Bits Bucket And Craigslist Finds For November 13, 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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KB Home CEO out in options flap
Karatz retires and agrees to pay difference for incorrectly priced grants; not clear if restatement needed.
November 12 2006: 9:50 PM EST
NEW YORK (Reuters) — Home builder KB Home said Sunday its chief executive was leaving the company, as it unveiled the results of an investigation which concluded it used incorrect measurement dates for reporting stock option grants.
KB Home (Charts), the fifth-largest U.S. home builder, said in an e-mailed statement that the investigation concluded it used incorrect measurement dates for financial reporting purposes for annual stock option grants during the period from 1998 to 2005.
More sneaky options schemes
Video More video
CNN’s Gerri Willis offers some smart moves in real estate investing. (November 9)
Play video
KB said it expected the incremental non-cash compensation expense arising from the errors was unlikely to exceed $50 million, spread over the vesting periods of the options. It added it was still evaluating whether a restatement of certain previously-filed financial statement will be required.
It said Bruce Karatz retired as chairman and chief executive officer, effective immediately.
Karatz voluntarily agreed to pay the difference between the initial strike price and the closing price on options he exercised that were incorrectly priced, KB said. Karatz is expected to transfer an aggregate value of $13 million to KB, it said.
KB said that Chief Operating Officer Jeffrey Mezger will succeed Karatz as Chief Executive Officer. It has created the position of independent non-executive chairman and will conduct a search to fill this position.
“Karatz retires and agrees to pay difference for incorrectly priced grants; not clear if restatement needed.”
Not clear if jail time needed. The best kinds of theft are the ones which are too complicated for most passive observers (aka prospective jurors) to realize that theft is occurring.
I bet there are more than a few attorney generals and assistant attorney generals of minor financial means and major Napolean complexes ready to rip guys like Karatz a new pie hole.
Someone should make up the RE bubble version of the Iraqi leadership playing cards to help the authorities identify, distribute, and pursue the REIC criminals.
Spitzer as AG in New York made his rep chasing Wall Street crimes in the wake of the 2000 crash. How successful he was is open to question, but he rode this rep to an overwhelming victory as NY’s new governor. With luck, other AGs will take note of this payoff and chase housing/lending/appraisal fraud.
GS,
This whole thing stinks and is clearly spun euphemistically by the MSM. Probably a ‘respected’ guy who got the ‘easy way out’ because he meant so much to the company.
‘You should probably retire…’(elbow bump…wink, wink…elbow bump.’
I guess Bruce will soon join Kenny Boy on the island…
He’ll be dead?
Island of the Damned
-
Steal millions and if you can get away with it, you get to keep it. If you get caught, you just give it back and walk away - no harm, no foul, no penalty.
Of course, this plan doesn’t always work out, as demonstrated by Kenny Boy’s untimely demise…
A far number of ex-Enron employees I know think Ken Lay faked his death.
If you think about it a couple of million to a number of well placed people should just about do it.
An old, obviously ill man (judging from photos) who has no life outside his friends fakes his death and lives in hiding. Why don’t you guys get real before this blog becomes a joke.
I have a couple of friends who as of a couple of months ago still worked for Enron. That is my source info. It was clearly stated as opinion.
I’m normally pro Occam’s Razor… but even I would believe Ken is sipping margaritas somewhere.
But not on a spaceship with Osama Bin Laden and Elvis.
Sounds like solid “conservative” values!
Good old fashioned “family values”.
As the guy in the movie (The Godfather) said, “You can steal more money with a briefcase than you can with a gun….”
Gekko posts “Steal millions”
GWBush’s ownership society.
looks like KB Homes chief has become the first sacrificial lamb of the house/credit bubble excesses…
Link: http://tinyurl.com/y5449p
Only a moron would throw away pension assets on hedge funds…
http://www.signonsandiego.com/uniontrib/20061113/news_mz1ed13tp.html
My worst nightmare. Please tell me New York City isn’t doing this.
“The trouble is that hedge fund managers used to be few and utterly expert in identifying and exploiting those slivers of the market where fortunes could be made. Their investors were wealthy enough to lose their entire investments without blinking. Now managers are a dime a dozen, even if dime doesn’t describe their fees: millions up front, and often a 20 percent cut of gains, but zero share of losses. Other investments may offer lower returns but, minus fees and risk, be a better deal.”
