Bits Bucket And Craigslist Finds For November 20, 2006
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REITS going GAGA …./ Blackstone to Buy Equity Office for 36 billion$ (incl. debt)
http://www.immobilienblasen.blogspot.com/
Residential real estate is in the toilet so money is now flowing into commercial properties. It seems to be just a mad game of too much money following whatever is hot at the moment. I think the stock market is pumped as full as it can get. Residential property is going nowhere. Where does money flow after these pop?
“Where does money flow after these pop?”
I’m guessing Gold and Silver.
Treasuries: IEF and TLT
Gold was/is already in its own bubble, and now it can’t even break $630 resistance. It is, from a technical analysis, at least on a short-term downward trend.
Better to put your money in a money market or short/medium term bond fund. When the FED lowers rates due to the housing market, the bonds will go way up in value. Although this may be somewhat supportive of gold, my hunch is that gold prices will have fallen so far by the time the FED lowers that any uptick in the gold price will still place its exchange rate lower than it is today.
You say “from a technical analysis”, but, just like the other “analyst” on this board, you fail to quote any statistics or data, or provide any analysis intelligent or otherwise, and then to top it, you tell us what your “hunch” is! Which is it - hunch or is it an analysis of data?
Just another phony.
Sounds like someone is a gold bug. Realistically, look at the price charts. In 1802, an ounce of gold was $20. At $700 per ounce in May 2006, this was equivalent to an annaul compounded return of just 2%! Equivalently, this same $20 placed in a bank account over the past 200 years would be equivalent to roughtly $100,000 today.
There is just not a good case for gold, especially in the long term. Let’s see: demand has been falling over the past several years since jewelry consumption still makes 70% of its physical use and prices have gone up some 200% in the past six years. Almost all gold that has ever been created is still in existence, and, most importantly, gold is really not useful for anything. It derives it value from a long-standing store of value and wealth.
Platinum would seem to be a far better investment. It is only twice as expensive, but is about 1/15 as common. Although, caveant emptor as it too is about 3X more expensive than it was several years ago.
Enough stats for you, or are you just one of these ignorant daydreamers who think gold is going to $4,000 ounce in two years?
Chicote,
Incidentally, I used to own gold. But, after its value had shot up from $252/oz to $720/oz in just a few years, I figured the time was to sell.
Could I say for sure that it ISN’T going to go to $1,000/oz? Of course not. I’d just rather not have tens of thousands of dollars wagered on that hope. Especially since at today’s (safe) interest rates, gold will need to tack on some good value each and every month just to beat the safe money-market alternative.
“Fortnight by fortnight we report upon dollar action, most of which is generated by short-term traders responding ahead of, and immediately following, important but constantly varying data. Their fluctuating views on such issues as the Fed’s future interest rate policies cause them to buy and sell the dollar. Robert Rubin and Paul Volcker are ignoring all of that noise and cutting to the chase. Their view, and one we share, is that the fundamentals are irrefutable and a weaker dollar should be the consequence. The recent strength of gold bullion may be a market signal suggesting that the next big negative moment for the dollar is close to hand…”
http://tinyurl.com/wq6tb
Moneyweek
Nov 20, 2006
Is the dollar set to weaken?
In 1802, an ounce of gold was $20.
Um…
In 1802 a dollar was defined as 1/20th of an ounce of gold. You’re arguing that a dollar was better than gold during that period, but they were the same thing.
Enough stats for you, or are you just one of these ignorant daydreamers who think gold is going to $4,000 ounce in two years?
“Ignorant daydreamers”. OK. I don’t pretend to know what the price of gold will be in a couple of years, I’m just here exposing the phonies who claim to be “analysts” but are really just spouting worthless opinions based on “hunches” and “gut feel”.
Oh, and, thanks for the fundamental analysis, which by the way is not the same thing as technical analysis.
Gold was valued @ $20.00 per Troy Ounce til 1933, then revalued up to $35.00, where it sat until 1971.
2000 years ago , an ounce of Gold bought a tunic a belt and a pair of sandals, in 1913 when Wilson gave birth to the monster known as the Fed , an ounce of Gold bout a Suit , hat , shoes and a overcoat. In 2006 , at 650/0z , gold buys same - a nice suit (unless your some kind of fashion horse , not that there’s anything wrong with that), coat , leather shoes and a tie. But since 1913 the $ has lost close to 95% of it’s value. 70% coming just since 1970.
And if you see a bear market in the Gold Chart , you’re looking at a different chart than I. Or certainly looking at it differently.
Gold is a store of value. Always has been , always will be. Especially in a world dominated by a Fiat currency issued by a (by any realistic accounting standard) bankrupt government. It’s been done many times over history. Precious metals used as medium of exchange to facilitate trade. Paper issued as convenience devolves into fractional reserve banking (usually to facilitate government spending programs and wars), fractional currencies soon become pure fiat paper. Fiat paper eventually becomes worthless. There has NEVER been an exception. Do you believe we are that much wiser that we will rise above thousands of years of historical precedent? Okay. I’m sure the previous generations and ages did too though.
Will China diversify some of their fiat funny money just to buy another one (the euro) or will they more likely use some of those trillion $ to buy hard assets? No one knows I guess.
As for Silver , mostly demonetarized (though Mexico looking to remonetize the Libertad)and now an industrial metal, it’s more of a supply demand play. And imo , a compelling one. Multi decade supply shortfall, increasing uses and usage (yes even with the ‘digital photography’ disaster that is not really all that large a usage when you look into reclamation and new paper for digital printout that create added demand). Look for Silver’s antimicrobial properties to create a whole new wave of usage. Got a Samsung Silver care washer myself. Maybe I’ll get some ionic silver lined gym clothes , towels , sheets etc to wash in it. Is silver a potential cure for H5N1 , influenza, and a host of other maladies - dunno yet , but google it for some surprising takes on the matter. Nano-Silver lined food continers keep food fresh for 3 times as long you say? Wow. Heaven forfend that high temp superconductivity ever becomes a reality. Going green? You’ll find silver is a crucial component of everything from solar panels to fuel cells to water purification technologies. Not to mention it’s the best conductor of both heat and electricity and can be found , in all your fancy gadgets from cell phones and computers to simple wall switches and contacts ( tiny little amounts add up and make for an intersting situation in which we have almost total price inelasticity - does it matter if the 30 cents worth or whatever of Silver (at $13/oz) components in a laptop becomes $1.50 (with silver at $60)? But forget all that and look at the massive drawdown on above ground bullion (the US Gov. has blown through something close to 2 Billion ounces , by dumping it onto the market these last 30 years, and now have zero silver reserves , even buying the stuff in the open market to facilitate the Mint programs. Throw in the largest relative short position in the history of commodities - much larger than the known ready to deliver supply of bullion that even exists in the world ( and silver is the only commodity I know that has it’s own reverse-cartel , the Silver Users Assn - who try and hold the price down). One fail to deliver will set it off someday is my prediction. What happened today in Platinum was just on a speculaton of shortage. What would happen in Silver , imo , would be exponentially more profound.
