Bits Bucket And Craigslist Finds For November 30, 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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Name:Ben Jones
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Ministry of Truth Data Rectifications
http://wallstreetexaminer.com/blogs/winter/?p=124#more-124
Podcast on this week’s housing data with Mike Shedlock, Steve Northwood and Lee Adler.
http://podcast.streetiq.com/streetiq?Page=CHANNELINFO&ChannelID=3135
Russ,
Thanks, again, for your extremely informative site!
The question is: why does anybody pay any attention to the govt numbers at all? Seems they go totally against what we see on Main Street — and we’ve seen a lot of “revisions” that attempt to prop up the US economy, even though they make no sense at all.
Cheers!
I agree the data put out by the government and many institutes (NAR anybody?) is almost criminally flawed. Need to stick to hard data like Wal Mart’s results and projections which are probably the best indicator available for 70% of the consumer sector of the economy.
‘Interestingly, as soon as the concern (in this case about “labor costs”) is baked in by Wizard Bernanke, along comes the rectification or revision. Instead of growing at a 7.4% annual rate in the second quarter, it turns out that employee compensation actually grew just 1.4%. Gee, just a slight miss, fully illustrating that almost all this data is now bogus, and badly distorted by Bully-Brazil America divide issues. Incredibly, the market still responds to this data as if it’s valid, witness Wednesday’s GDP revision “surprise”.’
This is a perfect example of the kind of Keynesian beauty contests which are driving up the stock market. It is not important that the new data release is plausible to a particular stock market investor, but rather whether such an investor believes that others will take the number as a bullish indicator and hence drive up the market.
‘Even more shocking is that most, if not all observers consider the solution to all this to be even more accomodative monetary policy.’
This is hard-wired into the brains of almost all Americans, thanks to the little bit of Alan Greenspan’s rhetoric they understood.
Palm Springs Land Rush
i´m sure this will end like the gold rush…….
plus make sure you read the summary from pimco
with innovation comes risk./ U.S. Credit Perspectives /pimco!
http://immobilienblasen.blogspot.com/
Yeah, I looked at the whole PIMCO article. Looks like they’re running a big arbitrage based on pricing anomalies between actual Corporate Bonds and CDS’s based on them. Given PIMCO’s long the real side and short the synthetic side, if they are 100% matched they should in theory be OK no matter what happens.
Nice for PIMCO, but who’s taking the other side of these trades? I seem to recall it was dabbling in derivatives to juice pension fund returns that sent OC broke a few years back.
Actually, I do see a possible market problem here. If any of these bonds REALLY tank, will PIMCO be able to buy back their synthetic shorts quickly enough to guard against panic redemptions?
can´t wait for the stresstest!
That is interesting. I posted something about that a few weeks ago (the likelihood of a dislocation in this sort of thing). I’ll try to find it.
Lest I be accused of posing as something I’m not, I’d better point out my post above was purely theoretical musing.
In real life I’ve always worked for a salary, and I haven’t done anything more exotic than unleveraged ownership of (local, which = Australian) equities and managed funds.
I just saw some new construction (PUD) in Salem Oregon for 1453 sq.ft./$175,500…..Thats $121. per foot for turn Key product that is fairly small…
Wow - I’m cheering up here in portland because I’m seeing things return to $150-160 sq ft. Would LOVE to see 121!
IMHO you should read Bill Gross’s article from July/August
The End of History and the Last Bond Bull Market
“…The important idea is that such a forecast speaks to eventual reflation, inflation, and declining bond prices sometime out there in 2009 and far beyond as the U.S. seeks to address its enormous future liabilities concentrated in social security, healthcare, and foreign holdings of U.S. bonds….”
I will continue to trust Bill Gross’s investment advice - he has been right on with the dollar collapse as well as this current bond rally.
Hoz –
Any thoughts on how far the Fed will allow the dollar collapse to go before they are forced into a Volcker-style solution (higher interest rates)? It may be harder for them to play the G. William Miller card this time, as a much higher level of import dependency than in the late 1970s suggest that a weak dollar may be more inflationary than the last time we had stagflation.
Hi GS, As you know I am a firm believer in INFLATION! I am sorry I have not posted as often as in the past - busy. The Fed is really worried about inflation (screw the rising unemployment, the declining GDP, the corporate buybacks of stocks {historically a very bad omen} and the housing market) - there are three trillion dollars overseas. This overseas money is buying anything and everything from commodities to asian stocks etc. The dollars have not come home to roost. The Porsche that cost $127,500 last week is today $132,300 - kids this is known by the government as Hedonic inflation and per the governments analysis this weeks Porsche is better than last weeks Porsche so it will not be counted in the Inflation numbers. LOL. Unfortunately the dozen socks that you bought at WalMart or equivalent for 5 bucks last week are now $5.50. This is inflation. We aren’t going to stop importing socks, shoes and TV’s from the asian countries, so our trade deficit is going to continue to expand. The Euro countries are going to go thru a huge expansion as the Renminbi is not tied to the Euro. And to add insult to injury the same socks in Europe which cost 4.50 Euros are now 4.00 Euros (numbers are simplified for this example). Contrary to almost all economists I believe that to keep the country solvent the Federal Reserve Bank will raise interest rates. Europe is going to raise its rates, Japan is going to raise its rates and China is not thru raising its rates. This incredible world wide growth is being fueled by excessive dollars 3 Trillion or so. I wish we were a part of the growth. If the US does not raise its rates, this past weeks sell off of the dollar will look like a blip on the charts in a year.
In summary, Japan has not bought a US debt instrument since 1994, China is planning on diversifying out of the dollar (they have 1 trilllion of them), Russia and Sweden will not accept dollars for their reserves. The name of my new business is “Shit Creek Paddle Stores”. The U.S. needs an additional 65 billion dollars every single month *(soon to be 73 billion) - I would not invest unless I got as good a rate of return as I could get on the Euro Bonds.
As an aside I had just bought a few stocks earlier this month and was going to keep them for a while - doing alright, then I heard Cramer this afternoon recommend 2 of the stocks that I purchased. Sold them both, my research must be faulty.
