Bits Bucket And Craigslist Finds For January 7, 2007
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
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“Moody’s May Cut Mortgage Lenders Network’s Servicer Rating”, By Lingling Wei, Of DOW JONES NEWSWIRES, NASDAQ, Jan 5, 2007.
http://tinyurl.com/yh4crn
A reason not to buy a formerly overpriced, forclosed home. Murder by the crazed former owner. From the New York Times http://www.nytimes.com/2007/01/07/nyregion/07yonkers.html?_r=1&oref=slogin
Thanks for another great reason to keep renting until the bubble is a fading memory!
i heard that on the news last night.
how dare you take “my house”!
sad thing is this doctor was really loved in the
low income community in which he served
may he rest in peace
What a tragedy. Reminiscent of a movie about a crazed former tenant, “Pacific Heights” with Michael Keeton, Melanie Griffith, and Melanie’s mom Tippi Hedren playing the silent role of the jilted socialite.
Rent “The House of Sand and Fog”.
also reminiscent of the movie and book “House of Sand and Fog” - both of which were very good!
Yesterday we did a field trip to the Super Target in Jersey City, NJ. Yes, life is exciting. The amount of luxury condos going up in Jersey City is astounding. This former slum has become a trendy new place to build for people that want to be near New York City. But are these trendy new places decent places to leave?
MisterSoftee said he lives in Jersey City. I would be curious to know what his take on JC is. Although close to New York, with a nice view, it does not seem like it can justify the whopping price tag. Plus I noticed it is windy as heck. We were getting blown down the street on a sunny 70 degree day (record highs).
What about the trendy new places in your area that just aren’t going to make it?
*Note: Mister Softee named himself after the ice cream trucks that are prevalent hear in the City. Mister Softee ice cream is great. The cherry dipped cone, and caramel sundae, are worth stealing for. If the truck just says, “Soft Ice Cream”, don’t buy. It’s a cheap imitation.
NYC every new POS building no matter how normal or in how bad of a neighborhood they plaster luxury condos all over it
i don’t think anyone pays attention anymore
dba you are so right
luxury condo’s in very suspect areas
even the one’s that a really in nice areas are
still not flying off the shelves
I know alot of RE firms give special recognition to be a “Million Dollar Agent” but, isnt that like selling 1.5 homes in a YEAR?
It’s even funnier than that. I think it’s typical to get robbed of 6% of the home price by the REIC at the time of sale. But the selling agent, after it all gets cut up and handed around, gets about 1.85% from what I understand. That means they get about $18,500 for every $1,000,000 of real estate they sell. To make $100,000 they need to sell over $5 million. They have to sell quite a few $hitboxes to make any decent money but grossly inflated prices do help. Then you have to remove all of their expenses from that income.
- Botox: To make that nasty looking puss of theirs look 10 years younger. This never works. It just looks like they melted. But they think they look like Paris Hilton or Jennifer Anniston.
- Fake boobs: They need that boob job to lure some desperate house husbands into giving them that listing. Cleavage is the key to closing a deal. This can be downright frightening to behold.
- Lexus or Mercedes (preferably SUV): They have to look like they’ve made it, long before they have. In a world where substance can’t be found, style is everything.
- Blackberry service: They need something to be constantly talking on while speeding through town in that $70,000 SUV. Nothing like being a public menace while being a public menace.
- Spa treatments: Lying to people is stressful. You need to take care of yourself and all of that cellulite that accumulates from so many Chik Fil A sandwiches on the go.
It’s expensive being a Realtor. I am guessing they need to sell close to $10 million just to make 6 figures. Oh well, they can always go back to their jobs as “marketing specialists” or entry level Human Resources clerks. Or just turn tricks. Ooooh, I just shuddered at the thought.
in UK the whole take is about 2%
realtors here will be making less after this bust
That’s true abou the UK’s 2% commission. When I came to the US 30 years ago from the UK, I used to laugh at the “tricks” used by the realtors. The stuff about baking bread in the oven, making the place look like it was ready to be photographed by “House International”, etc. Who gives a sh*t about the smell of freshly baking bread or how nice the house looks when it can only look like that if you have a resident maid and no kids!
Whenever I have bought property, I looked for only one or two things besides having the property inspected structually. Is the property fair value for the area? At the moment NO property is fair value (in the major areas) and probably will not be until 2008/9 or even 2010. Then the prices will stagnate for many years.
I also make sure the property hasn’t been upgraded and thus isn’t the “best” house in the area because that means I’m setting the value in the neighborhood. Let some GF do that. I prefer to do the upgrades and reap the rewards when and if I sell.
So much for making it look like it’s the studio set of, “Leave it to Beaver.”
As far as commission? 2% is about right. 6% is ridiculous. However, it doesn’t matter. Not many realtors will not be around in about 15 years. When this mess is over, there will be so many screams about crooked mortgage brokers, crooked realtors, crooked builders, crooked appraisers, etc, government will be forced to take a long hard look at the whole real estate industry and bring in a whole slew of regulations.
Even more negative for the over paid, botox faced tour guides is the internet. It’s going to totally change the real estate landscape. Just a matter of time before someone comes up with an internet real estate sales model where, probably, the commission will be 2%…..or less.
Fifth request. How does that wok?
Excellent!
Dont forget about the trip to the local Glamour Shots studio so, that they can plaster their mug on every piece of marketing.
On another note, how about the husband and wife “Teams” that you see all over the place. The always refer to theselves as the “Smith Team” (insert whatever last name). So now you have both members of the hhld not making any money. It must be a great realtionship since they are both so spectacularly good at lying.
