Bits Bucket And Craigslist Finds For January 8, 2007
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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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question the euphoria / disaster risk my rise
plus
Stock Markets Contract as Global Mergers Overtake Equity Sales
http://www.immobilienblasen.blogspot.com/
who are they going to sell this stuff to next year?
avis ? some of these deals look looney
MEANWHILE IN EASTERN EUROPE………………………
BUBBLES EVERYWHE !
Kiev, the capital of Ukraine, is now apparently the “most expensive city in Eastern Europe” in terms of property, says the BBC. Prices at one development start at $1m for a three-bedroom flat, while the cheapest one-bedroom flats start at around $100,000.Apparently, the cost of apartments is already higher than in Amsterdam. A number of reasons are given for this: “People simply want to move out of their old-style Soviet housing, and move into something more comfortable,” says property developer Jaroslav Kinach.
And then of course there’s the tiny group of massively wealthy businessmen who have flourished following the collapse of the Soviet Union.
But of course, the Kiev property boom couldn’t all be down to supply and demand and a small group of hugely wealthy business people, could it? There must be a pretty wealthy population to support a city where the cheapest one-bedroom flat costs in the region of £55,000, surely? After all, that may not be London prices, but there are certainly a few far-flung parts of the UK where you might just be able to get a one-bedroom place that cheaply.
So what’s the typical inhabitant of Kiev earn? $25,000 a year? Maybe $15,000?
No. Ukraine is one of Europe’s poorest countries - apparently the typical salary is around $2,400 a year. So the average Kievite would need to pay just over 40 times their annual salary to buy the cheapest property in the region.
As the BBC concludes, “the main driver for the property boom is speculation.
“It could be a bubble - and if so, there is no way of knowing when it might be burst,” concludes the Beeb ominously.
Could be a bubble? Of course it’s a bubble! Who is buying these places? Why on earth would you choose to live in Ukraine unless you had family or a job there? Not that there’s anything wrong with Ukraine particularly, but has it turned into the world’s financial centre over night? No. Have the streets recently been repaved with gold?
The whole idea of a boom could well be overblown of course - as investors would do well to remember if they decide to buy property abroad, the UK’s system of property records and rights is some way ahead of most international markets. There is no public register in Ukraine, so the honest truth is that no one’s really sure how much prices have risen.
One estate agent in the BBC piece says that she bought a flat for $30,000 three years ago, and it’s now worth “up to $200,000″. Well, she would say that wouldn’t she? She’s trying to sell flats to naïve foreign investors who think that they too will be able to make seven times their money in three years. My initial reaction is, that if the average salary in the region is $2,400, then why hasn’t she sold her great investment flat and retired?
It’s these kind of stories that show the unsustainable hysteria that lies beneath the global property boom. When you hear of properties in Kiev going for 100 times average earnings, that’s when you start to think about the triple-digit p/es of the dotcom bubble era.
We’ve been predicting a property collapse here at MoneyWeek for some time - and there’s absolutely no getting around the fact that we’ve been wrong so far. But we can’t, in all honesty, recommend property as an investment (buying a property as a home is slightly different - though it’s more important now than ever to ensure that you aren’t overstretching yourself to buy a place).
When people start relying on capital gains rather than income to justify an investment, it means they are expecting a “greater fool” than themselves to come along and buy it for more at a later date. But even the supply of fools in the world isn’t inexhaustible. And with the threat of a US slowdown knocking onto other global economies, that supply could well dry up if life isn’t as rosy in 2007 as everyone seems to expect.
Here’s Twist’s very detailed response to last week’s REIC attacks (and BusinessWeek’s temporary withdrawl of their blog post). We invite fierce peer review of this one (spreadsheets and all), as it will certainly be getting close scrutiny later in the day.
“Accuracy Problems With MLS Reports, Or what I learned when I was investigating something else”, by Twist, HousingDoom blog, January 8, 2007.
http://tinyurl.com/wcgxo
We have a big problem out here, San Fernando Valley, with agents raising asking prices appearing in the mls AFTER the sale goes to pending status. The one and only reason to do such a thing is to deceive the lender so they will allow some kind of funny money deal and appraisal. I actually wrote a letter complaining to our board (SRAR). I’ve never seen any public discussion of the practice, though.
Hopefully, Paladin’s exposure of this stuff, to all the authorities he could think of, and the countless readers of Ben’s blog, some of whom surely have to represent bagholders or enforcers, will result in a spike in crook-catching and some long-overdue MSM exposure.
Wonder if Twist’s impressive analysis of the MLS data will turn out to be a juicy scandal?
I suggest you contact the lender and the title co.Let the shit hit the fan.
You need to report the broker to the CA dept of RE. Also the FBI mortgage fraud div in Los Angeles.
I know the house you posted last week in Calabasas. That one is totally a cash back at close deal, it was listed 3 months at 1060 then sold foe 1.2? All there for the world to see in the MLS!!
Anyone taking the ‘realtor oath’ should feel obligated to report such goings ons. Thank for posting deb.
I contacted the board they said they would “handle” it. Nothing ever happened. The sale I’m refering to is the one Paladin researched in Calabasas. For some reason that one just really pissed me off. The house sat for MONTHS at $1,060,000, then the agent wants to claim some idiot came in and brought a legitimate offer of $1,225,000???? Pu-lease!
The agent raised the ASKING price as he reported the sale pending in the MLS. I actually contacted the agent and told him nicely that the terms of the sale indicated some sort of fraud and that he should be careful. I also told him that no matter what, raising the asking price after a sale was completely dishonest. The only possible reason to raise the price would be to deceive the lender- that’s it. He told me to MYOB in no uncertain terms and acted very insulted. I reported this to the board and I believe my complaint was promptly filed in the “round” filing cabinet under the desk, if you know what I mean.
I truly believe that none of the parties benifiting from the RE biz want to know what is going on. They just want to stick their collective heads in the sand and hope everyone moves along.
Can’t wait for the property to show up in default, because it will, and rub it in the guys face.
