to walk 4 miles each way to school when I was young”, says one.
” I had to walk 5 , uphill both ways , in the snow” says the second.
“I had to do 7 miles - with no shoes on my feet!” claims the third.
At which point the fourth guy , and the oldest of them blurts out “Feet? You mean You had Feet?”
Or something like that. Very funny .
Speaking of humor, The Onion has an article called “Home Sales Dropping” in this week’s print edition:
For the third straight month, sales on preexisting homes dropped, leading realtors to call it a “buyer’s market”. Here are some strategies sellers are using to entice buyers:
Droppping price by 50 bucks
Carring around wad of money, acting like owning the house got them that money
Pointing out dishwasher several times
Explaining to potential buyers how fulfilling it is to make mortgage payment on time
Telling long, touching story about how grandmother needs $312, 500 for kidney operation
Letting third blouse button go
Drowing out sound of noisy furnace with soulfull vocals of Michael McDonald
Reassuring buyers that people purchase things they can’t afford all the time
I can assure that in some Central Florida markets the MAJORITY of homes were “bought” by people (often people without real means) who want to get-rich-quick by flipping. There are entire neigborhoods in Polk County Florida full of ticky-tacky-houses that are all owned, but sitting empty waiting for tennants and/or buyers.
That Onion article reminds me of a house I saw once. The kitchen was at least 30 years old, very 60s-70s. Yet the seller had put in a stainless steel dishwasher. It was actually listed as a feature on the listing sheet. You have a completely filthy, obsolete kitchen, but, hey, it has a stainless steel dishwasher. Doesn’t everyone want stainless?
I thought you planted houses in the ground and pretty flowers sprung up from them. Are you sure you live in them?
No, you don’t live in the flowers! Although dwarfs do live in mushrooms. But only in fairy-tales.
I doubt that - here in Austin, we have a huge wave of investors. These people are buying preconstruction houses and after they are built, these investors are selling the house in less than years time. The same thing is being seen in Arizona, Flordia, California, etc…. I would like to see his figures and data sources.
“The same thing is being seen in Arizona, Flordia, California, etc…. I would like to see his figures and data sources.”
Uh, I think you have your time line a bit scrambled there, pal. Have you been reading on the SDCIA board? I can believe that Austin might have a huge wave of investors buying preconstruction, but the big balloons advertising “New Homes for Sale” over sprawling brand new San Diego McMansion tracts suggest that the wave has morphed into a trough out here.
There’s not much speculation left in FL either. Maybe a little around Ocala, which had the lowest median prices for a long time. Everything else is flat. Forgedaboudit in Miami, Naples, Cape Coral, etc. Speculators were bailing out a year ago!
All my comments were deleted from the 24 year old Sacramento real estate magnate’s blog. I figured that would happen. No problem, I have all the information saved.
Also to the person who theorized that Mommy was on the hook as well for this worm’s debts, right you are. Read the note acceleration letter he has on the page for the Dallas property. The letter was written as a notice and acceleration prior to posting for foreclosure.
I also know who the guy is who “assigned” the house to the squirrel His name never appears on the title chain. This dude is running the same scam in Dallas, trying to take assignments of houses from upside down owners and then flip them off to another sucker without ever taking title or closing. I actually talked to this clown recently and he is also holding multiple underwater properties in Dallas. Completely clueless about what he’s in for.
There are so many of these idiots around, it’s mindboggling.
What kills me is that they think they’re so smart. I wish you could expose this guy. I’m so sick and tired of seeing the criminal succeed and the honest, hard worker hosed.
I don’t need to expose him. He’s exposed himself! This amazes me. Of course, I grew up on the pre-Jerry Springer/ Rosie O’Donnell era when you didn’t air your dirty laundry on TV or on the internet and keeping your own counsel was considered a virtue!
My guess is that li’l Casey is someone’s spoof site. He accpets his financial destruction but can not seem to address the moral and legal implications of what he did. Can someone be so clueless?
Yes.
I think the site is for real. Look at all the documents he has posted, etc. No sane person would put in that much work for a spoof that only a handful of people might ever see.
Someone with access to ownership records could verify.
SoCal’s put this guy up on his blog as a case study.
I made myself a little bet last night that he would do that.
Hey to everyone leaving posts on this knucklehead’s blog:
Please STOP!!!!!!
