Bits Bucket And Craigslist Finds For January 17, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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massive debt fueled special dividend……the new way wall street works (plus a warning in the finefrint…….)
plus some oil and something about investor sentiment
Will the FED try to hide what is going on in the subprime market? 11 closures in 16 days.
How many elephants is it possible to simultaneously hide under the living room rug?
Make a war. Bomb Somalia once a week. Reinvade Cuba. No Granada. Attack Canada. I knew you would answer that.
Yeah it’s a little bit diffucult to hide DUMBO under my bed.
Aren’t you describing Hitler’s economic plan? I don’t believe we will go there.
Bah you never know. It’s a great way to solve unemployment problems for politicos and you have the advantage to enrich yourself greatly without any problems. You find a real real bad guy in a far away foreign country, a dictator. It’s a real good fun distraction and you can make a lot of parades and say “mission accomplished” or whatever.
–
“Aren’t you describing Hitler’s economic plan? I don’t believe we will go there.”
You are right, we will go lot farther. Remember: We ARE #1!
Germans has Nazis and we have Financial Nazis. There are many routes to disaster and we have created our own. Human Nature in play — Power corrupts and our leaders have more than anyone ever had. No?
Jas
There is still time left. I hope. But anything can happen if we ever have a hyperinflationnary depression.
–
“But anything can happen if we ever have a hyperinflationnary depression.”
Or, if we have a deflationary depression.
Jas
yes
Yes, I recommend leaving the US while you still can.
Remember, the concentration camps could open at any moment so there’s no time to lose. Pack your things today.
Where can I find a list of the 11?
The PPT is hard at work making sure that puts on housing stocks expire worthless on Friday. Free markets are great, aren’t they?
How do you rule out other explanations to conclude that it is the PPT?
I can’t imagine the volume of trading and costs associated with trading the underlying enough to cause options to expire worthless is more cost efficient than either buying back the options or just letting them be executed. There would have to be a ridiculous amount of options versus the float to do so (is possible, I should probably bother looking but would need maybe a good example).
“I can’t imagine the volume of trading and costs associated with trading the underlying enough to cause options to expire worthless is more cost efficient than either buying back the options or just letting them be executed.”
You provided an excellent argument in favor of the PPT theory. Governments can afford to undertake “investments” that no private trader could ever afford to make.
Suppose your assertion that the “PPT is hard at work” turned out to be 100% on target. Would there really be anything wrong with that? I don’t believe any laws would have been broken. They are the government, after all — doesn’t that give them carte blanche to do whatever they see fit to keep our asset markets humming?
http://www.immobilienblasen.blogspot.com/
cold weather destroys the citrus crop in California
need to bring in the money to pay the mortgage
Hopefully these people have crop insurance and will be able to get forebearances until claims are paid. That really sucks, both for them and for those of us who are heavy consumers of California produce. I have a big box of those giant navels in my kitchen right now. Thank goodness, they were expensive enough before this happened.
Unfortunately, the crops that were ruined, happened to be in some of the bubbliest areas of Central California, as luck would have it.
A double whammy, if you will.
Bad crops are never good for real estate.
Go ask that to Babylonians.
I also have a giant navel, but its nothing you want in your kitchen. Trust me on this one…
With taxpayer’s money and a lot of printing and borrowing. It’s like the “broken window” theory. Want to have a boom in construction and renovation ? Break all the windows in the US or let’s have another Katrina. The freeze will affect Canada too. We buy in the winter from California, Mexico and Florida. Did somebody buy orange juice futures this morning ?
No, but it has been a long time since Florida citrus paid enough to pick, and my groves picked the right year to be a heavy crop.
Cold weather in my area is putting the brakes on outdoor construction work. There have been several weeks of minus temperatures. This morning its -14F. One night last week was
-31F. I know a few people that have been out of work.
farmers are pulling citrus trees out of the ground in Fillmore CA because its too expensive to compete with S. American citrus.
They are growing nursery stock in place, for all the new homes that need landscaping. Drive up hwy 126 and take a look for yourself. That was one of the last places for citrus in Ventura county.
Saw somewhere that CA wants to pay heating expenses for unemployed crop workers. Not only no work, but it’s cold.
PPI m/m and y/y higher than exp. Rate cuts? Huh????
TxChick –
Inflation reports are irrelevant, as the Wall Street cargo cult’s belief in future rate cuts is faith-based.
That’s for sure. The CPI calculations are a joke. What’s funny is that can’t even hide inflation. Look what happened today to UK CPI. These liars are screwed.
They can’t even hide it!
Attempts to hide inflation — like, for example, claiming that homes are assets, not embodied consumption streams, and hence don’t factor into inflation, even though they represent over 25% of household expenditures (and probably over 30% given their current inflated price levels) — is doomed to failure. The problem is that the side of the inflation balloon which is excised from the data because it is growing too rapidly eventually causes the visible side of the balloon to bulge, due to the “wealth effect.”
Not in the UK anyways. Rates are going up again and again. Lool what is happening in the UK for an “avant-goût”. The same is coming in the US. More rate hikes. And more bursted bubbles.
Look at…. Sorry.
how can Uk banks offer loans at 5 x income ?
Only Sherlock Holmes and Watson knows. Nobody can really explain it. Except, maybe the banks are expecting an explosion in the value of houses or a spectacular increase in the future earnings of their borrowers. Bloody crazy.
Industrial production and capacity utilization were also higher than expected. PPI is relatively useless … even more so than the overly adjusted CPI. But it’s worth nothing that core PPI for finished goods and crude goods were both up, and net/net, that’s a negative for those hoping for a Fed rate cut soon, in my book.
You can read more at my blog, as well as an interesting nugget I found on another big commercial property holder looking for the exits, a la Sam Zell…
http://interestrateroundup.blogspot.com/
I read your blog everyday. I have it bookmarked. Interesting site with interesting observations. Keep up the good work! Too bad you don’t allow comments (you can always edit them you know!).
I’m hoping for a rate cut because my private student loans have adjustable rates. I began repayment in ‘03 when rates were low. What a shock it’s been over the last three years. My payments have jumped over 50% I pray for a rate cut every day!
Sorry Chicago guy. You are out of luck. It won’t happen.
Man, guy, why didn’t you get a fixed consolidation? I consolidated $35000 in 2005 @ 2.875 percent, plus I get 0.25 percent off for autopay. I hate debt, but this kind of debt is better to keep and pay the absolute minimum than pay off. I make the spread on a dollar saved in my savings account that pays 5.38%
The rate cut crowd are bleeting sheep. They have been calling for cuts for months, and it hasn’t happened. Bloomberg interviewed 50 british economists before the UK rate hike, and not one of them predicted a rise in rates. So much for wishful thinking. Rates will be held flat as long as possible, but if the USD index starts pushing toward the 80 level, look for raises, not cuts.
