Bits Bucket And Craigslist Finds For January 4, 2007
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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uk bubble watch
with some really sobering stats including the “locations with the highest square foot prices worldwide”
plus kkr is paying $837 million in fees.
http://www.immobilienblasen.blogspot.com/
Thanks for that. I had a cousin visit me from London this Christmas. She was thinking of talking to a real estate advisor about purchasing a one bedroom for 300K pounds or so. Not knowing too much about the London market, I still urged her not to, as I understand the bubble is generally even worse in Europe. I’ll pass this on to her.
As a sidenote, my cousin has an MBA and works for a big American financial services company. I don’t understand. What do they teach you in B school?
same as law school. a lot of theory and not much practical
They teach them how to smile, dress up well and only think positive. The usual Dale Carnegie bull.
This blog is almost perfect! I had a question.
To what extent all these real estate are related ? Now that would be a fantastic subject. I read for example that a lot Brits with their puffed up real estate values started leveraging and buying foreign properties in places like Bulgaria and Croatia. It would be really interesting to see the relationships between the bubbles.
this is the mechanism by which the EU bubble spreads and survives. It started in the Netherlands and UK and gradually spread to other EU countries because of equity locusts, priced out buyers, speculation and all kinds of subsidies and new laws that favour RE investment. The EU bubble has been growing for 10-15 years (depending on country), many speculators have a huge amount of virtual capital with most of that invested in foreign RE (because RE withing their own borders is no longer attractive). It is really leverage upon leverage. Speculation like that started on the French Riviera, the Spanish Costas etc. (mostly UK/Dutch/German buyers) and later moved on to outer EU areas like the Balkan, Turkey and now even RE bubble areas like some former Russian republics and Dubai.
Remember: it’s all a pyramid game; the pyramid is stable as long as they can add suckers at the bottom. The ECB knows this so they keep pumping money into the EU economy at record speed (average over the last five years about 9% yoy) by keeping interest rates firmly in negative territory.
from msn money this morning
avoid housing stocks. really?
http://articles.moneycentral.msn.com/Investing/StreetPatrol/AvoidHousingStocks.aspx
“Considering that home builders recently announced that they plan to continue construction at a rapid pace, that spells trouble”.
I disagree with this view! I have not seen any statement by the large national builders saying this. In fact I believe that their actions speak louder than their words. Why would these builders write off 2-3 billion in land acquistion charges in 2006 if they thought that housing would recover in 2007? This just does not make sense.
There’s continuing and really continuing. Note that the housing starts have been heading down for a few months, but not quickly. If they start it, they’re gonna finish it, unless they hit the big BK.
Presto, continuing construction.
The builders clearly do not see a turnaround in 2007, and they will not build more than they can sell. However, don’t underestimate the importance of the huge write-offs they made. Once they have built out the communities they kept, they will go out and buy more lots and start building again. Only this time, they will greatly reduce their land cost and build at much lower price points. This will be devastating to the existing home market, but they builders could not care less about that. Builders make money by building and selling. They will make whatever adjustments are necessary to do this.
Builders learned their lesson in the 90’s when they were caught with huge inventories of lots at inflated prices. They were unable to adjust to the changing market, and the slow sales rates really hurt them for an extended period of time. They all adjusted their business plans to prevent that from happening again, hence the large write offs.
Many people on this board have commented on the loan resets causing bank buybacks and a flood of properties being dumped on the market at fire sale prices. This will likely happen. One thing that is not often mentioned that will be “different this time” is the homebuilders will be actively building and driving prices lower until the bottom is reached. I suspect this “correction” will be deeper and faster than previous bear markets because the banks and the builders, who are “must sell” operators, will be very active.
Avoid Housing Stocks.
WONDER WHY THEY SAY THAT ?
It isn’t supposed to be a sure thing ?
A great way to start the year!
Not so Happy New Year: Another Sub-Prime Lender Cuts its Workforce By Steve Christ
Baltimore, MD * Jackson, WY * Missoula, MT Thursday, January 4th, 2007
The New Year got off to rough start for the employees of Mortgage Lender’s Network (MLN) yesterday, when the Connecticut-based sub-prime lender announced that it was no longer in the business of funding or originating loans.
MLN announced that some 1,440 employees or nearly 80% of its workforce would immediately be placed on “temporary furlough” as the company continues to struggle under the weight of “deteriorating market conditions.”
Outside the company’s Rocky Hill, Conn. office, hundreds of teary-eyed employees were seen leaving the complex with nothing but boxes of belongings in their hands.
The news amounted to a stunning reversal of fortune for the privately held multibillion-dollar company. In fact, the company had recently broken ground for a new $100 million Connecticut headquarters and also announced plans for major expansions into the Phoenix, Atlanta, and Philadelphia markets.
Primarily a wholesaler, the company specialized in funding sub-prime loans to the broker end of the business. But the slowdown in the housing market led to a string of defaults and late payments that ultimately forced the lender to cease its wholesale operations, which accounted for about 90% of its loans.
In a press release, CEO Mitchell Heffernan said, “Until we see that credit quality and margins return to acceptable levels we have determined that MLN needs to pause from wholesale broker originations.”
This cutback is just the latest sign of trouble in the sub-prime mortgage business.
Last week another sub prime giant, Ownit Mortgage Solutions Inc., filed for Chapter 11 bankruptcy protection. Earlier in the month the company had laid off some 800 employees nationwide when it announced that it was closing its doors immediately and had no money to pay its employees.
The bankruptcy filing revealed that Merrill Lynch & Co., JPMorgan Chase & Co., Credit Suisse First Boston and other mortgage purchasers were demanding that Ownit buy back more than $165 million in loans on which borrowers had missed payments.
But the pain in the industry hardly ends there. Numerous other sub-prime lenders have closed their doors, including Harbourton Mortgage Investment Corporation (HMIC), which ceased operations on December 20.
Like Ownit, Harburton was forced to take action when it was unable to satisfactorily resolve mortgage repurchase claims asserted by investors that had purchased mortgage loans from HMIC.
Even beyond that, numerous sub-prime companies are also reportedly on the auction block, including Irvine-based Option One Mortgage, a unit of H&R Block Inc., and ACC Capital Corp., the private holding company for Ameriquest Mortgage Co. and affiliates.
Sadly, for those still employed in the business it is just a sign of things to come. Issuance of sub-prime mortgage bonds jumped from less than $13 billion in 1995 to $594 billion in 2005, according to analyst Michael Youngblood at Friedman, Billings & Ramsey Inc., with a slight dip to $521 billion expected in 2006.
Given those monumental figures it is only a matter of time before more of these risky loans begin to go into default, forcing their originators to buy them back.
The banking debacle continues.
Many bulls say a housing bust in the absence of high interest rates is not capable of tilting the broader economy into a recession. Well looks like interest rates are higher today than in recent years…
Sucking Sound Is Global Liquidity Drain: Mark Gilbert (Bloomberg)
http://tinyurl.com/y9y243
this must be a typo
The so-called real interest rate, calculated by subtracting annual inflation rates from central bank lending levels in the four regions and adding the results together, surged to 7.8 percent in October, and is currently about 7.1 percent
I’m very excited by that possibility. That could cause some excellent “volatility” (ha) in the markets.
az_lender happy because Australian dollar at a new high vs USD today
Many bulls are full of bull.
Stephen Roach, one of the rare analyst that still has integrity (which is a rare commodity in banking and finance) has calculated that each 10% decrease in real estate values cuts 1% of GNP.
So let’s say real estate crashes 40%. That would mean an conservative implosion of the US GNP of MINUS 4%. A lot of suffering in perspective. Thanks Easy Al.
check this out from a realtor… gag choke cough.
Inventory has been reduced for the fourth consecutive month.
Markets are slowly shifting from a buyer’s market back to a seller’s market. Recent data provided by the Federal Government indicates that we have had hit the bottom of the so called “real estate bubble” several months ago and low mortgage rates and influx from cash heavy Canadians and Europeans moves upscale properties.
Ocean Pearl Estates in Pompano Beach
Sunny Isles Beach Broker and Realtor, Katerina Brosda, reports that only three units remain for sale at Ocean Pearl Estates in Pompano Beach, Florida.