You’re creating the text for his new book! He just sits back and does copy & paste, then sends it to the publisher.
How tough is it!
Kidtrump has figured out how to really make $$$ money and get his mug plastered around the world!
Please stop helping him!
The squirrel deleted me as well. I basically said that people like him, with no construction experience, do not perform a public service, as he asserts on his blog. Nothing like a guy who “comes clean” by spewing a bunch of altruistic garbage to rationalize away his unmitigated greed.
I forwarded the information to the California AG. Lets see if they start sniffing up this kids a$$!
Good move crispy….
I love your energy, txchick! I took one look at that guy and gave up.
Yo, txchick! I went looking for your comments on Wonderboy’s blog today to show someone, and yep, gone like you said. But he still left a few other scathing ones, as well as his STOOPID confessions. Oh well, now I’ll just have to get the whole set from home — where I saved his pages yesterday.
And what a stupid mom, cosigning for that speculative venture. One thing my parents always warned about when I was his age is to never co-sign for anyone if you can help it — and as an aside, they mentioned that I’d better not even bother asking THEM to co-sign for me, either! “If you can’t afford it by yourself, then… you can’t afford it.” Very conservative advice, but served me well.
Moms will be moms…
Not this Mom! My kids know better. I wouldn’t co-sign on a skateboard.
one of the biggest german banks in the residential loan business has just anounced that they have to increase their reserves for bad loans related to the residential loans. the increase is 384 mio$.
remember this increase comes after our prices have flatlined the last 10-15 years and the lending standarts are as high as they were 1990. the interest rates are near historic lows etc.
one can argue the reserves are needed because their was no increase in value.
but on the other hand you really wonder in what trouble the banks
will have when the underlying property decreases in value. thier reserves are at all time lows and even if they have sold the vast majority to the secoundary market the assets relatet to the real estate sector are still huge.
Is there a difference in amount of bad loans between the former Eastern part of Germany and the once prosperous Western part?
good to see that your posts are coming through
i think they are both linked. the vast mojaroty of re in the east was financed from west germans. in the commercial re nearly 100%.
the decrease/collapse of values was really significant.
Wasn’t Germany’s housing price run-up the lightest/weakest in Europe, or one of them?
there was no runup in prices.
only a massive overbuilding (thanks to the tax breaks). mainly in commercial real estate.
the value decreased without any runup.
for those who didn’t have a chance to listen to Wed’s hearings, the clip is still there, but i’m not sure for how long:
http://banking.senate.gov/index.cfm?Fuseaction=Hearings.Detail&HearingID=239
i wish there was an easy way to save (archive) a copy without relying on our gov’t servers. any ideas?
Sure - just play it, and pipe your analog audio output to your microphone jack and use a recording application.
There is a free, open-source audio recorder called Audacity on sourceforge’s website that you can use to record it, and the save it to mp3, wav, or ogg. It can record the stream without any cables or anything.
more on wall street enron acounting (thanks to barry ritholtz)
from the earning release fedex
Management is revising the company’s earnings guidance to reflect up-front costs related to the proposed pilot contract. If the contract is ratified, the resulting net impact to second quarter and full-year earnings is expected to be approximately $0.20 per diluted share due to signing bonuses and other up-front compensation. FedEx now expects second quarter earnings to be $1.45 to $1.60 per diluted share, and earnings for the year to be $6.30 to $6.65 per diluted share. Excluding the impact of the up-front pilot compensation, the fiscal 2007 earnings guidance range has been increased $0.05 per share from the company’s initial guidance
they now want to eliminate some part of the labourcompensation (besides the options) from the costs.
they are really desperate to keep the valuation high and the game running to some extra innings.
Here’s a sad note on the housing situation. Just heard of a housing bust suicide. To protect the family’s privacy, I won’t give too many details. Apparently the man had been depressed for quite awhile. Had bought a home in late 2003. Decided to move up in all the mania to a larger home six months ago. Couldn’t sell old house. Took a $100k hit. Friends and family are devastated because they saw he was hurting. No one knew what to do to help this poor man! I doubt this is the first nor the last housing bust suicide. This is the UGLY side the housing bubble!
Very very sad - if you know the family, tell them our thoughts are with them. This truly is the sad side, and why we need to remind ourselves not to look upon this with glee. Unfortunately I admit I’m guilty of that myself oftentimes.
