Bits Bucket And Craigslist Finds For December 4, 2006
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
To donate by mail, or to otherwise contact this blogger, please send emails to: thehousingbubble@gmail.com
PayPal is a secure online payment method which accepts ALL major credit cards.
Links
-
November 2024 M T W T F S S « Sep 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Photo Submission: hbbphotos@gmail.com
View the HBB Photo Gallery *updated 4/13/2008
I’m in Orlando for a few days. Half work but time to play. I don’t enjoy amusement parks — I am hoping to find a nature park to visit. Would also like to visit “ground zero” of the housing bubble here. Any suggestions where to find it?
I would drive down I4 and look for the housing company signs. There are 10-100s of new developments in that area. Just find one, tell them you would like to look through the community. Drive around the community and look for for sale/for rent signs. Something tells me you won’t have any trouble finding them.
It matters where you are in Orlando, it’s a sprawling place. If you are in the south side of town by the convention center then try county road 535 from Lake Buena Vista to Winter Garden, the Poincianna area, Hunter’s Creek, or if you are really brave and want to see thousands of cookie cutter homes owned by flippers, drive down I-4 to Championsgate/Reunion (exit 58?) and then drive up US 27 to Claremont. The majority of homes on US 27 are either short-term vacation rentals or flipper homes, and there are thousands for sale. I have a friend who is an appraiser in that area, and he says he has been swamped with calls the past few weeks from Brits in a panic over the exchange rates. I guess they are OK if the loan is on an American Bank, but many of them are upside down if it is a British loan.
That’s an interesting issue. How many overseas investors are there from Britain? And how much more would the weakening dollar hurt their investment?
Experts?
I would say at least 20% of investment homes in Florida are investors from Great Britain. Go to VRBO.com (vacation rentals by owner) and check out how many have United Kingdom phone numbers. When we go to restaurant, stores… in Sarasota, you are bound to run into several Brits. Ten years ago, you only ran into them on the beach or at the mouse. From talking with local Brits, Florida was a great investment. They could buy a decent house for $150k with a pool, close to the mouse, beach…. and rent it out for the majority of the year to friends and other Brits. Not only covering their carrying costs, but also making a huge profit annually. Now the market is swamped with Brits trying to do the same and carrying costs are ridiculously high for those that bought in the last two years!
I bet those Brits are pleased to see their ‘investment’ going down the drain with the US dollar.
And the Dollar/Euro has gone from 1.1650 (dec 2005) to 1.3327 (Dec 2006). Not good for inflation.
“I bet those Brits are pleased to see their ‘investment’ going down the drain with the US dollar.”
I bet the stuck flippers are dismayed to see the slice of demand driven by GFs from overseas going down the drain with the US dollar. Of course, Lereah would point out that it just got cheaper for Brits to own a Florida vacation home…
Well, it’s nice to see that
1. the US does not have the market cornered on stupid
2. stupid with money goes beyond losing money on your house; oops you forgot about exchange rates too
Check out the nicer areas of Orlando metro, too. I lived there 15 years ago, close to Winter Park. I never saw Mickey, but liked visiting the Morse Museum in Winter Park (Tiffany stained glass). There were some really nice, non-cookie cutter areas around - and I doubt they’ve been replaced by condos.
Thanks for all the suggestions. I didn’t really go anywhere today except Target (for Starbucks and food) and Applebee’s. I guess I could have just stayed home
Tomorrow I do more exploring.
The next Amaranth is out there somewhere. ……/ bloomberg on hedge funds
http://www.immobilienblasen.blogspot.com/
Would have thought this Yahoo article was posted yesterday. Assuming GSax follows through with a 1% flat fee and hedging strategies that rival the best of what’s out there today, this year’s bonuses should be the final ones for a lot of hedge fund managers.
http://tinyurl.com/y6o9rl
A frontline first-hand report from Perth, Australia: bubble still inflating here. I spent the day with a friend from here. She showed me around some of the lovely beach areas. She pointed out her father-in-laws’ house - recently valued at AUD 9,000,000. This same house, if transplanted to La Jolla, would likely go for USD 4,000,000 at best. Full on mania here. And all because of a boom in the mining/commodities business?
My friend was a bit embarassed that she still was renting with her husband at the age of 37. Both have great jobs. She even said that some of their friends look down on them for renting - so “renters shame” is not just an American concept!
One great quote I heard whilst here : “interest only is the way to go”. Yeah right.
So far my work year has taken me to some of the great bubble centers (ex USA) of the planet - London, Dublin, Dubai, Cape Town, Bangkok, and now Australia.
My conclusion - the glut of easy credit combined with cash-out equity locusts is a world wide scourge.
Brace yourselves - I sense a brick wall on the horizon.
Hey Left LA Behind, thnks for the world wide update. What kind of work do you do to travel like that? Im jealous - still stuck in LA here.
Music business - professional touring for about the last decade. Lou: Shanghai was on the schedule, but we were forced to cancel. Would have been interested in seeing that one, too.
A friend works for a big computer firm and he goes to Shanghai often and he related that there are oh so many new spec condos there, totally unoccupied…
My wife and I were in New Zealand for 2 months from Jan-March of this year and NZ was ever so bubbly, especially in the lakes area of the South Island, Queenstown/Wanaka, etc.
