Bits Bucket And Craigslist Finds For January 31, 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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Test Your Silly.con Valley Housing Knowledge
Q1: Are rents in Silly.con Valley higher today than six years ago (2001Q1)?
If, yes, by how much??
Q2: Was there a sustained declined in rents over the past six years?
If, yes, what was the extent of the % decline, peak to trough, and how long the decline last??
Jas
My guess: Rents are about the same as 2001 and yes, they dropped about 15% in ‘02-04.
Yellow graph shows rents bottoming around 2005:
http://www.apartmentratings.com/rate/CA-San-Jose-1776-Apartments-Pricing.html
Thanks for the research JP - it’s pretty amazing that rents have dropped that much (at least according to that survey). IMHO rents are a much more accurate reflection of market fundamentals than sale prices - people don’t get caught up in the frenzy of renting, that’s for sure.
You clearly don’t remember the LA Times articles a few years ago, about the tightness of the rental market, wherein owners of crappy buildings in Hollywood and Mid-Wilshire were requiring prospective tenants to write essays explaining why they wanted to live in the building.
I would imagine such stupidity occurred in San Francisco and Silicon Valley during the peaks of their rental markets as well.
It’s true that such stupidity is driven by fundamentals - too much demand for rental apartments chasing too little supply, incomes rising too rapidly, too many people moving here from elsewhere. But that doesn’t preclude a frenzy, at least in the short term.
This has of course reversed itself nicely. Renters now need to pay attention to the market every year in order to determine how much of a rent DECREASE they should be demanding from their landlords!
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Hello paladin,
Wrong on both counts. Answer will be posted tomorrow with commentary. BTW, I do appreciate your posts on mortgage fraud. Can you guess how long did the rent decline continue?
Jas
Jas, I read the Silly.con Valley Housing article on your website, I print it and read 3 more times. It is the best articles that I have read in the last several months. Great job! Thank you!
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Thank you, David. And you are most welcome.
You should have “seen” the reaction of SVB; he is having very hard time dealing with the facts.
Jas
The rents in Silicon Valley in 2001 were clearly an anomaly…It was due to the Dot.Com explosion and people entering the valley at a exorbitant rate….I happened to own some town homes at the time down the street from Intel and across the street from Sun Micro…My town homes at the time were renting for $1850. per month…The renewals in the complex were renting @ $3800. per month for the same unit as mine….That all went away in the Bust….Current Market rent in the complex is $2200. per month…
Rents over the past year in the valley have increased roughly 10%…Certain pockets in the valley (Mt. View) have increased far more….
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“The rents in Silicon Valley in 2001 were clearly an anomaly…”
So many things in Silly.con Valley have been anamolies since 1998, including the mindset of the people who have been active in tech Scams and Unreal Estate.
The “payday” is coming soon. These people learned absolutely nothing from 2000-02. They got saved by the Housing Bubble during 2004-06.
Jas
timeless…..The way to grow poor. The way to grow rich
looks like nothing has changed since 1875
plus
Australian buyout spree could end in tears
http://immobilienblasen.blogspot.com/
More global idiocy:
http://louminatti.blogspot.com/2007/01/spanish-real-estate-market-collapse.html
I understand the desire amongst some here to think only Americans are stupid, but the fact is the idiocy is a global phenomenon.
I think that would be Marc Authier who thinks only Americans are stupid. I think the rest of us all realize that it’s a worldwide phenomenon.
Sometimes, while reading these comments, I have to wonder.
Uh, maybe these are Americans owning and marketing these things in Spain? D’oh!
No actually, the housing bubble is by no means only an American thing. Australia, UK, Spain come to mind right away. nhz also pops in to remind us of extreme bubble prices in the Netherlands. And the Asians have had their bubbles come and go.
In this case, the mania and foolishness is more of a generic human trait, I’m afraid.
Marc has a bit of American envy which comes off as sour grape syndrome. Nothing unusual about that — I have seen it in many Canadians over the years.
Stucco – your comment is the very attitude why many Canadians (most parts of the world) hold contempt to those who have this Godly “America knows best and the rest want to be just like us” attitude. Sorry – your way off on your comment – Canadians have not dug themselves a financial grave. First, many Canadians are more conservative – there is a disciplined banking system that won’t let you sniff there money if you seem like you won’t be able to repay it. A interest only loan is absolutely laughable and unheard of here , to apply for a loan you basically gotta sign off your first born to have them even consider you – our lending standards have lowered somewhat but nothing compared to what is brewing south of the border – creating this awful mess that will surely tilter the global economy…Envy you say – naw – I call it apathy. America has become the country of greed and excess (like many other places in this world, but to a smaller extent) everyone is climbing over each other to make the “big” kill, and if you can’t make the big cheese you write in this blog hoping your fellow citizen suffers some great financial hardship cause they were essentially suckered into the great American media hype … I have never seen such disregard for your fellow man as I do when some in this blog are gleaming with happiness that a tidal wave of foreclosures, bankruptcies, evictions, suicides, marriage breakdowns, creating a crime infested society. Staring into the Abyss and it stared right back at you – the future of America.
You’re just jealous.
Bill Murray - Canadian.
He’s a’ight.
This canuck has to disagre with dirty diaper. Maybe the average canadian doesn’t want to be like the U.S.A. ,but our big bussiness sure does. Look at the role our so called responsible banks had in enron!!. How about td and bank north . DO you think they are not doing toxix loans stateside? There are interest only loans to canadians , however these are offered only when the bank doesnt want to foreclose on the asset. Our banks love the american dream so much they will probably try to expand even more in the U.S. The same greed is here and so is the envy. We all have our stupid ,I just dont like being the one to pay for someone elses stupidity. If it wasnt for the U. S. oil demand , our federal debt would be skyrocketing. As canadians we should all say thankyou for lowering our debt.
GetStucco, please keep believing we envy you. And don’t forget to bring a valid passport the next time you visit the nice part of Niagara Falls .
I’m both American AND Canadian, so I’m simultaneously offended and flattered by you both.
And I have become fast friends with all the Canadians I have gotten to know over the years, so please don’t take my mischievous impulse to stir the pot personally
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Remember: We Are #1!
Americans are leading the rest in stupidity about economics and investments (getting rich via asset inflation rather than production). Indians (in India) are the worst offenders in terms of coyping Americans blindly and badly. The economic mayhem, made in America, will be global.
Jas
Now so sure. I was in Hong Kong and China in early 97′ and the chinese have this way of mimicing the worst of american culture like making the cheap paper hats from fast food joints part of the uniform in their upscale restaurants. so very david lynch
don’t forget the Dutch when talking about ‘get rich quick’, it has been one rollercoaster ride there after the invention of the stockmarket in the early 1600’s. Tulipmania was just the first Dutch asset bubble and it is clear by now that people don’t learn anything from the past (we even had a second tulip bubble a few years ago!)
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There are big differences in how Chinese and Indians copy Americans. Outwardsly, Chiense and Japanese are much more Westernized than Indians (I am talking about the general population and not just elite). Chinese are much more practical and Indians are among the most conservative, culturaly. It is a subject that can’t be dealt with a paragraph or two.
Jas
You know you say Americans are too egotistical and then you talk about everyone imitating them.
What if we’re all just stoopid monkeys that do the same crap, a lot of it similar?
