Bits Bucket And Craigslist Finds For October 31, 2006
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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The fraud that has been and is being committed related to mortgages is really scary. I can not imagine that there will not be significant fall-out when the extent of the fraud is exposed.
Any ideas on what the best play is to protect oneself from the repercusions? I already committed the cardinal sin which was to buy a home(although I did put 45% down with a nice low fixed rate)?
You want corruption just look at Fannie Mae, this company has not filed required reports (quarterly & annual) for the last two years. If it was another company it should have been de-listed from stock market by now.
Corruption is rampant in our political and economical system.
At least FNM’s stock price is holding up very well…
Was the 45% down from move up sale? Fixed rate for how long?
IMO, it’s only a sin if you purchased in anticipation of appreciation and not as a home to live in…I’ll be a bull for today
I don’t think your advice necessarily makes you a bull. Your expressing a principle which should guide all potential homebuyers (Although, just because one is living in a home does not mean the aren’t a specuvestor). I always tell the folks that just have to buy today that the keys are; Can you afford the home? Can you emotionally handle a potential 30%-40% equity loss? is there any chance that your circumstances could force you to move in the near term, and if so, will you be willing to pay out a substantial sum to sell your house? If home ownership means so much to them that they are willing to assume these risks (and many more not mentioned) then I say to them “Knock yourself out! I’ll help you move in!”
Does that offer to help us move in include a couple years from now?
“Any ideas on what the best play is to protect oneself from the repercusions?”
I assume you don’t want to sell and rent or trade down to a smaller home b/c of the intangible costs associated with moving and so on. If you trade down, however, you minimize your total potential equity loss. If you live in a McMansion, it might be worth trading down to something smaller. Here are some other suggestions:
(1) Maybe you can look into hedging your bet in the housing futures market (and perhaps someone else on the board could explain how that is done).
(2) Or, I once read about an insurance product that covers a sellers loss if he/she must sell at the trough after buying at the peak.
(3) Finally, after solid research, you could also short as a hedge some companies in the REIC including mortgage originators, PMI insurers, builders, building material suppliers, and so on; if they go down you buoy up.
By the way, in haste, I neglected to add most of this advice originates from John Rubino’s book “How to profit from the coming real estate bust.” Credit must be given when credit is due. The book has some nice peak to trough graphs for the Boston and LA markets with durations and so on but I digress. Good Luck!
“I did put 45% down with a nice low fixed rate)? ” I am going to try to be as sympathetic as possible in reviewing your “sin”, but why is it you come looking for help after the barn door is open?
Who talked you into putting 45% down? If you would have come to me before buying, I would have presented the scenerio of either owning the house free and clear (all cash) or putting just enought down to make the mortgage payments, so you and the bank are in a shared risk position if something really bad happens to the market. The cash would then be hidden away in a rainy day account, to be used for an emergency…like having to move to a rental if we have the mother of all mother real estate crashes. I don’t know what kind of low fixed rate mortage you have, but I sure would get another mortage with less cash invested.
Of course you are vulnerable to losing a large part of your down payment, but if you like the place and your mortgage is “low fixed rate”, I don’t see what other “repercussions” are likely to bother you. You don’t say how safe your income source is, or what is its type.
It seems the only way you would be “vulnerable to losing a large part of your down payment” is to sell your home during a down market time. Otherwise, this mortgage mess will not effect you whatsoever. So unless you reside in a subdivision outside of Las Vegas or some such place, light a fire in the fireplace, pour yourself a glass of champagne and enjoy your home—and, most importantly, your fixed rate!
Aha, Susan Jacobson, your answer is better than mine, possibly, because I do believe recent prices will come back SOMETIME, at least in nominal dollars. In inflation-adjusted dollars, perhaps NEVER. But so what. Your advice is good.
Not that good; it depends on Sniggle’s job security, doesn’t it? Trouble is, there is little coincidence in the fact that about the time when home prices are sinking is often concurrent with when job security is sinking. This is why buying a home is a very questionable household wealth diversification strategy, especially when homes are so overpriced as they are right at the moment.
“Not that good; it depends on Sniggle’s job security, doesn’t it? Trouble is, there is little coincidence in the fact that about the time when home prices are sinking is often concurrent with when job security is sinking.”
So true. I cannot imagine the pain of (1.) Watching home prices in my neighborhood plummet after having paid a high down payment–that is rapidly turning to vapor. (2.) Grappling with the pain of #1 and having my job hang by a thread would really be a double dose of hurt.