Not only, no cuts. But even higher rates.
Meanwhile, Nightly Business Report interviews tons of American econs, and they all say HeliBen will be cutting rates in early summer. I guess they think that if they ALL say it, HeliBen will HAVE to do what they say. Squatter’s rights on Wall Street. Yuck.
Goebbels rides again.
There is a rumor that ACPI (Advanced Core Price Index) will be used in the future. This index excudes food, energy, and rent but includes things like styrofoam cups that can be bought at WalMart.
I believe there is a flipper close-out sale currently underway on $2m+ homes in my SD zip code (Rancho Bernardo / Santaluz 92127). Are there really enough move-up buyers with bank to absorb this glut of recently-built, supersized McMansions? My guess would be no; it is very difficult for flippers to stretch their accumulated investment gains to these heights without the leverage of subprime lending, and subprime is toast.
Unfortunately for used-home sellers (or fortunately for priced-out renters
), an inventory glut at the top end weighs down the market value of all the older, less desirable used home inventory within close proximity.
————————————————————————————————–
Here is the SD zip current inventory of homes w/a $2m+ wishing price (just in 92127); the number and price density of used home listings in the $1m-$2m range is ever-increasing at lower price points (and there are too many to post).
Nine of these 41 homes were listed since 1/1/07; the rest have all twisted in the wind since before Christmas 2006 or earlier…
The date shown is the stated MLS listing date, though bear in mind that these may actually be “relisting dates.”
7954 ENTRADA DE LUZ EAST, SD - Rancho Bernardo, CA 92127
5/8 11,000 39,204 Sq. Ft. 08/04/06
$7,995,000 - $7,995,000
8131 RUN OF THE KNOLLS, SD - Rancho Bernardo, CA 92127
6/7 8,200 1.4 Acres 08/02/06
$4,750,000 - $4,750,000
7961 OLD MAN RIVER ROAD 239, SD - Rancho Bernardo, CA 92127
4/6 7,500 27,878 Sq. Ft. 02/22/06
$4,695,000 - $4,695,000
7937 OLD MAN RIVER ROAD 241, SD - Rancho Bernardo, CA 92127
4/5 6,700 31,799 Sq. Ft. 02/22/06
$4,395,000 - $4,395,000
7975 VILLAS, SD - Rancho Bernardo, CA 92127
5/6 6,140 N/A 09/15/06
$3,895,000 - $3,895,000
7758 ROAD TO ZANZIBAR, SD - Rancho Bernardo, CA 92127
5/7 7,759 N/A 01/11/07
$3,850,000 - $3,850,000
8388 SANTALUZ VILLAGE GRN E, SD - Rancho Bernardo, CA 92127
5/6 6,417 1.5 Acres 11/02/06
$3,775,000 - $3,775,000
7955 RUN OF THE KNOLLS, SD - Rancho Bernardo, CA 92127
4/6 6,150 1.5 Acres 12/05/06
$3,695,000 - $3,695,000
8024 ENTRADA DE LUZ W, SD - Rancho Bernardo, CA 92127
4/6 5,620 29,621 Sq. Ft. 01/05/07
$3,695,000 - $3,895,000
7785 SENDERO ANGELICA, SD - Rancho Bernardo, CA 92127
6/7 6,600 37,026 Sq. Ft. 05/12/06
$3,595,000 - $3,595,000
7837 SENDERO ANGELICA, SD - Rancho Bernardo, CA 92127
5/6 5,895 32,234 Sq. Ft. 08/04/06
$3,495,000 - $3,495,000
7518 TOP O THE MORNING 303, SD - Rancho Bernardo, CA 92127
4/5 6,525 23,522 Sq. Ft. 08/01/06
$3,495,000 - $3,495,000
7904 WHITE CHRISTMAS, SD - Rancho Bernardo, CA 92127
4/5 N/A N/A 10/17/06
$3,300,000 - $3,849,876
1 ARTESIAN TRAIL, SD - Rancho Bernardo, CA 92127
5/6 5,677 2.5 Acres 12/06/06
$3,095,000 - $3,095,000
7535 PLEIN AIRE, SD - Rancho Bernardo, CA 92127
5/6 4,571 1.6 Acres 09/29/06
$2,985,000 - $2,985,000
7519 PLEIN AIRE, SD - Rancho Bernardo, CA 92127
5/6 5,550 1.4 Acres 03/12/06
$2,925,000 - $2,925,000
2 SANTA FE HILLS ESTATES, SD - Rancho Bernardo, CA 92127
5/7 5,382 2.5 Acres 12/06/06
$2,895,000 - $2,895,000
7907 DOUG HILL, SD - Rancho Bernardo, CA 92127
5/6 5,500 1.2 Acres 09/28/06
$2,885,000 - $2,885,000
7506 TOP O THE MORNING 302, SD - Rancho Bernardo, CA 92127
4/5 6,242 26,136 Sq. Ft. 11/13/06
$2,875,000 - $2,875,000
7815 SENDERO ANGELICA, SD - Rancho Bernardo, CA 92127
5/6 5,536 1.1 Acres 04/06/06
$2,800,000 - $2,800,000
7985 SENDERO DE ORO, SD - Rancho Bernardo, CA 92127
4/5 5,500 36,590 Sq. Ft. 08/02/06
$2,800,000 - $2,999,000
14662 ENCENDIDO, SD - Rancho Bernardo, CA 92127
5/6 5,048 1.6 Acres 11/03/06
$2,775,000 - $2,775,000
7828 SANTALUZ INLET, SD - Rancho Bernardo, CA 92127
4/5 4,097 32,670 Sq. Ft. 01/06/07
$2,695,000 - $2,695,000
7868 TOP O THE MORNING WAY, SD - Rancho Bernardo, CA 92127
5/7 5,686 N/A 08/11/06
$2,650,000 - $2,650,000
17174 BLUE OF THE NIGHT, SD - Rancho Bernardo, CA 92127
4/5 4,682 19,798 Sq. Ft. 12/18/06
$2,595,000 - $2,595,000
7823 SANTALUZ INLT, SD - Rancho Bernardo, CA 92127
4/5 4,098 43,560 Sq. Ft. 01/06/07
$2,595,000 - $2,595,000
8246 RUN OF THE KNOLLS, SD - Rancho Bernardo, CA 92127
4/5 5,000 43,560 Sq. Ft. 01/15/07
$2,495,000 - $2,495,000
7755 SENDERO ANGELICA, SD - Rancho Bernardo, CA 92127
4/5 5,300 40,075 Sq. Ft. 01/06/07
$2,450,000 - $2,450,000
7984 CLAMBAKE DRIVE, SD - Rancho Bernardo, CA 92127
4/5 4,318 12,632 Sq. Ft. 07/16/06
$2,395,000 - $2,395,000
8161 CAMINITO SANTALUZ SUR, SD - Rancho Bernardo, CA 92127
5/6 5,534 43,124 Sq. Ft. 01/01/07
$2,394,000 - $2,444,000
7948 CLAMBAKE DRIVE, SD - Rancho Bernardo, CA 92127
4/5 4,318 13,068 Sq. Ft. 11/14/06
$2,369,000 - $2,369,000
7844 TOP O THE MORNING WAY, SD - Rancho Bernardo, CA 92127
5/6 N/A 27,443 Sq. Ft. 12/22/06
$2,350,000 - $2,650,876
7972 CLAMBAKE DRIVE, SD - Rancho Bernardo, CA 92127
4/5 4,244 12,632 Sq. Ft. 10/25/06
$2,317,500 - $2,317,500
7844 DOUG HILL CT, SD - Rancho Bernardo, CA 92127
4/5 4,825 30,492 Sq. Ft. 12/04/06