I’m convinced if you replaced every American with a Chinese/African/Indian/Russian/whatever… within 10 years they’d all be driving Escalades while complaining about being robbed by corporations.
I don’t understand the ‘market collapse’ part, there is no sign this market is collapsing (not in Spain, not in any other part of Europe as far as I can see).
This kind of scam marketing is simply getting more popular in Europe; it’s probably a sign that the well-informed people (mostly from UK, Netherlands and Germany; maybe a few from Spain itself) are starting to unload their Spanish properties and that the bottom of the buyers market is now getting targeted. But even the well-connected are still buying in Europe, just no longer in Spain but instead in Eastern Europe, Turkey etc. (at least 2-5x cheaper for similar properties, so another chance to multiply your capital in a few years if the ECB keeps doing what is always does).
idiocy is definitely a global phenomenon, RE prices in many parts of Europe are even more crazy than in the US. Of course it often is not really idiocy, it’s more like an educated bet to get rich quick while the rest for society will pay if things to wrong (especially in Europe).
Lou
I don’t think any foreigners (and I’m one of them) think Americans are stupid where property is concerned. The Brits, Dutch, French, Australians, Italians, etc, you name it…are all in the same boat.
I think you will find that foreigners only regard Americans as being stupid in one area. G.W Bush. In fact, the Brits had a headline in one of their newspapers after Bush won the last election, saying: “How can 50 million people be so wrong!”
So, the American “stupid factor” only relates to that Idiot In The White House.
Sorry. Should have read: “When Bush stole the election by fraud.”
Stupidity is global..same old, same old.
Shanghai RE goes bust…
Six months ago, Shanghai’s property market was the hottest on the planet…. How serious could things get? Very serious, according to Credit Suisse First Boston’s (CSR ) Dong Tao, chief economist for Asia ex-Japan in Hong Kong. He reckons mortgages account for 40% to 50% of all bank lending in Shanghai and that Shanghai property lending accounts for a fifth of all mortgages countrywide. A Shanghai crash could slam China’s already shaky banks. Property generated about one-quarter of Shanghai’s 14.3% growth in gross domestic product last year. Moreover, while Shanghai accounts for just 5.4% of China’s GDP, a crash could have a ripple effect… Speculators who bought flats by the half-dozen with the notion of flipping them have been left holding the keys — stuck with empty properties and big debts to the banks.
http://www.businessweek.com/magazine/content/05_41/b3954072.htm
Morning all,
Just thinking..
The superbowl is only five days away.
Do you nice R/E bulls think that we should get our checkbooks and pre-approval letters ready for the spring buying season?
I actually went through the process and have letter in hand in case something unbelieveable appears. The amount they’d like to lend me has no basis in reality.
I did the same thing. And got a preapproval number that almost made my head explode. Very close to 9X income. Come on?!
Sure, all these people are rich living around you, because rich people need to borrow 9X their income to live in a nice home, right?
Mike, what does that come out to as a percentage of your take-home income?
What if someone were to get pre-approved, but asked for it to be based ONLY on reality…is that even possible anymore? Wouldn’t it hurt me to have a pre-approval 9x my income when I went to bid on something…especially if I’m planning on low-balling?
I recently got preapproved by BoA too; also spoke with a mortgage broker. I said I’d put at least 30% down, finance 2.5X my annual income, 30-year fixed. Both asked if I wanted an interest-only loan — I said “why would I want to do that?!?” No response.
I knew we were headed somewhere like this when I started getting spam promoting mortgages 5 years ago.
At my BOA branch a manager asked me if I wanted to get pre-approved. I said “We’re waiting for prices to drop.” She marched off in a snit. I get the feeling she’s been hearing that a lot — probably bought at 9x income and is watching her equity melt like the ice caps.
Go Bears!
test
“Plan” for “fixing” SOH revealed (FL market).
http://www.sun-sentinel.com/news/local/southflorida/sfl-ctaxcut31jan31,0,5177713.story
Great idea, that will effecively remove the first time home buyer from the market. I am just shocked at how stupid this idea is, the level of idiocy is truly without parallel.
Just cap the tax increases you idiots (the amount of tax govt takes in) and let the values of the homes float. This will be the end for FL as a retirement destination, and actually for anyone buying anything down here that does not already own a home. Good way to work through the 100K homes we have on the market.
“Overall, Crist’s proposed property tax relief would save about $2 billion in the first year for homeowners, landlords and businesses, but those savings would come from the budgets of local governments and school districts.”
The brilliance of this idea can’t be understated. There’s no way people are going to go for that. Give the flippers a break and close down all the band, drama and other character building extra-curricular activities you can find. Don’t cut out sports. Young thugs have to have something to do. This is another brilliant idea from the Citrus State.
The article goes on to say how local governments will be forced to better allocate funds and tighten their belts. That is good for a laugh.
“An Orlando Sentinel series last fall, for instance, found that that singer Jimmy Buffett and talk-show host Rush Limbaugh each saved about $224,000 in property taxes last year on their Palm Beach County homes. The average Florida homeowner, by contrast, saves about $1,700″.
Thats great another tax break to the RICH. Can anyone guess which political party the govenor is from?
And before all you libertarians jump on me just think for a minute what kind of world we would have without taxes and regulations. I’ll give you one example - home prices would not have doubled in 5 years if the toxic loans were never allowed to be offered.
I don’t mind giving tax breaks to the really rich but giving tax breaks to the middle class and upper middle class is really stupid. Super rich people blow their extra money doing stuff like building the new gym at my kid’s school or funding the scholarship fund that put my father in law through school. He went on to start several companies and put thousands of people to work. Middle class tax breaks end up buying chrome wheels for the H2, plasma TVs, lawn ornaments, boob jobs and gambling trips to Vegas. Middle class tax breaks almost never get invested in anything productive; they just get flushed down the fast drain to china.
Interesting point……
All that frivolous spending is someone else’s income.
Or the rich just buy that extra NY penthouse (inflated price, who cares), 300 ft yacht, 1M$ car, $30K/night vacation, 30M$ painting, etc. There are greedy people and thoughtful people in all classes. I’m part of the middle, would love to have a reduction in taxes and wouldn’t spend it frivolously.
Got ya, just trying to make a point about class warfare.
Grubby(tm)
PS. I was being factitious, to illustrate a point.
PSS. I am pro boobs and neutral on boob jobs.
Sometimes they create endowments, sometimes they build Neverland. Just as there are a lot of middle class people who donate to charities, though this is almost by definition less ostentatious than parking an SUV in the driveway, so it tends to fly under the radar of nosy neighbors etc.
Seems some of you think that the $429,000 Rush paid last year isn’t enough, that he should pay $650K. I’m trying to figure out how anyone can feel that one person, no matter how wealthy, using the same fire department and police department, driving on the same roads, access to the same schools, etc. as the rest of us should have to pay more than $430,000 in property taxes. Can someone enlighten me?
Can someone also enlighten me as to why it’s better for a middle class person to send THEIR money to the government, instead of spending THEIR money that THEY WORKED to get, on something THEY want.