Today saw the first ever Open House sign where the lady’s (figuratively speaking) photo was the dominant part of the sign. She’s had good plastic surgery, so I trust the vinyl windows will last forever! -
In the better than average parts of the Bay Area it is about .5 homes a YEAR…
Was a a party last night when my mother-in-law finally got religion. A group of five or so was talking about “things” when one of the guys asked my Mother-in-law if she had sold her Mothers home yet (has been sitting vacant for close to two years after the passing of my 90 year old grandmother-in-law)? Of course, I knew she hadn’t since I have been delicately telling her that she might lower the price if not one offer has been taken in the eight months that is has been listed. She answered “no luck yet” but was then asked “what’s it worth?” She answered, “I don’t know.” To which the guy says “Bullshit, you know what it’s worth. What would you pay for it if you were going to buy it? Or, more importantly, if you HAD to buy it” The look on my dear ol mother-in-law’s face was priceless.
People have woken up. I think the speed at which pricing corrects might surprise quite a few of us.
From a scary article about Maine subprime loans and foreclosures:
In the subprime market, refinancings are used mostly to consolidate debt, avoid higher interest rates or catch up on late mortgage payments. A substantial number of subprime mortgages are paid off while the borrower was behind in payments, indicating it was paid as a result of a refinancing, the CRL report said.
http://business.mainetoday.com/news/070107subprime.html
“… catch up on late mortgage payments.”
I’m wondering how many FBs are kicking the can forward as we speak, and how many more would be doing the same if not for the stagnant/declining (depending on your area) and the recent reduction in subprime loan availability.
I might be laughing a little as well, because you know some of the FBs in group two are of the Trump school of real estate investment. Sorry kids, the Donald had much more favorable BK laws. Enjoy the reform!
Yeah, not to mention the Bank of Daddy to get him started as well. I have ZERO respect for Trump as a businessman. He is nothing more than a self-promoter.
“Yeah, not to mention the Bank of Daddy to get him started as well.”
And keep his worthless a$$ out of the clink.
don’t forget the new season of the apprentice tonight on nbc. when will the reality tv bubble pop?
and just this morning i was flipping around and there was this infomercial on for the next get rich quick idea
currency trading! free seminar in the nyc area today
and all the people on the commercial were boomers or blue hairs
“I have ZERO respect for Trump as a businessman”.
I have zero respect for Trump as a hu-man.
The CRL report only deal with subprime loans so what will happen to the millions that used option arms? I think the number of foreclosures will be higher than the CRL thinks right now. The only way that this does not happen is if housing prices start to rise again, however I keep asking myself who is going to buy all of these houses? If home ownership is at record levels and foreclosures are at record levels - where is the buyer coming from? The move-up buyer is screwed because they cannot sell their house and take out enough money to put down on the next house. Also when wave after wave of foreclosed homes come on the market the price continues to drop. If today’s foreclosures are loans that originated in 2004 - we have a long way to go. I don’t see a bottom until 2010 or later.
I’m sure most option arms were actually subprime paper because mortgage brokers were using those teaser rates to qualify people. Hence the recent government recommendations on using the fully indexed rate and an amortizing loan to qualify people.
I would really love to see a thread on why whoever (government do gooders, sleazy industry people, and the lower income folks, etc) ever got the idea and promoted it (at great expense to society) that it is a god-given right for any person to be able to have as big a house as possible without any real regard to whether they will be able to pay for it. Do get wrong, I am not trying to racist, just realistic. There should only be one qualifier for purchasing a home, can the person afford the home and a very high reasonable expectation for them to be able to pay the mortgage, taxes, insurances, etc. If they can’t, then they should be renting and saving until such day. This has no regard for race, religion, ethnicity, or any other minority status the majority of the people have found to claim one of.
The gov’t wants to reform certain ethnic groups into acting more responsibly; they think homeownership will lead to this, because someone with a mortgage doesn’t riot, but those on public assistance do.
That was the whole point to the g
The gov’t wants to reform certain ethnic groups into acting more responsibly; they think homeownership will lead to this, because someone with a mortgage doesn’t riot, but those on public assistance do.
That was the whole point to the go’vt agencies.
That agrees with my (subjective) interpretation of what the Ownership Society program is all about. But the whole thing may blow up big time given the widespread use of subprime debt to help poor folks buy stuff they can’t afford.
The “nice thing” about transfer payments (welfare) is that there were no strings attached. In principle, at least, debt has to be repaid. At some point, politicians may need to deal with an unsavory choice between welfare payments to poor homedebtors (which will go over like a lead balloon with middle class voters who will get stuck with the tab) or a destabilizing wave of low-income bankruptcies. Let’s hope for a resumption of rapid home price inflation in the near future, so neither of these unpleasant scenarios unfold.
I hope that between taxation and deflation of housing, the middle class disappears; they were the ones who wanted the welfare state to begin with, even tho’ they complain about it.
Both the middle class and their “morality” are things the world would be better off without.
Sounds like the gov’t confused correlation with causation. Just because ‘the good people’ don’t riot, it is NOT because they own homes. Look deeper..
The answer to 99 out of 100 questions: Follow the money.
The banks calculated it would be profitable to get everybody into houses, and the gains will outweigh the costs.
The answer to 99 out of 100 questions: Follow the money.
Agreed, Journalism 101.
The banks calculated it would be profitable to get everybody into houses, and the gains will outweigh the costs.
Let’s zoom out several orders of magnitude. The equity in people’s homes was needed to boost the economy after the dot.com bust, and the MBS product was designed to liberate the retirement accounts of these same equity holders.
need 2 leave ca notice spelling error: (as imploder would say). Second ‘public’ spelled wrong. remove l
Blackberry service: They need something to be constantly talking on while speeding through town in that $70,000 SUV. Nothing like being a public menace while being a pubic menace
I caught my first glimpse of a gold coin infomercial today. Anybody think that there are enough fools who were lucky to get out of housing at the right time and are licking their chops to apply their genius to investing in gold. Also, I haven’t been around long enough or at least haven’t paid enough attention, but have people always been so eager to jump into the latest get rich quick scheme? If not, what are thoughts on the causes of this mentality. Perhaps more importantly, can this type of mentality be (mostly) prevented or is human nature in the end just too powerful?