You report it to REIC and nothing will happen.You need to find out who the lender is and contact them,its their loss in the end.Forget contacting NAR or local re board they could care less.If anything they will blacklist you.
Send another letter with a cc to the Attorney General and anyone else official you can think of. THAT should get their attention. The only analogy for that I’ve seen is when a family sends a letter to a hospital or Nursing Home regarding some problem with a family member’s care and they don’t get a response, BUT if they send the letter to them with a cc to DPH and/or JCAHO, the hospital administrators move quick like little miceys tripping over themselves to “get to the bottom” of it. Do they really care? Nope, it is just the threat of the regulators coming in that makes them act and ONLY that threat.
I think that is the route that Paladin had to take, too. He was sending letters to the lenders, title companies, etc., and no action was being taken. But as soon as he sent them letters with a cc: to the FBI and other law enforcement agencies, suddenly the lenders took notice. Might be a good idea for Deb to follow. And Deb, keep up the good work and keep us informed. Thanks.
We gleefully highlight corruption in poor economies where fraud almost always is paid in full when the deal is struck while in sophisticated economies fraud usually hides where financing occurs; look no further than housing, cars, furniture, heathcare, education, etc., because the cost is spread thin over years where it disappears from cursory observation.
Countrywide denies Artisan offer is cheap
By Yvette Essen
Last Updated: 3:13am GMT 08/01/2007
The chairman of Countrywide has hit back at suggestions that management are attempting to buy the estate agency business on the cheap.
Christopher Sporborg will send a letter to shareholders today, rejecting allegations made by Artisan Partners, the US investment giant which owns more than 7pc of Countrywide, that a £940m bid for the FTSE 250 company is “clearly inadequate”.
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He said yesterday: “We think it is the only offer, the price is a good price and if the scheme fails, the shares will fall very sharply. To think the company is going to have a magical re-rating is, in my view, total naivety.”
The bid for Countrywide, which also owns a 21.5pc stake in quoted property website Rightmove.co.uk, is being led by chief executive Harry Hill and is backed by private equity firm 3i. It values Countrywide at 490p-a-share in cash, plus 0.16518 Rightmove shares for every Countrywide share.
…
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/01/08/cncountry08.xml&DCMP=EMC-mcn_08012007
Got a question for You guys.
I know that this is a free blog, and the advice I get is worth what I am paying,But……
I have $112.00 to invest every month.
It goes to a bank account now, split between checking and savings.
X-mas wiped it out, but this year, I have resolved to make the money work for me.
Any ideas on What/ How to invest such a small amount? I’d like to buy a CD or some other invest ment with it, and pay my bills with my regular pay, and leave this money alone to build.
So, What do I do with.
Thanks for your Help.
Thunder Eater
Unfortunately, 112 a month (1344 a year) is not really that much to “invest”, eg, take equity risk. any mutual fund you get into most likely will eat a big portion of your investment with fees.
My advice: put it in an ING orange account or a similar online banking offering. its guaranteed, interest rate is 4 to 5%, you can withdraw the money any time, and there are no fees. In a year or two, with 1 to 2 thousand in the bank, then consider taking equity risk.
You could buy a fund or funds directly from Vanguard and avoid the costs of going through another party.
However, at least some of their funds have an initial minumum of say $1k, $5K, $10k, or even $100k.
If you can get good advice on cheap stocks (commodities are my favorites), an account at Sharebuilder costs nothing to set up and you can buy as little as $1 in shares (tho it’s $4 to buy so that’s not really smart). They don’t have ALL stocks but they have enough small $ ones that I’m betting I can make more than inflation this year with what little I have to invest.
A lot less risky than plunking $1k on one stock. Anybody else think this way?
In today’s WSJ: the NAR now says housing was overpriced and there were lots of speculators, causing housing values to fall now despite the lack of a big interest rate increases or a recession. The article is on flippers getting hosed in Naples, FLA as bottom (or they think it is the bottom) feeders move in.
C1 article says more pain ahead, despite predictions of a botton.
Let the Blame Game begin!
The real problem, of course, was the head and the mouth of the dragon — The Fraudulent Reserve System. Blame the flippers, blame the mortgage brokers, blame the Realt-whores, but someone at the top levels allowed them to do what they did so easily.
Jas
They should have entitled the article, “Make Way for Dumb Bunny Investers.”
http://www.pilkey.com/bookview.php?id=22
Corkery and Hagerty of the WSJ have a front page piece out today on the auction lady from Naples, FL — Dresner. They describe the role of her trusted realtor during the boom and bust. He sold Dresner his investment property earlier on in the boom then recently bought it back at auction, the bust.
The article also has this gem of a quote from DL: “‘If you look at the last two contractions you can see what caused it: high mortgage rates and a slumping economy,’ says David Lereah, chief economist at the National Association of Realtors. ‘Today we don’t have that. The economy is still good. The thing that sent us into a contraction was that house prices were getting high and affordability was aggravated by investor speculation.’” Is DL getting closer and closer to saying the truth?
Subscriber’s link to the article: http://tinyurl.com/ynb4qj
–
“Is DL getting closer and closer to saying the truth?”
Not at all. He is just playing the Blame Game after things went aerie.
Jas
“Is DL getting closer and closer to saying the truth?”
For Liereah to speak the truth… would require that he vomit forth a hairball the size of a cow patty.
Until DL’s nose starts shrinking, he’s still Pinnocio.
DL is like that chick on the exorcist, he will say anything to get more people to become greater fools. I know for fact that he can turn his head 360′ and also vomits green slime on a daily basis. Just Kidding!!!
‘Today we don’t have that. The economy is still good. The thing that sent us into a contraction was that house prices were getting high and affordability was aggravated by investor speculation.’”
Or, in other words, what we have here is all the earmarks of a classic bubble.
Here is a lot more detail about the Dresner fiasco — about the foreclosures and refinancings:
http://tinyurl.com/ykjrvz
Vote early, vote often!