I want to pay the same tax rate as everybody else. Those richer will end up paying more in dollar terms and those poorer will pay less. Whenever people start deciding who has too much or who pays too much in taxes and who has less, and should pay less, they forget that such judgments are subjective. Chances are that they have way more than a whole lot of other people but that gets rationalized away. Theoretically, there is one person in the US who has less than everybody else. Maybe that guy should decide who has too much and who should pay what in taxes. Why do you deserve to have more or pay less than somebody else? You have a mini van, you don’t really need that and besides the money could be better spent helping people who can’t afford a mini-van. Substitute Maybach for mini van and there you go. It’s an endlessly circular argument resting on a slippery slope. (wacky mixed metaphor alert!) While I’m sure there are some who will misconstrue my comments as being overtly political, they are not meant to be. I will now try to calmly breathe in and out of my paper bag.
Um, if you are paying $429k in property taxes, your house is worth what, $5 million or more? I would say that in that case you DO derive proportionally greater benefit from having fire and police departments than someone owning a $200k house.
As for schools, one reasonable argument that I have heard is that we all benefit from having other people’s offspring educated, as education correlates with lower crime. Yes, I acknowledge that this is similar to paying the Mafia for protection. Nonetheless, as someone who is childfree, I’d still prefer not to be surrounded by baboons who have never been to school. If I wanted that, there are plenty of other countries to choose from, and I bet they have lower property taxes there too.
I think his house is worth $30 million. Let’s say Rush pays 100 times more for property taxes than the average homeowner in Palm Beach already. He’s paying every dime the rules say he should. There’s no way he’s using 100 times more government resources than the average person. He doesn’t have his own police force or fire station. They don’t close down I95 for him when he goes for a drive. He doesn’t get his own reserved parking spot in every town in Palm Beach County. There’s no special dedicated team of doctors waiting for him at the local emergency room. Seems like the rest of us should be pretty happy that Rush is in essence subsidizing a whole bunch of people he doesn’t even know, but some on here are insinuating that he should pay more, say 150 times the average person. Why?
I can’t disagree with you in terms of property taxes. But I do have to take issue with income taxes. The more wealthy you are, the more you have to lose without things like a military protecting your assets. So, rich people do derive more govmt “protection” than do poor people, who would still be poor with little if any protection from thieves, whether in this country or the next.
Though I’m a libertarian and Rush is not, one classic quote of his, from long ago, has stuck with me since:
“Have you ever tried to get a job from a poor guy?”
this (portability of SOH) will completely shut down first time home buyers and hence a non-starter.
of course, no wonder as Crist and his cronies are big fools.
the best way to address property tax problem in Fl: to reassess and reappraise all homes (be flexibale for future much lower appraisal)..so everyone pays equal share as many counties do.
Esp as county benefits are shared equally.
Not only will it further screw the first time buyer, but it will guarantee that every current Florida resident who is thinking of moving to a larger (or smaller, or the same size) home elsewhere in the state will just sit on his hands until this “reform” becomes law. Think about what that will do to sales……
Here’s my opinion on the thinking in Tallahassee, and it wouldn’t matter if those in power are Republican, Democrat, or Vulcan:
1. Real estate fuels the Florida economy. If people don’t buy houses in Florida, all hell will break loose. Florida is a homebuilding company with a couple of small side businesses in tourism and healthcare. Our bread and butter product homes - aren’t being sold, let’s look at possible target markets and come up with a plan.
2. 1st time homeowners - Even if taxes were 1/2 what they are, 1st time homeowners can’t buy. Insurance companies are not going to lower their rates by 50%, we can’t make them. So let’s forget about 1st time homeowners.
3. Noone is going to built a substantial quantity of affordable housing, if we give companies state funds to do that, they will steal the money and go to South America. So forget about affordable housing consumers.
4. So that leaves us with current homeowners, some of whom aren’t buying because they don’t want to be back at square one regarding taxes. They can afford a new house if they sell they’re old one, are already getting hammered on insurance.
5. So lets make the tax break portable, sell some houses to the existing homeowners, worry about tax shortfalls later.
if you chain all the existing homes sales, the lowest on the chain has to sell to a firsttime buyer, whose purchase is what feeds the chain..
Not if older people sell their big houses to younger people wanting to move up from condos, and vice versa. There’s no new house, but there are two real estate commissions, mortgage commissions, and lots and lots of government fees, taxes, doc stamps, etc. I know quite a few people that want to change houses, staying within the same price range, but can’t because their taxes would double. I’m not saying this is a good long-term solution, but we are talking about the government here. It would result in at least a short term burst of sales.
Irony — if the changes Crist proposes went through, and If I were able to transfer the property tax base that I had when I sold my principal residence in 2005, then I would most likely buy another property in Florida and remain here, instead of moving out of state as I now plan to do.
But the changes would be unfair, IMO. I would just be capitalizing on their particular advantages to me.
If I were a buyer in Florida, I would by the cheapest, rat-infested POS I could find to lock in the low tax basis, then sell it and go buy something I wanted.
You’d only be locking in the difference between what you paid for it and when it sold. So if you buy a POS for $75K and sell it for $100K, then buy a house for $500K, you’ve only lowered your tax basis by $25K. Not worth it.
How about the insane notion that everybody be taxed the same way? The more your house is worth, the more you pay.
This is how they’re peddling mortgages to the cash strapped “luxury must have “crowd in Sarasota, Florida.
http://thehousingbubbleblog.com/js_slideshow/#2
Relationship…Trust…and, in truth, neither applies.
An anecdote: My wife and I have a 30-year fixed mortgage with Washington Mutual. We closed on the loan in November 2004 (it was to buy our house, not a refi). The rate is 6.125%. Last night, we got a solicitation call from Wamu asking if we were “happy with our payment” or something like that. It was clearly a sales pitch. The funny thing is, long-term, fixed mortgage rates are UP from where they were back in November 2004 — by about 60 basis points. So clearly WAMU is in no position to REALLY save me money with a rate-and-term refi. They were obviously going to try to get me into some kind of funky financing, like an interest only or option Adjustable Rate Mortgage. I didn’t even let the guy go any further … and hung up. I understand that lenders are in the business to make money. And I can fully understand why they’d bother me at dinner time IF rates were falling — you don’t want your borrower to refi out from under you with the guy down the street. But to try to hit me up to refi … when the interest rate climate is actually moving AGAINST me … that’s just wrong.
http://interestrateroundup.blogspot.com
I don’t know: you might be in the subclass of people who actually pay their mortgages, let’s henceforth call them the “Super Prime”
and thus deserve lower rates than those who are only “Prime”.
That kind of gives you an insight into the “real” state of the mortgage business right now. I am sure that the official numbers of mortgage apps are overstated. Further, those numbers probably include people that would only be refi’g to go into a toxic loan from another toxic or fixed. Since, as you mentioned, rates are rising, and prices are falling, so the refi winodw is closing. First those that lenders that can still hang on a bit longer, will do so. Then they plus all those that are no longer making money will soon be looking for other work.
I got the same thing from the folks at Chase on my 6.5% from 2002. After about a minute of back and forth with the girl who phoned me, she gave up pretty quickly and said “obviously, you don’t need this.” I credit her for at least realizing that going further down the sales script would be a waste of time for both of us.
“I need it like I need a hole in the brain” would have been a snappy reply!
Some time back, my own mortgage holder (ING) gave me an oh-so-not-tempting offer to adjust my 3.99% 5/1 mortgage to a 5.00%, complete with a new, higher rate cap when it floats. The benefit there was that they’d extend the 5 years fixed rate, thus buying me two more years, albeit at a higher rate starting now.