My only question would be why is a $100K hit worthy of suicide. I’ve taken $100K hits (and more) in one trading day at least 10 times in my career. You get up, you dust yourself off, try to figure out what happened and go on.
Yeah, this is sad, but there must have been other issues with this poor guy. But it will probably not be isolated…so many people have confused self-worth with net worth.
There were probably other issues. However, for months in his church group he prayed about selling the house. Everyone was elated when he sold and told him he could start rebuilding. He reluctantly agreed, but it was going to be a long, difficult road to rebuild. Obviously, he probably had no savings, no income to cover his debt and felt like he lost everything. $100k is a lot of money to most people. He probably felt like a failure to his family.
Yes, greed got him there, and he couldn’t handle the punishment. I think there will be many, many more like him! It happened in the stock market crash, and it looks like it’s going to happen in the housing crash.
I for one am now looking at this bubble as devastating. I wanted the housing in florida to go down so I could buy a home at a reasonable rate. Now I’m seeing first hand the tragedy that comes when a person loses it all. I’m second guessing my original feelings of happiness, told ya so….. in regards to the housing downturn. I don’t want bailouts for these poor souls, but maybe a compassionate place to turn! This man obviously didn’t know where to turn. He left behind four children, a wife and grandchildren. Not to mention MANY friends who are devastated by this!
I’m guessing that losing a small percentage of one’s net worth in one transaction is a different feeling than losing a multiple of one’s net worth in one transaction even if the dollar amount is the same in both cases. Not worth killing oneself regardless. It was the depression, the bust was the trigger but it may have happened at some point in the future anyway.
I hate to say, but this story is a leading indicator for one aspect of the trough
which will naturally follow in the wake of the greatest real estate investing tsunami in US history.
Compassion……..
… agree it won’t be the last. People jumped from windows during the 1929 stock market crash upon learning they were wiped out or went negative in net worth.
This housing bubble bust will be financially and emotionally very painful for many — I know I took a hit in the stock market crash a few years ago. If anyone has friends or family caught in the bubble trap (hopefully, you’ve warned them long ago and they heeded your warnings), be on the lookout for warning signs and give some emotional support. I value a $ just like anyone here, but it’s only $ and not worth killing yourself over.
I expect the counseling industry to pick-up as many depressed from the financial loss of the bubble burst seek help. And unfortunately, based on our consumerism, get-rich-quick, instant gratification society, I would expect the # of divorces to pick up too as the financial loss and finger pointing take their toll on marriages not built solidly on love and trust, but rather built on money, keeping up appearances, and a “what can you do for me” attitude. The positive side, after the fallout, is that people’s attitudes may possibly be reshaped into more conservative, traditional values.
I’m sorry, but I have to respond to this situation. I agree wholeheartedly with Jeff. People are self-centered and need to grow up.
And as far as the man that took his own life - how selfish is that. He was self-centered during high times and then became self-centered at the end. He only lost $100K, give me break. So you give the cars back and the house and you go to work and keep your nose in your job, maybe get a second job to pay your debts. But you still have the kids and grandkids and his wife and church. Just because he didn’t have bragging rights anymore, he killed himself. He was a coward plain and simple.
I have quite a bit of experience in finance, acctg and R.E. and at one point about four years ago, I lost all of our money and was in the hole $100k, but I din’t kill myself. I asked myself, what is the most stable job I can take in the business world, so I went to accounting. I had to start the bottom, even though I have made six digits in the past. I took a job with a small CPA firm doing grunt work (bookkeeping) for $38,000. How embarassing was that - lets see degree from ‘SC, not more football tickets (couldn’t afford them), only could afford one used car (still driving it today which I share with wife). Many people driving better cars and living in nice homes (they couldn’t afford) looked down on us. But you know what, soon I’ll be a CPA and this year I will make somewhere in the $80’s, not bad, but reasonable - we can eat. Next year maybe $130 or so, and then eventually Parner level (3 years from now).
So it can be done. People are going to need to GROW UP and take some personal responsibility for actions. I took a business gamble and lost, big deal. You win some you lose some - that’s part of being a man and leading your family.
