Bits Bucket And Craigslist Finds For February 13, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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mort interest spread grows,but no effect yet on market in general
we’re a RISK FREE universe !
didn’t someone here point out that the whole MBS world has about .00000005% of accual cash insurance give or take 5 0’s
Sounds like the reserve requirements for the title insurance industry.
or the banking industry
Are you including the “too big to fail” guarantee?
Good Morning.
Couldnt sleep. No school today because of weather so enjoying the silence for however long it will last.
Tooling around the NEW message board on Yahoo for the evil grins and laughs. Oy. At least 4 or 5 messages regarding mortgage insurance and of those a few were stand-alone posts/questions.
The gist of them were “but, but, how can NEW be losing money? They do mortgages. Where is the mortgage insurance?” oh, yeah, and…”but it is only a small portion of the loans I like to believe that most people are honest and will pay what they owe”
Almost signed up and posted a reply to that lost little waif, but came here instead.
Welcome my little lambs, er noble genius investors, to the new world of 80-20, stated income, inflated appraisals, strawbuyers and plain old stupidity and greed. Come come! quickly now, I need to shear thousands today so dont hold up my line I have to fleece many more than you.
I need more coffee.
“I like to believe that most people are honest and will pay what they owe”
There is a looming tragedy in the truth that sentence contains. Because I believe that at heart, most Americans are honest, and take their financial obligations seriously. However, many of them did not get the memo that said the lending industry had thrown away the underwriting rule book, and was now willfully making loans that would most likely lead to the borrower losing his home. And many of them (including some with good math backgrounds) do not understand mortgage loans well enough to assess the risks — that, in principle, is the lender’s job, isn’t it?
“And many of them”
Clarification: “them” was meant to apply to the borrowers, though I have to confess that a willingness to make guaranteed-to-fail loans leads me to wonder whether the lenders understand their own business?
the comment about honesty and paying what they owe made me roll my eyes NOT about honesty. ( I do believe many people took out these loans thinking one way or another they would be able to pay it back,either through servicing the debt itself or selling) but about the assumption on this investers part that they WILL be able to.
That is what makes me keep going back to the message board well and reading. These investors have no idea how the real estate landscape has changed, and quite frankly it sounds like alot of them never even cared to check as long as they were getting the fat dividend from new.
Now that it is starting to teeter, now they ask, now they try to understand. Before you invest your hard earned money, arent you supposed to understand the basic premise of the business/entity you are investing in and the environment it exists in?
That is what makes me sigh, giggle and wish for a drink.
“… assumption on this investers part that they WILL be able to.”
If real estate truly always goes up, then I guess they WILL.
“a willingness to make guaranteed-to-fail loans”
That’s the crux of the matter, in my opinion. If a fool wants to give a lot of money to a bad risk, let that lender learn the consequences the hard way. Sure, the borrower bears responsibility, too - but s/he would never end up in that position if some other irresponsible idiot wasn’t enabling them.
The credit card companies could quit whining about people filing bankruptcy if they’d go back a couple decades to their tough qualification standards and lower credits limits.
Bed. Made. Lie.
“However, many of them did not get the memo that said the lending industry had thrown away the underwriting rule book, and was now willfully making loans that would most likely lead to the borrower losing his home.”
Once the common people figure out that some folks at the top are no better than the lowly welfare cheat with their finely tuned disability limp, then civility slips. Severe prison sentences are the only thing that allow us to sit back, comfortable in the knowledge that the system works most of the time. It may take awhile, but I feel that mortgage fraud is eventually going to land many in jail or prison.
“I like to believe that most people are honest and will pay what they owe”
Yes, everyone paints their own version of reality and ignore the realities of the real world (not), but by today’s PC standards it’s their intentions that count and not their actions.
Everyone is honest (well, sort of) when they’re making money. Ah, but when losses start accruing, watch the character defects float to the surface.
I must respectfully disagree. It’s not the car dealer’s job to determine whether you are a good driver. It’s not the grocery store’s job to determine whether you can cook well enough to prevent food poisoning. Similarly, it’s not the lender’s job to make sure you know enough about your own finances to avoid ruining your financial future.
Lenders only calculate whether there is a reasonable probability that they’ll get paid. They know that under standard X, a certain percentage of loans will go into default, and they can live with that because the loss is built into the profit from the other, performing, loans.
At least that’s the way it used to be.
In the last five years, lenders didn’t keep the loans they made. They shoveled them off to MBS investors, who gobbled them down like candy. Lenders learned that they didn’t need to make the cost/benefit analysis for these loans, and therein lies the problem.
Still, it’s not the lender’s fault when people hammer on their door demanding loans and the lender hands them out.
I’ve had this conversation a few times before, but let me reiterate my position:
It is not the lender’s fault but that doesn’t entitle them to be paid either. A contract is as good as the laws that support it. We’ve abolished slavery and decided that if someone lends money but that money becomes uncollectable (which I imagine many of these loans will become) then the loan will be discharged.
In addition, in California, purchase money loans for real estate are non-recourse, which means that the bank cannot come after the borrower beyond the value of the property. That’s the law. Right or wrong. So the LENDERS have responsibility to make sure that they will get paid back. If they don’t I have no sympathy for them nor do I think the laws should be changed to protect them.
However, I am in agreement with you that the borrowers get what they deserve to the fullest extent of the law. No bailouts, handouts or other favors. Let them go through BK or jingle-mail or whatever course of legal action they want to take.
But for f*ck’s sake, please don’t lend them any more money.
Kia, I agree with you that mortgage lenders do sell their loans as common practice; if they didn’t, their standards would be tougher. But I believe the car dealer DOES have a responsibility to make sure they sell a safe car, and the grocer must sell groceries that are clean and edible.
Lenders should indeed look out for their clients. Even though their loans are sold, a professional lender should not knowingly allow a borrower that can’t pay to borrow. The lack of financial education is rampant - there are many who don’t realize that you can’t borrower $500,000 for a $1500 a month payment. It is the lender’s job to educate these people and provide either the right loan or no loan. Doctors don’t write prescriptions without doing a diagnosis. I wouldn’t allow my 5-year old son to play with a steak knife. In the same way, a lender should not allow his client to take out a loan that’s not right for them. Taking care of the client properly will also help ensure that the lender will have a LONG TERM client - one they can look in the eye when they meet on the street! Reckless / selfish lenders are not professionals - they are mere peddlers.
I was talking to an FBI agent last night. He estimated about 20,000 loans are true mortgage fraud in Northern Califormia alone. Many perpetrated on ignorant investors by crime rings, others are opportunistic individuals, enticed into action by the sub prime “free money”. It is going to be hard to find enough courtrooms and prison space to hold all these idiots. The funny thing is, the paper trail is recorded in the county offices. Even today there are still RE agents doing the old “increase the listing price to facilitate the mortgage fraud scam”. That is so 2006. You are advertising your activity and will get caught, have your license pulled and do a little time as a tenant (all expenses paid, but lousy accomodations). The high end subdivisions around the Sacramento foothills are a great example of areas where the RE brokers will do anything to make a sale commission. Pretty easy pickins for the FBI & DRE.
