Bits Bucket And Craigslist Finds For March 10, 2007
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Ben, I just want to take a second to thank you for running this amazing blog. You are helping thousands and thousands of people learn about and stay informed about the bubble. You are providing us with great information and a great forum to share and discuss information and insights. Your organization of bubble related material is fantastic and such a time saver for all of us “followers”. What you are doing is truly invaluable. Thanks again, and thanks to all of the blog regulars who contribute their wisdom and insights. You all are great!
I’ve got to go. It’s time for me to make another paypal contribution to this blog.
I have a question that hopefully someone here can answer. Recently I read a report that there were 2.1 million vacant homes for sale in the country. I would imagine that there is also a large number of homes for sale that are not vacant. Does anyone have an idea how many homes are for sale right now and how many months or years it will take to sell those homes?
Thanks
nationwide the US is just over 9 months inventory at current sales rates
For-sale inventory figures are released every month by the Census Bureau (new homes) and the National Association of Realtors (existing homes).
You can find the latest Census data at:
http://www.census.gov/const/www/newressalesindex.html
At the bottom of the page are several drop down menus, one of which allows you to access monthly “homes for sale” data going back to the 1960s.
The NAR data is availiable here:
http://www.realtor.org/Research.nsf/Pages/EHSdata
I try to put the figures in context every month when they’re released. Here are some comments on the latest batch of new home inventory figures from several days ago:
* Inventories remain elevated – a seasonally adjusted 536,000 homes for sale in January. That’s roughly unchanged from December’s 537,000 and down from the 573,000 peak in July. But it’s up about 2.7% from a year ago. It’s also far above the roughly 280,000 – 370,000 range that persisted throughout most of the 1990s.
On a months’ supply at current sales pace basis, we had 6.8 months of homes on the market in January. That’s just shy of the cycle peaks – 7.2 months in October and July. Keep in mind that the new home inventories figures fail to account for order cancellations. Specifically, if you contract to buy a house, it’s recorded as a new home sale … but if you later back out of that contract, the home is not added back to the overall inventory count.
And here are my thoughts on existing home inventories from a couple weeks ago:
* Inventories are climbing again because of the “March of the Re-Listers”: The number of homes for sale rose to 3.549 million units from 3.45 million in December, a gain of almost 3%. Why is this important? Well, a lot of people crowed about the decline in inventory for sale in November and December. They said it was proof the market was stabilizing.
I argued differently. I pointed out that this was entirely seasonal – home inventories almost ALWAYS fall late in the year because of the holidays. Specifically, sellers who fail to sell during the peak spring and summer selling seasons pull those homes from the market around Thanksgiving, then start re-listing them early the following year.
This “March of the Re-Listers” is clearly underway in 2007. I expect the inventory numbers to continue rising in February, March, and April, and we may very well set a new high.
Good morning, campers. How could so many become FBs? We’ve made jokes about what seems to be the rampant stupidity in the population and how so many were willing to drink the kool-aid.
It might not be a stupidity problem, but misplaced trust in “authority” figures. People in the US and maybe elsewhere are so used to having others determine what they can and can’t do, that they often don’t take a look for themselves. In other words, if the “bank” says you’re good for the money, you must be good for the money, right? If the “bank” says it is OK for you to fudge the figures on a liar loan, it must be OK. If the realtor says “real estate only goes up”, it must be true, right? Because these are the “authorities”.
Many probably don’t understand what a mortgage broker is, really. Probably they thought the broker was a representative of “the bank” and that he or she certainly wouldn’t approve a loan unless “the bank” thought they could pay it and if “the bank” thinks so, then it must be true! As if “the bank” had some magic knowledge about the future of the FB that all would be well. After all, the banks have the money, so they must know.
We’ve made jokes about what seems to be the rampant stupidity in the population ———–
And its True…….This is “THE MORON GENERATION” even from my small part of being a Wedding dj, its next to impossible to find anybody worth trianing anymore.
We put ads in the paper and maybe 1 out of 100 even comes close to be trainable. the other 99% want to be rap hipp hop crunk deejayz, and are extremely close minded to other forms of music, like the Grateful Dead, or Frank Sinatra.
Also i find in desperately looking for a real job, that smart people are routiely tossed aside for the moron. Just look around you everyday stuff, do you really run into smart, talented, helpful people, in any job anymore? So by dumbing down America it made it easy to con them in to buying a house never goes down in price.
Remeber when an employer says “overqualified” it really means “We Want a MORON!”
“Remeber when an employer says “overqualified” it really means “We Want a MORON!”
Sad but true. You should expose some of your dj prospects to Frank Zappa.
overqualified = you want to high a salary as well
Yes I stil have close to 50 Zappa Records i’ll never sell and over 60 cd’s
High salary= YES i want more then a Moron, heck i could live on $30K during the week then i have my side jobs.
“his mothers a hooker somewhere in L.A.”
” The father is a Nazi in Congress today.”
The Idiot Bastard Son
“Just look around you everyday stuff, do you really run into smart, talented, helpful people, in any job anymore?”
The only way that could happen for most of the people on this blog is if they could run into themselves.
I look around at my competition in my field and I just laugh. Competing against them is easy. Putting up with them is difficult. I’m sure there are a lot of others on this blog that feel the same way.
“Putting up with them is difficult.”
Sing it, Brothah! Testify! I know EXACTLY what you mean. Some of us gave Mark a good flaming when he posted that he prayed for the destruction of the US. Personally I think he was just frustrated and expressing anger through sarcasm. I understood where he was coming from and your above quote is the reason why.
Much as I think I care for my fellow man, sometimes it is JUST SO DIFFICULT. Remember that joke about the definition of “stress”? Something about resisting the urge to choke the sh*t out of some a**hole who so desperately deserves it.
Stress level is pretty high these days. If this phenomenon known as the housing bubble isn’t a good argument for population control, I don’t know what is. Some people just shouldn’t reproduce.
I value individual freedom most of all and it seems most people can’t seem to get rid of it fast enough, that’s why I hope for chaos and crazy times in the aftermath of debt deflation.
I dig, Mark.
I look around at my competition in my field and I just laugh
Hey NYCboy i live here in Sunnyside Queens, I used to see the World Trade center from my picture window, i got pics standing on the LIE Greenpoint ave ramp, from 9/11 and watched it fall.
My problem is we were all trained to put our best foot foward , but i keep running into HR and being inerviewed by people who are really not too bright.
You dont know how many Real Estate lawyers i’ve called trying to convince them to retrain me as a paralegal, to do foreclosure work, and how clueless they are to the housing bust.
For the vast majority of office jobs out there, intelligence is completely irrelevant and often a drawback. At most places it is more important to fit into the corporate culture and not question authority.
I’m with you–office jobs are a joke. What’s not a joke is when those flunkies, functionaries, and lazy-asses have real responsibility. Then they fall on their faces and guess who pays?
I can’t get exasperated about this. The stakes are too high. I do know some good professionals in my field … and I have to believe.
Just look at the finanical calculator on any bank website that “calculates” the price of a home one can “afford.” No where in the calculator does it ask you:
* “How confident are you that you will not loose your job in the next five years? Ten years? Thirty years?”
* “Are you are using both your and your spouse’s salary for calculation purposes? If so - are both of you confident in your jobs? What about kids? Cars? College costs?”
* “If you have borrowed money from anyone in the past two years so you can afford to eat until your next paycheck (including buying groceries or McDonald’s on credit card), check this box. Please note: it will automatically indicate that you cannot afford to purchase a home. This is not in error.”
“The apple does’nt fall too far from the tree.
ah.. “Der Apfel fällt nicht weit vom Stamm”.