$2,279,000 - $2,279,000
16241 WINECREEK ROAD, SD - Rancho Bernardo, CA 92127
5/6 4,849 N/A 08/18/06
$2,229,950 - $2,229,950
17221 SILVER GUM WAY, SD - Rancho Bernardo, CA 92127
5/6 5,450 N/A 01/04/07
$2,150,000 - $2,350,000
14850 ENCENDIDO, SD - Rancho Bernardo, CA 92127
4/5 5,173 40,946 Sq. Ft. 04/18/06
$2,145,000 - $2,145,000
17212 COUNTRY GIRL LANE, SD - Rancho Bernardo, CA 92127
4/6 4,800 N/A 01/01/07
$2,100,000 - $2,100,000
16548 DOWN MEMORY LANE, SD - Rancho Bernardo, CA 92127
5/6 5,046 39,640 Sq. Ft. 11/15/06
$2,100,000 - $2,499,876
16229 WINECREEK ROAD, SD - Rancho Bernardo, CA 92127
4/5 4,205 17,424 Sq. Ft. 08/26/06
$2,049,950 - $2,049,950
12930 POLVERA AVENUE, SD - Rancho Bernardo, CA 92128
4/6 4,541 1.1 Acres 07/13/06
$2,000,000 - $2,300,876
So true. Up north just a bit, its amazing what’s happening with sales prices in the South bay. Homes above about $1.4M just aren’t selling. They’re on the market… They aren’t selling. Look at bearmaster’s excellent blog: http://sbbeachbubble.blogspot.com/
Look for the Redondo Beach stats article.
I’m all for an inventory glut at the top.
Got popcorn?
Neil
I don’t really see anything amazing about the situation — it is actually a logical consequence of many years of regulatory neglect with respect to loan underwriting standards. There simply are not enough McMillionaires out there to prop up the high-end McMansion bubble prices without the crutch of subprime.
Regulation ? You must be a communist. The ghost of Ronald Reagan rides again. It’s exactly like the Savings and Loans fiasco but 1000 times worst.
Suprizing? No
Amazing? Yes.
Well… amazing it took this long for the craziness to reach a level of sanity.
Neil
These prices never fail to amaze me. I’m looking at a 3700 sq. ft. house now on 7 acres, they are asking 211k. It’s a bit older country home, so thats part of the reason for the price. But even a brand new 4500 sq.ft., modern style, upscale everything (granite counter tops, etc) on 10 acres with an out building or two and nice pond would be probably 400-500k. (central AR)
It’s amazing.
Do they come with their own stills?
Are you amazed by how expensive or how cheap they are?
It appears to me prices those price you quote are ’snap em up now’ buy 3 at a time prices. Of course I’m a clownifornicator and have no perspective.
I should add one detail to this post which might help put it into perspective. It is important to grasp that builders have thrown up literally thousands of new McMansions within a five-mile distance of these $1m+ McMansions. Those listed above represent the high end of the Rancho Santa Fe Valley-Carmel Valley McMansion inventory glut. Their price ceiling is weighted down from above by comparably-priced more-desirable homes in neighboring Rancho Santa Fe. Santaluz is wannabe Rancho Santa Fe.
Was I the only one who threw up a little reading those street names?
(1992 graduate of RBHS)
Lennar (1.24) vs (1.11) exp. Revs 4.27b vs. 4.17B
GM 14.4 down from 27
Deliveries will decline >20% in ‘07 vs. ‘06
guides to 3.69M revs or better in ‘07, higher than est.
Hi TX!! LEN is up 2.5-3% this AM……..seems way optimistic to think they will make 2007 #’s????? Appreciate your thoughts.
Figured it would be. Haven’t looked at the chart but it might be a shorting opportunity in it. I have no idea where that extra 1.3 bil is going to come from with a 20% drop in deliveries.
That’s not what I heard at Bloomsh-t the other day. They had an “analyst” that said that GM was clearly in a fighting mood and that last year had the best performing stock. Wonder why ? A little bit of intervention by the Plunge Protectiont Team ? So do these numbers mean that it’s a screaming buy and that I should mortgage my house to buy GM stock ?
Haven’t got the memo from NAR? OF COURSE, mortgage your house and buy. As a matter of fact, BUY ANOTHER and mortgage IT! It’s good for business…it’s good for the economy…it’s GOOD FOR YOU!!
(Well, two out of three ain’t bad.)
Higher foreclosures? No problemo
(The graphic looks remarkably similar to a tsunami, though…)
————————————————————————————————–
SD Union Tribune
Foreclosures in county rose 660% in ‘06
Defaults are up, but analyst says that’s not a sign of darker days
By Emmet Pierce
STAFF WRITER
http://www.signonsandiego.com/uniontrib/20070117/29.html
Well that’s what the bullsh-ters at Bloomberg were saying. The foreclosures don’t seem to affect at all the great economic activity in the US. Bloomsh-t says “no problemo”. Who should I believe you or Bloomsh-t ?
Neither. Refer to historical data. This time will be no different.
Did you see this? I put it on here late last week. Foreclosures in CA increasing by a factor of 10
http://www.itulip.com/forums/showthread.php?t=817
Heavy non linear stuff indeed.
There is certainly a Black Swan swimming not far.
I believe that Black Swan is underwater, drowning in subprime debt.
It was really tasty. Stuffed black swan “braisée” in strawberry sauce. I ate it. Très bon. Magnifique.
DataQuick analyst John Karevoll: “The numbers last year were unnaturally low, and we’re coming off that low into a more normal range,” he said.
Funny how they started the graph at ‘92.
So ‘92 to ‘97 were normal years? Yeah, right!
Anyway, anyone with half a brain can see where that graph is headed.
A picture sure tells more than a 1000 words. Make that 10000 “analyst” words.