20,000 loans. Estimate a $100,000 each on an average basis. Then at a 20% drop in market value from June 2005 to June 2007. That totals $40 Billion collateralized by NOTHING BUT THIN AIR. Whose RMBS bonds are you going to buy, Mr. Pension Fund advisor? New Century, Wells Fargo, Countrywide, Option One, Bear Stearns? Take your pick. They all have underwritten their mortgages “into thin air”.
$40,000,000,000 loss/ 20,000 loans = $2,000,000 loss per loan. I think you either you mean 200,000 loans are fradulant or the loss per loan should be $200,000.
Thanks Jay. $4 billion in “thin air” underwriting value. $100,000 mortgage fraud, plus 20% drop in value on a $500,000 home price. 20,000 loans X $200,000 per house. My bad, and I have even had my coffee. The point is still the same. Overencumbered RMBS paper. “A billion here, a billion there, pretty soon, you’re talkin’ about some real money”.
4b. one week tab in irag and afghanistan. no big deal.
If only the FBI and DRE would actually start looking… I see the posts on CL every day…
Whew!! Finally got a contract on my Denver Willow Creek property after 6 months of listing ..original ask $345,000 cut to $335,000 sell for $330,000. Buyer using a 80/20 with $4,000 back for closing. Win-Win for both. He got a nice property and I’ll clear my books of a big one.
Rex, that is a “just in time” sale IMO. My guess is a new sub prime buyer will need $82,500 to put down in 2008-2009, in order to buy that same house, just like he would have needed in 1995. Today, he is “paid” $4,000 at closing. Hilarious. Think about how different this will all look in a few more years. Anyone buying real estate today will be in for a big adjustment in a few years when the buyers pool shrinks by 30-40%.
He got a OK deal…unlike the neighbor two houses down that got his foreclosure “insider” deal for under $300,000 on a originally $460,000 over-the-top-remodel listing. Older areas of SE Denver Tech RE has been flat for the past 3 years (with the exception of those CA locust buying $1,000,000 McMansions in Lone Tree. Unlike area in Adams and Weld there aren’t really sharp declines yet in the foreclosure markets in this local area. I have owned this 2000 sq ft 2 story house for 25 years as a rental and this has always been my exit strategy for when I retire…I’ve already sold 75% of my rentals over the past 3 years. The idea of peak oil and global warming and it’s long term impact on RE values are just too much to contemplate for this old geophysicist. From now on I’ll be putting my investments into weather futures, energy futures and gold.
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Bankers’ Fairytale World
If you look at how the risk assessment for Fannie and Freddie was done, with Housing Price Index (HPI), as more risky lending drove up the home prices the risk on existing mortgages was going down! On and on this went. So, the secret formula for reducing the risk was — make more risky mortgages and drive up the home prices!
Wonderful watchdogs at the OFHEO to monitor risks at the GSEs.
Jas
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Forgot to mention that it has been a one giant Ponzi scheme.
Jas - OT. See this? They’re not going to be happy until India looks like Cleveland.
http://biz.yahoo.com/e/070212/igc8-k.html
I’m more concerned about Cleveland looking like India.
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LOL! It may look more like Africa!! Heil to Diversity!!!
B of A, issuing Credit cards to illegals…Seems the easy money still flows like wine…
http://tinyurl.com/2bngum
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Indian elite take their guidance and inspiration from their American counterparts except when it comes to roadside filth and illegal slums. Like their American counterparts, they are experts at ignoring the problems at the lower levels of economic ladder.
Set up is complete for the horror story to unfold within this decade when the inevitable depression begins.
Jas
I’m a big fan of Arundhati Roy.
“Indian elite take their guidance and inspiration from their American counterparts except when it comes to roadside filth and illegal slums.”
Indian elite was established many moons before the USA was a gleam in the eye. Unfortunately the elite of the USA seem now to be taking their guidance and inspiration from the centuries established elite of other countries, with courtesy of globalization. Hence, the beginnings of our own illegal slums, brought to you by the housing bubble.
“So, the secret formula for reducing the risk was…”
I wonder if anyone raised a question about whether this approach was sustainable?
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NO. We had economists and statisticians to advise the lawmakers as to how to monitor risk! As the price went up the risk went down as per the statisticians’ formulae. No attention was ever paid to what would happen if the price goers back to where it was 5 years ago, something that has happened countless times. Had this been done Fannie and Freddie wouldn’t have been able to exponentially increase their portfolios.
What a system!
Jas
Reading about the mortgage lender implosions has reminded me how prescient this blog collectively has been. Events are unfolding almost exactly as predicted over a year ago by countless comments on this blog.
With more ARM resets this year, tighter lending standards, and still-increasing inventories in many markets, this spring and summer are going to be very interesting to watch.
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THE RECESSION WILL BEGIN THIS SPRING LED BY HOUSING IMPLOSIION (my forecast in August 2006):
http://www.financialsense.com/fsu/editorials/jain/2006/0828.html
“Events are unfolding almost exactly as predicted over a year ago by countless comments on this blog.”
The most amazing bit is the persistently surprised tone of MSM commentary on the unfolding subprime implosion. Was this really that hard to foresee, or does the pretense of surprise serve as someone’s political smoke screen?
GS, I would think that your second choice is the correct one.
pppfft….the MSM has more important things to report - like, the death of Anna Nicole Smith and the premature 2008 Presidential campaign.
rampant foreclosures in brooklny and queens
apoligies if already posted
http://www.newyorkbusiness.com/apps/pbcs.dll/article?AID=/20070212/FREE/70212009/1048/breaking
sorry for the spelling just starting morning coffee
brooklyn-apologies
I just thought it was your accent. (I spell worse than anyone)
no problme.
is this SFH or does it include co-ops and condos as well?
mortgage fraud is old news here. plenty of ads in the subway where some company sells rehabed POS’s for top dollar hoping for a foreclosure
i am not sure dba, if you look in the local papers in the marginal sectiosn of brooklyn and queens there are alot of people in trouble, this just has to slowly work it’s way through the better areas. btw i think we are neighbors in rego park
The article once again says people bought homes they could not afford.
That is probably true in land-rich markets where you had a construction bubble rather than a price bubble. Here in New York, however, people ended up in the same houses they would have had anyway — but at a price they could not afford.
You might say this is classic inflation — drastically increase the supply of credit with little increase in the supply of what is bought with credit and you get higher prices not more well being.
NYC is different because 75% of the RE market is co-ops. Short story is if you want to buy one you have to go through a whole background check most of the time independent of the mortgage process. you can have a stated income loan, but the co-op board will make you declare your income, it’s sources and provide proof. If you rent then chances are you will have to do the same thing since co-op boards require it for renters as well. Most co-ops require at least 10% down and many 20% or 25% and anywhere from 6 to 18 months of liquid assets available after you close on your purchase. They make you send them copies of 3 months of financial statements and 2-3 years of taxes and a few weeks of pay stubs to make sure you have enough money to pay your bills in case you lose your job.
this leaves a lot of people the option of buying only houses or condos because they cheat on their taxes, work for cash or just not qualified to buy a co-op.
You are spot on.
I see this first hand driving around here in Silicon Valley, CA (Cupertino/Sunnyvale/Santa Clara).
Very basic homes (30+ years old) here are asking $750K to $1M.