“We aren’t going to stop importing socks, shoes and TV’s from the asian countries, so our trade deficit is going to continue to expand.”
We might soon be importing less socks from Asia, though, thanks to the 10% overnight price hike you mentioned…
“In summary, Japan has not bought a US debt instrument since 1994, China is planning on diversifying out of the dollar (they have 1 trilllion of them), Russia and Sweden will not accept dollars for their reserves.”
Time to surprise the world and tighten, then. Let’s hope that Dallas Fed President Fisher reads here…
Except Bill Gross badly speculated in June 2005 about the FED cutting interest rates at the end of that year. Heck, he even had a few hurricanes thrown into the mix to help shave a point or two off of GDP, and was still wrong.
From earlier this week.
38,000 take buyout from Ford. http://www.detnews.com
14,500 in southestern Michigan alone. I imagine some of them will want to move out of state and this will increase the inventory even more. My wife and I want to buy a house but the way things are going we may never see bottom.
Don’t worry about bottom…worry about what you can comfortably afford. That’s what I’m waiting for. (And waiting…and waiting…and waiting…)
I disagree. Wait for the bottom. Why be upside down from buying too early?
Too hard to time.
And, if your not selling, your not upside down….
But you never know when you might NEED to sell (health, divorce, job loss, unexpected expenses, etc.).
IMHO, one should always buy when the upside potential is much greater than downside risk. It might not be the *exact* bottom, but you should be close.
But houses are not commoditized prices like stocks. The market moves up and down, but your buying a house, not the market. I know someone who bought a house here in central Florida at the market peak, but becuase of a great situation, they were able to get it at a great price (2k ft2 + pool for $180k). I have also know people who way overpaid for a specific house in the down days of 1991. The key is to figure out what you can reasonably afford, and what that SHOULD buy you in a normal market, and if you happen to stumble upon one of those in even this whacked out market, then more power to you. Otherwise, wait until prices drop, or wage inflation brings you up.
Rent until your monthly expenses match the potential PITI of buying, and, here’s the important part, your purchase has the potential to appreciate in price. Or until you can’t stand to rent anymore.
Even though appreciation may not return until 2020, I can see purchasing a house (for living in) once owning is on a par with renting -and- the downside is much more limited, say in 2 to 4 years. Pure investments are another matter entirely.
Right, cksh: 38000 hourly workers including the 14500 in SE MI. At the bottom of the story are mentioned an additional 14000 salaried workers expected to be phased out by late 2008. So, the “see bottom” in Michigan will be later than that.
MI is the most overvalued RE market, not FL. The bottom has fallen out of the MI economy for several years now, so even flat to slowly declining prices are still way too high.
When the depopulation of MI begins in earnest, the whole state will end up like detroit.
And they mortgaged every asset they have to get the 18 billion for the buy outs. Ford is toast. Is not GM also buying out about the same number of employees? Wide spread lay offs will effect housing.
http://news.monstersandcritics.com/business/article_1227712.php/Holiday_job_cuts_gain_momentum
lease a place for two years, with an option to buy. If the market tanks, you don’t have to buy, and i’m sure landlord at that point will renegotiate selling price.
The bottom in Buffalo is $5K-$10K for a house…
The upward revision to GDP is not nearly as encouraging as the headline might suggest.
Of the .6 upward revision to GDP, .4 was directly attributable to a huge decrease in imports. (Exports ticked up by a very tiny amount).
So, we shipped in less crap from China. How does this portend growth going forward when 70% of our economy depends on bi-weekly visits to Wal-Mart? Oh well, at least China gets something of a reprieve from buying more of our junk bonds.
The other .2 was attributable to yet ANOTHER build in inventories. Hey, that’s great news, huh? They had better all be $800 42” LCD TV’s.
Fixed residential investment was revised down from -17% to -18%, but commercial was revised up from 14% to 16.7%. The revisions effectively cancelled each other out.
“So, we shipped in less crap from China. How does this portend growth going forward when 70% of our economy depends on bi-weekly visits to Wal-Mart? Oh well, at least China gets something of a reprieve from buying more of our junk bonds.”
It sounds like the symbiosis may be dying, or is at least in recession. Not sure of all the implications for the economy, but one of the key props for low interest rates has been a glut of $US in Asia that gets repatriation into the US bond market. Who will keep the lid on US interest rates if the Asians stop doing it?
Exactly my point. If the Asians start to see drops in our demand for their products (probably exactly what they’ve been looking for), that is what will trigger a more expedtious departure from the US dollar. Gold up, bond yields up, oil up, bye bye US economy and the housing market with it.
And in the next stage of the game, you will see lots of Asian buyers showing up at fire sale auctions held by US lenders dumping REO.
And in the next-next stage of the game, you may be surprised to discover that your landlord lives in China.
That’s the problem, the only things we have that the Chinese want to buy are our IOU’s and assets (and technology, but they don’t pay for that one…). The Fed claims that as long as this trade goes on everything is fine. They would be right if we were exporting stuff to pay for this, but we’re not. We’re charging everything. They are not that stupid, what’s going on? Are they hoping for some miracle or are they just keeping a straight face while letting the dollar drop?
“Who will keep the lid on US interest rates if the Asians stop doing it?”
Exactly, GS. It seems that a lot of folks think of the U.S. Consumer issue only in terms of S&P 500 profits, but the point you make is probably the bigger issue.
Bank of America upgrades homebuilders and building products. Meritage, Toll, Standard Pacific and Pulte from sell to neutral. Apparently it sees “an improving out look for traffic, affordability and discipline on new construction.”
You just couldn’t make this shit up. Nobody would believe you!
But B of A has the PPT on its side. Might as well profit from the rigging.
That’s because most of the monkeys following these “upgrades” have NO belief system longer than 5 minutes.
Could this be one last short squeeze before the big boys get out?
I hope this is the blowoff top of a right shoulder on the XHB. That’s where most of my trading money is, and there isn’t much of it left at this point.