No thank you. I’ll take my chances (and pay off the bulk of the mortgage if my adjustable rate does skyrocket in 2010).
So then they come back a couple of months later and offer me… the same deal, only at an even higher rate of 5.50%! Arrghhhh!!
Well, they’re in business to lend money at profitable interest rates, so I can’t blame them for trying, and this was only by mail, so them not bothering me with a dinnertime phone call is appreciated.
“Cash pore”? Cripes, they are going to scam people, they should at least know how to spell.
I believe that is a play on words with their lame “spa” theme.
I fell for the same thing NoVaWatcher did, till a few seconds later I realized it was a play on words. Maybe I expect such poor spelling and grammar these days that I expect that before I expect any trace of wit.
NoVa Sideliner, the same thing happened to me, but I wouldn’t say that “cash pore” is a witty thing to say. It is incredibly stupid, and to think they paid money for that ad…
The audience at whom the ad was aimed will not appreciate the abuse of the King’s English.
trump seminar ad on the tube this am-
free !
And still way over-priced.
Only if your time is worthless…
Where’s the (Subprime) Love?
http://wallstreetexaminer.com/blogs/winter/?p=384
“Success has many fathers, but failure is an orphan.”
‘Russ Winter wrote:
The comment from Bill Fleckenstein on the subprime market was passed on to me. It is totally consistent with virtually all the other evidence we are seeing. That market is nearing melt down in my opinion.’
And I wonder, in turn, whether many housing market watchers grasp the connection between the subprime melt down and the question, “Where did all the buyers go?”
REIC team members are really going to be pissed when their star player Subprime doesn’t show up for the tip-off this Spring.
‘Like Fremont, New Century has taken further steps to make its underwriting more restrictive, according to the company. Several of the new rules affect first-time buyers. New Century won’t lend them money if they don’t plan to live in the property they’re buying. And if first-time buyers are putting less than 10 percent down with a “stated income” loan, they need to have savings equal to six months worth of mortgage payments.’
You can’t mean that lenders are actually going to require buyers to live in the homes they purchase? If so, how is the demand side of the housing market going to absorb 1m or so vacant homes? I guess it is time for HUD to get in there and use taxpayer dollars to compensate the builders for all the surplus $500K+ beauties they have dumped onto the landscape…
I believe this one additional signature during the closing process will add inestimable stability to the housing market. This will make fraudsters think more carefully about the other 43 fradulent statements they have made during the buying process.
LMAO.
Correction:
“If so, how is the demand side of the housing market going to absorb
1m or so2.1m vacant homes?”From Russ’s blog:
‘I ran my story “echoes throughout the house” just a tad too early. There are new numbers on vacant houses for sale out, and they are up to 2.1 million from 1.94 million in the third quarter. The chart shows the homeowner vacancy rate (not rental vacancy which is 9.9%)’
Actually isn’t it 2.7? (or 2.3 if you’re talking SFH)
http://www.census.gov/hhes/www/housing/hvs/historic/histtab2.html
http://www.census.gov/hhes/www/housing/hvs/historic/histtab4.html
Those appear to be vacancy rates, not total numbers.
2.1m vacant homes / 114m households = 1 vacant home per 54 households, and that is just for the homes currently on the market. Just wait until latent inventory of homes under construction + second (or more) homes which will prove too expensive for their owners to hang on to w/o 10%+ annual appreciation get added to the inventory pyre.
As has been noted here many times before, everyone is already living somewhere. The NEED for new housing is pretty slight.
“And if first-time buyers are putting less than 10 percent down with a “stated income” loan, they need to have savings equal to six months worth of mortgage payments.’”
Hey, that’s not FAIR. You shouldn’t have to have any actual MONEY to buy a house, should you?
Money, in the form of deposits, should only be required of renters…
“how is the demand side of the housing market going to absorb 1m or so vacant homes?”
Rich baby boomers will clone themselves and save the market.
“..if they don’t PLAN to live in the property they’re buying.” [caps are mine]
“Sure, I ‘plan’ to live in that house!” Plans change.
The Shanghai index was down nearly 5% today. But that shouldn’t be any problem. We will just throw more liquidity into it. The mad run of the HSI also seems to be coming to a slowdown. It was down nearly 1.7%. And gold is over $650.
I remember as a kid, looking up to the sky, and seeing that it had turned green. The winds had completely stopped. There wasn’t a noise in the air. There was no rain coming down. It was complete calm. And you always knew that 10 minutes later all hell was going to break loose. You knew that your only concern at that point was finding shelter for you and anything you loved. Does anybody else have that feeling right now?
Feel that trembling? That is the juiced financial system shaking under its’ own weight. Oil up $3/bbl yesterday on no news; Precious metals breaking resistance; Chinese market wobbling; Buckle your seat belts.
Gold may seem pricy @ $650+ to some, but look at it this way instead:
In 1980, a decent house in el lay cost around $100k and gold was $800.00 a troy ounce.
Now a decent house costs around $700k and gold hasn’t even reached it’s previous peak price.
Inflation-adjusted peak for gold is over $2000 toz. We have lots of room to run.
What’s really noteworthy is how many DON’T have that feeling.
just bought my first ever hand gun this weekend.
Congratulations!
p.s.: Now do everyone a favor and learn exactly how to use it.
More on Coast Bank today. http://www.heraldtribune.com/apps/pbcs.dll/article?AID=/20070131/BUSINESS/701310325
I like Michael’s writing style - pay close attention, and you can see he’s mocking all these corrupt officeholders and the flippers getting stuck.
total twaddle…
http://www.theglobeandmail.com/servlet/story/RTGAM.20070130.wxibbernanke3101/BNStory/Business/home
“and there is evidence the worst may be over in housing.”
And what would that evidence possibly be??????
This looks like a Bernanke press release. What a swell guy and everything is under control. Let’s all go back to grazing…er, uh, shopping sheeple.
“Mr. Bernanke, who grew up working in his father’s drugstore in tiny Dillon, S.C., said he stays grounded to his middle-class roots by thinking about the concerns of ordinary Americans.”
Ah, ain’t he so sweet and cuddly.
Every time I read that reassurance, I cringe at the thought of what manner of behind-the-scene market manipulations might be underway to ensure “the worst may be over in housing.” You see, it was market distortion that brought us this 1m+ (or whatever) number of vacant homes, and further market distortions to ensure a soft-landing are likely to bring more vacant homes (and speculative purchases thereof).
GS, I agree. There is no way BB&Co are unaware of what’s coming, but as we speak they are doing what they have to do to fall on their feet.
If people are calling the bottom, it isn’t a bottom. Capitulation means giving up all hope.
I just added that one to my “great quotes” list.
Still wondering WTH happened to the realestatehaircuts blog.
Pretty good explanation as to why HB stocks don’t do what they “should” do.
http://biz.yahoo.com/cbsm/070129/5d3626dc318249a6abeabbd5171c3142.html
TxChick –
I saw that one. I don’t believe it tells the whole story, however. I have explained why not many times, so will not get into again.
