Bits Bucket And Craigslist Finds For November 4, 2006
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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In today’s Honolulu Star-Bulletin:
Fall has cast a chill over the residential real estate markets on Kauai and the Big Island, which saw both median home sales prices and sales volume lag last month as demand for properties paled.
Reminder:
Slient Spring
Summer Bummer
Fall Maul
Winter of Discontent
January Flight Sales
February 2nd Buyers see their shadow and predict sen more months of no purchasing
March of the Lemmings
Good thing that Honolulu home prices always go up!
From the same article:
Prices in Kauai’s single-family home market took a 26 percent nosedive in October, with the median falling to $422,500 from the year-ago $570,000, according to data released yesterday by the Hawaii Information Service. Kauai condominium prices fell 32.75 percent to $305,968 from the year-ago $455,000.
if ANYINE here ever sees a house between Waikiki Beach and Diamond Head (those neighborhoods in that area) for 200k -where you own the land- TRACK ME DOWN and / or call me!
I can wait !
A massive pressure dome seems to be building in the asset markets. For instance, while stocks continue in their holding pattern, gold price has spiked from $580 to $630 an ounce since Oct 24 ( http://tinyurl.com/trbsh ) and bond yields saw a big rupture to the upside the last couple of days.
What gives? I know hedgefundanalyst says now is the time to buy stocks (usual stopped-clock advice), but I personally have some serious doubts…
Dunno if that’s right or not but buying stocks has beaten the hell out of buying houses this year . . . even if your timing sucked.
tx, I leave the stock trading to you professionals. I agree that my stock funds have done pretty well this year, but I still say the stock market is setting up us regular folk for another bad fall. I just can’t find enough places to stash cash.
I feel the same way. I parked 65% in my brokerage’ money market through the last two months of this run up.
Only thing that I’m considering is a new Dreman fund on 11-21 that’ll short the S&P (high P/E’s)
I’m dumb enough to loose money in bull market but smart enough to admit it.
Crash 1
Correct about the stock market. I’m not much of a consipracy theory guy but I must say I find the timing of the stock market rally (in which I have done very well) and the gasoline prices drop VERY suspicious this close to the election, considering US Treasury Secretary Paulson is/was one of the Wall Street Financial Gangsters (a.k.a Da Boyz) and obviously has close connection on, “The Street Of Broken Dreams” and that Bush/Cheney and the rest of their corrupt crew have their sticky fingers in the oil business to say nothing of the Bush Crime Family connections to our loyal friends in Saudi Arabia. My thinking will be confirmed if we have another rate hike in the next 6 months.
Frankly, I think the rate hikes are being kept artificially low by the Fed, for various reasons including the overvalued property problem, because inflation is way above the fake (as usual)government numbers. I think around 7% + is the true inflation number. Here’s a very simple example. In just the last week, I bought a power tool from Harbour Freight. It was a $60 item marked down on sale to $20. Five years ago, that powertool would have cost $90.00 at Sears. That same day I bought some tomatoes from Vons. There were four tomatoes and they cost $3.20. Two years ago those tomatoes would have cost $1.20. So, the lesson here is, if you buy a power tool everday (it was made In China whereas 5 years ago it would have been made in the USA so some US worker lost his job in the last few years) then inflation is really low. However, I buy groceries 3 times a week but I only buy a powertool every 5 or 10 years. Same with tv’s, same with fridges, same with computers and most are made in China or some other cheap labor country. What that means exactly I’m not sure except the US seems to have become a giant currency printing press that no longer makes “things” but is in the business of juggling paper currency.
As for the market? I don’t care because I play both sides of the fence but I do think we have a financial crunch coming. A recession is almost baked into the cake. How long and how deep? I don’t know because there are so many “new” factors in the equation this time. We have grossly over valued property when compared to incomes, a MASSIVE national debt, a health care problem which could get worse if people lose their jobs and health insurance. I doubt if we will see a crash but a good corrrection in the US dollar and in the stock market could arrive next year or so. Of course, it will probably not happen overnight because of things like the PPT on the stock market and property prices sink verrrrryyyy slowwwwwly. Actually, the dollar has ALREADY dropped very badly. Ask anyone who has been to Europe lately. We are almost the poor realtions who live in America.
Well said, Mike. When I hear the talking heads on the morning financial programs talk about this great economy I can’t help wonder if they’re just plain stupid or can’t see the bigger picture of the exploding debt, deficit, impending entitlement wreck, trade deficits…etc. I guess we will see what happens after the tuesday elections.
TxChick — pretty much anything (including money stuffed under the matress) beat buying houses this year…
And I feel confident that stocks will outperform residential real estate again in 2007. (For those who are quick to argue about correlation and apparently have a hard time thinking in negative numbers: Outperform means “lies to the right of on a number line.”)
“And I feel confident that stocks will outperform residential real estate again in 2007″
Which stocks vs. what real estate. My real estate holdings in 2006 did 2 times the QQQQ. And all the REIT’s beat every market average out there.
What part of residential don’t you understand? This is easily measured, by the way.
By stocks I mean the broad market average, best represented by the S&P 500. Very few people would say the QQQQ is representative of the market. REITs are a type of equity by the way; also most of them (at least the best performers) are involved in commercial real estate. They are not in any way “the residential real estate market.”
The S&P 500 outperformed/will outperform an index of residential real estate prices in 2006. I predict the same for 2007. Sheesh, David.
index of residential real estate prices in 2006
And where might I find that index of residential real estate prices???
“hedgefundanalyst says now is the time to buy stocks”
Not time to buy, but not quite time to sell. Yet.
HOME BUILDING STOCKS have historically hit bottom between one to four months before the biggest drop in home prices on a year-over-year basis, Oppenheim wrote. On that basis, “we think the greatest price declines are likely to be seen in mid-late 2007,” he predicted.
“Higher inventories from overbuilding will exacerbate the record inventory of homes for sale,” Bank of America analyst Daniel Oppenheim wrote. “We think this excess inventory makes it unlikely that the market will rebound in the near-term.”
Bank of America’s survey also showed home prices declined in nearly all 39 markets it surveyed. Based on the trend of declining home prices, the bank forecast homebuilding stocks may fall even further from current depressed levels.