Co-worker here in Stockton sold place in 2001 he bought in 90′ at peak of last runup cause he had to move south for job transfer. Took him ten years to get back to even. If he had to move in 96′, Ouch!! Would’ve had to bring $$ to the table.
DOC
“light a fire in the fireplace, pour yourself a glass of champagne and enjoy your home”
Don’t make me vomit! This sounds like something out of Reality Times. When prices recede dramatically, the character of neighborhoods, especially new and untested ones change in a heartbeat, you might be “sipping champagne by the fireplace”, the renters next door might be knocking back 40ozs in the front yard, while workin’ on one of three Trans Ams permanently parked there! Just ask some of the people who bought into the “dream” spun by this kind of realtor puke spin back in the 90s, in places like Palmdale, CA. Many places went from “dream homes” to Section 8 in the course of a year. Gaud! What about quality of life Madame, Give me a Break!
I hope this isn’t applicable to Sniggles situation. I really do.
“Just ask some of the people who bought into the “dream” spun by this kind of realtor puke spin back in the 90s, in places like Palmdale, CA. Many places went from “dream homes” to Section 8 in the course of a year.”
Got that right; know some folks who lived (survived) 12-years in Lancaster, CA following the Berlin Wall’s collapse…waiting for their home’s equity to right itself.
Exactly. Bet they were drinking champagne….a lot of it.
Home prices in Houston have never regained the nominal level acheived during the Texas boom.
As one who survived the 80s in Houston there are some things to be aware of. Each locality is different, but when neighborhoods are full of abandoned and foreclosed homes, lets say quality of life suffers. Especially vulnerable are bankrupt HOA that are obligated to pay for services for the community. REO property will pay back assessments, but it can be slow and affect operating expenses.
Having a fixed rate affordable mortgage or paid for house makes it survivable, but still, you will feel the effects.
Hey, it’s only money. Plenty of people can take a hit of $100 Grand to their balance sheet and just shrug it off.
Because Youtube and Google are of interest to at least a few of you, this article may be of interest:
http://www.blogmaverick.com/2006/10/30/some-intimate-details-on-the-google-youtube-deal/
“So the parties (including venture capital
> firm Sequoia Capital) agreed to earmark a portion of the purchase
> price to pay for settlements and/or hire attorneys to fight claims.
> Nearly 500 million of the 1.65 billion purchase price is not being
> disbursed to shareholders but instead held in escrow.”
Cuban’s probably chewing on a few sour grapes there.
sour grapes? he’s mad he didn’t get to pay $1.6 for a site that will have half the viewers when all the copywright material is taken down?
I think the major players (studios) will be (are) making a deal. Many of the smaller players will fall in line just MH. The world is changing. Change or fade.
PS Utube is an INCREDIBLE media marketing forum…. sheer genius
food for thought
Subject: what is a billion
The next time you hear a politician use the word “billion” in a casual manner, think about whether you want the “politicians” spending your tax money. A billion is a difficult number to comprehend, but one advertising agency did a good job of putting that figure into some perspective in one of its releases.
a. A billion seconds ago it was 1959.
b. A billion minutes ago Jesus was alive.
c. A billion hours ago our ancestors were living in the Stone Age.
d. A billion days ago no-one walked on the earth on two bare feet.
e. A billion dollars ago was only 8 hours and 20 minutes, at the rate our government is spending it.
>
While this thought is still fresh in our brain, let’s take a look at New Orleans. It’s amazing what you can learn with some simple division .
Louisiana Senator, Mary Landrieu (D), is presently asking the Congress for $250 BILLION to rebuild New Orleans. Interesting number, what does it mean?
a. Well, if you are one of 484,674 residents of New Orleans (every man, woman, child), you each get $516,528.
b. Or, if you have one of the 188,251 homes in New Orleans, your home gets $1 ,329,787.
c. Or, if you are a family of four, your family gets $2,066,012. Washington, D.C . HELLO!!! … Are all your calculators broken??