Meanwhile , almost all of the Gold ever mined is still around, and much of it in the form of bullion held by investors and banks. Not so for silver which is used up and beyond reclamation in so many applications over the last 40 years. If just a tiny percentage of Gold bullion investors decided to diversify a tiny percentage of their holdings into Silver bullion , the effect could seriously profound.
At some point people’ll start melting everything down, from coins to candlabras. I know many already do. Brother sees junk silver coming into his shop on a slow but regular basis . Sent to the smelters , destination as far as he can glean is Asia. But I think it will take much higher prices to bring any significant amount of Silver back to the market from that end. Just my opinions. I like Silver , if you couldn’t tell :-).
I’m an unabashed gold bug, love the look, the feel and the rarity of it’s 24K charm, (lesser karats are welcome, as well) and seemingly every day, I feel so much more comfortable owning it, verses paper/electronic investments that 99.9% of you have so very much faith in…
That would be a cheap suit!
Huck : Nice inputs. I work in the electronics industry and concur about increased content of silver usage. For leadfree soldering, S.A.C solder is 3 to 4% volume silver. Previously solder was tin/lead only. July 2006 is when EU inacted it’s RoHS initiative which means anbody manufacturing or selling into EU, has to have leadfree soldering process.
Gold is also used in semiconductors as bond wires and one of the biggest cost factors in a semiconductor package assembly BOM. However, before y’all become gold bugs over that, they biggest factor of semiconductor is still silicon manufacturing and test.
Precious metals are in a retraction at the moment. Like Peak oil, we may be coming to a peak “X” stage in commodities that need to be mined. There has been Buggerall investment in them in last 20 years whilst commodities prices were so low and they are also subject to increased energy prices. In gold miners, there is period of consolidation going on. Minor players are getting taken over for their reserves. Best investment may be stuff already on the ground.
Most money goes no where. It is destroyed. When a stock drops on a gap from 80 to 30 where did the 50 dollar difference go? It went poof based on a psychological change. When a house valued at $1,000,000. can not be sold at $500,000. where did the money go? Poof. Fear and greed determine market value and we are about to get a whole lot of fear.
FDR hit it on the head when he said, “all we have to fear is fear itself”. He had the luxusary of saying this after much of the fear and deflation had run its course.
People speak of speculators exiting the market. The facts are that most speculators are stuck and the market will probably only let them out via forced liquidation.
When a house valued at $1,000,000. can not be sold at $500,000. where did the money go?
That’s not money, that’s a house.
Tulips?
Given the variety of responses, it’s seems like a grand casino, doesn’t it?
According to NYU economist Roubini, even the commercial real estate market is heading for recession.
Looks like liquidity is going to slosh around from market to market, like a ball around a grand roulette wheel.
The real question is: what is the new direction for real productive investment? Even energy policy is in disarray: the recent new energy law in the US is a hodgepodge of subsidies for a far-flung array of initiatives; The Economist recently ran a special report (http://tinyurl.com/ydfvjp) on such initiatives and the dubiousness of subsidies to support them: take away the subsidies, and many of these initiatives are simply not viable.
The conclusion is that we are going to muddle along for the foreseeable future.
Ok, so everyone’s heard a million times for the last year about the ARM resets in 2006 -2008, $600B, $1T, $1T. Well, 2006 is almost over, isn’t it time we get revised figures for 2007, 2008, and 2009? After all, in that letter by Schiller with all the graphs, didn’t he indicate that over 37% of mortgages in the first half of this year were I/O or option ARMS, nationwide?
As long as nobody is buying at a lower price sellers have equity. If owners have equity they can refi. If they can refi they can put off the reset another couple of years.
The dollar is tanking compaired to other world currencies. This is both good and bad. Good in that it will make it harder for foreign companies to dump their product at slave labor prices in our market. Bad in that good will for the american dollar will decrease. Try traveling to a foreign country then.
If the government wants to make our dollar worth more they need to increase interest rates. Because inflation isn’t happening as fast as it was over the summer I don’t see it rates going up much in that next couple of years.
The great deperssion was caused by interest rates going up too quickly as the feds tried to make the dollars value go up as fast as possible after the stock market crash.
if dollar tanks (very low prob), the process will trigger treasury sell off and rates zooming up..higher rates inherently would mean that dollar is more valuable, hence supporting it. Since treasuries are near generational low, dollar still looks OK.
I was in French Polynesia a couple of months ago and the American dollar was worth less then the Euro.
Some of the people in my department just got back from the UK and directly saw the dollar loose value in just 2 weeks.
I’m sure it goes up as well. But, I tend to remember days when the US dollar was almost always worth more than foreign currencies. Now that simply isn’t the case. This directly shows our decline and other countries rise.
The dollar has been worth less than the Euro since 2002 - “parity” was broken in Dec 2002 and has not been seen since.
Full disclosure : I receive most of my income in GBP (further converted to USD).
What is so bad about the decline of the dollar, anyway? Our tourists stay home and spend here, our crap products (GM et al) are cheaper abroad, and foreign governments taper off financing our crack (credit) habit. Sounds like a good rehab program to me…
The dollar has been in a relatively stable 1.18-1.29 trading range against the euro for the better part of a year now, lately at the upper end of this range.
A tanking of the dollar means it goes below 1.36 to the euro is a disorderly fashion.
Two attempts at that since January 2005 have failed, and it is unlikely that another will succeed, but anything is possible. We’ll see where relative growth and interest rates are in mid-2007.
The dollar WILL decline and in doing so will hurt foreign countries trying to export TO the US (China, Japan, Europe, et. al.). All it will take is for our economy to reveal its true weakness and for dollars to look like the bad investment they are.
Beg to disagree, but IMHO we will still buy are TV’s, computers, cars from overseas as well as the junk from the Marts et al. The only difference is they will cost us more aka inflation. The rest of the world will be impacted by the US recession. It appears that other countries have their shit together and are trying to distance themselves from this debacle.
Touche’. We, the US may still buy from them, but in far fewer quantities. Doesn’t that hurt them? So with what do you disagree?
You clearly do not know your history. In November 1929 after the crash the FED began to cut rates (discount)from 6 1/2 to 1 1/2 through 1933. The FED cut rates and could not stop the deflation.
Milton Friedman and Anna Jacobson Schwartz upended that view in 1963. In “A Monetary History of the United States, 1867-1960,” they argued that the Depression was far from inevitable, but brought about by an “inept” Federal Reserve. First, they said, the Fed foolishly raised interest rates in 1928 to end speculation on Wall Street, causing a recession the next year that precipitated the crash. Then, it let thousands of banks fail and the money supply shrink. In part, it thought weak banks should be allowed to fail. It also feared that lower interest rates might lead foreigners to dump dollars, straining the currency’s link to gold.
What’s really interesting is that Ben Bernanke calls understanding the Depression ‘the Holy Grail of macroeconomics.’ He’s written books on it and studied the subject extensively.
Bernanke really is the best person to bring us out of the cr@phole Greenspan screwed us into. After reading up on the guy I believe his goal will be to try and keep inflation reasonably in check by talking it down and slowly raise rates. By slowly I mean over several years and with very small increases (if any).
But there was no minimum wage back then.
Guys, the manipulation of interest rates was a REACTION to a screwed up economy, not the CAUSE.