Ocean Pearl Luxury Estates feature a private clubhouse and pool, two car garages, private elevators, two master suites, gourmet kitchen, and designer touches throughout. The main feature though are the spacious yet secluded fourth floor rooftop garden terraces with private Jacuzzi and incredible ocean views! These luxury town homes will only be available for a privileged few who desire and appreciate to live on the ocean in a small community with like-minded people of similar style and affluence.
Ocean Pearl Estates caters especially to the European clientele, who prefer more intimate beachfront communities, which remain properly maintained and managed during periods of absence.
Ocean Pearl Estates townhouses start at $1.39 million, more information can be found on http://www.miamijustlisted.com/oceanpearlestates.html or by calling the sales center at (305) 788-9393.
Pompano Beach is a pearl nestled between Boca Raton and Fort Lauderdale. Pompano Beach has an array of recreational sites for all family and sports enthusiasts. There is also a variety of new development projects such as the Citi-Centre, designated to be one of the best, new shopping malls of the future in South Florida. Atlantic Point, which will beautify the entire beach area between the Intracoastal and the beach, will feature high-end retail establishments, nightlife, fine dining, fist class entertainment and so much more.
Ocean Pearl Estates are your treasure amongst it all!
I’ve seen Ocean Pearl. They are very very nice. Too bad they’re selling.
I plan to check back a in a few weeks to see if they actually are selling
I was hoping to see those at 50 percent off in a year or so.
at those prices, you may get your wish. I live down the road so I need to run by them at some point.
Couple of observations:
- Pompano is on the top 10 areas in the US for Mortgatge fraud.
- Pompano is a HOLE. Most of it is crack central, or commerical. The schools are pathetic and crime is high.
Sure on A1A everything is ‘nice’, but you cannot compare oceanfront property in Pompano to Boca Raton or Ft. Lauderdale. Its like putting Rosie O’donnell and Jessica Biel in bikini’s. Yeah, you can say “Look, Rosie can wear a bikini just like Jessica Biel!” They both might be in bikini’s, but they sure don’t look the same.
“A1A”?? Didn’t Vanilla Ice referrence that in “Ice Ice Baby”? If so, that’s all I need to know!
Thanks for that visual, I won’t eat for days.. I tend to agree that pompano is no where close to ft laud, but I don’t know that I would call it a hole?, I am interested in your and everyone elses take on which areas will be most hit with decline, both geographically speaking and price ranges?
“A1A - Beach Front Avenue”
The girls were hot, wearing less than bikinis
rockin lovers drivin Lamborghinis, Jealous-
cause I’m out gettin mine
Shay with the ‘gauge and Vanilla with the 9!
Yes, sign me up for $1.39M.
Doubly ironic is that Vanilla Ice took the proceeds of his career after it was over and made a comfortable fortune in real estate.
OT–Do you actually have pompano on the east coast of Florida? I always thought that they run along the Gulf Coast from somewhere in the south on their way to Mexico to spawn. Spring pompano fishing directly from the beach is one of my favorite activities. Just curious.
Not sure, I still need the fish chart to id the ones that swim by, last time I tried to catch something I caught a submerged applicance, so I gave up.
Yes. We have a decent run of Pompano off the east coast of Florida.
I have gaught them off the jetty at Sebastian Inlet myself.
I know that Pompano fishing is very popular up in the Melbourne area of the East Coast. They use sand fleas (crabs) as bait.
Yup.
Pompano love crabs of all types. They will hit shrimp too.
That’s what I use depending on how their biting–usually sand fleas or live shrimp (my preference). They also hit various jigs pretty good if they are really running hard.
ogts good grammer- is he buying
or lying ?
I have been accessing the US market through a European broker but am disatisfied. Any recommendations for brokerage/trading services in the US for an American expat located in Europe? Thanks.
I can tell you who to stay away from: Schwab, Etrade, Ameritrade.
Thanks Txchick.
Another really good one is MB Trading. http://www.mbtrading.com. I opened an account with them in 1998. They’re very solid and give you a good deal on market data and level 2. The owners also have a Terra Nova franchise which I migrated to but the retail one (MB) is great. The same people are there that were there when I opened the account 9 years ago.
Check out Thinkorswim. Very good broker.
Has anyone used Interactive Brokers? I keep thinking of giving them a try, but love that my Scottrade branch is so close to work (I walk by it daily). I don’t trade often enough to really care about execution and so far it hasn’t been terrible so I’m happy.
Look into Tradestation Securities. I have been automated trading for about 5 years now. If you are an active trader, the $1 commissions are great. However, if you aren’t, the $100 monthly software fee is a drag.
Don’t housing sales come out today? does anyone know what time?
The NAR pending home sales index is usually released during the first week of the month, so we should see that shortly, but they haven’t updated the schedule on their site.
Existing Home Sales - January 25th
New Home Sales - January 26th
jb
http://njrereport.com - New Jersey Real Estate Report
Correction, the NAR PHS data will be released today (Jan 4th) at 10:00am EST.
jb
Quick summary of just-released pending home sales …
The National Association of Realtors’ pending home sales index dropped 0.5% month-over-month in November and 11.4% year-over-year. Market expectations called for a 0.7% MOM gain. This is the fourth decline in the past five months, though in fairness, the smallest in magnitude of those drops. Sales spiked in the Midwest, but dropped in the Northeast, South, and West.
Curious question. Not for this number but for the Existing Home Sales number that is released on the 25th. Any idea if that number includes foreclosure sales, since in reality when a lender completes a foreclosure it is technically a “sale” to the highest bidder at the foreclosure auction? Interesting way to “pump up the numbers” in difficult times if that’s the case.
The EHS numbers are derived by sampling MLS transactions. If that foreclosure sale was an auction, and not an MLS listing, it doesn’t get counted.
jb
New Jersey Real Estate Report - http://njrereport.com
New York… lots of “soft landings” and mixed reports:
Home Prices Fall Just a Bit; Brokers See ‘Soft Landing’
“Sale prices for Manhattan apartments fell in the last quarter of 2006, while the pace of sales was reported to be strong and the backlog of unsold apartments fell, according to several market studies released yesterday by large real estate brokerage firms.
“The new figures were also reported in a series of competitive and sometimes contradictory studies. One report, released by Prudential Douglas Elliman, reported a 5 percent decline in the average apartment sale price, compared with the previous quarter, while one by the Corcoran Group put the decline at 1.5 percent. Both put the average sale price for all apartments at more than $1.2 million.
“A third study by Mr. Heym showed that average apartment prices actually increased by 5 percent from the prior quarter. But even this study showed weakness in the market. It found that prices for co-ops, the older apartments that make up most of Manhattan’s residential real estate, declined by 5 percent, with these declines offset by increased sale prices for condominiums. He said more than half the sales were in new luxury buildings that command premium prices.”
Reports Contradict Predictions of Apartment Market Slump
“Overall, the three reports show a moderate increase in major price indicators for the fourth quarter of this year as compared to the same quarter last year. The average sales price for condominiums and co-ops increased between 3.2% and 8% depending on which report you look at, and median sales price increased between 5.1% and 11%. The number of sales are also picking up, according to the reports, produced by the Corcoran Group, Prudential Douglas Elliman, and Halstead Property.”
Reports show real estate slowdown
“Prudential Douglas Elliman also reported that sale prices jumped as much as 5% in year-to-year comparison, though they dipped slightly from the third to fourth quarters.”
Also MillerSamuel blog:
4Q 2006 Manhattan Market Overview
Has long list of articles which, I believe, include mention of their report.
Report: Manhattan Housing Slightly Less Astronomically Expensive
“Let’s go right for the negative: In the fourth quarter of 2006, for the first time in more than a year, the average price per square foot for a Manhattan apartment fell below $1,000, according to a new report. The report, from appraisal firm Miller Samuel and brokerage Prudential Douglas Elliman, shows the average dropping 5 percent from $1,050 in the third quarter to $998 in the fourth. It was last below $1,000 in the third quarter of 2005, when it reached $984.
“Otherwise, the report–a benchmark for the health of the Manhattan housing market, along with others from Halstead Property and the Corcoran Group–painted a familiar picture of a Manhattan that remains very expensive, even with other quarterly price dips besides the per-foot slide.