The Housing Bubble Blog is nominated in several categories:
“2007 Realestate Blogging Awards”
http://www.housingwire.com/2007-rebas/
“Vote early, vote often!”
Early, yes; often, no. We must not emulate those we trash!
Jas
While my blog was not nominated for the best regional category, if you do read and enjoy my blog, I ask that you please vote for my site as a write-in
The New Jersey Real Estate Report - njrereport.com
(formerly the Northern NJ Real Estate Bubble Blog).
Thanks everyone!
jb (aka grim)
Grim — will do. Your blog is the one to whom I refer people who ask about the New Jersey market. Always enjoy reading your stuff. Voted for Ben, Neil and others early on, as those sites were on the lists.
Groan — “Keith,” not “Neil.”
BTW, anyone know if Housing Wire is written by one of our posters? I’m trying to figure out its agenda.
I could have done without that correct.
Not that I ever intend for my blog to be in the league of the others. Its more like a diary of my very delayed buying process. (A process not scheduled to really start until fall 2008… or maybe even later…)
Neil
One small vote… for the little guy without a $$$$ 41 million dollar ad campaign.
You got my vote Jim!
My write-in for most outrageous/opinionated: http://www.realtor.org
its not a blog, but gotta get the digs while you can.
Does anyone besides me find it ironic/amusing that Option One is advertising its automated broker services here?
Ed — that’s because the advertising is “directed” to sites by a computer algorithm that is based on keywords found in the text(s).
Orange Couty Register interview with “High End Broker.” You gotta read the comments; especially Buffy’s.
http://tinyurl.com/yx9pzv
it’s not there
Here?
http://blogs.ocregister.com/lansner/archives/2007/01/insider_qa_with_a_luxuryhome_b.html#more
Buffy has to be a poser. If “she” was for real, blogging would be the last thing she would lower herself to do. I mean, Omigawd, why waste time blogging when you could be shopping for that perfect pair of Jimmy Choo’s?
“He sold Dresner his investment property earlier on in the boom then recently bought it back at auction, the bust.”
“The article is on flippers getting hosed in Naples, FLA as bottom (or they think it is the bottom) feeders move in.”
Two pieces of evidence that the smart money recognizes the bottom.
Over the next few months, when the news is at its worst, they will be quietly snapping up the very best of the bargains. But even a year from now prices will be flat to only slightly up, so there’s no need to rush.
IMO you have an optimistic view of the bottom in Florida.
The nature of Florida investment is overreaction, due to the nature of most of the people who invest there. There will be some overreaction on the downside IMO as well. Since prices are still *well* above where they should be, even for auctions, there’s still too far to go down for it all to happen before then end of this year.
I’m thinking the real bottom will be in about 3 years, and that’s when the real bargains will be had.
I bought at auction in the spring of 1992 in Florida. That was the bottom & RE bounced along that bottom for a couple of years. When you see serious no reserve auctions that will be close to the lows.
“
Over the next few months,Three or more years, out, when the news is at its worst, they will be quietly snapping up the very best of the bargains.”Goldman Sachs et al put together a “consortium” of investors who went charging into Tokyo in 1993 or so - they “snapped up” a lot of real estate at 30% discounts to peak.
Then they stood around for another dozen years watching their “deals” fall another 50 points. “Smart money,” indeed.
“Two pieces of evidence that the smart money recognizes the bottom. Over the next few months, when the news is at its worst, they will be quietly snapping up the very best of the bargains. But even a year from now prices will be flat to only slightly up, so there’s no need to rush.”
Bottom? Bwahahahahahahahaha!!!
This morning I wake up, put on Bloomberg, and the first thing I see on the bottom of the screen is “US economy set to rebound due to end of housing slump.” Where do they get this shit?
From the potty, that’s where!
But also on Bloomberg:
http://tinyurl.com/y5bwap
“Global Markets Face `Severe Correction,’ Faber Says (Update3)
By Ian C. Sayson and Pimm Fox
Jan. 8 (Bloomberg) — Marc Faber, who predicted the U.S. stock market crash in 1987, said global assets are poised for a “severe correction” and says it’s time to sell.
“In the next few months, we could get a severe correction in all asset markets,” Faber said in an interview with Bloomberg Television in New York. “In a selling panic you should buy, but in the buying mania that we have now the wisest course of action is to liquidate.” “
and another from Bloomberg:
http://tinyurl.com/y8jls7
“`Disaster’ Risk for Stocks May Be Rising After Four-Year Rally
By Michael R. Sesit
Jan. 8 (Bloomberg) — Bennet Sedacca, president of Atlantic Advisors LLC in Winter Park, Florida, recalls being an equity trader during the October 1987 stock-market crash, in which the Dow Jones Industrial Average had its biggest one-day plunge.
He was trying to sell 25,000 shares of a company. “For four days, no one answered the phone,” he said. Today, as a manager of $200 million, he is protecting himself. In the last three months he has reduced his holdings of stocks and raised investments in short-term Treasury and other securities on the view that another crash may be coming, two decades later.
“Disasters may be rare, but I see the kind of conditions that could make one happen,” said Sedacca. “It’s like a big keg of dynamite with a fuse. I don’t know when, but I think the conditions exist for the explosion to eventually occur.”
Even as strategists at the biggest banks in the world forecast stock rallies in the U.S., Europe and Japan, disaster scenarios are being spun from New York to Hong Kong. For Sedacca, the potential triggers are the Iraq war, the U.S. trade deficit and the fallout from a glut of global cash.
For Phil Orlando, the chief equity market strategist for Federated Investors Inc., which manages $223 billion, it’s the potential for a recession in the U.S. For David Mouser, who helps manage $350 million at Driehaus Capital Management, it’s the buildup of debt to finance mergers and acquisitions.
“The single biggest risk facing global financial markets is a change in the benign credit-market conditions prevailing the last three years,” said Mouser. “We’ve had record liquidity in global markets the last few years that has driven all asset classes to continued new highs.” “
“The single biggest risk facing global financial markets is a change in the benign credit-market conditions prevailing the last three years,’’ said Mouser. “We’ve had record liquidity in global markets the last few years that has driven all asset classes to continued new highs.’’