I am sorry to say this or maybe you did not have your glasses on, but the numerous errors in sentence structure and spelling show me something about education in this country.
LMAO
If I were a dj in NYC, my sentence structure and spelling might not be so great on a Saturday morning, either. C’mon, give the guy a break.
What is sentence structure ?
Funny…….Maybe its because i used to write those 10-15 second teasers at Tv stations “Coming up next, a Fire in the hole destroys 3 parked cars”
Actually a manhole cover blew and damged 3 cars
I work in a gov agency where jobs are “dumbed down” to fit the abilities and willingness of people to do those jobs. There’s no expectation that anyone will show up for work or produce anything if they do. Yesterday I mentioned to a co-worker, dumbass, that the license plate on his car was hanging down, ready to fall off. I thought maybe he had not noticed. His response was he knew it, besides “when people see my car like that that won’t expect too much of me”. I don’t fear for my generation. We’ll get what we deserve. I fear for my kids.
…..This is why I am on the Verge of Tears Everyday…..
I have to do everything just last week a pipe under the sink rusted out and water dripped on the floor……I ran and got metal tailpipe tape to wrap around the pipe, and stop the leak and its been dry ….I just didnt want to tell the landlord yet becuase its time for another small rent increase which we dont have. And the refridge is old and needs new seals too….
But its amazing what a wedding dj has to know to get the job done right from sales to people skills to technical skills to car skills, to performing skills, to troubleshooting skills, and to think most people think we are just pushing buttons and getting free drinks…
PS not to mention reading maps, listening to trafic reports so you dont get lost or be late.
And then in Most TV stations they are designed so that 1 person can run the TV shows and the commercials on the weekends late nghts holidays, You are IT, and you get praised by NOT calling the chief engineer at 4 am with a minor problem you can fix yourself.
So not expecting much, makes me cry…. how can i attain that goal, and have a great paying job too?
Good luck with your job search. Hang in there, and don’t let the morons get you down!
“How could so many become FBs?”
Someone posted an interview with a psychologist where he argues purchasing a home is a very overwhelming process as a result some people exhibit herd like behavior.
mrktMaven, this is OT, but are you in the Jax area? I’m looking for someone who can give a personal opinion on the Palatka area. Do you know anything about it?
“…the Palatka area. Do you know anything about it?”
They’ve got a DZ at Kay Larkin Field on the westside.
Maybe the psychologist is correct, but IMHO since the constitution was written by land owners and favors land owners with the right to vote, the result is parents, grandparents et al saying “buy a house”. This lasted long enough to become entrenched in the American psyche. Roger Herman (a drafter of the constitution), “The people immediately should have as little to do as may be about the government. They want information and are constantly liable to be misled.”
I think that most folks of middle-income means or better have traditionally held the view that once you graduate from college, get married (or otherwise form a household partnership) and settle down, the next step in life is to buy a home (even the board game Life suggests as much). Renting has traditionally been viewed as an alternative for those who don’t have the means to buy.
The REIC savagely exploited this collective belief of the American public over the course of the bubble, by their combination of super-sized McMansions and toxic loans that let unqualified buyers purchase more house than they can afford.
I think the urge to buy is deepy associated with our need for security. In theory, if you own, you cannot be pushed around by “the man”. They can make you move, but they have to pay you. Our culture was founded on the concept of property being sacred. Becoming a home owner (not a home debtor) is really going up one step in the ladder, but people have confused home ownership with home debtorship. They don’t seem to have thought that the bank owns the home until you’ve paid it off. Caveat emptor.
i.e. stupidity.
Muggy, are you around? You’re over in Pinellas County, aren’t you? If you know, can you tell me why rents are lower over there than here in Hillsborough?
Hey Palmetto,
I have no idea why this is. Is Hillsborough as transient as Pinellas? You have more stabbers and shooters, but we have more pervs and blue hairs, at least according to my informal observations. The pervs and blue hairs die and/or perv somewhere else. I think shooters and stabbers like to stay in their hoods.
I think there is a silent standoff right now. I don’t see any real price drops or the kind of capitulation we’re expecting. Much to my dismay, seasonal traffic - although late - is entirely out of control right now.
I’m still bubble-sitting pretty regardless.
” You have more stabbers and shooters”
LMAO! Might have something to do with the fact that much of Hillsborough, until recently, was rural farmland. As a result, a lot more “guest workers” than Pinellas.
I agree with your post, capitulation hasn’t happened yet, but that’s the last stage of this mess anyway, so it is going to take at least another year or two for that to happen.
I am also seeing the late influx of seasonal traffic. The fact that it is late is a sign to me that the snowbirds are shortening their stays, though.
Just for grins, though, check out the rental prices in the real estate section of Tampa Bay Craigslist sometime. Huge disparity in rental prices between the two counties.
Spot The Loony
Do you think we might see a time when Canadian dollars seem harder than USD? Several years ago (during the “lagging loony” crisis) NE gov’t and business started refusing to take CD or took them at a posted discount, when in the past, despite the slight discount, Canadian quarters and other coins were often taken at face.
Canada had a huge national debt. They have spent the last five years paying it down. Commodity prices have come up, and they are a natural resource rich country. They also haven’t been bankrupting themselves in Iraq, like their wonderful neighbors to the south. (Hi.)
From a simple point of view of GDP to debt ratio, Canada’s the most solvent country in the G7 right now. Why is nobody buying loonies? Also, doesn’t Jim Rogers think commodities are in the midst of a 17 year bull market (8 years to go)? Doesn’t think mean Canada has some booming to do in its real economy (not housing)?
During the time of the great national debt, Canadian businesses would gladly take USD as payment … might we see this in reverse? If US experiences hyperinflation (for example), why would Canada? The peso used to be hard currency centuries ago, and Mexico is moving to make silver coins, but that is long out of memory for most Americans. However, most of us have handled Canadian cash, even if we called it “play money”, “funny money”, “monopoly money”, “not a real country, anyway”.
The joke will be on us, soon!
“The joke will be on us, soon!”
I’ve been wondering about this, and the conclusion I come to is not pretty. The FED is not composed of stupid people, for the most part. With all the historical data at hand, they HAD to know what the outcome of cheap and easy money would be.
There has been speculation on the North American Union (NAU), the SPP (Security and Protection Partnership) and the “Amero” being instituted as the coin of the realm. Some say it is “tin foil hat” speculation. I say not. Even now, the Dept. of Transportation is making plans to allow truckers from Mexico full and free access to our highways. If the US economy melts down and the dollar tanks, well, da boyz at da FED have da solution: Presto! Da Amero!
Harvard’s torture-apologist Ignatieff was rejected with horror at the recent Liberal leadership convention, but is now embedded deeper in the shadow-cabinet than C.D. Howe.
Barring a miracle, SPP’s a lock. There’s still that little detail of public opinion, though. Ontario is welded to the US rust-belt (especially auto), and Quebec is something of a wild-card, with Charest’s exhausted Liberals at risk of losing to a weak PQ separatist opposition in the present provincial election. Of course actual separation would freak out Washington, as Quebec hydro supplies a lot of the electricity for NY.
Most people don’t know the US Federal Reserve is a private for-profit corporation, majority-owned by some of the oldest and wealthiest European families, and is not a federal agency. It was set up to create debt and earn interest on the debt they created.
Anyone who wants perspective on the Fed and its upside-down pyramid of fractional reserve banking (debt scam) might want to watch videos from the Ludwig von Mises Institute (Austrian economics). Their debt pyramid is now teetering and will eventually come crumbling down… that sounds like Chicken Little, but it’s fairly realistic.