“Every Manhattan-wide sales-price marker cited in the Miller Samuel report–average, median and per-foot–declined slightly from the third quarter to the fourth. But the meaning’s in the details: The average, for instance, declined from $1,288,748 to $1,224,840.
“In a borough where the median household income was $50,000 in 2005, does that drop to $1,224,840 really make a difference to most?
“- Tom Acitelli”
I thought this article was interesting:
———————————————————————————–
http://www.pittsburghlive.com/x/pittsburghtrib/s_486963.html
“Tom Kuretich, of Westmoreland County, could reduce his commute from 30 miles to mere footsteps if he bought one of the residences being built at Piatt Place, Downtown.
But the banner advertising “Luxury condos from the 300s” outside the former Lazarus-Macy’s building guarantees that Downtown living is not in his future.”
“We’re starting with the luxury units for people who can afford to live Downtown and make it a place to live,” said Lucas Piatt, vice president of Millcraft Industries, which is spending $65 million to convert the former Lazarus-Macy’s into Piatt Place. “Then we’ll open it up to more people.”
“That second phase of the revitalization — making it affordable to live Downtown — may cost taxpayers who only visit or work there.
“The way to do that is to subsidize,” said Patty Burk, vice president of housing and economic development for the Pittsburgh Downtown Partnership. Taxpayers will have to cover “20 to 30 percent of the costs for working professionals and college grads,” she said.”
“The high-rise luxury condo building at 151 First Side, which Falbo’s company is helping to develop, is almost two-thirds sold six months before the first unit is finished. Prices for the 81 units started at $250,000, and the bulk of those still on the market range from $300,000 to $700,000.”
———————————————————————————–
I guess that means the City wants to raise property taxes on people who already live there in order to give subsidies to people who move in?
I wonder how many of the units at First Side were bought by flippers.
$300K? If he were content reducing his commute to a mile or two, he could choose from MANY neighborhoods a couple of miles from downtown Pittsburgh where houses are MUCH cheaper. And he’d have a real house; no assessments, no associations, etc.
Interesting… they are converting the former Cincinnati downtown Lazarus-Macy’s (formerly something else) into condos as well. Not sure of the pricing though.
Cincinnati has a wage tax on workers, currently 2.1% of your gross salary. I work in Cincinnati, but live well outside the city. I still pay the tax. If the Cincy condos are subsidized, it will be my tax money doing it! Wonder if Pitt has a city wage or income tax as well?
They have a tax but I think it is an annual pay-once thing. It’s because we suburbanites use so much of the city’s resources when we come in to work every day. They also have a 7% sales tax whereas the rest of the state, except Philly, I believe, is at 6%.
Pittsburgh has a 4% city tax. Most other places in the state have 1%. This is on top of the state income tax.
There is an additional tax for people who work within the city limit of Pittsburgh, but do not live there. It was $10/year when I lived there several years ago; I’m sure it’s gone up since then. When you changed jobs within the year it was a real pain to get a receipt from your old employer and convince your new one not to tax you twice, etc.
I’m always amazed at how easy it is to get people to accept being taxed.
Will property tax rates be raised when the assessed value goes down, or will the assessors just not lower values, even when the property sells for less?
join these
http://cagw.org or http://ntu.org
here’s our local http://fcta.org and we’ll make a rate freeze our central theme
They are talking about subsidizing people who move into $300K condos in the city but they want to cut up to 60% of bus routes throughout the county.
http://www.pittsburghlive.com/x/pittsburghtrib/s_486886.html
Yet another reason why I’m glad I left Pittsburgh.
Indio Mortgage Fraud Update: 1/4/06
Hi fellow bloggers….No, I did not move to Indio. One of Ben’s bloggers in Indio suspected some mortgage fraud there and asked me to do a little research. Viola! Suspiscious deals everywhere I turn. Is Indio still appreciating at 20%/year? I thought we were in a soft market. This is just as bad as Lincoln, CA and Hillwood Loop. There seems to be so much cash back, sub prime 100% acquisition mortgage fraud in America today, that the FRAUDSTERS ARE SETTING THEIR OWN COMPS. I am baffled. This market is insane and insanely over price. It is going to fall hard when the RMBS buyers get wise and refuse the paper. How long? I can’t believe it has gone on for this long already. I give it until February to really accelerate, but as you know the real estate market will then take 2-4 years to painfully hit bottom.
Below is the exchange with Lex in Indio. He asked for my help because he was currios about “above market” sales on two condos which have remained vacant. Look what we discovered. If I had more time, I could probably expand the findings geometrically. It is to the point where I am ready to hire a college kid to start a web site to post fraud deals (and do the work the FBI should be doing) and research these perps.
See Below:
___________________________________________________
Comment by lex
2007-01-02 23:44:11
Paladin, I need your expertise on exposing these frauds.
In the past 6 weeks two rentals on my block (4 bed SFH) sold for approx 185,000 over comps. They have been vacant since I moved here (approx 7 months). This is in the Coachella Valley (Palm Springs area) and this area in particular is flipper central. I checked the Riverside assessor office and both were owned by the same Realtor office for about 2.5 years. Most comps for these houses are in the high 300,000/low 400,000 and they both were sold for 585,000 two weeks apart. It just seems extremely unusual as nothing else is selling in the area. Then out of the blue two sales for WELL over comps/asking prices. Could it be legit…I suppose but seems extremely shady. If you can share your investigative methods and who to contact I’d be thankful. More of us need to get involved in stopping this crap. I’m tired of it. What the hell is going on in this country that this fraud is so widespread? It cannot be this easy to scam the system.
Comment by paladin
2007-01-03 10:28:09
Lex, You need to get the loan information and the sale comps. I have access to a title company database. You need to contact a title company customer service dept. They will help you (and remember them when you buy or sell) If you put the addresses up here, I will tell you in 30 seconds what the info is. I will check back at 3 PM Pacific time.
Comment by lex
2007-01-03 20:17:08
Sorry about the late reply but I’ve been working to pay the man. The addresses are 49454 Wayne St and 49814 Wayne St, Indio CA, 92201.
Thanks for any information.
Comment by Paladin
2007-01-04 04:51:34
Lex, Welcome to the nightmare of the sub prime financing game. Both of these properties were sold by a seller named Gold Hawk using 100% 80/20 loans.
Unit # 49454 sold to Sean Libbert for $585,000 on 9/29/06, funding by WMC Mortgage Corp, $468,000 1st & a $117,000 2nd mortgage. The unit is 2112 SF.
Unit # 49814 sold to James Proetz for $585,000 on 10/10/06, funded by Master Fin’l Inc., $468,000 1st & a $117,000 2nd. The unit is 1985 SF
I did some checking on comps and these are the highest priced units in the area at $275-$300/sf. In all the comps, I have yet to find a sale with less than 95% financing, except 49562 Wayne, which is 2066 SF and sold for $403,000 on 2/10/06 and used 80% financing. It is 2066 SF.
It certainly appears this area is ripe for fraud and rife with fraud. How is the overall market there? Solid, weak, appreciating, declining? These sales, using 100% LTV finanicing suggest it is continuing to appreciate at 10-15% per year.
Oh, and this just in….Sean Libbert (above) purchased another property from Gold Hawk the very same day: 48788 Sojourn Street, for $900,000, using 100% financing from Homefield Fin’l Inc. Prior sale of this property two years earlier for $574,000. 57% appreciation in 2-years, in a declining real estate market?
Lex, the real estate world has gone mad and is spinning out of control. You are seeing it live, before your very eyes!
Paladin “Wire Paladin, San Francisco”
In light of your post, let me attempt to review all the bubble premiums that will have to go away before prices revert to affordable levels:
1. Appraisal fraud premium (needed to get those Indio deals you describe above to work out)
2. Subprime premium (due to money loaned on very loose terms — e.g. no money down w/ backloaded debt repayment schedule — to those who will be unable to repay it)
3. Irrational exuberance premium (due to buyers who truly believed real 10%+ YOY home equity gains forever were a realistic possibility)
4. Flipper squeeze premium (due to flipper encroachment into segments of the housing market, like SFRs, which were traditionally far less commonly used as investment vehicles)
5. Move-up premium (buyers from other locales throwing massive amounts of recent home equity gains into a supersized down payment)
6. McMansion incentive premium (comps reflect the market value of new McMansions + cars, vacations or cash back deals which are included in the purchase price and financed on the mortgage loan)
Any more to add to this list?