Maybe if more men would step up to the plate and raise their families with dignity whatever income they make (and pay child support if divorced) and treat their wives correctly, then the country might not have this economic problem to begin with…
I agree with you. I think it was cowardly too.
I have a friend who lost 800K in one day in the market in 2000. On a $2M account. Then, lost most of the rest of it over the next few months (trying to buy that horrible crash in April ‘00). He was very depressed to say the least. After a few months, he went back to work, which must have REALLY sucked, earned a lot of the money back, and is now basically back where he was when all the bad stuff happened.
Really, it’s how you behave when the doodoo hits the blades that tells what kind of person you are.
There’s a big difference between losing $100k when your net worth is $150k. Than losing $800k when your net worth is $2 million. You know you still have 1.2 million. This guy was retired, living on a fixed income, had to pay out $300+ in medication a month…..the job opportunities are small and he bought into the hype. We only know of the $100k. Maybe he took out some strange loans that were increasing on the new home….He couldn’t find any hope and gave into desperation! The point is, this time the small guy who can’t afford to lose the money will.
From the sounds of some of the people on this board, there is little compassion and it’s quite sad! To me you are as bad as the sleazy developers, mortgage reps and realtors, who took advantage of the little people to make the next buck. Your morals seem to be in the same place. What ever happened to “love thy neighbor”. I guess in the trading world it’s “love thyself”.
During the dot.com, the little guy didn’t jump on board. A little compassion. Yes, obviously he was depressed, and yes it was a cowards way. This guy wasn’t driving the fancy cars, going on the vacations…. He was a little guy who bought into the hype of what a great investment real estate is and got burned. This was to lock in their retirement and he lost it! He wasn’t some guy making $80k a year buying a $500k home he couldn’t afford, driving a Lexus, wearing fancy clothes. Yes, I would love to see those folks get squeezed as the bubble busts. I just am not happy to see the POOR people who bought into the mania get burned! Remember it was a MANIA. People do stupid things in a mania. Even the most educated, experienced investment folks got burned in the Dot.com!
I think we will find that suicides will be very common in this downturn. So much so that real estate investment may come to be associated with suicide.
Imagine the bigg picture:
Lose house.
Lose money.
Lose plasma tv / SUV.
Lose wife (and kids).
Lose job (maybe).
Lose self-esteem.
Get bankrupt.
Get unpayable debt.
Get 1099-c.
Get sued.
Get jailtime (fraud will be prosecuted when appreciation ends)
Get over it? Many won’t
Paul
Suicides will become common because hardly anyone has the cojones to tough it out.
The bubble is bursting: Treasure Valley home sales down 25%
http://www.idahostatesman.com/apps/pbcs.dll/article?AID=/20060922/NEWS0203/609220363
I’d like to add that last year a coworker left our company to get his RE license- yesterday he was back in the office for a job interview. I’ll be glad to have him back, but its another sign if the falling market.
Hey Brandon, are you having big fires up there?
very cool weather has come in and put a damper on the fires. The fires and resulting smoky air were bad for a while- alot of people got sick from how bad the air was.
I was up visiting in the upscale town of Ridgefield CT, last weekend. Everything is for sale! There were four or five homes for sale on every street.
There are just not enough people moving to this little town to absorb the inventory.
Why not ask a tv-station to organise and broadcast a real MONOPOLY game in those areas, with live people and real houses and … easy credit?!
I know Ridgefield very well. Beautiful place. Far enough away from NY yet close enough to get into the city when you wish. A good range of housing - smaller and larger - but all done very nicely. At least that was the case several years ago.
If Ridgefield is having troubles then there are some real problems in RE in the NY area. Could it be that the stock brokers, financial types, tech mgrs (those who normally buy there) are not doing as well as reported?
Nice story about “churning” on the MLS:
With home sales slowing, you would think that “time on the market”–the average number of days before a house gets a contract–would be lengthening. But some real estate agents, with the cooperation of sellers, are fudging this figure to lure buyers to homes that other house-hunters had already decided were overpriced. The result: The housing market may seem more active than it is.
Call them determined or call them unscrupulous, agents are relisting houses that haven’t drawn buyers, leading other agents to believe that the houses are newly listed. This practice came to light when an alert pro in California was surprised to see the average days on the market decreasing in some multiple listing services. The sleuth, Mike Lyon, president of TrendGraphix, a data miner and producer of software for the real estate industry in Sacramento, Cal., detected relistings in high-priced East Coast and West Coast markets, but he would not disclose the names of specific metropolitan areas.