Things today are totally different from things back then. We no longer pile up our oranges and set them on fire to keep the price up while children starve. We no longer do these things because we now have certain safeguards in place: minimum wage, social security, and social welfare.
Not to say that it’s IMPOSSIBLE for things to go haywire again, but comparing 1920-140 to 1990-2030 is like comparing two different societies. There are too many variables!
-Big V
You clearly do not know your history. In November 1929 after the crash the FED began to cut rates (discount)from 6 1/2 to 1 1/2 through 1933. The FED cut rates and could not stop the deflation.
Awesome point. Isn’t it interesting that central bankers never point this out?
Neither could the Japanese and that’s why deflation terrifies central bankers. When people begin to believe prices can only go down, economic activity spirals down and down and down. People simply don’t spend.
Inflation isn’t “good” but it can, usually, be reined in without too much damage to an economy. Its hyperinflation, ala Brazil or Argentina, that becomes as bad as deflation because then all people think about is getting rid of paper money (not real economic improvement, simply playing a money game).
Californians are Insane, Part 7
http://louminatti.blogspot.com/2006/11/californians-are-insane-part-7.html
California real estate certainly deserves a premium, especially in nice coastal areas. I am not so sure that Riverside should have such a premium.
Even if California real estate deserves a premium, that premium didn’t suddenly arise in the last 5 years. If anything, California was even more desirable in past decades.
Good link! Brief, to the point, and says it all. But yes, the coastal areas of California (to a certain extent) do command a premium. I say “to a certain extent” based on my observations of Los Angeles. Check out LA. I lived in the South Bay for 3 years and I am not impressed with well over 99% of the houses there. First of all, most of them increased in value by well over 100%, sometimes 170% in the last 7 years while incomes annually increased single digit. Just choose an address of a house for sale and Zillow it. Check out the price history. The sellers are insane. I’ve seen houses of similar quality (lack of) selling for $80,000 in the central valley 5 years ago in urban blighted neighborhoods. But the ones in the South Bay are selling for $650,000 around 1 and a half miles from King Harbor. Yuck!
“California real estate certainly deserves a premium, especially in nice coastal areas. I am not so sure that Riverside should have such a premium”
Puzzling that Manhatten beach(SCal) should have such astronomically soaring RE prices, when you consider that it is a few miles south of the huge LA dept of water/power scattergood power plant. There is a 1-2 mile industrial/fwy barrier which separates Manhatten beach from the lovely gang-infested cesspools of Hawthorne and lennox.
The California Coastal premium must also cast its radiant magic out to such LA sylvian areas as Compton, scentral,Inglewood,Milmington,ect. Would’nt anyone just grab for the opportunity to pick up an 800 sq ft Compton crack shack for ‘only’ $400,000. After all, it’s only 20 miles from the beach.
Forget Scattergood, what about the Hyperion sewage plant 1/2 mile farther north? Remember what happened when a few of the pumps failed last year? Not to mention the takeoff pattern for LAX.
Still, if you stay within two miles of the coast, MB is nice enough.
What makes MB property so valuable is that every property is slanted at a 45% angle toward the ocean, providing a wide-angle unobstructed view of the water.
Plus MB/elsegundo PD is extremely effective in ferreting out unwanted rifraff from the nether regions/orc wastelands of inglewood.hawthornw.lennox.
Who exactly has jurisdiction to prosecute for appraisal fraud? Is it exclusively within Federal domain? Are there any state attorneys general cracking down, a la Elliot Spitzer? Reading SoCalMtgGuy’s post last week, I have this image running around in my head of trillions of dollars in MBS’s being traded around the globe, valuation and risk based upon one guy with a pen and an office above a liquor store in the sleezy part of town.
The quote I liked about appraisal, in one of Ben’s posts some time back, is that appraisers have a choice “between eating well and sleeping well.” Sometimes I think those who are getting ahead are sociopaths who sleep well regardless. And not just among appraisers.
Ben, One of my friends went to an auction Sunday night in Sacramento. Only 2 of the 16 houses sold. Here is the report.
The auction in Roseville today was totally goofy. 16 properties and nothing sold except property #2 & #12. Everything else had minimum bids that were too high and no one wanted to be a fool. Buyers today want 10% cash on cash returns for rental properties, or there is no reason to buy it. There is too much risk in this rapidly falling market and nothing will appreciate again for 10 more years.
Property #2 @ 1607 Basler Street at 16th, Sacramento, MLS # 60066365, 828 SF, sold to the only bidder, a woman who paid the minimum bid of $195,000. $235/SF. It looked like she bought it to live in it herself.
Property #12 @ 3416 Milburn Street, Rocklin, MLS 60063806, 2213 SF, sold to the third bidder. The minimum was $275,000 and it went to $330,000. $149/SF. Milburn Street is a fairly solid property. The seller paid $336,000 for it in October 2003. After selling costs, he took a loss.
None of the other properties sold. None of the other properties even had an opening bid. The buyers are getting smarter these days. They know if a property reserve is over $125/SF, it is not worth seeking.
Two months ago, I saw an auction at 6000 Little Rock, also in Rocklin. It was an 1800 SF house with a minimum bid of $380,000. It had been listed for many months at $485,000 or so with a Realtor. The house sold for the minimum bid of $380,000. Today, you must realize that buyer, who probably thought he won a good deal, really caught a falling knife! He paid $211/SF. The new comp in town is a nicer, bigger, better located house for less money at $149/sf. That makes the Little Rock home worth what…$268,000 today? That buyer is down over $100,000 in two months!
The auction had about 60 people seated in the room at the Hilton Garden Inn in Roseville. They all came to check out the action and win a good deal. The only action turned out to be on the one home in Rocklin. There were 4 properties for sale in Lincoln, some are brand new, obviously owned by inverstors. No bids. The minimum bids are above what the home builders are asking for new homes in today’s Sacramento Bee. How stupid is that?
There are several lessons here: 1) overpriced homes will not sell, particularly at an auction, 2) if you are going to buy an auctioned home be careful. A good deal 2 months ago may prove way overpriced two months from now, so it better make sense from a cost, income, and market comp standpoint. (ie., the Little Rock investor got burned, in hindsight). 3) Much better deals are coming downstream. There are 14 unfilled sellers at this auction who cut their prices to what they thought were the bare bones. Yet 60 qualified investors with money in their pockets just told them to go pound sand. Now those sellers get to reduce their prices further, or take the properties off the market. 4) If you bought a house in 2003, that is about what it is worth today. And it will probably be worth less tomorrow.
The auctioneer was named Barry Mathis with Accelerated Home Sales and Auctions. http://www.AHSAuction.com He seemed to be an experienced Realtor and kept telling us what great deals these were. Clearly, even the Realtors are out of touch with the market. He was trying to say how “small” the negative cash flow would be on these as rentals. Well, no one wants any negative cash flow in a declining market. If a property does not gush cash flow after all expenses, including vacancy and management, you can keep it, Mr. Auctioneer.
All the best, Pete
Great local update Pete. Thanks for taking the time to type it up.
Imagine - a loss on a California property bought in 2003 and the theory that there will be no appreciation for 10 years. Whodathunk it?
Thanks for the information, great stuff! These sellers are going to have to go to no reserve pretty soon I would think.
Great post!
