Bits Bucket And Craigslist Finds For December 8, 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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Ageing bull / rocky VI and the bull market…….
http://www.immobilienblasen.blogspot.com/
have an update on the employment data
here the housingreatate numbers
Construction employment declined by 29,000 in November, following a loss ofsimilar size in October. The November decline was spread across all componentindustries. Since peaking in February of this year, employment in residentialspecialty trades was down by 109,000
Employment continued to fall in two construction-related industries: wood products (-6,000) and furniture and related products (-5,000).
“Construction employment declined by 29,000 in November, following a loss ofsimilar size in October”
I thought we were told that commercial construction would pick up the slack from the drop in residential construction (hah!). JMF, do you have a source?
direct from the bls
on my blog or direct link
http://www.bls.gov/news.release/empsit.nr0.htm
yo~ Adrian?
This is worth perusing…
Posted at indexcalls.com:
In the good ole days of 2005 when an appraiser was asked to supply an appraisal there was little doubt as to which way a house’s valuation had gone. All you had to do was look at the comparables and you would quickly discover that houses had gone up by double digits at least. As an appraiser this was your out when the mortgage people pressured you to meet the number to get the deal done, you could proudly point to the comparables and know you did your job even if you didn’t really think the house was worth that much -hey who are you to judge anyway? Oh yeah it is your job to judge, isn’t it?
This all works swimmingly well as one fudged appraisal provides support for the next higher fudged appraisal and pretty soon things can get out of hand as comparables spiral up, up and away - all built on prior inappropriate appraisals.
So what happens if, gawd forbid, prices started falling and lenders were just a tad bit more nervous about collateral? You head out shopping for your little slice of vinyl blight heaven and you find an almost new subdivision with a house you like for only $300,000. Excited as a kid finding a new bike under the tree, you eagerly sign the offer and begin the mortgage process. Now Fly By Night Mortgage, a lender with over 3 years of experience, orders an appraisal. In looking at the comparables he discovers that two houses in the same subdivision similar to your desired little slice of heaven were sold due to foreclosure by the lenders for $250,000 in the past 6 months. Widening his scope a little he discovers that the same developer has another subdivision going just half a mile away with similar homes and lot sizes and the still vacant spec homes there can be bought for $280,000 but the builder in order to help sell these homes has include granite counter tops, wood floors and a fence, all of which you value at $20,000. Since you can’t include the free upgrades, that brings the valuation in at $260,000.
Can you see the problem? In a falling price environment comparables will become deal killers and lend strength to the downward price spiral. This becomes increasingly evident as the lenders, which are facing some increased scrutiny and already bleeding due to previous egregious lending are forced to actually look at what they are lending against.
On Squawk Box’s list of Upgrades and Downgrades was CFC (Countrywide Financial) this morning. The analyst cited the problems that the mortgage industry is facing. I still don’t think the average Joe has the first clue what is happening behind the scenes in this economy. I was discussing the implosion of subprime yesterday and got the old, “well, that won’t impact us”. In the financial world the hip bone is connected to the leg bone is connected to my wristwatch, etc…..
*Note: Jan 2008 $55 puts on CFC are at $14.10. The stock closed just over $41 yesterday. You can basically get even money on those puts. I told myself I would stay away from some of these puts but damn if that isn’t tempting. I might have to pawn the wife’s wedding ring to free up some money. That should get me at least $70 or $80 to play with.
i think we see real action in the stock when the debt fueled buyback is running aout…..
the Company intends to repurchase $1 billion to $2 billion of its common stock in the fourth quarter financed through the issuance of high equity-content debt securities.
Once tried to pawn a diamond ring…..each pawn shop said $5.00 when I started whining enough one took mercy on me and explained that it wasn’t the diamond they were paying me for but the gold in the ring. $5.00 for a $100.00 ring.
The WSJ has an article about the subprime mortgage bond market taking fright, and risk premimums going up.
Funny, but mortgage rates are supposedly also falling, to below short term rates. I can’t figure this out. It isn’t just “subprime” folks who are going to be underwater. They were the once who had bad credit, but a lot of other people will have bad credit.
It doesn’t matter what your credit score is if you bought a house you can’t afford with a negative amortizing, interest only, teaser rate mortgage. Those with the most stellar credit scores bought into the bubble with toxic loans like never before in the history of earth.
That’s the thing that will always astound me about this bubble. In ‘03 when interest rates were off the chart low and even going forward, why did people use that to buy MORE house instead of lowering the payments on the one they had to ludicrous levels. And if you did get a loan then, why on God’s green earth would you refinance it to get money for consumer junk.
you obvioulsy just don’t fully realize the true value of granite and ten foot ceilings!… or hummers for that matter. What kind of ameican ARE you?
….or the full value of getting invited to the clique’s cocktail parties because that granite kitchen along with the Mercedes wagon and Volvo SUV in the driveway meant you are one of them.
