Bits Bucket And Craigslist Finds For December 12, 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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The `Skyscraper Curse’ Is Worth Watching in 2007
good read that reflects all the problems like carrytrad, excess cash etc …
maybe someone from the chicago can tell me that tehy are making jokes with their planned “chicago” spire.
http://www.immobilienblasen.blogspot.com/
Perhaps there is a correlation between the heigth of the corporate building and the density of that population that is below the poverty line for that country. How about the corporate name that’s on the building and the amount of corporate charity donated to whom and to what causes?
In a similar vein there’s a chapter in the book “Parkinson’s Law” on the tendency for organisations to do their best work from relatively makeshift accomodation, and build magnificent HQ buildings when they’re actually in decline. Parkinson used examples as varied as the UK Admiralty and the Roman Catholic Church to make his point.
That certainly works for Sears, Roebuck and Company.
And, while we’re on this topic, let’s look at the World Trade Center. I seem to recall that it was a perennial money-loser.
The Apple Campus was constructed with money from the first Macintosh market which was all but swept away by the IBM PC and the DOS and then Windows clones that followed, and in that grand circumstance the company nearly died.
The NYC skyline is littered with famous buildings from companies that have gone on.
I put a page about this on Wikipedia, but it was deleted, in part because dared to use the term I am familiar with for this: The Erection Index. Maybe with these references I or some other can put together a page that might last. Skyscraper index does sound more reasonable in a way, even if it does obfuscate comparisons to Rome and other places that may lack towers.
Its because if a company is spending its money and time on thinking about what their headquarters is like they are not spending it on what their customers think of them
The spire looks like a loosely twist joint. Which is porbably what they were smoking when they thought it was a good idea to add another skyscraper at this point.
:-)!
I’ll give it a 20% chance of getting built. (I live in Chicago.)
The Trump building isn’t selling, so why should anyone think this would, too?
The Chicago city Spire tower is not a joke. I know a business involved with the project. I doubt it will get built, though. Most people call it the “Candle” because with the twists in the building’s exterior, it looks like one of those cheap birthday candles.
even Bob Kamikazi says RE can make you miserable- gee bob say it ain’t so
I went and looked a two houses the were about to be sold as “short sale”. These house are old Cap Cods style houses. The people who own them bought them last year and rented them out to day laborers.
The first house I looked at was so nasty that I would not even let my worse enemy live there. This house was on the market for 250k. I told my agent that I give 50k to the owner just to rip it down.
The second house was not to bad of shaped, but it still need a lot of work. I told my agent I give 150k to the owner and fix it up. This one is going for 330k.
I also was tell her about this blog and how the NAR is stating a recovery next year. She stated that she and her fellow agents see only doom and gloom for the area next year.
She stated that she and her fellow agents see only doom and gloom for the area next year.
or two, or three, or four……..
“I also was tell her about this blog and how the NAR is stating a recovery next year. She stated that she and her fellow agents see only doom and gloom for the area next year.”
She is not the only one thinking that way:
Bet The House
James Grant 12.25.06, 12:00 AM ET
“Ebenezer Scrooge was a mortgage banker, and the arguments I am about to marshal for a hard landing in housing might sound un-Christmaslike. But during the just-pricked bubble, it wasn’t the Scrooges and the Marleys who lent more than 100% of the purchase price of a house without bothering to verify the income or employment of the applicant, or even to insist that he or she pay down a little bit of the principal now and then.”…
…”The question is whether the stock market and the famously resilient U.S. economy will continue to shrug off the bad news.
Gary Gordon, a member of the investment committee of Annaly Mortgage Management (nyse: NLYPRA - news - people ), has built a coherent and persuasive case that they won’t. The housing downturn will proceed in three phases, Gordon postulates. In Phase I, now under way, home sales will drop to cure what are politely known as “affordability issues.” In Phase II, starting soon, job growth will falter as the pace of lending and borrowing downshifts. In Phase III, lingering into 2008, mortgage lenders will relearn the fine art of saying no. The resulting withdrawal of easy credit will add new downward pressure on house prices and consumer spending.”…
http://www.forbes.com/home/free_forbes/2006/1225/142.html
“…relearn the fine art of saying no…”
When this world bubble busts, we will have to relearn lots of things.
Looks like Annally Mortgage found housing bubble religon.
I clearly remember them being posted here and they were in the denial phase of the housing bubble.
Nice post….
Please everyone. Do what I have been doing. Go to Craig’s list and send a link of theHousingBubbleBlog.com to every seller or renter (landlord) of real estate. It is time for more people to become educated so the prices will drop faster and we can get this bubble behind us. I want to buy a home!
I would also concur with this the view that real estate agents are starting to have. The word form agents that I know here in Florida (St. petersburg-Pinellas County) is that the market is totally dead. Not sold anything since the past spring. Also same agent is getting killed on taxes and insurance here on rental property. Last year the rents were raised due to tax and insurance increases, and are at a level now that they can not be increased from if they are to rent out. These properties were purchased years ago before the boom and these once positive cash flow properties are just barely breaking even now. one property purchased (a one bed one bath condo/duplex) for around 35,000 is now valued over 120,000. Now this may not sound like alot of money perhaps, but I lived in this thing for a while and there is no way that this kind of price is justified. Although it looked nice and was well maintained the crappyness was in the design and construction, not to mention that it was small all the way around. The drive way could barely hold one car (a 70’s vintage cadalic would stick out into the sidewalk when parked) and there was an exteem lack of aditional parking as the street thru the development was barely able to handle 2 cars passing in oposit directions. To boot, they are constantly raising the association fees partly due to insurance issues, but for some mystery maintainance that I personally never saw happen. Each person was responsable for their own lawn care so I have never really figured out what was being maintained.
where in N VA ?
I’m in 22151 - things are selling at early 2005 prices- If we go paygo DC suffers ,but may save the US
Flat — “If we go paygo DC suffers ”
What’s “paygo?”
tis where your pay go to someone else.
My realtor keeps forwarding listings to me with notes like, “Prices are really coming down!” Frankly, I haven’t seen it so far.
we’ve got a long way to go.
Sean:
Where are these houses? Just curious if they are in Loudoun. I haven’t seen any short sales come up in Fairfax Co. yet.
Novasold
Manassas Park. They say need third party approval on the listing.