His discovery makes days on the market a questionable indicator for buyers. A better measure of a local housing market is “months’ supply,” or how long the current inventory will last given the current pace of sales. Between June 2005 and June 2006, months’ supply increased nationally from 4.4 months to 6.8 months, according to the National Association of Realtors, so there are a lot of homes for sale in most communities. You can ask the agent for a “listing history” on any house.
The Realtors’ association says it hasn’t addressed relisting because it is up to the more than 900 multiple listing services to regulate their own businesses.
-Kiplinger’s Personal Finance, October 2006
“But some real estate agents, with the cooperation of sellers, are fudging this figure to lure buyers to homes that other house-hunters had already decided were overpriced. The result: The housing market may seem more active than it is.”
How shocking!
Figures lie and liars figure.
We should be watching just two indicators- Number of sales and median price (not average price). What can’t be accurately measured without a great amount of detective work (like Mike Lyon has done ) is the selling price as a percentage of the ORIGINAL asking price (before multiple relists).
Collapse? Looking that way here in Carson City.
According to the Carson City Assessor’s Data for August - Sales of SFHs over 300k are down almost 80%. Only 12 homes were sold in Aug 2005. 429 are on the market. A 37 month supply.
SFR Sales
2005 2006 % Change
May 46 36 -22%
June 56 42 -25%
July 51 27 -47%
August 56 12 -79%
2 homes in the 500 to 750k range were sold in Aug 2005 and 106 are on the market.
Sorry id this has already been posted: Steve Brown: Will condo craze cool?
http://www.dallasnews.com/sharedcontent/dws/bus/newsletters/stories/092206dnbusrecol.18715c6.html
“One condo deal that’s not going ahead is developer Craig Hall’s planned tower in downtown’s Arts District.
Mr. Hall owns the derelict construction site at the front door to the symphony hall. It’s been a jungle of unfinished concrete and steel since plans for an office skyscraper were canceled in the 1980s bust.
Recently it looked like the stalled development would get going again. Mr. Hall came up with plans for a combination office-condominium tower that would have been almost 50 stories high.
But the veteran Frisco real estate developer says he’s decided to mothball the project for three to six years.
“We were pretty far along with our plans,” but he said he was discouraged by a lack of support at Dallas City Hall and decided to wait for the next real estate cycle, however long that might take.
Mr. Hall’s site will soon be in the shadow of construction of the new performing arts center on Flora Street.
“When those new buildings open, we will be an eyesore and we feel bad about that,” he said.”
Boy, he’s not kidding. His abandoned project is a big time eyesore. Lack of support at City Hall. What does that mean - a handout? When basic services in Dallas simply suck and property taxes are already outrageous? Being the cynical beyatch that I am, I’m guessing maybe his lenders weren’t giving him the terms he needs. Gee, that’s a shock considering the giant dump he took on them back in the 80s and early 90s.
“When those new buildings open, we will be an eyesore and we feel bad about that,” he said.”
That’s a Pontius Pilate if ever I read one. It just really makes it all OK that he feels bad about the eyesore he’s inflicting on the area, so now he feels better. Why don’t the politicians get up enough backbone to condemn the structure and get it torn down?
Yep, cities will fine some homeowner if they don’t cut their grass but will let these developers leave unfinished buildings sit for years.
“Will condo craze cool?”
Doh…
Isn’t Trump still putting up ‘ultra luxury’ condos in Las Vegas, Hawaii, ???
Maybe the ‘ultra luxury’ segment is always strong, or maybe The Donald is late to *this* RE party?
http://www.trumplv.com
http://www.trumpwaikikihotel.com/
There is a Trump condo building going up in Chicago. Only about a 1/3 done, if that. Knowing Trump and his stellar ethics, he will regroup his bankrupt condo buildings into 1 corporate entity and declare bankruptcy for that one corp. Thereby, keeping his money and screwing the investors of the late-to-the-party condo projects.
Roger,
I am currently watching the Austin market and have access to the MLS and I’m not seeing what you state in your comment. How did you arrive at that conclusion?
He’s probably got a few tract shitboxes in Leander or Round Rock he’d like to sell you.
