Bits Bucket And Craigslist Finds For December 31, 2006
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Ben, thanks for a great blog and the best to you in 2007!
Ditto, Ben. Hard to imagine how you keep your blog filled with such a complete array of timely information. Heck, it takes a chunk of my time just to read it all — assembling it must be a real “bear.” Thanks so much for all of your work — it has saved me cold, hard cash and has totally reshaped the way I look at housing, shelter and “investments.” I hope 2007 is more bountiful for you than for myself — you deserve a huge reward for so steadfastly showing us the right path.
That said, thanks, too, to the posters here, from the reliable regulars with deep knowledge and long experience, to the infrequent posters who contribute insights into their own markets and experiences. Beats the heck out of any formal training I can think of.
Someone just posted that Mortgage Lenders Network USA just tanked. Is this in the same league as Ownit Mortgage?
Ownit was supposedly #11 in subprime lending, MLNUSA #13.
http://forum.brokeroutpost.com/loans/forum/2/81847.htm
Their forecast (per their website) was $12.1 Bigguns for 2006. 1600 employees as of Sept, plus they were gonna hire 650 in Phx for the west coast.
“ooohhh….that’s gonna leave a mark!”
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i like these posts:
“I know a lot of people that went to MLN thinking it was the promised land. It doesn’t take enormous brain power to figure out that any lender that is undercutting their competition on rate by .75 to 1.50 bps, letting borrowers go 100% stated at 600 and using the first page of the bank statements as full doc is eventually going to get their ass handed to them. Subprime people are exactly that, subprime and their credit sucks for a reason: they don’t pay on time. I think the industry is finally figuring out that they need to go back to treating these borrowers with higher rates and more money down.”
“This is a reality check for the lending industry. Every indicator is there. Easy qual neg-ams and no money deals are going by the wayside as these are the real weapons of mass destruction. It was a nice ride as everyone was so busy refinancing and living off of their homes to be blinded by what else is going on. The survivors are going to be going tighter and the days of turn in an incomplete file and go to docs “subject to” are gone. A higher degree of accountability and professionalism from all sides will no longer be obligatory but will be mandatory to survive. If Sen. Obama’s bill passes then there will be a greater power handed to the Fed when they want someone. I doubt that this will revert to a Suze Ormond A-only and everyone else has to rent in PotterTown world but the abuses of our business are returning big-time to bite us in the butt. On the upside, by the end of the year when you say that you are in lending there will be a new perception of respect as the idiots and con artists depart. Know your guidelines and don’t be afraid to say no to a bad deal.”
“and everyone else has to rent in PotterTown world”
Actually, I think it was Pottersville in It’s a Wonderful Life.
Gekko, you take a lot of heat on this blog but I like your posts most of the time. You are good for this forum. Still, there are those times when I would like to take a steel toe to your nutsack but those moments are rare.
Have a Happy New Year and a prosperous 2007.
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Thanks and Happy New Year to you too!
If it’s President Obama then the revolution is on.
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for what it’s worth, this show appears to have been cancelled after only 6 episodes.
http://www.bravotv.com/Million_Dollar_Listing/about//index.shtml
that show was vomit inducing just off the previews
i saw an ad last night for a new show
high maintenance in 90210
another vehicle for brainless idiots
That show was sureal. Another reason I left Cali - there really are people like that out there, lots of them. Cali is a magnet for every Movie Star want-to be from all over the world. this causes alot of mental illness I think. Gated communities won’t help out there either. best hope for Cali is a giant earthquake and all the flakes will leave for awhile.
terry keenan bearish article in today’s ny post http://www.nypost.com/seven/12312006/business/housing_illusions_business_terry_keenan.htm
Holy cow, Terry Keenan is writing like a bear. What next? Will Gekko turn on the stock market? The world isn’t making sense to me.
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500 Index Fund Adm as of 12/31/2006
1 Year 15.75%
5 Year 6.15%
10 Year ~8.5%
I think we still have some more up years to revert back to the hisorical mean of 10.4%.