I’m sure I’m not telling you anything you don’t already know, but just in case, be VERY careful buying anything in Manassas Park. Rough area.
I live here and I know where all the bad and good area are.
BTW one must be careful about these property since the owner may not be in a very good mood.
That was my thought right now for all REO’s. Our maybe the ex-homeowner comes back and decides to take it out ont he new tenants/owners. You never know what people are thinking, especially if they have lost everything. They are either going to come after the the above people or the mortgage lender and real estate agent.
Is a revolution possible in this country?
We have no history of it, like say Europe, but all the ducks seem to be in a row, a false sense of entitlement leading the charge?
You have to be skinny and starving to revolt. We have an obesity problem here among the poor, remember?
Whoops… forgot.
Every time I drive past a high school nowadays, I see oh so many fat kids, perhaps 40% of them are grossly overweight. The grand poobah of the National Park Service paid a visit to Sequoia National Park a few months ago and she was quoted as saying that there are statistics that 95% of kids under 12 don’t play outside anymore~
I have been wondering about that also aladinsane .If enough people start hurting it’s possible .But ,can people justify a revolution when the basis of the discontent is that people didn’t win out on their RE investment gambling ?
Try a different history book.
Well, aside from that 1st one… ha
An interesting article written by a contribuor to the Army War College:
http://www.d-n-i.net/lind/lind_12_05_06.htm
Boomerang Effect
By William S. Lind
Last week, one of my students, a Marine captain, asked whether I had heard a news report about an “IED-like device” supposedly found near Cincinnati, and if I thought we would soon start seeing IEDs here in the U.S. I replied that I had not heard the news story, but as to whether we would see IEDs here at home, the answer is yes.
One of the things U.S. troops are learning in Iraq is how people with little training and few resources can fight a state. Most American troops will see this within the framework of counterinsurgency. But a minority will apply their new-found knowledge in a very different way. After they return to the U.S. and leave the military, they will take what they learned in Iraq back to the inner cities, to the ethnic groups, gangs, and other alternate loyalties they left when they joined the service. There, they will put their new knowledge to work, in wars with each other and wars against the American state. It will not be long before we see police squad cars getting hit with IEDs and other techniques employed by Iraqi insurgents, right here in the streets of American cities.
I know this thought – not to speak of the reality when it happens – will be shocking to some readers. To anyone who really understands Fourth Generation war, it should not be. Fourth Generation war does not merely work on the will of a state’s political leaders, as some theorists have said. It does something far more powerful. It pulls an opposing state apart at the moral level.
We saw this phenomenon in the effect the defeat in Afghanistan had on the Soviet Union. Just as that defeat led to the disintegration of the USSR, so defeat in the current Afghan war will bring the disintegration of NATO. We are seeing 4GW pull Israel apart today, to the point where a leaden blanket of Kulturpessimismus now oppresses that country.
We will see the same thing here, powerfully I think, as a result of our defeat in Iraq. It will manifest itself in many ways, and one of those ways will be the progression of inner-city and gang crime into something close to warfare, including war against the state.
Police will not be surprised by this prediction. I have talked with cops about Fourth Generation war, and they “get it” much better than do American soldiers and Marines. Many have told me that they already recognize elements of war in what they are encountering, especially in inner cities. Cops have been killed while just sitting in their cruisers, because they represent the authority of the state. How big a step is it for those cruisers to get hit with IEDs instead of pistol shots?
The Bush administration, as usual, has it exactly backwards. The danger is not that the “terrorists” we are fighting in Iraq will come here if we pull out there. Rather, American involvement in 4GW in Iraq will create “terrorism” here from among the people we have sent to fight the war there. Well educated in the ways of successful insurgency, they will come home embittered by a lost war, by friends dead and crippled for life to no purpose. Thanks to America’s de-industrialization, they will return to no jobs, or lousy “service” jobs at minimum wage. Angry, frustrated and futureless, some of them will find new identities and loyalties in gangs and criminal enterprises, where they can put their new talents to work.
It will, of course, be only a small minority of returning troops who will go this route. But something else they will have learned from the Iraqi insurgents, along with how to make and deploy IEDs, is that it takes very few people to create and sustain an insurgency.
The boomerang effect is a central element of Fourth Generation war. When a state involves itself in 4GW over there, it lays a basis for 4GW at home. That is true even if it wins over there, and all the more true if it loses, as states usually do. The toxic fallout from America’s 4GW defeats in Iraq and Afghanistan will be far greater than most people expect, and it will fall most heavily on America’s police.
who was it that remarked “Afghanistan is where empires go to die”
Chris - “Our maybe the ex-homeowner comes back and decides to take it out on the new tenants/owners.”
It’s funny you mentioned that, because it was on my mind when we walked on a possibly decent pre-REO property. The owners were going to remain in the area and were belly-up.
is this for real? I guess people really do pay the “average” of a THOUSAND DOLLARS a month condo fee
hey its the downtown average
crazy
Residential condo association fees for the residences will “be competitive with others downtown” at around $1,000 a month,
http://www.heraldtribune.com/apps/pbcs.dll/article?AID=/20061212/BUSINESS/612120494/1060/SNN
You can’t get away with charging $1000/month in downtown Chicago for anything less than a 3BR with good views. And unlike Tampa, Chicago is a real city. Good luck with that.
$1,000 in rent or HOA?
Assessments. I am actually under a grand a month in rent, but don’t tell anyone. Oh, too late.
1K/mo. is HOA, and it’s NOT in Tampa, it’s in the big city of Sarasota. (pop. 50K)
They are out of their minds!!
I’ve seen grand old co-op buildings with $7,500 per month assessments. (The $7,500 includes taxes - such a deal!).
i went to inspect one of these co-ops as a young appraiser many years ago and escorted by the owner’s nurse, her assistant and her live-in chef. She was sweet as pie, as i would be too if i could afford that lifestyle.
Oh, and the $7,500 assessment didn’t include parking.
$1K a month is a LOT in Florida for condos that sell for $500K. $500/mo or even less is more typical, at least on the eastern coast. That said, I don’t know how much of the fee is paid out for the insurance premiums on those places.
Here is a good read I found
http://www.wtop.com/?nid=111&sid=1002269
“There have started to be “early signs of credit distress” in financial institutions’ holdings of so-called “subprime” mortgages, especially in California, Richard Brown, chief economist for the Federal Deposit Insurance Corp., said at the conference.”