Stucco, you know how to boil it down to the real issues. You did leave out the FBI premium (will need to hire 50% more agents) and the prison guard premium needed to lock up these fraudsters and make nice examples of them.
Bubble market equity diffusion premium (due to California equity locusts paying high prices in PDX, Seattle, Midwest, Texas…)
Rent vs. own premium.
Beyond renting, I get giddy thinking of all the money I could save by living in a van down by the river, as long as I can have internet access to my trading account, and a fishing pole, and my dog.
“Living in a van! Down by the river!”
I caught that. Made me smile.
Cheers
I just sold my van, but I had seriously considered moving to a local camping park for free (in exchange for cleaning the bathrooms) for a year to save a ton of money. If it wasn’t such a long drive to work I might have done it.
Fred’s premium operates in the opposite direction, of course, and is one of the factors that will put a dent in Stucco’s #3,4,5,6.
Stucco’s list is great, and in a market now known to be falling, some of his premiums will transform, e.g., the irrational exuberance premium is morphing into an irrational persistence premium. “I’m not giving my house away, I’d rather take it off the market.” “I can make the payments so why worry?” [without regard to the fact that most of their neighbors CAN'T make the payments]
“… irrational exuberance premium is morphing into an irrational persistence premium.”
I am expecting it to morph into a morning-after ownership cost assessment discount, which takes into account PITI plus the investment losses associated with catching a falling knife on the way down.
Irrational persistence is right… how long will this stalemate last? …how much laxative does one have to take before it all explodes? I really look to the big builders to start dropping prices first, forcing in-denial resalers to do the same.
You could add the zero down payment premium. The need for a downpayment used to be a barrier to market entry keeping prices a bit lower. Perhaps you could count this in the sub-prime category, but IMO, when down payments come back, demand will disintegrate.
Zero down payment is one of many ways to backload the debt repayment schedule; hence I agree it loosely falls in the “sub-prime” category (although according to a post here yesterday, the “sub-prime” label strictly applied only refers to borrowers with a past, not future, bad credit rating).
You are doing a great service, thank you.
JEEZ–the fraud here is obvious–anything in Indio at $400k+, er maybe > $150k. Armpit.
Yes, and here are three deals, one at $900,000, two at $585,000 each. All 100% LTV loans to the buyer with the same seller, Gold Hawk…..”owned by the same Realtor office for about 2.5 years”.
These homes are still VACANT months after the sale.
“Armpit.”
And the San Andreas Fault runs right through it. You may as well live in a civilization zone like SF or LA if you are going to play Russian roulette with Mother Nature.
Great work - How do we contact you to do some “research”?
Paladin,
great work. is there anything that would help you?–
Hi everyone, nothing would make me happier than to give you my e-mail address and start working on this BS full time for all of you. However, the FBI and the fraud division at New Century have both cautioned me to remain anonymous. Some of these mortgage fraud deals are run by gangs out of prison (can lenders be “more stupider”?) Plus, I already have a job that takes 50-60 hours a week and I plan to get 20 ski days in this winter, busting powder, if it ever snows again.
That being said, I have a good relationship with Max at the Sacramento Real Estate Stats blog http://sacrealstats.blogspot.com/. Perhaps Max will help me set up a web site to start listing all the fraud deals publicly. I am willing to hire a college student to run it and perhaps we could donate to his educational fund together. Let me know if you all want to support this action. Also, Ben, if you have an idea, please let us know.
Paladin,
Have Gun, Will Travel….reads the card of man….
” Some of these mortgage fraud deals are run by gangs out of prison ”
Note to self - Shut down my blog ASAP. See you guys on the otherside!
How convenient that is for Lancaster, speculators’ paradise, to have a one-square mile prison right smack in the middle of new residential development.
I would be willing to help out in busting fraudsters.
I follow the MLS in the SFV and see these deals come through periodically. One recently made me absolutely furious. The house had been on the market for months at $1,060,000. Suddenly, it enters escrow and the AGENT RAISED THE PRICE IN THE MLS to $1,225,000. I emailed the agent complaining that something was clearly fishy. He dropped the newly raised price to $1,200,000, but offered no explanation for his actions. I complained to our board of realtors, but got nothin’ there. The sale closed at $1,225,000.
There is no possible explaination for raising an asking price after a property has entered escrow other than to deceive the lender in some way. No one around here seems to care. I guess I’ll just have to wait a few months for it to show up in the foreclosure stats. Sure screws up the comps in the meantime.
I would be happy to help by making a donation to a site dedicated to exposing this kind of fraud. Maybe if enough of us are willing to help, we could make a difference.
If you are willing to provide any info on this property, the address is 23415 Park Hacienda in Calabasas, closed on 11/9/06.
Deb,
The house at 23415 Park Hacienda sold on 11/27/06 for $1,220,000 with 100%, 80/20 financing from Cornerstone Lending to Alvin J. Staana. The property is 2243 SF, so the price is $546/SF. The house was built in 1977 and the prior purchase price was $413,500 (no date given), so there appears to be plenty of equity for a funny money transaction. There are other units in the area that have sold for similar amounts, but as I have stated before, the comps are very suspicious because of all the funny money lenders. The nearest comp with “regular” financing is 4631 Park Mirasol, for $1,130,000, for 2010 SF with a $642,000 loan.
You will be interested to note Mr. Staana also bought a house at 37637 Millbrook in Palmdale for $318,000 in August, 2006. He received $355,000, 112% financing on that purchase from Lime Fin’l Services Limited. Perhaps that deal went so smoothly, he decided to up the ante!
Strangely, it apprears he actually lives in an apartment on Madrid Avenue in Torrence. Clearly, a few months ago, he seemed to only have a rental payment. Now he has mortgages totalling $1,600,000 with no money needed as a down payment.
You called this one right Deb. The residential real estate world is a very surreal place right now. You do not want to get near it with a 10 foot pole. It is clear the crash has not even started. No one is feeling any pain…..yet.
Is the house in Calabasas even occupied? Please clue us into the scenario details.
Paladin
Deb, skip forward to the Bits Bucket Jan. 5. I posted the genesis of this thread there. The world needs to see the insanity we are all finding in this RE market.
Have you thought about also notifying the auditors of the loan companies? They don’t want to be the deep pockets when the lender goes bk. For New Century it is KPMG LLP, Suite 700, PlazaTower, 600 Anton Boulevard, Costa Mesa CA 92626-7651
Telephone 1 (714) 850 4300. New Century director in charge of audit committee is Michael M. Sachs, 18400 Von Karman, Suite 1000 Irvine, California 92612. This is from the company proxy statement — CPA firm address is from their web site.
JK — outstanding idea. Send them that stuff registered and they will not ignore it.
Paladin could create the mortgage-fraud version of “America’s Most Wanted.”
Come to Colorado, we have plenty of the fluffy white stuff!
paladin: cheers from the Netherlands for your great work. I’m following your posts and trying to learn. I’m seeing many similar strange sales in my country (like homes appreciating several 100K euro in a few months, sales price way above the comps, often sold by the same RE brokers). Unfortunately I don’t have the expertise to find out what’s going on and most of the required data (e.g. mortgage information, seller information) is not publicly accessible over here (only available for RE agents). I am sure it is one of the things that has been driving up price like mad over here (currently close to +1000% over the last 15 years). There have been some lawsuits for mortgage fraud in previous years, but up to now no convictions (some very well connected officials were involved). However, some new lawsuits are pending and some people are in jail while the investigations are running (probably they robbed a big bank or so with their fraud, otherwise authorities are simply not interested). I would love to see all these high profile crooks exposed for what they are.
The buyer of 49824 Wayne (James Proetz) also bought another house (82530 Yeager) for $585,000 from Gold Hawk using 100% financing. The transaction recorded on 12/13/06.
Rick, You got it. It does not take much to find this stuff. Every time I turn over a rock, I find a slimy snake buying or selling real estate. This is pandemic. I can not believe the rating agencies are giving RMBS pools passing grades with this junk in there. And the sub primes are getting their *sses handed to them as well. Wake up people.
