“It Shouldn’t Even Be Called An Investment Now”
The Patriot News reports from Pennsylvania. “State and federal regulators are looking at ways to cut down on the risky loans in an effort to curb foreclosure rates. Pennsylvania has not escaped the national trend. Foreclosure filings in the state shot up 34 percent, from 28,650 in 2005 to 38,333 in 2006, according to RealtyTrac.”
“Cumberland County had 218 foreclosures in 2005 and that number jumped 53 percent, to 334, in 2006. Chris Gulotta, executive director of the Cumberland County Housing, said the county numbers might be a result of the higher median prices of houses in Cumberland County.”
“People with more expensive homes in Cumberland County generally have larger mortgages, he said. ‘I think the foreclosure issue, it’s a combination of the effect of the adjustable-rate mortgage and relatively serious increases in interest rates,’ he said.”
The Journal Sentinel. “Hard times and bad choices have landed thousands of Wisconsinites in deep trouble on their home mortgages. Foreclosure filings, which rocketed 34% in the state last year, jumped another 27% in this year’s first two months, reported ForeclosuresWI.”
“‘We have credible lenders and good laws. What we need is much better education,’ said Bill Malkasian, president of Wisconsin Realtors Association.”
“One important lesson that needs reinforcing right now is delayed gratification, said Jim Kopp, past president of Wisconsin Mortgage Bankers Association. ‘Some people say, ‘I want it now and I want it easy.’ But they may not be getting the best deal they could,’ Kopp said.”
“By June, the two men say, their trade groups will have a consumer alert to distribute, ‘in time for the spring selling season,” Malkasian said.”
“Of the 300 to 350 calls a day fielded by Homeownership Preservation Foundation’s consumer hotline - a 600% increase over 2006 - about half involve non-prime loans, VP Dean Caldwell-Tautges said. ‘A lot of the people that are having trouble now are in loans that are not more than a year old,’ Caldwell-Tautges said.”
From KFVS 12 in Illinois. “In recent years, it seems there’s always something new under construction in Marion, Illinois. But can the local building market continue to grow when national trend is the opposite?”
“‘Right at the moment, the outlook is very, very promising,’ said Arthur Mize with the Home Builders Association of Southern Illinois. ‘But we’re all standing on eggshells because this little building bubble that we’ve got going on could collapse.’”
“Some folks who checked out the Spring Home Expo said they’re stuck in limbo; they want to build a new home, but can’t because of a slowing real estate market. ‘We have a house on the market, so we’re like a lot of people we’ve got to sell in order to build,’ said Craig Baumgarten.”
“New homes keep going up as Williamson County grows in leaps and bounds, which makes contractors optimistic that the local building bubble will stay intact. ‘Marion has been a boom town for the past few years, and hopefully the next few years,’ said Mize.”
The Daily Nonpareil from Iowa. “Donna McFadden, director of the home ownership program with Family Housing Advisory Services, said foreclosures are becoming more of a concern as many adjustable-rate mortgages have adjusted upward. ‘We probably see at least two a week,’ she said. ‘A year ago it could have been maybe, three or four a month.’”
“Scott Simpson of Western Horizons Mortgage Group in Council Bluffs said during a recent week his office saw six people who could have been approved for a home loan six months ago, but no longer were eligible. ‘The person that was a tougher credit, or a credit risk, so to speak…those people are not going to be able to get a home loan,’ he said.”
“‘It’s going to get real ugly, I’m afraid,’ Simpson said. ‘I don’t think people understand what’s going to happen.’”
“Byron Menke, president of the Southwest Iowa Association of Realtors, said the situation has been a topic of discussion and some tightening was expected on institutions that issue higher-risk loans. Many of the problems will come from those individuals who entered ‘creative financing’ agreements with 100 percent financing, he said.”
“‘They just walked away because there’s nothing invested on their part,’ Menke said.”
From USA Today. “A 10% drop in home sales in the Minneapolis/St. Paul area at the start of the year was actually good news. The area’s housing market looked even worse at the end of 2006, according to the Minnesota Association of Realtors.”
“The Twin Cities area enjoyed double-digit price appreciation from 2000 to 2002, after which price increases slowed to the single digits.”
“Those who expect to sell need to keep their homes well-maintained. ‘People aren’t willing to spend that much money anymore for properties that need work,’ notes Chris Galler, senior vice president of the association.”
“Real estate agents are concerned, though, about the many homes in foreclosure, as well as investor-owned homes that are sitting vacant and for sale. Not only are homes in foreclosure often in disrepair, which depresses property prices, they’re also typically sold below market prices.”
“‘We are working with a group to try to track the problem,’ Galler says.”
The Citizen Patriot from Michigan. “It’s not news Michigan finds itself in a one-state recession. But what is shocking for many families is that the place they call home could become a stone around their financial necks as they try to stay afloat during rough economic times.”
“‘For many families, their house is their largest asset. To see it eroded in value after having seen only modest increases in the last year or two causes real concern,’ said economist Dana Johnson.”
“It’s been more than 22 years since Michigan saw a three-month quarter with a drop in home prices, according to the U.S. Department of Housing and Urban Development. The last time was the third quarter of 1984, the tail end of the 1980s recession.”
“In 2006, it happened in both the third and the fourth quarters.”
“Analysts say the reason for this is clear. ‘Housing prices are just a reflection of what’s happening in the rest of the economy,’ said Marcia Howard, director of a Washington-based research group.”
“Some economists say families should steer clear of putting all their savings into their home. Look no further than the recent spate of property owners challenging their spring property tax assessments to see the downside of a real estate-only investment plan.”
“‘They really thought this would be a way they could save for retirement or emergencies,’ said David Littmann, an economist with a free-market policy group in Midland. ‘It’s become a negative investment at this point. It shouldn’t even be called an investment now.’”