The real key is that “…60 qualified investors with money in their pockets just told them to go pound sand…”
If 60 ready able and willing buyers showed up to look at 14 properties, we are no where near bottom. Way too much interest.
Check back in when your friend tells you no one was at the auction but him, the auctioneer and the coffee and donut lady.
These crowds at some auctions could just be curiousity seekers.
Fair enough.
“Buyers today want 10% cash on cash returns for rental properties, or there is no reason to buy it.”
THis new crop of investors must not know much, ’cause in my day (not htat long ago), we were looking for 25% cash on cash, especically when you factor int hat I have to manage the property, fix stuff, collect chase renters for money, get my sh*t torn up and the backyard a/c unit stolen…etc.
No wonder those of us who know cant find any “good delas” and wont for many years, because those that dont know (the game) have such low ROI expectations.
sorry for the misspelling (I’m not sure where I got my lernin from).
Chris USC, congrats on winning the game over Cal by the way. The 10% cash on cash is actual cash flow, after all expenses and debt service. People in CA have been buying homes and feeding them HUGE negatives each month on the expectation the property will appreciate. Some of them have made 25% ROI from 2002 to 2003 (if they sold). But as you know, those days are gone.
I own a bunch of homes. But I chose not to buy this year when I needed a bigger home for my new and extended family. rent a home where the Flipper paid $750,000 in April. His expenses are $1,100/mon with tax, ins, bonds & HOA (forget mngt., maint. & vac.). He pays a 80/10 mortgage and recently complained he loses $3,000/mon. So yes, these are the kinds of idiots that formerly competed with you.
The overall ROI you speak of can be acheived thru leverage, or rapid appreciation. I do not count that as interest rates and appreciation/depriciation are not fixed rates.
For the NJ/NY Metro readers, a new edition of Lowball!
http://njrereport.com/index.php/2006/11/20/lowball-111-1115/
MLS# Town OLP LP SP % off OLP $ off OLP
2208171 Franklin Lakes Boro (1120) $9,995,000 $6,900,000 $5,400,000 46.0% $4,595,000
2276318 Millburn Twp.* (1612) $4,500,000 $3,350,000 $3,000,000 33.3% $1,500,000
2203111 Kinnelon Boro (2315) $2,150,000 $1,449,000 $1,360,000 36.7% $790,000
2110543 Bernardsville Boro (2703) $3,925,000 $3,495,000 $3,350,000 14.6% $575,000
2290235 Franklin Lakes Boro (1120) $2,899,000 $2,395,000 $2,395,000 17.4% $504,000
MLS# Town OLP LP SP % off OLP $ off OLP
2208171 Franklin Lakes Boro (1120) $9,995,000 $6,900,000 $5,400,000 46.0% $4,595,000
2308230 Plainfield City (2912) $289,900 $269,900 $175,000 39.6% $114,900
2279689 Springfield Twp.* (2917) $499,000 $400,000 $315,000 36.9% $184,000
2203111 Kinnelon Boro (2315) $2,150,000 $1,449,000 $1,360,000 36.7% $790,000
2276318 Millburn Twp.* (1612) $4,500,000 $3,350,000 $3,000,000 33.3% $1,500,000
2304299 East Orange City* (1605) $345,000 $345,000 $240,000 30.4% $105,000
2060526 Hardyston Twp. (2811) $1,199,900 $975,000 $850,000 29.2% $349,900
2283791 Newark City (1614) $129,000 $110,000 $93,000 27.9% $36,000
2267697 Bernards Twp. (2702) $1,150,000 $899,000 $845,000 26.5% $305,000
Interesting that Platinum took a $72 jump this morning.
http://www.bloomberg.com/apps/news?pid=20601012&sid=a1sMhvH_lf94&refer=commodities
Wonder if anyone took the oil short I mentioned the day after the election. Narsty!
Maybe FCBs have decided to diversify into more precious metals than gold…
just when you thought it was safe to get out of the expensive city living:
http://www.unionleader.com/article.aspx?headline=View+tax+victim%3A+In+Hopkinton%2C+a+big+one&articleId=9d9a7b38-3e8c-4587-89a6-d94598fb32ea
City living is far more sustainable than suburbia when on a fixed income.
Most people live on fixed incomes- they can’t readily demand a higher paycheck whenever desired.
Brad;….Its this kinda crap that generated the prop. #13 movement in California….Just tax these people out of business….The powers don’t give a rat’s ass about the ramifications of the tax….Gotta fund those pensions ya know….
What friggin dolts thought this absurdity up? What a travesty.
This is one of the few circumstances in which tragedy is actually funny. A “view tax?” What the hell is that?
“Oh, I prefer hues of brown to fields of green. I am the assessor, thou shalt pay according to my preference. Oh, and those lilacs will cost you.”
New Hampshire cracks me up. It is such a right wing state, yet remains determined to out perform the Soviet Politburo in its governing stupidity. Good Grief.
Long ago I thought the Beatles song ‘Taxman’ had the funniest lyrics. No way could anyone be taxed 95% on their income. The lyrics are not that funny to me anymore. A very sober song. How do the people that get the authority to tax us get in power anyway? There must be a glossed over detail that John Smith, town councilor of town XYZ, has every intention to stick it to property owners and income earners. Partisan ideologies at work? Where the f#%@ is the money going?
Top marginal UK tax rates in the early 60’s were very high, and there were surcharges for “unearned income”, such as royalties.
The Beatles were indeed paying 95%, in fact I heard once it was 19/6 in the (old 20 shilling) pound which is 97.5%.
I believe that Sweden in the 1980’s had a combination of various taxation factors which led to one hugely successful children’s author having a marginal rate of OVER 100% at one point.
Modesto, CA closes in on Merced, CA on the way to the bottom
That’s the bits from the Central Valley.
Oh, and the Merced Sun-Start local newspaper is silent on the issue. Last week, all the major newspapers posted articles on price reductions and forclosure rates, but not the Sun-Star. They were busy covering an emergering gand war between the Merced gangs and the gangs in the surrounding cities — all within 10 minutes from UC, Merced! So you better get these deals while they last!
At least the rag was not concealing the gang activity. In Fresno, major gang wars have been common for 2 or 3 decades. You hardly ever would see that in the news media. But my mother had a hobby of listening to the Police radio. There would occasionally be 1,000-member gang fights in the 1980s and early 90s. No joke! The news media would conceal this since it would drive away taxpayers and RE buyers. I’m not sure if the gang wars are continuing in Fresno. But if they are in Merced, you can bet they are going on in Fresno still.
You ain’t kidding! I learned about the problems in Fresno firsthand when I was 16 years old. A friend and I went backpacking for 2 weeks in nearby Yosemite Nat’l Park. High on life and packing nothing but a bunch of dirty clothes, we were jumped by a street gang on our way back home through Fresno. After 5 to 10 minutes of torment they left us alone. Lucky to be alive I suppose.
Costa del Sol News (Spain)
“Properties purchased as investments are saturating the real estate market ”
Almudena Nogués
http://www.surinenglish.com/noticias.php?Noticia=9540
Bottom line says it all:
“Sales: At the moment, apartments on the Costa del Sol take an average of two and a half years to sell.”