Any idea what or who “Gold Hawk” is?
Go Paladin!
I googled mortgage fraud and found this nice site with LINKS TO REPORT IT. Are there other better sites?
http://www.flippingfrenzy.com/
Maybe Ben should add one to his link list if we asked nice. A link to report mortgage fraud. As will all other crime, the local community cannot look the other way or it will flourish.
Shame on all the relitters who see the fraud based comps in the MLS on a daily basis and do nothing.
I wonder if it’s this Sean Libbert?
http://forum.brokeroutpost.com/loans/forum/2/50915.htm
his numbers on the bottom
anyone feeling brave?
Is Zillow slow or is it me? The crush is really crampin’ my “distressed owner” search.
Declining MEW beginning to take it’s toll on consumers?
December same-store sales are rolling in today, and the results have not been good. The big department stores, and plenty of specialty retailers, are all missing. The bigger winners so far (v. expectations): Costco, T.J. Maxx, Family Dollar and Dollar General. Add WMT to those beating previous forecasts, and perhaps there is emerging a picture of the U.S. consumer being forced down.
I would imagine that as things get rougher economically, that the lower end chains will do better than the upper middle class stores. Same will probably hold true for upper middle class restaurants like P.F. Changs, Cheesecake Factory, etc.
I’ve seen this happen in declining communities, where a higher end retailer like Nordstroms would close, only to have Target take over — or worse, Target would close, only to have 99 Cents Only occupy part of the unit. However, there will always be a niche for overpriced consumer venues like P.F. Changs. Plenty of people without money, including college students will continue to have breakfast at Panera’s. I’ve seen fast food employees who make 7 bucks an hour walk across the street to take their break at Starbucks and spend that money that they just worked an hour for on a cup of joe.
O.k., I can’t figure out how to do this with Domania or Zillow: does anyone know a site where you can search past sales by price range?
I want to see everything that has sld in my range.
To be more clear: zillow does this but I can’t seem to search prior to 2006 even when “any” is selected.
Ignore me, Domania does it, but the function is buried…
Another One:
http://bakersfieldbubble.blogspot.com
So Secured Funding is closing? Why? When you lend 100 of purchase at $100,000 over market value, can’t you make up the loss in volume.
Good riddance!
How could anyone think this or any of these guys “business model” would last any length of time?
“business model”
1) Loan out as much money as you can to anyone with a pulse.
2) Artifically inflate real estate prices so that when a borrower defaults their is a greater fool to take their place.
3) Enable this process to continue for several years.
4) Suck/Bleed the company dry and pocket the cash.
5) Real estate market implodes declare bankruptcy and move to a nice tropical island.
Yep, that sounds about right. I’m I missing anything?
Oh I think they got this “business model” from that movie “Good Fellas”, so the only difference is that they do not burn down the building for the insurance money. Or do they?
Good one David.
The “Good Fellas” business model is not only utilized by the subprime market but seems to be popular across the breadth of the financial community including investment banks, private equity, hedge funds, etc.
Are home builders “Good Fellas” as well?
I can see this business model in much of the EU housing market as well - only difference is that all kinds of subsidies (financed by taxpayers) are a big additional factor in pumping the market as soon as FB buying power seems to decline.
“all kinds of subsidies”
How about Fannie’s (imaginary?) too-big-to-fail implicit guarantee? $500K home equity cap gains exclusion? Mortgage interest deduction? etc.
From the February 2007 Consumer Reports magazine (”What to watch for in ‘07″):
THE HISSING BUBBLE
Housing prices should bottom out later this year, says the NABE survey, and, of course, there’s no way to know how soon prices will rebound.
What to do. If you have a 5/1 hybrid adjustable-rate mortgage, which has a fixed rate for five years before turning into a variable rate, you can sit tight, especially if you think you’ll move before it adjusts. If your ARM payments are already climbing or you opted for a mortgage that doesn’t reduce the principal, refinance to a 3/1 hyrid. Try your current lender first; it might be willing to streamline the process and keep fees low. Finally, if you are selling soon, get real about the price and forget about that whopping profit your former neighbor made last year.
—————————————————————————————————
I have two questions for the financial gurus who advise Consumer Reports:
1) What if the NABE survey results are wrong, and history repeats itself? Because the last time there was a housing bust, prices declined for over five years straight in many parts of the US, and a 2003 IMF article (”When Bubbles Burst”) demonstrates that housing busts in a broad cross section
of countries and over a long period of time have normally lasted a period of several years.
2) What if interest rates adjust up over the next five years from their recent levels near all-time-lows? Wheaton and Nechayev mention in a recent (May 2006) paper their opinion that we are in a “rising rate environment.” Higher interest rates and lower home prices go hand-in-hand, kinda like the way that higher home prices and lower interest rates went hand-in-hand during the bubble price runup (not due to coincidence, but rather to a fundmamental principle of financial valuation).
“Housing prices should bottom out later this year, says the NABE survey, and, of course, there’s no way to know how soon prices will rebound.”
We just got our issue today, and when I saw this I couldn’t believe that CR would publish this nonsense without considering the basics like debt to income ratio. They just lost my respect for their “impartial” financial advice.
Doesn’t matter. The people who bought in the last 3 years can’t afford the payment on a 30-year fixed. This is just a “close your eyes and pray” move in the HOPES that housing prices will increase and the FB’s will be saved.
January 04, 2007
America’s Mortgage-Backed Economy: A Picture Worth a Thousand Words
Refer to the first graph at:
http://calculatedrisk.blogspot.com/
Cumulatively, MEW (mortgage equity withdrawal) has contributed to a 20% growth in the GDP over the past 11 years. Just imagine, and I realize how hard it is for an American to imagine such a thing, the 6% or so extra source of “income” that the households had via MEW, over the past 5 years (see the second graph), turns into a 2-4% drain on the income. Woops, a depression in a short order.
Once the housing prices start to fall in a serious manner, and the supply of new homes and the inventory says that they will, the artificial boost to “the aggregate demand,” the Bernanke potion for the past few years, will turn into a drag on that “aggregate demand,” a real poison to the growth.
Hasn’t the American Huckster heard of the payback time? It is coming and coming real soon. It is never very smart to play the Crooks’ Game in the first place, is it?
Jas
Txchick, next major support for TOL around 27.50?
yeah, looking good. made a lower high on this up move, still short
I’m short as well, trying to be a bit more patient this time around as I left quite a bit on the table last time it went below 28.
Don’t be greedy. I got all of the move down last time, but lost most of it when I started getting back in too early.
patient = greedy? Long term I see TOL under $10, if not bankrupt. I’d probably allow 10-15% unrealized loss on this position before I bailed, because long term I’ve got high confidence where this is headed.
Behold the permanently high plateau (2000-????)
http://finance.yahoo.com/q/bc?s=%5EDJI&t=my&l=on&z=m&q=l&c=
Happy New Year All!
I’m looking for the link to the Florida land bust of the 1920s. I think the link was a collection of chapters about historical finacial bubbles, perhaps done by an ACC University.
Thank You in advance.
You can find a good article on Wikipedia.org titled, “”Florida Land Boom of the 1920s”, which also lists other references at the end.
Click max on the bottom of the graph to get the full DJIA series back to 1928.
The Distorted Bag:
http://wallstreetexaminer.com/blogs/winter/?p=258
Real Estate: An Economic Drag
By Richard Suttmeier
RealMoney.com Contributor
1/4/2007 8:33 AM EST
URL: http://www.thestreet.com/p/rmoney/financials/10330528.html
Developers and builders are starting to get squeezed. Slower sales, lower prices and more stringent qualifying terms for mortgages, mixed with high land prices and construction costs, make it economically difficult for them to offer further discounts.
That’s a problem, especially for first-time buyers, as home prices have risen 200% from 2002 to 2005 in many locations around the U.S., pushing affordability to low levels. Even existing homeowners are facing cost pressures: higher property taxes, higher insurance premiums and jumps in adjustable-rate mortgage payments. I’m expecting a significant rise in mortgage foreclosures in 2007.