Gekko, although I consider myself a Boglehead, and I’m going to put another $4,000 into my traditional IRA this week in the Vanguard 500 Index fund, I think the average gain on it the next ten years will could be considerably below 10% and we’ll see some negative yearly gains for a few years.
I’m buying more gold bullion in two weeks, along with a 3 month T-bill. I just put in another $1200 to my DODFX fund (international).
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nobody knows the future - it’s smart to stay diversified.
BUT - gold pays no interest or dividends and it cost more to store and insure than is worth as an inflation hedge. it’s not an asset class. you speculate in gold - you do not “invest” in it.
if you want to hedge against a dollar decline, invest internationally. if you want an inflation hedge, buy TIPS.
if you want to prepare for doomsday, stockpile bottled water, MREs, radiation suits, and ammo.
“you speculate in gold - you do not “invest” in it.”
Also, don’t forget that renting is just throwing money down the drain with no tax advantages. So all renters should buy a home as soon as possible in the new year.
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Your comments are so poorly conceived as to not merit a reply.
And you are too much of a moron to merit an explanation.
Why don’t you ladies take your feud someplace more private?
The left-wing and the right-wing are two sides of the same coin.
Just because I point out that some right-winger is a moron does not make me left-wing. And if Sammy Schadenfraulein doesn’t like Gekko and my feud, then maybe he should start his own blog. Last time I checked, Ben Jones was the moderator here.
GetStucco,
I find your feud amusing at times, and since your views seem pretty close to my own, I get where you’re coming from. Nor do I have any problem with close-in fights and scathing personal attacks, when warranted. It’s the “I know you are but what am I” tone of some [not all] of the exchanges between you two, that is sometimes more annoying than entertaining or enlightening. No need to get testy - I’m just suggesting a reduction in gratutious swipes at each other for every trivial disagreement might not be a bad thing for the sake of the blog. [And no, I'm not trying to moderate the Blog - Ben handles that responsibility just fine.]
The real funny part is that I always am confusing gekko with get stucco, so seeing ” one person” arguing with himself just bemuses me.
Paul
Take away 4 generations of living beyond their means, vis a vis easy credit, gold was the Gold Standard, for many thousands of years and will return, as it represents real money.
Let’s look @ buying physical gold, vs. a house.
A 1 oz Gold Krugerrand will cost you around $645 today. To take delivery, you’ll need to pay in full by cash or check. No creditcards.
A $500k house in Bubbblesville, USA can be bought, with no money down, crummy credit and little more.
Gold is a deflationary standard. It represents real deflation. There are solid reasons why modern industrial economies cannot rely on the gold standard and must stoop to using fiat currency. Not only the crash of 1929, but quite a few steep drop offs before that happened with gold standards in place. If gold is so great, then why are the great winners of our day pop artists and consumer tech vendors?
Mole man,
What are you talking about? We were on a gold standard until the 70s. We built our modern industrial society on that standard, and we are dismantling it on your fiat paper system. Please note that USD depreciation has sharply accelerated since we went off the gold standard while debts have exploded. Gold represents real price stability, not deflation. Fiat currency represents inflation and financial ruin. There has never been a fiat system in the history of the world that survived. Not one. We don’t learn from history, so we will repeat it.
http://www.safehaven.com/showarticle.cfm?id=6594
I thought a lot of shops take credit cards for gold coins. Please someone correct me if I am wrong.
Mark,
The spread on a bullion purchase is about 2.5%. Credit cards charge about 3%, so dealers don’t take credit cards.
Gekko, the S&P return this year was beaten by gold (up 23%), emerging markets, Europe…and on and on. Your statement that precious metals are not an asset class is absurd. All in all, I expect more of the same from you next year.
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i don’t look at year to year returns. i look at long-term historical returns. performance-chasing is for fools.
Hey Gekko,
at 12:12 EST Vanguard finally let you fund 2007 IRAs. I fully funded my traditional IRA already, 12 minutes into the new year. New Year’s Eve celebration is over for me! Vanguard rocks!
gold pays no interest or dividends”
gold pays for no salaries, management fees, options grants, etc.
it cost more to store and insure than is worth as an inflation hedge”
cost of safe deposit box in a bank where you have an account-free
“I’m buying more gold bullion in two weeks….”