Millions up front? 20 percent of the gains but none of the loss? This isn’t a very good description. Many managers have significant skin in the game. I cannot recall ever having invested in a single hedge fund with up front fees, having executed/assisted with over 30 billion in subscriptions. And the 20 percent incentive fee is not always 20 percent (it is negotiable) and except in a few cases (which I’m not sure even exist any longer), it is NET gains. There may be a few cases where there are ways around this such as sidepocket usage, but this is just a delay rather than an outright avoidance.
“Bluntly, it takes a lot of money to make money in hedge funds, and just as much to lose, especially as some innovative funds bet big time on home mortgage foreclosures. A loss there, say experts, could cripple the nation’s economy. Extreme caution with public money, then, is the key word.”
I can imagine how this might work.
1) Hedge funds first channel lots of dough into the hands of subprime lenders who then tempt financially unsophisticated borrowers into drinking the suicide loan koolaide.
2) Hedge funds also make side bets that pay tall dollars when lots of subprime borrowers can’t make the resets on their ARMs.
Does this sound about right? Does it sound legal?
I am not sophisticated about finance, but how can a large entity like a hedge fund make money with foreclosures. They are expensive and time consuming, and profiting requires intimate knowledge of local conditions.
It is not the sort of business that implements a hedge fund’s strength.
the advantage of a hedge fund in an investment portfolio is as a risk reducer. this is not because the hedge fund is not a risky vehicle, but because in theory the market risk is reduced so that the risk is solely a product of the manager’s methods and skill. this should produce a return stream that is uncorrelated to the other investments in the portfolio. in this context, this non-correlation is more important than the risk/return of the fund alone.
non-correlated assets are hard to find. so, employing a hedge fund in a small sliver of a large portfolio can be a great strategy.
you just have to use them right, just like any tool.
Problem is, when the hedge fund bubble implodes, almost all hedge fund returns will suddenly go negative, and the correlation across returns will approach 1, IMHO.
The real problem is not hedgefunds per se, but credit/derivative boom. If you equate hedgefunds to a bunch of people in a casino making all-cash bets, then no matter how things go, there is no correlation between them. However, when you introduce leveraged bets (in other words, when the length of one dollar spans more than one transaction), then you have a systemic risk, and correlation may reach 1.
non-correlated assets are hard to find.
umm, I think they are very easy to find. Here are classical steps - pick a sector, and pick two small players in the sector - the two are uncorrelated.
Hedgers have been using this strategy since the beginning of time, not rocket science.
Stucco;…I read recently that Calpeers has changed its portfolio effectively reducing cash and increasing foreign investment…It said that it needed to earn a 9% rate of return to cover its pension obligations….That seemed kind of high to me and begs the question what if you don’t ?
9% rates of return are generally a wishing rate given the period of low risk premiums which we are currently enjoying (remember Greenspan’s ominous warning about periods of low risk premiums?). It is only possible to achieve such high returns at a high risk of losing the investment proceeds, a la Amaranth.
Dutch pension funds like ABP (one of the biggest by capitalisation in the world) are direct investors (owners) of several big hedgefunds. These hedgefunds, just like the pension fund itself, are extremely active in RE related stuff (like Fannie stock, REITS etc.). Unlike the pension fund however, the hedgefunds have no obligation to tell what they are doing with the pensioners money. If they run into real trouble, the hedgefund managers will use their golden parachutes (in fact they don’t need a parachute as they make enough money in one year to retire as a multimillionaire) and the taxpayer will have to repair all the broken pension promises.
I think there is a beer bubble growing. They have the price of a 12 pack up to $15 all of a sudden. Maybe if I fill my apartment up with cases of beer I could flip them in 2 years and double my money. Anybody think they will get the price up to $30 a 12 pack? Also Jersey Mikes wants $10 for a sub sandwich. Are they out of their minds?
When I was in Pensacola, Florida this past summer beer was on sale for $9.99 an eighteen pack at Tom Thumb.
A beer is a refreshment, not an investment = A house is a home, not an investment.
Don’t get greedy, just drink those things. Let me know if you need some help.
Warren Buffett took a stake in BUD so he
thinks beer is a good investment. As far as
pricing goes, I live near a Bud plant and we
can go over and get it for free. If we’re willing to take a free tour first. I don’t drink beer so we don’t go there very much.
“A beer is a refreshment, not an investment.”