Look at Jan 2008 puts of Pulte, Lennair, Centex
No free lunch!: Home Is Not a Piggy Bank !!
http://www.immobilienblasen.blogspot.com/
The Sydney Daily Telegraph featured a 4/2 Kurrajong Heights SFH today, which was for sale at $429K. For those of you who don’t know Sydney, there’s nothing wrong (apart from a possible long commute, depending on where you work) with Kurrajong Heights as a place to live.
Previous sales were $345K in 2000 and $405K in 2003. The Sydney market is expected to be flat or fall slightly (again) in 2007, especially if the Reserve Bank raises interest rates again next week.
Here is yesterday’s WSJ article by June Fletcher and Ruth Simon. The WSJ (subscription) version had a sexier caption (”The New Word in Home Sales: Canceled”), but otherwise, the content appears to be pretty much the same.
BTW, does Shallis rhyme with phallus?
http://www.post-gazette.com/pg/06308/735390-28.stm
I can’t get over this article — HOME RUN, JUNE AND RUTH!
———————————————————————————————
‘Kickouts were high nationwide in the late ’80s, and in California and New England in the early ’90s, spurred by massive job losses. But until now there’s never been a period where cancellations have spiked in the absence of a recession, according to Amy Crews Cutts, deputy chief economist at Freddie Mac. Ms. Cutts says the current jitters are largely a result of investors fleeing the housing market in the last few months, which “slammed (it) into reverse,” and consumers’ fears that the bubble had burst. Rising interest rates earlier this year also gave buyers who hadn’t yet closed on their homes cold feet. The result: a huge backlog of unsold homes, which could further depress prices.
But mortgage rates have fallen recently, and if they stay below 6.5 percent, Ms. Cutts expects that buyers will regain their confidence by late spring, causing cancellations to ease up. Vienna, Va., housing economist Thomas Lawler agrees, but says builders must continue to cut their production and sell off their inventory so supply and demand can get back in balance. “Builders need to take a bullet,” he says.’
There’s just one minor problem with this theory.
The buyer pool has been sapped, depleted, emptied. The only people left are the hardcores like us and the HH types who would love to “upgrade” their status with concomitant debt load, but can’t sell their current houses. It’s a circular problem and to me the only answer is much lower prices.
“Builders need to take a bullet,” he says
I’ll supply the Smith and Wesson if they use it on David Leaher
P.S. This article comes highly recommended to husbands whose wives are badgering them about when they will buy a home. I believe this is the first lengthy article about the hazards of homebuying which my wife read from start to finish. (It may help that the authors are female — not sure about that…)
Is that a real problem? Can you guys not talk economic sense to your wives?
How about this one? “Okay, sweetie, we’ll buy a house now. But you understand that if we do that, you don’t stay home when the baybees come. You will have to work until this mortgage is paid off.”
That ought to back a few of the harpies off.
Is that a real problem? Can you guys not talk economic sense to your wives?
Yes, it’s a problem. However in my case the problem has been solved.
Yea..You guys are wussies…You should rule the roost…”Whats that?…Uh?….Oh OK honey Ill be right there.
Im sorry for being on the computer so long.”
“Is that a real problem? Can you guys not talk economic sense to your wives?”
There is what makes economic sense, and there is nesting instinct+comfort. I’ve convinced my wife that we may be renting for the next 2 years, and she’s finally settling into that idea. It helps that we watch RE here like a hawk and she’s seen actual price declines on same-type houses just over the last year ($600K+ houses now listing for the high 500s).
What sticks in here craw is the inability to personalize the residence. For example, getting rid of the carpet in the dining room and the downstairs bathroom. We have kids, and carpet in those areas just plain blows. I’ll probably make a proposal to the owners to change those out, so we’ll see.
She’d also like to paint the walls, and feel like we can buy “final” furniture, instead of the ‘holding pattern” furniture we currently have.
You truly have no idea how big an issue that is. Since having moved to San Diego at the height of the madness (Sept 04), I’ve had numerous stern discussions about why we weren’t going to by a house. It hasn’t been until the past few months (multiple headlines that she has seen not to mention numerous anecdotes of her FB co-workers that have begun to hit rough patches with their mortgages) that my wife has significantly backed off the house thing.
Yes, it is real problem. I can’t tell you how many fights I have had about that over the past 2 years. Especially when things were going up; I felt like I had DL living at home with me (we are going to be priced out forever!!).
Anyway, finacial prudence is just not a trait that many women posess. They know what they want; and they don’t care how they get there. I know this is a BIG generalization (I greatly respect your opinion TX, and I know that you are the anthisis of this type of person), but it just seems to be true for me and most of the guys I know.
It’s hard enough to talk some women out of a 200 dollar pair of jeans they are never going to wear. Imagine trying to talk them out of homeownership; the path to “stay at home” in the eyes of most younger women (the house will make us more money then my job; therefore I can stay at home!)..
Please do not take this the wrong way, I know there are lots of women not like this, and lots of guys who are looking at their homes as meal tickets. Its just my observation.
Am also female but I think you are right. In my case the FB (whom I couldn’t talk out of it) is a female relative. Now that her boyfriend and her mother both died, she decided to get rich so her kids could inherit something substantial. How did she propose to do it? By buying on IO ARM in 05. duhhhhhhhhhhhh her kids may inherit debts, if she can keep the house that long.
I take this the wrong way. Generalizations like this are insulting. Here’s another theory: the husbands on this blog are poor decision makers when it comes to choosing a wife.
Good come back Ozarkian…..
I thought I was the only one with a wife who wanted to buy, and she is 65 so this nesting thing does not seem age related. “It’s not an investment because we are going to live in it”
I’m sort of stunned at what’s going on with this male/female discussion. I guess me defending women is “political” and shouldn’t be included on this baord, but this woman-bashing is getting ridiculous.
To quote Michael Fink: “finacial prudence is just not a trait that many women posess”. (posess? finacial? maybe he’s speaking a different language and that’s why i’m so offended).
I refer to this article: ht tp://www.themarriagefiles.com/pages/file_52.html
Enuf said?