Same ‘ol gold fever that spreads every 25 years or so. They wait until another generation comes along, dust off the same ‘ol arguments, and people bite. Everything you read about buying gold today was said during the late ’70’s and early ’80’s. The result, lots of people got stuck w/$750+ oz gold and watched it tank over the next 20+ years…..GREAT “INVESTMENT”.
Buy more….PLEASE! It’s entertaining; it was back then and still a giggle today.
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exactly. and i forgot to mention the high transaction costs.
gold returned 23% this year.
….after gold, it was D-Flawless diamonds, after that it was MLM, after that…..
It’s a circle so get the jump on the “next thing”…..buy diamonds NOW!
Gekko, you know nothing of what you speak. High transaction costs? You can buy precious metal ETFs for $7 online brokerage fees. If you want to buy physical the spread is about 5%, but when you sell will you declare your gain to the IRS? It’s a cash business. Try not paying taxes on your S&P gains. Why do I bother correcting you Gekko? You just won’t learn anyway.
So you counsel committing a felony in order to subvert the correctly identified high transaction costs?
I don’t counsel anything. I point out that the spread is lower than any capital gains rate. It is also about equal to what you would pay on a loaded mutual fund, but metals have no ongoing management fees.
I buy “cash only” at my dealer whenever I get to Los Angeles. Premiums on American Eagles are around 4%. On Platinum Eagles about 1%, which is a great deal. You buy a certain minimum amount and you don’t pay California salees tax. I never keep receipts of my purchases. I live in a small space and don’t like keeping paper around. I already paid income taxes on the money I exchange for precious metal currency. I never sold any precious metal coin I ever bought. And I’ve been buying since the mid 1990s. My friends sell when they get jumpy. Dealer pays in cash about spot price minus 2 percent. My friends think it’s a great deal. They forget how much $ they paid originally for their gold too. Short memories we geezers have I suppose.
Congratulations on your stock market success, Gekko. It appears the stock market has reached a permanently high plateau of high appreciation.
Happy New Year!
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10.4% since 1800.
http://www.esrresearch.com/image007.gif
where is your money???
In some stripper’s g-string. Now, that’s a great investment.
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been there done that. but Scores has a great happy hour buffet so at least you can recoup some of your “investment”.
Great book by the way - I highly recommend:
“All the stripper girls are so friendly and smiling and happy to see you. They dance and dazzle and tell jokes while they take your money. Inside, they hate your guts. Each and every one of them. They think you’re a sucker and a mark. They lure you in and rob you blind. And they laugh at you when you leave, every one of them. They laugh and try to figure out ways to get you to come back.” - April the Stripper, “Bringing Down the House”
“At its heart, it’s all about greed. We build the casinos because we want to take your money. You come here because you want to take our money. The rest is just window dressing - how we lure you in, how you justify it to yourself when you get back home.” - Damon Zimonowski, “Bringing Down the House”
“That’s the nature of the motherf***er. It’s no different than any other business. You don’t open a movie theater and let people in for free. You charge ‘em for the entertainment. That’s what Vegas does. The house’s edge is the price of the movie ticket.” - Damon Zimonowski, “Bringing Down the House”
“Over time, nobody beats the house - that’s the cardinal rule of Vegas. You f**k with the cardinal rule, you f**k with Vegas. And sooner or later, Vegas finds a way to f**k you back.” - Damon Zimonowski, “Bringing Down the House”
http://tinyurl.com/yzn6f5
You can view strippers and casinos that way. Or you can view them as entertainment. I view them as entertainment and have my own entertainment budget. They have to make a living like the rest of us. I trust a stripper more than any of the following Pat Robertson, Jim Bakker, Oral Roberts, Jimmy Swaggart. Capiche? Also, unless you give a stripper your phone number, she will not nag you after the transaction is over with and you are out the door of the club. I met one or two women in the last year who told me they earn in the 6 figures in their entertainment. One of them is conservative, believe it or not, owns and operates guns, and is against illegal aliens.