“early signs of …distress”
Looks like the first signs of an Alzheimer patient…
A hispanic man here in Salinas had his house up for sale for 9 months and had to lower his asking price in order to make the sale. His RE agent told him right before selling that he’d have to raise the price from 500K to 550K to make the sale go through because he had so many different people to pay off. The man told the RE agent ‘no way’ as he’d be paying a 9% commission and to forget the deal. The agent finally put the deal through without added fees. By the way the RE agent was hispanic and probably thought he’d found a sucker. I imagine there are a lot of hispanic RE agents preying on and scamming other hispanics.
The only FBs I can find any pity for are simple folk, especially immigrants (legal or otherwise) who through lack of knowledge and education trust the unscrupulous “experts” (realtors, mortage brokers, etc.) who despite being their own countrymen and speaking their language do not hesitate to take these poor folks to the cleaners.
Sammy, here in California it’s sickening to see savvier Latinos ripping off the simpler ones and the newer arrivals. I have saved my housekeeper from three different types of scams since she’s been working with me. They included a “health medallion”, an unnecessary operation for one of her nephews and an illegal lottery. I could not save her from the dentist who took money from her and did a shoddy job, although this last one was and all american scam artist…
“I have saved my housekeeper from three different types of scams since she’s been working with me.”
How much do you pay her, and is she legal??
$10 hourly. I don’t think she is legal.
Maybe you should run for office then.
The white middle-class tender this fantasy that the colored poor coddle and look out for eachother. Reality is that the poor, giving the opportunity, are some of most carnivorous predators among us.
Well middle class whites dont look out for each other, they routinely screw each other - as evidenced by what is happening with McMansions and toxic loans everywhere. So why would minorities be any different.
Also Affirmative Action, created by white Republicans to hurt other whites.
way off topic, but affirmative action is not designed to hurt whites. It’s just way cheaper to force universities to take a token percentage of underrepresented minorities, than to actually spend the tax dollars to educate the entire population.
I’ve seen many examples of that tendency, rms. More than I care to count.
It’s surprising the subculture of business that speaking a little bit of Spanish can get you into. Probably like any language minority, pero si usted puede a hablar a little bit of Spanish, you can find a lot of good deals - some up front, some under the table.
Media RE shame watch
Marketwatch and Reuters -tut tut - again with the single-source, rosy beyond reason home-sale predictions from NAR’s Lereah.
But an interesting (although all over the map) take from bloomberg- on an updated story, they stopped using Lereah as a single source and quoted sources with mixed views - but the gold star moment was buried int the story -they actually went back to see how accurate NAR has been:
A year ago, NAR projected 2006 housing resales would be the second-best on record, at 6.84 million. Instead they fell to 6.47 million, the third-highest. Its year-ago forecast called for mortgage rates to gain in the second half of 2006 to average 6.6 percent. The average has been 6.4 percent so far in the second half of the year, according to Freddie Mac data.
Interesting point.
So all the doom-n-gloom and homebuilder cannibalisation of resales we’ve been observing has only led to a sales rate which is a touch over 5% under estimates nationally.
Holy cow!! Imagine the headlines if/when we see a REAL slowdown in sales.
That’s what has amazed me. Really, a miniscule drop if one believes the numbers (ha ha) that are reported and yet the howls of anguish, mortgage lenders folding, etc. . . . you’d think we were a lot further along the depreciation path than we allegedly are.
The WSJ is on the rising risk premiums in subprime today. No change in the rest of the mortgage market yet, although another article reveals that those with multiple mortgages have higher default rates on primary mortgages than those with just one.
I read that article… typical subprime spreads are LIBOR + 3.5. That’s pushing 9%!
And yet, do you remember 1979 or 1980? People would have killed for 9% mortgages.
I bought my first home in 1989. 10.5% — and at the time that was a very good rate.
I know. 9% sounds low to me but I’ve been out of the market for 17 years.
Also remember that housing price was a lot lower too.
S in S;…
Yes but it was relative to income…I clealy remember my income being around 32K a year in 1979….
I recall my dad refinancing our house DOWN do 9% around 1986 or so.
A 3.5 LIBOR spread is pretty huge when interest rates aren’t that high to begin with. The difference in payments between 9% and 6.5% is proportionally much bigger than that between 13.5% and 10%, but you already knew that.
I know and that of course was your point. But having the historical perspective still makes me wonder why people didn’t take advantage of those once in two lifetime rates in ‘03 - ‘04 to get as low a payment as possible on an affordable house or their current house (freedom, anyone?) rather than using it to ratchet up as high as they possibly could on adjustable rate stuff. Makes no sense to me.
Because people had to buy an expensive home to impress people. Why did they need to buy a new home period? How about paying off the one they already lived in and staying put and saving the money for retirement?
I agree with you wholeheartedly.
A lot of it was lack of perspective. Very few people under 35 had any idea what getting a mortgage was like in the early 1980s. This constitutes the vast majority of the first time buyer/flipper/casey serin type crowd.
And yet these people have set the prices for us.
Something is wrong here.
Amen txchick, amen.
Txchick .. I agree with you .It was a beautiful opportunity to get a low fixed rate .Unqualified no/low down payment purchasers and speculators ,set up by sub-prime lenders ,established the market appraisal comps in this Country .And people wonder why the prices went up beyond reason .
The market would function if it were allowed to. The problem is not the customers, it is the free money they are being given. Changing lending rules so that people who take out a loan or buy a loan package from an institution have to prove a reasonable likelyhood of being able to pay it off and even cover a fraction with cash would completely change everything. Not leaving interest rates at nothing for years on a whim would also help a lot.
This is a case where it makes no sense to blame the critter in the trap, no matter how clearly their noses may have gotten them into trouble. The real issue is what is up with the trap and why it is there.
Not really, ALL homes are expensive these days, and most are hardly impressive. I’ve been looking at crap Cape Cods for $700K+, these were built as “starter homes” 50 years ago, for plumbers, etc. Now they’re almost a “million dollar home,” yet look nothing like it.
I guess I was one of the few who took advantage of the low rates and refinanced my mortgage to a 15-year fixed at 5%. Made sense to me.
Mole man . In the final analysis I do blame the lenders more than the “critter in the trap “. That isn’t going to change the fact that these trapped critters are going to have to pay the price for the mistakes made ,as well as the economy .