Can I give you one piece of advice: take down that 10-foot inflatable Halloween monstrosity before you publish your photo on the MLS:
http://www.recolorado.com/Search/propertyDetail.asp?mls_number=424780
LOL - and holy cow! They’re asking $319 on that POS in Denver?!! Good luck with that.
Hmmm…I live about 1 mile from that house. It’s in a nice area and only 3 miles from downtown. I sure as heck wouldn’t pay $319k for it, but that price doesn’t sound too far out of whack (maybe $250k-$275k). In this neighborhood a 2151 sq. ft. house is considered to be on the larger side.
I live within a mile of it too, on Perry St. Price is somewhat comparable by current standards (i.e. overpriced)
Interesting thing about that house, it is pre-foreclosure, it was bought just in February of last year, for 15 grand less than they are offering it for-just trying to get out after less than a year. Well, way less, considering their photo which is obviously from October…
Up, up and away… hopefully with a farewell to subprime ARMS.
—————————————————————————————————–
SD Union Tribune
BUSINESS BRIEFS
Rates on Treasury bills rise
January 17, 2007
Interest rates on short-term Treasury bills rose in the government’s auction. The Treasury auctioned $17 billion in three-month bills at a discount rate of 4.975 percent, up from 4.94 percent last week. An additional $14 billion in six-month bills was auctioned at a discount rate of 4.95 percent, up from 4.92 percent last week.
The three-month rate was the highest since three-month bills averaged 4.99 percent Oct. 23. The six-month rate was the highest since 4.955 percent Nov. 13.
Separately, the Federal Reserve said the average yield for one-year Treasury bills – a popular index for making changes in adjustable-rate mortgages – rose to 5.03 percent last week, up from 4.98 percent the previous week.
“hopefully with a farewell to subprime ARMS”
The (finally) rising risk premiums and (slowly) rising underwriting standards will strangle subprime long before rates do.
But rising long-term treasury yields limit the Fed’s option to reflate the housing bubble by squashing short-term rates like Greenspan did in 2002; the consequence could be a major steepening of the yield curve, due to inflation fears. A similar crash in long-term T-bonds in the Spring of 1987 set the stage for the Black Monday stock market crash.
“Housing slump will help spur retail slowdown in S. Florida, economist says”
http://www.sun-sentinel.com/business/local/sfl-zretail17jan17,0,4920044.story?coll=sfla-business-front
A mini-condo boom!!!!!!!
http://www.sptimes.com/2007/01/17/Tampabay/It_s_a_miniature_boom.shtml
From the Lennar sales report:
Gross margins on home sales fell in the fourth quarter partly on land charges and the use of more sales incentives. Lennar said the average sales price of homes delivered in the fourth quarter fell to $302,000 from $338,000 a year earlier. Sales incentives offered to homebuyers averaged $47,300 per home in the fourth quarter, up from $10,600 the previous year.
Net price drop of ~$60k. Way to screw your customers who bought in 2005.
Nevertheless, get this:
Profitability will drop in the first half of 2007, Lennar said, but “if the current environment of strong employment, low interest rates and a healthy economy continues, and the market for new homes demonstrates traditional seasonal improvement, we will meet or exceed our 2006 earnings of $3.69 per share.”
Keep smoking that pipe, Lennar…
Link: http://tinyurl.com/34tslr
Gee, that’s pretty pathetic rationale for increased guidance. Yeah, I’d probably take a whack at shorting a 3% gap up on this “news.”
Pipe dream.
“Net price drop of ~$60k. Way to screw your customers who bought in 2005.”
Correction…those that bought in 2005 screwed themselves (is that possible?)…they should have waited.
“Net price drop of ~$60k. Way to screw your customers who bought in 2005.”
The 2005 customers were already screwed in 2005. The 2006/07 customers are refusing to bend over for the same treatment, but what happens to them has nothing to do with the 2005 sheeple.
I’d say the chances that all four “if’s” come true is about 0.1%. Way to CYA, Lennar.
Is a soft landing still afoot? Or is the REIC currently searching for a new moniker? Just curious
———————————————————————————————–
Bad quarters for 2 big homebuilders
Centex, KB Home drop $793 million
BLOOMBERG NEWS
January 17, 2007
Centex Corp. and KB Home said they would report disappointing quarterly results because a slumping housing market forced them to write down a combined $793 million of property.
Centex, the third-largest homebuilder in the country, will book $450 million in the fiscal third quarter to reflect the reduced value of land and to abandon options to buy property, the Dallas-based company said yesterday. KB Home will have $343 million in property charges in the fourth quarter.
http://www.signonsandiego.com/uniontrib/20070117/news_1b17builders.html
Same old, same old in SoCal — rising prices, falling sales (except for SD and Ventura, which lead the pack…)
————————————————————————————————-
S. California home prices up despite drop in S.D.
6-county region sets record, but sales slip
By Roger Showley
STAFF WRITER
January 17, 2007
Southern California home prices set a monthly record in December of $495,000, up 3.3 percent over December 2005, even as the number of sales slipped in all six counties, DataQuick Information Systems said yesterday.
Graphic: Southern California housing prices for December
As reported earlier this week, the December median price in San Diego County fell 6.4 percent, to $483,000, from December 2005, the only county in the region besides Ventura to see a year-over-year price drop. The Ventura median price fell 5.9 percent, to $593,000.
http://www.signonsandiego.com/uniontrib/20070117/news_1b17housing.html
A puzzlement: LA reports a median home price of $522K for Dec 06 (versus SD’s $483K), and LA county sports a median household income of $42,189 (as of the Y2K census), versus something like $65K for SD county. So far as I know, LA has not had explosive wage growth since Y2K.
Based on the above figures, here are the approximate median home / median HH income ratios:
SD 483/65 = 7.4
LA 522/42 = 12.4
How long can this price anomaly persist?
http://en.wikipedia.org/wiki/Los_Angeles_County,_California
“Ground control to Major Tom:
Your circuit’s dead, there’s something wrong
Can you hear me, Major Tom?
Can you hear me, Major Tom?
Can you hear me, Major Tom?
Can you….”
“median home price / median HH income”
Maybe rich foreingners from China and Japan are buying ?
The burgeoning McMansion inventory around LA will inflate away the value of any rich foreigners’ investments… Similar to the effect of printing lots of paper money, a massive increase in the supply of houses beggars the value of neighboring houses.
Never said foreigners from China were particularly intelligent. Vancouver has a had a wacky real estate market for that reason. Chineese immigrants with a lot of cash. We even have this type of phenomenom of whacky puffed prices in Montréal. Naturally the “locals” are priced out of these markets. A lot of horrible looking McManshions too. Boy this thing is really a global epidemy.