Just when I thought all the good THBB ‘headlines’ were used, you find a new, better one. “Not an investment” is a classic. Nice job Ben.
That was the first thing I thought of as well. Ben is a natural talent when it comes to picking great titles.
What planet is Mozilo from??
Lou? He’s the “Man from G.R.E.E.D.”
LOL
Pardon the extra post.
Check out Lou insider trading (ahem) *selling* spree! (Credit to Aaron Krowne’s ML-Imploder.com)
http://www.secform4.com/insider-trading/25191.htm
Wow, he looks like he is just printing shares off and selling them. Maybe he needs to get a job with the FED on the printing press.
WOW! I think they are the only people that are selling. They are just printing shares and selling them. Did you see the ones he got for $1.53 each. I wish I could do that too.
ooooohhhh the pain!
The implosion ain’t local, it’s Countrywide!
(uncalled for! low brow! hiissss!)
Nice!
Look at these stories…
Minnesota, Iowa, downstate Illinois, Wisconsin,…
These are not supposed to be the Bubble markets.
These are some of the states (via license plates seen ALL OVER) whose residents are a LONG WAY from home, clogging up our roads, searching for houses and jobs in OUR area right now!! (Greenville/Greer, SC). Stay put, stop the mass exodus and home prices will be fine!! A border fence should be built around South Carolina to keep out these nomads!!
Columbia
nomads
I prefer the term “equity locusts”.
The Twin Cities with half the people of Minnesota had a 50% appreciation 2000-2005. It’s not California, but it’s much more than the historical trend.
I’d take a bullet to the head before I would buy anything in Cottage Grove or Woodbury. Nice suburbs turned into suburban hell. The Twin Cities are full of such tales.
I live in the Western suburbs and are seldom east of St. Paul - what made Woodbury etc. into a suburban hell?
“what made Woodbury etc. into a suburban hell?”
Overdevelopment. It was a charming small village surrounded by rolling farmland. Nice country drives just a few minutes outside the metro area. Now it’s just another ugly, soulless shopping mall-infested, cookie-cutter subdivision hell. With the accompanying traffic jams.
Ridiculously enough, many folks in Woodbury consider it a prestigious location, and brag about living there. It’s the Minnetonka of the East Metro, so they imagine. They look down on people in neighboring suburbs.
Prices in my part of the TC have absolutely dropped from the ‘05 peak. A flipper sold a house up the street last autumn for $30,000 less than he’d paid for it in ‘05 - not including the additional costs he’d sunk into ‘improvements’. Homes in the cheaper subdivision a few blocks away are listing at about $20K-$30K off their ‘05 peaks, which had ranged from about $215K - $220K.
And the new rowhouse subdivisions down by the mall have quite a few sitting empty. That’s not dissuading them from building still more, unfortunately.
Where do you live, homoaner? Maybe I should have look in your corner for buying or renting houses? Don’t worry, I won’t buy before Christmas 2008. BTW, thanks for the answer on Woodbury - I am new in the Twin Cities, renting in Minnetonka.
“Where do you live, homoaner?”
Maplewood. Not far from the old Ramsey County Poor Farm.
They just had on the news that half the homes for sale in the Twin Cities are foreclosures. They might want to start thinking about re-opening the Poor Farm.
“‘They really thought this would be a way they could save for retirement or emergencies,’ said David Littmann, an economist with a free-market policy group in Midland. ‘It’s become a negative investment at this point. It shouldn’t even be called an investment now.’”
May I suggest a new moniker? How about calling it an albatross?
Call it what it is…a home. If a home is an investment then shouldn’t we all be checking the ticker for our current market price?
http://chicagobubbleblog.blogspot.com/
When I think of investments, I think of things that pay me interest or dividends. My house has yet to do that.
families should steer clear of putting all their savings into their… real estate-only investment plan.”
Diversification! Diversification! Hello?
They didn’t need diversification because it was different this time and RE never goes down. Remember ? 10% was in the bag, it was a sure thing !
Only it wasn’t !
Good article in the WSJ about how a home isn’t an investment…
http://www.realestatejournal.com/buysell/tactics/20070313-crook.html?refresh=on
http://chicagobubbleblog.blogspot.com/
I would argue that it DOES provide a dividend: housing. Which, unless you rent out rooms you consume in it’s entirety. THAT’S the problem with equating a home with other investments. Buying a bigger house doesn’t mean that you save more. It just means that you get to live in a bigger house. I actually believe that the policy wonks are RIGHT to include only “rental equivalents” in the CPI.
Hey tulips and beanie babies were great investments too - for a while. One of the positive things that will come out of the housing debacle is that maybe, maybe people will stop referring to their primary residences as “investments”. Then maybe they’ll talk about actually spending less than their paychecks and investing their savings into a real, captial-producing investment.
You mean something like an energy source for all the energy a home consumes?
I keep trying to convince my wife that solar panels are a better investment than more living space. So far she’s not going for it. What amazes me is given the prices they’re getting for houses these days they should be generating a surplus of energy. The technology is there.
“Then maybe they’ll talk about actually spending less than their paychecks and investing their savings into a real, captial-producing investment.”
Like alpaca farming, ostrich ranching, and emu breeding? All three are agriculture bubble schemes. The emu and ostrich ones blew up a few years ago, but alpacas are the current rage.
You know, this might make a good weekend topic. Try to list as many past and current get-rich-quick bubble schemes that we all can remember. And share anecdotes about them, if we have any.
Sheesh! This reminds me of the W.C. Fields movie where he’s so hot to invest his money into a beefsteak mine.
See that’s the problem with this. An “investment” is not a guaranteed return, otherwise it would be called “savings.” As such, the downside risk should be assumed. Still however, it takes a long stretch of the imagination to call anything purchased recently an “investment.”