Michael, I’m sure you actually have run across a number of women who fit the description you’ve posted, but I gotta say, it pisses me off when people generalize out to ALL women based on their experiences with a subset of women.
I’m female and I am not a slackjawed, $200-jeans-wearing, must-buy-a-home GF. And I am not the only one.
Fiat lux, count me in! I too am a woman that would NEVER pay that much for a pair of jeans, or any other piece of clothing for that matter.
I have purchased homes, by myself, twice (relieved renter now.) Hey guys, it’s nice to want to please your wife, but you gotta draw a line somewhere. If she’s so desperate to “own” a house, tell her to buy it herself and that you’ll sign a quit claim deed. You’ll be amazed at how quickly she becomes silent. I have a new husband that tends to let money run through his fingers like water.
It’ll be a cold day in hell before I let him coax me into bankruptcy court! Stand your ground! So what if she pouts, she’ll get over it. If she doesn’t, toooo badddd……
I have the opposite problem.
My wife considers renting to be “limbo.” She understands and buys into the numbers, but she dislikes the unsettled nature of being in someone else’s property. So she is the one of the two of us who likely would jump at a “good” price rather than a “great” price. Fortunately, it takes two signatures in our case, and Ben’s blog keeps me fed with fresh proof daily that things are going more our way instead of less.
Chip –
Just point out to her that life is “limbo.” That will make her feel better!
Just remember stereotypes typically follow the 80/20 rule. They will be right about 80% of the time and wrong 20% of the time. Ask any statistician how good your life will be if you are right 80% of the time. He or she will tell you, “it will be fantastic”.
Stereotype away and things will be just peachy. You will offend 100% of the group being stereotyped while being right 80% of the time. Just don’t be too vocal about your stereotyping and you will keep yourself free from trouble.
“If there is anyone here I forgot to insult, please accept my humblest apologies.”
- Johannes Brahms -
I suspect that most of the women on this blog are extremely financially prudent. However, we are also aware of the couples taken into financial despair by an overspending wife.
However, all of us know men who have to have the latest toys, the new sports car every two years, the fancy trips and big house to show how good a provider they are, and the trophy wife which to me seems the poorest investment of all time.
How about we agree that those of us actually on the blog and who are saving our pennies to buy home in the distant future are financially prudent regardless of sex? As for the fb’s - I suspect if you knew the true stories then the blame would be much closer to 50/50. Women will “force” husband’s to buy “homes” and men will “force” wives to risk their financial futures with “investments.” Either way, if you are married to a spendthrift you are screwed.
However, all of us know men who have to have the latest toys, the new sports car every two years, the fancy trips and big house to show how good a provider they are, and the trophy wife which to me seems the poorest investment of all time.
————————
Don’t forget (and I think this is a BIG one) how much men spend on “going out with the boys” and trying to impress “hot” women.
Frankly, if you look at single people (so there’s no real influence from the opposite sex), I’d say the men are in MUCH WORSE FINANCIAL SHAPE than the vast majority of women I know — even though the women often make less money.
The stereotype that women are big spenders is laughable when compared to how most men spend money.
And I agree with SD RE Bear, trophy wives have got to be one of the worst “investments” around.
I have the same problem, Nikki!
New edition of Price Reduced! up for everyone in the Jersey area.
Price Reduced 10/16 - 10/31
MLS Town Orig. List Price List Price % off OLP $ off OLP
2256891 Mendham Twp. (2320) $6,900,000 $4,700,000 31.9% $2,200,000
2246981 Mendham Boro* (2319) $6,900,000 $5,900,000 14.5% $1,000,000
2257103 Franklin Twp.* (3005) $2,500,000 $1,700,000 32.0% $800,000
2292369 Watchung Boro* (2721) $2,300,000 $1,695,000 26.3% $605,000
2298084 Montvale Boro (1136) $1,899,000 $1,295,000 31.8% $604,000
2256538 Lake Mohawk Sparta $2,500,900 $2,000,000 20.0% $500,900
2283606 Bernardsville Boro (2703) $7,995,000 $7,500,000 6.2% $495,000
2296532 Westfield Twp.* (2920) $2,750,000 $2,300,000 16.4% $450,000
2297945 Mountain Lakes Boro $1,599,900 $1,179,000 26.3% $420,900
2294006 East Hanover Twp. (2310) $1,400,000 $998,000 28.7% $402,000
2289615 Demarest Boro (1109) $1,396,500 $999,900 28.4% $396,600
2246211 Kinnelon Boro (2315) $1,649,999 $1,274,900 22.7% $375,099
2209092 Hopatcong Boro (2812) $650,000 $324,000 50.2% $326,000
2246180 Mountain Lakes Boro $1,800,000 $1,495,000 16.9% $305,000
2208633 Saddle River Boro (1158) $2,800,000 $2,499,000 10.8% $301,000
2292075 Essex Fells Twp. (1606) $1,199,000 $899,000 25.0% $300,000
Caveat Emptor!
jb
unreal! those reductions show you how overpriced they were in the first place!
Looks like the high end is dying a slow death?
Grim — thanks very much for keeping up with, and posting this information.
Do you feel these price cuts are reflective of the state as a whole or are these the “best of” type cuts?
Is there anywhere on line that I can look at the NAR ad?
There’s a link to the ad on this page, but it isn’t loading for me right now. The ad is a PDF file…
http://www.realtor.org/press_room/news_releases/2006/nar_advises_consumers_to_buy_now.html
What’s roiling the bond market? My hunch: The Phillips curve is coming back into vogue…
http://en.wikipedia.org/wiki/Philips_curve
Today’s WSJ p. A1, right column lead article:
Strong Growth In New Jobs Eases Economy Worries
Bonds Fall as Unemployment Hits 4.4%, a Five-Year Low; Weathering Housing Storm?
By Mark Whitehouse
Bond investors suffered and Republican politicians cheered as the government reported that the U.S. unemployment rate had fallen to a five-year low, mitigating concerns that a sharp housing downturn will sink the economy.