>
Accounts Receivable Tax
Building Permit Tax
CDL License Tax
Cigarette Tax
Corporate Income Tax
Dog License Tax
Federal Income Tax
Federal Unemployment Tax (FUTA)
Fishing License Tax
Food License Tax
Fuel Permit Tax
Gasoline Tax
Hunting License Tax
Inheritance Tax
Inventory Tax
IRS Interest Charges (tax on top of tax),
IRS Penalties (tax on top of tax),
Liquor Tax,
Luxury Tax,
Marriage License Tax,
Medicare Tax,
Real Estate Tax,
Service charge taxes,
Social Security Tax,
Road Usage Tax (Truckers),
Sales Taxes,
Recreational Vehicle Tax,
School Tax,
State Income Tax,
State Unemployment Tax (SUTA),
Telephone Federal Excise Tax,
Telephone Federal Universal Service Fee Tax,
Telephone Federal, State and Local Surcharge Tax,
Telephone Minimum Usage Surcharge Tax,
Telephone Recurring and Non-recurring Charges Tax,
T elephone State and Local Tax,
Telephone Usage Charge Tax,
Utility Tax,
Vehicle License Registration Tax,
Vehicle Sales Tax,
Watercraft Registration Tax,
Well Permit Tax,
Workers Compensation Tax.
>
COMMENTS: Not one of these taxes existed 100 years ago and there was
prosperity, absolutely no national debt, the largest middle class in the world and Mom stayed home to raise the kids.
What the hell happened?????
What happened?
Empire building came into vogue.
The Fed happened.
The New Deal happened.
Somebody wake me when Ron Paul runs for higher office, otherwise I’m going into my bunker to count my hoarded metals.
Ron Paul Yes Yes Yes
Gold Yes Yes Yes
Silver Yes Yes Yes
What happened? Read “The Creature from Jekyll Island” about the founding of the privately-held Federal Reserve in 1913. Very eye-opening. That, and FDR’s socialist New Deal, put this country on the road to ruin.
http://www.wealth4freedom.com/creature.htm
National freeway system happened
New Deal happened (Social Security, Medicare, etc)
Welfare happened
Beats me “what happened,” but the notion that the average American was better off 100 years ago is nonsense, at least in a material sense.
“Largest middle class in the world” is a relative statement, just like “cheapest house in Phoenix” today.
Thank you for posting all the taxes. Anytime I hear someone calling for higher taxes, I cringe.
Me too. But not as much as when I hear calls for deficit spending: higher taxes plus interest piled onto the backs of a future generation.
“To spend is to tax”
-Milton Friedman
True dat. Whether you borrow it or tax it spending is the problem. And it seems no Dem or Repub politician is willing to tell people that we can’t afford more spending, we can’t even afford our obligations now. Let alone new health care entitlements or whatever.
But then I guess it really isn’t surprising, because people don’t want to hear the truth. They want to hear they can have all the services and benefits at none of the cost (to them).
“Government is the great fiction through which everybody endeavors to live at the expense of everybody else.”— Frederic Bastiat
Ah, yes. “The Law” - 1850.
“Away with the whim of governmental administrators, their socialized projects, their centralization, their tariffs, their government schools, their state religions, their free credit, their bank monopolies, their regulations, their restrictions, their equalization by taxation, and their pious moralizations.
And now that the legislators and do-gooders have so futilely inflicted so many systems upon society, may they finally end where they should have begun: May they reject all systems, and try liberty; for liberty is an acknowledgment of faith in God and His works.”
Here in CA, new taxes are going out of vogue. We just have “fees” (ie $8+- for the privelige of owning a flat panel monitor in our great state), and bond initiatives. I cringe when I hear the advertisments promoting all the bond issuing propositions that sing the praises of more funding with “no new taxes”.
Voting no is the only thing that keeps me going to the polls sometimes.
I’m not too pleased that electronic voting machines are going to be used in the coming election here in SD.
http://www.hbo.com/docs/programs/hackingdemocracy/synopsis.html
Don’t you wish you could vote “NO” on candidates just as you can with all the propositions? Unfortunately, you can’t vote against a candidate in the same way you can vote against a proposition.
Don’t you have a new ‘fee’ proposition for every container entering the Port of LA, SF and SD? In Arizona, we’ll probably get a new $.80/pack tax on the nasty smokers to fund government run pre-kindergarten schools. Nothing like letting NEA get into the minds of toddlers and infants. Hopefully, they’ll teach in English.
Happy,
You forgot to mention…that the I.R.S. tax code is …20,000 pages and growing…
Makes you almost forget what an orange blossom smells like.
Back to my clay and solar powered pottery wheel,
something’s are better than a hundred years ago.
Excellent list - but, believe it or not - you forgot a couple - hospitality taxes (additional levies on hotel stays and rental cars) and dining taxes — in the Washington DC area (DC, Alexandria, Arlington, maybe others), there are a couple additional percentages tacked on to normal sales taxes for restaurant dining. Drives me nuts. Also - there are varying federal and maybe local airport use taxes — along with recent “homeland security” surcharges. I realize taxes pay for many important things — but the growing appetite of every jurisdiction for their take is depressing.