The real estate bubble was overblown by the Fed maintaining its artificially low overnight rate for more than a decade, and the bubble is the end effect of another Fed scheme to create additional debt for average citizens, thus transferring more of the average citizen’s wealth into the pockets of their wealthy shareholders. I know, I know… just one more conspiracy theory.
“Money, Banking, and The Federal Reserve” - 41 minutes
http://video.google.com/videoplay?docid=-466210540567002553
This all completely misses the point. Fiat currencies are used because their inherent inflation is preferable to the inherent deflation of commodity based currencies. Even if they completely blow out now and they they are still more desirable. Whether fractional reserve banking is doomed or not isn’t really related to the current scheme in the US which effectively made reserves optional in 1996.
If people would actually be coherent about things and think them through then the results would be much better.
As far as the evocative fingerpointing goes, no one looks worse than the goldies. Gold bugs are mostly rich old men who want to keep their high status without continuing to contribute. They fear that others are out to get their earned status. They don’t care how deflation harms a society as long as they get to keep theirs apart from the madding throngs, but currency is nothing but a tool of the madding throngs that represents a kind of social contract for future payment. Gold bugs want the future payment without the social contract, but this is all just fiddling astride the fire since it is too late anyway.
Gotta tell ya moleman, your just plain wrong. Not interested in wasting time discussing it with you though.
Fiat currencies are used because the politicians can get re-elected by promising programs that aren’t funded and the bankers get to loan money created out of thin air and collect interest on it (as opposed to waiting for someone to save something and making interest on those funds). It is a system vehemently opposed by the framers of the constitution and one that was implemented by back door lobbying and arm twisting in 1913. I can offer anecdotal proof of that from the fact that the constitutional definition of a dollar (371 1/4 grains of silver) still exists and has never been changed. To do so would have required a debate (and constitutional amendment) over what constitutes money and why (and would never have passed). You will never witness that debate in congress, for a reason. We are on a system that is not sanctioned by the constitution yet “we the people” were never consulted about the change, don’t you wonder why?
The “gold bugs” aren’t rich old men who don’t want to contribute. I would offer that they are folks who would like to get a fair exchange for their labors. A friggin piece of paper that can be (and is) created at will by bankers which continually sheds it’s purchasing power and thus lowers everyone’s standard of living does not constitute proper “payment”. The system doesn’t allow for wages to keep up with this erosion and never will. The ability to store purchasing power for future goods and to allow for specialization is what money is all about, otherwise we’d be back to bartering. No one really gives a shit about holding paper or gold but really wants what those instruments can provide for them in the future by the way of goods/services. This system sucks and is entirely indefensible because it is designed to enrich a few at the expense of the majority.
The “deflation” comment is puzzling to me since I would add that stable, low prices would be considered a benefit to society. Not one educated person believes the twisted numbers that come out of the BLS with regard to inflation. In fact the fractional reserve scheme is merely running it’s pre-determined course of ever increasing, geometrically progressing inflation to be followed by a bust. This isn’t the description of a sound monetary system, at least to me.
The reserve system you speak of, I’m assuming you are referencing the demand account sweeps that allow these deposits to count towards reserves, IS part and parcel of the fractional reserve system. It wouldn’t exist outside of a fractional reserve system so I don’t understand the statement.
I’m not sure how people being “coherent about things and think them through” would change the ultimate result of this inflation other than they would realize how fu*ked they are a bit sooner than they would otherwise.
I’m not someone who is a forceful advocate of the gold standard, per se. I am not smart enough to figure out what system would allow for stable prices without being gamed by the bankers. I will note that the gold standard offered such a system (reference price stability throughout the 1800’s). I believe that system was dismantled for the benefit of an elite group of bankers who promised benefits to the politicians who went along. We will all get to experience the collapse of this system which will be spun to be blamed on some other exogenous event. That event will start the collapse and when the dolts (U.S. citizens) become desparate enough, they will accept the subjugation to the elites and allow the NAU to be implemented.
http://www.postchronicle.com/cgi-bin/artman/exec/view.cgi?archive=9&num=65911
Of course there will be a fair amount of dissenters who will have to be dealt with accordingly. Say, might this be a clue?
http://www.informationclearinghouse.info/article17190.htm
Regardless, to assume that the FED, Congress, the president and all the Central Bankers are oblivious the the impending collapse of the dollar and don’t have a plan B while all of us out here in bloggerland can see it coming is a bit naive. In summation, we are all screwed because of this system and I agree that this “debate” is too late to change this fact.
I’ll second that, on both points.
Perhaps someone can parse this passage from Weds WSJ editorial page re: Fannie and Freddie for me:
“{Fan and Fred] keep piling up debt to buy those MBSs, growing them tenfold from 1990 through 2003. Today, the two have a combined total of $5.2 trillion in debt and MBS obligations, which exceeds the entire $4.9 trillion in publicly held U.S. government debt.”
First, the numbers are absolutely stunning.
Second, Fan and Fred are “private companies that borrow in open capital markets at an interest rate only slightly above that paid by the U.S. Treasury and below that paid by other private participants in mortgage markets.” Hence the great success of their business model.
Thirdly, did the Fed governors hold a gun to heads of the folks at Fannie and Freddie saying “buy mortgage paper or else?”
Isn’t there something in systems theory where if you change the dynamics in one area of a system (access to funds) in order to fix a problem in another (affordable housing), that eventually the system pushes back?
Most of our economic woes can be traced to irresponsible finance by the U.S. government and that is made possible by paper money. Without the paper money to finance them, the stupid wars we got involved in since WW2 would not have been possible. We have spent a billion dollars in Korea and what have we got for it? Nothing, even a backwardation of progress. I am getting sick and tired of Congress and the Government rewarding slackers and consumers and penalizing producers. This is only possible when you can borrow to keep your hold ridden hull afloat. I understand the flexibility that paper money gives. During times of emergency it allows a boost of nitrous oxide into the engine of the economy but that benefit is far outweighed by the misuse of easy money by the government to fund special interest programs and pure waste.
But, there is no need for anyone to be the victim of this. Simply make sure you spend your dollars into hard assets as soon as you get them. Land, gold, silver, oil, commodities or anything that has real value. Let everyone else chase the paper. If paper money value is fantasy, then owning some reality is your protection
All wars are paid for with paper money … the Revolution most especially.
Heck, corporations expand and do R&D with paper money–it’s called “bonds”.
You may say I’m torturing the meaning of money, but I don’t think so… Gold-backed paper currency is nothing more than IOU’s; non-backed fiat currency is an abstraction of human trust without the “let’s pretend we can exchange it for the shiny metal” fiction.
Gold sucks as money, as all commodities are prone to inflationary rises and then nasty hard crashes. Deflationary periods have their good sides, but the bad side is the destruction of wealth and the destruction of perfectly good enterprises (as well as ruining lives). Fiat money allows for a stable, slow inflation and stability. Slightly loose money *is* good for business.
Can money expand forever? Well, no, and history is littered with the wrecks of old currency systems. It’s just a matter of mathematics.
I own some gold, want some more, because I can see how the USD has been debased–imprudently debased. Because of my lack of confidence in the currency, I have sought multiple hedges. However, when gold hits true bubble status (ala tech stocks in the 1990’s), I will funnel the gold into real assets, while you paranoid goldbugs ride the shiny metal all the way down, just like you did from 1980 to 2000. Cheers.
One of the problems with the Fed’s black box operation is that it creates a fertile field for conspiracy theorists to come up with wild explanations of what the Fed is and isn’t.
Getstucco:
If your comment relates to Auger Inn….then I would suggest you become better informed. Otherwise ignore below!