The Labor Department said U.S. nonfarm payrolls rose by 92,000 in October as gains in service sectors made up for housing-related losses. More importantly, large revisions boosted the estimate of August and September payroll growth by a total of 139,000 jobs, bringing to about 5.8 million the number of jobs created since the current expansion began in late 2001. Meanwhile, the unemployment rate dropped to 4.4% — the lowest level since May 2001 and well below economists’ expectations.
“This tells us that the economy is weathering the housing storm quite nicely,” said Joshua Shapiro, chief U.S. economist at consultancy MFR Inc.
The report threw a new curve at invstors, who in recent weeks have seen the Dow Jones Industrial Average hit a high amid hopes that falling oil prices would boost consumer spending, and bond prices surged amid worries of an impending recession.
Immediately after the report was released Friday morning, bond prices plummeted on renewed concerns about inflation. Treasury prices fell sharply, pushing the yield on the 10-year note, which forms the foundation for long-term U.S. interest rates, up to 4.72% from 4.60%. The 10-year note lost $9 per $1,000 face value. Stock investors were less imipressed: The Dow ended down 32.50 points at 11986.04.
——————————————————————————————-
I have two comments and a question:
1) It just became more expensive to buy a home, as mortgage rates are tied to the TNX; according to Peach (NY Fed), home prices have to fall to realign with new fundamentals.
2) In a crazy world where the stock market only goes up on stronger belief that the Fed will drop interest rates, the news that the bond market is smelling inflation should be bad for stock prices.
3) What share of the 5.8 million new jobs created since 2001 were in real estate?
Jobless rate falls to 5-year low of 4.4%
Housing, automaking are main weak spots
By Nell Henderson
WASHINGTON POST
November 4, 2006
WASHINGTON – Unemployment fell last month to the lowest level in more than five years, 4.4 percent – a drum-tight labor market that shows the economy remains fundamentally strong despite weak spots such as housing and manufacturing.
The Labor Department said yesterday that employers added 92,000 jobs in October, a modest number.
But the department revised earlier estimates to show more payroll growth in August and September, for an average of 156,000 new jobs in each of the past three months. That was enough to drive unemployment down from 4.6 percent in September.
Higher interest rates have slowed economic growth.
However, much of the bad news has come from just two sectors: housing and automobile manufacturing. The unemployment report and other data suggest that the problems there haven’t spilled over to the broader economy.
Considering that some workers lack the education and skills to be readily employable, economists regard any unemployment rate below 5 percent as striking. “We are beyond full employment,” said Mark Zandi, chief economist at Moody’s Economy.com Inc.
The job market is tightening so much that some worry that it will fan inflation, as employers raise wages to attract workers.
Yesterday’s report showed strong wage growth.
A report earlier this week showed that productivity growth, which is necessary if companies are to raise pay without boosting prices, is stalling.
Investors reacted negatively to yesterday’s news, fearing that profits will suffer as corporations are caught between higher labor costs and weak productivity gains. The Dow Jones industrial average, which climbed above 12,000 points for the first time last month, lost 32.50 points to close at 11,986.04.
http://www.signonsandiego.com/uniontrib/20061104/news_1b4economy.html
Take a look at “Calculated Risk.” A graph of unemployment shows that unemployment declines right until the start of a recession, when in shoots up. About the only time unemployment goes up is during a recession and the only time it doesn’t trend down is during a recession. The historical data show that low unemployment is no guarentee that a recession won’t start next month.
Right, Bill, and what’s more, once unemployment spikes up, it generally continues doing so until it has gone up by 200bps or more. Once word is out that unemployment is on the rise, employers play a mutually-assured-destruction game of unloading workers, which tends to reduce demand for the stuff these former workers’ companies produce. Falling demand leads to more layoffs, leading to precautionary behavior by consumers (for instance, saving money — imagine that!) who fear the consequences of facing unemployment with no cash stash. The vicious cycle continues until the bloodletting runs its course.
“The vicious cycle continues until the bloodletting runs its course.”
Same with manias going up, same with manias going down. To me, this is the most bankable aspect of human behavior - the self-reinforcing trend.
Excellent!
I have a simpleton philosophy about things like employment numbers or any others that purport to describe the economy — in the six weeks before a national election, I don’t believe any of the numbers that are published.
Buckle up! Pump prices set to take off
Industry denies claims of pre-election manipulation
By Craig D. Rose
STAFF WRITER
November 4, 2006
The price of gasoline available to unbranded retailers rose sharply this week, prompting predictions that the long cycle of declining pump prices is ending.
Since Monday, the spot gasoline price for unbranded retailers in San Diego County has jumped about 20 cents a gallon, a dramatic increase even in an industry increasingly accustomed to volatility. The increase pushed the regional wholesale spot price to about $1.82 per gallon.
The spike has renewed suspicions among consumer groups that refiners held prices in check to defuse gasoline costs as an election issue, a contention vehemently denied by a national refiners trade group.
Local unbranded retailers, meanwhile, are struggling to deal with the higher prices.
“My cost has gone up 20 cents a gallon since Tuesday, but my pump price has only gone up 11 cents,” said Dave Whitlow, who owns Spirit Auto Center in Lakeside. “So I’m making 9 cents a gallon less.”
Whitlow added that he was reluctant to pass along the full price increase to motorists because his posted prices are already far higher than a nearby branded station.
While branded stations receive prices under contract from major oil companies, independent unbranded retailers buy their fuel in spot markets. The gasoline sold on these markets is typically surplus from the major refiners.
Rising prices in spot markets can signal one of several underlying scenarios.
Stan Mays, a spokesman for Shell Oil Products, noted that this is a generally slow time of the year for refiners and a period when many opt for maintenance, though he declined to comment on Shell’s current operations. When shutting down for maintenance, major oil companies may tap spot markets to secure gasoline for their customers, he said.
Similarly, refinery outages can force major suppliers to make spot market purchases. No major outages have been reported, but they are often not publicly announced.
Charles Langley, who directs the gasoline monitoring project for the Utility Consumers’ Action Network, said he expected consumers to start seeing pump prices rising sharply beginning Election Day.
http://www.signonsandiego.com/uniontrib/20061104/news_1b4gas.html
Will illegal immigrants save the housing bubble from collapsing? Fannie Mae is trying to put your tax dollars to work in order to make it happen.