You need a reality check about how good life actually was in 1906. Here’s a few tidbits:
-US life expectancy was 48.9 years. It was only 33.9 years for black females.
-Women would not earn the right to vote until 1920.
-Neither TV not radio existed.
-The average wage in the US was 22 cents per hour.
-The average US worker made between $200 and $400 per year.
-Two out of every 10 US adults couldn’t read or write.
Wow Fiat. Those facts just make me want to turn back the clock.
Why don’t we just go back to 1929 and relive the depression and the dust bowl. Where Americans actually starved to death. Right here in God’s Greatest Country on Earth. Oh!~ How good were the good old days?
It’s technology, not taxes, that is responsible for our improved standard of living.
You imply that better than 2 out of 10 adults can read now??? And just because you made 22 cents an hour does not mean the purchasing power of that money was not greater. Also, no TV would probably be better for the country.
22 cents in 1906 is equal to less than $5 in 2006 dollars.
Yeah, and kids could play kick the can after dark without being abducted, and people kept their doors unlocked. Not sure TV and radio were an advancement. Life was probably better when people sat out on their front porches in the evenings and actually knew their neighbors.
Agree with that, Sammy!
figure 30 million actual net fed taxpayers
-tops
Happy LA renter,
Most Americans, like most people elsewhere, long for tyranny and oppression if they think it provides a bit of security. If something is not sustainable it WILL fail; the current gov’t with all its taxation is not sustainable. It will fall just like the USSR, which looked strong until the very end. I am looking forward to the collapse; I think the popping of the housing bubble will lead to the collapse of the fedgov, especially after Fannie Mae can’t maintain its scam.
Funny how people who long for live in the US a hundred years ago are also anti-immigration and child labor.
I’m not anti-immigration. In fact, I’m for the open borders one gets when there is no government at all.
As for child labor, if a kid wants to work, who are you to prevent him (with your guns, or the gov’t’s guns)?
The child labor problem has nothing to do with kids wanting to work. Do you have that poor a sense of history?
Not every kid was working in a coal mine or meat packing plant. The entire history of the US starting from yesterday is not depicted by The Jungle either. Children have been working since Adam and Eve.
If our federal gov’t collapsed like the gov’t in the USSR, you can look forward to a keptocracy run by mafia. You think a collapse would be orderly? And that the outcome would be a better life in the US than we have now?
Who do you think is running this government now?
Kleptocrats and homosexual pederasts (not that there is anyting wrong with that).
Kleptocrats and homosexual pederasts (not that there is anyting wrong with that).
Hey Mark, I don’t like bush either, but why call him a pederast when there’s no evidence that he ever abused a child.
” I don’t like bush either, but why call him a pederast when there’s no evidence that he ever abused a child. ”
23 million children go to bed hungry every nite in George Bush’s American. That is Child Abuse!!!!
Spike66,
I believe he was talking about Foley-Gate. Heh.
“23 million children go to bed hungry every nite in George Bush’s American. That is Child Abuse!!!!
”
Not in this country. Have you seen the whales we have out there. Please spare us the left wing talking points.
Do you really think the US government has the same level of corruption as Russia? I’m not defending the corruption in DC, but it’s preposterous to compare the two.
Are you one of these nuts living in the middle of Iowa worried about black helicopters? Lemme tell you, if the sh*t goes down, there are a lot of other places that would be _a lot more_ dangerous than the middle of Iowa…
“If our federal gov’t collapsed like the gov’t in the USSR, you can look forward to a keptocracy run by mafia. You think a collapse would be orderly? And that the outcome would be a better life in the US than we have now? ”
Good point. I suspect folks that long for a major anarchy
would cry like little girls if jailhouse-tattooed thugs came calling at their door. There will always be a problem with what to do with folks with criminal tendencies, people that truly need help, disabled, etc. and folks that don’t want to work.
I can handle paying my share to deal with and help the folks above and fix some highways and roads–what makes me cringe, however, is the non-contested contract megabucks rolling into the likes of Haliburton. Scam city.
DOC
Absolutely. Corruption is a problem, and we need a transparent government that is held accountable for its actions. What we do not need is collapse of the federal government, and a reversion to a tyranny that most people live under and have lived under throughout history. These alarmists who crave anarchy need only visit Sierra Leone or Haiti to see what we would enjoy as citizens of a failed state.
As much as our system has its faults, it is still one of the best around.
I’d like to hear some ideas from the anti-socialists (and I’m not a full-blown socialist — just believe “the people” should control basic necessities). Specifically, what would they do with the sick, disabled, criminal and otherwise unproductive people, as Doc mentioned above?