The Kiwi $ is like around 66 Cents U.S. and we saw just ok houses for NZ $500-900k that I could have bought for NZ $100k, just 10 or 15 years ago.
T I M B E R !~
Will you be traveling to Shanghai, Moscow and Barcelona anytime soon? AFAIK, the only country that hasn’t participated in the mania is Germany.
Love Barcelona, and would jump at the opportunity to live there. Have not been this year. Was in Moscow in 1998, 2002, and 2003 - no thanks. Good for a 2-3 day trip, but cannot imagine living there. Are those prices justified? Are any, anymore? Petrodollars.
or Switzerland
Has irrational equanimity replaced irrational exuberance as the driving force on Wall Street?
————————————————————————————————–
FT Home
Q&A: US capital markets
Relaxed about risk: Wall Street’s gains may be a case of irrational equanimity
By John Authers
Published: November 27 2006 02:00 | Last updated: November 27 2006 02:00
The US equity markets sailed with equanimity into last week’s Thanksgiving break. A strong rally has seen the Dow Jones Industrial Average index gain about 15 per cent since midyear, bringing with it similar rises in the developed and emerging worlds and a rash of acquisitions.
But the data used by market professionals to show the level of anxiety in the market are perplexing. On the face of it, despite great uncertainty over the direction of the US economy, nobody is worried about anything.
The Chicago Board Options Exchange’s Vix index, one popular measure of volatility, infers levels of anxiety from what investors are prepared to pay through the options market to hedge against future volatility in share prices. The Vix hit an all-time low last week. Volatility in the foreign exchange and credit markets is similarly at very low levels.
There is also little sign of risk being priced into securities. The extra yields, or “spreads”, that investors receive for buying relatively risky paper such as emerging market debt, “junk” corporate bonds or the stocks of smaller companies, are all at or near historically low levels. This is out of kilter with the US Treasury bond market, arguably the most sensitive to the economy. It is signalling a sharp slowdown next year.
Normally, investors require a higher yield on longer-term bonds. This is logical, as there is greater uncertainty further into the future. When long-term yields are lower than short-term yields (known as an inverted yield curve), it implies that the market expects an imminent worsening of conditions and lower interest rates.
The yield curve for US Treasury bonds has been inverted for a while - and the inversion has deepened over the past month as stocks have continued to rally. Ten-year Treasuries last week yielded 18 basis points less than two-year Treasuries - a strong signal that the market expects a recession.
http://www.ft.com/cms/s/333247dc-7dbc-11db-9fa2-0000779e2340.html
Has irrational equanimity replaced irrational exuberance
Based on your exchanges with gekko in the previous thread, yes. Not an insult in sight.
I have nothing personal against gekko. I just quickly tire of reading his recitations from the 401(K) investor’s handbook.
The problem with gekko’s plan is that the 10% avg. he points to is over a century, while most people only invest during the 30 or so years of earning time they have. If you hit one of those stretches - like the last few years - were the market goes no where, or down in real terms - you are dead in the water.
I concur with your point. He ought to take a careful look at the long-term price-earnings history on the S&P500 which is shown in Shiller’s Irrational Exuberance. As you suggest, the implication is that if you start your dollar cost averaging program at the wrong point in history, you can keep buying more and more stock at an ever-lower price for upwards of sixteen years.
Previous such wrong points in time, when the PE ratio peaked at a level over 25 before starting a long (16yr+) retracement back to a level below 5, were 1901, 1929 and 1966. The most recent similar peak in the S&P500 price earnings ratio was hit in 2000…
I try to keep my mouth when it comes to the investment comments because so many others are more qualified, but I also have a problem with this idea of dollar cost averaging into index funds right now.
Everyone here seems to be versed on the challenges of the dollar going forward as well as the various geo-political issues the U.S. is facing. Going back to 1971, when the world’s major currencys last underwent upheaval (due to U.S. defaulting on Bretton Woods), it is becoming apparent that the Volker fix was only temporary (35 years isn’t a bad run though) thanks to the ongoing debasement that by some measures (recreated M-3) is at 10%+. Several analysts and indicators suggest that a major turn in the road is directly ahead for the world with regard to currency valuations. If true, then projecting some sort of auto-investment methodology out into the future is more likely to leave one in a field as opposed to on the road.
If we get into a worldwide competitive currency devaluation scenario as some suggest may happen, then while nominal returns might look great, the gains won’t reflect an increase in purchasing power. Should the U.S. get “cut loose” during the devaluation ahead by the other major currency issuers (as suggested by some recent articles concerning capital controls by Euro-union) then it’s unchartered territory for all investments, but I would anticipate that dollar based investments will surely get hit hardest.
Nimble traders like Tx Chick may be OK but the rest of us had better have thought this through and be on the right side of the trade going into the turn.
“If we get into a worldwide competitive currency devaluation scenario as some suggest may happen,…”
Beggar thy neighbor’s currency…
Any thoughts or suggests on books to read as an alternative strategy to cost averaging in index funds? That’s what we do right now and I’m definitely open to the argument that we might be catching the wrong 30 year period.
I can’t tolerate the strutting around with absolutely no justification.
You mean drumbeating a lie so often in becomes truth?
-
Sorry I’m late to the party but I have to work for a living. The rally continues and the rich get richer. This market can’t be stopped.