You always have great commentary & knowledge, but not on this time.
Much of what he wrote has long been verified, and denied by the culprits.
This Real Estate bubble was the Global Central bankers acting in unison Their diabolical plan of the upcoming collapse WAS FIRST chronicled in the records of Congress during the 1930 deflationary unwinding and non violent overthow of our government. In additonally, the corporate privatiers chronicled their brazonous, Mastery in separate Biography’s….
If you really want to understand the worlds paper money syetem… I would be happy to give you a few sources to seek.
As for current goings on…these peple have allready lost lawsuits over their minipulation & intentional illegal depressing of the gold markets..the cases are moving forward. But of course their loses were not mandated in GOLD or silver constitutional money but paper $ - called legal tender….ergo FIAT ! Ihave posted that the ETF’s is an attempt to facilitate the gold maniplulatiosn by getting speculators to play in the paper binkity blink game rather than accept the phiyscial, which they have sold, along with the wharehouse receipts. AND probably cannot deliver, just as when they broke the HUNTS over the socalled silver manioulations…when Hunt was attempting to set up a Constitutionally sound bank system with silver & silver wharehouse receipts as their equity.
Opps got to go bet on PITT, can’t proof read this time
Good post, Injun Joe! Very true, IMHO.
Personally, I don’t tkae Canadian money - although I live just over the border. I prefer to leave Canadian money for the Canadians, and only use U.S. coins. If a waiter brings us Canadian change as part of our money back when paying for a meal, then it automatically becomes part of his tip. Let him deal with it. Banks won’t accept it here. I don’t know if Canada is set to be a boom economy or not. You make some good points. I do know there is a lot of unemployment, quite a few foreclosures, etc., plus the extremely high taxes (VAT) across the border. However, our Canadian friends are much more intelligent about keeping their noses out of middle-east politics and wars, so they may have some advantage over our misguided government….
imagine if CAN builds a nuke to process the oil sands
=wow
About 6 months ago I hypothesized the nuclear processing idea and forwarded my thoughts to a major oilsands analyst. Have you seen any discussion or study on this idea?
I’ve seen the idea of a nuke plant to power desalinazation plants to provide the copious amount of water the oil sands will need for processing being bantered about. I don’t recall it coming from an offical source though. I don’t have a link.
Wasn’t CAN and USD about 1 to 1 around 1980? Pretty much at the top of the last commodity bull cycle.
Reasons against CAN doing any better than USD over the near term. All markets will crash when liquidity exits the global marketplace. Did you see gold crumble last week at the exact same time the Dow tanked? I don’t say gold in the long run (5+ years away) won’t do better, but in the next year the USD will skyrocket in value as people bid the dollar up in order to pay debts. That’s what happens in deflation. The hyperinflation comes afterward when the government, always a couple years behind, tries to print us out of deflation and overshoots into hyperinflation. SocioEconomy - always the same.
The weakness of the dollar is certainly apparent. I remember travelling to Canada in 1995 when the Loony was worth $.66. The first time I went to Europe the Euro was worth $.84. Paying $1.31 for a Euro is hard for me to fathom. It makes it very hard for me to want to travel outside the country. I got spoiled. Now I think I’m getting robbed if I go to one of these places.
The last time I was in England the Pound cost $1.10. Boy was London fun for a Yank kid with dollars in the pocket! That was in the days of Reagan/Thatcher, never to be seen again.
The Canadian dollar WAS above parity in the mid-1970s. As you may know, it was another period of commodity inflation, and our country sucked donkey balls during that time.
Being Americans living in Canada, my husband and I have most of our money in Canadian dollars, and though we are moving back to the US in the next year or so I think we will keep our Canadian bank account.
Although the Canadian economy will follow the US economy in the tanks the Canadian dollar is pretty close to being a hard currency. You are in a good position.
I remember the ’70’s when the loony was worth more than the greenback. It sells at a 15% discount right now (used to be as high as 40%).
I have a Canadian bank account that I will contribute to regularly moving forward because I think I’m about to re-live my childhood, economically speaking. Inflation, stagnation, fuel shortages, falling dollar. Easier to see where we’re going when we know where we’ve been, right?
Melsky, are there any limitations on Americans having Canadian bank accounts? Does the IRS give you a hard time? Do you have to pay taxes to the US and Canada on the interest? if you have a moment, I’d love to hear from you.
Spike - The IRS doesn’t care. But, you have to travel to Canada to open an account. You can’t do it online or by mail. The Canadian government will tax your interest - I don’t remember off the top of my head - 20% or something. But, the IRS recognizes the Canadian tax and will only tax the interest that Canada lets you keep.
Keep in mind, it ain’t about interest, it’s about the capital gain you will (may) realize when you exchange your loonies back into greenbacks. Canada doesn’t care about the capital gain, but our own beloved IRS will love it as much as you.
Excellent point! A major irritation is that it is taxed as capital gain as opposed to a decline in the purchasing power of the dollar. This tax is theft.
I think I forgot something - the IRS doesn’t tax your interest, because Canada already did it - that is how they “recognize” the Canadian tax. Also, the bank deducts the tax and pays it - no paperwork involved at all on the depositor’s part.
Hoz–if you used CND to buy other assets, instead of selling it for dollars, would the IRS try to tax the capital gain? They can’t tax you for using money as money, can they?
Btw, if they didn’t tax the cap gains on forex trades, forex would be even crazier than it is now. Remember, some people’s profession is to trade currencies for profit. This should be tax free? Give me a break.
NAG: They have spent the last five years paying it down. Commodity prices have come up, and they are a natural resource rich country.
You just nailed the reason the Canucks are paying down their debt. It’s the windfall from the simultaneous industrializations of China and India - a massive rise in commodity demand. Canada is now Saudi Arabia without a kleptocratic royal family of thousands. The problem they’ll run into is that inside every commodity boom lies the seeds of a commodity bust. Both existing and brand-new companies - funded generously by the capital markets - tend to rush in to boom areas creating, when their plans come to fruition, massive oversupply and a crash in commodity prices. Canada has some of the most high-cost oil reserves around. When oil prices crash, it will bear the brunt of the losses among oil-producing countries.
For fellow south Floridians who have to suffer through the “Real Estate and Financial Show” on 740 AM, and listen to the drivel from the “smaht man” peddling his 40-year negam “smaht loan”, they now have a web site and you can send them a note to let them know what you think of them!
The link is http://www.mysmartloan.net/contact.html. Following is a comment I sent them:
Shame on you for suggesting that people “get out of debt” by borrowing on their house! You cannot get out of debt by borrowing more money, and in fact, if you pay off credit cards by refinancing, you have converted unsecured debt to secured debt and
jeapordized your home! Are you not aware that most people who refinance for loan consolidation purposes end up with MORE credit card debt on top of their secured debt? It’s deplorable that you bill your show as a “financial” show when you have no financial
acuity whatsoever and are only trying to push products.
In addition, you cannot advertise an annuity as “risk free” because there is no such thing as a “risk free” investment. Every investment has risk. An annuity bears the risk that the issuing company can default or go bankrupt. In addition, an investor suffers
liquidity risk (if they need the money but are subject to fees and penalties and cannot withdraw the money).
Finally, when you calculate the monthly principal and interest payment on your so-called “smart loan” you neglect to mention that you are basing your calculation on the teaser rate, and not the full
rate. This results in negative amortization and distorts a borrower’s cash flow. Are you not surprised by the high number of foreclosures and early payment defaults that have trashed the subprime
industry? It is because loan brokers convince unqualified borrowers that they can repay their loans on an unrealistic repayment schedule.