I think what a lot of people miss is that a somewhat humane “socialist” system actually provides security to the population at large. Security and freedom from tyranny of the underclass/criminal who tend to be stronger, faster and more brutal than the “intellectual” types. By enabling most people to have the basic necessities, we prevent acts of desperation. I, for one, would do whatever it takes to feed my children — and I am one of the most square, law-abiding, middle-class mom-types you’ll ever find. What do you think the criminals will do to feed and shelter themselves and their families? What would the sick do, if they do not have access to medicine which would cure them? Do you think sick and desperate people tend toward productivity or criminal behavior?
correction: tyranny BY the underclass/criminals, not of…
Blah, blah, blah….
The Soviet Union DID NOT look strong until the VERY END. Soviet Union always was a Potemkin Village economically. Stalin NEVER raised it out of the muck it had been in since its feudal beginnings. Their military got EVERYTHING the country had to PRETEND parity with the US. The US under Reagan put their foot on the gas and busted the USSR out economically in 6 years.
“I am looking forward to the collapse; I think the popping of the housing bubble will lead to the collapse of the fedgov”
How naive. So your “looking forward” to a Gut Retching, blood curdling Civil War? I bet it won’t be nearly as fun and romantically adventurous as your are fantasizing. Go take another look at the photos of places like Bosnia.
And when everyone finally gets tired of killing each other?
“Meet the new Boss, same as the old Boss”
Some people “look forward” to strange things.
No kidding. I don’t understand the mentality that WANTS a full-scale economic and social collapse. They seem to think they can ride out the storm safe and secure in their little island while better men put our house in order. Personally, I think we’d end up with the worse kind of “Big Brother” government imaginable — like the one we have now, but with all the restraints and accountability (what little remains) removed, and an even more controlled and servile media than we have today, if that’s possible.
“They seem to think they can ride out the storm safe and secure in their little island while better men put our house in order.”
Exactly, it doesn’t work that way. Where in the course of human affairs has it? If you live in the USA, to wish suffering on the Republic (as imperfect as it is) , is to wish suffering on yourself. It would be the rare occurrence indeed, that one avoids the suffering and:
“rides out the storm safe and secure in their little island while better men “DIE” to put our house in order.
just my HO
“I am looking forward to the collapse”
You are a moron.
Better said than I, GetStucco. Better said than I.
In my personal opinion, people that “wish” for the collapse and destruction of the United States, underestimate the true nature and will of the people who make up this country. The people of the United States have come here to struggle for a better way of life. (completely imperfect, yet BETTER than the rest) A chance to succeed. This is an admirable undertaking. And Yes, it is an experiment. There is nothing but imperfection in regards to human endeavor and our system is no exception.
Yet, how many wait at our borders desiring the chance to be part of us?
It is reckless to underestimate that which we already possess. It is much more reckless for those within and without this country, to ignore our resolve to defend it. Those looking forward to the collapse of the United States might be surprised at the number of Boy Scouts “Here”.
in my very humble opinion…
Well said imploder.
I suspect Mark will be one of the first to drop if his “wish” comes true.
Data point from San Jose zip code 95118
Sold Fall ‘05 $650K
About $75K-$100K of improvements
Put on market at $875K (not sure when)
lowered to $850K
lowered to $839K
now at $799K
No lookers and no takers.
People that bought it are real estate agents (from Saratoga) and planned to flip from the beginning. The house needed TLC as the previous owner had been ill for a long time and neglected it.
The flippers are now talking about renting it for $3000/month which according to those that live in the area is about $700 over the going rent.
Ozarkian;…..Its very hard to flip here since the price of entry is so high…The costs of labor and the carry can eat you up very quickly…The margins are typically to thin to take on the risk…
I agree…but these people have described themselves as flippers. They never intended to live in the house, just to fix it up and sell it asap. Even in Saratoga where prices are double there were two-year flippers…people that bought 50 yr old ranch houses, lived in them with their families for 2 years while fixing them up (usually without any help from an architect or interior designers) and the sold them.
“The flippers are now talking about renting it for $3000/month which according to those that live in the area is about $700 over the going rent.”
They’re probably right:
http://sfbay.craigslist.org/sby/apa/227940616.html
That house is probably in a nicer area. The one I am describing is not near Saratoga, it’s about 4 exits S. on 85 in San Jose. What’s interesting about the listing you link to though is “pets ok”. That’s good news for renters with pets.