Big mergers, big rally
Major gauges surge, with S&P 500 hitting new six-year high, as investors welcome deals and falling oil and shrug off Pfizer.
By Alexandra Twin, CNNMoney.com senior writer
December 4 2006: 5:17 PM EST
NEW YORK (CNNMoney.com) — Stocks surged Monday, sending the the S&P 500 to a fresh six-year high, as investors welcomed a slew of merger news and a slump in oil prices.
The broader Standard & Poor’s 500 (up 12.41 to 1,409.12, Charts) index climbed about 0.9 percent, closing at its highest point since Nov. 7, 2000.
Bully to you for being able to read this market. I am on the sidelines with all savings and reserves as safe as I get them. (I hope) - not in stocks.
The “Ahead Of the Tape” column on p. C1 of today’s WSJ explores a similar theme:
– Today’s Market Forecast –
By Michael Hudson
Bond Conundrum Redux
+ Investors like to watch the bond market for clues about the economic outlook. If you do that now, you’ll get a headache. Treasury yields are behaving as if a recession is approaching. But in the corner of the bond market that would be hit hardest by a downturn — junk bonds — investors are partying like it’s 1999.
In the Treasury market, bond investors usually expect better returns on long-term notes than on short-term bills, because long-term bonds are exposed to unwelcome inflation over bigger stretches of time. But the bond market has been upside down since July. Three-month Treasury bills yield just over 5%, while the yield on the 10-year Treasury was 4.44% Friday. The “inverted yield curve” could be a harbinger of recessions; investors could be buying long bonds on a hunch the Federal Reserve will have to slash the very short-term federal funds rate — even higher at 5.25% — to boost economic growth.
In the junk-bond world the backdrop is different. Junk, or “high yield,” bonds are issued by the shakiest corporate borrowers who would likely suffer most in a downturn. One might expect these bonds to weaken if the economy risks deteriorating. But junk-bond fans, hungry for investments with even slightly better returns than Treasury bonds, don’t see recession risks. Instead they’ve focused on the currently low rate of junk-bond defaults and have been gobbling up new junk issues, which hit a monthly record in November.
Junk investors aren’t demanding much for their money either. Jack Ablin, chief investment oficer at Harris Private Bank, says junk-bond yields are about 3.4 percentage points above safer 10-year Treasury note yields. That’s paltry compared with the 6.6 percentage-point premium earned when the yield curve — as measured by 10-year notes and the fed-funds rate — has inverted in the past decade, he calculates.
Caution might be in order for junk bonds. But Tom Huggins, an Eaton Vance bond-fund manager, says it still feels “like there’s a fair amount of momentum left in the market.” Treasury yields might not flip for some time either. The Economic Cycle Research Institute’s Lakshman Achuthan notes foreign central banks and other overseas institutions have been big buyers of Treasury bonds, helping to keep Treasury yields exceptionally low. They’re unlikely to change behavior overnight.
Still, it’s a good bet somebody is going to get hurt. The question is: Will it be junk investors bullish on the economy, or economic bears who love safer Treasurys?
Question: Could the explanation be that bond investors are extremely bullish on the economy and The Fed, and they are expecting both high growth *and* low inflation? In other words, maybe the bond market is just pricing in ‘perfection’, and any deviation from ‘perfection’ will cause someone to get hurt?
The part that does not fit your bullish story is the persistent yield curve inversion. This means that the market anticipates long-term rates to drop in the future as they typically do when the demand for loanable funds drops through the floor in a recession. There is normally an inflation risk premium priced into the long-term end of the curve to compensate investors for the risk of finding themselves locked in to a long-term fixed rate investment at a future point when inflation lurches higher than expected.
I was travelling over the weekend to Nashville, TN. Stopped in a McDonalds in Tullahoma, TN which is about half way between Nashville and Chattanooga. Overheard a table of older gentlemen discussing real estate and the dramatic increase of foreclosures. Imagine, in Tullahoma! This not far to the west of the mountain areas that all of the half-backs are migrating to.
We’re a far, far way from stabilization. Housing will probably only begin to stabilize when new unit permits fall to near 250K a month. Look for the beginning of 2008 to be the start of stabilization.
you can read more here:
http://blog.myspace.com/index.cfm?fuseaction=blog.view&friendID=51443639&blogID=200757710&Mytoken=FDD9CBF9-987F-4612-8B23E81ECF961CBF5735982
whether stabilization means an end to declining prices is not clear, it just means the worst will probably be over and builders will start picking up the pace, albeit most likely a slower pace than in the last 5 years.
Global Expansion Threatened by Vehicle, Phone Glut (Update1)
By Rich Miller and Joe Richter
http://www.bloomberg.com/apps/news?pid=20601109&sid=aQfwdhNpf6ME&refer=home
___
Factory inventories worldwide rose faster than sales last quarter for the first time since 2001, according to economists at UBS AG in London. Behind the build-up: an unexpected slowdown in demand, especially in the U.S., brought on by the mid-year surge in energy prices and a housing slump.
Reducing the glut will be painful, says Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. “The faster companies clear out inventories, the bigger the hit to the economy,” LaVorgna says. “This could ripple through the economy, to jobs and consumer spending.”
____
You’d better shop and spend now, before they run out of inventory!
“You’d better shop and spend now, before they run out of inventory!”