Hi TX!! I recently went negative on LEN, CFC, WCI & RKH (2009 puts) am considering doing the same to IYR…..any other REITS that look way overextended to you? Darryl
i read this link thinking “this is way overblown but there must be some point to it.” i discovered the point in the last paragraph where it recommends the lazy man’s portfolio. this portfolio is a compilation of ONLY vanguard etf’s and mutual funds. a colleague had pointed me to the article. i looked at it and thought it could be interesting. looked at it again the next day to email it to someone and something had changed — the stock symbols for the etf’s had been removed while the symbols for the mutual funds were still there. vanguard makes roughly 3X as much on its mutual funds. i emailed the author of the article who responded with a nonresponse. marketwatch is a shill for its advertisers. i often feel sorry for people who make financial decisions based on crap like this and this is but a minor drop in the bucket of false/misleading/biased info that’s out here.
rant off
Very interesting sleuthing. I don’t buy the stuff, but I admire people who keep pulling on the thread, to find out what’s at the end.
This looks like another case of revision boost. Over 300 MSM stories have headlined the microscopic rise between this month’s raw consumer confidence number and last month’s revised number. Anyone remember what last month’s raw number was? (the MSM isn’t telling)
“Behind Consumers’ Growing Confidence: With gas prices down and the job market up, consumers are feeling better about the economy”, by Pallavi Gogoi, BusinessWeek, January 31, 2006.
http://tinyurl.com/ypbnh3
By the way, twist has posted today on revision boost in last Friday’s new home sales report. This little stats scam seems pretty widespread.
“This little stats scam seems pretty widespread.”
Refer to TxChick’s link above to ArroyoGrande’s article on psychological economics. The pressure to tweak stats to manipulate public perceptions must get a bit overwhelming at times…
Yeah, that one’s already up on Doom’s sidebar. By the way, my Jan 10th post “Quantum Finance and Synchronicity” was supposed to be a joke.
I went searching caches and the number for december was revised UP from 109, so in this case, it actually is going in the opposite direction. While I suspect many groups of revision boosting, this is not apparently the case here. The 105.3 was the same. Basically, the Nov to Dec gain was higher than expected.
“Most Americans feel good enough about their situations that they plan to buy cars or homes in the next six months.”
More than 50% of Americans plan to buy a home or a car in the next six months? What kind of nasty lie is that? Car sales are in the tank along with houses. New-model cars don’t come out until more than six months from now. Yadda, yadda, yadda. 50+%? Impossible.
As has been mentioned before on this thread, “Plans change”Most of these people think everything is going swimmingly, and they’re going to keep getting raises.
Plus, a few makes have 2008s available. They can impress their friends with a 2008 Buick, Dodge, Ford or Mercury.
WCI Communities Adopts Limited Duration Shareholder Rights Plan
“Don E. Ackerman, Chairman of the Board, commented, “The Board is committed to maximizing value for all of our shareholders. Given current conditions in our real estate markets and their negative impact on our stock price, we believe having a rights plan with a limited term will help ensure that all WCI shareholders realize the full and fair value of their investment in the Company in the event of a potential change of control.”
“Under the Plan, one right will be distributed for each share of WCI common stock outstanding at the close of business on February 9, 2007. If any person or group acquires 15% or more of the voting power of the Company’s outstanding common stock without the approval of the Board of Directors, there would be a triggering event causing significant dilution in the voting power of such person or group (other than any existing stockholders who currently own more than such percentage, who will be precluded from acquiring any additional shares). The rights plan, which is similar to the rights plans of many other public companies, will continue in effect until January 30, 2009, unless earlier redeemed or terminated by WCI, as provided in the Rights Plan.”
http://tinyurl.com/2b8ftf
Commonly called a poison pill. WCI doesn’t want an unfriendly takeover. I’m not sure what makes them think that anyone would want to take them over.
I suspect they are just trying to encourage rumors.
Suggested topic. The tax code changed in 1998 to allow the $250K/$500K capital gains exclusions (replacing carry over basis). To the extent real estate is now a “tax-free” asset class (like muni bonds) one would expect that this tax change would cause some measured increase in residential prices. How do we quantify what this measured increase should be? I guess what I’m saying is that I don’t expect prices to revert to 1998 +3% per year because the tax code changes added some additional value and I’d like for the board to attempt to quantify this added value.
Unless it led to increased speculation that might hurt short term values in the end.
Depends how big the gain is and how long they hold onto the home. If a couple purchases a home for $1M and expects to sell it in 10 years for $1.5M and the cost of money is 5% then the value of the tax break is:
$500k gain x 15% LT Cap Gain rate / (1.05)^10 equals $46,043
That sounds like an interesting topic. Each Friday, Ben solicits such suggestions, for the weekend. You might want to re-post it then.
This is a gem haircut (or fraud)I found yesterday .
Purchased on 7-12-05 for $310 k.
Bought back by Long Beach (forclosure) 4-5-2006 for 297k
Now on sale for 179k.
That’s 42% so far. Not a bad area either.
No bubble here in Rhode Island.
.
http://www.riliving.com/PropSearch/mfformdetails.asp?MLSid=663770&indiv=1
.
http://data.visionappraisal.com/CranstonRI/(S(2v45eryeetvscf4532pyrb55))/findpid.aspx?iTable=pid&pid=12633
multi family for 180k
dang - is Cranston that nasty now?
Actually, if you use the 100 x gross rent rule, this is still overpriced by about almost 40K. Of course, that’s not really counting any improvements made to the house, nor taking into account the neighborhood.
Whoever bought that place for $310 in ‘05 was smoking something. No way a two-family in Cranston which may gross $16k/yr in rents is worth more than $175…
In talking with a friend who happens to be a realtor/property manager in SE Mass, investors looking for multis are paying 30-40% off of peak for properties. The only people paying more than that is for owner-occupied and only on nice properties (i.e. fully renovated, in good neighborhoods).
Sorry if this posts twice.
Actually, if you use the 100 x gross rent rule, this is still overpriced by about almost 40K. Of course, that’s not really counting any improvements made to the house, nor taking into account the neighborhood.
Whoever bought that place for $310 in ‘05 was smoking something. No way a two-family in Cranston which may gross $16k/yr in rents is worth more than $175…
In talking with a friend who happens to be a realtor/property manager in SE Mass, investors looking for multis are paying 30-40% off of peak for properties. The only people paying more than that is for owner-occupied and only on nice properties (i.e. fully renovated, in good neighborhoods).
Cranston is a hole.
GDP surges at 3.5% rate in fourth quarter
Consumer prices fall for first time in 45 years
http://tinyurl.com/2mx5tm
Wow.
What the heck does that mean? Did Goldilocks just enjoy a big bowl of grizzly stew?
Technically, isn’t that deflation? Uh oh, maybe crazy deflation expectations are true…
“Disposable personal incomes rose 5.4% annualized, with the personal savings rate improving to a negative 1% from 1.2% the previous quarter.”
5.4% increase? Mine didn’t increase at all. And check the bastardization of the word “improvement” re the savings rate.
“His condition improved from dead to buried.”
Looking Twice at Overpriced Homes
From Elizabeth Weintraub,
Your Guide to Home Buying / Selling.
It’s Not Always a Physical Defect that Drives Away Homebuyers
Common knowledge dictates that if a home doesn’t sell, there must be something wrong with it. That’s a true statement. In a market that is moving, there is something wrong with a home that doesn’t sell. But contrary to popular belief, it’s not always location or condition. The number one reason why an otherwise attractive home does not sell is price. Homes that are grossly overpriced often never sell at all. Why? Because home buyers don’t make offers on them.