Carrie Ann, you are so right. For years I felt bad because I could not treat my friends to the same kind of entertainment they provided in their incredibly appointed and big homes. We invited them out to restaurants to celebrate our birthdays. I didn’t have any idea that quite a bit of that money probably came from debt. At least, what I have is real.
It is amazing is it not. I know a fellow that is behind in is mortgage payments. So what did he do? Went out and bought a flat screen TV. Of course he didn’t pay for it, he just slapped it on a credit card. I have long since stopped trying to figure out what is wrong with these people. Buying things they don’t need, with money they don’t have. It’s the American way!
“It is amazing is it not. I know a fellow that is behind in is mortgage payments. So what did he do? Went out and bought a flat screen TV. Of course he didn’t pay for it, he just slapped it on a credit card. I have long since stopped trying to figure out what is wrong with these people.”
Friend with 3 year old vehicle just told me that her transmission blew and will cost $3000 which they cannot afford. The next day she’s telling me they’re negotiating for a hybrid vehicle which is used but cost $47k new. Man my tongue must have been bleeding!
Effectively he’s probably being rational (the difference is you sound honorable). He’s behind on his mortgage with no reserves, so he’s probably eventually due for bankruptcy so why not live it up and have fun for the last three months before you have to file (it’s not like the lenders seem to be bothered by it, yet).
Lower cost of funds equals major opportunity for risk taking.
Txchick: Why would one go out & buy a hot car for say $50K by cash out refi, & get a new 15 - 30 year loan, increase the balance by the same amount, car gets stale/old/dies in 5 years, AND YOU ARE NOW PAYING INTEREST FOR 10+ YEARS AFTER ITS GONE TO CAR HEAVEN…. Fools
Well, the usual saying is, “buy as much house as you can afford.” I agree with that in a normal market. The bubble was certainly underway by 03, but in the long term in many markets it wasn’t a terrible idea.
How do you define “afford.”
Heh, that’s easy: “afford” has been defined FOR us of late, has it not? We’re all lucky to have nice folks with only our best interests at heart working for us so we don’t have to analyze and define such obscure metaphysical concepts like “affordability.”
“Buy as much house as you can afford” is a great idea for the fake it before you make it crowd. I would suggest reading the Millionaire Next Door to really get an idea of how that idea financially hamstrings you.
Face it. Marketers OWN the average US citizen. For many, buying more “stuff” is a way to feel better.
Could it be the persistent drip, drip, drip of 30 second spots over entire lifetimes that fuels the urge URGE URGE!! to buy BUY BUUUYYY!!!!!
Combine this with gross ignorance or disregarding of financial concepts (interest/compounding/etc) and it is not hard to see how we are where we are…
(smug smile) I did. Refi’d to a 15 year fixed. I pay less than $400 in interest every month. (/smug smile)
It always seem to me that getting an ARM when the rates were are all time lows was akin to waiting for Microsoft to fall to $1 and then shorting it. I’d want an ARM when the rates had peaked to the high end not the low end.
Once again, I rejoice in the fact that I bought LESS house than I could afford.
I’m with you Slim. I sold in S.F. in 2001 for 1.2 M and bought a house in another area for 286,000. Not at all unhappy with that move.
I can’t stress enough how important this is. IF you get a fear/contagion trade, with secondary market buyers backing away from MBS purchases in bigger numbers, spreads on high-risk mortgage bonds can “blow out” very quickly. That, in turn, can really put the squeeze on thinly capitalized lenders. See my post from my blog yesterday about what happened in 1998 … conditions are nowhere near that bad right now. But given all the risk out there, and the very poor performance of subprime bonds, we may continue to see market conditions deteriorate with time.
http://interestrateroundup.blogspot.com
Only a matter of time before the problems in sub-prime start impacting the prime market, too.
A Minneapolis Craig’s list note - I have been following a house in Plymouth (nice area) since summer. It is a 4be/4ba on a nice sized lot. It has all of the obligitory upgrades (ugh), probably 10-15000 worth. When I first saw it listed, it was at 409000. It stayed on through the whole summer with small reductions down to 399000.
In Sept., I saw it for 379000. Last month? 369000. Last night? 339000. What do county records show this moron paid for it in 2004 (the seller is also a realtor, not very old either)? 326000. Plus he’s pulling the “this is temporary, it’s going back up after this week” ridiculousness.
Let’s see: loan of 326000 + carrying costs for 2.5 years + remodel of most of house = desperate flipper getting burned and blaming buyers. Ha Ha.
Also, the the Star Tribune has been very reluctant to carry any sort of hard reporting on the conditions up here. This area is in much bigger trouble than people think - mostly because of the explosions in the exburbs. (cue Darth Vader music) P.S. I love this blog for so many reasons.
Thank you for the craigslist information. I work in Plymouth, and it is on my list of neighbourhoods to buy in - in 2009/2010.
> Also, the the Star Tribune has been very reluctant to carry any sort of hard reporting on the conditions up here.
The Pioneer Press is much more straightforward in its real estate reporting than the Strib, which still trys to put lipstick on the pig. (Politically, the Pioneer Press is more conservative than the liberal Strib.)