Fellow software contract engineers coast to coast like to label ourselves w*ores, because we go for the highest $ per hour. We label the headhunters “p*mps.” We don’t even laugh about it when we toss out those words anymore. It’s our lingo. We’re proud. A good stripper earning 6 figures should also be proud. Everyone should excel in their own way of making money, whether in entertainment or engineering or education. Ayn Rand wrote great fiction novels about people like that (”The Fountainhead”).
Good Day.
The drug-free strippers I know are some of the most honest people I’ve ever met. Really.
But they tell me that making big money has been over for the past year or so.
>But they tell me that making big money has been over for the past year or so.
i heard the same thing immediately after 9/11. these strippers are always crying the blues. it’s one of their sales tactics.
The only guys who turn to strippers or other “pros” for companionship or entertainment, are guys who would sleep alone in a women’s prison.
You are wrong again Sammy. You are only trying to make an insult and not a substantiated fact. You are discounted here.
You must be gay. Not that there is anything wrong with that.
I’m with Sammy.
that’s laughable, how many stocks still exist since the 1800s and how many companies have gone bankrupt since then?
tell us about that period between 1900 and 1980ish when stocks returned a big 0%.
Erm…
http://en.wikipedia.org/wiki/Survivorship_bias
Dodge & Cox Stock fund: DODGX
Expense Ratio 0.52%
1-Year 18.53
3-Year Annualized 15.60
5-Year Annualized 12.84
10-Year Annualized 14.63
There are a few conservative mutual funds to consider too.
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this fund has done well. a few problems though:
1. how do you pick the handful of funds that beat the index in advance?
2. how do the 20+ year returns look? my analysis tells me that the farther in time you go out - the crappier the returns are for active managers.
3. what about tax efficiency? taxes can eat away seemingly good returns.
1) I look at the 10Y + returns & charts, especially in the bear market years. If the fund did not get killed (like Janus 20 !!!) it is a strong indicator to me that they will not suffer as bad as most. I also look for if the fund has consistently beat the S&P 500 over a 10 Y pull.
2) Don’t know about 20Y return, (a bit of a long time for me), but for the 10Y the fund beat the S&P 500 by 5.81% (annualized) according to MorningStar.
3) Tax efficiency : 10 Y = 12.45% vs 14.23 (pretax) still better than the ~ 8.5% of the S&P
I also dollar cost average like you (every month a contribution goes in) I don’t have an index fund, but they also looks like another very worthy investment vehicle…. Happy New Year
Yes but after inflation it will be more like 4-5% real returns. The stock market can be a good inflation hedge though.
I get so excited these days when I see helicopters fly over head these days…….. I keep waiting for the money to start falling out of them.
“I think we still have some more up years to revert back to the hisorical mean of 10.4%.”
yeah, like 10 years. do you understand the concept of a secular bear market? we’ve been in one for almost 7 years.
Try 16 years. My long term goal is to hang onto the lucrative jobs I have in contract engineering. That requires renting, no marriage, continuation of my regimented fitness workouts to keep from being obese, drinking gallons and gallons of green tea, being able to shift my work location within one week coast to coast, and not worrying about investing aggressively in equities in my tax deferred plans, but investing like an old man outside those plans (T-bills, savings bonds, precious metals). So that’s why I will maximize my investment into the S & P 500 fund for my traditional IRA this week ($4000), as I wrote earlier. BFD if it drops down 15% this year. I may be wrong about my negativity toward equities, but I focus on separating emotion from investing and have my own asset allocation plan that is long term. I don’t believe in market timing in things I can dollar cost average. I do believe in market timing in real estate though. That’s why I’m a huge fan of this blog and thank you all for helping me learn. In 2009 I will be very happy if I could get to ten years worth of emergency expenses in T-bills, Savings bonds, municipal bonds, CDs, and money market funds. That’s the amount of money to live on if I could not have a job for ten years. I’m up to 7 years right now.