It’s always been this way. It’s nothing new. Look at 1849 and 1929 as prime examples. I love watching HBO shows like Deadwood and Rome. I think they accurately depict the mentality of people in past days. They were no less prone to lust, greed or fear than any person today.
i agree nycboy
btw deadwood is a incredible show
The difference here is you don’t have to buy $600,000 in gold all at once or with an adjustable rate loan. I’ve been buying small amounts of bullion over the last ten years. People told me at times I was a fool. But based on the current price of $605 per ounce spot, I think I was not foolish.
Most people just cannot grasp the concept of dollar cost averaging and think they should invest all or none. It’s the fat ugly American “supersize me” way. Moderation is really the key.
On the opposite extreme are those people who only have money in the bank in savings deposits earning 0.33%. Not only are they losing to inflation, they are taxed on the interest every year. A better idea is to buy T-bills so that only the federal government will tax them on the gains - not state government. An even better idea is to buy Savings bonds. They are not taxable by the state, and you can defer federal taxes until you redeem them - effectively making a one time tax on the gains. Back to savings deposits, since you are taxed on the gains every year, you are ripped off repeatedly every year. You lose out on what could otherwise be compounded gains. Finally, municipal bonds are not taxed at all in your state.
People going from one extreme investment to another end up being losers. Those are the ones who hold the hammer and sickle signs the highest at any Dizzy Dean rally.
How much gold did you buy at $650 an ounce or more? And if you used DCA like you preach I know that you have lost money on these purchases. BTW where do you store this gold? I bet you pay some to store it as well. I get 5% in my money market with no storage fees and interest compounded daily and paid monthly!
Gold is not really an investment because it is a non-perfoming asset. It is a tangible asset that can act as a hedge against inflation. Buying gold is like buying raw land. It doesn’t provide any cash flow but it may prove to be a wise buy at some point. Gold should be a very small part of any person’s net worth. Just because you buy some gold doesn’t mean you cash out money markets, stocks, bonds and all the rest. Renters are cautious creatures.
“Houses are not really an investment because they are a depreciating asset.”
(Y2K version):
“Tech stocks are not an investment because they are an overpriced asset which are about to sink the net worth of anyone foolish enough to be heavily invested in them.”
CityBoy –
I forgot this one (Y2007 version):
“Stocks are not an investment because the dividend yield on them is so paltry that they don’t provide any cash flow relative to interest-bearing investments. They may prove to be a wise buy at some point, once all the worthless paper floating around reverts to fundamental value, the way it has in every other credit bubble since the invention of the printing press.”
The US Dollar will appreciate as baby boomers start to save. If the dollar goes up, usually gold goes down. I don’t see the Pepsi Generation buying gold coins instead of buying treasury bonds.
Baby Boomers save. BAHHAAHAHABAHAHBHABABHABAAAAA.
I’m going to go buy a gold coin tommorrow.
The big money is in retirement plans, and they don’t buy coins. They buy treasuries. By the billions of dollars worth.
They buy treasuries. By the billions of dollars worth.
Must be the baby boomers in China.
Today was a good time to buy gold.
I confess I have gone over to the dark side and become a precious metal bug. Most of my purchases have been in the 450 - 650 range with the majority below 500. Those Tv commercials with the guy hawking gold gives me the heepie jeepies. Every time I see it I think I must have a screw loose. However I keep buying PM based on the only way a fiat-debt based monetary system can continue is to constanly devalue it’s currency over time (Google the Younger Greenspan speech when he was a goldbug) Secondly I think we are headed for a housing bubble bursting with the fed and major finanical players massively tryinge to inflate behind the scenes to contain it. In Ben Bernankes speech he said he would decrease the value of your dollars in order to keep the ponzi scheme going, essentially stealing from the prudent to reward the prolifigate. People say that that he cannot push on a rope and he would not risk the value of the dollar. Those are compelling arguments but I have lost faith. Why does anyone have the right to try and destroy my families’ savings in order save a bunch of people who took on more debt than they should have? Why did the same people leverage in on margin into the dot-com bubble and then get the housing bubble as a reward? The IMF says the US dollar is currently 10-35% overvalued. That is quite a haircut if and when it takes place. There is still a significant portion of our families’ savings going into traditional products as a hedge against my current beliefs. I know intellectually the country and my family will be much better off if precious metals never significantly appreciate, but every ounce someone buys of a precious metal means one less ounce for someone else. PM cannot be increased ad infinitum like the electronic digits on a computer. Would you save rain in a rain forest in buckets living by a lake? Snow in the Artic? Sand In the desert? Would it be more prudent to save something pretty but very rare even if was relatively useless in the big scheme of things. PM are the most hordable commodities on earth and they will have value long after the dollar is gone.
WAmon,
I lost money on some of my gold purchases. Read my comment above again. I have been buying precious metals in quantities of 1 or 2 ounces periodically over the last ten years. Go to http://www.kitco.com and look at the long term chart of gold. Did you notice gold was in the $250 range 6 years ago? The commodities boom started after September 11, 2001. I don’t pay to store my gold. And it’s not underground.
Once again you did not read my entire message. You assume I do not have a money market fund (implicitly assuming I only own gold). Read what I’m saying. I do not invest more than 50% of my net worth in any area (stocks, bonds, PMs, real estate). My allocation into PMs is above 5% and below 10%.
I love how The Man has designed the current financial dilemma for the middle class: Either pay lot’s of interest on a mortgage to Big Banks or lose the tax write off and pay lot’s of taxes to Big Government.
Either way the Small Guy gives his money to the Big Guy.
“Either way the Small Guy gives his money to the Big Guy.”
…..as my mil likes to say you just figured out you’re a cash crop!
Or most people are a battery in the Matrix. I don’t believe in government anymore, so I may change my handle to Neo or something.
or fight the big govt like hell for every dime like I do, but that’s exhausting and takes up a lot of time
“Also, I haven’t been around long enough or at least haven’t paid enough attention, but have people always been so eager to jump into the latest get rich quick scheme?”
This has pretty much been the case since the dawn of capitalism, and maybe before. For an interesting example (which I happen to be currently reading), check out Simon Winchester’s account of San Francisco during the gold rush era in A Crack at the Edge of the World: America and the Great California Earthquake of 1906.