—————————————————————————————————
Realtors project housing boom if alternate credit scores adopted
By Garance Burke
ASSOCIATED PRESS
3:31 p.m. November 3, 2006
FRESNO – The slumping housing market could get a $200 billion boost from new immigrant home buyers if mainstream lenders start using alternative methods to score credit, a national group of Hispanic realtors said Friday.
Creditors like Citigroup Inc.’s Citibank see recent immigrants as a growing market niche, but those who lack Social Security numbers or legal status in the U.S. are often rejected by the three major credit bureaus.
A handful of new credit reporting systems already used by 200 real estate brokers, community groups and mortgage counselors nationwide allows them to calculate risk by evaluating a prospective client’s utility bills and rent checks.
Should the new reporting methods gain wider acceptance on Wall Street and among secondary mortgage lenders like Fannie Mae, housing markets in places like California’s Central Valley would stand to gain the most, the National Association of Hispanic Real Estate Professionals said.
http://www.signonsandiego.com/news/state/20061103-1531-wst-hispanichousing.html
Stucco, this gives me a headache.
Give Fannie Mae credit for trying to solve California’s shortage of housing for illegal immigrants already!
Catch 22: Limit immigration, wages rise, house prices slide. Don’t limit immigration, wages slide, house prices rise.
Good point. Maybe if they are successful, Fannie Mae can drive California affordability all the way down to 0%.
Stucco & Chick;…..I could tell a couple of real stories on this but fear it would appear racists which I am not…I will just say; 100% + financed transactions on multi family properties is just scary….
“I will just say; 100% + financed transactions on multi family properties is just scary…”
What does it do to the comps when multiple families plow into a McMansion? Or is that not happening (yet)?
I’ve been saying for some time now that the illegals would be given a fast pass into the housing market.
This doesn’t surprise me, at all. My parents neighborhood, my old home, has gone from completely white to almost completely “hispanic” in just the past 5 years. They all have better cars and more home improvements than my folks, who worked all their lives for their home and lifestyle, however meager. The new-comers get it ALL upon arrival. How is this possible?
The money had to come from somewhere?
Mortgaged future??
Like I’ve said………..think Mexicans. I don’t think our politicos will get serious about the fence and controlling illegals. They need more to keep the Ponzi economy working. Illegals create their own demand, while straining the gov’t resources as well.
The elections on Tuesday will tell whether we get control of immigration or give the country away. I fear that the takeover is already too far along. We are mortgaged into eternity and additional drains created by illegals will be the end of us.
“The elections on Tuesday will tell whether we get control of immigration”
Why? Is a mysterious third party expected to take control of the house and senate?
Holy smoke! You mean we’re actually in the rear view mirror?
I’m spending the weekend trying to get out the vote in Texas for our Libertarian candidate there, Bob Smithers.
“The elections on Tuesday will tell whether we get control of immigration”
Let me clear up the matter for you, neither party will fix this (perhaps a third party in the future will).
Unfortunately, I was born a US citizen. Where can I apply to become an illegal alien?
Just move to the former Soviet Union, and don’t apply for citizenship…
Nah, you miss the point, I want to live in the USA, with all the benefits of citizenship but no responsibilites. Starting with no jury duty, for example. Did you catch on the “amnesty” program, that it was proposed that illegals given amnesty make good on unpaid taxes by paying 2k? There are plenty of citizens that would jump for that one.
Its even better if you are an employer of an illegal, you get complete amnesty for not withholding any taxes on your illegal employee. I bet there are plenty of business people who would love to not have to pay withholding.
Here is a November housing update (for the 1 or 2 that may care) I promised for November here in Santa Clara, California (Silicon Valley)…
When I first posted this in February or so our inventory for single family homes was around 60….A balanced market would be around 200….As a comparison, in 1991 we had around 500….
Anyhoo, over the spring and summer we have bounced between 60 & 90…We increased to 120 in September but have now fallen back to 96 as of this morning…
I would characterize the market as firm….Some properties languish on the market due to overpricing….Any property that is in good condition and priced with near term comps sells fairly quickly (2 weeks)…
It appears that our valley is on the up tick….Big office buildings that have sat vacant for years are now leasing up….Expressways & Freeways are backed up during commute hours….Everyone I talk to is very busy with work…
We are heading into the dead period (Holidays)…..I will not update again until February of 07…..
It’s possible that some areas won’t take a royal beating . What do you think is in store for your area for the future scdave ,if you care to make a prediction ?
Wizard;…New entries into the market are strapped to the gills in debt….High incomes and the availabilty of work is propping it up….Its hard to get a handle on because this valley is awash in money….I don’t see ANY upside in prices….Its pushed over the limit on afforability….I think we will float along assuming we continue with the strong job market…..
With all that said, if we get some internal or external shock (terrorists attack) all bets are off….Given the leverage in our valley on houses, cars & credit cards we could see a drop in housing prices that dwarfs 1981 & 1991…
This is really suprising that the market is holding up so well in Santa Clara. I’m very familiar with the area as I lived in Saratoga for 15 years and only moved out last year. I agree though that there are two-income families that are easily, without even considering stock options, making $400K/year.
YUP…..
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How many of you tin foil hat “PPT” believers got burned in 2000-2002 when the stock market crashed? Something must explain the anger, jadedness, and vitriol.
How is that Colorado “gay” incident working out for the right wing nut jobs? Listened to a bit of Hannity on Friday and he didn’t metion it.
Gekko-
Do you own a home in Ny? If you are so confident on the economy why not buy now (or buy more)??
Gekko — Sorry to see you did not take Ben’s rather strongly worded hint yesterday.
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Answer the question.
Answer mine. Above
Thanks
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I do not currently own any real estate. It should be obvious to you that the economy, the stock market, and the housing market do not all necessarily follow the same cycles simultaneously.
I do have $862K in the stock market today which represents 66% of my net worth so I guess you could say I do put my money where my mouth is.
What are your credentials?
I own my home (60% of it) worth about $600k. I had a rental but sold a couple of years ago - made a nice profit - but left some on the table (maybe that’s where my anger comes from - LOL.)
The rest of my “wealth” is 50% mutual funds/50% Treasuries.