Just goes to show you that Alan Greenspan’s contention that we didn’t have a nationwide housing bubble, just a few areas of “froth,” was total B.S. Central banks the world over pumped far too much easy money into the global economy. The result was an international housing bubble — one that stretched from Ireland to California to Spain to China. Flippers bought in Shanghai just as aggressively as they bought in Boise and Barcelona. Now, we’re dealing with the fallout.
The sad thing is that there is STILL too much liquidity sloshing around out there. We’re seeing the same nuttiness that infected residential property “investors” infect commercial real estate. Buildings are being purchased at capitalization rates that make zero sense — and many REIT shares yield less than risk-free short-term T-bills! Then you’ve got your private equity funds buying everything in sight … and borrowing gigantic amounts of easy money to do it.
I have no idea when our two NEWEST bouncing baby easy credit bubbles (in commercial RE and private equity) will pop. But as far as I’m concerned, it’s just a question of when, not if. What a great way to run a global economy, eh?
http://interestrateroundup.blogspot.com
I’m switching to calling him GrinSpin
Investors of all stripe are gaga over real-estate. As a result, they’ll build ghost malls and office buildings to go along with the ghost housing developments. Ghouls and reapers will inevitably reign.
Mike in FL - the commercial real estate craze is not new and has been going on for several years now. I was expecting a “crash” in 2000/2001 due to high vacancy rates in office buildings and a weak economy. However, low interest rates propped up values, and due in part to a gradual recovery in the fundamentals, prices/cap rates are really crazy right now.
I recently read that cap rates for super-premium hotels were in the low single digits - in other words, the buyers were pricing in no risk whatsoever for these properties.
“Sales: At the moment, apartments on the Costa del Sol take an average of two and a half years to sell.”
If you have open houses every weekend along those two and a half f@cking years and you serve cookies and sodadrinks, are you considered being a RE agent or a caterer?
I am currently in Southern Thailand (Phuket). I have a couple of friends here who own and develop property. The bubble effect reached Thailand about 2 years ago. 100% gains in that time frame. I accompanied one of my friends to a development sales office.
Apparently, a Swede had been by recently and bought up 50 properties in one shot - to flip to other Swedes back home at a higher price.
The salesman (English) said “Phuket is the new Spain”. How long until this one unwinds?
BTW:
“LOS ANGELES (AP) - Bruce Karatz, who stepped down last week as chief executive of KB Home, could get as much as $175 million in severance pay, pension benefits and stock options despite leaving the homebuilder amid a stock option controversy, according to a published report.”
It must be nice to get a $175m kick in the pants…
that’ll buy a lot of Hershey bars, cigarettes and condoms.
I was thinking about a local (Hampton Roads/Virginia Beach) sales - pitch - radio show I called into a week or two ago. The show is run by a local realtor and mortgage guy, and they were all hell bent on pushing some crap condos. Their huge thing was “no mortgage payments for 1 year, live free.” I was thinking about it, and by doing this, wouldn’t the lender ensure that the mortgage would get sold off and be out of their hands? Seems like an easy way for lenders to escape the non-performing buy-back threat.
I threw the guy a bunch of curve balls. Perhaps next time I call in I will ask if the free mortgage for a year is an effort to escape forced non-performing loan buybacks. I’m afraid they will recognize me, as I’ve called in multiple times with multiple names inflicting bubble paranoia on the drooling masses stuck in traffic listening to these dorks that might as well be low grade used car salesmen. I said I didn’t want a condo, and dude was like “Buy the condo, live free for 9 months, then sell it at a large profit and move up to a house.” I didn’t get a chance to mention the 6% RE fees would eliminate any profit, and houses aren’t appreciating no mo. They going down.
going down fast- UK is up 12% yoy ?
Good point about a way to avoid the non-performing buy-back
threat. I’m curious how they write up these deals . Also I’m wondering if they are requiring a higher down payment on the loan because of these incentives .How can appraisers determine value anymore with all this nonsense going on ? It’s just become a joke . Lower the price . Can you imagine that they are selling this project based on the idea that you can move up to a house after a short time while you never make a payment on the condo to begin with .I’m surprised they didn’t offer a car to go with the deal also . Im sure the loan they put thses suckers on is a adjustable with a pre-payment penalty ,so they pay dearly to try to move up . Stuck GF’s for a long time .
Sorry to repeat myself, but yesterday morning I did some back-of-the-envelope analysis exclusively for this blog. I am curious whether y’all think this lays to rest the bull case that it is different this time, and that we are in for a soft landing next year followed by a resumption of the construction boom and ever-higher home prices (5%+/year appreciation)?
The analysis is based on the share of Residential Construction as a % of GDP, with numbers estimated by eyeballing Chart 13 in this report:
http://www.safehaven.com/article-6329.htm
My apologies for any estimation errors due to misreading of the charts; feel free to look up the actual numbers on which to base a more precise estimate, but I don’t think the qualitative conclusions would change. I also took the liberty of throwing out some guesses for the denouement of the current construction downturn (indicated by ?).
I drew on one additional data source, which is the NBER dating of recessions:
http://nber.org/cycles/cyclesmain.html
I use the following abbreviations below:
P = peak year of construction as % of GDP (peak % level in parens)
T = trough year of construction as % of GDP (trough % level in parens)
D = depth of construction downturn as % of GDP
E = length of preceding construction expansion
R = length of ensuing construction recession
N = dates of next subsequent GDP recession
P 1964 (5.5%)
T 1967 (3.5%)
D 2%
E 4 years
R 3 years
N 12/69-11/70
P 1973 (5.8%)
T 1975 (3.7%)
D 2.1%
E 6 years
R 2 years
N 11/73-3/75
P 1978 (5.7%)
T 1982 (3.2%)
D 2.5%
E 3 years
R 4 years
N 1/80-7/80, 7/81-11/82
P 1987 (5.0%)
T 1991 (3.3%)
D 1.7%
E 5 years
R 4 years
N 7/90-3/91
P 2005 (6.3%)
T 2009? (3.4%?)
D 2.9%?
E 14 years!!!
R 4 years???
N ???
Conclusions:
1) The periods of the three most recent residential construction recessions overlapped with GDP recessions (and we have apparently already entered a residential construction recession).
2) The 2005 peak of residential construction as a % of GDP was the highest since 1960 — 6.3% versus the next highest level of 5.8% in 1973.
3) The recent residential construction expansion (aka housing bubble) was the longest in duration — 14 years versus six years for the next longest period (1967-1973).
4) Previous residential construction recessions bottomed out at 3.4% of GDP on average. This time it would take a drop of 2.9% in the residential construction share of GDP to get down to the average of the past troughs, and that does not factor in ripple effects (i.e., GDP will likely drop farther due to downstream effects on consumption and employment). And Chart 13 shows the downturn has only just begun.
GS can you supply some color in order for readers to comprehend more fully what a drop of 2.9% in the residential construction share of GDP means i.e. drop in investment expenditures, drag on overall GDP, no. of people unemployed, construction start impact, completion impact, etc. I take it roughly as a 50% drop in all RE related activity.
The methodology looks okay and the resulting figure is in line with historical data but inquiring minds want to know what does it mean?