History has not dealt kindly with the aftermath of protracted periods of low risk premiums.
GetStucco,
I appreciate the ironic counterpoint of Greenspan’s quote; too bad he didn’t listen to his own advice when he was chairman.
Greenspan has carefully peppered such comments throughout his tenure, masterfully combining CYA with plausible deniability (”bubbles are detectable only in hindsight”).
Bennett is one of Minyanville’s best commentators and contributors. Minyanville is a must-have for market participants IMO.
“In a selling panic you should buy, but in the buying mania that we have now the wisest course of action is to liquidate.”
Buy when everyone else is selling, and sell when everyone else is buying. Gosh, I learned that a long time ago.
Marc’s a good guy. I see him every so often. I’ve had a drink with him a couple of times in the past 6 months when he comes through Hong Kong. His Gloom, Boom, Doom Report every month is always a fun read. Flying around the world to invest in all kinds of esoteric places. He’s been a big bear on the Mortgage Lenders for a few months now.
“Where do they get this shit?”
NAR = National Association of Retards
“Where do they get this shit?”
They just pull it out of their a$$eS!
Here’s an interesting tid-bit from Austrailia.
I wish we would see more of this here. It would put the cabash on loose lending just about as fast as you can say “no money down”.
Court Ruling Alarms Low-Doc Lenders.
A recent ruling by an Australian court has sent shockwaves through the ranks of providers of low-doc and no-doc loans to sub-prime borrowers.
The court ruled in the “Khoshaba versus Perpetual Trustees Case” that the agent who wrote the loan had acted illegally because he had failed to establish that the borrower in fact had the capacity to repay the loan and would not default.
Tina Perinotto goes on to say “The ruling affecting the Resimac mortgage fund – one of Australia’s biggest, with shareholders including Westpac Banking Corp and Macquarie Bank – has sounded an alarm about the booming category of so-called low-doc and no-doc loans.”
In a precedent-setting decision the presiding judge ruled that the loan to Khoshaba be revoked and that Resimac not be allowed to foreclose on the family home in order to recover its money.
For the full story, here is a link:
http://www.financialsense.com/fsu/editorials/swagell/2007/0107.html
Nice find. Really, what if it happened here? Lenders would be crapping in their shorts and ….
Possibly I misunderstood the article, but it appears that the lender is not at fault and that “The broker had not acted ethically or responsibly in carrying out his duties to both the borrower and the lender, but had relied solely on the security offered by the family home.” This is the same argument that should/would be made by any borrower that has a “liars loan”. The broker/ agent has a fiduciary responsibility to state a reasonable income by present living standards of the borrower to protect both the lender and the borrower. Or if you know that your prospective borrower is a grocery store clerk making $10 hr then you cannot state he is making 50K yr. If your clerk tells you he made $10 hr then the law requires you to act accordingly. The NINA, SISA, and SIVA were approved for substantially qualified individuals, over time that has become anyone. There will be a lot of mortgage companies buying back loans.
wow
so who pays after the mort com goes broke, which will be soon
Question - how do you just “revoke” a loan? Were not the previous owners paid from that loan?
I don’t get this - it seems to be providing an easy way out for the bank. I’d much rather revoke a bad loan than have to foreclose on it. By “not allowing the bank to foreclose” means the bank is losing less money that it otherwise would. Some punishment.
You guys need to read the article.
The lender got the shaft………a total loss of money.
The borrower spent $120k on gambling, using his house as collateral for the loan.
The Courts are saying since he could not have re-paid the loan in the first place, that he will not lose his home to foreclosure.
It’s a VERY IMPORTANT ruling.
The Courts are faulting the lenders for making loans that could never be repaid and telling the lender “tough luck buddy”.
Yes a lender has to inquire what the money is going to be used for. They just cannot say oh you have collateral so here is some money.
In other words - I smell a rat. And the smell emanates from the banking community.
The bust is over. Better buy before prices start going up again.
http://bloomberg.com/apps/news?pid=20601087&sid=aj_uUcvveZy8&refer=home
After having recently read on Russ WInter’s blog that a very high percentage of Dec 06 homes sold in PHX (47%) and SD (51%) were vacant, I now fully understand how prices could continue increasing even as the number of sales transactions dwindled. The housing bubble is flaming out exactly the same way as the NASDAQ market flamed out in 2000, with a dwindling number of GFs still entering the market as everyone else runs for cover.
Justin Lahart’s sidebar — AHEAD OF THE TAPE — Will Housing Finally Bloom in the Spring? on p. C1 of today’s WSJ — picks up on the vacant homes theme (my comments are added in parens):
“Here is one reason to be careful about calling a bottom now. A large number of homes for sale are unoccupied.
In the third quarter, there were 5.7 million vacant housing units for sale or rent, accounting for a record 4.6% of all U.S. homes. The average in the 1990s was about 3.5%.
To get this ratio back to normal, 1.3 million vacant homes would need to be occupied. For comparison sake, economists polled by Blue Chip Economic Indicators expect construction to begin on about 1.6 million homes this year. With so many empty homes out there, one wonders why builders would bother breaking ground on new ones (Indeed!).
High vacancy rates have other effects, points out Credit Suisse analyst Ivy Zelman. When an occupied home gets sold, the seller has to buy or rent another house.
That sets off a chain reaction that ripples through the housing market. When a vacant home gets sold, the seller doesn’t have to do anything.
The owners of those unrented, unsold homes bear costs (such a PITI!). They have insurance, the lawn guy, taxes and, often, a mortgage to pay (not to mention the risk of squatters taking possession and setting up a meth lab). Seeing those costs pile up can motivate an owner to sell or rent at much lower prices. When a house sells at a lower price, other would-be buyers expect lower prices as well (in other words, the comps are hosed). When it rents for less, it becomes a more-attractive alternative to buying (especially when prices are dropping like a rock!).”