State’s housing market continues to slide.
Hold on, WEEEEEEEEEE
http://www.projo.com/business/content/BZ_WARREN12_12-12-06_FT3AQPT.229a620.html
good article from john mauldin
not sure if this was posted yet
warning -pdf format
http://www.frontlinethoughts.com/pdf/mwo120806.pdf
things are great if you work at goldman sachs
http://articles.moneycentral.msn.com/Investing/Dispatch/061212markets.aspx
Collateral: the Rest of the Story:
http://wallstreetexaminer.com/blogs/winter/?p=184#more-184
A few words on the economy:
From the Daily Reckoning:
Is the noose is tightening?
Last week, the European Central bank raised rates. This, combined with a
falling dollar, will make it difficult for the Fed to go in the other
direction. But it is in the other direction that the Fed will want to go.
Because, while the dollar is threatened…U.S. consumers are beginning to
feel the rope chafe their necks.
Let’s glance backwards at the fundamentals. The U.S. economy is 70%
consumer spending. But the money consumers spend, recently, has not come
from earnings - but from borrowings. And now the lenders are getting
scarce.
The weekend’s news brought word that consumer credit is now falling at the
fastest rate in the last 14 years. We did not examine the details of the
report. But it is surely related to the fact that house prices are no
longer rising…so lenders have nothing to lend against.
In the sub prime market, for example, late payments are rising
sharply…and so are foreclosures. Texas and Michigan lead the nation in
foreclosures, says the Financial Times, with a total of more than 20,000
foreclosed houses for sale between them.
And wouldn’t you know it, one of the big sub prime lenders just went broke
- a company called Ownit, which just happens to be a firm in which Merrill
Lynch bought a big stake a year ago. If there were one industry that the
geniuses at Merrill could master you’d think it would be the business of
sharking mortgage money to semi-literate poor people. But even there, they
seem to have missed the whole cycle…buying Ownit at the very peak of its
regrettable and sinister success…when customers are less interested in
owning-it and more interesting in not losing-it.
Now Ownit has gone bust…and the U.S. consumer is getting nervous. He’s
standing up proudly on what looks more and more like a gallows. He’s
wondering what will happen next. Will the housing correction stop at a 2%
loss…as Alan Greenspan suggests? Will it halt when it is down 25%…as
Gary Shilling guesses? Or, will it go all the way to a more than 40% loss
- as Robert Shiller’s numbers imply?
We don’t know. But if the poor consumer is waiting for the Fed to ride to
his rescue - with lower rates - he may have to wait. Because, meanwhile,
the dollar seems to be under pressure. The poor greenback faces trouble
whichever direction it turns. The United States has run up the biggest
trade deficit in the history of international trade. Keeping it up is like
trying to keep a dipsomaniac’s drink topped up. It needs a constant flow
of new money into the dollar…or it will drain away. And yet, practically
every major dollar holder has warned recently that they intend to sell the
buck. And now the Europeans are making euro deposits even more
attractive.
It was nice while it lasted. Foreign buying of the dollar helped keep
interest rates in America low…which helped consumers refinance their
houses and take a little out, which helped ‘buck up’ consumer spending.
But now all that seems to be coming to an end. The consumer may not know
what he did wrong…but the poor fellow feels he is about to be lynched
anyway.
“Keeping it up is like
trying to keep a dipsomaniac’s drink topped up.”
Keeping it up is like trying to keep a sex addict’s ???? up.
Dawnal — is Daily Reckoning a subscription site? I tried going to an old link I had for it — doesn’t work.
http://www.dailyreckoning.com/
Still there, still free. An excellent source of information & insights. Bill Bonner’s excellent book EMPIRE OF DEBT should be required reading for every American.
Sammy — thanks. Agree re Bonner’s book.
Just Google “The Daily Reckoning” It is free.
I’m trying very hard to convince my girlfriend not to buy a condo in SF, and I’m not sure I’m winning. Today she sent me a CNN Money article quoting Lereah saying that sales would be up at the end of next year. I told her sales aren’t what are important to her, but it would help me out if I had some old predictions from Lereah that have proven false. I know he’s made lots, but I couldn’t find any good ones. Any help?
Send her the Amazon review page for his book. If that doesn’t convince her, nothing will.
Maybe look for a new girlfriend?
Here, this should help
http://davidlereahwatch.blogspot.com/
Yeah, I actually went through almost all of the posts there, thinking I would find something good, but the only then-and-now post I could find was Lereah’s Most Recent Deception. It’d be nice to have something like “one year ago, he said prices would do X, and they actually did Y”, and I can’t find a good X quote
OK so, if you can’t say no then allow her to buy it herself with you assisting in the payment…If it goes up in value, marry her (community property state you get 50%)….If it goes down, you can walk and tell her “I told you so”…….
The “dump her” comments aren’t very helpful, people. We’re nowhere near getting married. I’m just trying to help her make a good decision. She’ll certainly lose money if she buys it, but whether she buys it or not isn’t going to affect our relationship.
“…but whether she buys it or not isn’t going to affect our relationship…”
I think it will, since you let DL in to convince eachother.
If she buys or doesn’t, if RE goes up or bust. David Lereah will be in you minds forever.
try this:
http://bubblemeter.blogspot.com/2006/11/nars-anti-bubble-predictions-in.html
Andrew thinks money and bad investments don’t affect relationships. He has a lot to learn.
Andrew has enough cash to buy two dozen condos in SF, intends to keep it well protected, and is not an idiot, thank you very much.
And FWIW, I realize money can be very important in a relationship, but if we did get tied financially (not happening anytime soon), this would be more of an “See. I’m right about money.” event than a bankruptcy event.
Thanks, David! Exactly what I was looking for.
Its not too late to trade up. You haven’t given her a ring and date yet. I know it sounds harsh, but you can do better.
Show her how the cover for Lereah’s book changed:
http://davidlereahwatch.blogspot.com/2006/02/david-lereah-changes-his-book-cover.html
It still shows the house hovering menacingly over the prospective FBs though.
The next cover: house finally lands on FBs and all you see is their feet sticking out the bottom, Wizard of Oz style.
Holy SH!Ti This is too bizar to be true! Next book: How to get rich from the housing bust at the expense of those suckers who followed my advice from my last book.
I actually think these are two different books, although the second may have copied a lot of material from the first.