And buy yourself a new McMansion while you are at it, for similar reasons…
Pile up new cars in the shape of a christmas tree and decorate it with cellphones and portable computers.
can anyone come up w a number 2000 stcok bust vs if housing fell 20%
For those in the NJ/NY Metro area, preliminary sales data for November is available:
http://njrereport.com/index.php/2006/12/04/northern-new-jersey-november-residential-sales/
January
Average Sales (2003-2005): 2000
2005 Sales: 2013
2006 Sales: 1705
(Down 15.3% Year Over Year)
February
Average Sales (2003-2005): 1583
2005 Sales: 1578
2006 Sales: 1395
(Down 11.6% Year Over Year)
March
Average Sales (2003-2005): 2193
2005 Sales: 2256
2006 Sales: 2033
(Down 9.9% Year Over Year)
April
Average Sales (2003-2005): 2322
2005 Sales: 2383
2006 Sales: 1817
(Down 23.8% Year Over Year)
May
Average Sales (2003-2005): 2615
2005 Sales: 2725
2006 Sales: 2298
(Down 15.7% Year Over Year)
June
Average Sales (2003-2005): 3486
2005 Sales: 3682
2006 Sales: 2911
(Down 20.9% Year Over Year)
July
Average Sales (2003-2005): 3495
2005 Sales: 3338
2006 Sales: 2428
(Down 27.3% Year Over Year)
August
Average Sales (2003-2005): 3661
2005 Sales: 3668
2006 Sales: 2599
(Down 29.1% Year Over Year)
September
Average Sales (2003-2005): 2854
2005 Sales: 2655
2006 Sales: 1968
(Down 25.9% Year Over Year)
October
Average Sales (2003-2005): 2570
2005 Sales: 2280
2006 Sales: 1867
(Down 18.1% Year Over Year)
November
Average Sales (2003-2005): 2330
2005 Sales: 2135
2006 Sales: 1858
(Down 13.0% Year Over Year)
Additional graphs and data available at the link above.
Caveat Emptor!
jb (aka Grim)
From Phoenix. . . My wife and I usually visit new home communities once a month or so in the West Valley. DR Horton on 103rd Ave and Broadway had well over 30 specs last month. As of yesterday, the list was cut in half, with all the one-story homes “sold.” This community had the biggest change in the four visited. Others had shrinkage in their spec lists, but more importantly, they were still reluctant to lower their base prices and instead offered an additional $10,0000 in incentives when compared to November. All the realtors used the “end of year clearance” tactics to get us to buy. We would like to wait well into 2007 before we buy, but is there any truth to builders wanting to clear their books before the end of the year?
That should read $10,000 in incentives. . .
Big Poppa, Take a look at Horton’s Mountainside development at Cotton Lane and Waddell in Surprise. This place has hundreds of spec homes about to be completed. Let us know what you think of this. Are there buyers for these places? There “Incentive” prices put them south of $100 per sq ft. This has got to drive all the flipper resales in the area crazy.
Sweet, I’ll take a look at that community this coming weekend and let you know what I find.
one-story homes “sold” Very misleading. They are in escrow, where new home builders are running about 30% cancellation.
It ain’t sold till title changes names
Meanwhile, in PPT, news, it looks like Kenneth Harney has joined the “bash the media” bandwagon:
http://www.azstarnet.com/athome/158394.php
“But if home sales are down so dramatically, why aren’t median prices down more than 1.2 percent? The answer is that absent severe reversals in national or local economies, housing prices and values move glacially in retreat. Most home sellers in stable local economies aren’t forced to sell if they don’t get the price they want; they can postpone the sale until market conditions improve.”
Guess what, Kenny Boy? Have you ever heard of builder sales incentives, suicide loans or appraisal fraud? Because we have had ongoing discussions here about the combined effects of these extraordinary factors in producing an upward bias in posted sales prices compared to underlying market values.
He writes:
> That’s what you’re seeing right now: Sales volumes in the frothiest markets have tanked. But the statistical fact remains: Median prices in 70 percent of the nation’s metropolitan areas are still growing and are likely to continue to do so.
So that’s what he is “seeing”: they are likely to continue to rise. Maybe “hoping” would be a better word here. I had this POS in my newspaper, too.
Oops! Too many commas in the previous post. Should have said, “…in PPT news…”
Do you still think $50,000 is a lot of money? Although my gut says yes, I realized yesterday just how much inflation has changed things.
My first full time job out of college as an entry level programmer in 1992 was $28,000. At 4% inflation for 20 years, that’s 50k today.
A candy bar was 40¢ from a vending machine in 1986. Today they’re about 80¢ to 90¢ depending on the machine.
A 10 oz microwave dinner was $1.49 back then. Now they’re $2.99. (Same brand. Same flavors.)
Do you ever stop and think what a dollar really buys nowadays?
A nickel in 1970 bought what a dollar buys today.
What? 5:1 maybe, not 20:1.
Houses are a poor example because of the recent run-up, but I would say compare the $30K house my folks bought in 1970 compared to what it is worth today. I bet its intrinsic value is about $150~200k in todays dollars.
Cars: An entry level ‘71 Pinto put you back $2000. An entry level Kia Rio will put you back $10000 today.
