Bits Bucket And Craigslist Finds For October 23, 2006
Post off-topic ideas, links and Craigslist finds here.
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
Post off-topic ideas, links and Craigslist finds here.
a brilliant study from dbresearch about all relevant european and the us market. including a riskscoring model, prices/rent ratios, affordability, very good charts. worth reading
http://immobilienblasen.blogspot.com/
too bad they use VERY VERY wrong numbers for the Netherlands, just like the Economist last year. Even the very conservative numbers from the official ‘Kadaster’ national register give 2x higher price growth for the Netherlands over the last 10 years. These heavily manipulated NVM (realtor) numbers that are used have nothing to do with reality. Even with the Kadaster numbers, price growth in Netherlands is the highest of all EU nations (above IE). And how they can conclude that Dutch homes are 40% more affordable than in 1998 while prices have climbed several hundred % is also a bit strange … I guess they get this affordability number directly from the realtors organisation as well, without checking anything.
Makes me wonder how reliable those other numbers and the conclusions are
thanks for the info.
i think they a right about ireland…..
I agree that Ireland is probably the most risky market of them all, no need to look at the numbers for that. Spain and Netherlands are probably not too far behind though.
but i think the us i really the first to fall hard.
this was from ca renter
The ABX index, which measures the risk of owning bonds backed by home-loans to people with poor credit, rose 30 percent since Aug. 9 to the highest since January. There are more than $500 billion of such notes outstanding
that is quite s spike!
sure, there is no sign of a pending fall in any of the EU markets; on the contrary, pricegrowth is accelerating again in most of the EU lately.
Well 1 in 7 houses in Ireland are currently vacant, if the market doens’t turn soon it’s going to look like the Potato Famine again.
Many houses for sale in Cobb County Atlanta. Many open houses with no one in attendance. Many construction sites that are dead. Many newly built condo’s that are priced at $600,000 and up are now for lease. Many condo communities have numerous for sale signs. Every other corner has at least two for sale signs, garage sales, FSBO, Auction, Foreclosure. What is going on? A realtor friend has sold only one house for the year. The income was $10,000. Are you sure real estate is local? No crash here in Atl. One building project was dead for two months. Just one piece of heavy equipment and all the green plumbing sticking out of the ground. Over the last week they have put in landscaping. I thought that was the last thing to do. However no building. Just a few workers walking back and forth doing I do not know what. Noticed many new SUV’s with for sale signs attached. Isn’t Atlanta immune since there was no run up in prices? Clue me in someone.
Outside of the Perimeter (OTP) is “toast”! Over building; people tire of commuting that far; more speculation out there. Too many bought out there that shouldn’t have. The overbuilding is rampant. I’d imagine that with gast prices (even with the temporary reprieve) and the commute, people figure that w/o appreciation, why live so far away in a cookie cutter neighborhood? Better to sell (pray to sell), get out and move in close to work and entertainment. Drop the commute from 90 mins to 20 mins. Unless one works out there, which some do, but the percentage of employment to housing out there is way out of whack.
I’m Inside the Perimeter (ITP) 2 miles from Midtown, 4 miles from Buckhead and Downtown. Thngs sell here, but it is slow (about like last Fall but with about 15% more inventory). Prices are flat Y-T-Y so far. We’ll get hit, but at about 1/2 the pain level as OTP.
I forgot to comment on the $600K condos. Who in their freakin’ right mind would buy a $600K condo in Cobb Co? Heck you can get one in Buckhead or Midtown for less than that! You can get a 2000-2500 sf (+ basement) house in Va Highlands-Morningside-Garden Hills built in the 1930s in a neighborhood with charm and convenience. No crazy HOA fees either! Lower taxes (on the old homes) per sf. Don’t want the old home? Get a condo for $400K in Midtown then…(But prepare to be hit with depreciation, just not has bad as Cobb Co).
Army, I am not familiar with Atlanta, but the various cities we have lived in while the kids were in school required that we live somewhere out in the burbs. Inner city schools were not an option. Good private schools for three kids cost $3K/month minimum. This would buy a lot of house and gas in the suburbs. Crime concerns always made inner city areas unsafe for kids if they were out and about. Has this all changed in the last 5 years?
Some city schools are good, many are not. Certainly NYC has improved a lot wrt crime. I’ve not lived in Atlanta long, but some areas to the north and east in the city are safe and have at least good elementary and middle schools. Old West Austin (2-3 miles west of downtown and Univ Texas) was good 12 years ago.
The condo’s are close to Vinings. Just off the 285 at Atlanta Road. Also, the condos/townhouses that line the East/West Connector in Cobb are all pitch black at night. They were built in 2004/5. In the morning going to work I see a couple of lights on but mostly pitch black. I took a drive through on Sunday and on every street of 12 townhouses there are at least 4 for sale. I am waiting to buy in Kennesaw or Marietta. While there are a ton of houses for sale, few have lowered their prices. While inside the perimeter would be ideal, I don’t want to live in Fulton. Since I am still a newbie to ATL, what should houses in the range of 240,000 be selling for factoring in inflation. I have held off buying for 2 years because in my estimation, I knew the price was steep compared to selling prices in 2001.
Vinings is pretty good and quite close-in, though still a bit of a commute to Buckhead, Midtown and especially downtown. $600K for commodity, albeit “nice” condos is too much, particularly if they are those cartoonish looking cluster f* homes.
$240K, forget about anything nice inside the perimeter for a while…there is plenty of stuff in or below that price range, but those areas you’d not want to live in. OTP there is tons of houses that fit that range and they’ll get cheaper. When the houses sell for a 20% down, 30 year payment that is 25% LESS than rent OTP for property like that, it will be the bottom. It MAY not get that low, but given the unlimited supply….
Yep, the builders were over-building everywhere . Builders thought the cash out money from higher priced markets would just keep coming . The prices went to high and the market went dead .
The builders were not building for the local buyers but rather for the cash out buyers in higher priced areas and the speculators /flippers . Now the builders face a dead market where the local buyers are priced out and the cash out buyers from other areas can’t find a greter fool to sell to .
A number of these projects are going to be a eyesoars because the won’t even be finished .How about the projects that have 50% of the houses for sale while the houses and condos sit vacant .
I hate it when houses are vacant and they need to be heated for the winter . What a waste , what a waste , what a waste .
Let me ask in inside perimeter Atlanta observers on here:
Are you noticing a ton of $1 million+ priced flipper homes? By my rough count, there is at least a year of inventory of these homes in almost all the prime neighborhoods in-town (Garden Hills, Va Highlands, Ansley, Brookwood, Buckhead). And that yr + figure is using top sales month of May or June 06.
Soo, given that building is still going on, while sales are slowing, it’s likely to get worse. I think there will be opportunity here for an opportunistic buyer in 18 months or so.
Any thoughts?
The $1 million + tear down and builds are moving the slowest. And many are not much bigger/better than the $750K-900K redone older homes. So I’d see those suffering a bit more than below $1 million, and the compression effect won’t be as strong as normal (since they are not really much better than a good redo). In fact, some of them are quite a bit less attractive (cartoon effect vs real thing), except perhaps their newness that appeals to some.
I should be more clear…if the $1.2 million new construction fell to $950K, on a $ / SF and value basis, it won’t hurt the $750K nicely redone old stuff much (maybe 5-7%). These new houses are that much overpriced vis-a-vis the 70 year old homes.
I posted this last night: yesterday I talked with an old friend who is an architect and builder in Atlanta. He is a long-time resident of Dunwoody. I asked him if he is seeing signs of stress among mortgage holders in Atlanta and he told me yes, he is seeing a huge increase and speculates that foreclosures will rise sharply. Foreclosures always were high in Georgia, but it appears he is describing a noticeably higher price range of housing involved, as compared to the long-term average.
Greetings fellow Atlantans. I owned two lofts in midtown — 805 Peachtree then Piedmont Park West. I was able to sell them both (purch Mar ‘01/sold Sept ‘02; purch Sept ‘02/sold Jul’05) and covered the sales/transaction fees with a little change left over. I have a few friends who now cannot sell their similarly located lofts or have had to bring checks to the closing table.
I feel lucky to have gotten out of the housing market and have been renting in Dunwoody for 2.5 years. I was also lucky enough to have met a lovely woman and we are planning to be married next March. We are looking for housing in the Dunwoody/Sandy Springs area with an eye toward Roswell and maybe Brookhaven. We haven’t decided to go with a house or a townhome. We also haven’t committed to buy or rent.