Sorry for the long delay, but if anyone is still there, here’s a clarification (I wasn’t clear at all) of my question on whether it has always been this way. I’m aware of the many manias throughout history. I was really wondering if the get rich, head in the sky mentality existed to the same extent in the generations who grew up in the 30’s, 40’s, 50’s (60’s?, 70’s?). I have, a most likely naive, perception of people from that era as being honest, prudent, neighborly, hard working etc. Is this perception true, or were people really just as lazy, dishonest, etc. as so many are today?
The short answer is that today we are more lazy, greedy, etc in our actions today then in the past. However, as individuals our basic tendancies have not really changed much over tinme.
What is different today is 1) the amount and velocity of information of all sorts, 2) the lowest common denominator of acceptable public behavior, reflected in 1, and 3) the availibity and access to people/companies/whatever who will help someone take advantage/profity from an individuals greed.
In the 1930’s, information of all sorts was a lot harder to come by, life was paced a whole lot slower, and the people living around you were a whole more likley to know you and your family, thus providing pressure on your public behavior. Credit cards didn’t exist, and the equivalent of today’s exotic financing was a hell of a lot harder to come by.
Short and over simplified, another way of saying that today we’ve greatly amplified the ability to bring out the worst in people on a whim, and make them feel good about it. (think going into credit card debt as a benign example).
Throughout history that is what happens when a currency does not hold it’s value. People become speculators because they realize they are falling behind by saving. Money developed as the commodity you can translate your production into future purchasing. Interest rates developed to pay people for the use of their money. Undevalue either and people will start looking for commodities less money like to save for the future ie speculation
http://www.timesonline.co.uk/article/0,,2089-2535177,00.html
Imagine what THIS would do to precious metals, oil prices, the dollar, the global and US economies, and real estate. I hope saner minds prevail.
Oil: Through the roof
Gold: Through the roof
The Dollar: In the tank
The global and U.S. economies: In the tank
Real estate: In the tank
That is why we should all have a well-rounded strategy for saving and investing. If Israel doesn’t nuke Iran we would probably all be okay. If Israel does nuke Iran, will you be okay? Prepare for all possible outcomes.
The dollar will strengthen in times of trouble. The Euro will crash, because they are at the mercy of mid-east oil. The US would use its military to secure oil supplies, and Saudi Arabia friend to and depending on the US, not Europe.
Before the US shivers in the dark, the military will get the oil before any other country. A positive for the dollar.
The US isn’t going to invade anyone anymore and get away with it. I just read a book about how China would react to any attack on their soil. A Chinese General said, “Should the United States make any aggressive moves toward China, we are full prepared to sacrifice ALL towns and cities resulting from a nuclear attack outside of central China. At that time, we will also have destroyed every major city in the United States.
Once again, forget the United States being the main actor on the world stage anymore. Get over it. Bush has TOTALLY destroyed the credibility of this country and I do mean TOTALLY. Any attack on Iran by the US or Isreal or both together, would certainly usher in World War 111. Russia and China and several other countries have a lot to lose if the US or Israel attacks Iran. Worse, again because of Bush, I cannot think of any country (after this Iraq fiasco) which would be on the side of the US. I venture to guess that even the Brits (the 51st State) would be more than reluctant to get involved.
As for the dollar? Toast. Once the Chinese decide, what they have already realised, they are buying confetti of diminishing value (the dollar) and start switching to another currency, it’s going to get nasty if they should start to dump their US assets.
As for the Euro? Undecided. There are moves by several entities in europe to go back to their old currencies because the European Union is moving too quickly and letting banana countyries (like Bulgaria) join. If they did break up the EU, that wouldn’t be good for the US dollar. A lot of those countries are FAR more stable than the US as far as fiscal responsibility is concerned and money would flow into those countries. Not the US. In fact, the US (again under Bush) has NO fiscal reponsibility at the moment and the financial investment world is taking notice.
As for the US taking over oil rich countries by force (which was Bush’s intention when he illegally invaded Iraq and used the Freedom and Democracy b.s as an excuse), ain’t gonna happen. The old way of fighting a war has gone. Iraq has proved that. The new way is through nuclear attack (last resort) or for the invader to fight a losing battle against another countries people on THEIR turf. Slowly, as in EVERY CASE since time began, the invading forces will be beaten by attrition. Check your history books.
Finally, it could be that Israel MIGHT attack Iran but that would mean only one thing even if Israel gets in first. The end of Israel. Frankly, even though I am sympathetic to Israel’s situation, I doubt if Israel will be around in 50 years.
Attack China? Why? They are the US’s banker.
Oil is in the mid east, my friend.
Don’t stop him now, he’s on a roll.
My friend read the post. China is NOT going to sit idle and watch the US take over oil rich countries by military force. China couldn’t care less about the long term future of the US and I would guess they are even now thinking up ways to wean themselves off their dependence on exports to this country. Their main objective is to secure as much oil as they can for the long term. Neither China or Russia are worried about the so-called American military might. The US would be far better off trying to become another massive money center like Switzerland and getting rid of all the John Wayne gung-ho idiot military crap. When the Iraq war began, on every corner in the area where I live, the idiot John Wayne imitations were out there waving waving the stars and stripes, cheering, blowing whistles, etc. I don’t see them cheering now.
Enough oil would be removed from the market to severely disrupt US domestic economic activity. First to go - gasoline for your car unless you are “somebody” (e.g., medical, political, law enforcement, etc…).
CityBoy,
Do you happen to make your living by selling stocks? Because your posts sure sound a lot like a lightly-revised version of the Realtor’s mantra:
“
Real estateThe stock market always goes up.”Really? Wow! I think the stock market is set for a huge hit. I have pulled everything out of the market and think it’s completely overvalued. Our retirement accounts are out of the stock market. I don’t typically post about the stock market, I don’t think.