Here in Indianapolis, realtors are blaming poor February sales on the Colts’ super bowl win:
http://www.indystar.com/apps/pbcs.dll/article?AID=/20070313/BUSINESS/70313020
Meanwhile, I just got a letter from Washington Mutual, asking me to take out a home equity loan to the tune of all my equity. They only overestimated the current value of my house by about 15%. Sorry, that’s not enough to tempt me into grabbing the cash and defaulting.
Hilarious! I guess March Madness will be blamed this month.
Here’s another reason to avoid WaMu:
http://blog-omotives.blogspot.com/2007/03/wamu-i-see-frustration-and-stupid.html
How f**king pathetic!
Who gives a sh*t about football? Give me rugby anytime.
It wouldn’t be so bad if this were really a one-state recession.
The problem is the one state is Michigan.
I’m from Michigan and I can tell you it is bad, here. The governor has tried to be up beat, but the state is in the hole, financially. So are the cities, counties and townships. Jobs are leaving and so are the people. For sale signs are all over the place and a lot of them are by owners.
I went to college in Michigan (Go Blue!) and the economy pretty well killed any thoughts I had of staying in that state. BTW, that was back in the 1970s.
I think the rest of the country will be joining our misery soon.
“‘It’s going to get real ugly, I’m afraid,’ Simpson said. ‘I don’t think people understand what’s going to happen.’”
I do. It’s called a depression. (Of course, they’ll call it a “deep recession”. In California they call one of those a “sinkhole”.)
“‘It’s going to get real ugly, I’m afraid,’ Simpson said. ‘I don’t think people understand what’s going to happen.’”
You obviously aren’t referring to the people here, on this board ! We FORECASTED this friggin situation ! Not only do we understand what is going to happen, we SAW IT COMING ! We anticipated it !
Of course I’m not, you ninny.
Oh, sorry. I didn’t realize it was you that said that !
Don’t worry they will be in denial, holding their hands over their ears humming to themselves. Well at least until they are evicted by the cops with battons. Their jobs will have been shipped over seas for lower labor cost so they could save a couple bucks when they drive their new Hummer/Beamer to go shopping at Wall Mart for all the stuff in their new home. They will be able to just sit and watch TV enjoying their home while they ignore those pesky credit card and mortgage payments.
CNBC is soooo entertaining today. I feel queasy listening to Mozilo BEGGING for rate cuts though, ick.
I saw an interview with Bob Pizani. I thought he was going to start crying ! Pretty sombre.
I heard a great one - Jim Cramer was begging for rate cuts to bail out illegal immigrant, no-doc subprime borrowers. Okay, he didn’t say it exactly that way. He called for the rate cuts to bail out subprime borrowers and then added that many subprime borrowers are immigrants with no papers and that “those people are on the run these days” from the administration supposedly cracking down on them.
You could cut rates by a full percent, or even more, and how much is that going to help someone who took out a loan at 7.70% above LIBOR? Ouch! It seems that the thin edge of this wedge are people who:
(1) Have loans adjusting to ridiculous rates FAR above what they can in any way afford, and/or
(2) Have teaser rates that adjust in any interest rate scenario to something they cannot afford, or
(3) Have no skin in the game, with 100% financing, so they can walk away.
In fact, even people who put 10% down now might effectively have “no skin in the game” because in many parts of the country, their equity is gone, gone, gone already if they bought their house a year ago.
So long as the exotic mortgages and freewheeling lending are closed down — and it seems they are unavoidably headed that way — any reasonable interest rate move by the Fed will not prevent the housing finance disaster ahead. Sorry, Cramer.
Yup. Credit quality went down farther than the FED ever could. Problem is, Mozillo and his ilk have gotten so used to mega-crazy credit that merely insane credit looks like an excuse for a rate cut. To him, normal 20% down, paystubs and 30% DTI is a death sentance. When the warehouse/investment types realize that Residential Real Estate is where money goes to die, the Fed rate won’t matter at all.
The pundits on Bloomberg TV are blaming today’s market rout on, of all things, Daylight Savings Time change and the fact that the Europeans can now get to see the market open. Didn’t mention how the last half of the trading session went into the toilet without their help.
Pass the popcorn, Neil.
Europe was only open for the first hour ! NY was only down 50 points then. Japan sold off last night. The sell off in NY started because of that and went lower as the news got better during the day.
And another thing. All the pundits on CNBC and other places are begging for an interest rate as it that will be cure for all problems. And it has been in the past. But I would argue that each time you cut interest rates to save the day it’s less and less effective because the imbalances that are building up in the system are not allowed to correct. There will come a time when interest rate cuts won’t work or will cause a worse problem to arise (e.g. dollar devaluation). That is when the brown stuff hits the fan because the Fed has lost its power, the perception of the Fed as omnipetent is shattered, and nothing will stop the collapse.
It won’t happen via rate cuts to the FFR. Assuming that the power elite are ignorant is fallacious. You have to realize that action would kill the golden goose. Their notes would drop like a rock.
The backing to this bank’s notes is gov’t debt. The gov’t is the largest debtor in history. No politician will get elected by saying they will cut entitlements or raise taxes. At least not at this point. The American electorate’s understanding of money (not how to use trading programs to speculate on stocks, bonds, commodities, etc) has been virtually non-existent.
As a testament, our former Chairman of the bank whose notes have been decreed as our legal tender, states that they realize inflation is a monetary phenomenon, but can’t quite determine what money is. Should have been clue number one that something was seriously wrong. The power elite do not have the individual’s best interest, or the state’s for that matter, in their gameplan.
“can’t quite determine what money is”
Of course they can. It’s well known what all money is: A shared delusion that’s allowed to continue because it’s more convenient than swapping grain for a pig.
This is true of every currency, regardless of what it’s based on. Even gold. Gold’s trading value (what you can get someone to give you for it) is as far out of whack with it’s use value (what you can actually do with it, if you don’t sell it to someone else) as the cost of high-quality paper is with the dollar.