I feel the same way about wine, but trying telling that to my “wino” brother whose home purchase decisions rest on where the temperature control wine closet will go. I keep telling him he’s drinking his retirement. But at least he’s enjoying it.
MGD was on sale this weekend for $6.99/12pk - Leinie’s was still $9.99/ 12pk (Creamy Dark). And green death (Special Export) $1.99/ 6 pk. LOL
In Wisconsin beer is a vegetable and necessary food group - a price increase would lead to a violent revolution.
The price is certainly rising - I had a party yesterday and paid $9.99 for a 12-pack of Budweiser at the grocery store where it’s usually $7.99. Plus Corona is now $12.99 per 12-pack. Can’t stockpile beer though; it has a shelf life but if you get the people drunk on fresh beer, they won’t notice the stale beer later.
Those damn boomers, going to every grocery/convenience
stores and buying beer…Soon first time drinkers will be priced
out.
I will drink as much beer as I can and then repackage the results from all that drinking. Then, I will put the “beer” into cases and sell the cases to foreigners. By the time the foreigners figure out the “beer” is garbage, I will have made my money.
I’m a fence-sitter - can’t decide whether I should go to Costco and get another 24-pack of Fat Tire before finishing the three bottles still left, or finish what I have first, and then go out and buy. Market is too uncertain - afraid to miss out on one hand, and on the other - afraid to be stuck with all that beer for many months.
A hilarious youtube Realtor video at Itulip. “Redrum Realty” - redrum, a la Jack Nicholson and “The Shining”.
This explains why Realtors were able to peddle so many overpriced homes.
The
Oops - lost the link - http://www.itulip.com
Wow, what an imagination!!!! A well done video, but on the sadistic side to say the least.
Too funny but am glad I did not watch it alone at midnight!
House sizes shrinking in the Northeast, as people trade better quality for square footage.
http://www.nytimes.com/2006/11/12/business/yourmoney/12small.html?_r=2&%20ef=business&%20ref=slogin&oref=slogin
Just like they did early in the 20th century as the “Arts and Crafts” era houses replaced the much larger Victorians. If you know the cycle, you see it coming.
It’s just a matter of time until people begin to trade size for location. McMansions don’t seem so necessary in times of high energy prices and 2-hour commutes. I’ll trade a larger yard for an extra hour of sleep.
I expect that some builders will try to flog off less house for directly-proportionate lower prices, in order to preserve outrageous profit margins. No idea if it will work, but I base my buying on $ per sq.ft. and when housing reached my price point, I’ll buy. During the boom, I ran into some agents who tried to tell me that square footage didn’t matter. Right.
or could it be that people are buying smaller because they cannot afford more? In my country during the current housing bubble (now some 15 years in the running), especially in the last 5-10 years, there has been a tremendous shift to smaller and lower quality homes because the same quality and size has simply become unaffordable for almost anyone (price gains 600-1000%). So instead of a big traditional 3-story home costing less than EUR 100.000 in 1990, you now have six EUR 250.000 apartments. Homes that no one would look at in 1990 because of very poor maintenance or bad neighborhood are suddenly in heavy demand because they are just within reach for working starter couples. And just like in the US, construction quality of new homes has plunged while prices where skyrocketing at the same time.
Vegas is showing signs of life in houses priced below $279,000. And, yes, the sq ft of these sales are from 994 sq ft to 1400 sq ft.
This is way down from the average 1900 sq ft (with $400,000 price tages) that most builders were offering last year. The top
4 zip codes for sales in Vegas since Oct 1, 2006 are all close to the strip and in low to middle class neighborhoods. These sales will bring down the median price in the next reporting period, but at least there is a pulse in Las Vegas housing
As usual these days I didn’t have time to check in with the blog over the weekend, so please accept my apologies in advance if this has already been posted.
A Las Vegas realtor writes candidly and IMO honestly about the Vegas housing market:
http://www.reviewjournal.com/lvrj_home/2006/Nov-12-Sun-2006/opinion/10738659.html
Peggy — I hadn’t read it — thanks.
What will it take to get you to buy this home?
“When she put up a new ‘for sale’ sign two weeks ago, real estate agent Mary Ellen Wasielewski had some unusual advice for the sellers: Give the buyer money to build a garage.