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fyi - best green tea that i’ve found. imported from Japan - it’s awesome. you will love it:
http://www.maeda-en.com/store/productdetail.cgi?productid=04977
Thanks for that Gekko! I’m open to new variations of green tea. I usually drink the Flavia brand of Japanese Green Tea with Jasmine. Yamamotoyama is good too, but certainly a different flavor. I was left with several boxes of green tea from my sister who is on her way to her new apartment and job in the great northwest.
Yup, MLN was in the same league as Ownit. You can see the comparison on this table:
https://www.newcentury.com/resources/other/origNews06.pdf
AWWWRighty then…the window is open, put your bets down. Two of the top 20 subprimes KABOOM in 3 weeks. Who’s our next lucky contestant, COME ON DOWN!
Thanks for the link!
I don’t know if anyone is interested in this, but an interesting fact has just emerged regarding CDS. Moody’s are now insisting that all CDS issuers post collateral (cash, treasuries, other bonds) if the CDS Issuer’s credit rating falls. Clearly they are expecting declines in credit quality of issuers due to CDS counterparty’s having to pony up big money soon on defaults in MBS pools. So far it’s only Moody’s, but since they rate almost every ABS and MBS deal it applies for all deals going forward.
Seems like the ratings agencies are getting very worried. So far I’ve only seen this for sub-prime pools. Let me know if anyone would like me to keep this board updated on this issue.
Ben, fantastic blog - thanks. Happy New Year everyone.
I would love to see how the sub-prime market unfolds, if this arena of the market continues to deteriorate as a lot of posters indicate it will, a heads up on what the ratings industry is doing would be cool.
Collateral requirements on derivative trades was the accelerant on the Enron debacle.
Ratings agencies downgrade credit and EVERY counter-party comes looking with their hand out for collateral.
IIRC, Enron burned through $4B in about 10 days in this manner.
Sunsetbeachguy,
WOW, four prophetic terms in one small sentence:
“Collateral “….”derivatives”… “accelerant”… “debacle.”
Way to go!
“She wrote a long letter…on a short piece of paper” …Traveling Wilbury’s
I lived the Enron debacle.
Former employee until the day after BK.
I had a front row seat for that one, and will have a vicarious front row seat (through this blog and others) of the housing debacle.
“Let me know if anyone would like me to keep this board updated on this issue.”
Please do, and thanks.
Englishman,
Thank you for that info. As the MBS/CDS markets are key to the credit/housing bubble, whatever knowledge & insight you have would be very much appreciated here.
Thank you & Happy New Year!!!
EnglishmaninNJ-
Definitely! Please keep us informed! Thankyou.
Someone posted the new time period for MBS buybacks increasing from 12 months to 24 months, to start in mid-2007. Who makes these rules, and what was the impetus for the change? (Well, apart from the obvious one?)
Of course, the extra time doesn’t help if the counterparty is now vacationing (extended) in the Caribbean!
The ones that someone posted were simply Fannie and Freddie’s rules that they are now changing. The time varies by the indenture contract associated with each security issuance; i do think that 12 months is fairly common though
Here’s an article in Reno Gazette Journal on housing slump.
http://tinyurl.com/tt6lf
“The good news is that it shouldn’t fall much more than that, according national experts such as Moody’s Economy.com, which predicted a 17.2 percent decline for Reno by 2008. That would mean just 2.2 percent more to fall for Reno.”
Why is it that every article that seems to get it suddenly veers way off course and ends up in Bullshitville? Only 2.2% more to go. Whew, that was a close call.
For those of you sick of hearing “Goldilocks” references to the current economy, allow me to point out that in the original fairy tale Goldilocks gets badly hurt when the 3 Bears return to their house (how appropriate :D).
It’s only the more recent “must have a happy ending” versions that have her happily sharing a meal with the bears.