All money is fiat money. It’s only worth what it’s worth because we all agree that it is.
–Shannon
I didn’t say it, Greenspan did (almost a word for word quote). I disagree with your definition of money.
Money’s value comes from its use-value and exchange-value. Its exchange value is critically affected by the law of supply and demand. If people know that 10% more money was created, then they will expect 10% more of that money for the same good.
Wherever it flows in the form of credit, what we all agree it is worth is varies wildly. That is the basis for our fractional reserve system. Money comes into existence via borrowing/debt. Someone has to pay it back, one way or the other, and it appears that a lot of folks are having trouble doing just that.
The FED has a job to create price stability. I would say that in the last 30 years they have done an absolute terrible job. The value of commodities, stocks, bonds, real estate (some not included in their inflation figures) have fluctuated wildly. No one seems to know what their true “value” is, including the folks charged with the task of ensuring stable prices.
“If people know that 10% more money was created, then they will expect 10% more of that money for the same good.” How many of us can say that our income has increased as rapidly as the money supply?
Mozilo from Countrywide who just sold 140,000 shares of his failing company’s stock? The guy’s got HUGE balls. HUGE. Stephen Colbert ought to have him on his show.
Yeah and he said something like The Fed should bail out all the FB because they had to be able to Climb the Social Ladder. He was whining. Ewwww.
Someone is going to have to bail him out of jail.
Na! I think he will be in Fedral Pen when this is all over and done. Good chance he will have a judge and a jury that are HELOCD to the Max!!
P.S. Those big balls may make him extremely popular with some groups in the pen.
Here in New England, sales were down because the Patriots weren’t in the SuperBowl. Go figure…………
I’ll go figure. Peyton Manning rigged the whole subprime implosion! Yeah!
Free Super Bowl rings for everyone!!! Yeah!
Well, OK maybe not.
What’s the difference between insisting that everyone should get government backed credit to buy a house and giving everyone that plays pee-wee football a superbowl ring? If decisions aren’t made based upon ability, there is no difference.
The dangerous game of musical houses is coming to an end. It would be nice to have the cheerleaders and shills left without a roof over their heads but I know its not gonna happen. They have stashed up the loot and are now dusting up their Plan B - searching for, and drumming up the next bubble.
All the FBs in their straw homes will be looking to set fire to the Mozillo. I suspect that you’ll find that those who are bailing out now have stickbuilt McMansions. I’ll bet if you look hard enough, you’ll find that the smart money got out quietly a year or more ago and are waiting out events in stately brick homes.
Picture a total “lockup” where no one can sell their house and therefore no one can buy some other house. Keeping in mind that no situation lasts forever, what kind of event would it take, in your opinion, to break such a lockup and begin to restore a normal housing market?
Just ask Japan what that total lock up is like !
Deflations take a long time to reverse because they are self-perpetuating. Look at the world in the 1930’s or Japan in the 1990’s. With Japan, there was no catalyst to the upside, just a lot of false-hopes and slowly improving conditions. With the world in the 1930’s it was WWII, but that’s not a path anyone wants to repeat. I think housing will be a slow, grinding process and it won’t be clear until way after the fact when the bottom was reached.
“With the world in the 1930’s it was WWII, but that’s not a path anyone wants to repeat.”
I’m not sure if “anyone” is the correct word to use. It should be “the majority of not insane people wants to repeat.”
Are you saying that FDR was insane?
Rolling waves of foreclosures, coupled with bank capitulation on REO sales prices. Trouble is, one begats the other. At some point (in an economic galaxy far, far away) when the bloods drains off the street, people will regain their footing and begin to buy again. But it may be a Japanese-collaspe number of years.
Uh, we’ve got a lockup in place already. Florida.
> what kind of event would it take, in your opinion, to break such a lockup and begin to restore a normal housing market?
ITI of PITI much below rents should do the trick, which means greatly reduced house prices. Otherwise, only wage inflation could do it, but that would be playing with hyperinflation.
What about offshoring and outsourcing. Hyperinflation not an option for the working stiff.
If the dollar falls faster than the wages increase, outsorcing and offshoring aren’t so attractive anymore. (Neither are treasuries.) So I modify my statement: The ONLY solution I see to “restore a normal housing market” is a great reduction of housing prices, measured in a (weighted) mix of foreign currencies. The weight of Zimbabwe in the mix is zero, but the weight of China, Japan, Europe, India etc. I could not tell you the weights though, because it would demand more predictive power than I have.
Of course Fannie was created to break up this sort of logjam.
“They really thought this would be a way they could save for retirement or emergencies”
Of course they thought this because Maria Bartorolla on CNBC said so.
I heard her several times argue with market bears regarding the personal savings rate. Whenever they said the savings rate was zero or negative, she would fire back and say “what about the 401k and home equity that people have”.
I heard that too, but not just her, also Arron Burnette. (sp?) I think someone instructed them to say that. Nevertheless, Maria et al deserve some flack because they have been cheerleading this thing forever.
Most of the folks on CNBC really have no idea what the markets are all about. AND, most of the people managing money don’t have too much of a clue, either.
I’m afraid the 401k is a terrible hoax, that has been played on the people in this country. They don’t see it yet, but will get the drift of it in the near future. Baby boomers are not going to like it.
EXACTLY! I can’t tell you how many times I’ve been excoriated by friends for not having one. I think I’m going to have the last laugh, but I will laugh to myself. Outwardly, big moist sympathetic eyes.
If you have access to a 401k you are missing out. If you think that we don’t save enough for retirement then you should be investing in a 401k because it gives you tax deferral.
I got my own “401K”.
Tax deferred until withdrawal at retirement age. How nice of Uncle Sugar, he lets you defer taxes now so he can take more later. Great investment for the gov’t.
Not only is 401k tax deferred, but it is taken out on a pre-tax basis. Thats a good thing also.