Why Don’t Home Buyers Make Offers on Overpriced Listings?
They don’t want to offend the seller. It goes against human nature to offer substantially less than asking price to a seller. It’s insulting to the seller and embarrassing for the buyer.
Buyers erroneously believe that the seller knows the home is overpriced.
They believe that if a seller would be willing to sell for less, the seller would simply lower her price.
Buyers also assume that the seller must have turned down low-ball offers from other buyers because surely someone, somewhere along the line, had offered a reasonable price to the seller. But many times, there are no offers at all.
How Do You Find an Overpriced Listing?
The easiest way is to ask your Realtor about the average days on market (DOM) for your area. Multiple listing systems are designed so it’s fairly easy to compute the DOM. Then ask your Realtor to sort through the listings and give you a print-out of every home that has been on the market longer than the average DOM.
If your Realtor is a neighborhood specialist, it is likely she has toured these homes and has intimate knowledge of condition and layout of these homes. Ask her to share this information with you. You can also ask your Realtor which of the homes she thinks are overpriced as well. You will be amazed to learn that often agents don’t tell listing agents whether their listings are overpriced because agents don’t want to offend anyone either! But listing agents aren’t infallible. Sometimes they make mistakes when estimating market value prices for a seller. Ultimately, however, remember that it is always the seller’s responsibility to select the sales price.
Why Would a Seller Lower the Price?
A couple who bought the house you see pictured on this page at first wondered the same thing. That home sat on the market at an asking price of almost $950,000 for three months. In a hot market seller’s market, it probably could have sold for about $800,000, but the market was softening and demand was decreasing. Moreover, the sellers had moved out of the area, leaving the home vacant. The listing agent was unaware that the home was overpriced. The sellers were motivated. Pointing out market conditions to the seller, this couple was able to negotiate a deal to buy the home for about $400,000 less than list price. Their contract was the only offer on the table while the sellers’ clock was ticking.
To make the offer more attractive to the sellers, the buyers did not include the sale of their existing home as a contingency. They offered the seller a sizable earnest money deposit to show that they meant business. And they also showed the seller a list of homes that sold in the neighborhood at more reasonable prices.
Now, not every home that is overpriced will ultimately sell for less than market value. But many homes that are listed at unrealistic prices are owned by sellers who are motivated and who are willing to listen to reasons why they should sell at a reduced price to you. If you find out that a seller has turned down multiple offers for less money, it might mean that it’s just a matter of timing. Eventually the light bulb will go on and a seller will say yes.
There are overpriced gems hiding among the inventory of homes for sale every day. Don’t just pass them by. You could be passing up an opportunity to buy your dream home.
Interesting Side Note: After this transaction closed and the final sales price was published, an irate buyer who had previously seen this home called the listing agent. She was upset and complained, saying if she had known the seller was willing to go that low, she would have bought the house and offered $100,000 more. Well, why didn’t she?
http://homebuying.about.com/od/homeshopping/a/Buyoverprice.htm
My take away from the article as posted:
1). Buyers are now fully responsible for researching comps and setting realistic offers as Realtors are now clueless in a declining market.
2). Apparently there is no standard that Realtors are held to. They can be off by hundreds of thousands of dollars in pricing, cost their clients tens of thousands in holding costs and it is just “ho-hum, business as usual” for these a$$hats.
3). Since when has listed DOM had ANY correlation to ACTUAL DOM (since Realtors always play the game of delisting and relisting to show it as “fresh”)?
Other than that, I like the lowball approach and resetting of comps!
I spent nine months looking for my first house, researching the markets I was considering and understanding the financing equation.
It NEVER occured to me to “trust” a broker. Listen? Sure. But seeing as I was putting MY financial butt into a highly leveraged, illiquid, transaction I wasn’t about to take any ONE person’s ideas as gospel.
Sorry, but anyone who buys a home, a business or anything else that significantly endangers them financially better do their “due diligence” and try and understand as much as possible about the entity they’re considering.
If you don’t bother you don’t deserve an outcome anymore predictible than a throw of the dice.
“The number one reason why an otherwise attractive home does not sell is price.”
Ya think?
But then, there are a lot of sellers who (unlike those in the article above) simply won’t budge. Case in point:
Friend of mine has an empty house after his relocation. Listed for $320k last year, got a contingent offer for $310, which he rejected. Months later, he dropped the price to $310k, but no offers above $300k now. So he rejects them all.
Must be a problem with the house, right, not the price? Well, that’s what he thinks. So he installs $10,000 worth of renovation/upgrades in the empty house! And now he wants $330k for the place! He actually has hard offers for $300k but won’t touch them.
In the meantime, he’s spent $18,000 on house payments/ insurance/ etc plus the $10,000 in new flooring and upgrades! And the house sits empty with no buyers in sight (at his price), and he refuses to budge. If (big if) he sells in the spring sales season, that will stilll mean another $7k in costs over the next four months.
Bite the bullet last year: $300k non-contingent sale
“Wishing price” sale this spring: $330k-$18k-$10k-7k = $295
Down and down it goes, so even if he DOES get a wishing price, he’s still behind in the game.
That drip, drip, drip of monthly pain is obviously better in his eyes than biting the bullet once and getting out of that mess, which would involve admitting that he just set the wrong price all along.
Pretty good example of self-injurous and delusional pride.
Yeah, death of a thousand cuts..difference is…your friend’s making the cuts himself. When the property does sell–He’ll secretly wrestle with self-recrimination like a cancer, but will probably not admit making bad financial decisions. I see these folks all the time at work. Mega egos with no demonstrated accountability.
DOC
NoVa — your post reminds me of a property I have been watching for more than a year. It sits and sits and sits, at $500K. It is in a type of town where, as TxChick so classically put it, “money goes to die.” Nothing sells there, so re-selling when I’m ready for the old-folks home, not that far off, will be a problem.
My offer would be $350K, a flat 30% off, but it would be all-cash and a two-week (or as-desired) closing. What are the odds the seller would accept, or that the agent would be eager to present the offer? I think we are in the express lane and traffic is light, but we are a ways yet from the exit. But I see constant progress, and that is encouraging. Meanwhile, renting is a heck of a deal.
fb’s in Bend still looking for the Cali equity locusts with a “box of stupid”
http://bend.craigslist.org/rfs/271211535.html
Here’s the money quote from that listing:
“If this doesn’t strike your fancy there are many more available.”
I guess the fancy Bend carriage is about ready to turn back into a pumpkin.
The people here have no idea…we are still at +250% YOY inventory which is starting to rise even more.
Everyone is waiting for the “spring bounce”. It is going get ugly.
I grew up in Beaverton and have a hard time thinking of Bend as anything but a dusty small town that happens to be near a ski resort. Growing up, I knew plenty of people who skied at Mt. Batchelor, but at most they rented or time-shared cottages at the mountain and went into Bend for groceries. The thought of living there year-round never occurred to anybody–what would you possibly do for a living there? Apart from telecommuters or web business types, I still don’t get it.
Bend. Over.
From today’s Stockton Record:
“Dolly Cruz, a Bay Area investor who a year ago bought a single-family home in Lathrop’s Mossdale Landing development for $625,000, figures if she had to sell now, she would lose $100,000.