How would you like to buy little 3 bedroom, 1500sq ft. for $1M, …and then have to turn around and get the 1950s era roof replaced?
How is this rationalized? Is it that the replacement cost of the $1,000,000 house is $175,000 and that the land is worth $825,000?
Or do the high-end kitchen amenities add another $50,000, so the land costs $775,000?
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What is there to rationalize? Scam Options fraud money — Easy Come Easy Go. This has created a price bubble, which means “rise in prices lead to the rise in prices,” as Galbraith noted about the 1920s stock bubble.
This time both the stocks and housing prices will go down in Silly.con Valley, a one-two knockout punch.
Jas
“rampant foreclosures in brooklny and queens”
At least Manhattan is safe from rampant foreclosures, thanks to the Wall Street bonuses…
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Yes, we have never had Wall Street slump. They will keep spinning their wheels even after they run out of the cotton.
brooklyn and queens are for the serfs after all
anyone who wants to read the sob stories, head on over to http://www.freeadvice.com. it’s a law forum i found a few years ago. In the RE section there is always a few stories a week of ARM’s adjusting and people can’t pay them
Middleclass tears. Thanks!
I also go to Yahoo Answers on occassion and try to answer questions there. Many people either have the quesion in regards the mortgage adjusting (or) they are first-time buyers with lots of cash or no cash / no credit. I believe that I have been successful in talking a few out of buying at the top of the market. It is my own little way of trying to help people, without pissing them off by telling them in person. Some of the people have even emailed later and asked additional questions.
Good post from charles smith today.
http://www.oftwominds.com/blog.html
Fibonacci analysis?! Come on — this is like those Pyramid mystics. He is overfitting and there is no predictive power to that stuff.
Oh really? Wonder why the Nasdaq rally stopped at 2500 and change?
Perhaps a bunch of hotshot big-monied investors on Wall Street were following one chart pattern, and they will keep trading based on that pattern until it doesn’t work. Then they will jump on board some other “system” that works and use that until it doesn’t work.
Traders are a highly superstitious lot.
I know this because for 10 years I worked for a company that was devoted to charting and screening. Meeting customers was always fun - it was like going to a New Age convention, where everyone has their own superstition they like to follow: It works until it doesn’t anymore.
Great post, Lou. When I took Econ 101 in college, I saw the same phenomenon. My teacher was attempting to apply an economic formula to some problem and was going along on the blackboard, pocketa-pocketa, and then stopped dead in the middle, stared at all his work, then looked at the class and grinned sheepishly, saying “It doesn’t work!”. That’s all I needed to know about Econ 101.
In addition to what Lou said (which I believe is possible, though I don’t know how likely), you have given me one data point. That’s what I mean by overfitting. With the right initial parameters, I can fit the Fibonacci sequence to any exponential curve. The real test is whether this same model with the same initial parameters can fit multiple instances. That is what is required to be able to predict patterns in the future and not just pat yourself on the back afterwards.
When I was in Dallas, I was a judge at the DMN Science Fair. Every year in my division (Computer Science) some kid would use Bayesian networks or some other machine learning techniques to predict something (stocks, weather, you name it). And every year they would make the same mistake: the data that they used to train the network was also the data that they used to test the network. Of course the Bayesian network will run great on the data used to train it — they would never be used for anything if this were not the case. However, the question as to whether they are a good predictor for X depends on applying it to different data for X than the one you used to train it.
Most so-called “technical” analysis is a pile o’ crap, no different than reading tea leaves or believing in astrology.
the reason it is good is the majority tend to look at it the same way and that is why it can be effective.
People like TxChic are good traders. I think technical analysis is nonsense. If it was as simple as reading a chart, anyone could do it. Successful traders who say their success is due to reading the tea leaves on a chart are incorrect and they are selling their own inate skills short. If we are to believe technical analysis works, then we must presume that we can fortell the future by using something other than reason. We cannot.
I think the words people are looking for are “self-fulfilling prophecy”.
Perhaps we are all just “Fooled by Randomness” ……
IMHO technical analysis has been succesful for a number of traders. There are probably pschological reasons that cause certain phenomena to pattern in a discernable manner indicative of future price patterns. Such technical analysis has been used by many on this blog to predict future recessions (interest rate inversions), housing price recession (shortest period of housing drops has been 47 months), housing stocks lead the recession by 9 months etc. Some of the best traders I have known over the years may not have used technical analysis but they were well aware of it, but some of the best traders did use technical analysis. Many market makers believe that it does not matter what trading system is employed as long as it is consistent.
Once upon a time I did some work for Swiss Bank O’Conner, we were looking at ways to use computer systems to enhance trading, and we started from the premise that you could not predict the market, there was too much chaos involved. What you could do was detect and exploit “pockets of predictability” that you could use to make money. It was never a huge killing, but it did bring in a steady set of gains under most conditions.
We came to find out that some other outfits were using similar methods, and we wrote a new system to watch their trades and extract what their AI was doing in several cases, then prepared a system to “spoof” the opponent trading system into making bad deals to our benefit. It was never a large scale project in terms of the money that was leveraged, but it was very interesting to see that you could convince the Dean Whitter system to give up a trade at a price you knew was too low.
I used to arbitrage the ECNs back when there was Island, ARCA, REDI, etc. in the extended markets. It was amazing how much you could make if you were willing to keep flashing through a bunch of stocks.
“Pictures can deceive as well as instruct. The brain highlights what it imagines as patterns; it disregards contradictory information. Human nature yearns to see order and hierarchy in the world. It will invent where it cannot find it.” Benoit Mandelbrot
It has no scientific value but it is a very useful tool because “everyone” also uses it and is predictive for that reason. I also use it for “fade” trades, but that takes a higher skill and experience. I could sit down with any one of you, a 5 minute or 1 minute intraday candlestick chart and a crazy stock like RIMM or BIDU and trade a fictitous 500 shares 10-15 times during the day with pretty good accuracy as to entries and exits.
” … it is a very useful tool because “everyone” also uses it …”
Hence, a self-fulfilling prophecy.
“I could sit down with any one of you, a 5 minute or 1 minute intraday candlestick chart and a crazy stock like RIMM or BIDU and trade a fictitous 500 shares 10-15 times during the day with pretty good accuracy as to entries and exits.”
Why fictitious trades, then? If you’re leaving money on the table then you really ought to be trading it.
I am. I was trying to say I could demonstrate how TA works even in tiny time frames for you skeptics. That’s what I do every day and it’s fed me for years.
Can you teach me…I like money…thanks.
The day txchick57 announces a trading class I’m signing up!
I read Charles’ Smith’s blogs for awhile. Then stopped reading them. He has lately become too politically one-sided - demo theft politics.
More every day, Gold looks like the savior…
To a financial world that makes no sense anymore~
Gold, platinum, Series I savings bonds, T-bills, international value stock mutual funds, and municipal bonds.
Most of the flipper baby boomers have their preicious metals portfolio held in their teeth. Can’t wait for the lenders to require them to pull it to pay their debt. I will need more popcorn.
To rationalize the holding of any significant amount of gold, one would have to have an outlook on the economy that envisions some sort of dollar crisis or other event that would make holding this type of insurance seem prudent.