I agree with the observation that construction projects have slowed down. We also visited the Manhattan in Perimeter Place on Sunday and was informed by the concierge that a number of sales have failed to close. Another agent at another complex told us that up to 30% of all closings for new projects are failing. That number seems a little high. I am reluctant to buy in some new development becasue I really do not believe that all the units will sell! What happens then?
Also note the following:
The View @ Chastain announces the Builder close-out of 58 brand new units in the heart of Buckhead, Atlanta, GA. Fifteen shall be offered absolute, regardless of price with no minimums or reserve prices. See http://www.albertburney.com.
I believe that this auction is a wake-up shot to the Atlanta market. In general, I see contracting employment in Atlanta while builders continue to defy odds.
Also, according to HousingTracker.com, Atlanta has 96,000 homes for sale. That’s number 2 in the country.
Furthermore, Atlanta was the number 1 metro market in the country for ARM mortages in 2001 at 32%. I know people all over the metro area, that are beginnng to rumble about escape plans.
How is the Atlanta job market today? Is it primarily RE related? Are a lot of businesses closing up or is it business as usual?
Given the emphasis on outsourcing of technology, how is Ga Tech doing? I’d think some of their engineering depts would be in pretty tough shape these days.
Seems like biz as usual to me. I’m in high tech, software.
There are a lot of things here, but in an economic downturn, Atlanta will not be spared. It probably is a sum of part of NYC, SF, Dallas, Raleigh, Ohio in terms of the type of work here. Financial, retail, transportation, import/export, some manufacturing (shrinking e.g. Ford), high tech, publishing, media, and a lot of real estate, of course .
There are way too many condos being built…like most other places, that is for sure. The Buckhead situation seems difficult to me…both in terms of value and congestion. OTOH, this area could (re)gain value if we end up on some kind of gasoline rationing program in the US. Not likely now…but in the next decade, who knows?
96,000 homes and condos…yes, boggles the mind. There is a lot to choose from. It must be said this inventory is spread out over something like a 40 mile radius…pi(40)^2 = 5000 sq miles and approaching 5 million people.
Get out your rose-colored glasses:
http://www.boston.com/business/articles/2006/10/23/housing_prices_put_at_or_near_low/
NE / Bahstin fell 30%+ last time
how can he say they’re near a bottom, off 15%?
Boston “is very close to the bottom,” said Mark Zandi, chief economist for Moody’s Economy.com. “If the price declines aren’t over, they’re pretty close to over.”
These idiots think just because depreciation has gotten prices close to their predicted bottom, then the depreciation MUST be coming to an end. Arrogant tools.
“These idiots think just because depreciation has gotten prices close to their predicted bottom,”
I don’t think it is predicted bottom, it is hoped for bottom. No expertise in the area but I bet if prices fall anymore then all those exotic mortgage bonds that have sold will be in real trouble and Moody’s along with them.
“…I bet if prices fall anymore then all those exotic mortgage bonds that have sold will be in real trouble and Moody’s along with them.”
Good point. I hope Moody’s gets substantial coverage when its estimates are proven to have been way out of whack. Fortunately, if the MSM won’t blab, we sure will.
Moody has a long history of undershooting downturns.
Moody has a long history of licking Wall Street’s B@lls…..
While I was hoping Mass would see 25% decline in prices over a number of years, the more pragmatic part of me thinks the article may have it right… BTW, this is almost all anecdotal
1. The tech employment market in Boston is going strong. I get 2 or 3 emails a day from former coworkers whose current employer is hiring, seems mostly java, QA resources, software architects. Also, searching Dice regularly shows strong listings for the area.
2. From what I hear in the nursery business, commercial and retail is booming with good sales growth year over year, especially down Cape Cod. Completely counter-intuitive to me if housing is tanking: consumers should be tapped out as far as affording new landscaping and builder projects should be slower… but they are spending. The one down note I hear is landscapers saying the jobs are smaller now than in years past.
3. In my neighborhood, while “For Sale” signs aren’t coming down, I see lots of home improvement project underway with more work starting every day… from new siding projects and roofs to new decks and additions. Even a few tear downs, with new multifamilies going up… makes sense that contractors whose building business has slowed are moving to remodel/HI. Also, if everyone expects house prices to decline, why sink money into the property (unless to fix and sell)?
4. My contacts in the local auto business say sales are down (expected with a consumer slow down), however sales are still strong compared to a few years ago and certain brands are booming: notably Hyundai at the low end and BMW/Mercedes/Audi/Acura at the high end for new cars…
My take on all this is that while the New England middle class is being squeezed, they are cutting back spending. Housing prices are still high/affordability low, but it will take significant job losses to knock the local economy and drive housing prices down considerably.
I’d like to hear from anyone else local to Mass/RI on what is going on here…
A buddy of mine just bought a house in Brookline, a short few blocks from Coolidge Corner, for the same price it had been sold at in 2003. I’m pretty sure that’s off significantly more than 15%.
I am afraid must be mistaken JimAtLaw. I have family in a Condo in Brookline and they have responded to my years of escalating warnings by consistently telling me all the reasons why Brookline is, wait, yes, here it comes..uh huh, you guessed it.. ‘different’.
sarcasm off.
Has anyone else had the annoying experience of your warnings to people resulting in being your being regarded first as ‘crazy’, and now ‘creepy’, (increasing ici-ness from previously warned owners/buyers) without anything in the way of ‘you told me so?’. I gotta say– I was looking forward to the ‘you were right’ phase and I feel a bit robbed!
Yeah…RE is going to be my Thanksgiving dinner topic in San Jose, CA. I’m going to keep a card player’s eye out for the 1000-yard stare of fear. It’s payback time!
Interesting points northeasterner. What struck me most in the article was the fact that 1) inventory is low to begin with in the Boston area, and 2) inventory dipped by more that 15% over the past year.
Maybe Boston housing market began decline early enough that builders had a chance to cancel projects before inventory got out of control.
Then again, the population is shrinking……….
No way is it over in Beantown. It may have just begun. Market cycles and in particular downtrends extend into years, not months.
That is all well and good, but what about the possibility of stagnant prices vs declining prices? What happens if Boston prices remain level for the next two to three years? What evidence is there that supports decining prices across all demographics in Mass? I’m trying to figure out this market just like everyone else, but I need evidence and the evidence I’m seeing is of a more moderate correction than other areas of the country.
Posters/readers here have to remember that there will be buyers throughout the entire decline. I know of a person who just bought near Boston, talked about making the first of 360 mortgage payments. He may have thought he got a good deal at ~15% off. His peers own homes so there is that pressure, and most are from other parts of the country, did grad-school at MIT so they are intelligent but may not have a reference point for prices.
My point is you can be damn sharp but be unaware of other aspects of life and think what you observe is the norm and follow suit. Not a lot of people ask the question why - if you start doing this about lots of aspects of human behavior, etc. it gets scary.
I had a feeling that the speculation going on in markets like California, Nevada, Florida, and others was mostly absent from Mass. Not to say that prices aren’t completely out of whack with fundamentals in terms of rent/own and incomes, but it seems the bubble is playing out differently here, more slowly.
The question is why? What factors are driving the market in Mass vs the rest of the country? We’ve discussed the issue of decreasing population, but I still think the the boon here is in higher ed. MIT, Harvard, BC, BU, etc. While many graduates move on, many also stay. Starting/raising a family here is expensive… what I see are more and more couples putting off kids until their 40’s, when they are more financially stable. My generation just moves farther out into the burbs to try and make a go of it, instead of leaving.
Some have also mentioned the next bubble could very well be the stock market again… how would that impact the area given financial players like State Street and Fidelity, never mind the small Hedge funds based in/around Boston… another boom based on bubble/funny money?
“I had a feeling that the speculation going on in markets like California, Nevada, Florida, and others was mostly absent from Mass.”
Are you truly that clueless, or are you a reincarnation of BeaConst coming back to haunt us as you try to find GFs to buy your flip condos?
The financial players are moving out. Fidelity is constructing new offices in S.C. or moving more and more to Rhode Island and Manchester, NH. Rumor is that State Street has been looking to move their whole operation south for a number of years, but the cost of the move has never added up.
Again though, where will the new growth be?