Keep this in mind - you dont need to buy stocks when putting money in the 401k. Most plans have bond fund options and cash acccount options.
That said, my advice is that if you are just starting out, take care of some things first before going full bore into the 401k:
1: Own your own home. only use 15 or 30 yr fixed loan for this. If you dont own yet….your hour is getting closer. Keep saving cash for the down payment and be ready to buy within the next few years.
2: Dont have any other debt besides your housing debt.
3: Have 6 to 12 months of living expenses in a cash account for emergencies.
4: Never borrow against or take early withdrawl of the 401k.
> Most plans have bond fund options and cash acccount options.
My long bond option is to 30% from Fanni Mae. Great choice - NOT. Your other points seem valid though. In a high interest environment, a fully amortizing ARM wouldn’t evil though.
Wouldn’t it be wiser to buy ARMs now? Interest rates can’t really go up higher, and a recession by year’s end is becoming more and more probable.
401K is great. Lunchtime, I sold out of any other longs and increased my % exposure of “SRS” to 85%.
I agree with you on the hoax. Actively managing investments to get a steady growth is not easy. I am lucky in that I have an option of a self directed account. The default funds options are shite.
I am lucky in that I have an option of a self directed account.
Nice if you can get it! Actually, what a lot of people don’t realise is that they when you switch jobs, you can rollover the 401k to your own self-directed IRA, where you have a lot more choice in where you invest it. Sure, this is no good to someone working the same job for a lifetime, but for most of us who switch very 2 to, oh, 10 years, it’s a definite advantage — and one that far too few people use.
In a related vein, if you are tempted by the Roth 401k, look up the recent Barron’s article about all the tricks the government and Congress might pull (in future) to get their paws on tax from those “tax free” accounts.
At that point, can’t you pay taxes and roll it over into a Roth IRA? Paying taxes now in return for untaxed future earnings seems a bargain to me.
401K a hoax? Get a clue. Future Social Security and Medicare taxes are the ticking time bombs, not future income tax. 401k is exempt from future SS and medicare taxes…already paid. In a high income tax state like California, 401k with my company’s match (that will pay for the future Federal income tax…plus some) is one of the only ways to get ahead down the road. Make a good salary here…max 401K…move away. Rent dont’ buy. Housing prices in SF are insane without a 50% decrease across the board.
Wow, a whole string on 401k and not one person mentioned the employer match. If you are fully vested in a 401k and the employer matches funds then you can get an immediate 100% return on your investment.
Who among you is going to step forth and say that is bad? I have a 2 x 4 with your name on it. Contribute at least up to the match.
Becarefull, if your earned you income in CA over your life time the Great State of CA has reciprocity with many other states. This means that it can tax your retirement income no matter where you move to. Ask your tax professional.
“Real estate agents are concerned, though, about the many homes in foreclosure, as well as investor-owned homes that are sitting vacant and for sale. Not only are homes in foreclosure often in disrepair, which depresses property prices, they’re also typically sold below market prices.”
“‘We are working with a group to try to track the problem,’ Galler says.”
Ok, so now a RE group is tracking the foreclosures.
Um, then what?
Got 10% down?
‘It’s become a negative investment at this point. It shouldn’t even be called an investment now.’”
I have never called it an investment. Never have, never will. But has anybody listened? Has anybody cared?
Never believed it when people told me “but you get all of your money back in your taxes”.
Never believed the sellers of “40 year roofing” that they will warranty it for 40 years.
And I never liked the way local gobmints spend increasing gobs of money year after year after year, as if all they have to do is shake (down) the
money treehomedebtors.Got 10% down?
From the Pennsylvania article -
The state agency has been pushing for reforms ever since it released a foreclosure study in 2005.
The study showed that about 55,000 Pennsylvania homes were auctioned at sheriff’s sales between 2000 and 2003. The state determined then that there was an increasing number of defaults on subprime and other nontraditional mortgages.
Well at least someone knew enough to investigate the problem a couple of years ago. It will be interesting to see a) what reforms are enacted and b) if they expect the PA taxpayer to come up with FB bailout money.
Reforms are always too little too late. By the time they put the clamps on, the market is correcting and the reforms just make the correction that much more severe.
Also from the PA article -
Egan said: “A plain-vanilla, 30-year fixed mortgage isn’t going to have any surprises.”
All I can say to that is - Make mine vanilla!
Can I get sprinkles on it? How about some Chocolate Syrup or Carmel?
Carmel sounds good. Mmm-hmmm!
Was CD shopping today. My credit union offers a pretty good rate for a ten month commitment. It’s interesting how my timeframe for home buying is changing as the RE market slides and funding schemes unravel. But when I talk to my peeps about delaying purchase, most look at me as if I’m a dumba$s. Like - “why is she waiting, doesn’t she know that RE can only go UP!!!”
???
That’s true. RE will go up….
…in flames !
LOL!
Ice cream only goes up too! I was going to buy this summer….. but think I’ll wait… it gets worse and worse every day… till the market over corrects…
How will I know??? When renting cost more than financing with 15-20% down and a fixed mortgage. Another factor people say works (I never used) was taking the rent a place could fetch and multiplying by 200 to get the fair market value.
DOW falls 245 points.
Yup. If you poke the anthill to many times, the ants will start to scurry.
I haven’t been in the bits bucket today. The shorts/puts crowd must be partying over there.
This one is out. Expecting a bit of a gap down tomorrow, wanting to buy that.
The best thing about today was:
1) It was totally housing related. No denying that. The market is finally starting to get it. Starting to.
2) There was no computer glitches to blame anything on. It was just an orderly progression lower and lower. There were a couple attempted rallies, but they failed and the market went lower yet. Tomorrow will be interesting, as will Asia overnight.
Im curious what Jim Cramer blames it all on.
He was unusually subdued. He didn’t yell “boo-yah” and tell anyone what stocks to buy because he “didn’t want people to lose any more money”. He blamed the drop today partly on options-expirations and told people not to buy financials until Friday. I think that he temporarily ran out of bullish things to say.