Flippers are still around, still long condo units at preconstruction prices. This provides competition as new units become available for sale. With appreciation rates tumbling, these investors are likely to cut their losses and walk away from contracts in droves. Developers and builders must then resell the same units for a second time, while new construction continues. Cancellations among the homebuilders I track are running from 30% to 60%.
Look for a spillover into commercial real estate in 2007 as well. To put it very simply, as the housing market slump deepens, new malls and shopping centers now planned and funded will be scaled back or canceled. If a community is cancelled, the related commercial projects will not be needed as originally planned. Growth of nonresidential construction spending appeared to have slowed from a rapid rate earlier in the year, responding in part to still-high vacancy rates in the office and industrial categories.
The Federal Reserve is telling us that a significant cooling of the housing market will put a 1% drag on gross domestic product. Given the potential contagion into commercial properties, GDP growth may be shaved to the 1% to 2% range for all of 2007.
This is why I fear that community and regional banks will be left holding the bag. So far, the spillover has been delayed by fancy balance-sheet accounting and by the prospect that mergers and acquisitions will continue in the banking industry. However, the time bomb is ticking, while the community and regional banking indices trade to new highs.
Stress in the Banking System
The bulls are making a risky bet, as the finance sector ended 2006 at 10.1% overvalued and the savings-and-loan industry at 15.4% overvalued. I have been stressing how the U.S. Treasury, the Fed and the FDIC, the major regulators for the banking systems, are concerned about record levels of both residential and commercial real estate development loans.
On Dec. 6, the Treasury, the Fed board of governors and the FDIC released joint guidance on concentrations of commercial real estate loans on balance sheets. The agencies have observed that commercial real estate, or CRE, concentrations have been rising over the past several years and have reached levels that could create safety and soundness concerns in the event of a significant economic slowdown.
CRE concentration levels at commercial and savings banks with assets of $100 million to $1 billion have doubled from about 156% of total risk-based capital in 1993 to 318% in the third quarter of 2006. The same trend has been observed at commercial and savings banks with assets of $1 billion to $10 billion, with concentration levels rising from about 127% in 1993 to about 300% in the third quarter of 2006.
The agencies’ examiners have also recently observed that some institutions have relaxed their underwriting standards as a result of strong competition for business. Further, examiners have identified a number of institutions with high CRE concentrations that lack appropriate policies and procedures to manage the associated risk arising from a CRE concentration.
Reviewing the Guidelines
The first proposed threshold stated that if loans for construction, land development and other land were 100% or more of total capital, the institution would be considered to have a CRE concentration and should have heightened risk-management practices.
Second, if loans for construction, land development and other land and loans secured by multifamily and nonfarm nonresidential property (excluding loans secured by owner-occupied properties) were 300% or more of total capital, the institution would also be considered to have a CRE concentration and should employ heightened risk-management practices.
Financial institutions have been able to camouflage this risk of the continued growth in residential construction and development loans, just as housing starts and new-home sales plunge. In my judgment, these statistics show that the nation’s banking system is slowly but surely feeling increased stress on their balance sheets as a result of the slowing real estate and housing markets.
In the table below, I’ve taken a look at regional banks with assets above $10 billion and CRE loan ratios above 150%. All but Whitney Holding (WTNY) traded during the last crisis in the late 1980s and early 1990s — below $4 per share back then.
BB&T (BBT) and Compass Bancshares (CBSS) traded to all-time highs last week, at $44.74 and $60.88, respectively.
IndyMac (NDE) and Whitney Holding have buy ratings, but are below their fair values. I would not consider adding to positions in these names unless their share prices drop to a value level. Investors should consider reducing holdings of all others on strength to risky levels.
Regional Banks
Dec 29 Price CD Loans Rating (-UV) / OV By Fair Value MOM 5-Week MMA Value Levels Pivots Risky Levels
BB&T Corp (BBT) $43.93 175% HOLD 3.90% $42.29 RM $43.68 40.59 A / 37.08 A 43.74 A / 44.58 A 46.38 M
Compass Bank (CBSS) $59.65 189% HOLD 6.80% $55.85 RM $58.36 56.52 S / 54.91 A 60.12 M 63.43 M / 65.15 S
Colonial Bank (CNB) $25.74 301% HOLD 1.80% $25.29 RM $24.72 24.96 S / 23.78 A 25.36 M 26.43 Q / 26.65 Q
Fremont Invest (FMT) $16.21 220% HOLD 1.00% $16.04 RM $16.06 14.36 Q / 12.84 M 18.38 Q
Marshall & Ilsley (MI) $48.11 179% HOLD 1.10% $47.57 RM $47.32 46.13 Q / 45.79 A 48.24 M 49.26 S / 49.85 M
Indymac (NDE) $45.16 181% BUY -3.60% $46.82 DM $45.09 30.58 A / 39.68 M 44.00 Q 46.32 S / 48.13 Q
Whitney Holdgs (WTNY) $32.62 180% BUY -8.00% $35.45 OS $32.56 21.00 A 33.01 M / 33.21 A 34.17 Q / 35.58 Q
Key: MOM, momentum; OB, overbought; DM, declining momentum; RM, rising momentum; OS, oversold; F, flat; M, monthly; Q, quarterly; S, semiannual; A, annual. A value level is a price at which my models project that buyers will emerge; a risky level is a price at which investors are likely to reduce holdings, according to my models. A pivot is a value or risky level that has been breached in its particular time horizon; the stock will likely trade around this pivot.
Source: RightSide.com
For all the talk of a housing slowdown, almost 97 percent of people who sold Bay Area homes in November got more than they paid for their properties and almost half at least doubled their money, according to a new report.
– SFGate
This is interesting…. FB messing up their credit with stupid purchases and missing payments. These people must be right at the edge.
http://forum.brokeroutpost.com/loans/forum/2/82750.htm
This is interesting too. In California, there is apparently no supporting income documentation for the majority of loans !
http://forum.brokeroutpost.com/loans/forum/2/82685.htm
Apparently OwnIt didn’t even have enough money to pay its employees.
http://forum.brokeroutpost.com/loans/forum/2/82848.htm
Mortgage terms appear to be tightening.
http://forum.brokeroutpost.com/loans/forum/2/82791.htm
How can a mortgage company do a mortgage with no income documentation ? I mean how hard is it for someone to verify their income ? Its like the mortgage company knows the customer is lying but does it anyway.
Thanks for the inputs. Wow, you’re spending a lot of time on brokeroutpost.com.
I’m a little sad that with a 640+ one can still do a 100% stated.
But credit is tightening. The fact that rumors are even out there is interesting…
Neil
Neil
No income docs for California and get this….35% of MLN’s loans had first payment defaults???? WOW. Now wonder they are history.
This is too good not to share. Woody Dorsey, Market Semiotics, my absolute favorite market commentator:
****************
I had a call (unsolicited) a few days ago from CNBC. The lady asked if I could come on air and do a bearish view. They hadn’t been able to find anyone else. She added, if I couldn’t come on: “Do I know of any other bears who could come on CNBC?” She really said that. Well, I guess it is slim pickings for any public equity negativity.
This sort of phenomenon is typical of an Adoration phase. Some might say, doesn’t recent market strength and snowballing positive fundamentals and pandemic positive punditry change all of that? No. Nothing has really changed in terms of the character of the market. This is still a liquidity driven happy time which will end up as an error.
However, there are two caveats to reiterate: First, tops can take more time than “top pickers” such as my firm may like. Second, the serious recognized declines in aftermath of an Adoration often occur a year or more later. Talk to me in a few years. Adoration will be seen then. No one will remember this call then (TXC - I will) Do you remember my call identifying the absolute lows in October of 2002 (TXC - yes) and March 2003 (TXC - yes). Humans are cognitively configured to forget. The history of markets is the history of human error or, human forgetting. This Adoration phase is likely a larger error than anyone realizes.
2007 will be the year of the trader. Buy and hold will turn out to be Buy and Scold. Apparently, it is Rodeo week in New York. Bulls abound, physically literally and metaphorically. What is required now is a conceptual cinch. Mr. Market is now rumored to be working out with a Lasso. One of these days, the noose will cinch. We would be willing to pay big bucks if anyone can capture that hanging on their video phone! Calling all bears . . . catch a top if you can.