Talking politically (always dangerous)
Bush and his administration will have this debacle all to their lonesome, as we have nearly 26 months to go, in his term.
He’s proven himself remarkably consistent, in his lack of ability and the coming housing bubble crash will make him long for the days of bad news from Iraq, as the war doesn’t really effect the rank and file citizen all that much, (my cost personally has been the doubling of the price of gasoline) but this is a whole different ballgame.
Bush’s personal ownership of the “ownership society” might actually dissuade Pelosi & Co from engineering a bailout for J6P.
(My hope springs eternal.)
It would, however, be extremely difficult for the Democrats to argue against a bailout initiated by the Republicans.
Bush is not a king, and congress, not he, holds the purse strings. Let’s see what the new congress does with the purse strings over the next 22 months in control.
Not a king, but a leader… (in theory)
I expect him to be our 1st presidential suicide. The you know what is going to hit the fan and he’ll be a prisoner of zenda~
I don’t think so. Remember when he was asked if there was anything he regretted or would want to do different? All he could come up with was a blank stare…. A staged suicide maybe. Karl might be planning it already. Or even better an assassination. Now there’s a thought. Martial law and Dick Cheney at the helm!
” Martial law and Dick Cheney at the helm!”
Tom, it’s been a long day, please do not terrorize your fellow posters.
“I expect him to be our 1st presidential suicide”
I can only hope
Not true. That is what the Constitution says, but not how it works. The Fed Reserve has the purse strings. Read their own website and on the global banking system. It isn’t “conspiracy”, just how the system works.
There is really no need for taxes. As long as someone is willing to purchase the gov’t debt (Fed Reserve notes are dollars that are created by that bank buying the debt and circulating their notes throughout their network of banks), the system continues with no real need to tax anyone. It is done to calm the masses. With no Fed tax, people would certainly be asking themselves how the system works. Instead, they cut taxes to fund war and entitlement programs the whole time creating Fed Reserve Notes by purchasing debt. If you think this isn’t how the system works, I would suggest doing some research on banking. It is there for everyone to see, just hard to believe we are that gullible.
’ssshrubery (my new name for our feckless leader, with apologies to Monty Python) will be the figurehead for which the scorn of the public will be directed.
The fed is a largely faceless being, aside from the fed chairman and he’s only been around a short while.
Uh… that purse contains nothing but pawn tickets, and they’re coming due soon.
http://news.goldseek.com/GoldSeek/1164816300.php
The dollar is toast, as China sees the light. Attention Wal-Mart shoppers: prepare to pay much higher prices for imported goods in the months and years ahead.
One man’s toast is part of another man’s balanced breakfast.
http://www.bankcreditanalyst.com/public/story.asp?pre=PRE-20061129.GIF
Spin doctors @ work, WTF! HB are heading up again in premarket trading.
NEW YORK (AP) — A Banc of America Securities analyst on Thursday lifted his rating on the homebuilding sector to “Neutral” from a prior cautious view, saying customer traffic, affordability of homes and construction discipline could signal a slow turnaround.
On Wednesday, a Commerce Department report showed new-home sales fell in October by 3.2 percent, the most in three months, although home prices rose.
The National Association of Realtors on Tuesday that existing home sales inched up 0.5 percent to a seasonally adjusted annual rate of 6.24 million last month, following seven straight months of declines. However, the median price for an existing home sold fell 3.5 percent from a year ago to $221,000.
Analyst Daniel Oppenheim in a client note said the sector is not out of the woods yet, and expects home prices to fall further and inventory to increase into spring.
http://biz.yahoo.com/ap/061130/homebuilders_ahead_of_the_bell.html?.v=1
so they can get their clients out- upgade my as………
The string is getting harder and harder to push on…
http://www.marketwatch.com/tools/quotes/intchart.asp?symb=26099400&sid=1643&freq=9&time=1dy&siteid=mktw
Who is the man behind the stock market’s curtain?
H.M.P.
11/30/06 WSJ p. C1 “Ahead of the Tape”
Justin Lahart
(My personal comments are in parens; got blog, Jason?)
Home Prices Adrift
With U.S. home prices heading into uncharted territory, it may be time to pitch those housing-market forecasts into the sea (Gary Watts).
Today brings a chance to measure the size of the swells when the Office of Federal Housing Oversight releases its third-quarter report on home prices. Its index has been better behaved than other measures of home prices. While the National Association of Realtors’ gauge of median home prices was down more than 3% in October from a year earlier, Ofheo’s measure hasn’t started falling (YET).
). Economists surveyed by WSJ.com this month looked for Ofheo’s index to fall 0.5% in 2007 from 2006 — the first year-over-year decline in the index’s 31 years.
…
It’s probably just a matter of time before this index starts falling, too. It lags behind the Realtor numbers by a couple of months and can be skewed higher if assessors inflate home values during mortgage refinancing (not that there is anything wrong with that
Without historical guidelines, nobody nows exactly how low prices will go, or how the housing market will react (but why not try to catch a falling knife if you want to find out for yourself?). Would-be buyers might decide to jump back in for good deal (but what is “good” when prices are falling?). But borrowing money to buy something that’s losing value could scare them off. That seems especially true of speculators who were in the market solely on the belief that prices would keep rising (and who may soon be scared into exiting the market solely on the belief that prices will keep falling).
“I think the willingness to close the deal might come down if you see prices still deteriorating,” says Goldman Sachs chief U.S. economist Jan Hatzius (so hurry up, Ben, and get the housing price inflation ball rolling again!).
The housing storm, in other words, won’t end until prices clearly stabilize. They haven’t yet. (But I thought all the ‘experts’ said the market had already stabilized???)
“Got blog, Justin” (sorry — have trouble with J names before 6.30am)
Here’s the report:
HOUSE PRICE APPRECIATION SLOWS FURTHER
OFHEO House Price Index Shows Declines in Five States, Continued Deceleration in Others
WASHINGTON, D.C. – U.S. home prices rose in the third quarter of this year, but the rate of increase continued to slow and some areas experienced actual price declines. Nationally, home prices were 7.73 percent higher in the third quarter of 2006 than they were one year earlier. Appreciation for the most recent quarter was 0.86 percent, or an annualized rate of 3.45 percent. This reflects a further slowdown from that reported for the second quarter when the quarterly appreciation rate was 1.3 percent and the annualized rate was 5.1 percent. The quarterly increase is the lowest since the second quarter of 1998. The figures were released today by OFHEO as part of the House Price Index (HPI), a quarterly report analyzing housing price appreciation trends.