Andrew - go to http://tinyurl.com/yfdqlc to see the reviews on the first book where DL declares that if you miss out now you’ll be priced out forever. The reviews are pretty interesting. Most are one star with obvious bubble blogger ties. Even most of the ones with multiple stars are for reason like future MBA school classic to file under ethics.
One is pretty serious about how in 15 years none of us will be able to afford a 15 million dollar home and we renters will be living in tents. Very hard to take seriously.
See if you can get her to take a deep breath and wait until late spring to make a decision. Six more months of renting won’t kill. I suspect by then, although I broke the crystal ball so I cannot be positive, that the decline of the RE market will become apparent to all, not just those if us here.
Good luck!!!!
Contrarian opinion: at least she’s not some gold-digger who’s relying on her husband to house her. In SF, that’s saying something.
Let her do it and see how it works. Not your money, not your problem.
It will be his problem if he marries her.
I would try to stop her by any means I could . People need as much counter-data to the NAR /REALTOR spin- masters as they can get .
When a big trade group like the NAR makes such bold up-tick predictions ,as well as calling a bottom to the declines ,without meaningful challenge from the media ,people need all the help they can get to be de-programed .
Scare her with something a bit more tangible that “David Leerah is a liar”.
Do the affordability, rent-vs-buy spreadsheet with her & see if that helps any. Show her what happens to the payments on an adjustable rate mortgage.
Ask her why she listening to a guy who makes his living in real estate?
She must be blonde. All the dye is seeping through her scalp and is starting to effect her brain.
make her a deal, if she follows this blog for one month and still thinks its the right move, then you will support her. If she actually still does….run my man run. She will ruin you financially. There isnt any sex that is worth a lifetime of financial torture.
Agreed!
Maybe you can find something on http://www.realtor.org/. They might a forward looking market statements for previous years that he’s quoted on. Just a guess.
wth? is she a grown up or a child? the statistics are out there. tell her to read and make her own decision. stop coddling these foolish people.
Are you serious? If she’s got her heart set on buying, and you keep trying to talk her out of it, she’s going to get the idea that you’re trying to spoil her party.
If you want to stay with this girl, you better just sit down and STFU.
At the same time, you will be developing good Marriage Skills.
The numbers and charts on this page are fascinating and include info on the SF, FJ and OF areas. http://www.housingbubblebust.com/SFMegaBubbleData.html
Good luck. It’s hard when someone you love is misinformed and believes the hype. I know quite a few who have this problem with real estate.
Andrew — it totally depends on whether you are a metrosexual or a standard-issue male. If you think that you are going to get laid, at least in a satisfactory manner, when the mortgage payment is late, you need to go to Square One and start over. Women do not get horny when there are financial problems. Men are not happy when there are horny problems. But if you are a truly liberated metrosexual, more power to you! You can overcome all that with whatever gift it is that you received along the way. I know. The magazine cover in the checkout lane says so.
LOL, Chip!!!
Lost of mortgage warnings popping up all over the place this morning. Here’s one from Fitch, as covered by Bloomberg, projecting cumulative losses above 7% for the 2006 vintage of securitized subprime loans. That would be the worst ever:
http://tinyurl.com/y7yoe9
Wall Street Journal has a pair of warning stories too. Here’s the lead of one of ‘em:
Debt Investors’ Double Burden
By Gregory Zuckerman and Michael Hudson
Word Count: 916 | Companies Featured in This Article: H&R Block, Ford Motor, HCA, HSBC Holdings, Merrill Lynch, Morgan Stanley
The crack in the debt market’s otherwise-strong foundation could be subprime mortgages.
Investors have been gobbling up risky debt lately, from junk bonds issued by struggling auto makers to loans used to finance mega-buyouts. But in subprime mortgages — an especially risky corner of the debt market — worries are keen
And here’s another one:
Double Trouble for Mortgage Shares: Dual-Loan Borrowers Pose Added Risk
By Karen Richardson
Word Count: 962 | Companies Featured in This Article: Countrywide Financial, Downey Financial, FirstFed Financial
As more homeowners skip out or fall behind on their mortgage payments, some lenders have started tightening their underwriting standards.
That may not be enough to save them from losses. Mortgage lenders, such as Countrywide Financial, Downey Financial and FirstFed Financial, try to avoid risky “subprime” borrowers, have become more cautious about who they lend to in general, and are setting aside more reserves for potential defaults. But the increasing popularity of second mortgages could end up undermining their efforts.
All I can say is that the industry should have seen it coming. Some additional thoughts here at my blog, if you’re interested…
http://interestrateroundup.blogspot.com
http://www.bls.gov/news.release/pdf/empsit.pdf
“Construction employment declined by 29,000 in November, following a loss of similar size in October.”
How will the nosepickers and apologist creeps dress this one? In a tuxedo of course. Can’t you hear it now? The borrow and spend nutjobs will unanimously state “The economy is roaring because of our policies!”
But we made up for it by an increase of 34,000 jobs in the “leisure and hospitality” sector, i.e.: “would you like fries with that and please pay at the first window”.
This is a puny drop in employment but there is a lot more to come. Employment logically follows housing completions not housing starts. Housing starts have taken a dive in the past few months. Completions follow starts by 5 or 6 months. We will have had about 500k jobs lost in construction by July of 2007. This is just talking construction, not any spillover effects in basic materials, furniture, appliances etc.
It’s not the number but the trend. And the ideology behind the trend sounds something like “lets keep chipping away at the working class. We’ll kill them by 1000 slashes”.
And it’s working.
SD landlord calculus: “Rents are up 5.8% — Yippee!”
Don’t mention to them that property values are off by 10%…
Mean reversion can be painful.
——————————————————————————–
http://www.signonsandiego.com/uniontrib/20061212/news_1b12rent.html
The San Diego Union-Tribune
Rents in county rise 5.8% as home sales slow
Average for all units hits $1,237; vacancy rate dips
By Emmet Pierce
STAFF WRITER
December 12, 2006
Not everyone is bemoaning the end of the housing boom that saw San Diego County’s median home prices double between 2000 and 2005.
The slowing pace of home sales in recent months has benefited the region’s rental-property owners, according to a fall survey released today by the San Diego County Apartment Association.
Average rents for all types of units increased 5.8 percent over the previous year to $1,237, the poll showed. Rent for one-and two-bedroom units, which dominate the market, increased by 6.2 percent to $1,229.