I live just down the block from Wall Street and I can’t stand those boys. I have to see those smarmy bastards on the subway, and in my neighborhood, every day. They sicken me. They produce nothing in my view. They just push money around and collect huge fees because they own the system.
I am in no way tied to the stock market. Once it corrects I would like to get back in with a long-term plan but I think 2007 is the year of disaster. The stock market run since July makes me believe we are headed for a nightmare.
Thanks for your response, and I apologize if I came across like I was harassing you.
Words ought to be a little wild for they are the assault of thoughts on the unthinking.
– J M Keynes –
I was thinking it would be fun to invite everybody from the blog over some day. I would provide all of the Jack Daniels and frozen pizzas that everybody could handle. Afterwards we could walk down the street and demonstrate against the Wall Street boys and the PPT. There’s always some protest going on in this neighborhood. So what if we have to start drinking early to make the closing bell. It would be great.
http://www.preparedness.com/
Amen. Hope for the best, plan for the worst.
I’m hoping for the best, but does Isreal have any choice? I’m betting on US involvement also.
Why do you think the new Centcom commander is an Admiral? When Iran tries to respond to an IDF raid on their nuclear facilities by mining and shooting up oil platforms in the Staights of Hormuz, it will be the US Navy’s job to stop them. It will be carrier based planes taking on strategic missions.
The US Navy will be the difference between an oil spike that goes to $100 vs. $200.
oil at an 18 month low this week, something has to be stirred up to prop it back to higher levels and the iran israel thing is
a logical place as well as the cutbacks in production
Why haven’t we heard of any more hedge fund meltdowns? I’m guessing that’s coming. I would think that an $8 drop in oil prices just crushed some set of greedy geniuses that had huge long positions on oil. Do we hear some news on this front this week?
“Why haven’t we heard of any more hedge fund meltdowns?”
I suspect part of the post-LTCM-meltdown “management” strategy is to keep hedge fund meltdowns out of the bright light of the MSM financial page headlines, in order to avoid a repeat of the 1998 Asian currency crisis.
Do hedge funds buy LEAPS, and don’t they expire in a year? I bet they went long in a big way last summer the way all the pundits were talking. Maybe next summer they go BK.
More Bush Administration bungling:
William J. Fallon: Wrong Man For The Job
At a time when the United States is engaged in protracted ground wars in Iraq and Afghanistan, one of the worst moves the Bush administration could make is to appoint someone with no background in land warfare to oversee these operations. In another baffling move, President Bush has decided to do just that, by replacing retiring Army General John Abizaid, the current head of Central Command, with Navy Admiral William J. Fallon.
Since its inception, Central Command, which oversees the Middle East and South Central Asia, has been led only by a Army or Marine Corps General. The Navy has been largely on the sidelines while the Army and the Marine Corps have borne the brunt of the wars in Iraq and Afghanistan; both are starting
to crack under the strain. Admiral Fallon is a fine officer and by all accounts has done a good job as head of the Pacific Command, the Navy’s traditional area of responsibility. But with little background in the Middle East or land warfare, his appointment appears to be based more on diffusing opposition to the military escalation in Iraq than on what is best for the
soldiers and Marines on the ground and the country.
Set to make the disastrous decision to escalate our presence in Iraq, the President is in need of a military commander to support his decision. While General Abizaid publicly opposed the surge in troop levels in Iraq, it would be surprising if Admiral Fallon is not more agreeable.
- Lawrence Korb and Max Bergmann
A short tale from the Tampa Bay area:
I took a ride down US301 on my old Silverwing to visit a buddy in Fort Lonesome. Yes, the place is just like it’s original name, a deserted outpost at the four-corners intersection of SE Hillsborough County with neighboring Polk, Manatee and I think Hardee?
Anyway, the entire stretch from Hwy 674 (College Rd. in Ruskin) to Hwy, back up to 672 (Big Bend Rd), comprising the Riverview/ Sun City areas is lined with undeveloped/ partially developed and new developments on virtually every square acre of land available.
I thought this would end last year, but no, it continues.
Signs from Lennar, Pulte, Beazer, KB Homes and everyone else you can think of on tracts of land from about 20 acres to 200 acres, with signs………NEW HOMES FROM THE LOW 200’s.
One is listed as “PRE-contruction Pricing”. I thought this would end by now.
This area is the middle of nowhere. It is 5-6 miles minimum to any stores. There are no gas stations. There are no shoppes…..Just miles and miles of vacant land, and new houses. Need milk? Take a trip.
But what was most disturbing was the sign along the roadside…………. $300,000 LOAN…….$998/month for 5 years FIXED.
Back-loaded flipper/renter loan.
This lending will drive this market for several more years unless the forclosures put an end to it sooner.
Is there any sanity left in the mortgage/housing market?? When will this all end??
I just can’t believe this lunacy!
Could HUD purchases account for the high percentages of Dec 06 home purchases that were vacant in SD (51%) and PHX (47%)? And are HUD purchases publicly reported?
http://wallstreetexaminer.com/blogs/winter/?p=263
To answer Gekko’s question…
———————————————————————————————-
Couple pays $350,000 for Laci Peterson home
By Olivia Munoz
ASSOCIATED PRESS
January 7, 2007
FRESNO – The house on a quiet, tree-lined Modesto street where police believe Scott Peterson killed his pregnant wife, Laci, is being sold again for nearly $350,000.
A couple that wants to stay anonymous are working with real estate agents to close on the three-bedroom, two-bath home where the Petersons lived until Laci Peterson was killed in 2002.
Her body and that of her fetus were later discovered along San Francisco Bay. Scott Peterson was convicted of their murders and is on death row at San Quentin State Prison.
Forensic tests never turned up any evidence of blood or tissue in their house, officials said.
The couple, the president of a motivational marketing group and a schoolteacher, have close friends living on the same street, said Terry Olson of Century 21 M&M Associates.
“It’s a beautiful house in a really desirable area,” Olson said. “It’s really too bad that it has the stigma that it does.”