“Our newest data confirm last quarter’s data that the housing market is in a decidedly different stage,” said OFHEO Director James B. Lockhart. “With U.S. house prices growing less than one percent during the third quarter, it provides more evidence that the long-forecasted national deceleration in house prices is occurring. Given the five-year appreciation prior to this quarter of 56.8 percent, the slowdown is not unexpected. There are still some areas where appreciation rates remain very high but now they are the exception rather than the norm,” Lockhart said.
Since the spring of 2004, year-over-year house price appreciation has fallen from a peak of 13.9 percent to 7.7 percent this quarter. Despite the deceleration, house prices grew faster over the past year than did prices of non-housing goods and services reflected in the Consumer Price Index (CPI). CPI prices rose 3.1 percent.
The findings of the third quarter HPI show varying trends in different parts of the country.
1. The quarterly appreciation rate fell in seven of the nine Census Divisions. The West North Central and East North Central divisions had small increases over weak second quarters.
2. Five states — New York, Rhode Island, Michigan, New Hampshire, and Massachusetts — saw price declines from the second to the third quarter of the year.
3. Michigan was the first state to show a year-over-year decline in more than six years. Prices fell in Michigan 0.6 percent between the third quarter of 2005 and the third quarter of 2006.
4. Appreciation rates remain at or near record-setting rates in areas affected by Hurricane Katrina. Baton Rouge, Gulfport-Biloxi, and Mobile all had their highest four-quarter appreciation rates ever with four-quarter price growth of 14.1, 23.3, and 17.5 percent respectively.
5. Idaho now tops all states with the highest four-quarter appreciation rate with prices 17.5 percent higher in the third quarter of 2006 than they were a year earlier. Other states with still large year-over-year increases were Utah (17.4 percent), Oregon (16.9 percent), and Arizona (16.4 percent).
6. Quarterly price declines occurred in more than half the cities in California. Fifteen of 25 California cities in OFHEO’s list of ranked Metropolitan Statistical Areas (MSAs) and Divisions experienced price declines relative to the second quarter.
“House prices continued to rise through the third quarter in most of the country, but generally at only low or moderate rates,” said OFHEO Chief Economist Patrick Lawler. “The transition from sizzling markets to normal or weak markets has been orderly so far, and recent drops in interest rates lessen the likelihood that precipitous changes will occur.”
OFHEO’s House Price Index is published on a quarterly basis and tracks average house price changes in repeat sales or refinancings of the same single-family properties. Changes in the mix of data from refinancings and house purchase transactions can affect HPI results. An index using only purchase price data indicates somewhat less price appreciation for U.S. houses between the third quarter of 2005 and the third quarter of 2006. That index increased 6.0 percent, compared with 7.7 percent for the HPI.
OFHEO’s index is based on analysis of data obtained from Fannie Mae and Freddie Mac from more than 31 million repeat transactions over the past 31 years. OFHEO analyzes the combined mortgage records of Fannie Mae and Freddie Mac, which form the nation’s largest database of conventional, conforming mortgage transactions. The conforming loan limit for mortgages purchased in 2006 is $417,000 and will remain unchanged in 2007 as announced on November 28.
This HPI report contains four tables: 1) A ranking of the 50 States and Washington, D.C. by House Price Appreciation; 2) Percentage Changes in House Price Appreciation by Census Division; 3) A ranking of 275 MSAs and Metropolitan Divisions by House Price Appreciation; and 4) A list of one-year and five-year House Price Appreciation rates for MSAs not ranked.
OFHEO’s HPI report in PDF form is accessible at http://www.ofheo.gov. Also, be sure to visit http://www.ofheo.gov to use the OFHEO House Price calculator. The next HPI report will be posted March 1, 2007. Please e-mail ofheoinquiries@ofheo.gov for a printed copy of the report. Full PDF of report is at: http://www.ofheo.gov/media/pdf/3q06hpi.pdf
This reminds me of the term currently in vogue among some of the REIC apologists: “decelerating.” If my car is decelerating, it is slowing down. Eventually it will stop and that is the absolute end of deceleration. But these shysters seemingly would have us believe that decreasing prices are a part of deceleration, rather than an outright reversal, which is the truth.
Check out these dumps selling for upto $300,000 in Chicago. New constuction and half are already sold! Check out the view from the balcony!
http://yochicago.com/today/new-construction/river-west-loft-style-condos-start-in-the-100s_3263/
I never thought I’d have to pay for a view of razor wire. Unless I was paying my debt to society.
http://maps.google.com/maps?q=949+N+Willard+Ct,+Chicago,+IL&ie=UTF8&z=15&ll=41.899754,-87.658238&spn=0.015588,0.035491&t=h&om=1&iwloc=addr
Even better, it’s right next to I-90/I-94. LOL
Slim - lol.
Looks like that building is surrounded by an elevated highway and train tracks on the other side (I see a signal tower).
MARGINAL NEIGHBORHOOD!
We now have auctions in South Carolina! Well maybe auction is the wrong word. How about high priced marketing?
http://tinyurl.com/y4fpp2
(Canadian) Bond rating agency warns of recession risk in U.S….
http://www.cbc.ca/money/story/2006/11/29/dbrs.html
“The Dominion Bond Rating Service (DBRS) said a model developed by the Federal Reserve Bank of New York is now predicting an almost 40 per cent chance of the U.S. economy sliding into recession within the next 12 months.”
…
“The bond agency says that it still thinks a slowdown — not a recession — is the most likely scenario for the U.S. economy. It also acknowledges that the yield curve inversion may be due to “benign” technical factors that have nothing to do with economic prospects.”