“The family lives in the Boston suburb of Medway, where homeowners enjoyed a seller’s market not so long ago. This $679,000 home has plenty to recommend it: an estatelike setting, a custom chef’s kitchen, a Jacuzzi, and a stone fireplace.
“But now the tables have turned. For a deal to happen, buyers must be pleased on every front. With the snow and slush of winter just around the corner, Ms. Wasielewski says no garage probably means no sale.
“‘The buyers are out there. I see the same ones coming around,’ she says. ‘They’re not willing to pull the trigger until [they find] the perfect equation of the condition and the price.’”
“I see the same ones”….”The buyers are out there”….
Same people. “Buyers” who only look. This is a “market”?
Ms. W, some one’s in denial here…….
“‘The buyers are out there. I see the same ones coming around,’ she says.
This realtor is confusing ‘lookers’ with ‘buyers’. If you see the same people coming around they certainly aren’t buying.
Not buyers, just members of “Ben’s Army” checking the pulse of the market. The fact that they are seeing the “same” buyers, over and over again, would seem to indicate that there are very few buyers.
I sure hope they aren’t expecting these few “buyers” to rescue the market any time soon. Seems to me, the informed future buyers are waiting for a 30-50% discount from peak prices, at least.
Good luck to them…
Credit Card Debt Goes Top 40
“Now we know credit card debt has truly arrived. There’s a new way to win money on the radio. In addition to the usual cash prizes and concert tickets, Boston’s local Top 40 station, Kiss 108, has started paying listeners’ credit card bills. Contestants send in a copy of their credit card bill and an explanation of why they can’t pay it themselves. The radio station then announces the lucky debtors in much the same way that it would announce the winners of Justin Timberlake tickets.”
They’ve been doing this for years here. (mpls)
This might be a sign of consolidation of the radio biz, rather than true change in credit card debt.
Our local station that does this (KDWB, 101.3) is owned by Clear Channel. When I was in San Diego the clear channel station there did the same thing.
A local TV station in Syracuse has offered paying one month of the heat bill for the lucky winner of their winter-time contest.
Odd that the NVAR hasn’t yet put out their sheets on October. They normally do it about the 8-10th of the next month, and normally just before the MRIS posts theirs. In this case the MRIS posted theirs last Wednesday, but NVAR’s numbers aren’t there yet. Must be too depressing for them to post.
http://www.nvar.com/market/mktreports.lasso
i looked for October this morning too, they must really be digging into the numbers trying to round up every last penny. MRIS had DC down 10%, NOVA down ~5%. can’t wait for the Arlington condo breakout.
Actually MRIS numbers are even lower - D.C. is down 11.76%, NoVa down 6.36% (medians).
I think the delay is due to hiring a French chef to cook the numbers well enough to be fit for public consumption.
LOL - the numbers are out now. The NVAR is now outright blatently *lying* with their numbers. For Loudoun (where I live), they still show an increase YoY in median and average prices. This despite the MRIS showing prices being down almost 11%.
Ben,
Did you see that deal in AZ that was paying a 20% cobroke!!!!!
HOW in the hell is that legal??? I saw it on the housingdoom.com site.
Wow , that reeks of fraud /kickback what ever .
As I understand it, It only has to be reflected on the HUD-1 to be legal.
I’m a wall st techie, not a finance guru, but my understanding of the typical RE loan life cycle is this: the subprime lender lures Mr John Q Pulbic into a no money down, 0 doc, teaser-rated ARM. John begins making payments- important because most lenders see this as proof positive the loan will not default- but since hes paying a teaser, hes seeing negative amortization. The lender then bundles a bunch of these craptastic loans together into a mortgaged backed security. That is sold to investors (which may include hedgefunds, but also includes the semi-governmentals, like Fannie Mae). To mitigate the risk of default, these purchasers also purchase Credit Default Swaps- essentially insurance against credit default. The problem is these ‘insurance’ policies arent being written by insurance co’s, who specialize in formulating exactly how much $ to have on hand to cover the insured, but by hedgefunds, most of whom are employing leverage at until recently unheard of levels. So technically, they profit from the fear of foreclosures- it makes investors want CDSs. But if foreclosures go wild, Hedge funds are the ones left holding the bag, and its unclear if they have the resources required to make good on their pledges.
So, based on this analysis, if large numbers of MBS tank the owners/investors of the hedge funds will lose their investments. Pension funds, including municipalities are now investing more heavily in hedge funds. Ergo, the little guy pays to bail this bubble out with his retirement.