From what i’ve seen, el lay wasn’t that much of a McMansion kinda gig, compared to other areas, with boucoup land…
Was skiing up @ Sierra Summit yesterday (less than 100 people there, perfect man made snow and sunny skies) and came down through the backside of Fresno and was blown away. McMansions to the right, McMansions to the left, as we drove westward. My favorite grouping of said houses, was near the Table Mountain casino, across the street from it, virtually.
“From what i’ve seen, el lay wasn’t that much of a McMansion kinda gig,…”
You are either lying or talking out your @$$. My family drove through the eastern reaches of greater LA over last Thanksgiving, and every flat area is built over to the horizon with McMansions.
I only lived in el lay for 44 years, so I have somewhat of a clue…
The outer reaches of the city are indeed full of Mc Mansions, but within the city itself, you’ll see just the occasional monstrosity, as any decent land had been developed eons ago.
There is no place in el lay that even vaguely resembles the tremendous overbuilding going on in the i.e., o.c. or s.d., where land has always been plentiful.
In a small way, it may insulate the city of angels from the future “Bushvilles”… (ghost towns of freshly minted houses, inhabited by folks that will never have a problem with payments, as they will “homestead” the property by breaking a small window in the back of the house, to get into their piece of the American Dream…)
Thanks for the clarification…
But I still maintain that those outlying McMansionvilles have a diluting effect on LA proper housing prices…
“Bushvilles” ? Nice expression. At least they are as big as his “el rancho” in Texas ? You could call them “Sopranovillas” too.
Tony Soprano seems like a fine, upstanding citizen, compared to ’ssshrubery… (my new name for our feckless leader, with apologies to Monty Python)
Well he would be really useful in Irak. Hey George W. I know what you need. It’s a shame that it’s the last year. Does Tony finish Republican or Democrat Senator ?
65k median income in sd county? it does not *look* like that at all.
Current estimates
According to estimates by the San Diego Association of Governments, the median household income of San Diego County in 2005 was $64,273 (not adjusted for inflation). When adjusted for inflation (1999 dollars; comparable to Census data above), the median household income was $52,192.
http://en.wikipedia.org/wiki/San_Diego_County,_California
–
“LA 522/42 = 12.4″
To be fair, the income you are using is for 2000 while price for 2006. I would guess the income to be 52.2, giving a ratio of 10.
Jas
Jas — thanks for going to the extra effort. I was lazy — just mentioned “approximate” rather than trying to adjust LA income to 2006.
A median home price / median income ratio of 10 is higher than ever before, at any rate.
“So far as I know, LA has not had explosive wage growth since Y2K.”
LA HAS had an explosive growth in ‘exotic’ mortgages, however - Payment option ARMS, stated income loans, 100% (or more) financing, etc. Prices went so far out of wach because you didn’t have to use any actual MONEY to buy a house. People just kept moving from teaser rate to teaser rate, making the minimum payments.
Exactimento!
Betamax:
Dallas News article on tightening subprime credit:
http://tinyurl.com/y6bbmy
This may have been posted yesterday, in which case I apologize, but it seems worth repeating nonetheless, as I believe this signifies a watershed moment in the credit cycle:
Now, with interest rates and home foreclosures rising, the lending industry is dealing with the fallout of its creativity.
Some mortgage companies have gone under.
And would-be homebuyers with blemished credit records are finding buying a house has become more difficult and more expensive.
“It’s tightening up a lot,” said Eddie Carmona, branch manager at Homewood Mortgage in Carrollton, a mortgage broker that deals with subprime borrowers.
“Almost every single subprime lender has done dramatic changes. It’s all recent.”
Gary Akright, a mortgage broker at Dominion Mortgage Corp. in Dallas, said tougher requirements for a down payment recently priced one of his credit-challenged clients out of a home purchase.
“The loan program was going to allow for 5 percent down, and they just came down with new guidelines to require 10 percent down,” Mr. Akright said. “It took him out of being able to purchase.”
Mr. Carmona said down payment requirements are the biggest change he’s seen.
“Before, you didn’t have to bring a down payment,” Mr. Carmona said.
Other changes:
•Higher credit scores. Previously, borrowers with a FICO credit score as low as 570 (out of 850) could qualify for a single loan financing 100 percent of their home purchase, Mr. Carmona said.
“Now, across the board, it’s jumped up to a 600 FICO score for an 80/20 loan,” Mr. Carmona said, in which a second loan has to be taken out to finance the remaining 20 percent of the home value.
•Rising interest rates. Rates on subprime mortgages have risen about a full percentage point since September, Mr. Carmona said, while regular mortgage rates have been relatively steady.
•More stringent savings requirements. “They want to see borrowers have at least three months of reserves in their account in case of an emergency,” Mr. Carmona said. “They want to see it in your bank account saved for at least 60 days. Usually, subprime lenders didn’t ask for that.”
What the hell do they ask you? A smile, a handshake, and a kiss on the cheek ?
Here is a link to Ben’s post on this from a couple of days back…
http://thehousingbubbleblog.com/?p=2180#comments
“There is a big difference between the ability to qualify and the ability to afford, and there are borrowers and loan officers who ignore that simple truth.”
If this is true, then the underwriter should be fired. Their job is *exactly* to make sure there isn’t a gap… isn’t it?
I suggest that anyone wondering about the timing and depth of the future trough carefully read this outstanding post from walt526 (from a couple of days ago). Pay special attention to his comments about the effect of falling rents in a real estate downturn:
——————————————————————————————–
The main difficulty in applying standard commodity floor models to real estate that lies mostly in real estate’s relative illiquidity as compared to most other commodities. All other things being equal, the inertia surrounding an illiquid markets exacerbates both the booms and the busts. So much so that I don’t know if its really feasible to try to calculate a floor for any particular real estate market.
The closest thing would be to extrapolate a market price for the property based on local rents (minus all other holding costs). At such a price, presumably real, big-time investors would re-enter the residential housing market and start buying up income-producing properties. And the inflows of their capital would help stabilize housing prices. The problem is that in Sacramento, for example, median housing prices would have to fall about 60% in order to attract this type of investment, which even with the imminent flood of REOs is probably at least 3-4 years away.
Another problem is that “rents” can fluctuate quite a bit in the short term during a recession. What rents out at $1000/month in January 2006 might very well only be able to get $850/month in January 2008 should the local economy grind to a halt (which in Sacramento, I’m nearly sure it will in the coming months). Any decrease in the expected rent requires a further corresponding decrease in the price of the home, which propels our floor down even further. If professional investment is required to rescue a housing market, a home that sold for $500k in mid-05 may very well sell at $150-200k at the trough some time in 2010-11 (real, not nominal prices of course–if this comes to pass, the Fed will obfuscate as much of the market correction as it can through inflation).