You read right ~20:1
Gold 35/ oz 1970
gold $650 / oz 2006
Gold was artificially held low by law in 1970. As soon as Nixon repealed the gold shackle, it spiked up to the 200’s. Also, you can buy a McD’s cheeseburger for 80 cents (on the high side) my father said 15 cents in the 1950’s. So, not all things went up 20:1.
You have to factor in the declining prices and increasing quality for many items as well.
In 1986 a cell phone was the size of a suitcase and cost many hundreds of dollars with only 100 minutes of poor analog service. Today you can get one for $50 or $100 much more robust digital service, mp3 playback, and a camera.
In 1992 you could buy a $1000 486 computer with an 80MB hard drive. Today you can buy a 1000X faster dual core processor and have 1000X the storage capacity for the same price.
In 1994 I bought a $1300 34″ sony tube TV. Today for less than that you get a 46″ HDTV.
I don’t buy into the “hedontic improvement” argument too much.
Yes, computers are faster with bigger harddrives. But then every release of Windows bloatware just takes up more space. I did many college papers using DOS WordPerfect. Am I really that much more productive now, typing an e-mail in Word? Do I really do much differently today in the latest versions of Access or Excel than I did 10 years ago?
Yes, cars have more safety items, more standard equipment. But did any of that really matter to me when as a driver? I can get from A to be just as easily without on board emissions diagnostics, airbags, rear seat shoulder belts, etc.
I agree with you about Word Perfect. I still think 5.1 is the best word processing program.
LOL — I thought I was alone in still using WordPerfect, though I use the Windows version. Can’t believe that Microsoft never copied WP’s superb “reveal codes” and “block” functions.
I’m with you mozo. I work in a place that is big on technology. We keep inventing new ways to use it. Things are not any better, just more complicated. Remember the talk of moving to paperless offices? We generate tons more paper now because of all the things that can be easily generated like reports that used to be done manually. Most is just waste and crap with no purpose.
My 1991 bag phone had a 3 watt signal and could blast across Lake Michigan. Now I feel lucky to get a signal.
amen. my dad used to have a bag phone. He could get a signal through concrete block walls!
Boy, imagine the signal strength of a bag phone with the improved signal processing of today…
Please don’t miss that 3W signal! Though it is not held next to brain, it will still slow cook the brain pretty well….
That is why it was a bag phone - the phone was not much larger than the LG I use today hard wired to the transmitter which I kept in the back of my truck. Awesome range and sorely missed when sailing.
“Today you can get one for $50 or $100 much more robust digital service, mp3 playback, and a camera”
How about one that works well as a *phone*? Where can I pick up one of those “robust digital service” phones, that’s what I really want.
I’d have to agree that Hedonics often doesn’t reflect the ‘real world’ value.
Electronics are the single realm where your dollar appears to go farther. Quality and quantity in ordinary items have suffered terribly. I’m shocked every time I replace a pair of Gap jeans or Nikes or buy a box of crackers. Most of you are significantly younger than I, so wouldn’t have the direct experience of knowing you could grab a size/style off the shelf and be confident of getting a consistent, quality item. Today, Nikes are junk….and Gap jeans are a grab bag…to name just two examples.
I’m thrilled with my reliable, 38mpg ‘05 Corolla, which is a mechanical miracle when compared to my ‘72 Capri ($2365 off the showroom floor….the $65 was for the radio)….
No, my wages haven’t kept pace with inflation, though I’m fortunate to have an old-economy job - the kind with benefits, and at least a reasonable salary.
Hedonic pricing adjustments? Marginally useful for obscure industrial metrics, but hardly a useful addition to the CPI.
How terribly amusing this all is…
Any pros and cons for FHA and CalFHA programs? I am planning to buy in 3 to 4 years, but need to get ready now!
http://www.calhomemtg.com/g_affilform1.asp
http://www.calhomemtg.com/g_custom3.asp
http://www.calhfa.ca.gov/homeownership/limits/income/index.htm
From Pensacola, Florida
Out of curiosity, I may attend this auction to see what the final price is:
MILTON/GARCON POINT
Best Bidder Sale
Adrian Woods
Westerheim Quality, Bay Views,
2415sqft, 4 bed, 2 Bath,
2 Car Garage, Move-in ready
Instant Equity Opportunity
Bids Start at… $141,500
Dennis D., Please keep us informed. I went to an auction in Sacramento 3 weeks ago. The auctioneer ate it big time. Only 2 of 18 homes sold. No opening bids on the other 16, as they started to high. The auctioneer was pushing the homes, noting “how little” the negative cash flow would be on these deals. Ha, no one wants negative cash flow in a depriciating market. If you can’t get 10% cash flow, why take the risk?
“If you can’t get 10% cash flow, why take the risk?”
BINGO!
I can’t figure out why ANYONE would structure a deal that doesn’t provide a decent positive cash flow. All the other benefits are “gravy” and not a factor in pricing an offer. If you put the deal together where most of the downside is factored out, all your surprises will be good ones. You won’t do many deals, but the ones you do make great money…..and last time I checked…..that’s why you do them.
Went to an open house over the weekend (actually, four open houses in the same neighborhood) in Eureka, Cal.
Far more lookers than I would have ever expected…a steady stream of traffic, perhaps nine or ten interested parties wandering through the houses in my 40 minute stay. Interesting combination of folks, too, from some 70+ year old couple looking to purchase an oversized house with steps (WTF?) to “normal” families. Despite the looking, only the older couple seemed even remotely serious. Most just breezed through the homes and left. I overheard the older couple talk about how nice their paintings would look in particular rooms, etc. Prices for these homes in the 400s-500s. Median income of Humboldt county=$36K/person.