A huge amount of dry wood and kindling should have accumulated in a fourteen year construction expansion. We are in for a major firestorm with the amount of fuel available.
P’cola –
Your point is well-taken. If I made my living as a housing analyst, I would supply the color. I am hoping Professor Pigginton or some other highly capable data analyst might take the raw ingredients I have laid out here and turn it into a presentation which anyone can understand.
Fair enough. Hopefully CR, Mish, or somebody will pick it up and add the color for perspective. A projected timeline would also be nice. After all Christmas is next month!
Excellent info GS. Thanks!
“I am curious whether y’all think this lays to rest the bull case”
Interesting work; however, it doesn’t totally put the bull case to rest. However, it does show how UNLIKELY the bull case is to come to fruition (all other things being equal).
I agree that there is some small probability that stealth intervention will somehow keep the bubble aloft, though I have no clue how this might work.
GS — nice work. It’s contributions like this, from posters, that really sets Ben’s blog apart, IMO.
UK is up12% yoy
? wierd
I have seen a money supply chart in some recent issue of Economist - UK money supply is growing 14-15% annualized, as opposed to 4-5% here in the US.
This shows that cutting the interest rates next year may also increase money velocity again and respike the prices (UK scenario). Moreover, this seems to me the most likely outcome - reinflation is the easiest solution for the Fed.
We already have an all-time record level of new homes on the market. Are you suggesting that reinflation is the prudent cure for overbuilding?
No, I am not suggesting that.
But Fed will of course try to stabilize or reinflate housing prices - to avoid housing-led recession. The bond market is already pricing in 2 cuts in 2007, and it can easily be 3 or 4 in some scenarios. This will go a long way toward sustaining the bubble or even restarting the appreciation.
Though perhaps some areas of CA and FL are beyond reflating - I hope so, since I am sitting on a large chunk of cash, trying to find some place to buy in Miami.
“Though perhaps some areas of CA and FL are beyond reflating”
Yup, I’d say that unless we see some wage increases (and BIG ones at that), coastal Cali is stuck. And any big wage increases (hah!) would set off the inflation klaxon in a big way. And we all know what The Fed does when it smells inflation…
“And we all know what The Fed does when it smells inflation…”
Pretends to not notice?
LOL!
Made me laugh.
UK money supply is growing 14-15% annualized, as opposed to 4-5% here in the US.
Why aren’t we seeing this in exchange rates? The GBP is still sitting right around its multiyear high at $1.90/USD.
The only problem with that idea is that the US consumer has nowhere left to go to get the money. He has been spending more than he earns for 19 months now. At some point you can no longer borrow from Peter to pay Paul. The Fed is helpless now. All that’s left is for the macro economy to reveal its true weakness and for systemic imbalances to self-correct.
The UK suffers from the same consumer economy as we do - I have witnessed it myself. Any weekend or even weekday walk along the typical UK “high street” and you will see the same thing for yourself.
However, (prepare to be flamed) the UK is somewhat *different*. The UK, and London in particular, seems to be the ultimate destination for newly-added EU workers seeking a better life, and many talented or skilled “dissidents” from other nations.
Unlike the US stiuation (more flames coming), many of the UK immigrants come from societies with well-established histories of craft, workmanship, thrift, and intellect - the leading example being Poland. Many Poles have invaded the UK and work their a$$es off - frequently upstaging their English counterparts (ex: the Polish Plumber).
Add to this - London is considered the ideal island in the world for both legitimate and illegitmate fortunes made around the world - especially with the Russians. Russians do not trust banks, but they trust the English term “safe as houses”. Even if that house is an overpriced 2500sqft Georgian townhome in Kensington at the rock bottom price of $5,000,000.
Also consider that the UK is VERY favourable to foreigners holding their money in UK banks (me being one). The UK only taxes domestically earned income - as does most of the nations in the world (not the US, of course).
The UK is definitely in line for a correction, but London in particular will always be a sought after place to live. Despite its crap weather 300 days a year!
I lived in the UK during the early 2000s and agree with many of your observations. I’d add the following:
1. The British work ethic sucks. One reason so many illegal immigrants have thrived there is that they actually have a good work and service ethic, and as such, are much sought after.
2. London used to be one of the world’s great cities, and is still an amazing place. But in the past 20 years it’s become “Londonistan.” The vast UK social welfare bureaucracy is set up to reward parasitism and punish initiative and responsibility. There’s a lot of social, ethnic, and economic tensions that have been percolating under the surface for years, but are now bubbling over.
3. The Brits are in a massive state of denial. They simply refuse to grasp that they are a has-been former Empire in decline. The housing bubble is far worse there than here, because not only are houses extremely expensive (roughly double what you’d pay here, for a much smaller house) but the modern tract housing is extremely shoddily built.
Their crash, when it comes, is going to dwarf ours.
All great points that I would not refute. I have lived in several neighborhoods in London - East, West, and North. I have lived in one that would definitely qualify for the title of “Londonistan”.
The most laughable moment is whenever I arrive in the UK and have to pass immigration. I have entered the UK no less than 50 times over the years. I have had several work permits. EVERY time I get questioned as if I had just arrived from the third world - as if I am coming to join the “dole”. Yeah right. If only these public servants knew what I was paid for my consulting services (plus living expenses, mind you).
Love the UK, but I would find it difficult to live there full time. I do love my own version of “carry trade” - get paid in GBP but spend in USD!
Just back from the EHX show (Electronic House Show) in CA. Talked to many high systems home integrators and they have seen business slow down. Spoke to a few companies and their strategy going forward is to tone down the electoronic home installations and go after commercial projects.
Spoke to a large wire supplier, their business in Las Vegas is dead and they see home residential wire installation going down in 07.
Thanks for the good info, Simi!
How Japan can avoid hostage situations in a globalized economy
By TERUHIKO MANO
“…If China’s overseas assets are frozen, Beijing can freeze foreign-owned assets in its own country in retaliation. It is also reportedly shifting its foreign currency holdings from dollars to euros in a likely attempt to minimize the stakes of any “hostage” situation that could involve the United States.
With its huge current account deficits, the United States has external assets of $ 10 trillion and debts worth $ 12.7 trillion, leaving it $ 2.7 trillion in debt on a net basis. Britain has a net debt of $ 371 billion. The net external assets of Germany, which like Japan successfully rebuilt its economy after World War II, stand at $ 269.2 billion…
Japan should try to increase yen-denominated trade and investment. This will boost both external assets and debt, and at the same time increase the value of any hostage that it decides to take….”
http://tinyurl.com/ymbp85
Japan Times Nov 20 2006
I believe it to be ominous when Japan is concerned about freezing assets - in this case US asstes being frozen by China. “If a country is a huge net creditor, its overseas assets can be taken hostage.”
Thanks for posting. We don’t get near enough information from Southeast Asia even though the US is dependent on that part of the world for manufacturing and financing.
China and Japan are Northeast Asia.
“… “We have to continue to be, in particularly as regards my own institution, strongly vigilant,” Trichet, 63, said at a briefing after chairing the G-10 meeting being held under the auspices of the Bank for International Settlements in Sydney today. Global growth in 2007, while slowing from this year, will “remain very, very dynamic.”