You gotta love unrestrained capitalism.
Ben posted an article from the LA Times regarding the new twilight open house phenomenon. Read about the house featured in that story.
What do you all think of Zillow these days?
Many posts in the past have said they are not accurate or even close! I am tracking a 55+ development north of Tucson & Zillow seems fairly accurate on current prices & most importantly the trend which of course is down.
The problem with Zillow is that they don’t make public the magic formula for their “Zestimates.” If you don’t know the inputs, the results are questionable at best.
With such a broad range of areas zillow is bound to be correct somewhere, even if it is wrong many other places.
I suspect our local area is overvalued on zillow… but the TREND is correct.
At the end of the day though, this is a computer model… it can’t tell an overgrown lawn or a roof that needs repair. I wouldn’t spend $500K based on a computer estimate. It’s fun, it’ll get hits, and does have a lot of good historical information, but an appraisal it is NOT. It’s a zestimate.
It’s worth exactly what your house is worth if you aren’t selling: nothing.
If you are selling a good appraiser + the market will tell you what it’s worth without zillow, so the zestimate is again worth nothing.
As I said though, I love being able to see previous sales and area trends.
“its unclear if they have the resources required to make good on their pledges.”
They don’t… or from their point of view, suddenly, they won’t
The NAR has a new ad:
The NAR Has Much More Work to Do
Hey Ben!
Tim posts new ad etc.
I am glad to see the “cupcake lady ” had closure. I read the bit just below the NAR peice. I cannot decide if it was the “cupcakes” that got her house sold or the 100,000 dollar price drop? Any comments would help me resolve this issue many thanks in advance. I most likley will get little sleep tonight trying to sypher this one out. Thanks again I am working on it.
Self-professed fools are puzzling over plunging home prices…
——————————————————————————–
“Home Prices Plunge!”
Become a Fool! Become a Fool!
By Selena Maranjian (TMF Selena)
November 10, 2006
Oh dear! Read some recent headlines about housing prices, and you might find your heart rate rising. Check out this one from an Associated Press article, for example: “Home Prices Plunge by Most in 35 Years.”
http://tinyurl.com/ycoovk
That Motley Fool article was worthless. No analysis, no hard numbers,no mention of mortgage/appraisal fraud, no understanding of the looming resets in 2007. Just optimistic fluff…not enough substance to even rate as spin.
At least the writer admits to being a fool, unlike most of the RE cheerleaders…
I wrote to a leasing agency out of state, about a SFR that I’m interested in renting while I wait for the local market to fall farther. Told them that I am interested in the financial well-being of the owner, that I do not want to rent from a 20-something flipper whose alligator will eat him anyway. Can’t tell if they’re pissed, or perplexed, but they haven’t responded to that quite-serious request. Interesting. Must be icy cold water on their end.
Did the homebuilders recently make an announcement about higher earnings that I missed? Because the only news that I have read for months has pointed to worse-than-anticipated results…
———————————————————————————
Stocks & Bonds
Shares Up, Led by Home Builders
By BLOOMBERG NEWS
Published: November 11, 2006
Stocks rose yesterday, wrapping up their sixth weekly gain in the last seven weeks, as falling oil prices lifted companies that thrive in an expanding economy. Treasuries had their biggest weekly gain since September on speculation that the government would curb spending.
KB Home, D. R. Horton and Centex led a rally among home builders, the best performers in the Standard & Poor’s 500-stock index. Solectron, a maker of electronic components, had the index’s biggest gain after saying that it would meet or exceed profit forecasts.
“I’m very positive on this market as the basic fundamentals are back in place,” said John Merrill, who helps manage about $475 million as president and founder of Tanglewood Capital Management in Houston. “It’s hard to have better earnings. The market does have further room to rise.”
http://tinyurl.com/ymp5rx
I wonder if any of it has to do with the fact that recent exorbitant builder profits give them a huge cushion from which to keep building and selling, knowing that used-home sellers will remain behind the pricing curve all the way to the bottom.
Here is some news about home builder fundamentals. Could this be what that Bloomberg piece was talking about? (Note to math geeks: The first derivative of earnings w.r.t. time is negative and decreasing.)