I talked to the realtor hosting the open house and was quick to mention that all these homes had been on the market a whole year, and that my wife an I are merely lookers at this point…that we would rather not catch a falling knife. Despite all the people at these open houses, he was quick to admit the market is “real slow” and fully expects to “sacrifice” his next weekend doing the same thing at these houses.
Either there are a bunch of people like me out there, who are just interested in seeing how much the market has to fall (highly unlikely) or there is still a real affinity in real estate that has simply (for now) climbed above most people’s means.
Why can’t this place just be like Sacramento, Fresno, Bakersfield, et al and just crash?!!!!
FWIW, the housing bust tsunami doesn’t seem to have reached my island in SW Charlotte yet. In fact, my subdivision has only 3 houses for sale. I have never seen that before. Inventory usually drops in the winter, but about 10 to 12 is normal then.
Just got off the phone with my stock broker. Had a real interesting discussion, almost loud voices.
Wanted to take $150,000 in a Defined Benefits Account, (Retirement) and put it into 3 Month T bills.
Broker: Why do you want to do that?
Me: I said I can get a safer and higher rate of return.
He fought very hard to keep me in Money Market Accounts or in an index fund.
Finally I said get put me into T bill or I will get a new broker.
Any insight as to why Broker do not want you in T-Bills?
Why would you use a broker for purchasing T-bills? They will take a commission–in the form of a lower return for you. Better off going to the source and purchasing Treasuries directly.
A Defined Benefits Acocunt has to have a “account manager” or thur a broker. Cost is $50 service fee.
liquidity for you, none for him?
“Any insight as to why Broker do not want you in T-Bills?”
There is a risk that you might figure out how to buy them without paying any broker’s commission (in which case Broker will become broker). In case you don’t know how, check out:
http://www.savingsbonds.gov/indiv/myaccount/myaccount_treasurydirect.htm
Hi Gs - This one is for you! Looks like the PPT helped the dollar today.
“…The pressure to halt euro’s rise may also come from the region’s corporate sector. A week-end article in UK Telegraph notes the nightmare that faces Airbus which now sits on 221 Billion worth of orders payable in dollars but must incur labor and production costs in euros. With the company’s hedges coming off soon, a prolonged exchange rate above 1.3000 would badly hurt the airplane manufacturer. Furthermore, we doubt executives at BMW, Bayer and host of other European corporations slept well this week-end as all of them face tremendous competitive problems in both North America and Asia as the euro continues to appreciate against both the dollar and the yen….”
http://tinyurl.com/ymw5bh
Just another reason why Airbus is doomed. They really cut their throats with that A380 flop. A380 orders stand at 166, of which 157 are firm and 10 are freighter models Airbus expects to sell a total of 750 aircraft, and estimates break-even at 420 units, increased from 270 due to delivery delays and the falling exchange rate of the US dollar.[
Any pros and cons for HFA and CalHFA? Thanks. Planning to buy in 3 to 4 years!
This weekend, I was haning out with the neighbor, having a few beers when some of his friends from work came by to join us. My neighbor and his friends all work in the auto repair industry.
At some point during the eveneing, discussions came to the housing market, and both of my neighbors friends admitted they were at the end of the teaser period of their I/O loans and were looking at refinancing. The first guy was looking at his payments for a 30 year fixed mortgage to consume all of his paycheck and nearly half his girlfriends paycheck (take-home) each month. The other guy was almost in as bad of shape, but has young children which make the situation worse.
Neither of them had refied or pulled equity out of thier homes. I strongly suggested to them that they look long and hard at refinancing, since if they do this, they lose their ability to walk away from the loan (Temecula, California).
First guy got kind of pisses at me when I suggested he might be better off letting the house go back to the bank then saddling himself with 30 years of debt for a place which will be worth less than he owes for at least a decade. He and his girlfriend really like the house and have a bunch of cats and dogs, so in his mind staying is a resonable option.
Second guy was much more concerned about getting stuck owning a depreciating asset. He said he regretted upgrading from a smaller home he had lived in for several years and buying a McMansion with the equitiy extracted from the sale of the first house.
Told them both to research their options, check the rental prices of similar houses in their neighborhoods so they could see how much less they could spend on housing by renting, and to be very skeptical of advice they receive from mortgage brokers and realtors, since thier may goal is to facilitate a transaction.
It’s too bad; both are hard working young guys who were just looking to own the places they lived in.
Two comments: first, in order to sell and rent you have to successfully sell, which is a huge if right now. Especially at any sort of palatable price from the standpoint of the IO borrower.
Second, if these IOers do succeed in staying on the refi treadmill year after year after year, refiing into new IOs each time, then they truly are just renting, only with a much higher stakes.
I told them they should consider mailing the keys back to the bank and walking away from their “owned” homes and renting. The reason I told them to compare rental costs is so they could see how much more they are paying to rent from the bank.
Does mailing the keys to the bank make it harder to rent a place?
“Battle of the real-estate analysts” in Las Vegas:
http://www.inbusinesslasvegas.com/2006/12/01/realestate.html
From another board I frequent, because I know people here will appreciate it:
Subj: Anyone concerned about home depreciation?