What no mention home ownership has risen from 64% to 70%, that 50%+ percent of purchase in “frothy” areas were 2nd homes or greater, that 70%+ of these mortgages are “non-traditional”?
I think its different this time.
Very good point. Not only are the number of unoccupied homes higher, but the number of homes that are occupied by people who would otherwise not occupy them (e.g. would have been in an apartment instead, or wouldn’t have that second home) is also a large contributing factor.
Anyone got a figure on % of homes that are second or vacation homes? And how that’s changed over the years?
“as everyone else runs for cover.”
When raindrops turn to hail…indemnify & RUN!
shooking
David Seiders, chief economist at the National Association of Home Builders in Washington, looks for the industry to do much better. He sees home building adding as much as 0.7 percentage point to fourth-quarter growth.
4th quarter 2016.
The MSM is really bad and become more irrelevant every day. My real time study of the Las Vegas MLS shows exactly 10 condo sales in the 1st week in Jan, 2007…thats for all of Clark County (Las Vegas). The SFR homes that are selling are under 1700 sq. ft. and around $275,000. Everthing else is sitting waiting for the spring bounce!!! Now, for all the economists and real estate “talking heads”, where are the qualified buyers going to come from to uptick the hugh inventory of overprice, extremely large homes??
The reporters from MSM must be hired from the bottom 1/3 of their graduating class based on their writing articles accepting any words from these PR midgets as facts
Shame on the MSM
Just in case this wasn’t posted before.
Suit alleges massive mortgage scam
“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.”
And the link is.
http://www.nctimes.com/articles/2007/01/06/news/californian/20_44_381_5_07.txt
Gates Foundation has (according to L.A. times) (along with obligatory Ameriquest horror story):
367 million in top 20 of 25 subprime lenders & companies
1.9 billion in FRE & FNM stocks and securities
So there are Foundation (asset) bubbles and charity/non-profit bubbles?
Lots of rich guys lost tons of dough in the tech stock crash. Would you expect the end of the housing bubble to play out any differently?
The rich as well as their foundations will lose some money, but currently there are asset bubbles which have made the foundations overbloated with extra cash which will spread to their charities. So those (hand picked) charities will have extra money this year (and next at most?) to spend for “help.” Charities will be burned if they think that the last 2-3 years (and the next 1 or 2) are the norm and budget for continual good years ahead….
“Charities will be burned if they think that the last 2-3 years (and the next 1 or 2) are the norm and budget for continual good years ahead….”
As will local governments, in a whole lot of areas, that counted on future tax revenues to rise as they needlessly spent all of their housing bubble windfall. Woe be the taxpayers.
I would guess Bill Gates lost more in the tech bubble than any other human on the planet. I doubt he knows any more about investing than he does about haircuts.
“Gates Foundation has:
367 million in top 20 of 25 subprime lenders & companies”
Oh well, the goes a small squirt of Warren Buffett’s donation money.
Even if they lost it all 367×10^6 is roughly 3% of Microsoft’s quarterly revenue.
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
From one of the recommended books:
““Bubbles, Booms, and Busts; Make Money in Any Real Estate Market,” by Blanche Evans (McGraw-Hill, New York), $16.95, 167 pages. This extremely well-researched and up-to-date book explains the signals of local rising, falling or neutral local home sales markets, and how to profit in any situation if you take a long-term perspective on home sales. “Except for local economic shocks, like the collapse or exit of a major employer, home prices nationwide have not gone down since the Great Depression,” the author reminds readers.”
Well, until this past year anyway!
I notice Talbott’s “Sell Now!” - the most important book about the RE market at this point (and since early last year) - is missing from this shill’s list. Quite expected
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
The link above got chopped off…
http://online.wsj.com/google_login.html?url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB116812190673969438.html%3Fmod%3Dgooglenews_wsj
“You want to limit your risk and you want to buy as much property as you can comfortably afford. You do that by using “leverage” — paying a fraction of the purchase price yourself and borrowing the rest. It’s called using other people’s money.”
Uh, yeah, use “leverage” to “limit” your risk.
“Leverage” to “limit” risk? That is SO 2003!
Christmas colors seem to be hanging around extra long this year…
http://www.marketwatch.com/tools/marketsummary/
What set off Japan market yesterday? Down 262 points. Couldn’t find any commentary.
mystery gas smell over midtown manhattan
http://www.wnbc.com/news/10694568/detail.html
I felt terrible at 10:00 but it seems to be getting better. No boom yet.
It’s the flatulent NYC real estate market.
The Mayor seems to have a sense of humor: “We are waiting for the gas to pass,” the mayor said.
http://wcbstv.com/topstories/local_story_008093506.html
The Demise of Picking Up Nickels in Front of Steamrollers?
http://wallstreetexaminer.com/blogs/winter/?p=277
The following article in today’s USA Today talks about Portland, Maine’s resurgence traces back to relatively low land values sparing many well-designed 19th-century brick and granite office buildings and warehouses from demolition.
The land values are much higher today and I wouldn’t be surprised if residential RE prices take a dip - but most of the gain is probably here to stay.
City of Portland is a Maine attraction
Updated 1/8/2007 6:36 AM ET
[]
A fishing boat returns to Portland Harbor as the moon rises over Ram Island Ledge Lighthouse last month.
By Rick Hampson, USA TODAY
PORTLAND, Maine — In a state where tourism tilts hard toward the rural and the wild, this city is earning a reputation by offering pleasures more urbane than camping, fishing or leaf-peeping.
Portland is showing the rest of the state — a self-proclaimed “Vacationland” locked in a love-hate affair with summer visitors “from away” who pay the bills but clog the roads — that tourism can flourish 1) in months besides July and August and 2) without driving the locals crazy.
Portland’s attractions include gourmet restaurants, historic buildings, a picturesque waterfront, art galleries, museums, boutiques, microbreweries and coffee shops. Now, they’ve combined to land the city on Frommer’s list of the top 12 world travel destinations for 2007, along with the likes of Zurich, Tokyo and the Caribbean’s Virgin Gorda.