Does that really sound like the mentality of a “flipper baby boomer”?
Please advise how many flipper baby boomers you know of that own gold because I don’t know any. Most flippers I’m aware of haven’t taken the time to consider macro-economic influences, but perhaps my observation is an aberration.
I would guess that 99% of Baby Boomers have never held Gold Bullion in their hands, let alone own any. The numbers for Generations X & Y, perhaps 99.9%
gold dental fillings
gold and silver dental fillings (their precious metals portfolio)
FL residents flipping out over SOH and the inequity of the taxing system (multiple papers down here carrying this story, just citing the ones that I read):
http://www.palmbeachpost.com/localnews/content/local_news/epaper/2007/02/13/m1a_proptax_0213.html
http://www.sun-sentinel.com/news/local/southflorida/sfl-ptax13feb13,0,5720405.story?coll=sfla-home-headlines
http://www.sun-sentinel.com/news/local/southflorida/sfl-cproptax13feb13,0,5953813.story?coll=sfla-home-headlines
Got to love it. I do feel the pain from some people, but you have to wonder why the cry is really starting now? Not such a big deal when the property is going up at 30% YOY?
Anecdotale report on driving through Sunnyvale/Cupertino/Santa Clara this weekend:
- not many SFHs for sale in neighborhoods I look at–like 2 for an entire neighborhood of ~100 homes.
- some of these SFHs on the market, have been sitting since last I checked in November/December.
- Agents seem to be upping the marketing on homes. Lots of full-page color flyers, full of REspeak: “cute” = small, “lots of potential” = a fixerupper, etc.
- Asking prices are still laughable.
Laughable prices meaning:
- $1.1M for 4bedroom, 1800 sq ft, built in 1970s.
- $750K for 3 bedroom, 1150 sq ft, built in 1970s.
- $650K for 2 bedroom, 875 sq ft, built in 1950s.
Also, to add on to REmarketing tactics, it seems that many homes for sale now have their own website domain. I take it these are targeted at avoiding buyer comparison shopping at ziprealty, etc.
Here is one that is particularly overpriced and atrocious:
http://www.1382southwolferoad.com/
Someone needs to take away this clown’s “!” key.
I always love in the Bay Area where they have a listing for a house but don’t state the price. My wife and I used to accept that this meant “So outrageously priced we dare not write it down, call us if you are that big of a sucker!” (exclaimation points added to match the link above).
Does it look to anyone else that the house number is spray painted on the wall of the porch. BTW, this house is not too far from a place I rented in the bay area 15 years ago, they are tiny tiny tiny!
IT IS!!
I couldn’t believe it when I saw it myself.
Here some hapless flipper has obviously put in blood sweat and tears to put in granite countertops and hardwood floors (and tacked on only $100K for their effort)
……. yet they have just spray painted the number on the side like a barn????
Strange.
Oh yeah. In case you didn’t notice, this apartment (call it what it is!) has a range “hook up”, so you have to bring your own stove too.
I really can’t believe the Realtor in this thread is spewing. I’m just agog:
http://www.phillyblog.com/philly/showthread.php?p=424388#post424388
I know I was posting about buying a few days ago and I may still but I really apologize if I came off like this guy.
Jesus.
Implode-O-Meter just got an a plug on CNBC by Rick Santelli (I don’t know how to spell his last name)
According to Rick (you got the spelling right) we’ve got 21 So-Cal based subprimes going under just since the beginning of the year. It’s a good thing we’re not going to lose any jobs in this region; that might REALLY bring down housing prices
Gee, I wonder if that figure included ResMae?
2nd. try
china vs nasdag
plus
something weird from dubai.
looks like they financed their palm island through a $ 3.52 billion bond issue (95% bought by europeans…)
dubai / borrow to build…….?
http://immobilienblasen.blogspot.com/
I found this article from Culpeper County, VA, a D.C. exurb that was all the rage 18 months ago for speculators.
http://tinyurl.com/3×7su4
Eighteen months ago things were different. A house sold in days, not months. An exodus of Northern Virginia residents struggled to find a home in rural counties like Culpeper, and the builders responded.
The picture is a bit grimmer now.
New housing has slowed considerably. Existing home sales have almost ground to a halt. Ryan Homes set up a regional office in Culpeper at the height of the building boom. They have since left the county, and their Charlottesville office as well.
Man goes crazy over bad investment.
http://www.philly.com/mld/inquirer/16685969.htm
Not sure if the company deals in real estate but it’s still scary that there are people out there that are capable of killing because of a bad investment. At least during the great depression people killed themselves and not others.
It was a RE investment. Somehow I think this type of revenge will happen throughout the US all-too-often over the next several years. When Joe Six-Pack feels defrauded, he’s more likely to deal with it violently.
More pain coming to the Inland Empire. Good read.
http://www.latimes.com/business/la-fi-foreclose13feb13,0,5503897.story?track=tothtml
Money quote:
“The rest are looking for side jobs at McDonald’s,” said Home Center President Jason Bosch. “It happened overnight.”
And would you like to supersize your Mc Mansion? please pay at the 1st window…
“More pain coming to the Inland Empire. Good read.”
Anyone interested in the current RE Meltdown going on in Riverside/San Bernardino counties(IE) needs to read this. Long article but a ground-level look at the wave of IE foreclosures and how Realtors/brokers in the IE are handling it.
This is actually a pretty bearish article coming out of the LA times, though it should have been on front page instead of buried in business section. If the print edition has it on the front page columns then more kudos to LA times.
I have long predicted that the IE would be a vast grave yard of foreclosed properties. Riverside cty is actually the foreclosure leader in all of Cal(highest ratios per population), with over 6400 NOD’s and 1300+ foreclosed properties as of JAN 2007. And climbing thru the roof.
RIP for the IE!
It was on the front page of the print edition, in the left side column.
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“He likes to pay his unannounced visits late in the afternoon, betting that the wife will be home and the husband not.’
Very civilized society we have here in SoCal.
Jas
You guys are going to love this one from the LATimes this morning. Page one, column one, above the fold. Long piece on foreclosures, the Realtors who are chasing them:
Quote from one Realtor:
“”People are walking away from their houses,” he says. “I’m giddy because I’m going to be so busy.”
Quote from one mortgage broker:
“To make a living, you had to push a product you didn’t believe in.”
‘Quote from one mortgage broker:
“To make a living, you had to push a product you didn’t believe in.”’
When the whole sad saga of deregulation-gone-wild is told in the history books, it will turn out that this quote applied to a broad swath of the financial services sector. Real estate appraisal and loan underwriting are two more lines of work which are tainted by perverse incentives when the old rules are abandoned.
not de-regulation !
gov subsidy
read the community banking act
Busy? busy doing what? sitting in an empty house? I have wondered for a while what the level of drug use in realtors was…
drug use in realtors….(belly laugh)…
someday I will post about my former boss, a realtorette who worked her way up the corporate REIC ladder. But I can’t just yet. the PTSD still comes in waves when I think about her.
I’m sorry, I didn’t proof my comment:
…a realtorette who
workedshmoozed/slept/blackmailed her way up the corporate REIC ladder.Fixed it.