Kudos to Ben!
http://www.housingwire.com/2007/01/15/announcing-the-2007-reba-winners/
Wasn’t it around last July that the PPT was revitalized?
http://tinyurl.com/23cz76
If the market were a vocano, I would say it looks ready to blow…
http://www.marketwatch.com/tools/marketsummary/
“volcano”
Mount Washington
Foreclosure article from CNN Money:
http://money.cnn.com/2007/01/16/real_estate/December_foreclosures_up_from_2005/index.htm?postversion=2007011706
Awhile back, Coldwell Banker’s 10 most affordable cities got a fair amount of press coverage. My city (Billings, MT) was listed at #8. As you may know, I’ve been making the case that there’s a bubble here. So that didn’t sit too well with me.
I finally put up a post analyzing this index. In short, I’m not sure what they were smoking. Billings is no way near as affordable as the other cities listed on the index. Check out the comparison photos:
Coldwell’s Flawed Housing Index
I totally enjoy your videos and your posts! If you ever need a bodyguard to protect you from the realtors, builders, etc, please don’t hesitate to post. It was one of my past jobs and I’d be happy to do it for you pro bono.
Minyanville. They’re always funny
4. Wait! Title Revision! Title Revision!
According to its 3Q 2006 U.S. Foreclosure Market Report released today, RealtyTrac reported that 318,355 properties entered some stage of foreclosure nationwide, an increase of 17 percent from the previous quarter and a 43 percent increase from the third quarter in 2005.
“What our third quarter research appears to be showing is that the first wave of adjustable rate mortgages is having a negative impact on the number of homes going into foreclosure,” said Saccacio. “With the volume of these loans–more than $1 trillion of them due to adjust over the next 15 months–this is a trend that definitely bears watching,” DSNews.com reported.
A 55 percent increase in foreclosures launched Florida as the leading state with total foreclosure filings during the third quarter.
James J. Saccacio, chief executive officer of RealtyTrac, states that hikes in interest rates and a slump in the market are two key factors to the 43 percent increase since third quarter 2005.
The bad news here is that Lereah’s publisher is probably going to have to change that book cover… again.
In 2005, National Association of Realtors Chief Economist David Lereah released the book,
“Are You Missing the Real Estate Boom? Why Home Values and Other Real Estate Investments Will Climb Through the End of the Decade - and How to Profit From Them.”
Interestingly, the title for the 2006 edition of the book was changed to:
“Why the Real Estate Boom Will Not Bust - and How You Can Profit From It.”
Below are Minyanville’s suggestions for subsequent title revisions in later editions of Lereah’s book through 2015:
2007: “Why the Real Estate Boom Will Not Bust and How Foreclosures are Technically Part of the Continuing Real Estate Boom, In a Way.”
2008: “Why the Real Estate Boom in Distressed Properties Will Not Bust (except in certain local markets) and How You Can Use Leverage to Profit From It.”
2009: “Why the Phrase “Real Estate Boom” is Often Misunderstood to Mean Higher Prices and How You Can Pray for Them.”
2010: “Why the Real Estate Boom Will Soon Bounce Back and How to Eventually Profit From It.”
2011: “Why Did I Have to Write “The Real Estate Boom Will Not Bust Through the End of the Decade” and How Did I Not Realize How Long A Decade Really Is?”
2012: “Oh, Dear God, Please, Please Let the Real Estate Boom Bounce Back… and How You Can Profit From It.”
2013: “Please, Please, Just Let the Real Estate Boom Come Back This One Time for This One House and How You Can Break Even From It.”
2014: “Why I Am Willing to Accept a Small Loss of 35% On the Real Estate Boom and No Longer Care About How to Profit From It.”
2015: “Why Can I Maybe Borrow a Couple Dollars Off You Until the Real Estate Bust is Over?”
“We believe that the housing slowdown will have dissipated by mid-year,” economist Doug Duncan told reporters Tuesday.
And then the route begins
http://www.marketwatch.com/news/story/mortgage-rates-rise-65-year-end/story.aspx?guid=%7BB31C865D%2DB767%2D4A3C%2D9C05%2D29A7EBB03C1D%7D
Funny clowns called economists.
Who pays this moron ? A subprime lender ?
Did Doug stop renting and buy a home yet? Don’t buy until he does (read his lips!).
“”We believe that the housing slowdown will have dissipated by mid-year,” economist Doug Duncan told reporters Tuesday.”
May I ask why you believe this, Doug Duncan? Is it just a ‘gut feeling’? In the areas I am looking at, inventory is trickling up again…is that a good sign?
txchick -like you I am wondering where the correction is / was. Any thoughts on this (or anyone else chime in) and what is keeping the stock market afloat? I try to stay away from investments I don’t understand, and right now I don’t understand how the market can react the way it does. Comments please!
It’s usually options related. Expiration is this week and it’s one of the largest, if not THE largest, ever (January is leaps month).
There was an article in Barrons that was saying one of the things keeping the equity markets afloat was all the $$$ (and euros) from the oil producing countries. Basically, they have nowhere to put all the excess dollars they are receiving, so they funnel them to the London/NYC equity markets.
Hi All:
Well I did some of the “Real Wealth Expo” this weekend – saw Bill Tan (sort of), Bruce Norris and Robert Campbell. I missed most of Bill’s presentation because I had an old schedule with the wrong start date. Bummer. Also, I’ve written about Robert Campbell before (excellent information) so I thought I would stick to the Bruce Norris presentation.
Most of what Bruce presented will not be new to anyone who frequents this blog. However, he is an excellent speaker and he is able to concisely and articulately present his arguments on why real estate is in for a very rough few years. If I could present my arguments for an upcoming (now continuing) RE crash half as well as he did I may have been able to talk a couple more people out of buying homes/second homes in 2005. If you have a chance to see Bruce speak, and more importantly if you can drag along the RE bulls in your life that you still want to save, I really recommend taking the time even if you have to travel. (See end for one opportunity.)
He started off the presentation talking about his own story where in 1995 he was able to buy a home in Riverside for less than the new Honda he bought his son for graduation. Curious by this strange paradox (shouldn’t homes cost more than cars?) he began researching the history of price fluxuations. Reviewing 25 years worth of RE articles he found lots of materials on why prices will go up but not one on why they will go down. (Hmmm, where have we seen that?) He began looking for sequences and by 1997 determined that prices would double over the next 6 years. Later he wrote about the coming crash.
He works with what he calls “The California Countdown:” that is a combination of:
Increased inventory
Increased time on market
Decreased sales of new homes (now down 50%)
Increased migration out of California
Increased foreclosures (predicting up 1500% to 2000% by 2010)
He talked about affordability and how NAR et al., promote affordability as being good for RE. However, the lower the affordability the greater the demand for RE until it hits a point of no return which is about 16-17%. We have now hit that. When affordability is at 40% (I do not know how the affordability numbers are calculated – I believe it is nationwide not CA) no one will buy – they can afford to but the psychology is such that they do not want to. So keep an eye on affordability numbers during RE cycles.