Yeah right, it’s just “benign” economic growth, nothing negative.
“”The difference between this yield-curve inversion and earlier ones is that the [U.S. Federal Reserve] has not slammed on the brakes this cycle, driving up short-term interest rates to levels sufficient to snuff out economic growth,” said BMO Capital Markets chief economist Sherry Cooper.”
There have been a number of comments that interest rates need to rise significantly in order for a recession to materialize however this line of reason ignores that real interest rates (though low by historical standards granted) have increased significantly over the last three years. It is my understanding real short term rates were negative three years or so ago and now they are positive. Taking into account that real interest rates “crossed the equator” so to speak the tightening is extremely large (what is the magnitude when going from a negative rate to a positive rate–infinite?).
Does anyone have a link to a chart or table that shows real interest rates over the last three to five years? Thanks.
A voice of sanity, she should have been screaming this from the top of spire for the last few years.
http://abcnews.go.com/GMA/print?id=2685399
Protect Your Home in a Dicey Market
Real Estate Guru Offers Tips on How to Bubble-Proof Your Home
Nov. 29, 2006 — - In today’s uncertain real estate market, many people are looking to protect the value of their home.
“Good Morning America” real estate contributor Barbara Corcoran recently shared important information on how homeowners can shop smart — and renovate smart — so that their nest egg keeps its value no matter what the market does.
For those who own homes, Corcoran suggested tips for bubble-proofing your investment.
Keep your home updated. Every few years, visit new construction homes in the area. Pay attention to kitchen models, watch the sizes of bathrooms, master bedrooms and closets. Keep your construction current relative to the price of your home, even if it means tearing out walls.
Keep the exterior of your home painted. Make sure the windows are in shape and the landscaping is neat. Great curb appeal never goes out of style.
Keep the colors of your home neutral and the floor plan functional so it never looks dated.
Buyers need to think like sellers in order to get a bubble-proof home. For those looking to buy, Corcoran suggested the following tips about choosing a neighborhood.
Settle down in the right town. Find a place with a charming downtown area. A high concentration of older homes will give the town more character: no one is going to tear down those structures to build McMansions.
Look for good public schools. The town’s average SAT scores should be above 1800.
Make sure the home prices in the town are affordable. The average home price shouldn’t be three times the average income. (You can find this information through the chamber of commerce.)
Fewer than 5 percent of all homes in the town should be for sale. That means no more than two “for sale” signs per street — not per block. The average street has 30 to 80 houses.
Make sure that empty nesters don’t move out. You’ll know that there are empty nesters around if you don’t see kids or their toys and bicycles in the yards. If older residents are sticking around, that means people love the neighborhood and the inventory of homes is locked up.
Strict zoning regulations are a plus. Though rules about how long your grass can grow and when the garbage can go out can be a pain, they’re great for value.
Once buyers have the neighborhood down, Corcoran had some tips about what to look for in the property itself.
A brick house is best. 68 percent of buyers prefer brick to other types of homes.
White is the best color. White is always among buyers’ top three color choices.
Buy in the comfortable “middle” of the price range — not too high or too low.
Find a house that gets a good amount of natural sunlight. It’s better to buy a smaller home filled with sun than a bigger one that’s dark.
Corcoran also offered tips on how to choose a smart loan that won’t hurt you if interest rates go up.
Choose pressure-free financing. The right financing can help to make your home bubble-proof if you finance conservatively. You’ll sleep much better at night and you won’t have any sudden surprises.
Try to put 20 percent down.
Buy mortgage insurance and insure your house for its current value — they’ll pay out the difference if it fails.
Lock in your mortgage rate if at all possible: a fixed rate gives you peace of mind.
If you do get an adjustable rate mortgage (ARM), estimate whether you can afford any adjustments today. Know what the ARM rate adjustments are and when they change.
Avoid extreme mortgages. Don’t take an interest only, 100 percent mortgage.
They must be kidding!
Pay attention to kitchen models, watch the sizes of bathrooms, master bedrooms and closets. Keep your construction current relative to the price of your home, even if it means tearing out walls.
Even if it means tearing out walls? And keep doing that as long as you own the house? No thanks! If it works for you while you live there, leave it. Otherwise, you’ll be ripping walls out every five or ten years, and that’s a LOT of expense.
I’m not sure that pouring $100k+ into you house every few years just to keep up with “trends” is going to be good financially, especially if you rip out walls just to undo a previous expensive project you embarked on to “keep up”.
The average home price shouldn’t be three times the average income.
Along with all the other great things you should demand, do you really think you’ll find a price:income ratio like that in such a neighborhood? Ha ha! Riiight!
And what’s this?
Buy mortgage insurance and insure your house for its current value — they’ll pay out the difference if it fails.
What is she talking about? If what fails? The mortgage? Huh?
What planet are these people from?
Roswell, GA (where I work though I live in downtown Atlanta) probably fits the requirements. For the love of god, do not move here, though, my communte is already terrible.
How in the world do you get above 1800 on the SAT? I thought the highest score was 1600.
2400 is the new 1600, or something like that. They added a third section (writing… the more text you can grammatically get in, the higher the score), on top of re-centering the mean a good 100 points higher.
A whole generation that busted their buts to get better than 1200 must be feeling ripped off.
They rejiggered the scores. I think there are three subtests now, not two, so the maximum is 2400, not the old 1600.
Aha! The perfect opportunity to introduce the model of contemporary American English grammar usage: Lindsay Lohan’s condolences to Robert Altman’s family. Surely, this is the basis for scoring the new SAT writing section. Enjoy.
http://tinyurl.com/y7ob6n
Come, now. You wouldn’t want the poor little dears to have their fragile self-esteems bruised by a low SAT score, would you? Too bad they’ll be competing against Japanese and Indian and Vietnamese kids who still put a premium on REAL academic success and rigorous standards.
Idiot Casey just featured on MSNBC re: foreclosure.
check that: CNBC
They said he “fudged” on some of his loan apps.
his fudging will come in san quenton
Packing or packered?
Packered=packed. Dang, blew it again!
You must have been thinking of Green Bay.