4 exits S on 85 — you mean, in the Campbell area? $3000 seems a bit high for a home rental in that part of the Bay, but I’m not an expert on South Bay prices.
No, it’s beyond Campbell. In San Jose. Right near the Camden/85 exit in the houses in the SE corner.
Here’s something interesting.
My financial adviser called asking if I wanted a preferred bond at 7%. (Yes, I did). Turns out it was offered by Countrywide, the biggest subprime mortgage company.
So they are borrowing at 7% and lending at 6.5% (approx.) They must really need the cash!
Could there be some trouble in the mortgage industry? :-}
“So they are borrowing at 7% and lending at 6.5%”
Actually, because of fractional reserve lending they can lend ten-to-one on what they have in reserve, this means that they are effectively borrowing at 7% and lending at 65%.
Now don’t you want to be a banker?
You have this wrong. If the bank gets $100, then it can lend out $90 to preserve the 10% reserves. If your method were correct, then the money supply would increase at an exponential rate.
I have dramatized the case, but I am not wrong. Banks do create new money. Not “out of thin air” but against a borrower’s promise to repay with interest over time.
This is how the banking system expands the money supply to accomodate economic growth.
Read this from the NY Fed’s own website:
“Reserve Requirements and Money Creation
Reserve requirements affect the potential of the banking system to create transaction deposits. If the reserve requirement is 10%, for example, a bank that receives a $100 deposit may lend out $90 of that deposit. If the borrower then writes a check to someone who deposits the $90, the bank receiving that deposit can lend out $81. As the process continues, the banking system can expand the initial deposit of $100 into a maximum of $1,000 of money ($100+$90+81+$72.90+…=$1,000). In contrast, with a 20% reserve requirement, the banking system would be able to expand the initial $100 deposit into a maximum of $500 ($100+$80+$64+$51.20+…=$500). Thus, higher reserve requirements should result in reduced money creation and, in turn, in reduced economic activity.”
You just proved my point. If a bank receives $100 it may lend out $90. This produces a geometric series, NOT an exponential series.
So at the limit (1/reserve requirement) of $1000, the bank has $500 in deposits, $100 in new reserves, and $400 in loans. This is why they must pay depositors a lower than the rate they charge for loans.
Chris is confusing aggregate money created with the amount one bank loaned.
No, you have this wrong. If a bank gets $100 they can lend out 10X that amount. The initial $100 respresents the reserve amount.
And, yes, the money supply has increased at an exponential rate.
Hrm, I’d presume though that the greater the velocity of money, the lower maximum growth in the money supply you would have due to queueing time as the money enters and exits the books of the bank. Therefore, might the slowing of the economy actually help the banks stay afloat by adding an additional buffer against failing reserves due to defaults? Presuming they just don’t instantly lend it all out again.
Again you are wrong. A bank can lend out $90. If that money is then deposited, the bank can lend out $81, etc. This is not the same as lending out 10X the amount. What this does mean is that when the federal reserve creates money by depositing say $100 in a commercial bank, the maximum increase in the the money supply is $1000. But that is split between $500 in deposits, $100 in reserves, and $400 in loans.
This is a new blog site, if you read me, please bookmark;
Move into the Real World:
http://wallstreetexaminer.com/blogs/winter/
The Auto Data was interesting….
Slightly O/T but this months issue of Popular Science (NOV 2006)
has a very interesting article about advanced homebuilding
techniques.
Some quotes from article that echo very much what has
already been written about many times on this blog:
pp 80.
“Every product except homes has become more sophisticated,
with higher quality at lower cost”….”Homes are just the opposite”
pp 81.
“Less than 5 percent of Americans live in homes custom designed
by architects. “Everyone else”,” … “lives in boxes thrown up
by land speculators”.
“Worst of all, the owners of even the lowest-quality homes are
paying for custom building”
pp 124
“Most new single family development today consists of cookie-cutter
tract housing that is driven more by real estate speculation
than by architecture…”
I wonder what percentage of houses built in the last 5 years are two story “monopoly” style McMansions. They aren’t going to appeal to old farts with bad knees. Maybe the builders should start throwing in knee replacements as an incentive?
Free elevators, maybe?
Thanks. Great info. I’m going to read the whole article as I am considering building my own house in ‘07 (maybe ‘08).
Is it just me, or are these newer subdivisions even uglier than than the older subdivisions? Pictures of Levittown don’t induce in me the instinct to hurl, like the new garage+fake nested-gable stuff I see today (with that horrible new siding — does it come in only one color?). I’d almost rather live in a double wide if means I wouldn’t have an HOA telling me what I could or could not do with my land.