JA,
I don’t have an answer for you… I just see some very inconsistant anecdotal barometers of the health of the local ecomony. I know in my gut something is not right, but the evidence I see doesn’t support it, yet.
GetStucco,
I expect a better response than that from you. Am I clueless? I expect not. Am I certain that speculation wasn’t rampant here in Mass? No, but some common sense tells me that Cali, Fl, and Nv have much more force behind there speculative decline in housing prices. Where is your evidence that this was a large part of the Mass market? So is the slowing sales volume and lower prices just a market slowly correcting an imbalance, with impact primarily to those of marginal/overleveraged fincances? For now, I think so. We’ll see come spring ‘07 if there are more drops and how far.
Lastly, I don’t flip. In fact I don’t even own a single family/condo/townhouse… I own a 4-family, that is cash flow positive when fully rented and pays the mortgage with my family living in one unit. I couldn’t justify buying a SFH with prices what they are. I have no debt beyond car payments and the mortgage and bank upwards of 33% of our gross six figure income for savings… so you tell me, am I clueless?
Yes.
GetStucco,
Disappointing… really.
You add no value whatsoever. You’re as bad as the realtor trolls who kept preaching “Real Estate only goes up”, only your message is “The sky is falling”. I might as well call you Chicken Little.
Show me you actually know anything about the Mass housing market or Mass economy to help people on this blog make informed decisions regarding their family’s financial well-being…
“Zandi estimated that home prices dropped a total of 2.2 percent in the Boston area in the second and third quarters this year”
“2.2%”?????? What a joke. Prices are already off 20%, at least. There’s still a ton of supply on the market. I’ve lived here for thirty years and have NEVER seen the proliferation of “For Sale” signs, anywhere you go, that I’ve seen in the last year and a half. I’ve even seen “For Rent” signs for the FIRST time in the last six months. I’ve NEVER seen for rent signs before.
Prices here still have another 20-30% to go. Am I thrilled about it? I’ve owned my home, debt free, for 20 years. I’ve no reason to sell for the next decade or more. I’d estimate my home has easily already fallen a third from the peak (if I could sell it). Which puts the base of this full market “correction” right back around 1999 prices. I don’t think the industry will be able to hide the decline, as it fully unfolds, because it is too broad based and because the Boston area probably had just as big a share of “liar loans” pushing prices up as anywhere. As those reverse, unlike other busts, it is going to be very big and obvious news. Articles like this one are just sops to the RE industry that pays for Globe advertising space.
As a potential first time home buyer who is waiting for prices to be more affordable in the Boston area, I would love to hear more about what people think the housing market will do. What I see just by keeping up with the listings is that most sellers have been moving prices slower to the tune of 1-2% each time while others are simply holding steady. Occasionally, I’ll see a price/property that seems attractive and almost reasonable, but typically those will actually sell because the seller has decided to move the price closer to what the value should be. I don’t know whether to read this as there are lots of people out there like me who are waiting for reasonable pricing, or there are still people who are jumping on properties because of a perceived flipping/investment value. Even at the listed price for some of those sold properties, they were still overvalued in my opinion…I admittedly don’t know a whole lot about the market, so I’d love any input you have.
My 2 cents from Boston. My wife and I have been saving a nice downpayment. I have a lot of friends who have done the same. We’ve saved like crazy for almost 4 years.
I see large population of late 20s/early 30s couples who have saved and are sitting on large downpayment money. They have been waiting for years for the prices to come down. We’re not looking for condos either, we’re going straight to SFHs.
When the “bottom” hits, I see a lot of buyers coming out of hiding.
A close friend of mine and his wife moved to Lake Placid, NY area from Marshfield. Bought a nice 3BR 2BA A-frame in Jay for $95K in 2002.
Needless to say, it is cold and lonely up there in the winter and now they want to move back… just waiting for prices to come down here.
I’d agree with JA, there are buyers just waiting for SFH’s to become affordable (I’m one of them).
I am sure most of you have read the latest on Casey. If not,
http://iamfacingforeclosure.com/59/nine-to-five-at-my-rich-dads-office
He has a nice blue bouncing ball to play with.
Lou,
I am running into your videos all over the net lately. They are pretty popular.
Cool! I hope some other folks put videos together. C’mon OC!
Here’s my favorite housing crash video! Sorry if it’s a repeat!
http://www.youtube.com/watch?v=oZFt46aQyQ8
I’ve seen that video quite a few times, and it gets better every time. Love it!!!!
Someone should take that little worm apart.
imploder think Casey bought wrong product. Casey need exchange Blue Ball for “Inflatable Doughnut Pillow” Casey will need this product.
1. Won’t work past 5pm
2. Won’t work weekends
3. Won’t take work home
That’s a way to keep America competitive.
Maybe he’s joined a union?
Rich mom asked if the blue ball keeps his jer**l from falling out LOL.
Casey got blue balled!!! Bwahaaaaaha!
From Rich Mom:
Does that ball keep the gerbil getting out?
LOL, classic!
Here is a Lou Video…
http://youtube.com/watch?v=0HPq31I0O5E&mode=related&search=
Here is more on him…
http://youtube.com/watch?v=a-clennDGk0
This all came about because two weeks ago “Rich Dad” had the thought -
“Hmm.. Perhaps this guys who’s getting all kinds of attention can make me some money. I’ve got an empty office now that I’ve laid Bob off to cut expenses since the real estate biz is so bad, so I can just stick him in there. I wonder if he’s dumb enough to work for free? Eventually I’ll get some free publicity out of it.”
One more Casey comment: Blue ball, blue shirt, blue Dasani bottle, blue computer cable…this is so obviously a staged photo op. His new career is going to be “poster boy,” and yes, he will make money.
IMO nothing wrong with working shorter hours, if you get paid accordingly. But no clockwatching if your millions in debt. And what about the poor schmoes who just wanted a home for their families, the schmoes who needed a neg-am because Casey priced them out of the market? Let Casey work two jobs, like they now have to.
schmoes now just need wait. now Casey’s will soon price schmoes back-in to market. Casey look nice in blue, but imploder think Casey would look nicer in Orange.
David Lereah’s New Book:
http://tinyurl.com/w3tvy
David
Bubble Meter Blog
Probably just took his last edition tore out about half the pages and reissued with a new title. Let me know when he comes out with “Why Real Estate Sucks”.
I believe his next book will be called “How to make money by being a private security guard at an abandoned housing development” or even better “How to steal copper wiring from those condos”
imploder still think misprint on cover. Should read:
“All Real Estate is Lo-Cal” “How I Ate My Own Words”
My cousin and I have been thinking of learning the trade of foreclosure-auctioneer.
Lou, hilarious post! Thanks!
An interview with David Levy that per Russ Winter “nails all the points” of the housing bubble (warning pdf). Pretty good read. I found out about it at Russ’s site.
http://tinyurl.com/ybz7ed
Popper — good reading. Thanks.
How much money is the IRS going to make from all the short sales? That is the money the lender forgives and reports as income to the IRS for you.
Not a lot. There will be a batch of screwed people from short sales, then it will become clear that helping the bank sell costs you a bundle. After that, it will turn to straight foreclosure and bankruptcy.
Bankruptcy does not eliminate IRS debt. There will be a lot of individuals who will be indentured slaves to the IRS.
Doesn’t a foreclosure have tax consequences also if it is not a purchase money loan? (which many/most loans are not, due to all the refi’ing)
A short sale might be considered income, but certain losses (business in particular) are tax deductible. Since losses might be much greater than income, no tax may be due. I wouldn’t say the IRS will be making a windfall here.
When the bank has to do a charge-off for $500k to close their books it’s just like a third party handed the FB a check for $500k, which is deposited to the bank. Either way, it’s just like tips for the stacked bar hostess — IRS-1099 income!
http://youtube.com/watch?v=pLjo7-J1qho
Oops, forgot to add that it compares comments from Lereah to irving Fisher. It’s a short youtube movie comparing quotes from the great depression to this current housing bubble. Quite a lot of parallels.
Krikey!
Well, this is sort of housing related. One of my girlfriends told me about this neat product you could buy at Home Depot called a stud finder. So, I thought, “wow, I want one of those.” Then I went down to Home Depot and bought one. But after a couple of days, I had to return it because it couldn’t find me one that had any money!
What did I do wrong?
Once you find a stud, you’re supposed to nail it so you can hang things on the wall.
Can’t you also screw it to the wall ???