You both should be ashamed of the snake oil you are peddling, and the number of lives you have probably already ruined with your disastrous self-promotion that masquerades as financial advice.
The sooner we get scam artists such as these off the air, the sooner we can get on with the real estate apocalypse!
“Are you not aware that most people who refinance for loan consolidation purposes end up with MORE credit card debt on top of their secured debt?”
I am guessing that people don’t consider this during the consolidation phase. Without changing their spending habits they can consolidate every 10 minutes and it won’t make a difference. Debt consolidation is no silver bullet but to the sheep in the flock it looks great.
yes nycboy you hit it on the head
they look at the consolidation as a clean slate to start up
a new mountain of debt.
hell with the value of their castle going up 20% a year
they are financial wizards
but then the music stopped………..
The music didn’t just stop, it is being played backwards. For those of you old enough you know what happens when you play a record backwards… evil satanic words.
WaMan: i don’t know but check this blog out, it will give you a sense of the problems in the West.
http://bubbletracking.blogspot.com/
There are plenty of links, to other regions, like Chicago, DC FLa,{ areas}
But I can tell you this:
For the past 4 years, probably 5 now.. The housing industry built 700,000 more housing units than the Country computed “family formations”.
The housing number of 2.1 million vacant homes that you quoted may sound like a large number but does it include “vacation homes?
In Vegas, I think I read that of the 24,000 MLS homes approx 50% were vacant add the builder inventory of another 2000 units and the current available “ready to move into” is staggering when in 2003, just as the LV boom lifted realtors claimed only 2100 units in the entire LV valley were availble for sale.
Now in Vegas the situation is more unique than most places in the country as a substantial # of homes not for sale are vacant as 2nd homes for retirement and Californian’s attempting to avoid CA state taxes.
In the Soviet Union of old, from what I understand it was not unusual for that government to seize a person’s home and give it to someone else, or force the owner to “share” with other residents.
Sometimes I wonder if this bubble is just another way of accomplishing the same thing.
In Soviet Russia, the house bubbles you!
it says thank you
can I have another
does LIErah have one of these?
the formulations formula is probably useless as illegals form multi family households
count the cars !
You mean count the junkers.
does something on cinderblocks count?
Inventories off to the races. No Spring relief in sight.
A friend of mine whom I consider to be a very smart investor told me something weird about foreclosures. She said she had read in the paper where people in Michigan who can’t sell their houses are starting to not pay their mortgage notes each month, using the $1200 or so monthly payment to build up a 10-month nest egg of $12000, and then are walking away from their houses to parts unknown. It’s called “living off your equity”….I told her I doubted that any bank would let someone stay in a house for 10 months when they weren’t paying their monthly mortgage note. The man across the street from us was evicted 2 1/2 months after he stopped paying his mortgage note. It didn’t take long. She swore she had read it. I googled the Detroit Free Press & Detroit News websites but there was nothing I could find on them. The only thing I could think of that would fit this scenario would be someone who was planning on walking away from their property, taking out a substantial home equity line of credit, using that to make the monthly note payments, and in the meantime, saving up their regular monthly payments as a “start-over” nest egg. She told me that the article said that the people then walk away with their $12k to $15k, move to parts unknown, get a job in a part of the country that is doing much better, and just rent. There are so many empty apartments and houses that a lot of landlords just care if they have a job and can pay the monthly rent, never mind bruised credit. Has anyone run across this strategy or the article she was mentioning ? By the way, the Detroit News had a recent article stating 10.9 percent of the people in the state of Michigan are now on food stamps. This is a shocking figure….
This may happen more or less depending on the state the FB lives in. Some states, the foreclosure process is long and others it is short. I think TX has the shortest - something like 2 weeks. Maybe TXChick can elaborate.
NV is super fast
rent eviction even faster
Blue states let you hang around for free the longest
im not sure sure ny is that fast. i have heard stories about
people living rent free for 6 months or better before finally being evicted.
12k is start over money? lol
in ny that is 1st, last and security deposit maybe a case of ramen from duane reade when all is said and done
I think flat was referring to Nevada there
hey at my age it looked like a ny at a quick glance
btw il be 36 next month
thanks you are correct
I don’t know about 10 months, but 6 months delay is entirely believeable nowadays. Even after the foreclosure auction, the former owner can stay until successfully ejected with an acceptable legal procedure. Eviction only applies to rental tenants.
Mtg delinquents can also further stall their fates by BK, veteran status, etc.
I read a similar article on this blog recently where a BK attorney advised this type of behavior.
oh lawyers are so warm and cuddly aren’t they?
Speaking of lawyers, has anyone else noticed that Alberto Gonzalez (Attorney General) is looking more and more like a “lap dog” lately? The man, seriously, needs to be shown the door….
I too had read somewhere quite some time ago that Fannie May rewrote loans that were 6 months deliquent to make the mortgage current. They put the deliquent months on the back endof the loan.. It made Fannie May look more solvent than they actually were. if true, I suppose you could probably then go another six months or pretty close.
desertfox
I would think that once this thing hits critical mass that an FB might have a little time before the banks force them out just due escalating volume and its ensuing backlog.
“There are so many empty apartments and houses that a lot of landlords just care if
they have a job and can pay the monthly rent, never mind bruised credit.”
I agree with you, but I will argue that it has always been that way, the landlords will simply become more lenient than in years past.
PM bullshit rant /on
When I hear or read about property managers who are very strict with their background credit checking I laugh. If this is true then where would all of the sub 550 FICOs rent? They would all be living in their cars, but clearly this is not happening. Also, what makes me think that a property manager with vacancies would deny a rental to a guy with a 500 FICO during a period of time when 500 FICOs are getting half million dollar loans for houses?
This myth of property managers being so careful with credit risks is a result of property managers always answering “yes” (and lying) when asked about it. Think about it. Why would a PM say “no, we do not bother checking on anybody’s credit because we do not care, we just want to put bodies in our vacancies.” This would only chase away the good credit applicants. They simply run credit checks on applicants who they know (gut feeling) will have a good credit score, just to give them future plausibility and be able to say “yes, we check people’s credit.” (This is no different than, for example, the local county sheriff deputies who are busy speeding (patrolling) with uninsured county sheriff vehicles through all the residential neighborhoods at 50 MPH two weeks before election time, while the meth labs in Warren county KY are thriving and doing a good business.)
The fallout from this whole bubble housing mess in a few years is going to be lots and lots of financially ruined people. Granted, some portion of the population is destined to be irresponsible, but the bubble would have ruined many of those who otherwise would not have been trapped by the mania.
So are all of these millions of ruined souls going to be living out of their cars because of PMs who “check people’s credit”, while the supply of rental housing goes up? Millions of people living out of their cars, with millions of rental vacancies available? This scenario does not make sense to me.
About the only case where a PM may consistently check people’s credit is when the applicant is under 21 years old, and they do not want that crowd. This would be a “legal” way to discriminate against the below 21 crowd, since most of these people typically either have no credit, or have bad credit. (I knew of a PM in Texas who did this for many years.)
PM bullshit rant /off
Well, I don’t know about property managers not bothering to check potential tenants’ credit. My husband & I have had several rental properties, and we ALWAYS check peoples’ credit histories. For one thing, you know that the SSN the applicant gave you is real. For another, if there are complaints against the potential renter on their credit history from other landlords about damage or lack of rent payment ( ! ), then you know you might as well not bother renting to them…..we have higher-end properties and seldom have trouble renting them. Maybe some extremely low-end properties have managers that don’t bother to check credit, but I doubt it. I think you don’t have any experience in the rental business and are just theorizing ( ? ). Larger rental companies which I have worked for also consistently checked credit history. So I must question your facts….