I met a pretty female realtor at a local bar last year. I asked her about the housing bubble to which she said RE would never go down because of xxxxx (nar selling point). She then invited me back to her house for another drink, and when we arrived, she immediately pulled out a bong and took a couple hits. So there’s your answer.
I read that one this morning and couldn’t help but wondering how long it will take before one of these realtors inadvertantly ends up trying to sell a foreclosure he had originally persuaded the owner to buy with a toxic loan. Wouldn’t surprise me if somebody didn’t come out onto the front porch wielding a shotgun…shades of Ma Joad.
And I love that they spent way more space elaborating on the opinion of the bearish realtor, who believes we’re headed right back to the dark days of ‘95 because of these subprimes. It’s absolutely odd how the L.A. Times manages to get it right on the front page but still reserves the bulk of the Real Estate section for pro-industry puff pieces.
In case anybody thinks this is reserved for the Inland Empire, we’ve got our building’s first foreclosure auction since the mid-90’s coming up in the next month or so. This was a flipper who tried every tactic in the book to get his duplex’s dues lowered (including criminal assault against a Board Member, for which he was convicted, and smearing feces on various areas of the building, which somebody around here has on videotape) to one set from two so that he could make a killing selling his place. Eventually — once the conviction had come through and after a whole summer spent trying to sell it for $200K more than he paid for it — he gave up on the place and just let it go.
Across from his place we’ve got a couple who bought at the peak last August and now have three adults, six dogs and a child living in approximately 1000 square feet. The extra adult (and his three dogs) moved in at exactly the one-year mark (i.e., ARM reset time). Now they’re crying poor and trying to get the HOA to pay for some fire damage one of them caused with a pot left unattended on the stove. The husband, who does most of the letter-writing, appears to be barely literate, and I recall the flyers at the open house for his place advertising that, by using the realtor’s chosen mortgage broker, one could own this two bedroom, two bath for around $1500 a month alongside the ones explaining the unit’s many charming features.
This is supposed to be West Hollywood’s “premiere vintage building” — two bedrooms like the ones I’m describing above have been selling for around $600K.
Nobody’s immune.
The smearing of feces usually always the strategically right thing to do, I wonder what went so wrong this time?
Where is this in WeHo? I live near SMB & Crescent Heights; I’ve noticed 2 buildings in recent weeks where units that have been on sale for months have now, according to the signs outside, gone to FSBO.
Two blocks north and one block east of you. On Hayworth.
The “funny” thing is, the City Council’s approved two brand new, high-priced condo buildings to be built across the street from us, once the affordable rental buildings that are currently there are knocked down. My guess is that they’ll either be turned into “repartments” once they hit the market, or end up languishing for months if not years.
And yet, I still have friends on the Westside who insist that this “bubble implosion” (if there is one) is going to be limited to “outlying” areas like Newhall or Corona or anywhere else off the 91 or 14. I can say absolutely nothing to pursuade them otherwise — apparently everybody in “our” neck of the woods refinanced into a lower rate, shorter term, fixed rate loan and there are suddenly way more millionaires between us and the beach to than there ever were before.
I remember seeing signs/ads at CSW last summer for some agent for Keller Williams that had “Have you made your million yet?” plastered everywhere. Totally obnoxious. I should have taken a photo for the blog.
Some nice, small SFHs up the street from me at Havenhurst & Fountain are also being torn down for a condo plan and there are (were?) plans for another at Sweetzer/Norton. There is one on Norton between Havenhurst & Crescent Hts that opened last summer and I swear it looks like it was put together with the cheapest materials available in the recylcing bin and has a gaudy late 1980s appearance, but they still managed to offer them from 600K - 1.1M. I have never given a rat’s ass about who’s who on West Hollywood city council but I’m ready to vote for those 3 people (”Heavenly” whoever and two other guys) who say they are ready to stop selling the city out to developers who build “luxury” condos.
Heavenly Wilson is on the Wehona slate — she actually lives in one of the buildings across the street from me — Ed Buck and Steve Martin (who was a city councilmember back in the early 90s, I believe). By all means vote for them, and encourage anyone else you know in WeHo to do so, too. Five minutes of research on how much developer $$ Councilmembers Heilman and Mann have taken over the years is enough to turn your stomach, especially when they keep insisting that they have renters’ best interests at heart.
Here’s a happy link to the Norton Villas you mentioned. After a year on the market, they’ve still not sold out, and the prices on the remaining units have gone from $1.2 million to around $850K. What a “bargain”:
http://www.nortonvillas.com/
Thanks for the links. They’ve got my vote. And I LOVE the fact that that tinker toy building still has units on the market!
Good job giving us the scoop on RE bubble happenings in the West Hollywood area. Was astounded that 2/2 1000 sq ft condos were going for 1/million+ in that part of the westside at the peak. Don’t live in that area but have a good knowledge of the type of folks(mostly young hip singles/couples involved in the ent business)and housing characteristics(High Density mix of luxury apts/condos and well-kept sfh’s).
Glad that the West Hollywood supposedly invincible RE Market is showing signs of cracking.
You made me spit out my coffee….
ROTFL
High Times at Broker Universe’s Grapevine.
———————–
http://www.brokeruniverse.com/grapevine/thread/?thread=359678
……..
“It was gonna happen someday. Lower property values and 100% LTV´s are a destructive combination (See FirstPlus Financial 125´s). The Wizard of Oz WAS all powerful until the curtain was pulled back. Sooner or later the curtain IS ALWAYS PULLED BACK and we are the ones holding the bag and are SHOCKED at how poor us will survive. Get over it. I felt sorry for the people in Warwick , RI when Keybank closed them years ago. They were a good team (some of you may remember) but they got screwed. It happens all the time. I am sure that they have moved on to better things although they didn´t think so at the time. Maybe some great company will come out of all this mess with the top minds from the currenly down-trodden. Great trees grow out of burned down forests.
The fact is some of us made insane money in the last 3-5 years (not me) all because we were in the right place at the right time. Don´t think it was because you were smarter than anyone else. You´re not. Wall Street sees an opportunity and they are putting the screws to the industry. Doesn´t anyone find it odd that All the major Wall Street funders/warehouses are finding there way up the “food chain” under the guise of cleaning up the industry and having a stronger hold on QC? Credit Suisse (ResMae) has been in ALT-A (remember SIB?) plus their own division, Merrill (First Franklin), Duetsche Bank (MortgageIT) and db funding, Morgan Stanley (Saxon), Bear Sterns (Encore) and their own division, etc. all think that if THEY did the QC, that they would be more risk averse and therefore make more $$. Plus why do they have to pay Correspondents 103/104 when they can make the 101-102 that´s out there and turn a tidy profit? Yet they are pulling the funding sources from mid level sized lenders (if you´re not a bank or a Wall Street firm, you´re Mid Level). What are they actually EXPECTED to do? 3-5 years down the road they will find out (to their suprise) that subprime customers don´t pay their bills. That appraisers aren´t all honest, that brokers don´t care about their “relationship” and are just out for the money. Heck, who said we are philanthropists anyway? They will sell of all or part of their subprime divisions and the wheel will spin anew. Ok, it was my 5 cents. I´m done. Be MORE professional, please. You´re not as great as you think just because your average loan size is $500K. Order takers need not apply. Good luck. Obviously, I have nothing better to do on a Saturday morning. leoknows (just ask him)”
Very interesting post, PDX. It always amazes me how the people on the ground see the reality first and often a year or two ahead of the meltdown. This thread really puts it into perspective for the account executive trying to make a living. It is basically over for those people now. The fall out will take 3 more years and sub prime will be toast. Back to the days when you needed 25% down if you had bad credit.