> This area is in much bigger trouble than people think - mostly because of the explosions in the exburbs.
And because of a large percentage of exotic mortages in Minnesota: 46% of non-prime as of 4th quarter of 2005, as far as I can see from an OFHEO chart (46% Share of Non-Prime Securitized Originations). That was larger than in e.g. FL, MD, NJ, NY, MA (but less than in e.g. CA, NV, VA, CO, DC).
Yesterday I had to do the weekly town run. As I left the house I was full of dread. On a normal day I am the first one in and out at Costco. Run all my errands in the middle of the Christmas rush. At mid day. This was going to be fun. First stop the bank, strange only three people in front of me. In and out. Next stop K mart. Got my stuff and found an empty register. In and out. Next stop Costco. I hate Costco, the place is a zoo. Did all my shopping and went to fight the line. THERE WAS NO LINE. We have less than three weeks before Christmas and I made it home an hour early. The last time I had seen it this slow was right after 9/11. On the way home it struck me. IMHO we are about to enter the crash zone. 2007 will be a bad year. What about the rest of you? Is it just me and my island or are you seeing the same things I am?
I notice that last weekend at Wal-Mart and I made comment to my wife that people are looking but not buying or if they are they are buy essentials items(everyday use) only.
Crash;….Where are you ???
Aloha from Upcountry Maui. I live in Kula area. Lived up here for almost 40 years. Costco has been in Kahalui for 6 or 7 years. I have never seen it so slow. Last year I would have been in lines 7-10 deep. In all fairness early December is a calm before the storm. January through April we are slammed with snowbirds. Planes are packed and a r/t ticket costs $600 to L.A. This year Aloha and ATA are offering flights to and from L.A. for less than half of that. The talking heads on CNBC are all say “soft landing”. My eyes see “crash and burn”. I hope I am wrong but am prepared to be right. 2007-2010 will be ugly. So pull up the soft chair and pass the popcorn because this will take awhile.
“Aloha from Upcountry Maui” Leaving From Los angeles to Embassey in Kannapalli Dec 23 thru Dec 30.
Would like to have coffee with a native and see Kula.
Been to Moma’s Fish House, and drove over from the hill,
but probably missed some interesting sights.
David drop me an e mail at JJOHNROSSJR at aol dot com would love to grab a cup and you can pick my brain. Hope to hear from you soon.
Can’t speak to stores, but I flew out of the ORD airport on the Wednesday before Thanksgiving (was going to Thailand, had to get out of the US). Late morning, like 10-11 am… place was a ghost town. MUCH less crowded than a typical weekday.
THAT surprises me.
Wed before thanksgiving was very quiet at DCA (Reagan National), too. Incidentally ATA and AA were both offering some pretty sweet fares this winter.
Cool stuff! Hopefully my weekend vacation trip to LA from Phoenix on the 15th, the airports will be sparse, as well as my usual haunts in LA. Renting and saving and cash rich when most people are overspent and in over-inflated houses! Fun! And how I hate crowds! Maybe I will take another summer vacation in Alaska in July.
Awww, Crash, here I thought I was the only one who had Retail Cooties.
[Retail Cooties defined: This is the disease that causes stores to be empty when you go into them. The other shoppers disappear into thin air when they spot you coming through the door.]
I took yesterday off to do some Xmas shopping. Everywhere I went it was dead…including the TOY store.
Funny story…I was at Kohl’s and the guy checking me out was short-circuiting. There were only like 3 of us in line and he couldn’t handle the pressure. God help him if/when the TRUE Christmas rush happens.
I think I will run the same scenario here in Sacramento and see how long it takes me. First stop the Bank, then Wal-Mart or Target, then Costco. I will stop by my favorite breakfast place first though.
LA and Central coast, still a lot of holiday buying activity (I’m talking gifts, not houses).
Target has been a zoo locally. I have been in Walmart a few times and have never waited w/more than 2 people in front of me. (Bionicle & Lego sets are wiped out though…damn!) The rest of my shopping has been done online. I have run into things that were sold out several times on quite a few web sites.
Our local Target has been very busy. Parking lot is very full. Was at Michaels (crafts store) the other day and the check-out line went all the way to the back of the store.
One thing fore sure, they are having sales like I’ve never seen before. Seeing 30-50% off in a number of stores, already. Also, much more advertising than other years.
I definitely think they are sacrificing margins to get the increased sales.
Was in and out of Home Cheapo last night in three min, I think there was around 10 people in the whole store.
Our Home Sucko is also a ghost town, but the nearby Lowe’s seems to be busy. Haven’t been to a mall in some months (retirees don’t shop ’til they drop), but our regional chain’s clothing/accessories store in town was quite crowed the day after Black Friday.
Nardelli and his platoon are running Home Sucko into the ground, but they’ll all walk away with big severance packages.
who shops at home depot in the middle of winter anyway?? i don’t think home depot is a good indicator of a slowdown until spring time. just my 02.