Good point. The bears are coming back! Defensive measures include loading up on T-bills (no state tax) and precious metal bullion. I’d say a wise move is 50/50 Treasury Bills to bullion, and mix gold, silver and platinum.
http://www.nytimes.com/2006/12/31/realestate/31zone.html?ref=realestate
$214000 home, 1100 square feet for a two bedroom house
my 1 bedroom apartment is in the mid 800’s
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“Cost of Freedom” Recap of Saturday, December 23, 2006
Cashin’ In
“Homes” For The Holidays: How Will The Housing Market Look Next Christmas?
2006 saw a slowdown, not a meltdown, in the housing market. So where will home prices be next Christmas, 2007?
Wayne Rogers says that in some areas of the country the slowdown has been pretty dire with price drops of up to 30%. He thinks that the real problem area in 2007 will be with secondary homes, not with primary residences.
Stuart Varney thinks that the Federal Reserve may put something of a “floor” beneath the housing market in terms of prices but cutting interest rates, which will in turn cut mortgage costs for many people.
Leigh Gallagher thinks that late 2007 could be a good time to buy a home. She says the Fed will probably cut rates in the upcoming year. She also thinks that while we aren’t totally out of the woods for a slowdown, we could see a lot of activity from first-time buyers.
Jonathan Hoenig says that real estate is a local story, and that he’s not really a bear on housing. He actually thinks that from an investment standpoint, international real estate is looking good right now.
Jonas Max Ferris says that since the housing peak in 2005, residential homes have been the worst performing asset class, and he thinks we are lucky that prices haven’t fallen more. The strong economy and low interest rates have helped, but we are still in for more drops in home prices in 2007.
Mike Norman thinks that all things being equal, the housing market is stabilizing. But if the Fed drags its feet in lowering interest rates, you could see the big slowdown in housing that never really materialized in 2006.
http://www.foxnews.com/story/0,2933,238632,00.html
It’s about time they (FNC shills) started to be a bit honest.
Stuart Varney has proven to be a tool.
Leigh Gallagher is a complete moron. She has those psychotic eyes that are reminiscent of the Runaway Bride. Nothing that comes out of her mouth has any intelligence.
Mike Norman is an idiot that wears way too much makeup. Last week Wayne Rogers called him an “idiot”. That was fantastic. Mike Norman freaked out. I guess the truth really hurt.
Jonas Max Ferris has understood the market for months. He routinely gets shouted down by fools like Norman & Gallagher.
Those shows are impossible to watch any more. They used to be entertaining but now it’s like watching Cramer Light.
trouble is that home prices are not in the CPI, rents are
Gekko –
Is Fox News where you get all the propaganda you sling around on this blog? Now I get it.
And Cactus says if the FED cuts rates we get more INFLATION and a lower dollar. More Inflation but probably no more pay. happy days. The alternative is RECESSION and NO pay at all. So what do you think the FED will do? What has the FED done the last few years? Gold is probably a good bet. NEM and Silver PAAS if you like stocks.
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it’s on at 3pm EST today (Sun) if anyone wants to watch it.
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it’s on at 3pm EST today (Sun) if anyone wants to watch it.
That’s football time. If you don’t know that you must be an anti-American commie terrorist.
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ever hear of TiVo?
I only watch fighting sports like UFC, Pride, WCL and IFL.
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UFC fan here.
“ever hear of TiVo?”
Go back to Russia!
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saw it today. Mike Norman and Tom Adkins mocked, laughed, and dismissed at the lone housing bear - Peter Schiff.
Norman also likes TOL stock for 2007.
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And Tom Adkins predicts housing prices will be up 10% in 2007 thus returning to “normal” historical appreciation. yes, I know he’s a realtor/RE investor.
Hey folks, whatever happened to the periodic posts of the Phoenix MLS listings (numbers of houses for sale?). Last I saw, the number was 54,000 in September. Whoever posted that, please provide a link at least to where you got the numbers.
Thanks
That was ptf’s regular post… wonder where he (/she?) went??
The SD REIC has declared a propaganda war on the press, and pounds them constantly for “hyping” bad news about the housing market (remember C&C’s post about “straw men” yesterday?). Here is the latest from the smiling broker featured in this week’s sdhomes Buying Guide (with my comments added in parens).