Best line along this same thread:
Guy asks friend if he “nailed” a woman they both know.
Guy responds “When I nail something, it STAYS nailed!”.
(From the show Weeds on ShowTime).
Sorry, very much OT, but I figured we can all use a laugh from time to time.
Makes me think of a great t-shirt I saw this weekend:
Men are like floor tiles
Lay them right the first time and you can walk on them forever
we have had the largest real estate ipo in germany last week. (gagfah)
the ipo ws 10 times oversubscibed. 20% of the whole shares were sold for about 853 mio€ (1.07b$). they could have sold shares woth about 8mrd€ (10b$).
owner is fortress. (british or us private equity) shares jumped over 15% on the first day (to 22 €). 50% of the shares went to us investors. 15% to german investors.
the nav is far lower (around 12-14 €). but fortess said that the new number to value re srocks is the us method “funds from operations” ffo
they now own 150.000 properties that thexy have bought in the last 2 years from geman companies and municipailty etc. now only 2 yera later they sell the propertys for 40% above the nav.
i´ll keep you updated if the stock can hold to skyhigh nav levels. amazing!
Krugman on the housing bubble.
WOW!
http://youtube.com/watch?v=qo4ExWEAl_k&mode=related&search=
He said “bubblelicious” — got blog, Dr. Krugman?
I don’t watch much TV - does he always look that scared?
IMO, Krugman said two very significant things in that interview:
1) He suggested that the housing bust fallout could be worse than the tech stock bust;
2) He very honestly stated that he had no idea how bad things could get, especially if the trade deficit blows up alongside the housing bust.
I personally put far more weight on the candor of top academic economists like Krugman and Shiller than on the steady stream of spin coming from the mouths of REIC expert economists like Lereah, Appleton-Young and Gin.
Yes, but keep in mind that Krugman is a shill for the democratic party. He actually believes that Kerry’s plan would have improved things. How does raising taxes solve the excess liquidity and trade deficit. Oh yeah, people have less money to make house payments and buy foreign products. So we will create inflation by lowering wages and reducing our need for cheap imports. Hmmm, yes, I believe that will solve our the liquidity bubble.
I know, I know. Kerry would have raised the minimum wage and reduced taxes on the middle class. Ahem, ahem. Excuse me, I had something in my throat. Raising minimum wage does not create demand for domestic products. And if you believe that a democrat is going to roll back taxes on the middle class, then I have a bridge I’d like to sell you.
No politicial/party has presented a plan that deals with the real issue: We spend too much damned money. If anyone thought Bush was going to lower spending, well, I hope you didn’t buy that bridge with I/O loan.
I think you have done a nice job of turning Krugman’s dire comments on the housing situation into a political strawman. Krugman seems to not even be aware of the connection between the “Ownership Society” push to turn everyone into a homeowner and the bubble. Readers are strongly cautioned to actually watch Krugmans’ interview and form their own opinions.
The irony w/the OS push is at the end of the dream, everyone wakes up ‘owning’ more debt than real assets.
The “You Got Owned Society™ “
Krugman is a shill for the democratic party
Well if you’ve got a problem with that, find us a shill for the Republicans who called the bubble in August 2005, like Krugman did. We’ll even settle for a GOP shill who admits a bubble today.
Paul Krugman was my finance prof years ago at MIT. He’s too intellectually independent to be anybody’s “shill”. He’s also very famous and highly respected at this stage in his career and can say whatever he wants.
This article was written in April of 2004. Paul Krugman has been on top of this bubble for a while. I do not believe he has a political agenda. But that’s just MHO.
But while sale prices have soared, rents have stayed flat; and in some of the most overheated markets, like San Francisco and Seattle, they have actually been declining. Such a gap, the economist and New York Times columnist Paul Krugman has written, suggests “that people are now buying houses for speculation rather than merely for shelter,” evidence that he called a “compelling case” for a housing bubble.
http://www.washingtonmonthly.com/features/2004/0404.wallace-wells.html
Evidently, things are getting out of hand in Kansas as well:
New York, Los Angeles, Olathe? Rent’s Bite Is Big in Kansas, Too
http://www.nytimes.com/2006/10/23/us/23olathe.html?ei=5094&en=7ccc1b9bf2fb0027&hp=&ex=1161662400&partner=homepage&pagewanted=print
Data shows without a doubt that there are few places in the US that have not had some form of speculative run up. Unlike the 90’s down turn that was highly correlated to the “peace dividend” the mania seemed to be close to nation-wide.
In addition the agressive loan product selling helped boost prices even in areas where there was not a “flipper” culture in place. This translates into prices being 40%-150%+ above median trend compared to where they should be based off of 2000 census median prices.
Oh - transation: we (as a nation) have a lot of deflationary pressure to digest for the next decade or so.
–
As “the Quality of Buyers Improve” (a comment on Bloomberg), the prices will continue to fall! This is because as “the Quality of Buyers” was going to trash the prices were skyrocketing.
Just think of all the fun that the Housing Bubble has given rise to.
Jas Jain
Watch this on Interest Only Loans lololol
http://youtube.com/watch?v=7RTqk1NbKJU&mode=related&search=
I HAVE TO SHOW THIS VIDEO TO FRIENDS WHO ARE IDIOTS!
They might actually “get it”. LOL and if they don’t, their kids will.
“Have I got a loan for you!”
ROFLMAO!
What an excellent explanation. I think the fed government should mandate that link on every mortgage banner. Sort of like the warnings on cigarrette packages.
Another softball real estate gem from the Boston Globe.
http://www.boston.com/business/articles/2006/10/23/housing_prices_put_at_or_near_low/
“Economist” Zandi now calling the bottom of Boston’s bubble as here — has this guy been drinking? We’re
just getting started! Kind of sad, because he’s actually been pretty bearish for a while. Another
one bites the NAR dust, I guess.
At this point I only see sellers shaving off their wishing prices in the Boston area.
James Corbett, 76, and his wife, Lorraine, 71, put their five-bedroom home in Danvers on the market in March for $539,900. Six months later it is still for sale — for $40,000 less.
…and…
Boston “is very close to the bottom,” said Mark Zandi, chief economist for Moody’s Economy.com. “If the price declines aren’t over, they’re pretty close to over.”
Dude, when old codgers are trying to sell their dumpy ranch in Danvers for $539,000, it ain’t even CLOSE
to the bottom!
Here is the house (Ziprealty login required):
http://www.ziprealty.com/buy_a_home/logged_in/search/home_detail.jsp?listing_num=70354314&page=2&property_type=SFR&mls=mls_boston&cKey=ps8w4g42&source=MLSPIN
For those that can’t see, it’s a barely updated 1964 vintage ranch, 2100 square feet. This house at
$539,900 is at least $150,000 overpriced. $40,000 off their “wishing” price is nothing. This house, in
this area, is a $350,000 house. PERIOD. It looks like they raided the “equity”, too, in order to buy
their nursing home room… I mean, “active senior apartment”. $420,000 second mortgage in 2003 on this
puppy according to county records.
Danvers is a middle class town with middle class people who can’t afford ridiculously priced homes like
these, not even with suicide mortgages. The bubble isn’t near bottom until these sellers are FLUSHED OUT.
Meantime, another story, carried by the AP but not published by the Globe details a study by the Federal Reserve
Bank of Boston: “…the Federal Reserve Bank of Boston has found that more people moved out of New England than moved into the region from 2003 to 2004.”
How is the Boston real estate market going to continue to levitate at unaffordable prices while people
are literally FLEEING the area, and nobody is replacing them? The politicians in Massachusetts want desperately
to give drivers licenses and in-state tuition to illegal immigrants but, call me crazy, I’m not sure border jumpers
who arrive fresh with just the clothes on their back are going to be buying Jimmy Corbett’s $500,000 shitbox
any time soon.
Let me try again.
” I’m not sure border jumpers
who arrive fresh with just the clothes on their back are going to be buying Jimmy Corbett’s $500,000 shitbox”
6 families to a room.
Zero Down. NO Documentation. Why not??
Good points Craven. The house in Danvers is a joke. You may even be overstating its value.
They are 70 years old and have a FIVE BEDROOM home………..
a candidate for govenor here is getting grief because she suggested subsidizing property taxes to OVERHOUSED elderly isn’t a good idea. Well, look at this couple; had they “transitioned” to some kind of smaller place sooner they wouldn’t be in this jam. I’ve known plenty of older couples and singles who live in fairly large homes. They can’t keep them up and yet they won’t move out. Simultaneously, I’ve known plenty of young couples with kids who’ve been priced out of the market even for modest homes.