I watched Jimmy on CNBC the day after the first precipitous slide - just to see what he’d say. In fairness, he did caution folks not to jump back in right away.
(In Cramer-speak that means Recession Dead Ahead)
That’s my idea of romance. Sitting in bed, eating pizza, and watching Jimmy make his predictions and yell Booyaaaaah!
oh wait, that’s comedy, what the heck was I thinking…
Haha. Have a good Thursday Jim.
BS, GS and LB will post profits reports this week. Given the kneejerk reaction to any positive news this market probably regain these loses by Friday.
Feh. 245 points points is a pussy drop. Gimme a thousand points. Of course, 200 points here, 200 points there, pretty soon we’re talking a real crash.
what is feh
Feh=pfft, big deal, yawn, etc.
One thing to keep in mind was that although it did drop 242 points the Dow didn’t break the previous low of around 12050, so the situation is not terrible from a purely technical standpoint in that the previous low has not been violated.
“the situation is not terrible from a purely technical standpoint”
But what it does do is to get more and more investors to look up the meaning of the word “risk”. “Stocks always go up” was beginning to be the new mantra.
“the previous low has not been violated.”
but Goldilocks was…and there’s more where that came from.
“‘They just walked away because there’s nothing invested on their part,’ Menke said.”
No sh*t, imagine that.
BRILLIANT! JUST BRILLIANT!
If the lender doesn’t look to it that the borrower has some skin in the game, the lender shouldn’t be surprised about the outcome. I don’t like people defaulting on their contracts, but better leave the house now than throwing money into it and leave it in a year.
“It’s not news Michigan finds itself in a one-state recession.”
If Michigan thinks its in a recession now, just wait. You know all those sub prime borrowers ? They aren’t going to be able to buy vehicles now. Their credit is wrecked. And you know how everyone qualified for a new vehicle loan ? Well, those people are gone now too because their primary asset (their house) is now a liability !
Auto sales are going to COLLAPSE in the near future.
I seem to recall reading an article saying that, recently, bicycles have outsold cars in the US.
That really sucks for Michigan. It’s a beautiful state and used to be one of the most productive. Great people, too. Never met a Michigander I didn’t like.
You know, that’s a good point. None of the people who actually do the work of making things have any control over how the companies are really run. We have MBA’s and bullthit coolege kids making the decisions that really affect the economy and the country. Jobs are lost, people are displaced, families are ruined through no fault of the people involved. They ar laid off because the company can’t sell product. Who makes the decisions about what product to produce? Who decides on the marketing strategy? Who gets the golden parachute? There are a lot of people in this country who believed that is they did a good job and were productive they would be rewarded. But the truth is that they will get the shaft if there are short term profits for the company. How short sighted is this? If there are no people to sell products to who will buy? The undervalued contribution of this country, in a national sense, is that we, as a nation, provide a basis for business. The infrastructure, the energy, the basis in law, the fairness of this country is all part of the system that a business uses when it exists in the United States. To move company headquarters offshore because of tax benefits and immediate profits ignores the fact the the United States, by its very existence, provides a huge measure of stability, transparency, and protection to business and the conduct of business the benefits the business and allows it to operate profitably. When jobs are moved overseas, who suffers? The people who design and make the product. Who can afford to buy it? When real wages decrease real purchasing power decreases. To move overseas may produce short term gains, but may doom the very basis of profitability. Can you make the part in China for $2.00? Did it cost $3.00 to make it in the US? Is your extra pofit $1.00? Sure, on paper it is. Byut in reality, the existence of the American system, with its law, its infrastructure, its benefits for citizens with schooling, housing, and the general weel being of the population are worth more than that ephemeral $1.00 extra profit. I think it’s time to wake up to the fact that corporations are not in business to promote the general welfare of the country, but are rather in existence to promote their own short term profit. And this short term profit may be counter to the best interests of the country and its citizens. Haliburton is moving its headquarters to the middle east. What does that tell yo? Do and should they deserve to benefit from the taxes paid by Americans? I think not. A multi-national corporation is by definition beholden to no one. They will always do what is in their own best interests. We all know that corporations are basing the location of their headquarters on tax breaks. When a company like Stanley Tools moves their headquarters overseas because they will get a tax break, you know it is all over. What happened to the concept of civic responsibility? If you benefited, you contributed. But no more. We all used to have a stake in this country, but I think the all has been decreased by our corporate (ex) members. This has been a long, rambling, and sometimes incoherent post, but the bottom line is that unless corporations support the country, they will not have a market. Beware, because Bangledeshis don’t buy many BMW’s.
In general it seems like a light is starting to go on in many people’s heads just how far-reaching the housing downturn is going to be. Specifically all of the sudden there is *tons* of talk about governments at local and state levels having to cut their budgets by large amounts due to reduced tax revenues. This means more less government jobs, salary cuts, etc. This is less money for teachers. This is less money for roadbuilders. Etcetera, Etcetera. It ain’t just housing.
The trigger for all this is this year’s assessments. Mine was 8% less than last year - that’s quite a cut especially for an organization that’s been used to 15+% gains for several years now. (Yes I own - have 70% equity tho at least; well 60% now maybe)
This is getting ugly quick.
“The trigger for all this is this year’s assessments. Mine was 8% less than last year”
Not in some parts of Florida. Some local governments have gone desperately rabid. I nearly fainted when I saw that my old house was valued about $25,000 MORE than last year. In fact it’s worth about $25,000 LESS.
” It ain’t just housing”
You are completely right! This is going to screw up everybody. Hold down and get popcorn.
Speaking of teachers losing money, one of the biggest bag holders at New Century: NEW YORK STATE TEACHERS RETIREMENT SYSTEM had
2,011,750 shares as of the end of 2006. I wonder if any were sold before the meltdown. Poor teachers.