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Don’t believe the hype
(I am already doubting I will believe anything this shill has to say after reading the title.)
By Fred Christiansen
Broker/Owner, RE/MAX United
Despite the onslaught of negative media surrounding the housing market (soft landing, soft landing soft landing…), the real story is that now is a great time for buyers to fulfill their dreams of owning a home (as there has always never been a better time to buy?). And with a large selection of inventory, low mortgage rates and tax advantages for buyers (not to mention increasing numbers of REO listings and deeply discounted new homes undercutting used home sellers), there is no time like the present to purchase a home.
Many potential buyers have been scared off by the hype about a falling market (do you mean like the NAR’s own admission that home prices are falling for the first time since the early 1990s?). Put plainly, the media’s stories about “bubbles bursting” (you said it right here in your ad, pal!) are exaggerated and lack historical perspective (well then why don’t you provide some, like for instance how home prices are falling for the first time since the early 1990s, and how price declines continued for six years or so last time?). Historically, real estate has been a cyclical market (do you mean real estate doesn’t always go up?). Throughout these cycles, prices fluctuate (is it called fluctuation when they go down for a period of several years in a row?), but as history has proven, real estate will increase in value (real estate always goes up in the long run), establishing it to be one of the best, if not the best, investment the average person will ever make (even those investers who bought five condos in Las Vegas last year that they can’t sell now for anywhere near what they paid?).
A real estate investment is the only one where the principle of leverage — 20 percent down for an appreciation on 100 percent — is applicable (should I ignore the media hype that says almost nobody in San Diego buys with 20 percent down, then?). Renters, who have seen their rents increase as the housing market has cooled, would be hard pressed to find these types of returns with any other investment (so are you saying that a 7% increase in rent is worse than a 20% drop in a home owner’s market value?). And what other investment allows you to reap tax advantages and a good return on your investment (can I claim a tax exemption on my 20% home equity loss?).
The avalanche is just starting in San Diego. The REIC can try to hold the boyant mentality in place as much as it wants, the math behind the I/O and ARMs from hell are starting to run the table already. I know GS watches things closely, and I think he would agree that barring some magic money tree the pain is going to multiply in the next year.
I like San Diego, its a great place to live. The industrial / production base here is very thin. We have not suffered a real slow down since the 90’s, and we have no idea how well our NAFTA-ized economy is going to do when everything slows.
I now read the SD Real Estate stuff only when I am in the mood for a good laugh, or wish to be outraged by blatant BS.
Is this the kind of negative media “hype” Mr. Christiansen is decrying? Because while the content gives the usual self-contraditory jumbled perspective on the situation, the byline wordbite suggests that builders are optimistic and modest gains are expected, which would suggest now might be a good time to buy…
——————————————————————————————–
Experts weigh in on 2007 housing outlook
‘Modest’ value gains forecast, but builders are optimistic
By Roger M. Showley
STAFF WRITER
December 31, 2006
http://www.signonsandiego.com/uniontrib/20061231/news_1h31outlook.html
Builder optimism is highly desirable, as it helps to assure a glutted supply for the foreseeable future.
Hey, Mr.. Incomestream:
A while ago someone posted a link to an LA based RE broker based in the South Bay that rents, he is a surfer and was the top LA broker for a number of years and was predicting a significant RE bust.
You had said that you had done a few deals with him and he was top notch.
Do you (or anyone else) have his name/website?
The OCR blog has Gary Watts giving his look for 2007 and I wanted to post a counter-point from inside in the REIC.
This is an article from LA times dec 31st sunday edition giving their year-end overview and roundup of several Major RE stories mostly focusing on the Scal market.
http://www.latimes.com/business/la-re-endofyr31dec31,0,1146336.story?coll=la-home-business
By October, a chill reached many of the expensive and mid-range markets. Beverly Hills, Manhattan Beach, Tarzana and Alhambra saw median prices fall at least 10% from September to November, according to the latest figures from La Jolla-based research firm DataQuick Information Systems.
Inglewood, Whittier, Bell, Pasadena and South L.A. still are riding the realty crest, according to DataQuick.