St. Joe is actually declining today on a weak earnings estimate. Now that the HB’s are backing out of their land options, it’s difficult to see how St. Joe is going to make money on selling land in Florida. The one thing going for them is that much of their land was probably acquired a long time ago at cheap prices. One the other hand, taxes on land ready for development are going through the roof. Looks to me like St. Joe will have losses in 2007–I think that their current earnings are something like 0.08 per share for third quarter. That seems low for a company selling at about $53/share.
Profits plunged 83% at JOE, but it’s still higher than it was back in May!
Haven’t you guys heard of the new paradigm? Earnings don’t matter any more, because home builder share prices always go up (just like home prices!).
Just like FNM (I got out of my short positions a few months ago because it so obviously wasn’t affected by fundamentals or logic).
I just read this great article in the Smirking Chimp. Its about the dollars meltdown and really sums up the problems with our currency and the role the housing bubble had and is still having in our weakening dollar. Its at http://www.smirkingchimp.com/node/2451. I dont know how to make it a link that you can click onto here, but just go to their site and the article came up today so it should be easy to find. A very good read!
Good but scary read. How long will we be allowed to post such?
Good but scary read. How long will we be allowed to post such?
Risk of boring all, I’ll repeat something I posted yesterday or the day before: for foreign exchange beginners like me, FXhistory is a nice site
Was on a Southwest roadtrip with my wife and we like to read regional newspapers when we travel and were browsing the Denver Post one morning and I took a look at the classifieds and there were 2 full pages of house/condo rentals and just 2 columns of house/condos for sale, or in essence, everybody had pretty much given up on the idea of selling their abode and were going to plan b, rent it, get something, anything…
aladinsane: if you read the paper on a weekday, nobody posts RE ads in the paper on weekdays due to the cost, since most realtors/buyers are looking on line instead
That makes sense…
All the papers we read in Utah, Colorado, New Mexico and Arizona had one thing in common, namely 85% of the articles were Associated Press stories~
Another thing we noticed was political candidates signs rarely included what party they were from (perhaps 10% of signs said republican or democrat) in those same 4 states, maybe both parties realize how fed up we are just seeing either name?
“…maybe both parties realize how fed up we are just seeing either name?”
I wish. Wanna make sure of it? Vote against all incumbents, then tell ‘em.
Flipper needing to sell in Seattle’s eastside:
ZipRealty Price Track:
Price Reduced: 08/29/06 — $600,000 to $589,999
Price Reduced: 09/09/06 — $589,999 to $579,999
Price Reduced: 09/27/06 — $579,999 to $575,000
Price Reduced: 10/04/06 — $575,000 to $559,999
Price Reduced: 10/18/06 — $559,999 to $549,999
Price Reduced: 10/24/06 — $549,999 to $519,999
MLS ID 26137879….and sitting. The beginning asking price was skyhigh, but with the housing now sitting at $520k, someone may be peeing their pants.
They are selling by Dutch auction, whether or not they intended to do so.
Consumers are spooked (good thing they don’t ask about attitudes towards the housing market …)
ECONOMIC REPORT
Consumer confidence dips in October
Attitudes about economy, jobs worsen slightly
By Rex Nutting, MarketWatch
Last Update: 10:53 AM ET Oct 31, 2006
WASHINGTON (MarketWatch) — U.S. consumer confidence dipped unexpectedly in October on growing pessimism about the job market and the economy, the Conference Board said Tuesday.
The private research group said its consumer confidence index declined marginally to 105.4 in October from a revised 105.9 in September.
Economists were expecting an increase to about 107.9 from the previously reported 104.5.
http://tinyurl.com/yeva8g
Bubble stocks seem spooked today. Happy Halloween!
http://tinyurl.com/fzeuw
IRWIN KELLNER
Boo! What scary goblins lurk for stocks
From oil to trade gap to the Fed, much could spook the market into gloom
By Dr. Irwin Kellner, MarketWatch
Last Update: 1:06 AM ET Oct 31, 2006
HEMPSTEAD, N.Y. (MarketWatch) — What could spook the stock market, causing prices to fall? Let me count the ways.
There’s no doubt about it, the Dow Jones Industrial Average has put on a pretty impressive performance since around the middle of the year.
Not only has the Dow hit record highs a number of times over the past few weeks, it did so at a time when stocks usually head south. September and October have traditionally been the two worst months of the year for the stock market (See my column of Sept. 5).