Don’t worry about the teachers. They always do all right.
Of course, real estate always goes up.
I don’t know if I recall corectly but the Oregon Teachers Pension fund used to give an 8% gauranteed return, regardless of the performance of underlying securities. Look out tax payers in New York!!
It’s too late for anything to be done about the Housing fiasco. Trillions of dollars have been misallocated by the credit bubble in Housing that has structurally damaged the US Economy. The Federal Reserve will ultimately be held responsible for this fiasco by providing the cheap capital from its money printing press, and “sleeping on the job” regulation of financial markets.
Well said! What was Alan Greenspan smoking? Due to his age, however, he probably won’t be around when the guillotines fall.
Those trillions lent out 2002-2006 came from the future, really. Future wages to pay back the borrowed principal + interest.
“ . . . Michigan saw a three-month quarter with a drop in home prices . . . ”
Maybe if you go to a two-month or four-month quarter, the numbers will look better.
Reminds me of one Sunday early in our marriage, my wife asks me, “Okay, they are in the second quarter, how many quarters do they play?”
Hah. Seems silly, but there are examples of having 3 quarters as a standard (such as the quarter system in higher education, where the summer is optional).
Where I went, the fall, winter and spring quarters were optional too.
Just like my ex-wife: when visiting Italy, asked me “Where did the Romans come from ?”
They came from Greece, silly.
Are you married to bearbankers ex wife?
or is it the other way around? You said ex wife; he didn’t say “ex”
So, are you still married?
Someone mentioned Cramer in a comment above.
His big rant on the tightening of lending guidelines that it ‘cuts off loans to the working man’ or something like that.
The thing that put the working man out of the market is the high home prices that require 50% or more of his income because of overinflated house prices.
What a doofus.
Leave it to Cramer to get cause and effect absolutely back-assward.
I’d like to see Cramer’s head explode during his show some time. It’s guys like him that glamourize financial intemperance.
What’s amazing is that the man is entirely different on his webcast—i.e. NOT on CNBC.
On his webcast, he sounds like an intelligent and highly cynical hedge fund manager. He talks openly about all the BS games that everybody plays, how they are are semi-illegal, “but that’s OK if you don’t have to go to jail”, i.e. the fines are lower than the profitability.
He is much less of a booyahboy—I think he knows very well that his CNBC gig is for acting, not for commentary.
Now Larry Kudlow on the other hand, it seems like he has really snorted the right wing Booshit
When they had the show “Kudlow and Cramer” they both seemed okay. Once they separated, their egos went out of control. They are both wastes of sperm now.
The Citizen Patriot from Michigan. “It’s not news Michigan finds itself in a one-state recession.
Keep the bar open. There will be LOTS of other states joining you very soon
Well, I for one say it’s time for a beer.
Anyone care to join me?
Meeeeee!
A Leinie’s Creamy Dark for me! Make that 2
Belgian Triple here.
9% ABV
GnomeBrewed of course.
Cheers!
Jack Daniels and Jager bombs. Quit being pusses.
If a rising tide floats all boats, what does a tsunami do? Anybody have any ideas what will happen in Western Colorado? Just sold at the peak and wanna house, but could this be a market that’s somewhat protected because of the city folks coming in? Does any of this make any sense at all to anyone?
I just read an article on Colorado’s housing market. Here is the link:
http://www.denverpost.com/ci_5335555?source=rss
Since this appears to be a nationwide phenomenon, I think it would be foolish to assume your market is exluded. You may want to rent for a while and see how it all shakes out.
Spell-check:
Maria Bartiromo (not Bartirolla or Bartisimpson)
Bob Pisani (not Pizani or Rolletini or Baked Ziti)
Aaron Burnett (Not Arron, Karen or Red Baron)
somewhat OT but does anyone else think Maria B. looks slightly Sofia Loren-ish? Around the eyes mainly.
Yeah, she’s got the whole package going on. Looks, brains… Bitch.
wittbelle:
Ha, ha!! I second that emotion.
Of course. That’s why she’s there, silly. You didn’t think it was her “journalism,” or intellect, did you? Oh, and that billionaire she’s married to - that helped, I think.
Who is she married to ?
And what was the thing about her going on the Jet with that MS (?) guy ? The “money honey” ?
I forget her husband’s name - one of those Ron Perleman types. Short, bald, chubby and very, very rich.
she’s married to bloomberg’s son.
No way…really?
I can’t figure out if it’s just that she’s got super good karma or she made a deal with beelzebub. Maybe it’s the latter and she’s due to have Rosemary’s Baby.
Bartiromo’s Baby. HAhahaha
Do she reside on the UWS?
She’s got the Sophia Loren eyes. But the similarities stop there…
I think she was hopping free airline rides with that Citigroup Executive right before his ass got canned.
Yeah… who else read that WSJ article from a month or two ago. Citigroup’s private client group head bought her off, and the article strongly insinuated at an affair. Not that I had any respect for Maria to begin with — she can show an alarming lack of basic knowledge of financial markets at times — but that removed any doubt she had any integrity.
Actually, she’s beautiful. Or does a bang-up makeup job. . . . I think she looks great.
“I think she looks great.”
How far back were you standing? You must have seen her from New Jersey when she was standing in New York.
Hahaha. No, she is beautiful. I’ve seen her up-close.
It’s Erin Burnett. Best-looking one of the bunch. I’ll take Liz Clayman too, one of the hotter 44-yo women around.
Carl Icahn wants to buy WCI for 995 mil
How could this happen? Lenders stock investors fleeing, Foreclosures all time high last qt 2006. How did this get to where it is today? This whole mess should have stopped in 04, had it’s adjustment, and we may have had the proverbal “soft landing” but not now. There is no way to fix this on the short term. Don’t we have overseer’s that are highly educated and paid running this counrty that did not see this coming or did they really believe that everyone was earning 6 figures? Man I’m pissed, but not too much, as I’m renting.