Austin is like the other large TX cities. Lots of crap, future foreclosures being built on the outskirts and sold to out of state scheep. Inner city has good but overpriced stuff. No easy money there or anywhere else in TX.
Mark Faber a.ka. Dr. Doom Turns Bullish on US Large Caps
http://tinyurl.com/jlmg9
Mind you, he’s still Dr. Doom for the longer term. To paraphrase;
The US trade deficit may balloon if the economy tanks, because companies will accelerate outsourcing to cut costs.
The US dollar may lose 92% of its value against Asian currencies in the next 10 years.
How about buying Indian stocks instead? That said, their index is very ominous looking. Timing would be important there.
Here’s something of some interest now that the 10 yr is off and running.
(M-ville)
Prof. Sedacca,
A “thought” on the commercial 1-0-yr position: Could it be that these “smart money” players are the Countrywide’s (CFC), WaMu’s (WM) and other big mortgage players that have hedged the portfolios they think are going to implode?
******
Excellent question and I must confess I don’t know but admit that it is indeed possible. But even when I look at rates falling and prepay speeds falling as opposed to rising, I wonder if the hedge wouldn’t blow up in their faces.
The convexity trade isn’t working like in days past as a direct result of slowing (crashing?) housing, ARM adjustments, negative equity, etc. So this cycle is different from the others. That said, I really don’t know is my honest answer to your question, but it’s definitely something to think about.
-Bennet
Would love some suggestions…I don’t like the way the market looks and I decided to cash out the funds in my 401K and hold them in a money market fund. This is at the largest investment bank in the country. They have no mm fund, but offer a “Stable Value” fund which they designate the most conservative, and equivalent to mm fund. I checked the holdings and they include agency paper and MBS. The REIT fund has been gangbusters, 26%YTD, but it makes me nervous now. I also have about 20% in morgan stock, which has been going up. It’s an old 401K, so I could roll it over to Vanguard, though I hate leaving the REIT fund, since the buy-in outside the 401K is 500K. Writing this, I guess my gut is saying, roll it over, and preserve your capital and worry about other allocations in the future. I would love to hear from anyone with thoughts, other ideas. Many thanks.
must be Fidelity
If you are already reading this blog and still have a REIT fund you must be schizophrenic. What do you think the RE stands for? Why do you think they will (after 20+% annual increases for the last five or so years) NOT get crushed in this downturn?
REITs are so overvalued it isn’t funny. Good luck.
If you are trying to move into cash (U.S. $) then try short term treasuries for safety. Fidelity has a short term treasury fund I believe it’s I.D. is FDLXX but be sure to ask.
augur-inn,
thanks for the answer…was thinking of rollover CDs from Pentagon Federal, 3years at 6%, but will check out fidelity suggestion before I send in the paperwork tonight.
That’s interesting.
After checking out the moneywatch link and returning, the page format here is totally different.
And submitting that comment returned it to normal.
State program to aid first-time home buyers
By Star staff
September 21, 2006
First-time home buyers in Ventura County can now borrow more money under a state program designed to help people buy their first residence.
The California Housing and Finance Agency has increased loan amounts from $561,000 to $592,717 for people buying first homes in Ventura County.
Interest rates are fixed at below-market rates, and the loan amount can cover down payments and closing costs in addition to purchase price.
The program offers people a chance to buy a home with no out-of-pocket costs.
For more information, call Fair Way Housing, which administers the program in the county, at 487-2800.
thanks to tim
http://themessthatgreenspanmade.blogspot.com/2006/09/friday-lite_22.html
And why is it that any first-time home buyer should be “entitled” to buy a home that costs more than $250K, much less a half-million dollars? In my book, NO ONE is entitled to “buy” housing when part of the cost paid is money forcibly taken from another. When will the taxpapers’ backs break in California?
If you buy for the first time, you better do it well and go for the heavy stuff. Big chance it will be your last time whatsoever.
Or, how first-time buyers become … last-time buyers.
Don’t know if this has ever been mentioned here but this is classic.
http://silveradoaz.com/index.html In the middle of absolute nowhere. “Centrally located between Phoenix, Las Vegas…” We drive to Laughlin or Vegas several times a year and have seen the Silverado ad, on a semi trailer for a couple years. Now they are actually building some homes. Looks like about half a dozen McMansions 20 miles or more from Kingman. God knows how you are supposed to live out there…or why.