Outside New England, some were surprised the travel guide publisher would honor a place that, as Frommer’s editorial director Kelly Regan puts it, “doesn’t immediately spring to mind as a singular travel destination.”
“People say to me, ‘Why Portland?’ ” admits Barbara Whitten, director of the Greater Portland Convention and Visitors Bureau. “Some people are startled — ‘Who knew?’ It’s like we’re the underdog.”
Not anymore.
“As far as the media go,” Whitten says, “we’re a little …” — and here she employs a word seldom used to describe anything in Maine — “hot.”
This coastal city of 66,000 is getting used to subjective but marketable accolades such as Frommer’s. This year it has been named one the “Healthiest Cities for Women” (Self magazine); one of 20 “Hottest Cities for Entrepreneurs” (Inc.); and one of 50 “Best Places for Businesses and Careers” (Forbes).
Last year, Portland was named one of 10 “Dream Towns” by Outside magazine and one of America’s 20 greenest cities by Vegetarian Times. In recent years it also has ranked No. 7 among “the Best 100 Art Towns in America” (Countryman Press); one of 10 “Great Adventure Towns” (National Geographic Adventure magazine); and “BikeTown USA” (BikeTown magazine).
“People want to know how we did it,” Whitten says.
A strong comeback
A quarter-century ago Portland was another fading New England industrial city. The downtown shopping district was crippled by the opening of the Maine Mall outside the city. Residential neighborhoods were sapped by suburban flight. The port was busy with fishing and cargo but attracted few visitors besides stray cats.
Portland’s decline, however, bore the seeds of its revival. Relatively low land values spared many well-designed 19th-century brick and granite office buildings and warehouses from demolition. So the city sat there, waiting to be rediscovered.
Many of the pioneers were young people in finance, design, the arts and publishing who were tired of the cost and congestion of greater Boston. Some were entrepreneurs who needed only an Internet connection, an airport and plenty of frappuccino. Soon enough, the fine old commercial buildings were becoming luxury condos.
One turning point for tourism came in the early 1980s with the opening of DiMillo’s Floating Restaurant on the waterfront. Other businesses followed, and today the district — known as the Old Port — combines busy wharves and a lively tourist trade.
Another occurred in the 1990s, when the Maine College of Art moved into the city’s old public library and into what had been downtown Portland’s leading department store. Now the college helps anchor the Downtown Arts District and its galleries, shops and coffeehouses.
Among other attractions:
•A minor league ballpark whose left field wall is a replica of the Green Monster at the Red Sox’s Fenway Park. There’s even a triangular Citgo sign to match the one behind the real Monster in Boston’s Kenmore Square.
•The Portland Observatory, a seven-story wooden tower built in 1807 on a hill overlooking the harbor. It allowed merchants to spot ships as soon as they entered the harbor and get crews to the docks to unload the cargo.
•The Portland Museum of Art, which has a 14th-century painting that may be by Leonardo da Vinci of a woman who looks just like the one in the Mona Lisa— only she isn’t smiling.
Bob Witkowski, a transplanted Midwesterner and Portland history buff, says first-time visitors “tend to expect a big city or a fishing village. They get neither. But they get the best of both.”
‘A hidden gem’
The result is a certain “wow” factor. “Portland’s still like a hidden gem,” says Dawn Clemens, a restaurant manager who moved from Portland, Ore., three years ago after discovering it on vacation. “It doesn’t have such a reputation to live up to yet.”
Its reputation is growing. Clemens says that last March some friends started looking for a hotel room for four consecutive nights in July and couldn’t find one. At Fore Street, the critically acclaimed restaurant where she works, most diners are out-of-towners who reserve days or weeks in advance.
Portland is not for everyone. The Old Port wharves, for instance, “have the fishing nets out there, the warehouses, the stray cats that live off the fish,” Clemens says. “We’re not like the other waterfront cities on the East Coast, where everything is nice.”
Also, zoning discourages national chain stores in the Old Port. Clemens says some tourists miss “that name recognition of Crate and Barrel or Restoration Hardware.” Unless they find such stores, she says, these tourists don’t “feel they’ve arrived at the center of something.”
To others, Portland’s quirkiness is a plus. “It’s not all gentrified and prettified,” says Sarah Ferris of Boston, who visited last month. “You feel like this is a real place, not some shopping mall or a theme park. It’s authentic.”
Portland’s variety also explains its popularity with visitors, says David Vail, an economist at nearby Bowdoin College. “Portland is a hub for visitors who want to explore lots of different things. Baby boomers with discretionary time and income are neither hard adventurists nor sedentary beachgoers. They look for lots of attractions.”
Using Portland as a base, they can explore Maine’s wooded mountainous interior; take ferries to the many islands in Casco Bay; hit the beaches to the south; or shop the outlets in Freeport, home of mail-order giant L.L. Bean.
And Portland’s not that cold. It’s farther south than Eugene, Ore.; in January the average high is 31 degrees, only 8 degrees lower than in New York City.
Best of all, from Portland’s point of view, tourism doesn’t hurt. Charles Colgan, a South Portland resident and associate director of Maine’s Center for Tourism Research, says Portland and tourism are a better fit than elsewhere in Maine, where in summer some small communities are overwhelmed by visiting throngs.
In Portland, tourists and locals don’t have to step on each other. “Different parts of the city are well-defined,” Colgan says. “The tourists go to Commercial Street and the Old Port, and that area is distinct from the downtown business corridor where local people go. Each group has its own zone.”
http://www.usatoday.com/travel/news/2007-01-07-portland-maine_x.htm
Not only do you believe every word of it. You expect others to do the same? It might work with the locals but not here.
I’m sorry, what is it that you don’t believe? Something in the article?
What can I say, Portland is a wonderful place to live. We moved here 5.5 years ago from NY (where we lived in a wonderful town) and still are pinching ourselves over how nice it is here.
The house we bought here for $500 would fetch $700 now and even if prices were to drop by some ridiculous amount, it would not be terribly concerning to us because we have no plans of moving. We just really love Portland and Maine overall. We’ve had a ton of visits from our friends in NY and other places and they invariably are very surprised at how nice it is here. At least a couple are planning on moving here in the next few years.