As prices rose, the region’s vacancy rate decreased from 3.4 percent in the spring to 3.1 percent, leaving about 13,509 units vacant.
Some renters are delaying home purchases in anticipation of declining home prices, said association Executive Director Robert Pinnegar.
“Rents are going up because people are not moving out,” Pinnegar said. “Fewer residents have left the rental housing market as they wait for prices to bottom out before they buy, which means we are seeing fewer vacancies.”
Renters who anticipate a steep housing price drop may be disappointed, analysts say. Because the majority of homeowners have seen high equity gains in recent years, a sudden downturn in prices is considered unlikely.
The for-sale housing market reached its peak in fall 2005. Researcher Russ Valone of MarketPointe Realty Advisors said it’s difficult to know when prices have reached their low point.
“The problem a lot of those people are going to have is, by the time we all recognize the market has turned, it will probably be too late” to make a timely purchase, Valone said.
———————————————————————————-
Despite precautionary Valone’s sage advice, I am going to wait until
- foreclosures stop rising;
- homes pencil out as rentals again (price = 100 to 120 X rent);
- the inventory glut is history;
- the home price to income ratio reverts to historic norms (median price no more than six times median income);
- everybody says real estate is a terrible investment.
“Because the majority of homeowners have seen high equity gains in recent years, a sudden downturn in prices is considered unlikely.”
Wonderful logic!
How ’bout: “Because it has been very sunny of late, it’s unlikely there’ll ever be heavy rain again”
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reversion to the mean! housing is same as rainfall.
“The problem a lot of those people are going to have is, by the time we all recognize the market has turned, it will probably be too late” to make a timely purchase, Valone said.
I wonder if these people who make these statements have ever seen a bell curve? incline starts at a low level proceeds to steeper incline peaks/levels off and back down the other direction. of course the flip side would be an inverse back up. So.. it’s not like the price is going to go top to bottom or bottom to top immediately. and if you pruchase on a rebound close to the bottom you have still made out better than those who purchased at the peak. So when is “to late” 3,4,5 10 years from now? looks like plenty of time for anyone who has a clue, paying attention and is waiting this thing out to time their entry point. By the way I did see that this was “researcher” Russ he must have had a stistics class right?
Real inflation is running at about 10%, so (relatively) renting is getting cheaper. Paychecks are unfortunately not going up by 10%, but that’s what a recession is all about……
I was in Bradenton, Florida the past two days and, as expected, I saw a lot of properties of for-sale. What really got my attention, and perhaps this is common or starting elsewhere, was a particular front-year arm sign. From a distance, it looked like a typical professionally-made RE for-sale sign, though it had two equal-size sections. When I got closer I saw that the top section said For Sale By Owner, with contact information, and the bottom half said “Financing Available Through McArthur & Associates,” or something very close to that. Assuming the owner is not part of McArthur, I thought it was an interesting “sign” of the times — a lender trolling for business by providing, probably free, a high-quality for-sale sign to a FSBO seller. Gotta give ‘em points for creativity.
Fannie Mae (FNM) Receives Delisting Notification from NYSE
http://tinyurl.com/yxz4xy
This news comes out and yet the stock goes up.
because noone believes that the NYSE is going to dump FNM and the fees that they represent.
They get a delist notification every quarter, all they have to do is request an extension which is routinely given.
This is nothing but CYA bullsh!t.
Ah, but all is not doom and gloom in the AZ real estate slump:
http://www.tucsoncitizen.com/daily/local/35412.php
What a drop!
Maui Home Prices Fall 18%
http://tinyurl.com/yghxac
“The median price was $598,795 in November, down 18 percent from $734,500 a year earlier, according to the Realtors Association of Maui. Last month’s median price was the lowest since $575,000 in February 2005, and was a big shift in what has been mostly higher prices this year…”
Did you see the picture of the house for sale? An 18% drop sounds like progress till you read this:
“This Kihei home, with three bedrooms and two baths, is selling for $550,000, a little under the $598,795 median price for Maui single-family homes sold last month. According to property records, the 1,276-square-foot house, built in 1999, last sold for $202,800 in February 2000.”
I was toying with the idea of buying a house in Hawaii 3-4 years ago. I couldn’t beleive how crappy most of them looked (on the carefully selected pictures in the MLS listings!).
HI houses ARE crappy. With few exceptions, that you’ll pay dearly for, you’ll find yourself next door to a 1300-sq ft flimsy bungaloo housing three generations of native Hawaians [who hate Mainlanders] and multiple dogs, all of whom are noisy, under one roof. You’d have to be clinically insane to buy there right now.
Axel Weber, European Central Bank Council Member
“The still low level of interest rates leads to a certain demand for credit… For us the current dynamic growth in money supply, in particular the very dynamic growth in loans, is a sign of mid- to long-term inflation risks.” – December 7, 2006
IMHO this ECB member is like Cassandra shrieking her prophecy to Paris “Where are you going? You will bring conflagration back with you. How great the flames are that you are seeking over these waters, you do not know.” The ECB will raise rates again next spring. Todays FOMC meeting is going to point out the evils of inflation and then the Fed will try to inflate the money supply again. Unfortunately this time the borrowers are tapped out. Construction layoffs, auto manufacturing layoffs, Mortgage companies closing, banks laying off personnel and as posted above “would you like fries with that and please pay at the first window” or my personal favorite “Welcome to WalMart”.
One of the things I love about this blog, are the posts from people like Hoz and others who appear to have had a classical education, or at least are well-read enough to have a much broader and deeper perspective than the average ignorant, irreflective dolts I encounter elsewhere. In every thread I seem to pick up some relevant historical precedent or allegory that helps illuminate the uncertain terrain ahead.
Thanks, Hoz.
I just got some intel on the Springfield, MO to NW Arkansas area. My brother is friends with a guy who works at a large plumbing outfit that services this whole area. This guy relates that business has dropped off over 80% in the past 3 months and that 1/3 of the employees have been laid off recently.
Also, he knows 3 builders who have brought keys to the local banks because they could not sell the homes and also afford the carrying costs. Here is the interesting part, the banks would not take the keys but instead they waived interest payments and are working with the builders in anyway that will delay the foreclosure process. This was independently verified as well.
In addition, this guy knows another builder in NW AR that just turned in 23 keys to the bank down there last week.