Interesting item on CNN Headline News yesterday. They are actually acknowledging the slumping market. Not only that, the news story they ran questioned the relatively stable sales prices in the “official” reports! Oh my! They specifically mentioned that even though sales prices might seem stable, (honest) realtors will admit that for any given specific house the price is slumping 10% or more from peak in most areas.
If that news really gets out to the masses, it will put a further damper on home sales, so let’s see if CNN keeps this topic alive. (I was really surprised to hear it there.)
Job market shows strength
November payrolls come in stronger than forecasts even as unemployment rises from five-year low.
December 8 2006: 8:47 AM EST
http://money.cnn.com/2006/12/08/news/economy/jobs_november/index.htm?postversion=2006120808
“Employers added 132,000 jobs to payrolls in November, according to the Labor Department, up from a revised gain of 79,000 in October. Economists surveyed by Briefing.com had forecast a gain of 105,000 jobs.”
Waiting for the revised number?
Pay no attention to the payrolls headline; employment is a lagging indicator. And in an economy changing as quickly as ours, it will be obvious we’re tanking before it shows up in the employment data.
The markets and CNBC made a big deal about this number because they knew it wasn’t going to show weakness yet. An attempt to prop up sentiment.
“In summary, the Friday employment figure may be ok (120K plus) or may be weaker. But the details of this job report will be more important than the headline: over time the job losses in housing, construction, auto, and manufacturing will accelerate and the quality of the jobs created in the service sector will deteriorate.”
Roubini 12/07/2007
http://www.rgemonitor.com/blog/roubini/
I have read before that the US needs 150k jobs a month for new job market entrants. That said, the currency markets are watching this report closely for an idea of what the Fed will do.
We got 180K+ when you count the back revisions.
one detail from the birth death model
one thing that is a little bid optimistic is that the bls assumes that they have only a 2k difference (down) in the construction assumption from 2005. maybe this can be explained to some part with the desperate builders try to built as fast as they can so they can sell before the full bust is coming. if this is the rational behind this number should fall of a cliff in the next quarters!
“…the desperate builders try to built as fast as they can so they can sell before the full bust is coming.”
I don’t know if they will be able to sell, but at least they’re finishing the projects they started, so at least they can add some (bubble-)value into their books.
Get ready, everyone! Next on CNBC…. Abby Cohen!
Abby says SPX 1550, Dow 12000. Emphasis on quality (risk-aversion). Doesn’t like tech. Interest rates will be rising ~75bp (long term, I presume).
Quality quality quality, focus on quality in stocks and bonds… reading between the lines, subprime crap is screwed.
She is a total crook. She belongs in prison.
bookmarked this call for 2007!
She got ‘06 right, said SPX 1400. As I’ve tried to point out here before, Abby is no moron, and you have to read between the lines with her.
once in a while……
here is an alltime classic from itulip on cramer and cohen
in retrosspect this calls were not so pretty…..
http://www.itulip.com/awards.htm
Yeah - and that only details the BS she spewed out in 2000.
Just imagine the amount of crap she’s spit out since then.
Did you see Altucher’s column on Real Money yesterday making the case for Dow 16000 next year? I spit on my keyboard.
Of course, he has that new Stockpickr site that I’m sure he wants to IPO so he’s motivated.
We ain’t kissing 16000 anytime soon, but most of the Dow stocks are pretty reasonably priced right now. I wouldn’t be surprised to see the Dow outgain the SPX by 10-15 percentage points in ‘07.
I wouldn’t be surprised to see the SPX outlose the DOW by 10-15% IN ‘07.
Pretty reasonably priced? Compared to what — houses???
Fair value is so far south you’ll freeze just thinking about it.
S&P 500 going to 1,550 isn’t much of a stretch. It’s only another 10%. Look at earnings growth.
Yes, I’m 67% for my stock allocation.
It is not much of a stretch for the dollar going to $0.60 Euro or to $0.45 pounds - nor fed funds going to 6%. They are all 10% away and there are a lot of economists that believe the dollar is 40% overvalued now and that inflation is of much greater concern than the ’street’ assumes. And if any of these things occur, I bet Goldman Sachs will be net short stocks as a firm just as they are net long Renminbi now.
-
Good. I like being a contrarian on the stock market. I certainly am one here on this blog.
Ummm, Gekko… that is not a good thing.
If you are a contrarian on a contrarian blog then does that make you mainstream?
There is a developer in Virginia Beach, VA who is working to get permission to build more homes on a piece of land than the city would conventionally allow. The idea is to build homes that firefighters, teachers and the working class can afford. The monopoly houses will be stacked on top of each other, and probably priced at the peak of affordability for median income homes ($180K+ I imagine). There is a meeting Monday in regards to the project. I think I’m going to attend to watch what goes down. It could be interesting. I’m also planning to bring a notebook PC to record the meeting if possible, and wear my Mr. Hou$ing bubble shirt.
They make it sound like they are doing the firefighters and “people that are unfortunate enough to have to work” a favor. I bet they are just trying to get rid of an expensive piece of land they have optioned or bought.