The current owner, Gerry Roberts, bought the 1949 bungalow-style house last year for $390,000 and has been trying to sell it for five months. His lender threatened to foreclose on him earlier this month before the couple made their offer Dec. 19, Olson said.
http://www.signonsandiego.com/uniontrib/20070107/news_1h07laci.html
“To answer Gekko’s question…”
Stucco, what are you talking about? You’ve banished Gekko. Something tells me you are missing your old nemesis. Be honest with us. You want Gekko to come back.
Like I want Saddam Hussein to come back.
That was pretty funny.
Gekko and Stucco fed off each other. Stucco still keeps invoking Gekko’s name and positions every other post, like if he taunts his old nemisis enough, he’ll reappear like some avenging fury and the endless squabbles will start anew.
C’mon, Stucco. Surely you can find some other way to validate your existence.
I wasn’t really trying to validate my existence there, Sammy — just recalled that Gekko was interested in the fate of the Peterson home (so was I!). I find it quite amazing that anyone would pay $350K for a ghost-ridden home in Modesto.
“You’ve banished Gekko.”
His exile was self-imposed, in response to Ben’s request that he start his own blog.
Priced out Cali renters take note:
———————————————————————————————–
Law doubles notice time landlords give to renters
UNION-TRIBUNE
January 7, 2007
California renters who are on month-to-month leases have a bit more time to get packing under a new law that requires those who have resided in their units for a year or more to be given 60 days’ notice by landlords wanting to end their tenancy, with some exceptions.
The new law, which took effect Jan. 1, differs from an earlier 60-day notice law that was in effect in 2004. If a new roommate moves in with the initial tenant, “the one-year clock starts anew,” the California Apartment Association noted.
Renters who have occupied their units for less than a year are required to be given 30 days’ notice by landlords.
Bless you, GS. Last night a “bank employee” (foreclosure contractor) came to our door to notify us that the house we have been renting is now bank-owned. (We were aware of this, mind you.)
(We have been renting a house that sold on an 80/20 loan for $691K brand-new for 15 mos., paying $2300 in rent.)
He suggested that we had only about 3 weeks to vacate under a “cash for keys” basis or eviction proceedings would begin. Needless to say, we are nore comfortable with 30-60 days due to the necessary arrangements of finding another rental, et al.
So “thank you” for your timely post and information which will be exceptionally useful in our negotiations!
An aside: our house and the house next door both became REO or “bank owned” on the same day. One across the street will become bank-owned early next month, and another across the street already is, as are a few others in our tract. Iasked the contractor how “business” is and he replied that in some tracts it seemed they were “taking back half the tract.”
We live in Murrieta, CA, part of the Riverside/SBDO metro statisitcs for which I expect steep declines (60+%).
I am glad you found my post to be immediately useful. The foreclosure wave that is sweeping California will make renting homes more perilous over the next several years.
Does anyone have any advice for how priced out renters can avoid having the homes they are renting sold out from under them? Does signing a longer-term lease offer protection?
GetStucco
For renters served notice. Sit tight until they throw you out but start moving stuff you don’t need in storage so if, and when, the final crunch comes you can slide out from under with less upheaval. Meanwhile, call CBS and NBC and ABC and the local rag and tell them the story of how you rented in good faith and now youi’re on the verge of a nervous breakdown and this is causing your marriage to crack up and ruining your childrens health. Then call the bank and tell them you have called the networks (relate your story) because this situation is “outrageous”. Should give the renter several months (in california) to get organized and, of course, don’t pay any rent. With the crap that goes on these days you have to look after the interests of your family. Not the damn banks, mortgage brokers and realtors. F*ck ‘em - let them go under.
I’m renting from a California “investor” and am wondering what legal recourse I would have if he gets foreclosed on or has to liquidate, though there’s no indication that’s in the cards. I was hoping to sit tight until December 2007 at the earliest. My lease doesn’t run out until the end of July, with the option to rent month to month after that.
I know this sounds crazy, but it might be worthwhile for anybody in this situation to actually spend 100 or 200 bucks and get a lawyer to look at your lease and the current owner’s situation so you will know your rights before something happens.
Normally if the owner sells the property the new owner will have to honor the lease. If the bank forecloses they usually have a priority interest and do not have to honor the lease. There are many different fact situations and local laws that could affect the outcome.
Catesby Kilmer, the Hamptons socialite who went to jail for bilking her employer Howard Gittes out of millions that she used to buy and furnish her Southampton home, has come up short on the $2.25 million asking price for the property.
As per a judge’s order, the house was sold to make restitution to Gittes, known as Ronald Perelman’s right-hand man. The house was estimated to be worth more than $2 million.
But the four-bedroom, 3 1/2-bath vintage farmhouse with a pool and guesthouse only fetched about $1.7 million. Kilmer received a three- to nine-year sentence last year for her little faux paux.
Listing broker Laura Nigro of Prudential Douglas Elliman could not be reached for comment.
http://www.nypost.com/seven/01042007/realestate/now_he_has_100_problems_realestate_braden_keil.htm
Kilmer’s defense was that she had “money addiction”. I suppose if every slob in the Hamptons didn’t suffer from the same malady, her chances of avoiding incarceration would have been better. Check out this picture of Catesby in the NY Social Diary. I’m sure the inmates are going out of their way to make her feel special.
http://tinyurl.com/yd2lvg
Not to sure Bruce Springsteen looked too happy to be in these pix.
Post Holiday Hangover Brazil America and Bully Watch:
http://wallstreetexaminer.com/blogs/winter/?p=272
another classic, Russ. Thank you!
“Thanks to the massive FCB $59 billion buying binge of agencies in the last quarter, Cyril was offered a clean prime rate of 6% on a plain vanilla 30 year.”
What’s in it for the FCBs (foreign central banks)? Is it about maintaining demand for their manufactured exports, which has in large part stemmed from US home equity withdrawals in recent years? Or do they believe those “agencies” (which I assume refers to Fannie and Freddie MBS) are backed by the full faith and credit of the US tax base?
http://www.denverpost.com/business/ci_4960960
Four people plead guilty in mortgage fraud conspiracy
By David Olinger
Denver Post Staff Writer
DenverPost.com
Article Last Updated:01/06/2007 04:25:56 PM MST
Four people accused of participating in a mortgage fraud conspiracy that stole millions of dollars and left a gated community in Arapahoe County ravaged by foreclosures pleaded guilty in federal court Friday.