The few people that live in this area have tried to stop this to no avail. Apparently there has been a problem with water for years and they already fear their wells will run dry. Kingman and Mohave county, however, can not say no to any developer. Per the planning and zoning file, at max build out they would have over 21000 houses and over 59000 residents. Plus, of course, a golf course, schools, commercial and yada yada.
http://tinyurl.com/rkbp4
Brandon
I’m seeing the MLS scam happening here in L.A. While most listings sit and sit, some ‘redheaded stepchildren’ are coming and going (ie active, then inactive, then active again with a new MLS#) on a monthly basis. Fortunately, I’ve constructed my own Excel spreadsheet that captures MLS# and addresses, so I can keep track of the spaghetti-like cluster@uck these properties’ selling histories have become.
One particular property, in a very swanky part of town, has been on and off the MLS for almost a year, with 4 different listings and prices ranging from $3.2 million to $899K!
Because I’m genuinely interested in this place, I looked it up on propertyshark, only to discover its actually in foreclosure and is now REO.
In the REO listing, the price went down to $899K, and quickly dissapeared to be replaced with the older listings. Two at $1.3 milion reactivated, followed by the ‘original’ listing (now at 330+ DOM) of $3.2 million. Its now almost impossible to tell how much the asking price is, what the ‘real’ MLS# is, and how much time its actually been on the market. Of course, no mention is made in these 3 listings of the fact that its now REO, or what the previous prices were…
My guess is that they’re simply trying to confuse potential buyers! Why pay only $899K, when its also listed at $1.3 million and $3.2 million? Take your pick (just as long as its not the $899K one…)!
oh yeah they’re just waiting for Sheik Omar Ali-Abib to come galloping in and buy the house at $3.2 million
Speaking of investments, I just received the following link in an email from Schwab:
http://www.schwabinsights.com/2006_09/mktoutlook.html
From their article titled, “Housing: ARM’ed and Dangerous” by Liz Ann Sonders:
Many investors assume the damage to the housing industry is an isolated event (much as it was assumed that the dot-com implosion was an isolated event). I find myself more concerned than the consensus, believing the housing industry is vastly more important to the overall economy than many are currently assuming. Given that prices have yet to fall enough to drain inventories, and mortgage rates have yet to fall enough to stimulate another mortgage refinancing boom, there is still likely more pain and suffering to come before we can close the books on this housing cycle. And the harder housing falls, the harder it will be for the economy to land softly.
They’ve downgraded pretty much all the homebuilding stocks to an “F”.
I was driving by the Trump Tower Tampa site yesterday, and I noticed that there are knee-high weeds growing on the piles of dirt on the site, and no work is being done at all. That building is never going to happen. They might as well throw some gravel on it and start charging $5/day for parking.
-
Bought for $167,000 in 2002
Put up for Sale at $402,000 in 2006
Help! Home for sale - Young and Ballanco
The Orlando-based couple thought they thought they were in a bubble. Are they in a bust?
By Les Christie, CNNMoney.com
September 22 2006: 12:37 PM EDT
NEW YORK (CNNMoney.com) — When Casey Young and his wife Jaime Ballanco put their Orlando house on the market back in March, they had no clue that the property would not sell. As far as they were concerned, Orlando was still bubbling.
“It was a foregone conclusion that we would sell it very quickly,” says Young. “There were still bidding wars going on around Orlando.”
http://money.cnn.com/2006/09/22/real_estate/help_home_for_sale_young_ballanco/index.htm?postversion=2006092212
Something about this story smells:
“We’re planning on starting a family someday,” says the 30-year-old Young, who builds simulation software for a defense contractor. “We wanted a bigger home - with a pool.”
They have a four bedroom house already! It will take them years to populate the house with children unless they they are planning to utilize fertility drugs to get three or four kids at a pop.
He’d better upgrade his own defense simulation software!
Look at their smiles. As though they think that the article will bring them a buyer!
It may bring them a family though!
-
Does some chair railings, crown molding, tile flooring, and a friggin koi pond create $235K of value in 4 years? 141% Increase???
Kois are rather expensive these days. But beware the Koi-bubble!