Look out for any special tax breaks or delaying of fees or whatever, developers love to slide these things into their “affordable home” projects so that they can get full profit while pretending to help the average guy, when in fact it’s the taxpayer who is helping without even being told they are helping.
firefighters, teachers and the working class
In my hood, 1st year firefighter starts @ 100K…..Retiree’s get 87% of last three years starting @ 50 years old…Have several friends 51-55…Pension’s range from 10k to 13K a month plus full benifits….
POINT;…..Is this middle class ???
Not for our region! Median _household_ income is $60Kish in the better of the cities. Firefighters might make $40K after they have been on for a bit? It’s mostly gov’t or tourism industry.
“POINT;…..Is this middle class ???”
In urban coastal California? Yes.
Wage growth and employment growth in the Valley has been greater for public sector jobs than elsewhere for a number of years now.
Didn’t vfsv detail this on a blog?
It may be the “new” middle class SF but seems to me that a 100k/Yr does not discribe the masses…..
Point;…You must be a Firefighter or equivelent to be middle class ??
Firefighters, police, teachers, nurses, etc. are EXACTLY middle-class.
BTW, not sure about that first-year FF earning $100K/year. Are you including overtime? If so, you can feel free to work 80++ hours per week (they average 56 hours/week **WITHOUT** O/T, I believe). I don’t think $100K is too much for those hours, and with their responsibility, do you?
Also, the days of paid health insurance after retirement are over. Have been for quite a few years, AFAIK.
“I bet they are just trying to get rid of an expensive piece of land they have optioned or bought. ”
Funny you should mention that, Va B:
Land Preservation Trust formed to keep Walmart out of our town several years ago actually bought the target parcel to keep Walmart out. I think the piece is about 40 acres. After sitting on it for 6-7 years, they all of a sudden want to bypass a 6-month moratorium the town has issued which in effect would bypass the village and town planning boards. I’ve been wondering if the investors are feeling pressure to dump this parcel before they take a real bath. (The public story is that they were waiting for just the right business to come along which the no growth town would accept…not sure the town was so impressed with a grocery store and more SFHs)
NEW YORK (Reuters) - U.S. consumer sentiment fell in December, a prelimiary report showed on Friday, as consumers pared back their views of future financial conditions.
“The University of Michigan said its preliminary reading on consumer sentiment in December was 90.2, down from November’s reading of 92.1.”
http://today.reuters.com/news/articlenews.aspx?type=newsOne&storyID=2006-12-08T150654Z_01_N08364813_RTRUKOC_0_US-USA-ECONOMY-CONSUMERS.xml
…and this only two weeks from Christmas. How sad…
what % of listings are getting yanked now (holidays) for the “after the superbowl” relist & spring bounce ? ???
opinions
Put me down for 15-20% getting yanked but an increase of listings in the spring of 30-40% due to surge from FB’s finally figuring out they are upside down and resets.
what’s a good way to obtain accurate inventory numbers?
I don’t trust housing tracker.net because it’s figure is way below what I’m hearing from REIC people on the ground.
Don’t know if anyone saw this yet;
“ABN Amro is looking for a buyer for its U.S. mortgage business, ABN Amro Mortgage Group. ABN Amro has hired Lehman Brothers to look for a buyer.
Most of ABN Amro Mortgage’s loans are made to borrowers with good credit histories. The strength of the business is in its servicing portfolio. ABN’s servicing portfolio totaled $224 billion as of Sept. 30, making it the eighth largest servicer in the nation.
More here;
http://www.banknet360.com/news/NewsAbstract.do?na_id=6526&service_id=1&bi_id=
Any thoughts ? ABN/Interfirst was a fairly big player in the biz when I was still a mortgage proc. 6 years ago.
There seems to be a number of companies rumored to in a state of flux, including Encore, Argent, Sebring, MLN, Ownit, Ameriquest, MLN, D1, People’s Choice, Fieldstone, Helvetica, Sebring and Maribella.
“ECC Capital Corp., an Irvine, Calif.-based real estate investment trust that originates and invests in residential mortgage loans, has announced that it expects to take a fourth-quarter loss and that the pending sale of its mortgage banking business will likely close in the first quarter of 2007. The company said arrangements with Bear Stearns Residential Mortgage Corp., which is buying ECC’s mortgage banking operations for an estimated total consideration of $26 million, are expected to reduce the cash requirements of funding the operating losses of the mortgage banking operations in the fourth quarter. “However, management cautions that, based on preliminary October and November results, operating losses are still expected for the fourth quarter of 2006,” the company said.”
http://www.originationnews.com/plus/#1
I think it’s important to remember the Sheeple truly don’t get it yet. Here is a local example from my area, zip 98382. A friend put their home on the market several months ago for 270K. This is a good price range for our area, the locals can actually afford it. (No Kalifornia equity nomads needed) They have had only one offer at 250K & turned it down. My wife said “are you crazy”! The wife just gave her a blank look. They may get lucky next year as their price is not too bad, but they are playing with “fire” as they are leaving the state in the spring…………..or, maybe not.