None of this is covered in the MSM around here at all. Lots of inventory building in the area I’ve noticed as well as some stalled projects. This spring will be interesting.
Auger;….Nice Post….For me, this type of “down in the trenches” info is the best….
Hi auger-inn,
Thanks for the scoop. I agree, the News-Leader (local Springfield paper) doesn’t have any reporting about the state of the housing market here in SW MO. I posted a few weeks ago here that a local banker said there are 400 empty new homes in Republic (a suburb of Springfield). I met a flipper right here in our little town 30 mi south of Springfield who admitted he is desperate to sell. A long time local told me on Sunday that nothing is selling. I have even seen “price-reduced” signs on shacks that couldn’t be listed at more than $50K to begin with! The influx of east and west coasters has come to a halt. The mini McMansions are sitting empty. Spring in the Springfield and Branson area is going to be interesting.
Look at the history in Springfield. Houses pretty much appreciated at 1% a year for many years, and by 2000 it was among the cheapest places to live in the state. The labor group in town has been hurt many times by factory shutdowns. Just ask any local about the “Zenith TV” factory that closed in 1990. I read Sweetheart closed their cup plant on N. Glenstone too and that was a HUGE deal. Wal-mart is one of the largest employers in town. Thus, wages are low but so were living costs.
So we have this housing bubble that doesn’t really hit SW Mo until 2004 or so and now there are tons of houses. I expect that a 3/2/2cg typical house will again sell for $90,000, down from about the $120,000 it would fetch recently. I remember renting houses in Springfield during college. Very nice houses for $750-900 a month and I can’t imagine the rental prices have risen much since 2000.
I rented a really nice 3/1 in the “Phelps Grove” subdivision for $600/mo, and the selling price of those beautiful homes was $50-60k. With such nice old neighborhoods what is the allure of some sh$^box subdivision tract home. Ozark and Nixa were the booming towns back then…..have plenty of friends who still live in that area and complain all the time about traffic. Going up 160 in the morning was a lesson in patience.
Thus, there’s no real reason for any kind of boom in the SW MO area, and unlike Ozarkian, I don’t believe there was ever an influx of west/east coast money, at least no more than there has been traditionally. The bubble in SW MO was an illusion of prosperity in a town known for cheap costs and low wages.
“The bubble in SW MO was an illusion of prosperity in a town known for cheap costs and low wages.”
Very well put. And insight into why the bubble affected virtually all of the country.
thanks
TheStreet.com has an article touting homebuilders as a great buy right now. I’m sure this board can offer some countervailing arguments.
A sample snippet:
“Check it out: Just as homebuilders were reporting second-quarter results over the summer that were bad and getting worse, their stocks were bottoming and turning the corner. Shares of most of the major builders, such as KB Home (KBH) and Centex (CTX) , are up 20% to 30% since Aug. 1, still have a great head of steam and are bloody cheap. When Toll Brothers (TOL) reported a terrible third quarter Tuesday, the stock rose 3%.”
http://www.thestreet.com/pf/newsanalysis/investing/10326582.html
The builder stocks have been steadily rallying since May 2006 against a perpetual backdrop of ever-worse results, with the most-recent picture spelling recession if not depression for the homebuilding sector. But maybe it will be different this time, and the stocks can continue rallying without ever having capitulated…
Yes they are “cheap” because (1) they will not have to offer incentives anymore due to the again booming housing demand, so margins will go back to 50% (2) the value of their land will not decrease because demand outpaces supply and (3) ARMs are stable and there is no problem with the subprime market. Hell, yeah, buy as much builder stock as possible.
my bud’s got a place he built in 2001 for ~$400K on the market for $1.1. He had good timing to get out — June 2005, and I told him so then — but it’s been in escrow for a couple of months now, and fell out of escrow earlier this year, too.
$650K could buy an insanely beautiful residence in the best neighborhood (Maui Meadows) 2002, and a total dump in Wailuku in 2005. Weird world.
Don’t know if this was posted elsewhere, but you all will probably love this example of creative house marketing: Buy a house, get a free gun!
http://news.yahoo.com/s/nm/20061212/od_nm/life_gun_dc_1
Nice offer, but I’m not sure I’d want a Glock.
Soon it will be: “Buy a gun and get yourself a free house!”
At least the FB will have a quick way out…?
Bring your own bullets… then negotiate the selling price.
http://today.reuters.com/news/articlenews.aspx?type=oddlyEnoughNews&storyID=2006-12-12T135303Z_01_N11282317_RTRUKOC_0_US-LIFE-GUN.xml&WTmodLoc=Home-C5-oddlyEnoughNews-2
Happiness is a warm gun bang bang shoot shoot?
Only one FOMC committee member dissented in favor of a rate hike. Whither the dollar from here?
http://tinyurl.com/yjagzo
“Readings on core inflation have been elevated, and the high level of resource utilization has the potential to sustain inflation pressures.”
Currently, Inflation is a world wide nightmare. The US has placed three trillion dollars overseas that are chasing investments and purchasing commodities - these dollars are the fuel for world wide inflation. Yes the fed should be worried, resource utilization = oil, metals and raw land.
resource utilization = oil, metals and raw land = irreplacable real wealth (not the paper kind which can easily be printed)
Bond traders to Fed: “Actions speak louder than words.”
http://tinyurl.com/qxpu9
Alas, I can’t load the page referenced above.
http://www.marketwatch.com/tools/quotes/intchart.asp?symb=TNX&sid=11420&freq=9&time=1dy&siteid=mktw
GS — from the “half-full” side of the bleachers, I’m glad his sentiment was registered in favor of up, rather than down.
From the “It’s-someone-elses-fault” dept.:
STATEMENT OF OFHEO DIRECTOR JAMES B. LOCKHART ON FANNIE MAE LAWSUIT AGAINST KPMG
“Fannie Mae’s filing today of a complaint against KPMG alleging malpractice, breach of contract and negligence for its failures in providing advice and services to the Enterprise and for its role in contributing to billions of dollars in direct damages and other harm to the Enterprise is appropriate and consistent with the findings of OFHEO’s Special Examination reports.”
Check out this RE Troll on
http://www.foreclosureforum.com/mb/messages/20038.html
Did you know that “it’s different in LA”? I like his argument that lots of poeple want to buy in LA because the freeways are jammed…!? WTF?