It looks like they are trying to create the next bubble in techs. From what I have seen today they are claiming tech are undervalued compared to the high PE’s of yesteryear. I call all bullsh@t but the sheep will following inline making the money managers their million dollar bonuses while the stockholders get just what homedepot stockholders got…nothing in dividend returns.
Watch the semis (SMH)
“It looks like they are trying to create the next bubble in techs.”
Wasn’t the next-to-last bubble in techs? (I guess “they” ran out of bubbles and are now recycling them…)
Yeah what a pack of bull. Probably a lot of hedge funds are short and they want to squeze them. These hedge funds are so stupid. I wouldn’t be surprised that somebody knows that. Lower prices for oil and then you push the bull on the rebirth the renaissance of tech. What a bunch of bastards.
“Dow 14000 on Tap”
From the WSJ (no link). Here’s the meat of it:
“Money doesn’t just evaporate. For every debit, there must be a credit. The world is a closed system as far as the dollar is concerned. Even if we send more dollars to OPEC, those dollars come back. Currency that leaves the country must return to purchase goods and services, or make an investment.
“This explains why our trade deficit with China is not a significant problem. The dollars sent across the Pacific rebound as investment or spending on goods and services, such as the recent $3- to $4-billion contract with Westinghouse Electric Co. to build nuclear-power plants in China. While many fear that China might stop investing in the U.S., or sell its current investment holdings, this is misplaced worry. If China traded its dollars for euros, then whoever stood on the other side of that transaction would hold those dollars — facing the same choices of buying from, or investing in, America. Foreign investment reflects the strength of the U.S. as a safe and sound economy.
“Yes, the earth is flat, but American technology made it that way. The argument that the U.S. cannot compete, now that technology has leveled the playing field, sounds like a Michael Crichton novel. You know the story: We invent something and it turns on us — Jurassic Park, the Andromeda Strain or even Frankenstein’s monster. This makes great fiction, and who knows, it may happen some day, but the only way U.S. competitiveness will fall off the edge of the flat earth is if we place too many burdens on the entrepreneur.
“Unfortunately, there are many who want to do just that. Based on a belief that the middle class is being squeezed, or too much of the profits of enterprise are going to the owners of capital, there is a push to raise taxes and redistribute more of our income.
“But these beliefs are more political fodder than reality. In the first five years of the current recovery, inflation-adjusted average hourly earnings have climbed a total of 1.7% — not great, yet still much better than in the first five years of the last recovery (starting in March 1991), when earnings declined by 0.5%.
“Even so, average hourly earnings are a terrible measure of income because they do not include tips, bonuses, commissions or employer- paid benefits. Nonetheless, the data show that low- and middle-income workers’ wages have performed better in the current cycle than they did in the same time period of the previous cycle. And to top it off, everyone who pays taxes faces a lower tax rate.
“The process may be mysterious and magical at its core, but it is completely understandable. Lower tax rates encourage innovation and risk-taking. The impact of this raises productivity. And productivity raises living standards by boosting incomes or lowering prices.
“It is true that corporate profits have climbed to a record share of GDP. And it is also true that income gaps have widened. But these can be positive signs, not negative ones. An economy without profits is a stagnant economy. And income gaps have widened in every period of rapid technological advancement going back to the invention of the wheel — the first to use a new technology, and the entrepreneurs who push it to fruition, benefit the most, even as the new technology lifts living standards for all.
“Fighting these trends diminishes technology’s ability to raise living standards. If France had chosen to cut tax rates, regulation and the size of its government in the early 1980s while the U.S. continued on its path towards a social welfare state, it would be the French who would be complaining about excess corporate profits and the income gap. Americans, on the other hand, would fret about a 10% unemployment rate and march in the streets demanding job guarantees and shorter workweeks.
“In an ironic twist, because the personal computer has decentralized business activity and altered the structure of many industries, the statistical machinery designed to measure economic activity has become increasingly inaccurate. The newspaper help-wanted advertising index has become useless. The Internet has spawned the growth of many companies with “no” employees. These microbusinesses, and an increase in self-employment, make it even harder to measure the total number of jobs or incomes. Legal documents and accounting programs are inexpensive and widely available on the Web, which means it’s easier than ever to start a new business.
“But measuring everything perfectly is not all that important. As long as policy is pointed in the right direction, technology and productivity will continue to advance just like they have over the past 25 years. Today, tax rates are still low enough to boost investment and entrepreneurial activity. At the same time, the Fed has not lifted rates to excess. As a result, both the demand-side and the supply-side of the economy in 2007 look solid. Another year of above- 3% real growth and a 14000 Dow are on tap.”
I would like to see the author of that article ‘embrace the deficit’ at the level of his family finances and see where he ends up. WSJ is a major apologist rag for the pump-n-dump scheme.
Buy gold and silver. And f–ck the WSJ. Stinking financial press. I remember all the bull on the new economy I read in this piece of sh-t newpaper. Boiler room editorial comment and analysis.
“Money doesn’t just evaporate. For every debit, there must be a credit.”
Damn the printing press technology.
Wealth evaporates. If you own a stock that gaps down or real estate that can not be sold and falls, wealth is destroyed.
The only thing the market has going for it is the desire of politicians to make things look temporarily good in the 2008 election. Thus the four year cycle. The low dividend of of the blue chips makes Dow 14000 highly unlikely.
“Wealth evaporates.”
Think dilution.
- If you own a home in a nice part of town and some home builders construct a gazillion nondescript tract homes nearby, your home equity wealth is diluted.
- If you own a company’s stock and a bunch of options are granted with the strike price chosen at the lowest share price over the past several months (years?), your corporate equity wealth is diluted.
- If you own a green piece of paper with a dead president’s likeness engraved thereon and the printing presses start running at full tilt, your fiat currency wealth is diluted.
http://en.wikipedia.org/wiki/Stock_dilution
Well they call it robber baron capitalism. It’s just that as an ordinary shareholder you are allowed at
shutting the f-ck up, and on some rare occasion making some skeikels, but only on some rare occasion.
And by the way you take 100% of the risk, but not the bastards and their little puppets journalists on payola by these S.O.B. from corporate america. The risk is yours not theirs.
According to an arm of the Treasury, there are approximately 970 billion dollars of currency and coin in circulation. That is it. Where do all these trillions come from? It is credit. This guy has never heard of fractional reserve banking and credit money. It is the credit that rapidly vanishes through default and bankruptcy that causes a great decrease in the money supply. This person is either extremely ignorant for someone writing an article on the financial system, or just flat out lying. Your call.
Flat out lying.
“Money doesn’t just evaporate.”
Oh really? Tell that to buyers of U.S. stocks in 1999 - 2000
“Money doesn’t just evaporate.”
He’s right. The buyers of tech stocks at the height of the bubble financed the mansions of the sellers on the other side of those same trades.
“Where are the customer’s yachts?”
“Money doesn’t just evaporate. For every debit, there must be a credit ….”
Too bad I was writing, not reading, this morning
you have to wonder whether the author has ever seen a currency crisis.
I guess if a lot of people sell houses, that isn’t a problem. after all, if a lot of people are selling, someone must be buying and living in it.
that’s just not realistic.
You have to wonder if the author has ever seen a ghost tract home development in the middle of the Arizona desert…
Westinghouse Nuclear is owned by Toshiba.
Hi, Hope this url works. From yesterday’s Craigslist for Washington DC. http://washingtondc.craigslist.org/doc/rfs/257277729.html
A FB under cutting the developer by $30K for a two bedroom, two bath, in a new building next to a metro station. Bethesda is a very nice upscale DC suburbright across the district line. Looks like the only spring bounce will be in inventory.
I’d bet that the developer will throw in more than $30K in upgrades.
This is actually much closer to Rockville, MD than to Bethesda. Have seen sign twirlers outside this one almost every weekend for a while now. The location is in an unincoporated part of Montgomery County and the building sits on an extremely busy commuter route, MD 355 (Rockville Pike).
Does anyone know how much electrical rates have increased in CA in the last 24 months? My mom just got a shocker from Edison. If others are getting hit like this, it’s just another nail in the coffin for thousands of FB’s.