Chris
(No Kalifornia equity nomads needed)
They probably don’t know how to pronounce it.
The listing agent blew that deal if they walked away from a 92.6% offer.
The listing agent sure did. My wife knows her and she has been a used home sales person for a whole FIVE months! She was afraid to tell the truth & p*ss off the sellers. My wife in no uncertain terms told the agent she better “get honest” with her sellers.
As an aside, this agent is the “preachers wife” collecting listings from her church. All of course, priced tooooo high & nothing is selling.
as they are leaving the state in the spring…………..or, maybe not. The down side of this bubble, people are going to get geographicly locked unless they are willing to trash their credit.
Some of the social consequences of this bubble will be huge.
Neil
i fully agree Neil!! good point!!
i fully agree Neil!! good point!!
“The down side of this bubble, people are going to get geographicly locked unless they are willing to trash their credit.”
Or like in old times, ma will stay behind and hold down the farm while pa goes off and looks for work….comes home when he can.
Yeah I know. I keep thinking the equity locusts who leave California for places that are half price (or lower) and take the other half cash will be pricing themselves out of California for quite awhile unless they get lucky with their investments - or become traveling consultants - jet setting consultants tend to have much higher annual incomes than the average sheople stuck with marriage, kids, pets, etc.
I know of people who bought California beach houses at bargain basement prices in the early 1990s. I am confident that bargains like them will return to California beach areas. But the majority of the public will not be able to take advantage of those bargains (otherwise they wouldn’t be bargains, would they?). The majority will be still recovering from this housing bubble and the HELOC hysteria.
Next weekend I guess I have to buy another series I savings bond to go with the equivalent investment I made this week in municipal bonds and the equal amount in T-bills! I keep accumulating while house prices keep tumbling! PGH is hanging in there. I just bought another 100 shares. Oil prices are going to go way up. And how about that Fording Canadian Coal Trust! FDG. double digit yields in that and PGH, despite extra taxes lately by the Canadian socialist occupation.
I made the same mistake, and the buyer bought a spec home the developer was desparate to dump. Then it dawned on me that I had to compete with developers with much deeper pockets. So I slash my price dramatically just to get another offer. Bad agent who’d only experienced the good and did not realize how the market was falling off the cliff. I was sending him links/stories about how bad the market was turning. That’s when I realized I was better than him at selling. My old plan still has 7 units up for sale out of 63. They are all the same except for price, which is all over the map but still reflecting last years prices. Several have been empty from the beginning as flipper craziness took hold. I’m out, moved, renting and a better/wiser person for it. I will own again after all this is over and your damn skippy that when its my turn I will demand an equal or greater price reduction!! Thus the re-enforcing cycle down begins!!
Finally a media person that tells it like it is.
http://www.sfgate.com/columnists/lloyd/
Get rich from debt !
http://www.sfgate.com/cgi-bin/article.cgi?file=/gate/archive/2006/11/17/carollloyd.DTL
Here’s a story Bloomberg just ran that you may find interesting …
Sub-Prime Mortgage-Bond Derivatives Post Worst Week of Year
By Jody Shenn and Darrell Hassler
Dec. 8 (Bloomberg) — Sub-prime mortgage bonds had their worst week of the year on concern about the failure of two lenders, the slowing housing market and the ability of borrowers to repay the loans, derivatives based on the securities show.
Full story here …
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aNrNjRjfwzfY
There it is in black and white. The subprime loan default market is starting to get worried.
“The reaction this week may be too severe, Chow of Seneca Capital said, since “investors are looking to the homeowners for the repayment of those loans; they’re not looking to Ownit.””
See, that isn’t really true. Ownit wrote those loans and when the homeowner can’t make the payment, they want Ownit to make up the loss. Obviously Ownit doesn’t want to be in that position, so they folded.
The whole scene is a house of cards. The mortgage broker folds. The homeowner folds, the bond holder gets screwed.
Honestly, we won’t have sub prime loans much longer. I could see this coming for a long time.
“The knockout blow will undoubtedly come (probably in the credit markets).”
http://www.economist.com/finance/displaystory.cfm?story_id=8382415
We are seeing some pretty good jabs right here, right now with the subprime credit swaps. What happened this week is the beginning of the end, but it broke the link to the free money for people who didn’t properly qualify.
I’m looking for more and more upset MBS holders as we go forward and a big tightening of mortgage credit. That will kill the housing market like you wouldn’t believe.