The house is rented out at $1,500 per month - not even enough to cover the mortgage payment, she said, but she is still confident in the long-term real estate market and isn’t upset about the slowdown.
“Even though the price is down, you’re not losing anything if you’re not selling it, is the way I look at it,” Cruz said.”
Here’s a link to the full article:
http://www.recordnet.com/apps/pbcs.dll/article?AID=/20070131/A_BIZ/701310301
“Even though the price is down, you’re not losing anything if you’re not selling it, is the way I look at it,” Cruz said.”
A loss is an economic event, not necessarily a cash transaction. If the homebuilder still had Dolly’s unsold house in inventory they would take an impaired asset write-off of $100k. This amount would drop straight to the bottom line of the income statement. In other words, a $100k loss.
What an idiot.
What if our housing market ends up being like the Japanese market of 15 years ago and declines slowly for over a decade?
10+ years of making payments to a declining value asset = losing ALOT.
Also from Lathrop, same town where Dolly bought, here’s a Craigslist ad from someone offering TWENTY new homes for rent at $1575 apiece.
Oops, the link didn’t post. Try again.
http://stockton.craigslist.org/apa/270005694.html
I will bet you $20 the landlord bought them all with cash back mortgage fraud financing. Why else would someone take on 20 houses and rent them in this market. Hmmm. Somebody local please answer that add, get the address and I will run a check on the borrower and lenders. Send it to paladin@paladinreports.com .
Paladin
Wire Paladin, San Francisco
“…offering TWENTY new homes for rent at $1575 apiece.”
Meaning, they’ll take noticeably less than that from renters who are solid gold — no kids, no smoking, no pets, no credit problems. It’s illegal to ask family and kid status, but it sure isn’t illegal for potential renters to volunteer the information — a valuable distinction, IMO.
I had to use Google maps to find Lathrop. It’s a hamlet on the fringe of Stockton. Anyone who pays $625k for a house there must be completely insane. I figured it was probably worth $200k, but then I remembered the trusty 110x rent rule, which yields a true value of $165k. Hello Dolly, you’re flirting with an ass pounding to the tune of 74%!! You may have earned the title of Greatest Fool Ever!
And that “pounding” only occurs after she loses $30,000 a year in negative cash flow for a few more years, until she is tired of feeding the aligator. There will be now appreciation in Stockton for 10 years. Just like 1990-1998.
“Even though the price is down, you’re not losing anything if you’re not selling it, is the way I look at it,” Cruz said.”
This thinking was not uncommon during the early stages of the Nasdaq crash in 2000-2001.
Ca$h idea: Buy up all the produce within a 10 mile radius of my house for 7 days, and then I’ll open a Farmer’s Market in town for those 7 days. I’ll artificially create scarcity, forcing people that want to eat to buy my produce.
Isn’t that kinda what people did with Real Estate?
the housing bubble is global, but housing bubble manias are still local. According to the Dutch realtors, for the first time in about six years buyers are regularly making bids over the asking price again as a result of ‘fierce competition’. Difficult to check if that is true but I wouldn’t be surprised with all those idiots running around that are spending other people’s money (because they don’t have any funds available themselves). The previous bidding war episode in Netherlands was around 2001, when price appreciation was already in the 400-500% range. In the six ‘post-bubble’ years home prices more than doubled in some regions while real incomes declined. All courtesy of unlimited loads of cash from the ECB (EU money supply growth is now officially over 10% yoy, while they target a maximum of 4%).
NHZ — prior to your posts here, I had always thought of the Dutch as rather practical people. After the Swiss, in Old Europe, the Dutch are the last I’d have thought to be caught up in speculative fever, having doubtless been taught along the way about the “tulip bubble.” What is it that causes modern-day Dutch to ignore the relative value of renting, until prices return to the normal rent-vs-buy relationship?
the real cause? I guess it must be something in the genes, the Netherlands had many speculative bubbles (including several housing bubbles) in the last four centuries.
On top of that there is a history of 20 years of government-stimulated speculation (gains on housing, stocks etc. are tax free but if you loose when gambling in housing, the government will pay everything).
People here feel even more entitled to the housing piggy bank than in the US (and it’s a bigger income source than in the US too!). Lucky for them, the new Dutch government will keep all the idiot housing incentives (including the most favorable HMD in the world) intact and probably even add some more - despite all the election promises of the Labour party to do something about it.
I did a search of my zipcode at http://www.realtytrac.com and was AMAZED at how many REO’s, pre-foreclosures, and homes to be auctioned were listed in my area. Also a lot of the prices listed are way below comps - more in line with the 2002-2003 prices range.
Do those prices get bid up much at auction? Has there always been that kind of volume of listings, or is this the result of the ARM’s and low credit-issuing standards so often discussed here? If the volume is that much higher these days, wouldn’t that translate to less bidding at the auctions?
I can think of a couple downsides to buying at auction: needing the cash up front, the auction fee (10%?), not having been able to check out the place thorougly, etc. What else am I missing?
TG — “not having been able to check out the place thorougly” is a BIGGIE to me. As in, a deal-breaker. Just one poster’s thoughts, though.
From my brother (an analyst in the RE industry) when discussing San Diego inventory:
It is actually worse than that. As you might know with numbers, the way that these numbers are reported is misleading and deliberately has a positive bias built into them. Also, current sales rate vs. inventory is a grossly inaccurate way of measuring supply/demand (though widely reported) because sales rates are always over-reported and inventory is very under-reported. (Just a stupid example: if a house falls out of escrow, the way the reporting mechanism works, the sale is counted when it went into escrow, but it isn’t discounted when it falls out. As well, the house is not put back into the inventory numbers. But when the house finally completely sells, it is counted as a sale again, and another unit is taken out of inventory).
But the good news is that rents should start going down as all of these units are summarily converted to apartments as builders are looking for any kind of cash flow. Units they do sell are falling out of escrow because 1. The value of the property has fallen more than the cost of cancellation 2. Buyers are leaving as insurance companies do not let people move into new condo buildings until they reach a high level of occupancy. Since most of these buildings have sold 15% of there units, they have only 65% more to go before you can close on your escrow and you can move in. At the current rate of sales you will be able to move in by… 2015.
A good unit for a good price should be available in San Diego in the future… get your wallet ready.
Looks like insurance companies still know how to do math and figure probabilities.
I owned a condo for twenty years and agree that the lender requirements tend to ferret out a bit of honesty about valuations far sooner than happens re SFRs. At least here in Florida, the ratio of investors to primary/full-time occupants is vital to the interest rate for financing. Lies notwithstanding.
Question: I check out the real estate records for homes purchased in my neighborhood. I’m noticing that folks execute a Deed of Trust securing, let’s say, a $260,000 loan and then another Deed of Trust (executed on the same date) securing, let’s say, a $35,000 loan. I know the second deed is inferior and these are NOT HELOCs. Why the two loans? In one case, the lenders are different - at least it shows different return addresses. In another case, it appears that the lenders are different, but the return address is the same. I know this is Real Estate 101 but the answer eludes me. Thanks!
If a loan exceeds 80% of value, it requires expensive PMI (Principal Mortgage Insurance?), which runs 1/2% or so on the loan amount. Thus, the lenders make and 80% loan and use a 10% or 20% second, so no PMI needed.