I missed it. Was he a looser or did he come off OK?
This morning on my daily walk I saw a second sign in the yard of a house that has been for sale for some time (this is in the Clairemont area of San Diego). The sign read:
You can afford this house!
Seller pays closing costs!
Seller pays down payment!
Monthly payment as low as $1650!
But nowhere was there any mention of the actual price of the house, of course. And I’m sure that $1650 is a suicide loan of some sort. It also happens to be in the range of the (house) rents around here.
Low lumber prices have Idaho mills worried
http://idahostatesman.com/103/story/61778.html
I believe Weyerhaeuser in Washington & Canada have already shuttered several…
Foreclosure reports for Virginia. There’s no way to accurately track foreclosures through any government offices, so here are some websites of foreclosure attorneys which list their sales:
http://www.siwpc.net/november/30.html
http://www.fmlaw.com/sale.html
Big offices which either don’t list sales or use an affiliated Trustee entity include:
http://www.bursonlaw.com/html/overview_mission.htm
Smaller offices which may or may not list their sales online number in the dozens and might include:
http://pview.findlaw.com/view/1621196_1?noconfirm=0
http://nectarp.com/nectar/NectarFS.html
http://www.krhpc.com/
http://pview.findlaw.com/view/2540113_1
http://www.lawyers.com/Virginia/Fairfax/Stephen-K.-Christenson-P.C.-1735346-f.html
http://pview.findlaw.com/view/1153141_1?noconfirm=0
Analysis: SIWPC is calling fifty sales a day, which is 1000 per month all by itself. D&G lists by county, so there’s no way to get a general total, because if you request all, it times out after about 134 listings. F&M is listing about 100 Virginia sales, and more in MD and DC. There are dozens with the smaller offices, and the lists above are in no way exhaustive.
I do not think it unreasonable to conclude that perhaps 2000 properties or more a month are being foreclosed in Virginia. This is easily comparable to any of the “disaster” areas like Colorado, Las Vegas, etc. This leads me to speculate that the full magnitude of foreclosure losses nationwide is not being accurately reported.
KIA — you might also post this information at Ben’s foreclosure blog, The Foreclosure Report.
http://getforeclosures.blogspot.com/
If time-share in an almost perfect town can’t survive, it likely won’t elsewhere:
“Time share developers file for bankruptcy”.
I no longer subscribe to Santa Barbara Newspress to see whole whole article.
The “Ritz-Carlton” timeshare, no less.
2007 Spring Sales Season question?
When is the ‘official’ kickoff date that homes are listed for the Spring season?
I’m wondering when will be the start date and if all of a sudden skyrocketing of inventory. I am also assuming some may decide to beat the rush and list early to try to geta jump. It seems to me it will be an early indicator of the 2007 housing market.
Comments?
Guess you weren’t around last year - the spring sales rush always starts right after the Super Bowl! In fact, I advise planning open houses all over the country for 8:00 that night while hubby is still a little buzzed! It could be like the Black Friday if real estate!
Superbowl XLI Feb. 4, 2007
How appropriate, it will be in Miami.
I tracked my area last year. Dec. 22 was the trough, and after Jan. 1 inventory increased steadily through August. I expect the same, if not worse, in 2006-2007 (because of all the “pull it and wait ’til spring” sellers)
It looks like someone has already started burning down houses to escape loans:
http://www.signonsandiego.com/news/metro/20061128-1145-bn28fire.html
Well probably not, but I bet these cases are on the rise!
Talked to a friend that lives in Newhall, Ca., where every other person that lives there is a cop or fireman and a friend of his is a fireman in the LAFD and has been for around 20 years and he told my friend that in 1990-91 there were oh so many houses that “caught fire” mysteriously, in the el lay area~
Don’t forget the marshmallows
Topic Request: Can we discuss smart places to put your money and retirement funds today based on what the blog sees in both the near and long term? And can we talk about it in terms that those of us who do not day trade would find useful and actionable? For example, what specific fund types would you have in a diversified 401k today if you were 20, 30, 50 yrs old? would it be 70% domestic stocks or an index fund, 15% bonds - what bonds? and 15% Foriegn stocks - what stocks or would a euro fund work? A simple, clear, actionable set of opinions that would help the joes who have been lucky enough to stumble on this blog and just want to try not to do too many stupid things with their retirement money in this very very weird period. if this is a topic that really should be somewhere else like Investing101, my apologies. There are so many very intelligent investors here and it doesn’t hurt to ask for numerous opinions to get the best understanding of the issue.
I suggest the stock market. It seems clear at this point is that the not-too-subtle plan is to try to inflate the US economy out of its troubles. That will transfer money out of the pocket of $US savers (mainly Asians, as the US has a negative savings rate) into the hands of US 401(K) plan participants, Wall Street players (like HFA) and investers (like Gekko). Not sure how happy the Asian savers are about this plan, but thats what the numbers coming out on a daily basis suggest…
Commodities are needed in up AND down times. Not all of them, but commodity stocks generally do well in a down market. People still need to buy food, raw materials, and heating materials.
Food and heating materials I will give you. Raw materials (e.g. copper) tend to be less in demand after the end of a construction mania, though…
Mr. Fisher — I hope you have more comments for the press soon. Because I doubt a falling dollar will do much to bring the US savings rate back to positive numbers…
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CURRENCIES
Dollar hits 14-year sterling low; 20-month euro low
By Wanfeng Zhou, MarketWatch
Last Update: 2:30 PM ET Nov 30, 2006
NEW YORK (MarketWatch) — The dollar tumbled against major currencies Thursday, hitting a 14-year low against the British pound and a fresh 20-month low versus the euro, after the latest round of economic news fueled concerns the U.S. economy is headed for a sharp slowdown.
The U.S. currency sold off sharply after a report showed business activity in the Chicago region slowed to its lowest level in more than three years in November. The Chicago purchasing managers index fell to 49.9% in November from 53.5% in October. Economists were expecting the index to rebound slightly to 54.4%.