I know its horrific to suggest older people consider moving at some point and blasphemy to suggest they shouldn’t get any property tax breaks but this is a good example how, over time, the elderly subsidy distorts economic decisions.
Now not only have the young couples been harmed but even many elderly. Why? Because subsidies “seem like a good idea”.
jag,
The issue, IMO, is whether or not we believe in the concept of “private property”. Some (like myself) would argue that there should be NO property tax (or HOAs or Mello-Roos — like in CA). Either we own it, or we don’t. If not, why the American infatuation with real estate and “The American Dream” of homeownership — not that I buy into it.
Just a thought…
I’m loving YOUTUBE today! Wow, there is a ton of housing bubble stuff there. Listen to this guy rip California Real Estate.
http://youtube.com/watch?v=4eqC2yS3yDA&mode=related&search=
Kai is not an economist, and he does not really “get it.” You cannot buy a home that is overvalued by 50% and fix the problem by using a downpayment, a 30-year fixed loan, and “diversification” into mutual funds, retirement plans, etc.
“We’re going to have to…realize that a 5 to 7 to 10% increase in the value of your home each year is normal.”
Yeah, right. Keep on buying, fella.
“5 to 7 to 10%” ….what a joke. I’ll give him credit that he says you should be diversified (duh) but then he says something like “sure, you can look to your house as a retirement fund”.
Uh, not if you don’t have any equity, Kai.
His comments are simply worthless spin.
Good to bear in mind that Fannie Mae is a major NPR contributor (they basically “advertise” this fact on a regular basis)…
NPR another one bit the dust.. Thanks,….. Newt Grinch wasn’t it? Can’t remember who speared that one through.
Anybody remember the move Glengarry Glen Ross? If you haven’t seen it, rent it. It’s about a real estate sales contest where salesmen are forced to try to sell lots to a bunch of people on a “chumps list”, before they are allowed to try to sell to the “hot new prospects list”. I’ll bet there’s a lot of this going on on RE offices all over the country!
From imdb.com -
Tagline: The hardest thing in life is sell.
Plot Outline: An examination of the machinations behind the scenes at a real estate office.
Times are tough in a New York office; the salesmen (Shelley Levene, Ricky Roma, Dave Moss, and George Aaronow) are given a strong incentive by Blake to succeed in a sales contest. The prizes? First prize is a Cadillac Eldorado, second prize is a set of steak knives, third prize is the sack! There is no room for losers in this dramatically masculine world; only “closers” will get the good sales leads. There is a lot of pressure to succeed, so a robbery is committed which has unforseen consequences for all the characters.
Great movie. You may also want to check out “Boiler Room” — same theme with a stock brokerage churn & burn firm as the backdrop. In the latter, Ben Afflek (sp?) copies (badly) Alec Baldwin’s character from GGR
Coffee is for closers!
My watch cost more than your car!
..I want the good leads…
A must have… one of my favorite sales oriented movies… Alec Baldwin is a real pr!ck… If you like Glengarry Glen Ross, you will also like The Big Kahuna.. (again Spacey and DeVito)..
These are the new leads. These are the Glengarry leads. To you, these are gold; you do not get these. Because to give them to you would be throwing them away.
There’s a contrarian article in the Boston Globe by a reporter who’s normally pretty sound on these issues. It says “the worst is over” in Boston–a market that PMI deems one of the most overpriced in the country. Feel free to debunk.
http://www.boston.com/business/articles/2006/10/23/housing_prices_put_at_or_near_low/?page=2
My husband and I had a good chuckle at that article this morning. As residents of metrowest Boston, I can tell you that on a short street cluttered with Mcmansions and sport utes in my neighborhood there are at least nine houses for sale, most of them only a few years old if that.Personally, all I can say is that I will not pay 400K for a starter home. If I have to, I will leave the area.
–
October 23, 2006
It is the Leverage, Stupid!
75-85% leverage had been a mainstay of the US housing, owner occupied as well as rentals, for decades before the latest “Reckless Mortgage Lending” hit every neighborhood in America.
One American faithful tells me that one reason that the US had the Great Depression was due to 90% leverage on stocks (just 10% margin requirement, in late 1920s). Now we have 90-100% leverage on a higher percent of homes than was the case for stocks in 1929-30 (less than 10%) and as a percent of GDP, the 90-100% leverage home value is 3-4 times.
It is the leverage that kills the speculators and they take naïve “investors” with them. Leverage combined with fraudulent home loans, with prices inflated by collusion, will do far more harm than did the stock market meltdown of 1929-32.
So, what are the economic ayatollahs of America, Bernanke and Bush, going to do? More tax cuts for the rich? More emergency rates to 0%?? And then what??? They will declare that the correction in the economy was “healthy” and “necessary.” Unfortunately, it would not remain “orderly” and get uglier and uglier until the world will see the signs of the Greater Depression. Nothing can avoid that outcome.
Jas Jain
I think the ayatollahs will eventually lower rates (especially rates on savings accounts) to below 0% to keep all the stupid borrowers afloat and keep their con game going a little longer. Maybe they can also include a new rule in Homeland Security III that simply states that every saver is a terrorist (well-connected savers will have moved all their capital to foreign accounts by that time).
You have no clue do you?
I think they will try, but of course it won’t work in the long run (no, I’m not as smart as Ben Bernanke but smart enough to see where his solutions are leading to).
imploder must humbly agree with JWM in SD.
Talking in the 3rd person is just plain creepy.
No putting up a Boomer Death count is just plain CREEPY.
Course not for you, you have immunity from death, so does all of your relatives, and friends.
Wickedheart post “Talking in the 3rd person is just plain creepy.”
Lucky you did not grow-up with a person who spoke in parables. You know little of creepy.
My friend “people who live in glass houses should not throw stones”
“simply states that every saver is a terrorist ”
LOL.
Jas Jain
Jas,
Unfortunately, I am beginning to agree with you. I thought that a serious depression was an outside possiblity, but that was before I realized the scope of this problem. I saw people making 1/2 to 1/3 what I make living in nicer homes (that they bought), while I was renting. Saw them buying BMW SUVs, while I was still driving a Honda (just bought an Acrua though; still 1/2-1/3 what they spent on those stupid SUVs). I just could not understand what was going on; I figured it must just be the way people live in S. Fl.
Then I discovered where all the money was coming from. These people were 100% or more leveraged into their homes. As equity increased, they pulled it right out. Used equity to pay the morgage, etc. And now its all falling down around them (as we all knew it had to).
However, I have seen SO much spending in the past few years, and only recently discovered that all that money was coming from home equity. I am starting to believe your right, as that equity disappears (and becomes negative, as people have to short sell/BK) the spending has to stop. And when it stops, its going to be very, very ugly.
‘29? I don’t think so (but would not count it out). Worst depression/correction since then? Yup, I would pretty much bet money on that. (and, actually, I am, living in my nice rental right now!).
100% leverage on an asset with very, very high carrying costs is not ever a good idea. Couple that with stated income/no doc, skyrocketing prices, etc.. You know the story Jas, you told it to me!
I think some homeowners in my area are closer to 1000% leverage. 1000% leverage on an extremely overpriced asset (near 10x 1990 price level) that is.
When this starts unraveling, all bets are off (including what authorities will try to stop/slow the decline).
Do not feel bad Michael, those people you see driving luxury cars and living in nice houses have obtained them via debt. People have had an illusion of riches, but in reality everything has been built on debt not on wealth. Their net worth is probably not even $10K.
Get a grip guys! Hate to break this to you but not every person driving a nice car and living in a nice home is in debt up to his eyeballs. This is the kind of “critical thinking” that will hold you down your entire life. Didn’t your Mommy and Daddy ever teach you to not speak in superlatives??
The key factor in this whole bubble story is– What truly is the percentage of all homeowners leveraged up the wazoo? My guess is around 20%. What about you??
I was not implying that every home owner is in debt up to its eyeballs. As a matter of fact 1/3 of home owners (I am glad to be one of them) have paid off their mortgage and they truly own their homes.
Having that said, the other 2/3 of home owners who are in debt in different degrees some more that the others. However, when I look at my family members/co-workers/friends, I easily see that every thing they got was because of debt not wealth. As to what percentage of home owners are in debt up the wazoo? My guess is 20%-30%.