Yeah, kinda like all the Indian H1B programmers in the dotcom bust. A lot of them left the keys of their Honda Accords in the car at SFO airport on their way home (as an H1B you have to find another job within 30 days or leave the US).
The meaning of B2B became “Back to Bangalore” for those H1B programmers. Same thing is going to happen to these mortgage industry folks who haven’t built up the reserve to last through the next 3-4 years.
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A lot of them left the keys of their Honda Accords in the car at SFO airport on their way home (as an H1B you have to find another job within 30 days or leave the US).”
I think that most of them stayed, illegally, of course. I knew some in LA area.
Funny, all the foreign IT people I’ve known seem to prefer the Mazda Protege rather than the pricey Accord.
ResMAE Files BK
http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20070213005571&newsLang=en
Anybody got BA in their account?
http://today.reuters.com/news/articlenews.aspx?type=domesticNews&storyid=2007-02-13T053517Z_01_N13447905_RTRUKOC_0_US-BOFA-CARD.xml&src=rss&rpc=22
I can’t see how that won’t be predatory lending when it comes out. The interest rate will have to be high to offset the risk of lending the money.
My guess: The credit card companies have circumvented the predatory lending charges by a new business model which makes cheap credit available for everyone, but imposes steep interest rate increases on those who stop making payments. Not sure how this protects them against undocumented aliens who return to their home countries when their debt balances get a bit uncomfortable, however.
Not sure what other big American Cities somewhat close to the border look like, but el lay is like 2 worlds. The Hispanic World and everybody else. Very seldom do these 2 cultures interact, aside from driving the same roads.
You’ve got that right, Aladin! The Hispanic World/Everybody Else divide is very much a part of life in Tucson.
I can vouch for that! The hispanic world in EL LEY basically covers a 20X20 sq mile section running just south of DWTN all way to the 91 fwy and from the 405 east to the 605. The SF valley east of the 405 all way to the 5 is another increasingly Hispanized region.
Thing is all business and social interactions at street level in these areas is conducted in spanish. The police, fire depts and the city bureaus may still be mostly white english speaking, but the populations they govern are 80-90% spanish-speaking immigrants.
I think that LA city and some adjacent communities comprising the LA Metro region really are indistinguishable from Mexico City, except for a small coastal/west LA fringe still dominated by Gringos.
Here’s a story on an Arizona credit union that denies business with illegals:
http://www.azcentral.com/business/columns/articles/0213biz-talton0213.html
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“Anybody got BA in their account?”
I am loaded with Jan’09 puts on BAC (you didn’t mean Boeing, did you, Chick?) along with lot of Bankrupters and Fraudsters of NYC as well as Hopedestroyers (formerly Hopebuilders, aka homebuilders). I expect at least 10x.
Jas
Bill Gates, the richest computer nerd, is buying hotels: Four Seasons
http://www.latimes.com/business/la-fi-hotel13feb13,1,5448591.story?coll=la-headlines-business
So did we hit the peak of commercial real estate or not?
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Yup.
Other R.E. related news on LATimes:
http://www.latimes.com/news/local/la-me-dorm13feb13,1,4242495.story?coll=la-headlines-california
Will college enrollment and college housing be the next bust of this post-housing bubble world?
http://www.latimes.com/news/local/la-me-disney13feb13,1,1986770.story?coll=la-headlines-california
There goes the Disneyland neighborhood!
I live in this neighborhood, and this upsets me. There is a ton of traffic caused by cast members and hotel staff driving in from cheaper places…low-cost housing would really help.
“Although some Anaheim City Council members see the project as a way to add needed housing to Orange County’s second-largest city, Disney says it would disrupt the tourist environment and street scene it has worked hard to create outside the gates to Disneyland and California Adventure.”
This is a joke. The neighborhood around Disneyland once you leave The Anaheim Resort is OC-ghetto, so it’s not like anyone would complain about property values. Tourists do not make it down to the area where these places will build, trust me. I live in that little square between Harbor, Chapman, Orangewood and Haster (map next to article). Tourists stay on pretty, tree-lined Harbor Blvd or 3 whole blocks of Katella unless they are in their car or the shuttle from the hotels on Manchester.
“The area, directly across the street from where Disney may build a third amusement park”
Also a joke. California Adventure is a laughing stock…a glorified county fair that acts as overflow for Disneyland. The only good thing about it is the ability to get drunk at Ariel’s Grotto. They really think they need and have enough ideas for a 3rd park? Please.
“”Tourists like to stay up late and make noise, while residents need a quiet night sleep so they can get up to go to school and work in the morning.”
HAHAHAHA. Is this why all the hotel bars are closed by midnight? The convention crowd may stay up a little late, but since there is nowhere cool to hang out they are just at the Marriot bar. I’m sorry, but Downtown Disney is not my idea of nightlife. It’s hard to have fun with adults when you are looking at the Build-a-Bear Factory. The families? Nope. They are tired from being at the parks all day. Seriously, the only people out late in Anaheim are the hookers in front of the Taco Bell on Harbor.
Adding more affordable housing units in that part of the OC would simply bring in more immigrants. Northwest OC, especially central/west Anaheim,Orange,Garden grove,Santa Ana,fullerton, La palma,Buena Park, ect seem to be becoming Densely populated with Immigrants, with large areas devoted to project-type apts brimming with immigrants. This proposal sounds like another developers boondoogle, just like the nearby Platinum triangle.
Disney knows about the negative impacts that a hugh affordable housing project would have. I have no doubt that a few disney folks have a knowledge of the changing demographic character of the NW OC, and how the negative impacts of the hugh immigration influs into NW OC have negatively impacted the entire area around the Disney domain. They know this, though they would not come out and make a public statement about it for fear of being labeled racists.
I detect A hint of payola influencing the Anaheim city council.
Lucy, Think You Have Some Splaining to Do
http://wallstreetexaminer.com/blogs/winter/?p=424
“I anticipate that a million residential construction jobs will be lost in 2007, and a million more in other real estate related employment.”
How many of these are illegal immigrant jobs (aka economic dark matter)?
Pushing the AZ bubble out into the boonies:
http://www.azstarnet.com/business/168864.php
The car dealers should make out well on this one. Those new Red Rock residents will be wearing out commuter-cars like crazy. Reason: Red Rock is a long way from any center of employment
I have a question for the appraisers on this board. I get conflicting info about the re-assignment of appraisals from one lender to the next and whether or not this is legal. My bank will not reassign not accept a reassigned appraisal. Can you guys pls comment?