The participants included Taiwan Lee, who managed to get 100 percent loans for five houses sold at inflated prices - including two he bought while living behind bars in the state prison system.
Lee was among a group of former prison inmates and others accused of buying 17 homes for inflated prices and taking $2.1 million from the excess loan proceeds.
In plea agreements, Lee and another member of the group, Talita James, each pleaded guilty to one felony count of wire fraud. Two others in the group, Ronald Fontenot and Nicole Puller, each pleaded guilty to one count of wire fraud and one count of money laundering.
As part of a series on Colorado foreclosures, The Denver Post reported last year that Lee, a state prisoner who had vanished while on parole, bought three houses in Arapahoe County for $1.9 million while police looked for him.
He bought two more after he was caught and jailed. Until the foreclosures began, he owned five houses in the affluent The Villas at Cherry Creek, thanks to distant lenders who put up 100 percent of the inflated sale price on every house.
On Friday, U.S. District Judge Edward Nottingham hesitated to accept Lee’s guilty plea after the 25-year-old defendant said he really didn’t understand what he was doing when he signed the loan documents.
“All I know is I signed my name,” Lee said. “I thought it was legit. I don’t know much about real estate.”
……………………………………………………..
I don’t know much ’bout real estate neither…
Real estate, section 8
Which one would you rather take?
–Xzibit (a rapper) lyrics
Interesting article at itulip.com:
“The question that most analysts and especially Bernanke are asking is: Why were long term interest rates still not rising in the face of 17 consecutive ¼ point discount rate increases? The answer my friends is both simple and very worrisome. All these Banks, Hedge Funds and other financial institutions that have had it so good for so long, making all that easy money are now between a “rock and a hard place”, as they are now locked since their positions are too big to liquidate (CASH OUT). They can’t get out because there is nobody to sell to. They are all forced to continue to keep playing the game until the bitter end. The same holds true for all the Central Banks that have been buying up all the US government’s newly issued paper. They too are caught between the proverbial Rock and a Hard Place. In order to maintain employment in their countries, they must continue to export and protect the value of the US dollar. They can talk all they want about diversification of their reserves but they too, like the arbitragers have no one to sell to. They are all locked in and must continue to play the game. However, all this used to depend on both the US FED and the BOJ, but now it’s all in the hands of the BOJ and should the YEN start to appreciate especially against the Dollar and the Euro; watch out below as the easy profits turn into even easier losses on the biggest bets ever taken.”
http://itulip.com/forums/showthread.php?t=773
“The increasing domination of stock market activity by financial institutions and financial services companies have quietly come to dominate not only the S&P 500 but the entire economy. For example, right now financial companies make up 40 percent of the index, up from 12.8 percent 20 years ago. The current weight of financial services is almost double that of industrial company stocks and more than triple that of energy shares.”
Does this sound accurate? I’m amazed that 40% of the S&P500 would consist of financial companies.
Yup, that’s why you’ll never get a severe correction until that complex breaks down. Watch ^BKX and big brokers for the tell.
And that’s also why when the financial contagion spreads a bit further upstream in the financial system –look out below!
LA TIMES REPORTS HOUSING BUBBLE CORRECTION OFFICIALLY OVER.
WE can all take a deep breath and relax. LA times has officially called the end of the ‘housing marketcorrection’(BS).
http://www.latimes.com/business/la-re-harney7jan07,1,1165831.story?coll=la-headlines-business
SOME QUOTES.
“All of this suggests that the 18-month market correction that followed the four-year housing boom has just about run its course(BS). From a national statistical perspective, we’re somewhere near slack tide — but no one’s looking for another frothy high tide anytime soon(more BS)….
Three dozen metropolitan areas — primarily markets with moderate prices and solid employment growth — were still racking up low double-digit house price inflation at the end of the third quarter of 2006, according to federal data. The L.A.-Long Beach-Glendale metropolitan area continued to chug along with an annualized appreciation rate above 7%. (big BS pile here)…..
In the main, however, the housing market appears to have weathered the correction phase of the cycle without the blood running in the streets that some bubble-bust bears had forecast”
This writer is cheerleading for the REIC! LA-LB-Glendale statement of 7% annualized yoy appreciation is misleading. YOY from Nov dataquick LA county showed +2.6%
Good. Now I can buy the 2 bedroom 2 bath Hermosa Beach house I had my eyes set on. Valued at $300,000 in 2003 and now at $800,000. Because the LA times said the correction is over. RE always goes up! Never mind incomes went up annually single digit for the same residents of HB during that time. It’s different this time!
not! (don’t worry, I did not drink the Phoenix water. Just a lot of venting of my sarcasm).
Another quote from that article:
On the other hand, smart shoppers should recognize that the game is changing, the spring buying season is looming and that lobbing low-ball offers at already marked-down properties isn’t a winning strategy. If you are seriously in the market, be prepared to pay a price that may not be as low as you’d hoped, but that just might be your last shot at a particular house before it sells for closer to the asking price a few weeks from now.
Does this guy write his stuff or just plagiarize NAR talking points?? If you care to ask, you can email him at kenharney@earthlink.net
Cher has become a house flipper in Palm Springs:
http://tinyurl.com/uvg34
“Cher is re-inventing herself again — this time as the flipper of a Palm Springs house she renovated and has listed at nearly $2.5 million.”
“The house, in the historic Las Palmas area of Palm Springs, was acquired in 2004 for $650,000, according to public records.”
“The 1938 Spanish-style home got a sprinkling of Cher-style pizazz when the original 2,000-square-foot floor plan was doubled by adding a master-bedroom wing with his-and-hers wardrobe rooms, a fireplace and a wet bar.”