“R.E. Crash / F’Closure Bargains…Not Seeing It
Posted by Al on December 12, 2006 at 8:20 AM
Not trying to rock the boat, just another opinion, but in monitoring this x’int site it seems many are expectant of grt deals in the near future due to inflated prices, option ARM loans, etc, etc…I personally doubt it, though none of us has a crystal ball and it’s wait and see who has it right.
Here in LA prices have NOT dropped across the board as many predicted they would have already, and I doubt they will drop by much (Riverside, S. Diego, Las Vegas - different story). This will play out differently in many areas.
I base my opinion on the following…
1.) The local market here is in a malaise - sales are WAY down - but not prices. Seller are taking homes off the market and buyers are playing wait and see.
2.) My contacts on Wall St tell me that as far as they are concerned the money markets feel the housing mkt has already bottomed out and there will be no across the board bubble bursting.
3.) The demand is HUGE locally - just be on the freeways at rush hour (all day is rush hour now it seems) and see how many people live here who need homes to live in - and thats not taking account of the ones coming.
4.) Rents are WAY up - and harder to find - capacity is tapped out - parlays into demand for homes.
5.) In comparision to other major worldwide metro cities - London, Paris, Tokyo, etc, LA real estate is still a bargain - even after the price run up.
6.) So prices practically doubled in 3 years and they go down say 20% - which I doubt - I’ll take that return any day - you are still way ahead if you bought 3 or more yrs ago.
7.) It occurs to me that if you are keeping an eye on when to pounce on foreclosure deals, and looking to buy at 50% to 70% of current market value - you would have been better off buying and holding (renting) as much as possible 3 or more years ago, and then have enjoyed the run up of 100% gains instead of settling for a mere 50% gain buying at sales.
Last but not least, I’m reading a lot of negativity here about the pickings at trustees sales these days and the lack of profit to be made - I don’t believe, or see, that either. It’s true most that go to sale go back to the bene with little or no equity, however there is rarely a day goes by when usually several are sold that buyers will do well on, especially if turned over quickly.
There will always be people who, sadly, have hit a roadblock with finances due to divorce, job loss, or whatever, and can no longer make mortgage payments resulting in foreclosure and the requisite equity that are in many of these properties - that make up a decent amount of sales, not just those overencumbered that are taken back. That they get bid up to whittle down some of that equity, in many cases still makes them worthwhile, upside buys, just ask the pros who are there, or have representatives there, every day and buy, buy, buy.
Think about it - would smart people be spending millions of dollars and not making money?
The more pessemistic you are about trustees sales opportunities the less the competition, which works for us that do buy. And don’t forget there are many ways to increase the value of real estate by rehabbing, adding square footage (espc in higher end areas that support any price).
Thanks to all who took the time to read my book of a posting and I welcome your comments - even if you don’t agree with mine, and thanks to Ward for his insights and solid legal knowledge. “
Well, I’d ask him how many homes he’ll be buying in LA since it is such a wonderful deal.
Have to say I don’t see SD prices dropping much either. Well, at least not on the MLS. Doesn’t mean that people aren’t get a whole lot more house for the money. I know it’s hard math for the realtors but let’s try again - More house for the same money means prices actually are dropping. And if you disagree please go buy a bunch so you are in a good position for the spring upturn.
Housing demand decrease, inventory increases, sales plummet, prices are resilent for a time and then they plummet. You will see it. Probably see it more than you want.
There’s two of ‘em, actually — the Troll Brothers.
Interesting Fannie Mae is starting to point blame:
http://tinyurl.com/yxerdy
Fannie Mae sues former auditor KPMG
Tue Dec 12, 2006 5:10pm ET
By Patrick Rucker
“WASHINGTON, Dec 12 (Reuters) - Mortgage lending company Fannie Mae (FNM.N: Quote, Profile , Research) on Tuesday filed suit against its former outside auditor KPMG LLC claiming negligence and breach of contract for its part in flawed accounting that led to an $6.3 billion restatement of past earnings.
The accounting giant applied more than 30 flawed principles and cost the company more than $2 billion in damages, Fannie Mae states in its complaint.
KPMG was Fannie’s auditor “for more than 30 years,” the 52-page suit states, and was paid “tens of millions of dollars” to perform a “critical watchdog function.” Fannie Mae fired the accounting firm in mid-December 2004, just a week after the Securities and Exchange Commission ordered the company to restate more than two years of flawed earnings.”
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US housing market is different this time - it’s worse
http://www.moneyweek.com/file/22805/the-us-housing-market-is-different-this-time—its-worse.html
How Bad Will the 2007 Property Market Be?
http://www.businessweek.com/bwdaily/dnflash/content/dec2006/db20061211_510835.htm?chan=top+news_top+news+index_top+story
-
From the first link: “One Merrill Lynch report reckons that a 5% fall in house prices could see defaults rise to double digit rates, which would be enough to hurt some investors who’ve bought seemingly-safe A-rated paper, the analysts reckon.”
Whoa. Surprise, surprise, surprise…
FWIW, I don’t buy the reasoning in the second post. But it’s all worth reading. Thanks.
Henry C K Liu at atimes has an interestin post here:
http://atimes.com/atimes/China_Business/HL14Cb04.html
On Debt:
“The United States is the only nation in the world whose foreign debt is denominated in its own currency. In that sense, the US has no real foreign debt as all its debts are sovereign debts payable in currency it can issue at will. The term “foreign debt” usually means debt denominated in foreign currencies. Such debts require the backing of adequate foreign reserves because the debtor governments cannot print foreign currencies and are therefore subject to risks of default on foreign currency loans. Foreign debts for the US, as they are denominated in dollars, are only sovereign debts held by foreigners. If foreigners holding US sovereign debt want to cash them in, the US can print as many dollars as it needs to satisfy them. ”
Inequality:
“Income disparity has now reached obscene levels. Capital One Financial chief executive officer Richard Fairbank exercised 3.6 million options for gains of nearly $250 million, on which he paid tax on the lower capital-gain rate rather the income-tax rate. His personal take exceeded the annual corporate profits of more than half of the Fortune 1000 companies, including Goodyear Tire & Rubber, Reebok and Pier One. Median pay among chief executives running most of the United States’ 100 largest companies soared 25% to $17.9 million in 2005, dwarfing the 3.1% average gain by typical US workers.”