The part of the story I have a hard time believing is that these people would actually have the discipline to save that $1,200 each month for almost a year. Fat chance! For that reason alone, your friend’s story is not believable.
Ben had this in one of his midwest threads about two weeks ago. I think it was from a Detroit News article and a lawyer recommended that people in foreclosure do this. There was some discussion on the blog about this. You might want to search Ben’s archives.
I know someone (who was in the mortgage business as well) who recently **sold** a house — for a profit!!! — after not paying his mortgage for at least six months. This is in CA.
Not sure if he knew certain strings to pull, since he knew the mortgage business, but that’s at least one example of a freeloader. I think this is going on all over the place right now.
“The only thing I could think of that would fit this scenario would be someone who was planning on walking away from their property, taking out a substantial home equity line of credit, using that to make the monthly note payments, and in the meantime, saving up their regular monthly payments as a “start-over” nest egg. She told me that the article said that the people then walk away with their $12k to $15k, move to parts unknown, get a job in a part of the country that is doing much better, and just rent.”
I don’t advocate criminal activity, so I won’t. But from a purely practical survival viewpoint, I can see why something like this would happen. The bubble has become so surreal it’s like the money means nothing. Hundreds of thousands of average Joes start waking up to reality and wondering why they should slave to pay back a bunch of suits who gamed the system with funny money. So they do a little gaming of their own.
Hey Ben -
I’m wondering how much of the Decider’s tax cuts are part of what we’re seeing in housing. I would bet that the high end of the market and 2nd-house vacation homes are not going to get hurt as much as the lower end of the economic ladder people are. What happens, then, is that the people who don’t want to buy RE, thinking that renting is the cheaper option, become slaves to the people owning those properties. Joe Average never gets a chance to live the American Dream; he will only be able to get to the top of the bottom. Haven’t seen any of that mentioned in the news, except for the fact that all the focus is on the subprime meltdown. Two economic classes, two Real Estate markets.
That must explain why builders everywhere are discounting their high end homes by 15%+ or offering free pools or cars with a sale.
I’d bet a shiny penny that many of the “vacation” homes purchased over the last few years are highly leveraged “bets” on appreciation.
Markets such as we have seen require strict adherence to the greater fool theory. Unfortunately in all cases you eventually run out of fools. In this case the fed regulators took away the punch bowl on March 2nd with the new guidelines which in effect pushed the rungs of the ladder up a notch or two and eliminated the most critical part of any quasi Ponzi scheme, the bottom rung. 100% LTVs are essentially gone - FICO scores are pushed up 100 points to qualify and horror of horrors the loan must be based not on the teaser introductory payments but on the true payment after the teaser period. Some may actually have to prove income instead of pretending that a Wendy’s employee actually makes $80,000 a year.
All of sudden the old rule of thumb that a house shouldn’t cost more than about twice ones income comes into play. The shocking reality that the old debt to income ratios might not have been so stupid after all will be news to mortgage brokers everywhere.
The simple truth is this will eventually spread to virtually every price spectrum and income level. Bill Gates is not going to be bothered, nor will Warren Buffet lose any sleep, but for the other 95% of us not in the uber rich class the day of reckoning creeps closer by the hour.
With current prices and rents, in many cases the rents received would not cover the interest on a loan or represent a decent return on money.
“I’d bet a shiny penny that many of the “vacation” homes purchased over the last few years are highly leveraged “bets” on appreciation.”
You’re wrong. MOST of them were.
A New Jersey housing analyst throws cold water on the NAR numbers, based on the problem of the composition of the housing stock that sells changing over time. His view on NJ — down 10 to 20 percent from peak, so far, if you really want to sell. That is what I would guess also.
http://www.nytimes.com/2007/03/11/realestate/11NJZO.html?ref=realestate
As a speculated yesterday, the subprime debacle may actually keep the NAR median existing home sales price up, by ensuring no lower priced homes sell except in foreclosure.
This is a wonderful article. And it eloquently states what many of us have been saying: “An influx of new housing that replaces deteriorated old housing in a community may skew the median price higher, even if the average sales price for existing homes is barely moving.”
That is exactly what I see in the quasi-ghetto where I live - nice, cream puff, turn key houses on the very best blocks are selling at pretty high prices, not peak, but pretty high. Everything else for sale is just sitting there, month after month. Lot’s of totally dilapidated garbage, too, that will probably only sell at rock bottom, 1998 prices.
“An influx of new housing that replaces deteriorated old housing in a community may skew the median price higher…
Large redevelopment projects most commonly occur in urban areas… it is more common to find a skewed price in cities than in suburbs.”
It’s not just Jersey City. This may explain the reported increase in NYC prices last quarter as well.
http://www.nytimes.com/2007/03/10/business/10real.html?ex=1331182800&en=442d8daf6bf56cac&ei=5090&partner=rssuserland&emc=rss
South beach slowdown
Ah, Miami! The myth of all the deep pockets from Europe and South America has kept it afloat, but now there’s a different type of hurricane on the horizon. Sheesh, I’m wondering why the beach doesn’t sink from the weight of all the new building.
Back in the day, if you wanted to have a successful project in Miami, all you needed was Dan Marino with his name attached. Now, it’s Nicky Hilton. Has it come to this? I weep…
“Back in the day, if you wanted to have a successful project in Miami, all you needed was Dan Marino with his name attached.”
Unless the goal of your project was to win a Super Bowl.
lol
When you live in Manhattan you really don’t know what’s going on in much of the world. You end up thinking the whole world is about 10 square miles. I’m guilty of that. Anything above the 80s is like a foreign country (and I usually don’t go north of 42nd St.). I rely on this blog to let me know what’s going on in the real estate world.
But yesterday I got a lesson in what’s going on. I met with some customers that are in to real estate. They own in the North Bronx and Westchester. I was amazed. Regarding Westchester they used words such as “stagnant” and “cold” for the real estate market. The tone was depressed. But they did manage to convince themselves it would pick back up.
Two of the customers had a new building that will be a total disaster. I won’t go into details. The folly of what they are doing was just amazing. And these were nice, honest people that have bought into the REIC party line. They are FBs and they don’t even know it. Yesterday made me realize that judgement day will make its way to The City sooner than I thought. By 2009 this whole area will have been hit by a mountain-sized mackerel in the melon.
I’m guilty of that. Anything above the 80s is like a foreign country (and I usually don’t go north of 42nd St.).
NYCboy is right I lived on 1st ave and 61st East side for 7 years and i didn’t know anything about the west side of manhattan past the old tower records or the Tavern on the Green, I did lots of parties there.
I think that is true in any major city. When it comes to real urban living, all your life revolves around a very small perimeter, anything outside is almost like a foreign country.
hey nyc go to curbed.com and they all feel things are great it is different here blah blah blah
and everyone wants to live in brooklyn and restore an old brownstone in crown heights which cost over a cool million
to get in the door.
is brooklyn that charming? i think not
I had heard of that site. I just went there and had to close within 2 minutes. It is designed terribly and it appeared to be full of bull—-.
Curbed is ony amusing to read the slams on the recent horrible NYC condo architecture, and the brokers/FBs who ferociously defend the condos they live in only to combat negative PR regarding their buildings.