Until Britney Spears oozed onto the scene, Cher was the epitome of tacky.
LA Times sez bust is almost over, don’t expect lowball offers to work in the future (All Hail the Spring Buying Season!):
http://tinyurl.com/skthm
“On the other hand, smart shoppers should recognize that the game is changing, the spring buying season is looming and that lobbing low-ball offers at already marked-down properties isn’t a winning strategy. If you are seriously in the market, be prepared to pay a price that may not be as low as you’d hoped, but that just might be your last shot at a particular house before it sells for closer to the asking price a few weeks from now.
Shoppers also need to understand that today’s prevailing mortgage rates — a little above 6% for 30-year money, and in the high-5% range for 15-year loans — are less than a point above 40-year lows. They won’t be around indefinitely, so a fairly priced house combined with a near-historic low-cost mortgage adds up to a potentially great deal.”
We should interview Kenneth R. Harney, Washington Post Writers Group (the author) what he thniks about the market when Summer and Fall ‘07 rolls around…
“Shoppers also need to understand that today’s prevailing mortgage rates — a little above 6% for 30-year money, and in the high-5% range for 15-year loans — are less than a point above 40-year lows.”
So, high interest rates killed the market but interest rates are at historical lows so the market will pick right back up? This is the piece of the Real Estate Syphilis that I don’t understand. It’s a disease that is easily caught and apparently eats away your brain once you have it.
The SD Union Tribune has a great cautionary tale in today’s Business section about the perils of trying to get rich quick by investing in San Diego real estate:
MONEY MAKEOVER
Real estate burden, not boon, to couple
Selling homes likely to lighten financial load
By Melanie Stevens
January 7, 2007
Robert and Marie Leboda would like nothing more than to make life simpler for 2007.
The San Diego couple, both 42, admit that they have been a little overzealous with real estate investments over the past few years. They’re now feeling buried by all of the financial obligations that owning property entails and don’t know how to come up from underneath it all.
JOHN GIBBINS / Union-Tribune
Marie and Robert Leboda wanted to know what to do with their real estate investments, which have turned more burdensome than profitable, and how to begin saving more.
When the Lebodas decided in 2003 to purchase a rental property to make a little extra money, they cashed out of Robert’s military Thrift Savings Plan to help make the initial investment. A few more real estate opportunities later and the couple is now responsible for maintaining four properties, not to mention mortgage payments that total about $6,500 a month.
The Lebodas also owe $23,000 in consumer debt, $16,000 for an auto loan, and have little savings toward retirement. After paying off their bills at the end of every month, they have only $840 to take care of personal expenses that almost always leave them in the red.
They’ve each taken up additional jobs, Robert as a nighttime security guard and Marie as a part-timer at the Navy Exchange. But their extra efforts – in addition to running a home-care business – haven’t quite afforded them the quick and easy solution they were hoping for.
“I wouldn’t say investing in real estate is a completely bad idea, but we just really overdid it,” Marie said. “We jumped on the real estate bandwagon when we thought it would be great for us financially. But it’s turned out otherwise and now we’re so overwhelmed by it all, we don’t even know where to start.”
http://www.signonsandiego.com/uniontrib/20070107/news_mz1b7stevens.html
$6,500 a month divided by four is a very affordable-sounding $1,625 a month per property they own. If San Diego property weren’t so affordable, I would almost be inclined to wonder whether they used subprime loans to finance their mini-real-estate empire…
Gotta hate it when you buy a house for $706K ten months ago and you can’t sell it for $41K less than you paid for it, minus transaction fees.
http://sandiego.craigslist.org/rfs/258947960.html
Failed rehab/flip finally in foreclosure
http://sandiego.craigslist.org/rfs/258937093.html
Purchased 03/01/2005: $530,000
Please please buy me now price: $495,000
A network of scam artists convinced unwitting investors to buy houses using questionable loans and then backed out, leaving the investors on the hook for as much as $5 million apiece, according to a lawsuit filed Friday in Riverside County Superior Court.
All told, the alleged scheme involved as many as 400 investors and an estimated $1.2 billion of property, Ackerman alleged in the complaint.
Top Ten Guides to Help Idiots Lose a Bucket of Money with a Box of Stupid —————————————————————————————————-
Book value
The top 10 real estate guides of 2006
By Robert J. Bruss
January 7, 2007
Each week I read and review at least one new real estate book. At the end of each year, I select from these 52 books the top 10 real estate books. 2006 was an especially difficult year to select the best because there were so many new, high-quality realty books. All of these excellent real estate books are available in stock or by special order at local bookstores, public libraries and Amazon.com.
http://www.signonsandiego.com/uniontrib/20070107/news_mz1h07rebook.html
Take some great advice from a guy named Crook…
—————————————————————————————
Post-Bubble, Property Still Pays
By David Crook
Word Count: 1,384
So you think there’s still a buck to be made in real estate? You’re right. There’s plenty of money to be made because everyone still has to live somewhere. And everyone has to work somewhere. And everyone has to shop somewhere. And someone has to provide the space.
That’s where the real-estate investor comes in — making money by providing one of life’s necessities. And just about anyone can be a real-estate investor. The capital requirements are quite minimal, and there are comparatively few legal restrictions on how you operate.
Keep that in mind as we look at how to …
http://online.wsj.com/google_login.html?url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB116812190673969438.html%3Fmod%3Dgooglenews_wsj
(Sorry if this is a double post; my earlier post did not show up)
Top Ten Guides to Help Idiots Lose Money in Real Estate Investing
—————————————————————————————–
Book value
The top 10 real estate guides of 2006
By Robert J. Bruss
January 7, 2007
Each week I read and review at least one new real estate book. At the end of each year, I select from these 52 books the top 10 real estate books. 2006 was an especially difficult year to select the best because there were so many new, high-quality realty books. All of these excellent real estate books are available in stock or by special order at local bookstores, public libraries and Amazon.com.
Here are the 10 best real estate books of 2006:
http://www.signonsandiego.com/uniontrib/20070107/news_mz1h07rebook.html