A little bit late, and from an unlikely source:
http://www.sacramentoparent.com/In_This_Issue/07%2001/top5.htm
The January 2007 issue has a story about “The Top 5 Money Mistake & How To fix Them:
Highlight:
“Mistake #5: Having the Wrong Home Loan
• 83% of home loans have over $3,000 in hidden fees/costs
• 85% have inflated interest rates
• 50% of sub-prime loans should be prime
• And 40% of borrowers are totally confused”
Sounds about right:)
I wonder if builders are committing insurance fraud in Naperville, IL?
http://www.chicagotribune.com/news/local/west/chi-0702130207feb13,1,3943508.story?coll=chi-newslocalwest-hed
Kind of reminds me of “had to burn the village to save it”…
Completely off-topic, but funny. I think, though, that we could look at what is espoused by this book as a symptom of the housing bubble. If you think you can afford it, you can. Maybe some of the FBs will start chanting some mantras.
http://www.latimes.com/news/printedition/opinion/la-oe-klein13feb13,1,280829.story?coll=la-news-comment
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Not OT at all, Bubble of the Head, or Head Bubble. Source of the Housing Bubble is the same, just more practical.
http://www.personalcreditindex.com/
“According to the Experian-Gallup Personal Credit Index survey, one in every two (52%) adults say they have heard of the housing bubble, though only 19% have heard a great deal about it.”
“Based on all consumers, 47% believe it is likely that such a housing bubble could occur in their area within the next three years (16% very likely and 31% somewhat likely). A slight majority (51%) do not think it is likely (36% not too likely and 15% not at all likely).
Based on homeowners, 43% think it is likely that a collapse of housing prices could occur in their area within the next three years (14% very likely and 29% somewhat likely), while 55% do not (40% not too likely and 15% not at all likely).”
I saw this article in the local Harrisburg, Pa. paper. Note that it says that the company went under because the builders and contractors are falling greater than 100 days behind on paying their bills. That does not say there is a problem, but if this is true of other companies, it could be signaling problems.
http://www.pennlive.com/business/patriotnews/index.ssf?/base/business/1171337116237760.xml&coll=1
Tx for Central Pa link. Usually not too much news about that area.
IMO something’s fishy -
“After 95 years at the same location in Harrisburg, E.C. Snyder Co. is shutting down its custom millwork business. …
(snip)
As owners of the business for three years, Miduri and his partner, Carl Bedenbaugh, the chief financial officer, said the business encountered a cash-flow crunch because it wasn’t receiving prompt payments on invoices. “
The business was solvent for almost a century and then two clowns buy it and it tanks in the span of 3 years? Some sing wrong.
“After 95 years at the same location in Harrisburg, E.C. Snyder Co. is shutting down its custom millwork business. ”
I noticed the present owners only had it for 3 years but this mill had survived The Great Depression. That’s one of those little details that gives me a real sense of foreboding.
Boeing aircraft cyclical booms and busts ravaged some of the smaller machine shops in the area to the point where the smarter ones stopped ramping up during the booms, and diversified.
It takes some experience to not run with the herd.
txchick posted this link last month, depicting the number of trustee deeds filed in San Diego County:
http://www.sddt.com/Finance/EconomicIndicators.cfm
It was updated with January data late last week. For a little perspective, pick a start date of 1990, which corresponds more or less to the peak of the last boom. Compare the rate of increase now versus the rate of increase during the last bust.
This time around may really be different.
Mongo only pawn in game of life.
The funniest movie ever. Well, it may share the top spot with ‘Monty Python and the Holy Grail’ but’s definitely up there.
It’s like three years of acceleration compressed into one. Any bets as to when it hits the all-time high?
Question for all of you:
No one seems to talk about the Northern Virginia DC market much; is this because as my real estate agent contends that this market is ‘special’ because of all of the government work. And not really subject to the bubble economy?
Wife and I have been looking at houses these past three weeks all around the 450k mark as this is said to be the starter home….over three weekends we have looked at 45 houses, 15 each weekend day for three weekends. Henerdon, Chantilly, Manassas, Bristow, Leesburg, Ashburn….we pull the property card on each property (our RE agent hates this), if we take the 1997 price and adjust for inflation 4-6% each year, we come up with a price 290-350k that oddly enough makes sense for our income, again our RE hates this when we bring it up, and basically has refused (although no saying as such) to submit such an offer. Well, our lease will be up in 3 months, about 1620 for an up-scale apartment in the nice are of Herndon/Oakton (Yes I know we can get a TH rented for that but it is a pain to move). Wife and I both think renting another year is a good idea. Any thoughts on this market? Are we making a mistake? There are some ‘patio’ homes next to our complex that sold new last year for 650-800k out appartment manager apparently had something to do with that (same company), she said the average family income for the purchaser was around 140k/year!!!
Not from NoVa, but think it would be a good idea to rent for **at least** another year.
Your numbers calculate out much the way mine do in CA. This market has a long, long way to go before it’s time to buy. Hope you can stay in your current place (maybe negotiate a better rent, if the rental market is soft in your area).
Good luck!
Look at virginiamls.com, and see the featured town house. It is listed at $849K. Then bring this house up in Zillow. Personally, I think the zillow price is more reasonable. I lived in that area, and 2 years ago they could have gotten $849K. And I had an RE agent who gave me the same story about government jobs (and the extension of rail to Dulles, and blah, blah, blah) when I left. I had to push for weeks to get her to lower my price and just sell the darn house. If I have listened, I would still live there.
I believe the in that part of N.Va. prices are triple what they were in 2000, and disconnected with reality. I think the same is true of Herdon, and those abominations called Ashburn and South Riding and all those communities that were thrown up in that area (my apologies to anyone who bought in those neighborhoods, but talk about institutional look/feel…)
The owners in NVa. still feel that they have gold mines. Until that attitude changes a bit, I would really wait. If you can find someone who must sell, you might get a bargin, but at best it will be near what the house is worth or more. Probably not worth buying right now.
Does the soft landing faith get propagated from the top (as in Catholicism), or is it more of a grass-roots conviction (like Lutheranism)?
More than 10% of Manhattan apartment sales are second-home purchases, up from about 5% eight years ago.
http://tinyurl.com/2xe9kr
I recently returned from Hawaii with my family. While there we attended a timeshare presentation from Starwood. The numbers went like this: they are building a 179-unit resort near the Princeville Hotel in Kauai. The typical unit is a “lockoff villa”, ie, about 1300 sqft total, 2 separatable areas, each with 1 bed, 1 bath, living area and kitchen. Timeshare ownership gives you 1 weeks use of the entire unit per year (or every other year for less money). The cost for every other year was $33,500 to purchase the timeshare, plus $1200/year maintenance fees for life (which are subject to increase, of course). From these numbers we figured the total value per unit was between $2.5 and $3 million, with a starting *monthly* maintenance fee of about $5000.
When I told the salesperson that those numbers seemed pretty high for a condo, he said that since Hawaii is the ultimate destination people will pay that. Then I told him that the RE market is going down so won’t it affect resort property values? He replied that resort values won’t decline because people will always go on vacation. I then indicated that many people go on vacation with HELOC money and they won’t be able to do that now that RE appreciation has dried up (and indeed, going negative). He maintained that the attraction of Hawaii will remain and that there will always be a demand no matter what. He said his dad is in RE and agrees that you need to wait at least 2 years before buying a house. But he didn’t agree that the resort value would decline.