Thank you, Paladin. So is it reasonable to assume that 100% financing is going on in these situations - no down payment? I think I’ve answered my own question here……
Sounds like a piggyback. Equals Bad News. Equals Nothing Really At Risk. Assuming it is common practice there, Equals Get Your Butt Out Of That Hood As Fast As Possible, IMO.
Did anyone watch “the real Orange County Wives” (or whatever it’s called ) last night? Holy smokes, if you think the rich are smarter, watch this show. They all live in Coto de Caza, so I checked the prices on the houses there, 1-2 million and up….
“…if you think the rich are smarter…”
That’s never been a problem for me.
‘The very rich are different from you and me,’ Scott Fitzgerald once said to Ernest Hemingway, or so the story goes. ‘Yes,’ Hemingway replied, ‘They have more money.’
O/T — I have the humble distinction of being the good friend of a woman whose father challenged Hemingway to a duel, in Cuba, with .45 automatics. It was over flirtation with Hemingway’s wife, in a bar there. Hemingway wisely declined, citing the fact that he had far more to lose than to gain. The challenger was not a lightweight, but rather a senior foreign correspondent from one of the major broadcast networks at the time.
Ben,
How about an article from the past. The japanese bought Pebble beach golf course and overpaid by a lot and sold for a loss. A timely reminder even professionals make mistakes.
I wonder how Arnie, Clint, and Peter are doing?
They did the same re a golf course in the Tampa area, perhaps Clearwater. I went there years ago, but forgot the exact property. Never understood why people would invest in such property so far away, except that the Japanese love golf and it is as expensive in Japan as good rental sex is in the U.S.
From the Fed’s latest comments…
“…and some tentative signs of stabilization have appeared in the housing market.”
Yep, let’s just declare the problem away.
What makes you think they would make this statement without having a stealth stabilization plan to back it up?
Found this the other day. Didn’t see it posted, but thought the following bit was interesting (bold is mine):
“Denver City Council members Michael Hancock and Rick Garcia created the task force to see what role a city government could play in helping reverse a foreclosure crisis that has ravaged some neighborhoods. Thursday’s meeting was the first of six planned to discuss potential remedies.
At the opening session, two speakers from Montbello, a neighborhood in Hancock’s district, described how the effects of hundreds of foreclosures spread through the entire neighborhood.
“A rampant number of foreclosures causes property values to decline,” harming elderly residents whose houses are a key asset to survival, said the Rev. James Fouther, pastor of United Church of Montbello. He said the foreclosures also raise demands on food banks, destabilize families and damage the image of the neighborhood.”
http://www.denverpost.com/business/ci_5089610
I like the title, “Lenders misread Denver market”, but I disagree; the lenders had their prey squarely in their sights. The magic trick was loaning these losers someone else’s money while charging big destination fees.
Fed chief Bernanke wins high marks for first year
LA Times
http://tinyurl.com/3bwwdl
“By most measures, Bernanke got it just right. Now it’s hard to find an economist who predicts a recession any time soon. In fact, the economy appears to be getting a second wind…”
“By most measures, Bernanke got it just right. Now it’s hard to find an economist who predicts a recession any time soon…”
“More than that, the nature of the economy has changed, to the Fed’s benefit, in the last two decades. Globalization — the easy flow of money and, more recently, jobs across national borders — weighs against higher prices and wages, making it easier for the Fed to look good in its fight against inflation.
Some increasingly common business practices — such as “just-in-time” inventories and the growing use of temporary employees — have moderated the economic cycle by keeping businesses from overexpanding and then downsizing dramatically when sales slow.”
===
Look everyone, it’s “The New Economy”. Now where have I heard that before…
Read about John Laing Homes False Advertising, Poor service and Criminal intent.
Melody — greetings! Thought of you tonight as my wife and I enjoyed a very decent Cabernet with roasted super-thick rib steaks. Hope your drop in postings over the past year+ wasn’t because you thought we’d chase you down about the New Year’s party, but rather that you’re making buckets of money at something or are otherwise well-entertained.
Latinos “apy as they go” far too much…they should get with the program and use debt more:
LA Times
Most Latino students spurn college loans
http://tinyurl.com/2mpt2x
“”My parents have always said, ‘If you don’t have the money to pay for it, then work for it,’ ” Fernandez said.”
“When I ask them about taking out loans instead of working so much, their thinking is, ‘If you can’t pay it in cash, then it’s not a good idea.’ ”
“Students, professors, researchers and loan providers cited three common reasons for the aversion to loans: lack of knowledge about financial aid, fear of debt and distrust of lenders.”
“”Many Latinos would rather make their college choices based on their current economic situation and what they can afford while managing family and personal responsibilities,” said Santiago.
“They would rather pay as they go and honestly believe they can get a quality education wherever they enroll, as long as they are motivated,” she said.”
“Some students are reconciling themselves to debt. Fernandez, who will get his degree in English literature and Chicano studies, said he realizes he’ll need a loan for graduate school. So does Coronel, who finds humor in taking out his first loan for graduate school: “My accounting professor put it best. He said, ‘If you’re not in debt, you’re not American.’ ”
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I’ll have to blow up this quote and paste it on my wall so that my daughters can see:
“IF YOU ARE NOT IN DEBT, YOU”RE NOT AMERICAN”
Good to know that we have such good professors here in the US. Good thing to be teaching our kids.
And yes, I know that some debt, if used *wisely* CAN be a smart move…sometimes. But, in my humble opinion, these kids have the right attitude…pay as you go, even if it take longer to finish college.
On October 1, the New York Times carried a very informative article titled, “Black Incomes Surpass Whites in Queens.” The key? “The gains among blacks in Queens, the city’s quintessential middle-class borough, were driven largely by the growth of two-parent families and the successes of immigrants from the West Indies.” The gist of the story was that where the immigrants came from, they either worked hard or they starved. They brought those values/motivations with them. Simple; effective; timeless. The “MasterCard” of upward mobility, IMO.
Has anyone else seen this? It seems that a new Gallop pole shows “about half of consumers expect a housing market collapse in their market over the next three years.”
The tide is turning.
http://www.realestate.msn.com/buying/Article2.aspx?cp-documentid=2727041>1=9005
No wonder people aren’t buying .
Great article. Thank God people are starting to come back to reality.
It’s about time.
I want the wave to be big enough to reach LA’s Westside. Prices are anecdotically down, but people still think it’s different here.
They are on the rental lists now, too.
Los Angeles Craigslist rent to own
Too bad I hate “dry” (lifelong Floridian) — that one’s really tempting.
Whenever I hear the words “North Las Vegas”, i’m instantly taken back to “Fear and Loathing in Las Vegas”, the twisted tale by Hunter S. Thompson… (he’d have loved the ridiculousness of this bubble)
Never has a hellhole been so aptly described~
PMI’s Winter 2007 Risk Index Reflects Slowing Housing Market
http://media.corporate-ir.net/media_files/irol/63/63356/Winter2007ERET.pdf
This is going to be awesome…!
They are being too kind in the article. The risk is greater and the loss is definitely too soft. I think it will come down a lot harder than they are reporting.
Good night all, tomorrow’s my “A Fourth Day” …I think,… why not, it’s the first day of February.