—————————————————————————–
EARNINGS OUTLOOK
D.R. Horton’s profit seen lower
Builder stocks in focus this week on housing starts, Fed minutes
By John Spence, MarketWatch
Last Update: 3:19 PM ET Nov 13, 2006
BOSTON (MarketWatch) — The nation’s largest home builder is expected to post lower earnings in a week that could see heavy trading in the housing sector, on the release of the minutes of the latest Federal Reserve meeting on interest rates along with October starts.
D.R. Horton Inc. (DHI:D.R. Horton, Inc. Last: 22.38-0.09-0.40%
5:14pm 11/13/2006) is expected to release financial results for its fiscal fourth quarter ended Sept. 30 before the market opens Tuesday. In early October, the company preannounced some results, saying that net sales orders for new homes fell 25% from the previous year as cancellations surged.
Analysts surveyed by Thomson First Call see the Fort Worth, Texas-based builder posting quarterly profit of 69 cents a share, down from $1.77 the prior year. Full-year net income is predicted to drop to $3.72 from $4.62 a share.
“We expect sharply lower margins in the fourth quarter due to higher incentives to resell cancelled homes (40% of gross orders cancelled in the fourth quarter), continued price erosion and additional write-offs and impairments,” wrote Banc of America Securities analyst Daniel Oppenheim in a research note.
He doesn’t think that D.R. Horton will provide a 2007 earnings outlook, “given the low visibility.”
Many home builders have booked charges for walking away from land options and from real estate that’s fallen in value due to the retreating housing market.
http://tinyurl.com/yyg77g
Real Estate Weekly
http://www.marketwatch.com/news/story.asp?column=Real+Estate+Weekly&dist=nwtreal&siteid=mktw
______________________________________________________________________
THIS WEEK’S REAL ESTATE STORIES
David Lereah has had an easy time of it in the last five years. The
chief economist for the National Association of Realtors has been the
bearer of nothing but good news to the more than one million members of his trade. And when it comes to Realtors, that is pretty much the only
position you want to be in because they can be an awfully surly lot when
forced to digest bad news: ‘Don’t shoot the messenger’ rarely works with
that crowd.
That’s why Lereah wasn’t kidding Friday when he told an audience at
this year’s annual convention in New Orleans that his was a tough speech
to make. The numbers have not looked good for housing this year and no
matter how optimistically you look at them the numbers look about the
same for next year.
But the numbers that really count for Realtors may be these: Lereah
predicted the housing downturn will shave membership in the NAR be 8%
next year. You’re talking about 100,000 or so of the NAR’s 1.3 million
roster that may be pounding the pavement looking for jobs instead of
listings in 2007. And that could still be a half million or so light of
what the industry might really need to pare.
One of the biggest problems with real estate sales has long been that
there are virtually no barriers to entry. In most states, getting a real
estate license takes far less study than getting a hairdressing license,
never mind that even a fancy salon cut at $100 doesn’t put consumers at
risk for one-thousandth of what a house does.
And boom times in the industry draw in many fortune seekers who take
out that license and hang it with eager brokers who, because most all
real estate agents are independent contractors, may have to invest very
little in the new hire while awaiting a cut of any commissions the
newcomers do bring in.
All of this is not lost on the veteran agents who understand that the
structure of the real estate industry can undermine their own
livelihoods. In fact, the packed ballroom in which Lereah made his
prediction actually responded with applause at the notion of having 8%
fewer colleagues trying to horn in on the action in this declining
market.
The complaint is that too many agents are not productive and do not add
to the quality of the profession. Especially for the 25,000 or so who
spend time and money to travel to this convention seeking to learn
something (OK, they will all be down on Bourbon Street partying Saturday
night, in matching T-shirts no less), that can be galling.
The fact is that that real estate business is changing in fundamental
ways. But the euphoria of the last few years has masked the changes in
some ways. The consumer is in control of the real estate transaction
these days more than ever, and realtors who have simply been trotting
along at the old gait during the good times are going to have to pick up
the pace now that the balloon, as Lereah says, has deflated.
You can’t really say that is bad news. But if you deliver it, you might
want to duck all the same.
Steve Kerch, real estate editor
_______________________________________________________________________
HOUSING MARKET APPEARS NEAR TROUGH, WITH SIGNS OF RECOVERY IN DATA: NAR
The housing market is on a “road to recovery,” the chief economist of
the National Association of Realtors said Friday, but just how long that
road is and how difficult a trek it will be in some parts of the country
is still anybody’s guess. “There is still bad news [on home sales}, but
the bad news is getting better,” said David Lereah, at the real estate
trade group’s annual convention here. “And the bad news is just about
behind us.” See full story.