Beware the local population of raptors. Once the fish-hawks cotten onto this phonomenon these will be empty pools.
For those who loves tales of FBers hanging themselves with their own noose, here a little ditty out of Orlando:
http://money.cnn.com/2006/09/22/real_estate/help_home_for_sale_young_ballanco/index.htm?section=money_pf
Oops, Gekko — looks like you beat me to it!
Fab - it’s just what I always wanted! A garage, a driveway, two neighbors to borrow sugar from without having to leave the house, and a generic tree from the local Ace Hardware.
Here’s a summary from the WSJ marketbeat blog of the impacts of the housing industry collapse on the wood products industry:
1:44 p.m.: As the housing market cools, the number of empty nests sitting on the market has soared. There has also been a big increase in the idle stockpiles of a key home-building commodity: wood.
A common method of measuring inventory in the wood-product industry, a metric known as “inventories to shipment,” which measures stockpiles relative to sales, hit 1.45 in July, the highest level since January 2001, according to Dan Jester, an economist at Moody’s Economy.com.
Other metrics are even more revealing. The number of railcars shipping lumber and other wood products last week was down 16.7% from the same time last year, according to the American Association of Railroads. That was the second biggest drop by any product tracked by the group. The steepest decline: primary forest products, down 16.9%.
Prices have been tumbling. Monday’s report on wholesale inflation showed lumber prices fell 6.2% from a year ago, even as overall wholesale inflation gained at a 2.7% annual rate. Random Lengths, a wood-industry research group, said last week that its framing-lumber index tumbled 25% to $301 per thousand board feet from $403 a year ago. In February, industrial production for sawmills moved into negative territory on a year-over-year basis for the first time since June 2003, according to Economy.com.
Now, jobs are being lost, a tangible sign of how the weakening housing market is hitting the economy. This week, Pony Lumber, a sawmill in Tacoma, Wash., shut down indefinitely, letting 85 employees go. Stimson Lumber of Missoula, Mont., just announced it would shut down its Bonner mill for three weeks. The company cited a sharp drop in prices for wood products.
Of course, slowdown in the wood and forest-product industry was expected to follow a housing slowdown. But the severity of the decline may have come as a surprise to some analysts. Quarterly earnings reports from forest-product companies such as Weyerhaeuser, whose stock is down about 20% since late April, will show just how much of a surprise.
The other day I was hanging out at the dumpster behind the 7/11, visiting my hopes and dreams and knocking back a few 40-ozs before work, as we all do from time to time. All of a sudden, fisticuffs erupted between some illegal alien day-workers across the street and a roving gang of hungry realtors who haven’t had a sale in months and wanted to underbid the illegals. Then the dreaded Hells Accountants rolled by on their choppers, on their way to gang-audit some hapless FB. At the same time, I spotted Suzanne lurking behind the service door of a local restaurant, trying to ambush the guy hauling out the garbage to get the best scraps before some unemployed, soon-to-be indicted NAR spokesman, or an alley cat, was able to grab the choicest scraps.
Call it a hunch — nothing I can put my finger on, really — but I think the housing bubble is toast. It’s going to take much of the rest of the economy — and legions of FBs — down with it.
Ah, Sammy….
Now that was hilarious.
the Desperate out of work realtors and the street corner unemployed illegal alien day laborers can all apply at the nearest Burger King or Del Taco.
ooo, ooo, I can hardly wait for this book to come out; it’s gonna make me rich! Rich, rich I tell you!
http://www.amazon.com/All-Real-Estate-Local-Understanding/dp/0385519222/sr=1-1/qid=1158958066/ref=sr_1_1/103-2437395-6895012?ie=UTF8&s=books
Am I evil for giving it one star without even reading it? My rating was based upon knowledge of the author.
Anectodal evidence from the western ‘burbs of Chicago. Was reading the local paper today and saw a foreclosure notice on an address that looked familiar. I looked up the sales info in the Chicago Tribune and it had sold for $1,350,000 in 2005. I know this is anecdotal, but it helps prove my hypothesis that most of the new construction McMansions in my town were bought by people who couldn’t afford them. I think this is only the beginning here.
There are probably less than 10,000 people in the entire United States who can afford a home like that using conventional financing.
Get a load of this. He works for a mortgage company…
http://www.nbc4i.com/cfoot572/9909843/detail.html