I just moved from my 950 sf 2BR 2BA UWS WEA West 60s apt where I was paying $3300/mo. The rented it out in 2 days at…..$4600/mo!!!!! (suckers). I had other reasons to move besides price, but I told the renatl agent it was too much and I was moving. Unsolicited, they called me to make a deal, I would have only had a $100/mo increase, maybe less. I don’t get it. No wonder people are moving to Brooklyn. Maybe the higher prices are a function of NYers choosing to rent instead of buy. Still nuts as when I moved in in 2002 I got it with 2 free months over two years which effectively sent the rent at $2800 a month. Still nutty they are able to get that much for a decent doorman bldg, and the views of the river would be gone after a new building blocks up the views.
The best news I’ve seen in months, no, years.
http://tinyurl.com/3xh7p4
This is what was needed 5 years ago to keep this mess from ever happening. Woo hoo!
Only their subprime unit stopped.
Are you sure it’s only subprime? The artilce states: “”Countrywide BC will no longer be offering any 100 LTV products as of Monday, March 12.”
Does “BC” stand for “Bad Credit”??!!
We dicsussed this yesterday: “BC” means B and C borrowers. A borrowers can still get virtual reality loans.
It is still relevant. We are still going in the same direction off the cliff, and with increasing momentum.
I tried to post a URL from CNN Money. It was dated March 9th at 5:28 p.m. It will probably show up at some point. It states, “Countrywide said late Friday in an urgent e-mail. “Countrywide BC will no longer be offering any 100 LTV products as of Monday, March 12.”
Countrywide is bringing back the down payments. How many of these gamblers can afford even a 5% down payment on their $700,000 dream?
Game over!
thank god!
with dp’s required on most real estate transactions it may
slow down the market a tad
got cash? lol
Just their subprime unit stopped.
Are you sure it’s only subprime? The artilce states: “”Countrywide BC will no longer be offering any 100 LTV products as of Monday, March 12.”
Does “BC” stand for “Bad Credit”??!!
I have been told by realtors of some 125% LTV deals in KY. (RE prices here are not nearly as high as in the coastal areas, but still very high compared to historical prices.) These people are soooooooo screwed come reset time.
Got 10% down?
Something a little strange happened in my neighborhood yesterday. Soundbuilt homes just listed 4 houses with a realtor who had told me two weeks ago were sold. I live in Washington state. Does anyone know if this builder is having problems? I think this builder is from the Seattle area.
Sub prime fallout. The sub prime buyers were the largest pool of greater fools. No more. Lots of “sold” deals are falling out. The paper is full of major price reductions by home builders this morning to move product quickly, before historical loan underwriting comes back to all loans.
If you have the listing numbers to post here, I’ll see if I can find out. I am in escrow in Snohomish Co.
In my zip code, 92562, the number of homes in some stage of foreclosure (815) now EXCEEDS he number of homes for sale shown by Realty Trac (724). WTF!!!!!
Not RealtyTrac, ZipRealty.
I noticed this in some zips when I checked a couple months back and wondered whether the foreclosure sites would become the new “MLS”. It’s pretty impressive. There’s some of your “hidden” or “shadow” inventory people have been talking about.
The subprime debacle is on the Houston Chronicle front page, big screaming type, top of page.
http://www.chron.com/disp/story.mpl/business/4618086.html
35% of mortgage holders are subprime here, compared with 26% nationwide. Holy dogsh**, Batman!
It used to be that “if you breathe and have a Social Security number … you were going to get a house,” said Mark Cady, executive vice president for Market Street Mortgage.
Something tells me that even those 2 prerequisites were optional.
That article has so many things in it that could get a person pi$$ed off. If you haven’t read that article and you don’t want to feel like punching somebody then don’t read it.
We’ve been told by the HAR that “its different here, we’re not like California. No worries!” We are about to see a tidal wave of foreclosures here.
Since it is difficult for me to believe that residents of Houston are poorer financial risks than the rest of the country, there must be an incredible amount of A paper financed as subprime. Or there is an incredible amount of predatory lending that occurred to the former residents of New Orleans that got hooked into buying in Houston.
Lou : Maybe it has got edited but I couldn’t see the 35% number in this article.
It would not surprise though. One observation I have made since living here is that Houston is not a high paying area. Plenty of low entry jobs and the energy jobs have not paid that well until recently. They are in catch up.
Appreciating Property tax rate is a hidden problem with RE and together with amount of available land, are a natural cap on property values. Reset Tax values are hitting many marginal owners.
“Lou : Maybe it has got edited but I couldn’t see the 35% number in this article.”
It’s on the printed version, not the web. Go look at today’s front page. There’s a sidebar graphic that shows this.
Here Here!
I’m sure some of you out there wonder where some of the RE agents and mortgage lenders have the balls or guts to put people into houses and loans they can’t afford. So for edification, here’s an example of both:
RE agent with GUTS - Arrives home late after a night out with the guys, being met by his wife with a broom, and having the guts to ask: “Are you still cleaning, or are you flying somewhere?”
Mortgage lender with BALLS - Comes home late after a night out with the guys, smelling of perfume and beer, lipstick on his collar, slaps his wife on the butt and has the balls to say: “You’re next.”
Yowza!
Baltimore area home sales numbers out…a mixed bag, two counties holding up the rest.
http://tinyurl.com/yqjpgy
From the LA Times this am…the party’s just gettin’ started..
Loan turmoil closes doors for buyers
http://tinyurl.com/2zbp3t
http://www.denverpost.com/headlines/ci_5389782
“Fed warned of foreclosure crisis as loan growth slows
By Craig Torres and Carlos Torres
Bloomberg News”
“We have found neighborhoods with abandoned homes, 200 at a shot…abandoned housing has “devastated our city to a great degree. Fed officials heard stories from Denver, Cleveland, Philadelphia and New York, where neighborhoods are deteriorating as borrowers struggle to pay loans or abandon their homes in foreclosure, a process where lenders take possession of property”
“Some 1.2 million foreclosures were reported nationwide last year, up 42 percent from 2005″.
“Delinquency rates on real-estate loans rose to 2.11 percent for all banks last quarter, the highest in four years, according to Fed data unadjusted for seasonal patterns”.
Q. What effect rising foreclosure rates will have on LA:
In the surrealistic mirage-scape region known as Los Angeles the problem of deteriorating neighborhoods from rising foreclosures and resulting abandoned homes is not the issue. LA already has vast swatches of deteriorating old hoods and barrios, with 60-100 year old crumbling homes in such places as Lynwood, Sgate,inglewood,North Long Beach,LA Puente,East LA,Echo park,Lincoln hts,Pacoima. Compton,CCentral,Pomona,Wilmington,Bell,ect.
There is never a problem with empty foreclosed properties in these rundown inner city slimeburgs as there is an endless supply of, you guessed it, IMMIGRANTS, to rent out to. All a distressed property owner or Bank-owned REO needs to do is plop out a cheap sign, SI RENTA, and presto, a zillion immigrant applicants will snatch up that rent.
I drive around a lot all over LA and actually see very few unoccupied abandoned properties, much less entire rows of them. I do see tons of deterioration of old SFH stock, ragged decrepit Victorians/craftsmans/clapboards in decaying older central city districts all over LA. These are often occupied by immigrant renters, 2-3 families at a time.
Interesting what effect skyrocketing foreclosure rates and falling prices will have in the inner LA S*itzones. IMOH not much, as these zones already in the crapper to begin with. Some enterprising investors will swoop in on the tons of LA REO bank properties at fire sale prices and simply rent them out to illegals, for which LA has a never-ending supply.
The vast waves of immigrants who will lose their recently-purchased properties in LA from foreclosures will simply become renters, possibly in their former foreclosed homes.
This line from that article is FASCINATING:
“Fed officials heard stories from Denver, Cleveland, Philadelphia and New York, where neighborhoods are deteriorating as borrowers struggle to pay loans or abandon their homes in foreclosure, a process where lenders take possession of property.”