Due to sluggish sales, my home’s value is decreasing. If the trend continues for much longer, I will owe more on my home than it is worth. I constantly worry about this. Cars depreciate; homes should appreciate!
It still baffles me how property values can rise over 100% within a 2 year period only for the market to tank one year later [baffled smiley here] .
Ah, the beauty of leverage. Great on the way up, heII on the way down. Don’t know if the poster bought at peak or just ATMed herself into the danger zone.
The most tactful response I could make was, “Well, that is how your house can be worth less. If your home is appreciating faster than wages are growing, sooner or later home prices have to revert to a sustainable level, i.e. one that the average person can afford with a normal loan (not one of the crazy option ARMs or interest-only mortgages). That seems to be where we’re at now. Give it a few years, things will catch up again. Same thing happened in the early 90’s.”
The nice thing about words such as few is that they’re so vague as to be nearly meaningless.
A Fascinating Article from Mr. Galbraith
________________________________________________
The Dollar Melts as Iraq Burn
by James K. Galbraith
The melting away of the dollar is like global warming: you can’t say that any one heat wave proves the trend, and there might be a cold snap next week. Still, over time, evidence builds up. And so, as the greenback approaches two to the pound, old-timers will remember the fall of sterling, under similar conditions of deficits and imperial retreat, a generation back. We have to ask: is the American financial empire on the brink? Let’s take stock.
It’s clear that Ben Bernanke got buffaloed, early on, by the tripe about his need to “establish credibility with the markets.” There never was an inflation threat, apart from an oil-price bubble that popped last summer. Long-term interest rates would have reflected the threat if it existed, but they never did. So the Fed overshot, and raised rates too much. Now long rates are falling; Bernanke faces an inverting yield curve and even bank economists are starting to call his next move. That will be to start cutting rates, after a decent interval, sometime next year.
Once again, all you monetary policy buffs, in unison please:
The grand old Duke of York, he had ten thousand men.
He marched them up to the top of the hill. And marched them down again.
This is not good news for the dollar.
The US economy is going soft faster than the inflation hawks and growth optimists thought. Housing has been in free-fall for months. With the new Congress anxious to display “fiscal responsibility” - cue Robert Rubin who has moved in very fast on Nancy Pelosi - there won’t be any help next year from them. If business investment falls off, recession could hit in 2007 or 2008. With that fear in mind, gloomy profit expectations are setting in, and that’s not good for the dollar.
The US trade deficit is near all-time records. By itself, this proves nothing: the US supplies reserves to the world system, and it can run any deficit that the world is prepared to finance. But, sooner or later the world may start to get other ideas.
So here’s the big question: is the age of the dollar economy lurching toward an end? Are China, Japan, Saudi Arabia and other big holders of T-bonds about to start a rush, or even a stately promenade, toward the exits? Let’s hope not, because the world is unprepared to replace the dollar with anything else. The euro is not suited for the job, and a joint dollar-euro system would need better central bankers than either America or Europe has got. An end to the dollar system would therefore be chaotic, inflationary, and very tough on world trade. The best argument for the dollar has always been: it’s not in anyone’s interest to bring it down.
Could it happen, though? Yes, it could. And it could be connected to that other unfolding disaster. As the “Pax Americana” goes to hell in Iraq - producing a nervous breakdown among the pro-war elites - let’s remember that security and finance are linked. Typically, the country that provides global economic security enjoys the use of its financial assets in world trade. And when the security situation changes, that privilege can be revoked. The consequences are unpleasant. Ask the British: after the sterling area folded, it took a generation for the UK to come all the way back.
That is partly why Economists for Peace and Security - a group I chair - opposed the Iraq war from the beginning. As far back as 2002, we understood - as the economically illiterate neo-imperialists did not - that a world system very favourable to America was on the line. And it was not, as they seemed to think, just a matter of military might. We knew that if the war undermined confidence in the power, good faith and common sense of the United States, that could lead toward disastrous changes on the financial front.
Four years in and with no end in sight, that risk may finally be catching up to the almighty dollar.
If the US falls from grace on the dollar too far, who will pick up the trusted exchange currency? The Euro? Is it being debated at all that the US is falling as a major economic player? If we do fall, what becomes of the rest of the world? Or is it a drawn out bleeding of the US until we are the same as the rest of the world for opportunity?
“A Fascinating Article from Mr. Galbraith”
For clarification, this is the son of the late John Kenneth Galbraith (of “A Short History of Financial Euphoria” fame).
I never lack for amusement at claims that hail the Euro as the new standard. Any reduction in the American Hegemony is going to result in a power struggle to replace them. So much for security! Do you really think there will never again be a nationalist Germany? That the countries that make up the Euro are not going to face tremendous turmoil in the future?
An amalgam like the EU is inherently unstable. It is a synthetic union based only on shared economic interest. Its working great right now because everyone is fat, dumb and happy. What till it hits the fan.
Not sure if it’s been posted elsewhere, but data on Q3 delinquency and charge off rates for U.S. financial firms was just published by the Fed today. Residential real estate loan delinquencies are at their worst level since late 2003. Commercial RE loan delinquencies are also starting to tick up, and credit card DQs remain elevated. More comments at my blog …
http://interestrateroundup.blogspot.com
Good point. I think the USD is doomed in any event.