I don’t have any money in the stock market. Not only that, I talked my dad (who had a similar amount in the market to you until last spring) to sell it all before the next down leg of the 2000 tech stock crash.
If you are in NY - I would say that the market (stocks and housing) are very muched tied together.
BTW, gek, did you see the post yesterday that NY prices fell 10.1% in one month? That is 72% annual rate of decline — ouch!
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This is good news.
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“The biggest conspiracy has always been the fact that there is no conspiracy. Nobody’s out to get you. Nobody gives a shiiit whether you live or die. There, you feel better now?” - Dennis Miller
The thing that makes me laugh about the idea of some grand conspiracy or other running things behind the scenes, is that that would mean this group of people would have to be both competent and able to keep a secret. I just don’t believe that’s humanly possible. People and markets are messy. If greedy geniuses ruled the world then LTCM would be as big as the S&P 500 today.
A “crash” doesn’t take 2 years to unfold. A “crash” happens very quickly. The 2000-2002 was an orderly manipulated decline from top to bottom which could easily be tracked on a day chart using any of the etf’s (SPY, MDY, QQQ, etc.) That manipulation was managed by the PPT.
There are no rules concerning time periods when a market (be it the stock market or property market) reverses in either direction. It is now manipulated all the way up - and down. In 1929 and in 1987, a BIG percentage of the markets “crashed” in just a few days causing a lot of pain. Even to the point of wiping out millions of small investors. Some who committed suicide. There were no (reported) suicides in the 2000-2002 decline. Millions of pissed off investors maybe - but no suicides.
ALL of the markets are now manipulated for one reason or another by government connected entities. That includes the property market via the use of Fed manipulated interest rates.
I firmly believe that property has been manipulated in order to reduce the future financial impact on social security/medicare. More and more people are being manipulated into owning property. Why? Because reverse mortgages will be the answer to government(s) problems. Think you can get out of it by gifting your property to your children? Wrong. IRS regulations will come into effect which prevent property owners from “gifting” their property to their children too early, thus escaping the obvious “means testing” which is also going to appear in the next 10 or 15 years. In other words, you will NOT be able to “gift” your property to your children in the last (say) 25 years in order to make yourself “house poor” and thus avoid being means tested. If you do “gift” to your children and you die within, say 25 years, they will pay 50% tax (or more) on the value of the property.
One doesn’t have to be a rocket scientist to see that it just is NOT possible for the government (the US government or any other government) to have enough money coming into government coffers to pay for the tsunami of health and pension costs which will arrive on the scene in the next 20 years. People are living longer, medical costs are increasing and governments can only run massive deficits for so long before the s*it hits the financial fan.
‘A “crash” doesn’t take 2 years to unfold. A “crash” happens very quickly. The 2000-2002 was an orderly manipulated decline from top to bottom which could easily be tracked on a day chart using any of the etf’s (SPY, MDY, QQQ, etc.) That manipulation was managed by the PPT.’
I guess we are arguing about definitions here. But I would say the Nikkei 1990-2006 and the DJIA 1929 - 1945 are two examples of crashes that took a while to bottom out. Your definition of crash (maybe something like what happened Black Monday — Oct 19, 1987 — when the DJIA dropped 20% in one day) is what I call a dip; anyone who bought lots of stock on that day would have been Greenspan putted into prosperity a couple of years hence.
“One doesn’t have to be a rocket scientist to see that it just is NOT possible for the government (the US government or any other government) to have enough money coming into government coffers to pay for the tsunami of health and pension costs which will arrive on the scene in the next 20 years. People are living longer, medical costs are increasing and governments can only run massive deficits for so long before the s*it hits the financial fan.”
Spot on. Bagholders will be selected for shafting over the next 30+ years.
“Bagholders will be selected for shafting”
Like owners of IRA’s and 401k’s?
Yes, not to mention anyone due benefits under Social Security and Medicare, and anyone with a traditional (defined benefit) corporate pension. In other words, most babyboomers.
“ALL of the markets are now manipulated for one reason or another by government connected entities.”
Mike –
Very insightful post, and one I largely agree with. I think a key role of govt these days (post-Greenspan era) is to make sure that any market corrections which transpire play out very slowly in order to avoid panics. But this has some folks (e.g. NY Fed’s Geithner) rather worried about systemic risk. I think about the San Andreas fault as a good geophysical model for this — there are long periods of very gradual movement, but lots of pressure buildup, punctuated by the occasional 8.0+ magnitude quake.
Think you can get out of it by gifting your property to your children? Wrong. IRS regulations will come into effect which prevent property owners from “gifting” their property to their children too early, thus escaping the obvious “means testing” which is also going to appear in the next 10 or 15 years. In other words, you will NOT be able to “gift” your property to your children in the last (say) 25 years in order to make yourself “house poor” and thus avoid being means tested. If you do “gift” to your children and you die within, say 25 years, they will pay 50% tax (or more) on the value of the property
Which is exactly why folks with assets they care to preserve for their children need to take action now in order to escape the witch-hunt for deep pockets that is coming. A combination APT (asset protection trust, preferably foreign) with family partnership LLC’s (where discounted ownership shares are gifted yearly to the children so that they own (but not control) USA based property prior to death of parents) is but one example of a strategy. These aren’t structured to avoid taxation but to give plausible deniability as to ownership of assets when “you know who” comes looking for a free lunch(although some vehicles will allow taxes to be deferred, which is a gamble as well).
Of course the gov’t has made this as difficult and as complex as possible so this isn’t a DIY project. The downside is of course economic. These can be expensive vehicles to employ and maintain since the IRS continually mucks up the tax reporting law from year to year. These vehicles take a specialized attorney to set up and a specialized accountant to maintain if you want it done with any degree of confidence. Anyone who has a liquid net worth north of seven figures needs to have one of these from a liability standpoint alone, given that thousands of law students are graduated each year that will need to eat.
A good rule of thumb is to never have the bulk of one’s assets in the country you live in. The politicians running a country (any country) don’t give a rat’s patootie about anyone, just what you represent to them. You are either a source of future tax revenue, someone that owes them money now or someone they can rob assets from at some point in the future. The tax law provides proof of this assertion from a USA point of view, so take heed.