“For the first time since April 2003, Chicago manufacturing conditions reached contractionary levels,” said Kathy Lien, chief strategist at FXCM. “This is the first time that we are hearing the recessionary bells ring and the market is not taking this well.”
http://tinyurl.com/yk4456
bulletin
NASDAQ CLOSES NOVEMBER WITH 2.7% GAIN; DOW AND S&P RISE 1.2% AND 1.6%
Sterling in sight of $2 by year-end
By Wanfeng Zhou, MarketWatch
Last Update: 3:55 PM ET Nov 30, 2006
NEW YORK (MarketWatch) — The British pound has rallied to its highest level since 1992 versus the U.S. dollar, making the elusive $2.00 mark an increasingly realistic target before the end of the year, strategists said Thursday.
“$2.00 is the target [for year-end], both technically and psychologically,” said Timothy Mazanec, senior currency strategist at Investors bank & Trust Co.
Sterling surged Thursday, breaching the key resistance level at $1.9550, after a report showed U.K. house prices rose 1.4% in November. On an annual basis, house prices are up 9.6%, the highest annual rate rise since February 2005, the Nationwide Building Society said. The pound also climbed against the euro, although to a lesser extent.
A weak dollar further exacerbated the move. The U.S. currency sold off sharply after a report showed business activity in the Chicago region slowed to its lowest level in more than three years in November, sparking concerns over a sharp slowdown in the U.S. economy. See currencies column.
“We see strength on the sterling side and weakness on the dollar side. It’s the combination which has sterling performing so well against the dollar,” said Ronald Simpson, managing director of global currency analysis at research firm Action Economics.
Looking forward, “where the dollar goes, it’s where sterling goes,” he said, adding that sterling at $2 is “certainly possible.”
Boris Schlossberg, senior currency strategist at FXCM, said that the pound may reach the $2 level “simply on anti-dollar sentiment,” if U.S. data continue to deteriorate.
http://tinyurl.com/u9mdu
Yes, please. I am 25 years old and currently have about $7K in an IRA. I have it in a “moderately high-risk” mutual fund that buys tech company stocks right now, which has been doing quite well over the past few years, but I’m thinking I may want to change it. Advice would be appreciated.
If your employer offers any kind of 401k with matching take full advantage of that because it is free money. You should be stuffing at least 10% of your pre-tax income into your 401k. Once the money is going into the 401k you need to setup and manage where it actually goes. Depending on what brokerage the 401k sits in you should be able to use their online 401k resources and tools to determine how to diversify that money. Another thing to consider is there is very little reason to buy a “loaded” mutual fund so make sure any mutual funds you choose are “No Load”. The “load” is charges the fund managers charge you as a percentage of what you contribute.
I also think, in my tin foil hat moments, that everything is going to hell in a handbasket and I need to get everything into gold or at least euros or cash. On reflection, I think adoptiing some balance that will mitigate overall risk is a better solution. The trick is doing that and getting a decent return over the long haul.
Gold is money. Paper “dollars” aren’t, even though most people think they are. They will find out differently one of these days, probably not too long in the future.
Money is anything that you can use to buy stuff you need, be it gold, paper printed with fancy green ink and watermarks, cigarettes or pretty pebbles on the beach that the indigenous tribe has decided to use as a medium of exchange.
A $100.00 Bill costs about 10 Cents to print…
The other $99.90 is faith based.
Gold is faith-based as well. What value does a shiny, inert, malleable, heavy piece of yellow metal have, at the end of the day? It is pretty to look at, but you can’t eat it, live in it, or use it to drive to work. And governments have stockpiles of the stuff which they can dump on the market to drive prices down, or withhold from the market to drive prices up.
And one more thing about gold — governments have no vested interest in propping up its price like they do in supporting the value of their fiat money.
Most European Governments sold their gold stockpiles in the 1980’s-1990’s.
Have you ever experienced hyperinflation?
In the early 1980’s, I went to South America on business, a number of times and I learned that if I stayed in a hotel in Buenos Aries for a couple of weeks and set the rate for the room the day I arrived, 2 weeks later, the rate in Dollar terms was about 2/3rds less, than 2 weeks before, due to the hyperinflation that was out of control.
Perhaps a 100 countries in the 20th century experienced hyperinflation and the result is always the same. Anybody that had wealth in the currency of each given country, was wiped out. Those that had their wealth in tangible goods were the only ones not lose everything, essentially.
Paper money is a recent development, in the scheme of things, in fact, there was no USA paper money until 1861.
Not totally true…There was the Continental Dollar (not technically US, but close enough) as well as the War of 1812 era and Second National Bank Issues. The Continental was not such a good deal to hold hence the term “not worth a Continental”.
But my favorite is Confederate paper money…truly a story of inflation and shortages and economic dislocation. Ironically, nearly any Confederate paper money is today worth more than its equivalent modern USA $ face value!
Continental Currency and privately issued currency by various banks from 1773 til 1860, caused the financial instruments to be completely discrdited, as the currency invariably became worthless…
They even had their own nickname: “Broken Banknotes”
I remember buying brand new 1864 Confederate $20.00 Bills, in original bundles of 100, for a few Dollars a piece, 20 to 25 years ago.
The gap between Wall Street PPT-pumped stock prices and Main Street reality keeps on growing and growing. How long is it possible to keep inflating away the economy’s worries through ever-higher stock prices and bogus analyst upgrades? Why would anyone buy stocks now, as the economy is heading into a recession before the DJIA even climbs back up to its inflation-adjusted value as of the all-time high in 2000?
——————————————————————————-
MARKET SNAPSHOT
U.S. stocks fall as Chicago PMI falls below 50
Wal-Mart, weak retail sales add to growth concerns, weighing on the dollar
By Nick Godt, MarketWatch
Last Update: 12:52 PM ET Nov 30, 2006
NEW YORK (MarketWatch) — U.S. stocks fell in midday trade Thursday, after data showed Chicago manufacturing contracted in November, adding to the downward pressure created by disappointing retail sales figures and another weak forecast from Wal-Mart-Stores Inc.
In addition, crude oil prices continued to rise, sending the price of a barrel close to $63, while the dollar continued to fall sharply.