I am inclined to believe he is referring to the assertion that “The land values are much higher today and I wouldn’t be surprised if residential RE prices take a dip - but most of the gain is probably here to stay.”
The whole “But it’s different here” crap is just that. The determining factor in whether or not prices hold up will be based entirely upon median income. And, as we all know, economies based largely on tourism hold relatively low paying jobs. Not a good sign.
Portland’s economy wouldn’t be characterized as being based on tourism. Secondly, prices never grew percentage wise anywhere near as much as in the real bubbly areas. Thirdly, there’s not been much speculative building, we don’t have many investors, never had any real flipping and also don’t have the second homes that are common in many coastal, mountain and lake areas.
The people who have been propping up home prices are from away and they bring their own money - often from the home equity they built up in the high price areas they slaved away in for their careers. Many bring their own jobs. Many are retirees.
Real estate is all local. Prices may go up and down in one part of the country and not in another. And even if they all move in the same direction, the magnitude of movement varies by market.
Where we lived in NY, the biggest dip they’d ever seen was just a few percentage points. Other areas in NY were down far, far more. But certain areas were pretty bulletproof.
If you’re in a market that hasn’t gone up tremendously and if your in a top school district, there’s a lot less volatility.
‘The whole “But it’s different here” crap is just that.’
Yet, here on this blog, a blog that dispells the foolish myths, PortlandMainer continues to insist its different in ME……. after being here for all of 5 years and coming from all places, New York. I’ve seen these same fools come and go for years and they all yammer the same foolishness.
First of all, odds are you don’t call people fools to their faces.
Second of all it’s different everywhere little Cappy.
“Second of all it’s different everywhere little Cappy.”
Of course it is. Where ever you got your money parked. Not only are you way off on ME real estate you blow smoke about NY RE too. Your wild claim that Westchester prices move a few percent is just that. Another wild claim as prices HERE in Westchester are off 10%…… but you’re different…. depending on which number you bet on. Don’t be dragging the uninformed into the mess just because you overpaid in ME. We’ll all be there calling you out on your cheerleading and happy talk….. Just like we do here. And I’ll be sure to add FOOL….. in person.
Chappaqua, Bedford, Waccabuc, etc. - these affluent excellent school districts hold their value. Not as familiar with southern Westchester but I imagine places like Rye and Scarsdale hold their value also.
Down 10% must be holding it’s value. Just like Portland.
I woke up this morning here in Northern San Diego to a radio advertisement from a law firm trying to find clients that signed a neg-am loan and the loan wasn’t properly explained to them……so it begins. Fckuers.
they are now victims. if prices were going up they would be
brilliant investors and market timing kings
good luck with that. typical. even if those claims fly, which I doubt, good luck trying to collect from bankrupt entities.
Heh, if them FBs think houses are expensive, wait till they try lawyers.
Reminds of the life-insurance-as-an-investment scam of the early 90’s, of which I admittedly got suckered into. Lots of class action lawsuits against brokers who “didn’t explain” the investment. I was solicited to take part in such a lawsuit, but didn’t because I take responsibility for my own bad decisions. Fortunately I wised up and canceled the “policy” after only losing about a grand.
Remember viatical “investing” when AIDS was really rolling?
I can’t even think of what they’ll come up with next.
Both the implode-meter and the bakersfield bubble have a story about an attorney who wants to train an army of lawyers to go after all the subprime shaddy lenders, not the good ones just the shaddy one, but I’m am sure there will bw collateral damage.
Part of downtown Austin shut down b/c of a bunch of dead birds. Dozens apparently.
Seems weird w/the NY thing happening at the same time.
Anyone seen the stock charts of the subprime lenders lately? Reminds me of a video game I used to play in the early 1990s called Total Carnage. I guess investors are starting to realize that lending money to stated income borrowers with 500 FICOs at 100% LTVs and 70% DTI ratios might just involve a bit of risk after all. Oops.
http://interestrateroundup.blogspot.com
“Total Carnage” …is a lagging indicator!
Someone needs to tell cnbc’s bob pisani today is NOT the fifth trading day of the year. We were closed the 1st and the 2d. The first trading day was Wednesday, then Thursday and Friday, so today is the FOURTH trading day of the year.
Normally I’d dismiss this as typical cnbc stupidity, but we’re only an hour and a half into the trading day and he’s mentioned this “fifth trading day” thing three times.
Eaton Vance bond manager predicting a CDS or LBO credit event in 2007:
http://tinyurl.com/ssl38
Faber predicting severe correction in global assets
http://www.bloomberg.com/apps/news?pid=20601087&sid=aIHHMwv3ehCo&refer=home
Does anyone else on this blog think it’s great that the NAR, CNBC, Bloomberg et all continue to call the bottom of the RE market each day, week & month? If the MSM told the truth we would have “con”-gress passing stupid laws & getting into all kinds of mischief.
My hope is they all continue to call the bottom until it’s too late for the “govment” to bail the fools out. We all know in the end they will bail the banks out to save the system if necessary. This way, at least it all will be over before “con”-ressional hearings are over.
Hi,
I’m reposting this message here as it seems a more appropriate place. I’m still figuring my way around here, so my apologies for any blaring faux pas…
I’d like to know if anybody here can tell me what’s going on with this house:
4415 Pleasant Valley Ct N, Oakland, CA 94611 2 beds, 1.5 baths, 1,035 sq ft
According to Zillow, it sold for 400k in May of 2006–then again in July 2006 for 560k. It’s listed again, (right now) for 599k with a messgae that the owners are “motivated and willing to look at all offers” http://sfbay.craigslist.org/eby/rfs/258928707.html
My wife and I really like the area and was thinking of possibly putting in a lowball offer. Any information appreciated on this blog or my email luiwul@hotmail.com!!