Think about it: if we pull out of Iraq, as losers, the sudden drop in government expenditures will send us further into recession. Couple that with the humiliation of the military loss, and other nations should rightly question the military prowess of this country (which is probably the only reason the USD remains the reserve currency). We saw the opposite earlier this summer in the “war” between Israel and Hezbollah: despite the conflict, everyone turned to the USD. The Euro fell. Gold fell hard. Perhaps that is why Bush is so bullish on the war: we need the government to keep buying from people like Boeing, General Dynamics, Raytheon, etc. to prop up the economy. We’ve dug overselves into a big hole with tax rates as low as they are (these will undoubtedly come up in the near future). Economically, it almost looks like Vietnam. We’re on the verge to admitting defeat in Iraq, just like Vietnam, and look what happened for the next 10 years after that conflict?
“We’re on the verge to admitting defeat in Iraq, just like Vietnam, and look what happened for the next 10 years after that conflict?”
High inflation?
The inflation-gremlin was pretty well tamed by Mr. Volcker. Although he used veddy, veddy high interest rates to do it. Methinks that our current fed chairman doesn’t have the guts to do such a thing, even if he had to.
Volcker only tamed inflation after six or so years of sky-high post-Vietnam War inflation under his predecessors Arthur Burns and G. William Miller. The end of the Vietnam War was roughly concurrent with the collapse of the Bretton Woods system of fixed exchange rates which, in turn, had to do with the US’s suspension of convertibility of dollars to gold (see
http://en.wikipedia.org/wiki/Bretton_Woods_system ).
Don’t look now, but the dollar peg of the Chinese renminbi yuan ended in July 2005, and gold prices have recently been on a tear. And beware of Central Bankers who work in tag teams.
What is a riot is the only reason we are going to cut and run in Iraq is because we have lost the stomach to do what it takes to win. I am not sure if the outcome would be the calamity cited above, but its completely needless. This one is ours to lose. Will America once more snatch defeat from the jaws of victory? Before you say I have it wrong, please consider the sources for your information.
“… because we have lost the stomach to do what it takes to win.”
I wonder why we lost the stomach?
http://en.wikipedia.org/wiki/Abu_Ghraib_prisoner_abuse
In the grand scheme of things Abu Ghraib was primarily a media event. So because this happened we are going to condem the people of Iraq to a life of chaos?
-
This guy got $1.5M in credit cards to finance his real estate operations.
http://www.fatwallet.com/forums/messageview.php?start=0&catid=52&threadid=662972
Here is a fairly upbeat (if somewhat vapid) piece on the US housing situation from The Economist. Do you think the NAR bribed them to gloss over all the sordid details?
——————————————————————————
America’s housing market
Wobbling, not collapsing
Dec 4th 2006 | NEW YORK
From Economist.com
Construction drops again, but it is not all doom and gloom
WOE unto the housing market. That is what many economists have been preaching for over a year. American housing prices have long marched upwards at a remarkable pace, particularly in coastal cities where the growth in home prices has far outstripped the growth in incomes. So many analysts have been waiting for a sharp change of course. Now even those selling the houses, such as David Lereah, the chief economist for the National Association of Realtors, are conceding that prices may have to drop.
http://economist.com/daily/news/displaystory.cfm?story_id=8371353
Whew! Do I have a doozy of a RE story for you. A girl I work with - mid-twenties, single, making probably $60,000 to $65,000 a year bought a FIVE bedroom house in Orange County in late 2004. She has wealthy parents who helped her get an “investment” property in the Inland Empire which she sold and used to buy this place. She owes over $600,000 on it, not including the loan from parents to fix it up. She has two roommates and makes the $200,000 neg am payment each month. Can you imagine? A good $2,000 a month tacked on to her principal each month since 2004 and prices going into the toilet!? This is a scary, scary story.
Ooooops, sorry. I meant she makes a $2,000 a month neg am payment.
‘She has wealthy parents who helped her get an “investment” property in the Inland Empire which she sold and used to buy this place.’
Having wealthy parents can become a liability in the kind of market we currently face. It creates a moral hazard problem for the parents to help get the kids into a home they cannot actually afford.
Ben-
Have you seen this?
Realtors now tampering with MLS listings
The National Association of Realtors is at it again. The NAR is trying to establish fixed commissions, despite the fact that they are against the law. The organization is trying to use the Multiple Listing Service (MLS) to keep business from the discount realtors. NAR reps are actually delisting the discount realtor listings from this site. The average real estate commission in the U.S. has dropped to 5 percent. And realtors are terrified that what happened in the travel agency business is going to happen to them. So, they are trying to stop the clock from marching forward by tampering with the listings. The U.S. Justice Department has already filed suit against the NAR for another issue. They will most likely jump on this one too. It’s simply wrong and should be against the law. People should be able to use any kind of broker they would like. But a discount broker who offers fewer services might work for you. The industry is morphing, and part of that is due to Foxtons, the full-service agency that only charges 3 percent commission. The company is only in the Northeast right now, but it’s growing like wildfire. So, the NAR is not going to succeed with this mission no matter what.
I wish the NAR the worst in their illegal effort to collude. Hopefully the Department of Justice will eventually get back into the “trust busting” business and bust up the NAR. If that doesn’t do the trick, the internet will do it.