Central banks “will need” to raise rates further to contain inflation, policy makers of the world’s 20 largest economies said in a statement yesterday after a weekend meeting in Melbourne. The fastest period of global growth in three decades is stretching production, spurring companies to raise prices and workers to demand higher wages….
In China, pressure for higher interest rates “has eased a bit” amid signs investment and industrial production growth is slowing, Zhou said in an interview at the G-10 today.
…“This decline in growth” in investment “is a good thing,” he said. “We still must keep an eye on inflation….”
http://tinyurl.com/yz98w4
Bloomberg Nov 20
Once again inflation rears its ugly head world wide and people think the fed will lower rates.
for a different view on the prospects for inflation
The deflation threat facing Europe
Economic briefing by Anatole Kaletsky
“… And the message from Europe’s policymakers has been loud and clear: the recent weak statistics are unimportant and should not discourage either tax increases or further monetary tightening.
The ECB has never cared much about stabilising short-term economic growth prospects, believing that its only duty is to maintain low inflation in the long term. Thus, Jean-Claude Trichet and his ECB colleagues simply ignore economic figures and repeat their mantra that interest rates are “low by historic standards”, that the rapid growth of Europe’s money supply points to serious inflation risks in the medium-term and that heightened monetary vigilance is still required. In taking this attitude, European policymakers are effectively following the deflationary model of the 1990s in Japan. Japan briefly pulled out of recession in the mid-1990s, recording the strongest growth among the G7 countries in 1996. But this was followed by a big increase in consumption taxes and a premature tightening of monetary policy by the Bank of Japan. So we should not be surprised by a Japanese-style deflation in much of Europe next year. …”
Times online
Nov 20, 2006
http://tinyurl.com/yg4ajm
“…the Labor Ministry of Korea said yesterday that wages for workers in local manufacturers grew 61 percent for the five-and-a-half year period through the end of June 2005.
For the same period, wages for U.S. employees in manufacturing companies increased 17.2 percent and those for Dutch workers climbed 15.2 percent….
The inflation rate was 17.8 percent in the United States for the period.”
JoongAng Nov 21, 2006
http://tinyurl.com/y9zp7c
Now the rest of the APEC’c can compare to the US and how much better they are doing. This sucks.
Shadow Government Statistics updated this morning, it just gets better and better:
http://www.shadowstats.com/cgi-bin/sgs/archives
“Exaggerated Gas Price Drop Pushes Inflation Reporting to Nadir / M3 Growth Hits Four-Year High / Economic Activity Continues to Crumble / Post-Election Environment Set for Rebounding Inflation and Deepening Recession / The inflationary recession is picking up momentum. The various special factors that have depressed near-term inflation reporting have run their course, while economic data ranging from retail sales to housing continue to signal plummeting economic activity. Such is not a happy environment for the traditional financial markets.”
“M3 Growth Hits Four-Year High”, them printing presses are speeding up…..
I guess the Fed believes the remedy for rampant housing market speculation and the all-time high level of new home inventory is more monetary stimulus? That seems about as smart as trying to put out a fire by pouring on some gasoline…
This is the second Realtor in a week promoting: “The (Solo) 401(k) Can be Your Best Method for Real Estate Investing”
http://realtytimes.com/rtcpages/20061120_solok.htm
They are not going to stop until they’ve sucked all the blood out…..
CNN:Home prices down 1.2% in third quarter
Rustbelt markets and Florida lead the decline. Sales volume plummets nearly 13%.
By Les Christie, CNNMoney.com staff writer
November 20 2006: 11:38 AM EST
NEW YORK (CNNMoney.com) — Once-hot housing markets cooled considerably this summer: The National Association of Realtors (NAR) reported Monday that the median price of a single-family house in the third quarter dropped 1.2 percent from a year earlier, continuing a reversal of fortune for sellers that started last winter.
Prices in the Northeast, down 4.8 percent, fell the most. Prices dropped 2.6 percent in the Midwest, 0.9 percent in the West and 0.1 percent in the South.
The Detroit market, buffeted by auto industry layoffs, suffered the largest loss; prices there plummeted 10.5 percent, to a median of $154,100.
Other rustbelt areas with drops included Canton, Ohio (down 9.2 percent to $112,300), Akron (down 8.4 percent to $118,200) and Bloomington, Illinois (down 8.5 percent to $156,300).
Three Florida metro areas were hit hard by price drops. In Sarasota, the median home now sells for $320,700, off a whopping 9.4 percent from last year, Palm Bay/Melbourne/Titusville prices sank 9 percent to $193,600 and Cape Coral plunged 8 percent to $255,400.
Sarasota condo prices also dipped, 11 percent to $275,600, the largest drop in any condo market.
Surprisingly, 102 of 148 metro markets had price gains while only 45 fell. One remained the same.
The best performing market in the country was Salem, Oregon, where prices shot up 24.7 percent from a year earlier, to $228,000. Other strong increases occurred in Elmira, New York, up 21.4 percent to $93,600, and Salt Lake City, up 19.3 percent, to $216,300.
Condo prices suffered more than single-family homes with the national median at $222,900 in the third quarter, down 2.1 percent from the same period in 2005.
Knoxville, Tennessee condo prices bucked the trend; they rose 29 percent to $155,700. Other strong condo markets were Wichita, Kansas ($130,300, up 25.5 percent) and Albuquerque ($153,300, up 21 percent.)
The most expensive metro area in the nation was in San Francisco/Oakland, where the median home price is $749,400. Two areas, Decatur, Illinois and Youngstown, Ohio shared the distinction of having the lowest prices - with medians of just $86,000.
Last year at this time real estate was bubbling; prices were recording year-over-year, double-digit increases every quarter. Markets finally started turning during the first quarter of 2006 and now are in retreat.
Even more dramatic than the price drops was the fall in the number of sales. Fed by speculative investments, many states, especially in the South and West, had recorded a frenzy of sales the past few years. Those have now largely dried up.
Nationally, the total numbers for sales of existing single family homes, condos and co-ops went down 12.7 percent compared with the third quarter of 2005. The decline was off the charts in Nevada, down 38 percent. Arizona, ( - 36 percent), Florida (- 34.2 percent), California (- 28.6 percent), Hawaii (- 25.8 percent) and Virginia (- 24.4 percent) also experienced steep drops.
According to Davis Lereah, chief economist for NAR, conditions are nearly the opposite of what they were 12 months ago.
3rd quarter Massaschusetts numbers are out. Ugly.
Monday, November 20, 2006
Mass. home sales fall 23 percent
Greater Boston fared slightly better in the third quarter than many other parts of the state as a “healthy correction” softened housing sales and ushered in one of the strongest buyers’ markets in years, according to a report issued today by the Massachusetts Association of Realtors.
Statewide, the number of third-quarter sales for detached single-family basis fell 23.4 percent, compared to a year ago, and Greater Boston sales decreased 19.5 percent.
The statewide median selling price dropped 4.9 percent to $352,000, compared with 1.9 percent dip to $505,000 for Greater Boston.
Statewide, the number of third-quarter condo sales fell 22.3 percent; the Greater Boston drop was 20.3 percent.
The statewide median selling price for a condo was $275,000, down 2.5 percent.
The Greater Boston median selling price was $337,000, down 2.3 percent.