Since November tends to be the month that attracts investors back into the market, will history repeat itself this time around, or are stocks overbought and ripe for a correction?
I’ll leave this to those who profess to be market mavens to prognosticate. But from an economist’s perspective, there are a number of ghosts lurking in the shadows that could scare the bejesus out of the equities market.
http://tinyurl.com/y5fqs5
Really nothing to fear but fear itself, though…
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/10/30/ccview30.xml
I like the market mavens reference…
Thanks GS. The Ambrose article was brilliant.
Hadn’t gotten around to seeing this, but Dataquick has the September YoY numbers for select cities in California:
http://www.dqnews.com/ZIPCAR.shtm
I had a conversation with someone at a playground recently, and she happened to be an appraiser up here in Arroyo Grande. We started talking real estate, and she agreed that there was somewhat of a bubble, but that the “nice” areas up here would see little (if any) decline in prices. After all, unlike neighboring cities (Grover Beach was mentioned), ‘everyone wants to live here’.
Well, Dataquick YoY numbers for September 2006:
ARROYO GRANDE : 32 $676,500 $722,000 -6.30%
GROVER BEACH : 14 $477,500 $505,000 -5.45%
(area, # sales, median, year ago median, % change in median)
Total cheerleading nonsense here:
‘07 Tucson housing market to turn corner
The only corner the market’s turning has a sinkhole just around the bend.
Check this out the realtwhores are now threatening to raise the price if we don’t buy now.
http://www.johnlscott.com/PropertyDetail.aspx?GroupID=33594628&ListingID=26787275&Sort=0
As if 30% drops in sales volume were not bad enough already. The mile-wide gap between what scared buyers are willing to pay and what delusional sellers still think their homes are worth would be driven a little wider by Realtors’ (TM) futile effort to grab a bigger piece of the pie.
This is waaayyy OT but… I’m considering leasing a house that has been for sale for like a year or something. I know the owner *definitely* can’t sell it for what he paid (was listed for less than he paid a year ago) The rent is *really* cheap (about 1/3 what I guess the mortgage is), with the understanding that I’ll do some work on the place. It’s been vacant for a llooonng time. My worry is it’ll get sold/foreclosed out from under me. So #1- Am I crazy? #2, can any realtors or landlords here give me an idea of some boilerplate I could put in the lease to cover my butt as much as possible? I know I’d be screwed if it foreclosed, but short of that… any suggestions? This is in Los Angeles. Thanks!
Sorry I can’t answer anything legal, but I think a lot of it depends on whether or not you have a family and lots of “stuff”. If you do, I would personally recommend that you NOT get into something like this. If it’s just you or you and S.O., perhaps you could store some of your belongings and take the bare essentials with you (so you don’t have to move a lot).
I could see doing this for a VERY reduced rate. Otherwise, sounds like the LL wants you to fix it up so he/she can sell. IMO, it would take a steep discount to do something like this — and you’d have to be willing to move.
Based on what you’ve posted, sounds like the LL will very likely get foreclosed on. Pay only one month’s worth in sec. dep. and keep the payments tight so you can ride out a “free” month in the event of foreclosure (you won’t be getting your money back otherwise, IMO).
Good luck if you decide to do it!
If you have good credit, wave your credit report in their face and do not pay any security deposit or last month rent. Also, you can record a Request for Notice of Default, and in the event a foreclosure action is started you may get a notice.
My concern about renting from a up-side-down flipper that is doomed to go into foreclosure, is that they take the rents and rental deposits and pocket it and you never get your deposit back . I really don’t know how you can protect yourself from a desperate person because desperate people do desperate things .Oh sure , you could sue that landlord but its hard getting blood out of a rock . My advise is to stay away from any situation that is not stable or you are dealing with desperate people .
In addition ,I have more warnings for people . During a down market some sellers will attempt to sell by a “take over payments “type approach . This is called a wrap-a-round mortgage . The seller will want you to make payments to him and in turn he makes the payments to the lender . When you assume a mortgage its a different thing and it needs the approval of the lender and it has to be a assumption loan . Anyway ,with the wrap-around mortgage you can end up holding the bag if the seller does not make the payment to the lender that you make to the seller . I saw people get burned in the last turn down because the desperate seller or crook seller needed the payments and didn’t pay the lender like he was suppose to .
The lender has the ability contract wise to call a note due and payable immediately if you don’t get a approved assumption on a note or if you do a wrap-a-round .My point is that lenders have alot of contract power if they want to exercise it ,and more important a thief or desperate person can take advantage of a buyer if they do not understand what they are doing .