($INDU :Dow Jones Industrial Average Last: 12,199.50-27.23-0.22%
2:01pm 11/30/2006) recently dropped 45 points to 12,181. Dow component General Motors Corp. (GM : Last: 29.52+0.02+0.07%
1:41pm 11/30/2006) dropped 2.5% on news that billionaire investor Kirk Kerkorian’s Tracinda investment vehicle will sell another 14 million shares of the company’s stock.
Wal-Mart (WMT :Last: 46.35-0.54-1.15% 1:41pm 11/30/2006) dropped 1.5% after forecasting that December same-store sales will be flat to up 0.1% in December. See full story. Pfizer Inc. (PFE : Last: 27.63+0.56+2.07% 1:41pm 11/30/2006) was a standout, gaining 2.2% after raising its earnings outlook for 2006. See full story. The S&P 500 ($SPX :Last: 1,399.10-0.38-0.03% 2:01pm 11/30/2006) dropped 1.65 points to 1,397.83, while the Nasdaq Composite (COMP :Nasdaq Last: 2,433.45+1.22+0.05% 2:01pm 11/30/2006) lost 1.86 points to 2,430.37.
After a mixed opening, stocks turned lower Thursday after the release of the Chicago purchasing managers index showed a reading of 49.9% in November from 53.5% in October. See full story.
The reading is the lowest since April 2003 and surprised economists who were expecting a rise to 54.4%.
Readings below 50 indicate contraction in the region, raising concern that a national survey on manufacturing this Friday might also show contraction.
http://tinyurl.com/y7jqul
The bond market wasted no time reading the Wall Street analysts’ bogus interpretations of the PMI number before making up its mind…
http://www.marketwatch.com/tools/marketsummary/
Check out how the floor has dropped out of the yield curve today.
http://www.bloomberg.com/markets/rates/index.html
I also predict that if you look at this chart at the end of the day, the gap between yesterday’s and today’s curve will have vanished (and I would like to hear anyone’s theory of why this happens, in the unlikely event that my prediction proves correct
).
Missed explanation in the story below: Shutdown of housing ATM…
——————————————————————————–
Weak November start hurt retailers’ sales
Weather, tough year-on-year comparisons cited
By Jennifer Waters, MarketWatch
Last Update: 11:48 AM ET Nov 30, 2006
CHICAGO (MarketWatch) — The nation’s largest retailers turned in mostly disappointing sales results for November as sluggish sales at the beginning of the month outweighed a largely robust post-Thanksgiving start to the holiday shopping season.
Across the board, retailers ranging from Wal-Mart Stores and Costco Wholesale to J.C. Penney and Abercrombie & Fitch turned in weaker-than-expected numbers, according to sales reports issued Thursday.
With 48 of 56 retailers reporting, Thomson Financial said 54% had fallen short of expectations for same-store sales, the industry benchmark of growth measuring receipts rung up at stores open longer than a year.
Comparisons to last November were tough to overcome, particularly for the so-called big-box retailers that benefited from surging sales in the aftermath of Gulf Coast hurricanes.
And not surprisingly, many retailers blamed November’s unusually warm weather for their troubles because consumers weren’t interested in buying winter coats, sweaters and boots.
The International Council of Shopping Centers tallied a cumulative same-store sales gain of 2.1% — below its 2.5% forecast, which the industry group trimmed just this week.
The biggest culprit was Wal-Mart (WMT :Wal-Mart Stores, Inc. Last: 46.32-0.57-1.22% 1:59pm 11/30/2006). The world’s largest retailer said its same-store sales were off 0.1%, confirming preliminary results released on Saturday. If Wal-Mart’s results were stripped out, the ICSC same-store tally for November shoots up to a 4.6% gain.
http://tinyurl.com/y9wv5q
“Canada’s Dominion Bond Rating Service (DBRS) is predicting an almost 40 per cent chance of a recession in the United States within the next 12 months.”
http://www.cbc.ca/money/story/2006/11/30/gold.html
Fresh out of my e-mail box (hazard of being a blogger, I guess?)…
——————————————————————————
Hi GetStucco,
Answers and more answers to easier homeownership or real estate investment
success…it’s right here, and you are first in line on this one!
Please keep this quiet, it’s a gift - that’s right a gift - Zero Cost…
Better take a closer look:
http://housinglistvwx.com/e9c08cd87bpcIuW0d1/LfLA/LLi/
To say the clock is ticking LOUD on this one, well we just don’t want you to
miss out…
The Foreclosure Staff
P.S. We will have to limit this to one per subscriber ONLY!
ForeclosureZD
P.O.B. 859
Norwalk, CT. 06856
H&R Block’s Net Loss Doubles on Falling Mortgages
(from Bloomberg)
http://tinyurl.com/y4e8uf
“In the past year, H&R Block miscalculated its own taxes, drew lawsuits from regulators and customers….”
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Uh Ohh! Not the best advertisement going into tax season.
Someone posted about Sunday River in ME earlier in the week and the overpriced market. What do you make of this:
http://tinyurl.com/y5vw6t
So is Bernanke’s plan really so simple as simply proving to all the world that the Helicopter Ben label was justified? That would be quite a disappointment. At least it will bring the British Christmas shoppers into the malls, though…
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Dollar hits lowest point in 14 years as it plummets towards 50p
· Frantic trading as fears of US housing meltdown grow
· Britons will head across Atlantic for bargains
Ashley Seager, economics correspondent
Friday December 1, 2006
The Guardian
The dollar continued its seemingly unstoppable decline on the foreign exchanges yesterday, hitting a 14-year low at just below $1.97 to the pound as analysts predicted the two-dollar pound mark may soon be breached.
The dollar was last this low against the pound in September 1992, when Britain was forced out of the European Exchange Rate Mechanism, the euro’s forerunner.
The news is likely to further boost airline bookings from bargain-hungry Britons rushing off to the United States for a pre-Christmas shopping bonanza.
http://business.guardian.co.uk/story/0,,1961438,00.html?gusrc=rss&feed=1