I told him we are renting (which kind of defused his main weapon) while saving for a down payment and waiting till house prices come down until we can afford to buy. Basically I told him we’re waiting till an 800k house comes down to 600k. He said we might as well buy the timeshare because 635k is not that much different from 600k and if we can’t afford 635k we won’t be able to get a 600k house either.
Needless to say, we didn’t go for the timeshare this time around. But the premise was definitely appealing, given all the various incentives that came with it (transferability, options, points, fee simple deed, etc), especially if one normally vacations frequently anyway. My question is, is it reasonable to assume that timeshare values in top-notch resorts like this will hold their value or increase, even while residential RE takes a dive?
They don’t generally increase, most of that upfront price is to pay for the huge commission. Typically you can rent a week for roughly the same amount as the maintenance fee, so the upfront payment is sort of a waste (lots of people don’t end up going back every year). You guys are just starting out, so be aware that your vacation plans may change if your family does. If you and your wife are on the second half of the children stage and you do think that you will want to return annually. I think it’s a decent idea.
You might look for similar places on the secondary market (ebay, certain realtor and I think trading places) to get a feel for secondary market values in the area. It’s been a while since I was in Kauaii but I think there are several time shares near Princeville.
I have to admit, that I think the lockout concept is a good one, but renting the lockout unit could be harder than it seems. It would be a tight fit for anything more than a single person.
Thanks for the advice, bluto. We have a five-year-old and a 20-month old. Each section of the condo also has a sofa bed, so the entire unit can sleep 8 comfortably. Perhaps we would better utilize the concept five years from now. I don’t see us going annually right now, although we absolutely fell in love with Kauai. I also like cheaper and very different escapes like camping, and don’t want my kids to get too used to luxury resorts as the be-all and end-all of vacations. Living in the extra special Bay Area does give us many options!
Seriously, don’t do this. A time share is not real estate. It is the worst investment you could possibly make, other than just giving your money to somebody without getting their name.
The only way you should consider owning a time share is if somebody dies and leaves it to you fully paid up. I am a probate lawyer and when somebody dies owning a time share the kids can’t get 10 cents on the dollar of what it’s supposed to be “worth,” so they usually keep it.
It is crazy to pay in advance for a lifetime of vacations that you might not even get to take. Vacations should be the ultimate pay as you go item in the budget.
wouldn’t touch it with a ten foot pole.
Lenders Direct Capital Corp in California is now folded.
Hi all you smart people on this blog,
I’m ready to invest in the downfall of this housing market and would like a few specific stocks to research. Noted Jas’s comment about BAC and I have done a copycat and bought a few Jan 09 puts. Could someone either point me to a specific thread or can we start a new one here? I would think that most of us would like to get some financial benefit from this train wreck while enjoying Neil’s popcorn. It would be a nice payback for the last few years of enduring rising property values and sympathy from our homeowner friends.
So, from what I’ve gathered on this blog and elsewhere, some of the categories to short or buy puts on are:
Banks
Homebuilders
Sub-prime lenders
REITs
It would be nice if those with any insight could put some ticker symbols next to each category, and please add more categories if necessary. It would help if you could state what steps you yourself have taken to profit from the coming bust. From my side, I have invested in the following so far (in Dec last year) :
long FXF (swiss franc index; down 2%)
long FXE (euro index; up a tad)
long GLD (gold index; up 8%)
long PGH (Canroy (oil and natural gas); up a tad)
The above moves are mainly to hedge against a falling dollar. However I am now ready to aggressively target the likely victims of a credit industry collapse and standards tightening. Let’s flesh out the above categories so we can all benefit handsomely by, say, 2009.
I’d not do that, if I were you. As you know, it’s a “buyer beware” attitude around here, and plunking down money just because some “anonymous” poster on Ben’s blog did it, is not a good idea, IMHO.
Check out the companies for yourself, but I’ll give my warning. There’s a lot of private equity money floating around right now. The vultures look like they’re circling the HBs and lenders (I think that’s the real reason for the recent upswing in these stocks).
If you’re short, and the company is bought out, you will be in a world of hurt.
Trust me, I’ve been trading some of these stocks for over two years, now (short and long). If not for some really nice profits before summer 2006, I’d be bleeding to death right now.
Be very careful, as it looks like many stocks are being manipulated to squeeze even more money out of folks like us (non-institutional types). I’d almost suggest looking at other (non housing related) stocks to possibly go long — I’ve been bearish on stocks for too long, and this has been a losing trend lately (obviously).
Good luck!!
Center City residential real estate prices fell 2.8 percent in 2006 to a median $362,000 but two areas - Rittenhouse Square and the Avenue of the Arts - saw sharper drops, according to a report by Prudential Fox & Roach.
http://www.philly.com/mld/philly/16689355.htm
Greetings.
My First Post
Philly murder spree by real estate investment “victim”
http://news.yahoo.com/s/ap/20070213/ap_on_re_us/philadelphia_shooting;_ylt=Al4afV9EOZDE2MBybxJYGLZH2ocA
regards
E.D.
Verrry nice…
doktor evil
TOAD YA SO, MORONS!
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Fears grow over subprime loan market
By Richard Beales and David Wighton in New York
Published: February 13 2007 19:53 | Last updated: February 13 2007 19:53
Concerns over risky US mortgage lending mounted on Tuesday as a key indicator of credit problems hovered at record levels, another small mortgage lender failed and a big homebuilder admitted borrowers’ difficulties could damage its business.
Investor worries over loans made to US borrowers with weak credit histories have grown since housing market activity slumped last year. They were thrown into sharper relief last week when two big lenders, HSBC and New Century, warned they had underestimated the spike in defaults on so-called sub-prime mortgages.
https://registration.ft.com/registration/barrier?referer=http://www.ft.com/home/us&location=http%3A//www.ft.com/cms/s/10ebfef4-bb9a-11db-afe4-0000779e2340.html
A Sinking Sensation for Subprime Loans
The default rate for borrowers in the sector has jumped faster than anyone was expecting, raising risks for housing and the overall economy
http://www.businessweek.com/investor/content/feb2007/pi20070214_954191.htm?chan=top+news_top+news+index_businessweek+exclusives
by Joe Niedzielski From Standard & Poor’s Equity Research
The gathering storm clouds over the nation’s housing and lending markets grow darker each day. Fueling the latest concerns is further fallout in the subprime mortgage loan market, where lenders offer financing to less-creditworthy buyers.
Global banking giant HSBC Holdings (HBC), the third largest subprime lender in the U.S., disclosed on Feb. 7 that full-year 2006 impairment charges at its U.S. mortgage unit would be 20% higher than the $8.8 billion or so that analysts had been projecting. On Feb. 8, New Century Financial (NEW), the nation’s second largest lender to subprime borrowers, said it expected to report a loss for the fourth quarter, and that it would have to restate its financial results for the first three quarters of 2006 (see BusinessWeek.com, 2/9/07, “Subprime Time Bomb”).
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(Here is the other article…)
Subprime Time Bomb
With HSBC and New Century Financial suffering losses from subprime borrowers, which other mortgage lenders face an unpleasant reckoning?
http://www.businessweek.com/bwdaily/dnflash/content/feb2007/db20070206_488329.htm