Not me. I didn’t have any stock then. The only “stock” I have now is in the international fund in my 401(k), and I’m willing to take a chance on losing that money because (1) it is a small portion of my assets and (2) it should have a good chance of going up as the dollar gets cremated.
I thought you guys might enjoy my little spoof of the recent NAR ad that was in the newspapers this week.
Dangit… I can’t figure out how to show a link…
http://tinyurl.com/y62n88
Great one, Charles. Thanks!
Here’s a flipper getting worried:
http://reiplace.com/newsgroup/read.php?1,108291,108291#msg-108291
The news about buyers who cancel contracts and lose thousands of $$ in deposits is quite telling. It means we are nowhere near the bottom of this fiasco if someone is willing to throw away $30,000 or more.
What’s the next item coming from the NAR? I figure in January of 07, we will hear the engines starting up on the NAR propaganda machine and growing more powerful as spring of 07 draws near. (1) “There’s never been a better time to buy!” (2) Great opportunity for first time buyers to get on the real estate ladder!” (3) “Property prices will be 25% higher in 2008.”
I agree. Suppose you were looking at an investment property, had put $30,000 down and realized that it had dropped in value by $40,000. Would it be worth buying?
Actually, maybe. You might decide the hit on your credit isn’t worth $10,000. You might decide it’s a long term strategy. Rent for a decade, and make money in the long run.
But bailing on that deposit, implies that you think there’s a lot more STILL to be lost. We won’t be close to the bottom, until people quit walking away from deposits.
For those of you who insist the Stock market can only crater, take a look at 2nd Nov posting on http://www.oftwominds.com/blog.html
This guy is not a housing bear. Economy does not equal the stock market.
No — just an entrail-reading chartist.
Just a first hand observation of a smaller market in TX; Tyler.
It’s no “MegaMetro Market” (Population 100k located 100m east of Dallas) but maybe of some interest. I just returned from a “check it out” trip…..
Market has been very strong this year with actual sale prices within 98% of listing price. Lots of new construction, many sold before completion. 1/4 - 1/3 acre subdivision lot….2800 to 3500 sq foot….for around $120/$130 sqft.
Then, on Tues. of this week, the economic outlook took a turn. Goodyear announced to striking workers at it’s local plant, they are closing the facility. While the local economy is diversified, it’s still going to have a huge impact.
From the Tyler Morning Telegraph, October 31, 2006:
$948 M Total economic output of the Tyler plant
$70.3 M Annual payroll
$16.8 M Medical and health benefits (three local hospitals)
$74 M Total real and person property on local tax rolls
Barely a ripple in the big pond but when a full ONE PERCENT of the local population loses their job…..it’s a big deal.
I had an interesting discussion with a buyer’s agent. She said this would “soften the market”…..somewhat. I told her point blank any offer I was considering has been discounted a lot more than “somewhat” and every other potential buyer, for the forseeable future, will do the same.
Prices are inversely proportional to the seller’s stress level…….
Trick or Treat for Tyler, Texas!
Tyler’s a nice little town. I like it. Hard to get past the “Bubba factor” but I’ve seen much worse.
I was real surprised to see Copelands in BK proceedings and while browsing the San Luis Tribune this morning. When I lived in Los Osos 10-yrs ago it seemed like anything the Copelands touched turned to gold. What a turn around of fortune! I loved living in the area, but the housing prices were well beyond what the local market could support; the SLO area thrives on outside money, IMHO.
No political debate here! I’m just pointing out an irony.
Bush gave his weekly radio speech today from Colorado. Here’s what he said:
“Our tax cuts have helped businesses like these create jobs and deliver prosperity across Colorado and across the nation,”
It’s hilarious, I think, that he should say this about a state that has the highest percentage foreclosure rate in the nation.
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U.S unemployment rate falls to 4.4%; it’s lowest in five years
Figures released by the U.S Department of Labor, shows that the unemployment rate in U.S fell to 4.4% in the month of October, hitting its lowest level since May 2001.
Still above the 3.8% during the Clinton years.
See how this game will have no end. For every pro (party x) claim you make someone else makes another and another and another. NOTHING IS GAINED!!!!
I am a fiscal conservative and socially very liberal (btw)
Dang, my life will be complete only when I hear someone say he/she is a fiscal liberal and a social conservative. I think that may have died out with Karl Marx, though.
Also, C&C - how did you morph into cripy?
Gekko –
Any thoughts there on the implications of five-year low unemployment rates for stock prices?
The unemployment rate is low, and this means …. ?
What it really means is that the labor participation pool continues to shrink. In other words, more and more able-bodied folks are opting out of looking for employment. Don’t believe me? See Barry Ritholtz’s work:
http://tinyurl.com/yy8dts
The real issue is: Why?
Gekko, c’mon, you gotta do a lot better than that …
The drum beating of a 4.6% unemployment rate is some hilarious stuff. First, does anyone have enough sense to look beyond the headline number and see how they conjure up this fraudulent figure? Nope, no govt. official, not BEA, not BLS, NOBODY is doing a headcount. The number is based on a warped model where jobs are “born” and then some “die”. Anyone trumpeting this headline garbage is a mindless drone.
It looks like Ben’s blog is now up against $40 million in ad spending:
http://www.nytimes.com/2006/11/03/business/03home.html?ref=media
Realtors Say the Stars Are Aligned for Housing
E-MailPrint Reprints Save
By VIKAS BAJAJ
Published: November 3, 2006
IT may go down as the “Got milk?” moment for the housing sector.
Just as dairy associations, with their widespread ads, have tried to convince Americans of the many benefits of milk, the National Association of Realtors will begin promoting the notion that buying a home is an unalloyed good in a $40 million campaign that boldly declares: “It’s a great time to buy or sell a home.”
The ads will try to counter the drumbeat of dour housing data and news by making the case that historically low interest rates, a large supply of homes on the market and the group’s forecast of rising prices next year make now an ideal time to buy a home.
The campaign, which was developed by the Most Agency, based in Newport Beach, Calif., starts today with full-page ads in The Wall Street Journal and USA Today. It will make its way into other newspapers, including The New York Times, over the weekend and onto television and radio networks early next year.