Loans we love and loans we loathe
No longer flipping out over Vegas
The country’s hottest hot spots
New McRules for McMansions
Power to the people interrupted
Mobile-home park is still in limbo
Sorry incomplete post. full version below.
What is with the reccommendation of all of these mutual funds this morning? How in the world will stocks go up if things in 2007 are as bad as we all are predicting? My money is in a 5% (for now) MM.
Here is an LA Times article summarizing some of the major SCal
RE-related stories of 2007. They provide brief synopsis’s of such things as Baja investing, Conversion of a Carson Mobile park into condos, Mortgage lending trends,Las Vegas RE,RE cooling trends, rules for McMansions, SCal foreclosure overview, blah blah blah, yada yada:
http://www.latimes.com/business/la-re-endofyr31dec31,0,1146336.story?coll=la-home-business
And here is my overview of the LA market trends for 2006-2007:
LAdwtn: Continuing construction of condos/lofts hi-rises especially south of 8th st along grand. Some units up but most will come to market over next 2 years. Maybe 2000=3000 units added to existing dtwn stock.
Westside: some zips in expensive westside coastal communities showing 10-20 %yoy declines from astronomical highs, more in condos than in SFH.s. Some westside spots such as Mar Vista/Playa Vista adding large numbers of new multi-units.
Scentral LA: Suicide idiotic Subprime loans for overprized POS ghetto shacks will result in lenders/SBA getting their a**s handed to them on a platter
REst of LA county: waaay overpriced and overrated, : At Least 50% of LA metro areas are tijuana blighted slums.
Have a happy new year!!
Anyone want to have a go at him on Bloodhound Blog?
http://www.bloodhoundrealty.com/BloodhoundBlog/?p=820
If anyone does not understand why the NAR says that it is a safe time to buy a house - check this out on ebay 150075963257. After seeing this you will know that we will never run out of fools in this country.
From Alan Ableson’s column in Barron’s tomorrow, he quotes Doug Cass (a hedgie) who sent along the third-quarter sales cancellation rate for each of the leading homebuilders. These are the cancellations that the Census Bureau does not count when tallying sales and inventory. Here you go:
CTX: 37%
DHI: 40%
KBH: 53%
LEN: 31%
PHM: 36%
BZH: 57%
HOV 35%
MDC: 49%
SPF: 50%
Cancellations usually run at about 15% of orders for the public builders.
Happy New Year, Everyone!
Thank you, SM LL.
Here are some predictions for 2007 that make ours look tame:
http://news.yahoo.com/s/ap/20061231/ap_on_re_us/2007_predictions_ap_poll
35 percent predict the military draft will be reinstated.
_35 percent predict a cure for cancer will be found.
_25 percent anticipate the second coming of Jesus Christ.
_19 percent think scientists are likely to find evidence of extraterrestrial life.
Should be an eventful year. LOL
San Francisco charmer, priced to move at $670k:
http://tinyurl.com/yao7ag
-
sweet!!!
Wow, what a deal! It has granite countertops!!!
Think beans next year. Soybeans that is.
http://www.theglobeandmail.com/servlet/story/RTGAM.20061230.wryearcomm/BNStory/Business/home
As a farmer, I follow the commodities markets closely and have been surprised by the recent increase in prices. I have to say I’ve had a growing suspicion some, if not a great deal, of money that might have been invested in real estate or stocks may now be flowing to the grain markets. Maybe the next asset bubble to inflate??? I know there is great interest in renewable fuels, but I’m not sure the fundamentals alone justify current prices. Only a year ago it seemed the midwest was drowning in oceans of corn, and now prices are up 80% in 4 months following another large crop. I’m naturally skeptical, but I’ll enjoy the chance to lock in higher prices on next years crops!
Many people feel that the income tax deductability of mortgage interest is the deal maker in their decision to buy a house. Most don’t seem to realize that it is an advantage only to the extent that the interest and other allowable deductions exceed the “standard deduction”. Many times, it doesn’t: or not by enough to make buying a house an otherwise good decision.