He also noted that in 2005 MSM was saying exactly the same thing as they were in 1989 and 1979. Often the exact same people through all three downturns. (Alas, David Lereah will be with us in 2020 saying prices can only go up and only we will remember his lies earlier in the 21st century.) Also, he points out the interest rates changes (increases) don’t have a negative impact on prices – witness 1989 – nor will the decline of i-rates stop a crash.
He talked about REO’s some – went over how lenders lose 43% of the value of an REO when they have to “touch” a house. His prediction – that time is coming. Talking about San Diego – 47% of all sales in 2005 were other than “owner occupied,” normally only 10% are. And with the loss of this speculative buying instantly over 40% of sales stopped. Also, in SD 50% of all homes for sale are vacant and for the US we have one trillion a year in loans for the next three years that will be facing their first adjustment. (For subprime the first adjustment is often 5% above LIBOR which means these loans will go up to over 10% in interest only payments.) Also, 90% of the time applicants for stated income loans lied about their income. (Shocker!)
He also said that in 1995 Congress passed a law that stated anyone 100 days behind a Fannie Mae loan must be foreclosed upon. There was a dip in foreclosures the months before because lenders were simply not foreclosing.
He predicts that while a decrease in i-rates won’t help the housing market, an increase in i-rates could make it a much more brutal correction than the last two.
I was amused by his “U-Haul Analysis” which has been brought up here before. Basically a U-Haul from Anaheim to CITY and from CITY back to Anaheim:
07/10/2006
Portland - $1,499 $199
Seattle - $1,119 $199
Denver - $2,024 $1,070
And six months later: 12/14/2006
Portland - $3,040 $299
Seattle - $3,313 $436
Denver - $5,085 $446
He is predicting that at the end of 2010 qualified buyers will not buy leading to opportunities. He also recommended the book “The ABC’s of Investing” by Charles Dow, which details the emotional response of a bull and bear market even though it was written in the 1800’s. Might be worth a look at on Amazon.
The last hour was spent talking about his system. It’s expensive (hey, any “free” seminar is going to have a sales pitch) but I think I might really be able to use some of his ideas well outside of the RE arena. I am seriously considering the cost and will probably buy in a year when I am ready to seriously think about RE investing. Also, I want to talk to people who have purchased it and get their feedback.
Anyway, this was a great presentation. Much of the info we know but he summarizes it in a way that leaves little to no room for the bulls to slip in their propaganda. He will be speaking on April 11th at the SDCIA meeting at the Scottish Rite Center. If you are in or close to the San Diego area I highly recommend you go to this event. A very well spent $15.
“He is predicting that at the end of 2010 qualified buyers will not buy leading to opportunities.”
Please explain… (this sentence has a bit of an “eats, shoots and leaves” problem).
OK, trying to answer this for the third time! (New computer next week.)
Was late when I wrote this - sorry about any readablity problems. What he is saying is that NAR et al., argue that higher affordability is good for RE. Actually the opposite is true. RE goes insane as affordability falls - at least until it just cannot continue on pure mania alone. Thus, as affordability falls everyone rushes in to buy and the realtors make a fortune. Than the correction begins. When affordability finally gets back to a high level and now lots and lots of people can truly afford to buy - no one does. People would rather buy in a mania and the “burns” from buying at the top of the market means they are too frightened to buy when stuff is affordable.
The basic message is that investors need to watch for affordability to rise to think about buying and 40% (under old standards not the CAR created BS) has been a strong buy signal in the past. (My interpretation - might not be Bruce’s exact message.)
Hope this helps.
Thanks — that clears it up. I think the basic problem is that the race to peak prices (and valley affordability) is accompanied by (1) lenders relaxing standards to keep the party going and (2) almost everyone thinking they need to buy or get priced out forever.
In the down leg, credit standards tighten shortly after the last GF buys at the top. At that point, there is a big gap between seller wishing prices and bids, as nobody can afford to buy at unaffordable prices with traditional loans. Neither lenders nor patient buyers want to ride out the down leg of the cycle, as new buyers get to catch a falling knife, and their lenders face short sales and/or REO sales if the buyers either get fired during the recessionary aftermath or otherwise tire of holding on to a declining asset.
“I am seriously considering the cost and will probably buy in a year when I am ready to seriously think about RE investing.”
I won’t buy until I stop seeing comments like this on Ben’s blog.
LOL. I meant Bruce’s system. Not a house.
“Denver - $5,085 $446″
You’ve got to be kidding me. If I was moving from Anaheim to Denver I’d buy a crappy old truck before I paid that.
People quickly lose sight of the value of a buck when some GF overpays for their house and they score a windfall. $5K is chump change for someone who just scored $300K or so free and clear on the sale of their POS house they bought 6 hears ago in California. The $5K expense for moving to Denver is just part of the package deal!
But it’s Denver! Everyone want’s to live here!
And six months later: 12/14/2006
Portland - $3,040 $299
Seattle - $3,313 $436
Denver - $5,085 $446
At those prices I would sell my big stuff and buy new. Ship the cloths and DVDs and take the snowboard, computer, and small electronics with me in the car.
From BrokersOuspost:
I was told today that New Century Mortgage Corporation
decided to close down their Woodland Hills, CA branch along
with other branches thru out the U.S. They are just downsizing
and not yet going out in style.
Since New Century is one of the largest 3 subprime lenders,
this illustrates that the prospects for subprime loan
originations in 2007 would not warrant their keeping many offices
open due to falling volumes.
[AG starts waking up, stretches, and finally starts watching the show]
Now things are starting to look interesting. Make sure you have the other TVs tuned to the spring inventory numbers and the rising foreclosure rates. And pass a beer, will ya?
test
liquidity
http://goldnews.bullionvault.com/yachts_Wall_Street_liquidity
MBA: Hundreds of Lenders Could Fail
A “couple of hundred” mortgage banking firms could fail in the next year or so as the industry works out its excess capacity, according to the chief economist for the Mortgage Bankers Association.
Awwww…
Couldn’t happen to a nicer bunch… idiots (for the loans).
Bubba has room for many more roomates.
Neil
crispy,
You’ll need to help me out with a link here. I googled |hundreds of lenders could fail| and all I got was an editorial comment: “Did you mean: hundreds of lenders should fail”
A realtor in Sacramento had this to say:
Wednesday, January 17, 2007
More houses for sale
For the first time since August of last year we have seen a week when more houses have come on the market than were sold or taken off. HousingTracker reported a one week gain in Sacramento inventory of 247 homes to a total of 12,465 as of January 15. Over at Bubble Market Inventory Tracking, where they monitor Sacramento, Placer, El Dorado and Yolo Counties, the inventory was reported at 12,150 as of January 14 which is an increase of 528 from the start of the year.