•“In visiting our local associations and state associations, we were hearing our members saying, ‘God, we are getting beat up out there,’ ” said Thomas M. Stevens, who is president of the trade group that represents 1.3 million real estate agents and owns a real estate brokerage firm in the Washington area.
“We think we need to tell them that the stars are aligned right now and the conditions are ideal for buyers,” he added.
Independent economists, however, are somewhat more skeptical. Many predict that sales and prices, as measured by the association, which fell in August and September from a year ago, may decline further because there are too many homes on the market and because the rapid run-up in prices has put homeownership out of reach of many.
“You can make the case that prices will rise in areas of the country that did not have a bubble,” said Ethan Harris, chief United States economist at Lehman Brothers. But “in the hot markets, I would say you are in for a two- to three-year adjustment in prices, not a collapse but a steady drop in prices.”
Mr. Harris recommends that buyers base their purchase decision on whether they intend to live in an area for a few years, not on the outlook for home prices.
Showing how perilous the art of forecasting can be, the ad by the National Association of Realtors cites a 4.3 percent increase in the number of existing home sales contracts signed in August, from July, as evidence that “prices over all have stabilized.”
•But Wednesday, new data released by the association showed that contract signings fell 1.1 percent in September, from August, and 13.6 percent from September 2005. A spokesman said that the first ads were prepared before the latest figures were available and would be updated next week.
Mr. Stevens dismissed the idea that the campaign, the first of its kind undertaken by the association, could be viewed as a sign of desperation. He noted that sales were on track to hit their third-highest level in 2006; 2005 and 2004 rank first and second.
“You can’t have a record year every year,” he said.
“Housing Bubble Bloggers Say the Stars Are Aligned for Housing to Crash”
“It looks like Ben’s blog is now up against $40 million in ad spending”
Then I’d say it’s an even match. Bring ‘em on. And when their $40 million is long gone, we’ll still be here, ammo cans full to the brim.
Trouble is, $40 million or any amount of money, for that matter, cannot buy credibility once everyone has caught on to the lying habit.
This is funny on so many levels
Chelsea Clinton takes new job at hedge fund
12:25 PM CST on Saturday, November 4, 2006
Associated Press
NEW YORK - Chelsea Clinton has started working for Avenue Capital Group, a hedge fund that manages about $12 billion in assets, the agency that represents Clinton confirmed Saturday.
New York-based Avenue Capital specializes in trading in distressed debt, or debt of companies that are nearing or have filed for bankruptcy.
Clinton, 26, had been working as a consultant for McKinsey & Co. since 2003, reportedly for a six-figure salary. McKinsey is an international consultant firm. She received a master’s degree from Oxford University after graduating from Stanford University in 2001.
Details, such as when she started work at Avenue Capital, her exact role and salary, were not released by the representing agency, Rubenstein Associates.
Federal records show Avenue Capital founders Marc Lasry and Sonia Gardner have donated thousands of dollars to Democratic lawmakers, including Chelsea Clinton’s mother, Sen. Hillary Rodham Clinton of New York, as well as to Democratic campaign committees.
Representatives of Chelsea Clinton’s father, former President Bill Clinton, and her mother declined to comment Saturday. There was no immediate response to calls seeking comment from Avenue Capital.
Maybe Chelsea inherited her mom’s genius for futures trading?
http://www.thesuntimes.com/articles/2006/11/01/news/news11.txt
When I read that I couldn’t help but thinking of Jerry Rubin taking a job with an investment bank in the 80s (can’t remember which one, but do remember it was main-line). . .
Stupid question: What does “inactive” on the MLS mean? I’ve been watching a couple properties around here (not really interested in buying; just curious to see how far prices drop or how long they take to sell) and one of them was just set to “inactive.” Does that mean the seller just gave up trying to sell it?
This questioned piqued my curiosity so I just called my agent friend. Her MLS (east central Florida) does not have a category called “inactive,” nor any synonym. It’s either active, contingent, pending, sold, withdrawn or expired.
It’s only a stupid question because you don’t say where “around here” is.
There isn’t an international MLS - it’s localized, and different terminology is employed in different MLS systems.
I wanted to see if anyone got annoyed by this (off-topic). I went into the local mall. While walking down the court, I was approached by a gang of a high school soccer team wanting to sell raffle tickets. I have nothing against them and trying to raise money, but just don’t like feel that I should try and support every school organization because the budgets are cut. Used to get co-workers selling stuff for their kids, knocks on door selling candy by kids, etc. I just felt like why should I be trying to support everyone else because the government would rather waste my hard earned tax money elsewhere. Anyone else with similiar feelings.
Someone was commenting yesterday about high vet bills. They must be high to cover the vet’s increased malpractice bill. Someone somewhere probably got sued for 2 M + because a vet broke Fluffy’s or Fido’s tail. Riduculous.
Anyone else with similiar feelings.
I have the same trouble at my office. It seems like every child of every other employee is selling something for some reason. I had to just start saying no to them all. The last “donation” I made was to a 4-H group wanting to take a group trip to an amusement park. That was the final straw.
What you need to do is ask the local school admin why are they cutting budgets when tax rolls are at historic highs…..assessments…..number of homes/businesses….tax rates. Some districts might have increased enrollments but at far less than the rising revenues.
I’ve got family in school systems (supervisor/admin positions) in a couple of states and all the BS they shovel about funding cuts and such is simply crap…..something they won’t admit in public; but when challenged, will readily admit it’s a tactic they use after putting a pet program in place.
Don’t buy their candy or their line of BS……..
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All Housing Markets Are Local, Except When They’re Not
http://www.nytimes.com/2006/11/05/business/yourmoney/05view.html?ref=yourmoney
Unusual TV ad tonight, at suppertime. Hyundai dealer appears to be offering a no-down (don’t know if trade is required) financing deal with NO payments for the first year. Zero cash of any kind for a year. Now, I think Hyundais are great cars for the money and getting better each year, but their buyer base has to be near the bottom income level for new-car buyers. If they are that desperate to sell fuel-efficient vehicles, the economy in general looks worser and worser.