True story from just two years ago: A (now former) neighbor was bragging about the house that he and his wife had purchased in ‘04. He announced, “We’ve already made money!”
Sounded like an odd thing to say, at least to me. Because neither he nor his wife had made any money in years. They were both retired.
But I kept my mouth shut.
And I continued to keep it shut as I saw her purchasing a lot — right next to the Union Pacific tracks — north of Downtown Tucson. The idea was that she and husband would build a house there. (Nothing like having the sound of freight trains rolling through your living room.)
But, as the carnival barkers like to say, that’s not all.
Last September, this couple put their “already made money” house on the market because they found a neighborhood that they liked better. So they bought a house there. I went by the “already made money” house yesterday, and it’s still sporting a “for sale” sign.
As far as I know, they’re still carrying two mortgages. And I saw him (at a distance) over the weekend. Didn’t look like a happy camper.
Well, the mortgage banker I heard on the radio Sunday morning, (Ken Michaels), advised a woman in Bakersfield to do the very same thing, and if she couldn’t sell the old house, just rent it out! She didn’t sound like she was necessarily sold on the idea, but I bet that’s typical mortgage banker/realtor advice. “Bad time to sell, great time to buy!”
I’m so curious - do you know exactly where the lot is?
It is very noisy within 1/2 mile of the trains, which run throughout the day and night. I’m amazed that *anyone at all* would choose to live in the IceHouse lofts or in Armory Park Del Sol. Some units in the IceHouse lofts are only a few feet away from the tracks!
The lot is west of Main Avenue, and about a half mile north of Downtown. There’s a narrow street between the lot and the tracks, and, yes, I agree with you. It is VERY noisy there. (As far as I know, my now-former neighbor still owns the lot. But I heard that she and her husband changed their minds about building there.)
BTW, I know a lady who USED to have a pottery studio in an old warehouse next to the Union Pacific tracks. Whenever a train went by, it was impossible to have a conversation. She has since moved her studio to a quieter part of Tucson.
I grew up close to train tracks, 200 yards or so. It’s surprising how you get used to it.
Don’t count the winnings until you leave the table.
Burn, baby, burn.
Fuego, to a crisp!
“Alarmed at the growing financial turmoil in a state known for frugality, officials at Wisconsin Realtors Association and Wisconsin Mortgage Bankers Association said they will team up this spring on a consumer awareness campaign about the risks of some loan terms. Their targets: new and existing mortgage customers.”
That is beyond laughable
I think the horse is already out of the barn. Back in 2004 when lending standards were lowered even more and the house bubble kept going -not too many realtors were saying much about it
Why not - they had a gravy train to keep afloat
I’m actively looking to buy a house since my financial situation is a little better.
But, due to this credit crunch it seems it is getting very hard to get a resonable loan. The problem is that, as recent as last week, buying a house without 20% down is getting prohibitly expensive. If you have only 10% down, creditors are asking 7.8% APR.
And houses in central California (i.e., Modesto) are from 500K to 700K.
I’m actively looking to buy a house since my financial situation is a little better.
Are you trolling, or for real? Unless your financial situation is very hearty and robust, don’t even THINK of buying right now, especially in California. And at 7.8% interest? Yikes. Just sit tight and rent. It’s not wasted money. Your landlord, if he bought anytime recently, is the one wasting his money.
Want some further advice? You think you could afford a $600k mortgage with 10% down at 7.8% interest? Then try this: Take that “virtual” mortgage payment, add property tax, and stick it in a bank account every month. Pay your rent out of that, and let whatever is left accrue until it IS the right time to buy. Can’t save that much out of your paycheck? Then how on earth would you afford to keep the house, anyway, not to mention all the added costs for unexpected maintenance? Just rent, just rent!
7.8% may sound like alot, but I think it’s likely that rates for 20% down, high FICO borrowers will be noticeably higher before prices bottom out. My advice is to figure out what the costs on a mortgage for a house that you’d like would be now for a normal, amortizing mortgage. Start a disbursement from your paycheck for the difference between that and your current rent. Have it sent to a different bank than you usually use, so that it’s inconvenient to tap it for expenses. In a few years, when this is likely to bottom out, you’ll HAVE 20% down and you’ll be able to qualify for a loan, albeit at a rate that woud seem high now. But with all the easy money swept from the market, prices are likely to be much lower. It is almost always better to lock in a low price, and refinance later when rates are lower but prices are higher.
Maria Bartiromo is married to real estate investor Jonathan Steinberg, son of Saul Steinberg a leverage buyout billionaire
The bottom line is that the million dollars plus per yr she makes from CNBC and other interests is basically pocket change for Ms Bartiromo - which she says she carefully saves in low risk accounts
sounds like she’s the 21c Hettie Green.
Not a good time to buy ANY houses in any of these bubble markets - it could get very ugly on the downside
It’s panic time now for many sellers now
I’ve seen all of the statistics about the biggest part of the subprime mess being limited to ‘04-06 but I really don’t believe that.
This is simply one on the ground observation but my ex-neighborhood started seeing that kind of frenzied, no standards lending in late ‘01. The neighbor who bought the house next to mine (which I sold in late ‘05) had no green card and got a loan. It was a total nightmare and I would say that the neighborhood moved very fast in that direction, by late ‘02 that was the dominate situation, and, as we all know, the party continued on until recently.
It may be just me, but I’m not buying that the subprime mess is contained to the last two years.
I get the sense that some of the sub prime lenders feel betrayed by their borrowers. I mean, we cut back on the bad stuff 6 months ago but we still go bankrupt? Dude! Unfair!
“It shouldn’t even be called an investment now.”
You mean like small-press B&W comics (Issue #1 of the guaranteed Next TMNT!) in the early Eighties and Magic Cards in the Nineties?