Thanks, Lu
If the guy paid 560k he will not sell for less,look for homes bought many years ago where the sellers are in trouble and willing to drop the price.That home will be a forclosure and add to declining values.It is too early for low ball offers wait at least a year.
Thanks for the feedback BF. We were thinking along the same line, but from the ad there seems to be some indication that the seller is desperate or quickly becoming so. We’ve waited this long so a few more months or even another year won’t be horrible. My wife would really like to “buy” and I’ve been holding her off thus far…I did however tell her with the housing market loosening up that we could start looking in 2007 (the later the better of course). The Oakland place is pretty close to what we’re both looking for and I told her that more such places will be cropping up with even better prices as time goes on.
Lu-
hmmm…. sold for 400K in May 2006, then 560K 2 months later and now they’re “highy motivated” to sell?
I’d check back a bit on the selling history of this one. I noticed a lot of homes being sold and resold w/in months on the Seattle MLS last Fall. It looked to be a “ponzi scheme among friends” where they’d jump the price and split the proceeds. Til the game comes to an abrupt end of course. It’s a great pyramid scheme as long as the banks are willing to keep financing it.
I hope, if you are seriously considering “lowballing” this property, that you will not offer one penny over whatever it was worth in 2000.
At any rate, you do understand that for sure that last 160K extra that it sold for in July was funny money, right?
Good luck and be careful!
Maybe you should have your wife read the “news from Wall Street and Washington” thread for a couple of days on this blog. Frankly, if I had a spouse pressuring me to buy right now, that would be my bottom line: Understand what you are asking us to get into or go away.
I think that once people understand the bizarre lending and fraud that created this bubble, it helps them to realize that, really and trully, these homes are WAY overinflated.
Also, the lending standards are set to tighten end of January. Really bad idea to buy before that gets priced in.
Unless, of course, you guys have so much $$ that losing a few 100K in a years time means nothing to you. In which case buy now and buy often!! I know that may sound facetious but I’m serious: If you can take the hit financially, any time is an “okay” time to buy. If money is a consideration though, now is a horrible time to commit.
No SPD we can’t afford to take a hit on a price drop. My wife is more or less reasonable and has been very patient so far. We can sit tight a while longer as neither of us gets emotionally charged when seeing a nice house. Thanks for your reply it’s greatly appreciated!
Some classic RE broker bulls_it about why she uses the average price as opposed to the median price:
“I use the average figure, because I have yet to have anyone I know convince me that “median” figures are relevant. Sure, everyone uses them and keeps comparing them to previous “medians”, but for the average person, explaining what “median” is is like explaining how to program the first VCR’s that came out. Imagine if we started keeping batters “medians” instead of averages. Or, quick, tell me how many liters are in 5 gallons”.
Interestingly, this broker’s blog allows comments and there is already one that shoots her down!
http://tinyurl.com/yjzp5g
he seems to be deleting comments. anyways, here’s what I posted. let’s see if he deletes this too:
__________________________
1. pdxrenter Says:
January 8th, 2007 at 5:26 pm
Liar liar pants on fire. make up whatever lies will help perpetuate the myth that RE ‘never goes down’. It is going to get 10X uglier than it has so far.
more evidence of an art bubble.
World awash in cash drives bull market in art
New wealth among U.S. hedge fund managers and Russian, Chinese and Japanese individuals fuels prices. Views differ on whether it’s a bubble.
By Deborah Brewster and Peter Aspden, Financial Times
January 8, 2007
http://www.latimes.com/business/la-ft-art8jan08,1,5976346.story?coll=la-headlines-business&ctrack=1&cset=true
“Art prices in the U.S. rose last year an average of 27% — the steepest ever, according to Artprice.com, which tracks global auctions. Depending on the index consulted, overall prices are either close to or above the level they reached during the peak of the last art boom, in 1990.”
I was floored last week when I was going back and forth with a guy from this blog about some art glass things I bought 10+ years ago. Paid less than $10K each for them and they are now selling for 3-4x that.
I just saw on the local morning news (Los Angeles) that consumers are spending $2.1 for every dollar being earned. They say consumer debt is worse in California. Everything is finally starting to add up. I didn’t understand how so many people were driving expensive cars etc. Although I wonder if these same people will ever “get it”?
Lucille Ball to Ricky:
“But Ricky, sweety, I got these 5 hats on sale…I saved over $500.00!”
Waaaay OT — wonder if there might be some great bargains on cruises real soon. Odd day today — first the gas in NY, then the birds in Austin, now some plastique in Miami. Shucks, the most exciting thing in my own day is going to be the smell of baking chicken.
So much for that — the bomb squad apparently blew up whatever the C-4 detector detected and it didn’t go bang.
Sacramento Area Flippers in Trouble gets some press.
http://www.sacbee.com/103/story/104372.html
“If you doubt there’s a frosty trend in the local real estate market, look no further than a five-month-old local Web site. At Sacramento Area Flippers in Trouble (flippersintrouble. blogspot.com), more than 470 Sacramento area homes are listed for sale at prices below — sometimes way below — what their owners originally paid.”
…
“Similar sites have popped up in other cities.”
“The local site was launched last July “to counter the positive spin (from Realtors and others) about how great real estate is in tems of appreciation,” says its founder….”
Lander or Max:
I clicked on the property tax links foe about half a dozen among these properties at random, and every single bill was unpaid (sometimes multiple bills on each property, all unpaid).
Question: how many of these ~470 properties are like that, with tax bills unpaid?
Just returned from Denver today. Much to report, but the funniest moment of the trip was passing a condominium development with a silly-lettered sign advertising “Deal or No Deal Condos - Call 303-XXX-XXXX”.
So if the REIC makes this one big reality/game show, people will still buy?
Anybody see the new Capitol One commercial? The barbarians discuss how they were the ones that originated banking and well…
Regarding mortgages, they offer fixed (i.e. prisoners in chains on the wall) and adjustable (i.e. prisoners in chains on stretch racks).
Classic!
http://www.tinyurl.com/yfw62g
This is a really good video made for the UK housing bubble. We need to make one for David Leahry !