I’m in Philly and everyone here says that exotic mortgages are not an issue. Personally, I don’t know of any specific neighborhoods where foreclosures are happening. Then again, how would I know? The two major papers here are owned by one of the Toll brothers!!
The two major papers here are owned by one of the Toll brothers!!
Shudder! Free speech in America is going the way of the polar bear…still out there but signs of stress becoming more and more apparent.
Isn’t that why we are here?
Businesses pinched as commercial rents soar in Southland
http://tinyurl.com/3bj2h4
From p. B1 of today’s WSJ Personal Finance / Money & Investing Section:
———————————————————————————
Bulletproofing Your Mortgage
With Delinquencies Rising and Lenders Feeling the Pain, Here’s How to Spot Looming Risks in Your Home Loan
It’s tempting to write off all the mortgage bad news — rising delinquencies, lenders in crisis — as someone else’s problem. After all, the mistery seems to be concentrated in loans to the riskiest borrowers.
If you have any kind of mortgage where the payment terms change over time, however, you should be asking yourself: How likely is it that you’ll get hit with a big jump in your monthly payment that would mess up your personal finances?
…
(DRUMROLL, PLEASE…)
The easiest out: Switch into a 30-year fixed rate. The national average is currently 6.27% according to consumer-loan data provider HSH Associates. That’s low by historical standards, and better than most rates available in the past 18 months.
———————————————————————————-
The problem with switching into 30-year fixed is that many borrowers are paying I/O or less (in the latter case with a payment-option ARM). Switching to 30-year fixed at “low rate” of 6.27% sounds like no big deal, until you realize what the principle repayment schedule looks like on a McMansion that sold for over $500K.
The even easier way out: rent
“The even easier way out: rent”
Retrospectively, yes. But I believe the article was addressing the situation of owners who got in on exotic loans and are now trying to figure out how best to survive financially. It is hard to sell and commence renting when you are underwater.
NoVA observations. Checking in every once in a while on ZIPRealty for housing numbers in Jan - Feb numbers seemed to stay around 45.5k - 46kish for units for sale. This morning checking in topped over 47k, maybe the spring listings ramping up?
Also still noticing these types of listings:
mls# FX6326459
on market 9 days
listed @ 399k
zillow est @ 350k
last purchase in ‘03 for 225k.
But it has all the trappings for a 175k profit, new stainls steel appl.W/bi microwave, dupont “simplicity” counters, refaced cabinets… wow, let me get hosed for 20k (maybe) in “renovations”… seems like a lot of hard work, let me reward you flippo.
Aoccrdrinig to rscheearch at Cmabridge Uinervtisy, it deosn’t mttaer in waht oredr the ltteers in a wrod are, the olny iprmoetnt tihng is taht the frist and lsat ltteer be at the rghit pclae. The rset can be ttaol mses and you can sitll raed it wouthit porbelm. Tihs is bcuseae the huamn mnid deos not raed ervey lteter by istlef, but the wrod as a wlohe.
Tkanhs for the cmioc rleif. Vrey fnuny.
Hw lnog dd taht raesrech tkae, I wnoedr?
Why am I now tempted to write a program that randomly swaps all the letters except the first and last in every word of a sentence?
Ti si tilsl namd rritatingi ot aerd rowds itrwnet ni hte gronw rdore.
Oops! I missed the first-last letter constraint (srroy…)
MLAO!
Now I’m thinking that this is a great way to defeat Echelon and still allow people to write political blogs.
From the EIR Executive Alert Service, March 6, 2007:
The Era of financial shocks fully underway. The global wave of instability that hit the world’s stock markets beginning on Feb. 27, is continuing apace. One leading edge of the crisis, as had been projected by US economist Lyndon LaRouche, is the unwinding of the yen carry trade, which is reflected in the fact that a steady rise in the value of the yen has followed from the rise in the Japanese interest rate two weeks ago. One of the currencies leading the collapse is the pound sterling—a collapse which could lead to pulling down the dollar.
Credit derivatives market in crisis. The roughly $30 trillion
credit derivatives market is echoing Lyndon LaRouche’s Feb. 28 characterization of financial markets as: “disintegrating—not yet blowing out, but disintegrating.” And the hedge funds and banks that dominate this market are getting hit with widespread losses, by all reports. Trading volume on credit default swaps indexes in European markets is estimated at unprecedented levels of $200 to 300 billion for the Feb. 27-March 2 period. “That’s three times the average weekly volume,” said Marcus Schueler of Deutsche Bank. Volumes on U.S. CDO markets are thought to be even larger. Analysts and traders say that big losses, particularly on junk-bond derivatives indexes, have hit bank traders and hedge funds. Everyone had made the same bets: “Both [Wall] Street and clients
have been caught long. . . . Some peoples’ year was wiped out on Tuesday [Feb. 27],” Schueler said.
The most violent plunges have been on the corporate bond index (higher risk but not junk) called “iTraxx Crossover.”
There, the cost of insuring EU 10 million in debt, against default, went from EU 169,000 to EU 240,000 in two days, March 1 and 2. This is the impact of the unwinding of the yen carry trade, and is set to continue as that “great unwind” accelerates.
As of March 2, Bloomberg reported that Goldman Sachs’, Merrill-
Lynch’s, and Morgan Stanley’s traders were valuing their own firms’ credit at just one or two grades above junk! Their credit-risk insurance derivatives were putting them at five grades below their “official” credit ratings. Goldman and Merrill are dominant in the credit derivatives markets. These three are also big securitizers of mortgages. Merrill has had two mortgage lenders that it owned fail, and had to bail out a third, First Franklin Financial Corp., for $1.3 billion.
At the same time, some hedge funds are being hit by the Securities and Exchange Commission (SEC) with civil and criminal suits in the U.S., for “shameless” and “blatant” insider trading on stocks and leveraged takeovers, with the participation or complicity of bank officers. Thirteen officials of UBS, Bear Stearns, and Morgan Stanley investment banks; and Chelsey Capital, Jasper Capital, and Lyford Cay Capital hedge funds, were charged by the SEC on March 1, with “a brazen insider scheme.” The bankers providing the information were also invested in the hedge funds, and/or earning fees from them. Then on March 3, the SEC charged “highly profitable and suspicious” insider trading on the takeover of TXU
electric utility in Texas, which was only announced on Feb. 26. A Chicago Federal judge froze the assets of some buyers of TXU stock just before the announcement—the hedge funds are not yet identified because they used foreign brokerage firms to buy the stock.
These SEC prosecutions are the direct result of demands by the Senate Judiciary Committee and both of its recent chairmen, Arlen Specter (R-Pa.) and Patrick Leahy (D-Vt.), who have raked SEC enforcement director Linda Chatman Thomson over the coals, for failure to go after hedge funds’ constant insider trading in collusion with banks. Two recent studies have shown that takeover announcements are routinely preceded by rises in the target company’s stock, as hedge fund insiders buy in.
Excellent read. It appears that we could be well approaching Gridlock not only in the real estate and RE related debt markets but very possibly in the “cash” and “liquid” (world) stock markets. When one look at the market cap of any stock with a bazillion shares outstanding, just think and wonder how many of these shares could possibly e sold and turned in to cash on an given day. When one looks at the whole totally illiquid and bloated banking and securities sectors that are supposed to be the conduits for maintaining liquidity and safety, one really needs to wonder whether or not it is time for a very quick exit from all of these markets with a view to cashing out most things and trying to find a “safe” place to store one’s cash. Perhaps the next leg of financial delevering is about to hit the global stock markets in spades.