No, but a little project I am working on is to go back, say 10 years and look at how much I have spent on goods like milk, cheerios, electricity , gasoline, etc. Then I can determine what the “real’ inflation rate is. By that I mean inflation on the things that we must consume, not the price of a sweater at Abercrombie or Gap.
Okay, gang, let’s get this blog a REBA:
http://www.housingwire.com/2007-rebas/
Thanks for the heads up.
Proud to report I voted for Ben for the categories he was nominated and CR in the brain power category. I also voted for Crispy’s http://www.bakersfieldbubble.blogspot.com in the regional category as a write in.
Come on everybody and pitch in -we need to make sure Ben wins the $25 prize!
Ditto. I couldn’t think of who to nominate as write-in for “most extreme/outrageous” blog category. Any ideas? I do not frequent any of the realtwh*re hangouts… maybe realtytimes.com ?
When is CFC going to start tanking? They really have to be hurting.
Also, “Money doesn’t just evaporate. For every debit, there must be a credit.”
It’s truly shocking the WSJ would print this. Remedial Economics, anyone? Someone had better break it to this guy that producing more of something leads to reduced value when demand falls (or remains constant, for that matter). I think my 13 year-old niece can take care of this one. How about $1,000 to buy a can of coke?? That’s OK, I can create a ledger for this transaction that shows a debit and a credit.
Sheesh…
Interest-Only Mortgage Payments and Payment-Option ARMs – Are They for You?
Owning a home is part of the American dream. But high home prices may make the dream seem out of reach. To make monthly mortgage payments more affordable, many lenders offer home loans that allow you to (1) pay only the interest on the loan during the first few years of the loan term or (2) make only a specified minimum payment that could be less than the monthly interest on the loan.
Whether you are buying a house or refinancing your mortgage, this information can help you decide if an interest-only mortgage payment (an I-O mortgage)–or an adjustable-rate mortgage (ARM) with the option to make a minimum payment (a payment-option ARM)–is right for you. Lenders have a variety of names for these loans, but keep in mind that with I-O mortgages and payment-option ARMs, you could face
+ “payment shock.” Your payments may go up a lot–as much as double or triple–after the interest-only period or when the payments adjust.
In addition, with payment-option ARMs you could face
+ negative amortization. Your payments may not cover all of the interest owed. The unpaid interest is added to your mortgage balance so that you owe more on your mortgage than you originally borrowed.
Be sure you understand the loan terms and the risks you face. And be realistic about whether you can handle future payment increases. If you’re not comfortable with these risks, ask about another loan product.
http://www.fdic.gov/consumers/consumer/interest-only/index.html
As someone mentioned yesterday, the FDIC unfortunately omitted and reference to, or discussion of, foreclosure and loss of the property.
They don’t want to scare away their best customers
Beware the veteran market watchers’ opinions…
———————————————————————————-
Copper, commodities sell-off may signal slowdown
By Nick Godt, MarketWatch
Last Update: 1:36 PM ET Jan 4, 2007
NEW YORK (MarketWatch) - A sell-off in commodities — from copper to crude oil — over the past few sessions is telling some veteran market watchers that a slowdown in economic growth, likely one of considerable magnitude, is already underway.
In the last two sessions, commodity prices seem to have fallen off a cliff.
http://tinyurl.com/y484md
At least the broken window helped stimulate growth last year. Maybe it is time to ask Pat Robertson to start praying for more hurricanes to hit NOLA?
——————————————————————————–
A fast-falling housing market and cutbacks in automobile production already took a toll on the economy in 2006. Growth as measured by gross domestic product slowed from 5.6% in the first quarter, when it was boosted by a post-Hurricane Katrina recovery, to 2.6% in the second quarter and to an as yet-to-be-finalized estimate of 2% in the third quarter.
In a word… Unbelievable
Now that is low — they arrested the guy.
What’s wrong with arresting him? He undoubtedly broke laws and is obviously a danger to himself.
wow..waiting for the Superbowl in my neck of the woods…not.
70 new listings on my ZipRealty selection in Westside/SFV in L.A. 30 them today. Some of them are actually ‘new’ too, not just resets.
Somewhat off-topic, but rental vacancy rates are rising as well due to all the excess housing supply, condo re-conversions, stuck flippers trying to rent to stem cash flow bleed, etc. Here’s the Bloomberg story:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aTpmB3aw1aKI
Here’s my take:
http://interestrateroundup.blogspot.com
Has anyone else seen this?
http://www.12modef.com/
A question was raised in a recent thread, “What exotic mortgage products will appear in the next bubble?” The most outrageous suggestion was a zero-payment mortgage with cashflow from a trust account. Well, you don’t have to wait for the next bubble. It is here now.
Park City Utah… Bubbly? Anyone? Heard that things there are humming right along, up up up… True? Just curious. Need facts for an argume…uh… discussion…
California celebs have played a role in driving that market. For instance, Robert Redford’s Sundance Film Festival is held there, and I believe he owns property in the area. Lots of the “vacation homes” up there are larger than the average San Diego McMansion.
“Demographics : park city (2000 census)
Population: 7,371
Median Household Income (1999): $65,800 ”
Although Population and Income are a bit higher these days (Household Income now 85K, from what I hear), two thirds of the homes are second homes.
There are 900 realtors in town (I know that because I know someone who regularly sends out invitations to local realtors).
The number of listings on realtor.com has been the same since August when I started checking regulary, hovering between 1500 and 1600 (please note, for a town this size). Some of those are time shares, but of course, close to nothing (condo or SFH) is available under 500K in this town.
New Condos near Deer Valley just going on market for between 2 and 8 million.
Friend bought “modest” Deer Valley condo in April 05, by Okt. 05 price was up 80% for same model. Similar with the “modest” townhouses near Kimball (Redstone, all POS), doubled in a year or so. High End still selling, I hear.
Somebody said that after the Olympics, there was hope that people would stay & buy, which they did not, at first. Area really took off 2 years ago. Now they destroy the mountains with those Mansions (10-20K square feet, six fireplaces etc).
An acquaintance is a realtor, does not seem to be worried. People are convinced it is special here, you see, ‘different’.
Also, just for fun, have looked around ‘vacation rental by owner’ to see how much their Park City rentals are actually booked in the winter. Last time I checked, plenty of vacancies.
Sorry if this is old news…..
Harbourton Mortgage Investment Corp. is being reported as shutdown…..whoever they are. I read the conversation on a forum.
Ignore please….was old info and pasted by mistake….sorry
Every few weeks I do a zip-realty search to see what cr@p has been sitting around near where I have some FL property.
One townhouse, on the market for 204 days had an updated listing. It says “Investor ready! Renter just signed 7 month lease!”
Investor ready? Please! If this thing were turning a rental profit, it wouldn’t be for sale, especially after 8 months on the market. And the asking price, assuming a 6% realtor fee, and modest carrying costs (I calculated it as being rented 1/2 the time at market rate), is just a hair below the purchase price.
Happy times for Panama City, losing that blue-collar rep with hi-rise, beachfront condos….
“But no matter how skittish investors are, city officials and real estate professionals in the long run see nothing but blue skies over an emerald sea. “The market will take care of itself,” said Mayor Oberst. “The northwest part of Florida has been discovered. Everybody wants to live here.”
http://www.nytimes.com/2007/01/05/realestate/greathomes/05havens.html?pagewanted=2&_r=1
ZipRealty Price Track: MLS #: 6051064
Price Reduced: 11/21/06 — $255,000 to $237,000
Price Reduced: 12/24/06 — $237,000 to $230,000
Price Reduced: 01/02/07 — $230,000 to $215,000
Price Reduced: 01/03/07 — $215,000 to $200,000
This is in Pearland, Houston suburb
Question for anyone who remembers and is willing to answer:
Has there ever been a similar “credit quality inversion” before where lending standards slipped so far that those with good credit and bank were better off letting subprime money have free reign with the bids?
My understanding subprime has really only been around since 1992. So if that is the case there is know way lending standards have slipped this far. Maybe in the 1920’s.
Margin call gentelmen. Too bad it will be a FB with a couple of kids now instead of the monopoly man.
Hawaii housing stats
http://the.honoluluadvertiser.com/article/2007/Jan/04/ln/FP701040345.html
Why home and condo sales numbers are combined in the historical data? What would the chart looks like if numbers are displayed separately?