I agree Tweedle, Carol Lloyd is pretty honest about the S.F. market. I’m familiar with the S.F. market after having lived there for about 25 years. I would say a big reason why the S.F. market has remained fairly strong is that a large percentage of homes bought and sold there are due to trust fund babies having very deep pockets. If you check out the new web site, Property Shark.com and look at the sales history provided, you will notice that many houses go in and out of family trusts. Just as an example, I sold my SFH in the Noe Valley area of S.F. in 2001 for $1.2 M. to two trust fund babies. They sold in 2003 for 1.3M to two other trust fund babies who never moved into the house but spent a year having architectural plans drawn and going through the process with the city to obtain permits to build up and out as much as would be permitted. After spending all of that time and money they decided that (ho-hum) they would not proceed with the remodel after all. So after one year (carrying over a 1M mortgage, paying property taxes, etc.) they put it on the market and sold it for 1.35 M. Keep in mind they never lived in the house so they were obviously paying to live somewhere else. The house sold again at the 1.35M price to two other trust fund babies. The permit history shows that they have since done a complete kitchen remodel (granite and all the other bells and whistles I’m sure) and added in a “powder room” on the first floor. That was I’m sure a costly item in a 1906 attached Victorian because it is difficult to run new plumbing and waste lines. Anyway, as long as the trust fund babies keep flocking to S.F. it’s probably less likely to crash than other markets. I am happy to have moved to another area and bought at a price that I won’t every have to worry about.
While I am not disputing the case of your house, I think you are not correct in the generalization. Anyone who buys a house close to 1/2 million and above - anyone with enough brains - forms a trust to buy it. I know many who have, and a look at the sold listings in the SJ mercury news, can show you any number of trust transactions, even in East Bay towns like Dublin or Fremont. It is mainly a tax planning tool for middle income buyers.
how’s this for unsustainable…
http://www.contracostatimes.com/mld/cctimes/business/16184241.htm
“‘These exotic mortgages have kind of taken over,’ said Mike Tacconi, president of the East Bay chapter of the brokers’ association. In the Bay Area, 43 percent of loans taken out in 2005 were interest-only loans. Another 28.3 percent were payment-option, which can lead to a growing loan balance known as negative amortization.”
And of the remainging 57% how many were ARMs? Half?
I agree Tweedle, Carol Lloyd is pretty honest about the S.F. market. I’m familiar with the S.F. market after having lived there for about 25 years. I would say a big reason why the S.F. market has remained fairly strong is that a large percentage of homes bought and sold there are due to trust fund babies having very deep pockets. If you check out the new web site, Property Shark.com and look at the sales history provided, you will notice that many houses go in and out of family trusts. Just as an example, I sold my SFH in the Noe Valley area of S.F. in 2001 for $1.2 M. to two trust fund babies. They sold in 2003 for 1.3M to two other trust fund babies who never moved into the house but spent a year having architectural plans drawn and going through the process with the city to obtain permits to build up and out as much as would be permitted. After spending all of that time and money they decided that (ho-hum) they would not proceed with the remodel after all. So after one year (carrying over a 1M mortgage, paying property taxes, etc.) they put it on the market and sold it for 1.35 M. Keep in mind they never lived in the house so they were obviously paying to live somewhere else. The house sold again at the 1.35M price to two other trust fund babies. The permit history shows that they have since done a complete kitchen remodel (granite and all the other bells and whistles I’m sure) and added in a “powder room” on the first floor. That was I’m sure a costly item in a 1906 attached Victorian because it is difficult to run new plumbing and waste lines. Anyway, as long as the trust fund babies keep flocking to S.F. it’s probably less likely to crash than other markets. I am happy to have moved to another area and bought at a price that I won’t ever have to worry about.
Sorry, for the double post, I’m a newbie at this!
The following excerpts from a recent Lancaster, PA newspaper article may be of interest to DHI shareholders. Certainly the company would prefer that you not know about it. I have no position (long or short) in DHI.
“Field inspections indicated serious building-code violations at several residences in the Village Grande at Millers Run development. [East Hempfield Township] Supervisors said they are committed to rectifying the situation and hinted the township may take legal action.
Residents of Village Grande, a 55-and-older community off Harrisburg Pike, first approached the [township] board in June complaining of poor home construction and building-code violations. The township called for the hiring of a third-party inspector at its July 19 meeting to examine homes built in the last year by D.R. Horton.
[A resident], who moved into their home in March, leafed through a six-page letter detailing code violations found at their home during the field inspection. “We had problems from the very beginning,” [he] said. “Leaking roofs, cracked foundations and severe electrical problems.”
[The resident] said when he began hearing about problems his neighbors were having as well, he advised them to start filing complaints with the state attorney general’s office. To date, eight residents have filed complaints. [He] also has filed a criminal complaint against the builder and the township. “I want compensated for what I’ve already spent and what I may have to spend in the future,” [he] said. “Aside from tearing the whole thing down and starting over, I think that’s the fairest thing to do.”"
pretty good article
http://www.moneyandmarkets.com/press.asp?rls_id=614&cat_id=6
The Dangers of Frankenstein Financing! (by Mike Larson)
France yesterday 12/07/2006 launched a newschannel that should be a counterweight to CNN and Aljazeera and will provide worldnews from a french point of view.
And its also in English (which is very unfrench)
http://www.france24.com/france24Public/en/news/world.html
Up to you to judge, because I myself(living in the french countryside) don’t have acces to broadband.