I agree pv tom. People on this blog make sweeping generalizations all the time on this blog.
I personally don’t know anyone who bought a house with 0% down (I live in Chicago). but i’m sure it varies market by market.
I feel the same way. I wish we knew some percentages of people in debt over their head. Farmland in Iowa is around $5000 per acre and has been continually rising for the last 10 or more years. You get about a 3% return on your money if you pay cash for it and are renting it out. Some recent figures show that well over 70% of the farm land in Iowa is held free and clear. A major collapse of farm land prices will probably not happen since existing farmers will buy up anything that comes on the market. Not because it is such a good investment but because that is all they know and they have plenty of cash.
When we sold our house in S. Ca. in 2002 we found that purchasers of houses in the area had changed from salaried people to professionals and small business owners from the SFV etc. who had plenty of money. I am assuming that certain areas people (like the Iowa farmers) whose homes are a small percentage of their net worth will not loose them and prices will stay fairly high. The Boomers I know are all financially secure and can weather most downturns in the economy. My small world view tells me we are not headed for a depression style crash, but a major adjustment. I would be interested in honest opinions on this.
Prices are set by those that sell. If only 20% of the 20% leveraged “up the wazoo” are forced to sell, it’s a disaster.
“As to what percentage of home owners are in debt up the wazoo? My guess is 20%-30%.”
There is this “map of misery” Ben posted earlier depicting California above 40% for IO and HELOC ARM loans in several areas, and lots of areas in the 20%-30% that you speak of. It’s going to end badly, and the negative effect of falling property tax revenues will only add to the misery as social problems mount.
What truly is the percentage of all owners leveraged up the wazoo? My guess is around 20%.
If 20% of the housing stock in any market goes to forced sale due to owners’ inability to carry, it’s clobberin’ time.
“You know the story Jas, you told it to me! ”
Thanks a lot Michael. The story is too long and can’t be told on a blog, but historical parallels for America’s impending decline, including a near-certain Greater Depression, are too many and too persuasive to ignore. All I can do in my short commentaries is to share my conclusions and provide some evidence to support those conclusions.
Jas Jain
The story is too long and can’t be told on a blog…
That’s for sure! Anyone that thinks housing is the only major issue just hasn’t done the research. Perhaps a “weekend topic” on factors contributing to the Greater Depression is warranted?
Hey the commander in Chief said the only way to beat the terrorists was to shop……what are you some sort of Islamofacsist??
This comment reminds me of a conversation I had with my young daughter about the housing market this past week.
A relative who has done 3 refi/cashouts on their home in the past 2 years is now in deep trouble. She was under the impression that the cashouts were “free” money. After I explained to her that the money all had to be paid back, she said, “why would anybody want to do something that stupid?”
Out of the mouths of babes………….
“So, what are the economic ayatollahs of America, Bernanke and Bush, going to do? More tax cuts for the rich?”
Dear Jas Jain,
Do you think raising taxes and giving more money to the US Government’s going to help anyone?
IMHO Bush has nothing to do with this bubble, other than the fact that he let the market do it’s thing, which in this case is screw the middle class.
Yes, the economy will be messed up, but “uglier than the Great Depression”?? It’ll only get that bad if we elect the Democrats into control.
Jas Jain, what wonderful country do you live in? Just wondering.
Lip
“IMHO Bush has nothing to do with this bubble, ”
Get your facts straight, then…
—————————————————————————————-
Consider the words from a White House Fact Sheet on the topic from June 17, 2002, as discovered by James Bovard. “The single biggest barrier to homeownership,” it reads, “is accumulating funds for a down payment.”
And thus does the Bush administration support every manner of housing subsidy and free-credit scheme to guarantee that all people can own right now the most expensive good that they will ever purchase. Might this be one reason we face a mortgage bubble, rampant delinquencies, and a housing financial crisis?
http://www.mises.org/fullstory.aspx?control=1601
How long will it take for the blind and the brainless to realize that every “tax cut” for those who don’t have to put in 40hours/week was a tax INCREASE for those that must work 60hours/week?
Republican supply siders never saw a tax shift they didn’t like.
Have you ever been hired by a poor man? Tax cuts for any part of society help all of society.
Gack! We all have been hired by poor men. Anyone can buy corporate stock, even poor people, you idiot.
A capitalist economy doesn’t need rich people at all. Only people with savings.
Today’s tax cuts for the rich are tomorrow’s tax increases or program cuts for the middle class. Take your pick.
Last time I checked it took cash to buy stock. In your dreams poor people buy stock or even care about it, dolt. If the rich are eliminated the capital and minds that direct it are gone which means the economy is gone. You sound like one of the characters from Animal Farm.
Right on Yogurt…. In many ways, the loud mouthed trumpeteers of the rich elitist club is the working man’s advocate. And they are always the ones that cry the loudest for the wealthy, and the last to profit from it.
The only way unproductive people can gain assets is to have government confiscate and redistribute the wealth of the successful people in society. Instead of playing the class envy card straight from the DNC playbook, if you, yogurt and Jis want to be critical, why not comment on the fact that only half the people in this country even pay income taxes and half the population is on the public dole?
Captain Credit;
Many Bush working republicans driving Pick Up trucks are like this. Mean while the Bush administration has turned them upside down and shook the lunch money out of their pockets….
Funny, but my tax rate is lower under Bush than Clinton. I guess on this blog advocating a position of retaining more of one’s hard earned wages makes one “mean.” I suppose in your world what’s mine is yours and what’s yours is yours.
invest3,
This tells me that you make your money from capital gains, lately as do I. Am I incorrect?
Let’s just say I don’t drive a pick up truck. Even if I did, I don’t find manual labor less than honorable work.
Nor I ( disrespect honorable work, period)
As of November 8, 2006, the housing market is healthy and the economy’s solid. Everything’s coming up roses. You better not vote for Democrats, or else things may turn sour…
Wow chilli,,, I’m convinced!
“Do you think raising taxes and giving more money to the US Government’s going to help anyone?”
No, but the doopus has a horrible record in spending dept. AMERICANS’ PROPBLEMS ARE SPENDING RELATED!
“IMHO Bush has nothing to do with this bubble, other than the fact that he let the market do it’s thing, which in this case is screw the middle class.”
Oh, yeah? Who needed to get re-elected, re-appointed and later appointed with Housing Bubble driven growth? Bush, Greenspan and Bernanke. Yes, sir.
“Yes, the economy will be messed up, but “uglier than the Great Depression”?? ”
Yes, the Greater Depression is Coming To America. Sorry, it is news only to history ignoramuses.
“Jas Jain, what wonderful country do you live in? ”
I reside in CA mountains. We got to live somewhere and that is the best choice for me right now. I got a fantastic vantage point to study Americans’ Beliefs and Habits, which SUCK. Far far worse than any other generation of Americans.
Any complaints?
Jas Jain
I reside in CA mountains.
Boy, that realy narrows it down…
Really
I’m not at all in love with Bush, but I think a balanced appraisal of the origins of the housing bubble should include the fact that the original displacement (a la Kindleberger) was the 1997 tax law (passed under Clinton) that exempted up to $500k for the sale of a primary residence.
And also, while Bush has been pushing homeownership, this has been a bipartisan effort for years and Fannie Mae and Freddie Mac have largely been fiefs for connected former Dem politicians such as Frank Raines and Jamie Gorelick (though not solely).
My point is not that Dems are bad and Repubs aren’t, it’s that both sides have played this game. As far as I see it the real problem is that in a democracy with a fiat currency, all roads lead to inflation and debasement. And that’s the case regardless of the party in power.
“My point is not that Dems are bad and Repubs aren’t, it’s that both sides have played this game.”
I agree. The parties are the biggest scam in America and in all democracies. James Madison was fully aware of the oppressive nature of the parties.
Democratic Dupes are unaware of the inherent problems of democracy that make things worse and worse over time. Unfortunately, America has reached that point where democracy itself is the problem. Problmes keep building where people refuse to look.
imploder, get a life about spell check. It is a blog, don’t you get it? I share my views and you can share yours. I always like to read people that I disagree wirth because at times they make some good points.
Jas Jain
“the original displacement (a la Kindleberger) was the 1997 tax law (passed under Clinton) that exempted up to $500k for the sale of a primary residence.”
Agreed!