Repeating a nugget from a few days ago. Saturday a Calif woman called me wanting to borrow $120K towards the purchase of a $160K property in a condo-ized RV park in Pinal County, Arizona. I told her I was not at all interested, that the most anyone owes me on a comparable property is $77K, and that the property is not worth $160K anywhere but in the seller’s mind. The prospective buyer tried to talk to me about her own creditworthiness, her “pre-approved” status with some bank, and I asked why she wasn’t getting a mortgage from the bank. She said the bank had too many questions about the property.l I said I had NO questions, that I was completely certain I wouldn’t want to have to unload it at $120K or anything close. Told her to challenge the seller.
Great article from Prudent Bear: “When the Home Cookie Jar is Empty.”
http://tinyurl.com/y7u2eq
“…Americans will need a wage increase of about 20 percent to make up for a loss of purchasing power if home equity extraction goes away. (I sincerely doubt Americans can expect this type of raise from their generous employer next year.)”
Nice, easy to read charts showing the evaporation of equity that fueled equity extraction and consumer spending.
“When the Home Cookie Jar is Empty.”
Five years of stagnant income growth while housing, transportation, education, and healthcare costs have outpaced inflation. Since the wife has already been put to work few political options exist outside of pay raises with inflated money.
“Since the wife has already been put to work few political options exist outside of pay raises with inflated money.”
Are you kidding? Most of these households have one or more kids that, as a class, have done nothing productive since the 50s. Disenroll them from soccer, violin lessons, etc. and put them to work. Save money on the lessons and earn income at the same time!
“Disenroll them from soccer, violin lessons, etc. and put them to work. Save money on the lessons and earn income at the same time!”
Now there’s a novel approach. Reminds me of the old newspaper route, by bicycle. Probably would make them healthier, too.
Actually I was thinking of the 1850s. Lots of good work for kids - mines, textile mills, chimney sweeps, etc.
Albrt - LOL — I’m going to see “A Christmas Carol” on Friday — perfect timing.
WaMu reaches $47M settlement with Comerica
Washington Mutual Inc. announced Monday that it would pay Comerica Inc. $47 million to settle a lawsuit against Commercial Capital Bancorp Inc.
KB Home gets default consents on senior notes
KB Home’s bondholders agreed to waive certain defaults on its $1.65 billion in outstanding senior notes, the company said Friday.
It was in danger of defaulting on the notes since it has yet to file its third-quarter report with the Securities and Exchange Commission due to an ongoing stock options investigation. The consents from bondholders give KB Home a filing extension until Feb. 23, 2007, to avoid default in all five series of its senior notes.
Can someone please explain this?
Hi, Melody — it looks to me like the draft 3rd quarter report was based on cooked books, based on the backdated options. I’d guess the financial implication of that is minor, but technically they have to re-do the statements. The bonds require regular issuance of quarterly statements, so technically there would be a default without a waiver; the bondholders are savvy and presumably well-protected, so it likely was very easy to get the required consents.
Thanks Chip
Bidding Wars Disappearing in Vancouver
“Every weekend we seem to have someone through the open houses who is really interested, who says ‘you’ll be hearing from us,’” says Mr. Webber, who’s already purchased a bigger home in another part of the city. “But nothing has happened.”
http://www.theglobeandmail.com/servlet/story/RTGAM.20061112.wvanhousing1112/BNStory/Business/home
I need to scan this ad in, but I’ll describe it for now. I’m at a client site (Disney) and I see an ad for homes in the internal employee publication “Eyes and Ears”
The ad copy makes absolutely no LOGICAL sense, but the advertiser decides to use the words “housing bubble” in the ad, along with a picture of a woman blowing a bubble-gum bubble. I’m paraphasing here:
“Who says the HOUSING BUBBLE has popped! We still have many homes available at attractive fixed mortgage rates”
Well, DUH! If the bubble has BURST that means there’s going to be a buttload of homes available at builder-subsidized rates. This builder decided to confuse people who may not know what “bubble” means by making them think that, the bursting bubble means homes are expensive and hard-to-come-by! I nearly did a spit-take when I saw this ad. Good think Mickey wasn’t standing in front of me.