Last week I said, “My current thinking is we will see inventory continue to decline but as we move into late February and March it will slow and may even begin to build by the end of the quarter.” Those folks who removed their houses from the market during the holidays have come back faster than I anticipated.
“Those folks who removed their houses from the market during the holidays have come back faster than I anticipated.”
Heh heh heh!
They had no choice. Their ARM’s adjusted faster than expected.
Royal bank imposes dollar restrictions:
http://www.cbc.ca/cp/business/070116/b011695A.html
Smuggle your pennies and nickels to Mexico, instead. Don’t forget to pay the border guards in zinc and copper.
p.s. Don’t call it currency controls unless you want an IRS audit.
So explain to me again just why the USD wants out of being the world’s reserve currency.
It could be a Fed head fake — letting on the dollar will be protected would require signalling that helicopter drops are not on the way, which would be harmful to business confidence.
Appears it was just a US Treasury department public relations fiasco. One whiff of extra-territorial currency controls and pictures of George Washington start tripping radiation detectors all over the world. In less than 24 hours the story has morphed into:
“Royal Bank ‘clarifies’ U.S. dollar account policy”, CBC News, (about 2 hours ago).
http://www.cbc.ca/canada/story/2007/01/17/bank-rules.html
Never mind, the original story never happened.
Good news for those of us in Orange County from Lanser’s OC Register Blog:
“Numerous visitors to this blog have wanted to see what O.C. home prices did when measured by cost per square foot, a common measure used when comparing relative home values.
Actually, the Register publishes a per-square-foot median for single-family residences sold in a given month. We don’t use it much for analysis because county officials haven’t easily shared details of many new homes, and/or home remodels. Thus databases like DataQuick and others (ever see lacking detail in, say, Zillow?) aren’t very deep in knowledge of actual home square footage.
Caveat explained, the square-foot measure has been down for the past two months, the first drops in a decade. (That’s the chart above, yearly change by month.) Square-foot costs were down 4.3 percent year over year in December. Compare that to a 0.8 percent year-over-year increase shown by the median sales price of a single-family residence.
Both figures, though, show similar drops from their respective peaks. Per-square-foot is down 7 percent; the median’s off 6 percent.”
http://blogs.ocregister.com/lansner/
“Square-foot costs were down 4.3 percent year over year in December.”
In all fairness, I don’t believe Gary Watts’ prediction said anything about price per square foot.
–
THE GRAPH IS A GOOD INDICATOR OF WHERE WERE ARE IN THE CURRENT HOUSING “‘CORRECTION.”
Jas
Agreed. Price per square foot dropped continuously from 1990-1996, then bubbled up continuosly until just about now. So should we expect falling OC price per square foot from now till 2012?
Interestingly China has authorized banks to RAISE US dollar limits on personal savings accounts from UDS $20,000 to USD $50,000. I guess the government is still trying to hold down the RMB….but otherwise this confirms the huge amount of cash the Chinese are hoarding.
They also cut the minimum required gold purchase to roughly $2000 USD, to bring smaller investors into the market.
Get ready for a paper glut to match the housing glut. Can’t these folks see the problem with trying to reflate the bubble? Or do they think it is just fine if everyone owns a second ghost tract home out in the middle of the southwest desert? I am having a hard time grasping the logic here…
—————————————————————————————————–
Fed can’t pop a developing housing market bubble: Mishkin
By Greg Robb
Last Update: 1:00 PM ET Jan 17, 2007
NEW YORK (MarketWatch) - The Federal Reserve shouldn’t try to prick a housing market bubble, but should be prepared for possible sharp reversals in prices to ensure they do not do serious harm to the economy, said Fed governor Frederic Mishkin on Wednesday. “Because subsequent collapses of…asset prices might be highly damaging to the economy, as they were in Japan in the 1990s, should the monetary authority try to prick, or at least slow the growth of, developing bubbles? I view the answer as no,” Mishkin said in remarks prepared for delivery to the Forecasters Club. But Mishkin added: “I do think that central banks can ensure that sharp movements in the prices of homes or other assets do not have serious negative consequences for the economy.” Mishkin was talking hypothetically about asset bubbles. While he said there has been an extraordinary run-up in U.S. home prices over the past decade, he added it was “extremely hard to say whether they are above their fundamental value.”
“The job of the Federal Reserve is to take away the punch bowl just when the party starts getting interesting.”
http://en.wikipedia.org/wiki/William_McChesney_Martin,_Jr.
–
Americana: A funny Video Worth Watching
http://www.youtube.com/watch?v=HCkYfYa8ePI
Ignorance of “educated” Americans on the subjects of economics, investments, and political systems, is mind-boggling.
Jas
Thanks to the tipster: Funding America is no more
http://bakersfieldbubble.blogspot.com
The picture says it all — a final farewell between employees leaving an empty new building.
Found a property for sale across the street from my b.i.l. in LV craigslist. asking price of $923K, zillow estimates it to be $723K..owner is moving out of state. hmm. soon to be foreclosed if it’s not sold within 6 months. doubt it has any equity in it.
8XXX luna sera
Upping the ante in the commercial real estate arena. While the Vornado $52/share bid is richer, it is 40% stock while Blackstone’s $48.50/share bid is all-cash. Although REIT Vornado is the lead investor on this bid, the REIT index is looking more and more like a play on private equity without the lock-up period:
Vornado Confirms Bid For Equity Office Properties >VNO
DOW JONES NEWSWIRES
January 17, 2007 4:52 p.m.
DOW JONES NEWSWIRES
Vornado Realty Trust (VNO) confirmed it submitted a proposal with Starwood Capital and Walton Street to acquire Equity Office Properties Trust (EOP) for $52 a share or unit, payable 60% in cash and 40% in Vornado shares.
The bid comes just two weeks before rival Blackstone Group’s $20 billion buyout offer was slated to close.
Vornado expects to fund its share of the bid with debt and the issuance of$10.6 billion in shares and units.
At closing, Vornado would acquire and retain half of EOP’s assets located in the major markets on the east and west coasts; Starwood and Walton would acquire the remaining assets.
Vornado expects this transaction would boost its funds from operations.
Here’s a fun game for ya… I (being obsessed
), check ZIP Realty daily in an area about 2 miles around 90048 (L.A.). Since the first of the year, about 1-2 houses a day get listed in each of about 10 zip codes. for these, I click the “estimated value” link to see recent sale prices. the vast majority of new listings were bought in the last 2-3 years. Of course, they’re asking more than they paid, but in a lot of cases… not that much (ex- paid 1.3 million, asking 1.45). IMHO, this ain’t gonn work out too well for them, since houses similar to these higher priced ones (owned for longer) are coming on at just over 1 million or less. Try it in your nieghborhood. Flippers trying to “beat” the Spring rush?