You can’t blame the 1997 Law for the 2002-06 bubble.
The PRIMARY cause was Toxic Mortgages helped along by “emergency rates.” It is disgusting that people keep blaming the previous admin. after 6 years.
This bubble has BB&G written all over it and not Clinton & Rubin.
BTW, I was a registered Republican and voted & contributed for W in 2000. Now that I know that both parties are Scams I am registered as an Independent and abstain from voting unless I could be sure about the integrity of the person that I want to vote for. I have been suckered twice and that is enough suckering for me. Most Americans like to be suckered all their life.
Jas Jain
“the original displacement (a la Kindleberger) was the 1997 tax law (passed under Clinton) that exempted up to $500k for the sale of a primary residence.”
Stucco;….Yes but it also replaced the “roll-over” rule which allowed continuous roll over of gains for you lifetime (IRS 1024 ?)….You can argue that the roll-over rule was even more beneficial since it would allow carry over through death and then a adjusted basis after that through exemption in the inheritance tax rules.
You guys are looking at it bassackwards. The g-men should not have singled out 1 asset class for special treatment. Instead, they should have eliminated the capital gains tax on all asset classes. While we’re at it, remove the tax on interest income as well. Maybe then people would have an incentive to save.
imploder want flat tax, no deductions. period.
Jack the corporate and upper margins back up where they ought to be to close the crater of a hole in the budget. Then apply the revenue to the debt.
imploder not think jas and his posse here for discussion. imploder think jas here for “pronouncement.” All have received “pronouncement”. please withdraw and revel.
imploder does have “complaint”, jas need get spellcheck. Imploder spent 15 minutes trying to figure out what “afficacious” meant in previous point. Pronouncements more impressive with better spelling. imploder go read magazines at Savon now…. All day.
Thank You,
Back from Savon… manager make imploder leave…. again… says imploder never buys magazines.
Sorry Jas, seemed like you were just raring for a complaint, and imploder couldn’t resist.
If this country is as bad as you say it is then why not leave?
“If this country is as bad as you say it is then why not leave?”
I am sorry, but that is how jerks react to valid criticism and warning of the impending danger. By pointing out problems, current and future, I am only helping you out. If you think that I am wrong then just ignore what I have to say. Is that so hard for you?
It is none of your f-ing business where I choose to live and why.
Jas Jain
There is one true test to determine whether a country is good or bad and that is too completely open up the borders. In a totalitarian state, if the borders come down the population dwindles to next to nothing. I guarantee you that if the borders were completely opened to the US we’d be at a billion people in less than a year. Yeah, my country has problems and I don’t mind you talking about them but if you say it “sucks” then you and yogurt can leave for a fine place like Iran or North Korea!
Jas I think you are being a bit knee jerk in your response, as well. He might not of meant it in a redneck, America love it or leave it, kind of way. Well, who knows, but for myself, I honestly don’t feel that way.
Look, you are obviously an intelligent and educated person and most likely a man of means. Maybe the question should have been, why do you chose to stay in a place that you truly believe is headed towards such wreckage and ruin? Is it because you feel even though it will be difficult here, it will still be far worse in the rest of the world? (which would be my belief)
By the way, I don’t dismiss your perception of future events out right. Many of my differences with your thoughts are largely in the severity of what’s coming and the ability of the powers that be to maintain control over the political and financial reins.
You do seem a wee bit thin skinned sometimes. I mean you are promulgating fairly dramatic scenarios on what is largely a middle of the road platform. You must realize your are going to get reactions from those with more typical views. It doesn’t mean anyones trying to keep you from expressing those views.
Finally, I just always assumed that it isn’t anyones f-ing business where anyone chooses to live and why. After all this is America!
I am interested on what you plan to do in the face of a Greater Depression. But if that seems like a prying question I won’t feel slighted if you ignore it.
imploder
“…why do you chose to stay in a place that you truly believe is headed towards such wreckage and ruin? Is it because you feel even though it will be difficult here, it will still be far worse in the rest of the world? (which would be my belief)”
Look, I respect you and you are right about things being bad in most parts of the world because of the American-led global depression. But, this blog is not about me and people should learn to be tolerant of why America SUCKS compared to its past. It has a lot to do with how the long march of democracy in America has turned people into dupes. I have the best authority on this subject — Alexis de Tocqueville.
Sorry, that is how I see it.
Jas Jain
I have to agree with Jas. He’s been ahead of the curve with the postings on his site for a long time now.
If we are unable or unwilling to seek out and fix the problems with our country, how are we any different than other countries (like many communist countries) who will insist on a particular form of governance, irrespective of its effectiveness. Capitalism has is strong point, but it also has MANY weaknesses. Without regulation, those in power are free to continue creating and changing laws which benefit themselves at the expense of the (middle class) masses.
Personally, I have yet to see a compelling argument which proves tax cuts for the extremely wealthy, or extreme concentration of wealth, benefit a society. People become wealthy because they hoarde money, not because they spend it. Whatever they let go of (investments, etc.), they expect to get all of it back, with interest. Without (money supply) inflation, if that is allowed to continue, you end up with a two-class system: the very wealthy, and the peons who serve them. Not my idea of a healthy society.
Oops, meant Jas’ posts & articles on FSO and FSU.
He knows what he is talking about.
It is a cycle. No leader or political party is responsible. We are all responsible just as a drop of rain contributes to a 200 year flood. Should we blame the levy builders when the levy breaks?
Stop looking for someone to blame. We are facing an economic forest fire that has happened before in history. It will cleanse the debt, allow new technology to bloom and provide a “survival of the fitest” war.
Why is it that a Nixon made overtures to China, Clinton moveds to remove welfare, (Ann Ryana and gold fan)Greenspan drove rates down, or a Bush busts the budget? These are all acts contrary to their political histories.
“Events make men” men to not “make events”. JJ is clerly knowlegdeable in history and the odds are that he is correct.
We are all part of this cycle to various degrees and levels of responsibility. We live in the “Age of Reason”. Humans in mass are not reasonable. We are a heard. The masses will only allow leaders in power that fufill the cyclic need of the masses. Even dictatorships indirectly follow this path.
There in my opinion are a number of people on this blog that have studied history, which is just greater human experience, and they are worth listening too.
The odds favor an economic forest fire and some of you on this blog will have the capital to participate in the resulting resurgence. It could well get as bad as JJ says.
It has been mentioned on this blog and others that the federal deficit is 8X larger than has been conventionally reported. The last federal budget even had an accounting disclaimer to describe this deficiency.
From yesterdays Financial Times
“…The FT has obtained a copy of the FASAB preliminary views paper which will be released on Monday. In it, the independent board majority argues that “for social insurance programmes an expense is incurred and a liability arises when participants substantially meet eligibility requirements during their working lives”.
By contrast, the government representatives argue that the liability arises only when the benefit amount is “due and payable” as under current accounting rules.
The majority independent directors want the government to start providing for the future cost of social security and other benefits when workers become fully insured after 10 years in covered employment.
They say the current arrangement is “flawed” because it “fails . . . to recognise the accruing cost of social insurance programmes in each reporting period”.
Adopting the proposed new rule would bring the government more into line with the private sector, an approach that has considerable support within a section of the Republican party and may in this instance be of interest to Democrats too….”
http://tinyurl.com/ymzhdp
I have read estimates that the actual unfunded liabilities of the US are 55 Trillion.
Is the United States Bankrupt?
(Caution: pdf)
research.stlouisfed.org/publications/review/06/07/Kotlikoff.pdf
I read about this site last night…it’s helpful, especially when we see acronyms bantered around here…! You can sign up for a “word a day”.
http://www.investorwords.com/
I saw Susan the Realtor (TM) came back to visit last night. I would like to suggest that instead of reaming Realtors (TM) who pop in to blog it would be more productive to “Turn Them” and then redeploy as “Double Agents”. It is obvious to me these people are trying to come in from the cold for whatever reason and are pschologically ready to work for our side.
I can appreciate many on the blog (myself included) enjoy kicking a few REIC heads when given the chance however we must restrain ourselves in order to pick up productive assets. It is better to turn them, pump them for information and redeploy into the REIC to gather further intelligence and extend Ben’s network.
I hope some of the cooler and more tactical thinking bubbleheads will keep the above in mind the next time we have a visitor.