(By Chris Reidy, Globe staff)
And if people think it will get better in Boston come the spring they’re in for a surprise. I’m seeing even more for sale and for rent signs. Visiting a friend in West Hartford I was amazed at how many for sale signs LINED one stretch of road.
short sale in Gilberts IL (exurbs) near me in farm land USA
http://chicago.craigslist.org/wcl/rfs/236887143.html
Update on the Vegas housing market:
Day Dawn homes is running a TV ad offering up to $80K to buyers of one of their homes located in NW Vegas. They say that buyers can use the money for anything that they want—it need not be put back into the home.
Stopped by the International Swap Meet this weekend. Just inside the entrance a realtor has set up a booth where she claims to be running a raffle. She asks whether you want a free ticket and then in the same breath inquires whether you own a home. When my husband and I said that we were renters and weren’t interested in buying, she said that through her company she could get us into a home for only $2000 cash, which she claimed included all closing costs. We told her that we still weren’t interested because homes in Vegas are over-priced and prices are dropping. She seemed very surprised. She must not read the local newspapers.
Today’s Las Vegas Sun has an article about the impact of the housing downturn on local construction workers. Reportedly, unemployment claims in the construction industry are up 32% in Nevada:
http://www.lasvegassun.com/sunbin/stories/lv-other/2006/nov/20/566647152.html
The article reports on the plight of a couple illegals who have lost their jobs in the construction industry. The lowest rung is starting to get the stick. One of the illegal’s kids is enrolled in the US school system and he has another one on the way though of course no medical insurance. Good material for a modern day Steinbeck.
“The lowest rung is starting to get the stick.”
That’s an excellent assessment of the situation here. One thing I didn’t mention in my post is the fact that the malls here are already packed with holiday shoppers, and judging from the bulging bags, people are purchasing. So it does look as though, thus far, its only the “lowest rung” that’s hurting.
The middle and upper rungs still have their credit cards so they still shop. If more of the lower rung including illegals had better credit ratings they would be still shopping as well, instead many probalby are maxed out or have no credit at all.
This the problem with figuring out when things will hit the wall, in years past, people ran out of money and they stopped buying, now they have long ago run out of money but still buy on credit. Figuring out when the credit machine collapses is the big timing question.
OK EVERYBODY GET OUT YOUR CHECKBOOKS -
This sacrifice price won’t last long!
“We just reduced the price of this house last week and we’re about to reduce it again…my realtor is going to update the official MLS listing for tomorrow!!! As you can see, we are very motivated to sell this house as soon as possible! I’m getting close to my due date, so we would like to sell the house before our baby arrives!!! From the way things are going, it looks like it’s going to be before Christmas. If we don’t sell it before then, we will wait until after the new year and bring the price back up again.”
http://philadelphia.craigslist.org/rfs/237214177.html
You can spot this spineless bluff and desperation from a mile away. Try and jack the price back up. If it’s not selling for $1, it sure won’t sell for $2. Another example of lack of economic fundamental understanding. I wonder if they think the second kid is cheaper?
First they hit you with the sob story:
“I’m getting close to my due date, so we would like to sell the house before our baby arrives!!!”
Then they close with the threat:
“If we don’t sell it before then, we will wait until after the new year and bring the price back up again.”
I am so confused. Friend or foe? Just say no!
If we don’t sell it before then, we will wait until after the new year and bring the price back up again.”
well, I’ve heard it said that pregnant women can be unreasonable.
Alas, it’s not just the pregnant ones!
Buy at 307x rent? No, I don’t think so:
http://sandiego.craigslist.org/rfs/234781583.html
http://sandiego.craigslist.org/apa/236658453.html
These guys bought it for $1.00M in the spring, now they can’t sell it for $1.075M after it has been “completely remodelled”. I guess they are waiting for the market to pick up again next spring. And I’m not so sure they can rent it out for $3500….
Motley Fools are puzzling about the home construction industry meltdown.
‘Putting things in perspective was Joel Naroff, chief economist at Naroff Economic Advisers. “A tornado hit the housing sector in October. Builders have seen the light from the housing market meltdown and are now moving as rapidly as possible to reduce supply,” he noted.’
Yet the builder share prices were remarkably resilient despite the tornadic damage to fundamentals! Curiouser and curiouser…
http://tinyurl.com/ylm33m
US-China Economic and Security Review Commission
2006 annual report
Nov 16, 2006
I wish I could cut and paste, but pdf format
From pg 66 - 69 /279
http://tinyurl.com/ygr9ro
“The chinese government’s deliberate undervaluation of the Renminbi makes US products more expensive to Chinese consumers who therefore purchase fewer of them. Conversely, Chinese undervalued currency also makes Chinese products cheaper in the US, and therefore US consumers purchase more of them. The combination is a major contributor to the record high and still growing US trade deficit. The undervalued Chinese currency harms American competitiveness and is also a factor encouraging the relocation of US manufacturing overseas while discouraging investments in US exporting industries….
Foreign holders of US treasury securities … need not disclose their ownership and are not required to do so…
China’s financial system is in its most critical transition period…
China’s export sector would be even more important to the overall economy … the US trade deficit might also accelerate since the Chinese export sector would stay strong.”
Typing errors are mine - security errors are the Federal reserve’s.
If you read any of the report read pg 74 “Possible Effects on the U.S. Economy”
“…(RE: current account deficit) This is an extremly high level that no other country has ever been able to sustain for any significant period….”
The symbiosis is not sustainable.
Thanks Hoz. I’ll take a read on it tommorrow.
China playing a modern version of mercantilism which is very effective for them at their present stage of development.
China is humping it up the value chain. This past year Chinese automobiles and trucks entered the Russian market and it really freaked out the Russians. China also put a man in space recently. The advances are amazing.
Sorry about the grammar. Its late over here!
My DSL service seems to have died while I was out today. PCPitstop tests out at 2Kbps. Tech support clamied a landslide of calls and hung up on me. So much for posting. Will be away for a few days from tomorrow — for all who celebrate our most-American holiday, Happy Thanksgiving! For those who don’t, have a good week.
The headline for this Centra Coast craigslist ad (below) advertises a vacation with EITHER rental or purchase of a house. I have seen a big increase in rental listings in North and South county during the past month. Most are asking significantly more than going rental rates, and many use “never lived in” or “be the first to occupy” or something of this sort. Many also advertise “executive” homes (with rents to match); few have pictures, but those that do, do not generally look as spiffy to me as you’d except from the montly rent.
I have two houses available in Paso Robles. One is a 2 bed 1 bath, and the other is a 3 bed 1.5 bath. Both are very charming and have tons of personality. We are very flexible and open to various possibilites. You could buy one/both of them traditionally, with owner financing, on a rent to own basis, or you could just simply rent. Your credit score doesn’t matter with us. The houses are ready for move in now. Both have recently been remodled and upgraded
For an upfront purchase one house is $369,000 and the other house is $385,000. If its a lease option or rental than the price would be determined at the time of sale. As low as $10,000 down could start your home ownership.
If were able to make a deal on either house before November 30th, we will throw in a complimentary 7 day hotel/condo stay(transportation not included) to a destination of your choosing for two people.
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d ( t m )