The wish-mongering continues:
Local economy strong, despite housing drop
I think the housing bust is gonna hurt Tucson’s economy a bit more than many think. Hopefully not too badly, but there are still people who should know better strolling about with their heads in the clouds.
some of my favorites articles.
#1 National Real Estate Investors’ Conference at BWI this week drew about 500 people, and many of them hopped on a bus to Baltimore for a tour of potentially lucrative investments
#2 Historical Census of Housing Tables
Home Values
#3 Even in the county’s toughest neighborhoods, we couldn’t find cheap housing
#4 After a holiday slowdown, the Super Bowl each year marks the start of housing’s prime season.
#5 Average US House Prices Measured In Ounces Of Gold Or Silver
#6 Supply Hits High In Condo Craze
#7 If you want to buy my house, you have to feed the squirrels.
#8 In come the waves(from the economist)
#9 Housing bubble’s burst could cost 1 million jobs and cause a recession, experts say
#10 From Dutch history, a real estate lesson
By Russell Shorto
#11 Analysts eye Miami’s condo boom, raise a ‘more risk’ sign
#12 Attention, Speculators: Here’s a Lesson from Hong Kong’s Housing Bubble
#13 Rich House, Poor House
Financial guru Robert Kiyosaki has turned bearish on the boom he helped create
#14 Real estate: When booms go bust…
Home prices can and do go down. Here’s what declines have looked like in the past.
#15 Real estate clubs ride the housing boom
#16 Global credit ocean dries up
#17 Understand risks of ‘creative’ loans
#18 Renting versus buying
#19 Real Estate Rebound
After a long, painful slide, housing prices around the Bay Area — especially in certain zip codes — are finally heading back up
Jonathan Marshall, Chronicle Economics Editor
Sunday, April 9, 1995
#20 Pension funds play catch-up with high rise of real estate
#21 As real estate market cools, ‘buys’ return
#22 Selling Condos? “The DJ’s Got To Be Really Good”
#23 Looking For A Condo? Grab A Sleeping Bag
#24 Buyers are sending flowery bios, pictures, and letters to sellers
#25 The Housing Bubble Made Me Quit My Job
#26 L.A. banks strongest in nation, report concludes(Sept 10, 1990)
#26 50-year mortgage debuts in California
#26B 50-year mortgage hits the market
#27 The Menace of an Unchecked Housing Bubble
#28 Do you like being broke? Keep renting
#29 High housing prices helped slow population growth last year
#30 America’s borrower-industrial complex
#31 I Want My Bubble Back!
#32 It’s a renter’s market
#33 Las Vegas project canceled(George Clooney’s Project)
#34 Shiller: Long-Term Perspectives on the Current Boom in Home Prices
#35 ALL BOOMS BUST!
#35 Suzanne Researched This Commercial(Video)
Agents of Change(this site)
The Nastiest Wife on
Television
#36 Housing bubble correction could be severe
#37 The boomer bust
#38 Of Bubbles Past: A Chronological Listing of News Headlines from the Last Housing Bubble in Southern California
#39 Rent or own? Don’t jump to conclusions
#40 Condo Prices See Significant Drop(San Diego)
#40b First Yearly Home Price Drop in a Decade
#41 Housing bubble(wikipedia)
#42 Fractional-reserve banking
#43 But This One Is Special
Each Developer Is Certain That Its Condos Will Sell
#44 New condos could become apartments as sales cool
#45 It’s RIP for the housing boom By Bill Fleckenstein
#46 Straight talk on what the Fed has wrought By Bill Fleckenstein
#47 The economy’s next time down has begun Bill Fleckenstein
#48 Superstar Cities
Thanks! I miss these postings. Truly appreciated.
And whatever happened to Melody?
Here’s a flipper in deep doo-doo
Flipping Homes Link
More signs of credit market tightening!!!!
Saw this at Mortgageservicingnew dot com:
Bond Prices Reflecting Housing Concerns?
Mortgage-related bond and derivatives prices have seen notable changes in the past few days that appear to reflect recent housing finance market concerns. Agency mortgage-backed securities were one to three ticks wider vs. the 10-year Treasury for discount and current coupons on Dec. 7 in a move that a report by RBS Greenwich Capital mortgage strategist Alec Crawford attributed to subprime lender Ownit’s Chapter 7 bankruptcy. In addition, the ABX tradable synthetic index of U.S. home equity asset-backed securities, which is considered reflective of housing market sentiment, has seen a “freefall” in the past few days, according to Andrew Davidson & Co.
House prices
Bubble and squeak
Dec 7th 2006
From The Economist print edition
While America’s housing market cools, property elsewhere is still hot
IN MANY countries, people are showing little sign of losing their appetite for residential property. Although the pace in several of the raciest markets around the world has eased a bit in the last quarter, prices have risen by more than 10% in the past year in eight of the countries in our table. The Economist has been collating these house-price indicators since 2002, allowing us to track the global residential-property boom (see chart).
http://economist.com/finance/displaystory.cfm?story_id=8381960