Well said. Way to many people with theirs panties in a wad here… I mean, is there really any doubt we are at the beginning of what could be a pretty massive RE correction? Civility will be your best asset in
the coming months.
imploder not need to turn Realtor™. “Reality” will turn Realtor™ for imploder.
I missed that exchange (only had one comment early in the discussion).
We need some sort of an email alert system to let us know when a heated discussion is occurring (ie. Boomer debate, REIC troll, etc…)
crispy&cole (TM)
Crispy! I see you got your (TM) thing going on bro’!!!
LOL (TM)
We need some sort of an email alert system to let us know when a heated discussion is occurring (ie. Boomer debate, REIC troll, etc…)
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Agree!!!
Popper — thanks — I’ve been doing what you recommend for a couple of months now. Looking in an out of state area, found a very nice agent who grew up in the area. Bubble prices, to be sure, though not as bad as here in Florida. Started out telling here we are staking out the area we want, but are far from a buy decision. Next, told her of our concern about the housing/credit bubble. Finally, have begun sending her detailed thinking on where prices should be going and why, including why building costs and margins on yet-to-be-built houses will be noticeably lower in a year or two. She has come around, knows we will stick with her when it’s time to buy and is very appreciative of the reasoning I give here. I think it likely that at the office sales meeting, she receives a different point of view. But she sees that what I am telling here is what is really happens.
BTW — we’re talking 2008.
“here” = “her, obviously”
(They say the current arrangement is “flawed” because it “fails to recognise the accruing cost of social insurance programmes in each reporting period”.)
Ah, but this point of view failed to recognize the fact the present generations know damn well they have a deal future generations will not get, and do not wish to advertize that fact.
I missed the weekend’s report on the local market, so I thought I’d weigh in here for Vegas. Builders are offering teaser rates and immediate move-in all over town:
Lennar advertises a 1.75% first year rate on a 30 year mortgage. The rate resets to 6.75% for years 2 through 30. This offer appears to be good at several locations around Vegas. Ryland Homes has an offer of 40% off of mortgage principal and interest for the first 2 years at Providence. Pardee Homes is advertising 0 down, 0 closing costs, 0 homeowners fees for the first 2 years at Trail Ridge.
These are but a few examples. Clearly, there is a lot of inventory to move and few buyers.
What is wrong with people in TUCSON?!!! I just took a trip there and even though inventory is skyrocketing, they are still building houses everywhere. WHYYYYYYYYY? You bunch of crazy nuts! Can someone please explain this? Is all this construction activity just the finishing off of homes planned during the previous peak-bubble speculating? Are some areas of Tucson still hot? Are these people drinking their own kool-aid? What is going on? Someone please enlighten me?
“Someone please enlighten me? “
Lenders need to lend in order to keep in business. If a loan company does not give out loans then they might as well shut the doors and without loans being issued then Wall Street will downgrade them since they are not hitting the numbers
Builders need to borrow and build in order to keep in business. They have already bought land, bought materials, bought permits so if they don’t build they can’t sell and if they can’t sell they can’t pay off what they have borrowed already
City government needs to issue permits in order to get fees and taxes so they can pay for their increase in spending.
All three are on a treadmill and if they stop many are structured so that they will fall flat on their faces.
That assumes they can sell them. Feeding inventory into an oversupplied market only works if you have a better product or price. Their homes are the same as previously built new homes, so they’ll have to sell them at a discount.
It seems very dangerous. What are they thinking? What is their bet? Are they betting prices will stabilize, construction costs will fall, selling at a discount will still be profitable? Do they think they can service their debt by selling homes at a loss until the margins return? I mean, what is their strategy? All I can see cookie cutter homes built with overpriced construction costs being fed into a falling, oversupplied market?
Graspeer, are you saying that they will continue to build in this environment? You say that if they cease now they will fall flat on their face, but won’t it be worse if they increase their exposure in this market environment? Wouldn’t it be prudent to cut their losses now?
Sure it would be prudent, and many will. But some are in a cash flow business, where they need a constant inflow of cash to pay off old debts and if people are not buying they will live off of construction loans. Also what happens to the lenders, if they don’t give out loans there goes their quarterly report and down goes their stock prices, sure it may be stupid in the long run to give out some of these loans but as you know what matters in todays economy is todays stock price, this months dividend. Next year is next year but if you don’t hit todays numbers then you might be looking for a job.
On the other hand some of the builders have probably pumped up prices so much above costs that they can drop prices and still make out, it may ruin the comps for the homeowners who have already bought but, oh well, they have already bought.
Thanks for the info, Graspeer. If they remain profitable after dropping prices then the continuing construction makes sense. It does stand to reason because demand has fallen due to high mtg payments. If prices or rates fall, then the buyer pool increases. I can see their strategy now.
That is not a position I would take. My sense is that their strategy will result in ghost towns like Avalon (Phoenix) and Riverside (So Calif). They might be able to pay their bills for a while, but they’ll destroy the market in the process. Furthermore, the strategy will probably not work because investors bought up the aforementioned ghost towns. Today, the only buyers are homeowners. In order for these people to buy, they must first sell their existing homes. It is unlikely they will sell their home at a lower price in order to move into a higher priced ghost town.
The bottom line is that if you have more inventory than potential homeowners, you will have empty houses and their accompanying desperate owners. Building into an oversupplied, falling market is just insanity. Their structure may require them to continue building, but how long can they ignore the writing on the wall?
I fear Tucson will get ugly. It’s a real shame because Tucson is a great town. I hope to move there next year, but I may not. We’ll see. I just wish they’d stop overbuilding. Then again, who knows, maybe the mall of America will save ‘em.
Not to worry el paso guy, “it’s different this time!!!!
Lol, imploder. In March 2005 I sat with a realtor in Tucson. I told her my concerns about the overheated market and a potential bubble. She told me that “Tucson is different because we have a limited supply of land.” I didn’t say another word and just left. Honestly, Arizona is an ocean of vacant land. To this day I do not know if she thought I was a fool, or she herself was one.
That Term Again, Derivatives:
http://www.xanga.com/home.aspx?user=russwinter&nextdate=10%2f23%2f2006+23%3a59%3a59.999
As another crack in the derivative market comes to light, it is only a matter of time ’til the house of cards implodes.
Some more anecdotal info…
Seems there are more and more boats being put up for sale. On a popular fishing website, someone posited the reason might be reduced home equity and the reversal of the wealth effect.
It’s starting…
GOOD….I am in the market for a Delta boat….
For those of you who recall the couple in Rochester Hills, Michigan who listed their home for auction last weekend at $1, the story has a conclusion in last weekend’s Detroit News.
http://www.detnews.com/apps/pbcs.dll/article?AID=/20061022/BIZ03/610220320/1012
I’m sure it doesn’t surprise anyone here that a realestate investor is who bought the home… what a joke.
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sorry if this was already posted - big USA Today profile on Casey -
10 mistakes that made flipping a flop
http://www.usatoday.com/money/economy/housing/2006-10-22-young-flipper-usat_x.htm
She wants to get a job giving financial advice to people.
priceless
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October rally sends S&P 500 to highest close since 2000
By Hilary Johnson
BLOOMBERG NEWS
10/24/2006
new york — The October rally in stocks pushed the Standard & Poor’s 500 index to the highest close since 2000 as falling oil prices buoyed shares of companies most dependent on consumer spending.
Wal-Mart Stores Inc., the world’s largest retailer, had its biggest advance in a year after announcing plans to reduce expenses. Hasbro Inc., the world’s second-biggest toymaker, rose the most since July after its profit exceeded analysts’ estimates.
Crude oil fell for a second day on speculation that OPEC’s member countries won’t fulfill their pledges to cut production. Anticipation that the Federal Reserve will leave interest rates unchanged this week also supported share prices.
The S&P 500 rose 8.42, or 0.6 percent, to 1,377.02, the highest level since Dec. 11, 2000. Wm. Wrigley Jr. Co., the world’s biggest maker of chewing gum, led the advance after earnings beat forecasts and William Perez became the first person outside the Wrigley family to head the company.
It’s possible that Casey is suffering from a classified mental disorder : Narcissistic Personality Disorder. I am familiar with this syndrome and Casey displays a number of the traits, hence his lack of fear or remorse:
clinical definition:
http://www.halcyon.com/jmashmun/npd/dsm-iv.html
here’s a guy that suffers from it:
http://samvak.tripod.com/
Jumping Jack-O-Lanterns, Batman. I think we found the Joker’s layer!