Bits Bucket And Craigslist Finds For March 18, 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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Well, I sat down and wrote my letter to Senator Dodd. I will be sending a copy to my Senators, Mr. Schumer and Mrs. Clinton, Congressman Frank, and several people at CNN, CNBC & Fox News Channel. I doubt that it will make much difference but it is definitely a therapeutic process. Make your voice heard! All of the idiots seem to work overtime to get their pathetic words heard. Have a great Sunday, everybody.
RE: Mortgage bailout plan due to the subprime implosion
Dear Senator Dodd,
With every passing day the memories of my youth become more strained. But I am not so old that all clarity has faded. I can still remember much about growing up in this great nation of ours. Our family was large. Only my father worked. We had little. But we never asked, nor would we have accepted, anything from anybody else. The envelopes that we put in the church collection basket were filled with coins and dollar bills. There was a “mission bank” in our cupboard. Its contents were periodically sent to the poor in Africa and then filled nearly as quickly as it had been emptied. Our clothes were handed down. So was an ethic of hard work and responsibility.
What happened to those days? Today, responsibility is a curse word and hard work is a punch line. It is not necessary to rely on one’s self nowadays. That is not in vogue. The game plan in the 21st century is to do whatever you would like, whenever you would like, and if there are dire consequences wait for some half-baked do-gooder political bailout.
There are reports that you are searching for a way to pull the borrowers and lenders of this disastrous housing mania from the jaws of the monster they worked so hard to create. These buyers were not buying homes to raise families. These lenders were not lending money to add stability to their communities. They all rushed to the mountains, with picks and shovels in their hands, when they heard the first cries of “gold”. Often they turned those picks on each other. While these reckless souls were prospecting for disaster, there were some of us that kept our heads down, worked hard and saved our pennies. Now you wish to steal our pennies and hand them to these “victims”. They are victim only to their own greed.
Did Jefferson, Franklin and Washington understand the situation of the common man any better than the politicians of today? I cannot say for sure. But I would hope that their understanding of the situation would be more substantial than what you have demonstrated. I would hope that their solutions would be for the long-term stability of this great nation and not just a reward for those that have played the system. I would hope that they would exhibit more vision than the current governing body that appears to be so blind. It is sad to see government officials seem so shocked by a disaster whose birth was so easy to foresee. Where were you five years ago? Did you just stand aside and let this madness reign because it was the easy thing to do?
We, the hard working and responsible of this nation, are being killed. And it is the people in power, like you, that are doing the killing. Every time you bail out the greedy, you kill us a little more. Every time you give a handout to reward lying and cheating, you kill us a little more. Every time you rush to give assistance to the lazy and irresponsible, you kill us a little more. The Republicans throw us to the big business wolves. Then you come along and pick off any flesh that remains. For god’s sake, either quit killing us, or just finish the damn job. And when the task is complete, climb to the top of the highest tower and herald our demise, for all the world to hear. Let the entire universe bear witness to what you have done. This is something that has been worked at for years. Your accomplishment should not go unnoticed. Take pride in the destruction of Responsible America. It appears to be the goal of your life’s work.
Sincerely,
NYCityBoy
You put everything in lovely perspective.
I was raised very much the same way and raise my two boys the same way. Though my husband has a hard time acclimating to this lifestyle (raised by the “me” generation ) he admits there is a great deal of pride in living debt free, within our means and give whatever we can to good ole St. Jude.
I will be writing Hillary and Schumer as well.
Thanks for the inspiration.
Danni
My letter will say this:
Senator Dodd,
There are five important steps you can take to make housing affordable again in America:
1) Appraisal process: All appraisals must be ordered thru a third party agency, removing appraisers from the control of lenders, agents, buyers & sellers. There is too much pressure and too much fraud.
2) Audit “Owner Occupied” loans. Speculators are buying multiple houses at at time, blatantly lying abut occupying the homes. This increases risk, drives up prices, and forces true homeowners to compete with investors. Get FNMA and FMAC back to their roots.
3) Use qualifying incomes for purchases based solely on using tax returns. You will raise tax revenue and eliminate the cheaters. If people want to buy a home, they must prove they can carry their own fair share of the public infrastructure which supports housing.
4) Enforce mortgage fraud laws. Fraud is so blatant today, it is laughable. People believe they will not get caught. Ten “auditors” in every city could each identify 20 cases/day, or 1,000/week, 50,000/year. Well placed inquires to Realtors, mortgage brokers, sellers and buyers would put a little fear of enforcement into the air and end 90% of the scams immediately. This type of action and publicity has a huge cost benefit ratio.
5) Provide more balanced laws supporting the home building industry to produce more housing. The bureaucratic nightmare involved in building housing units is out of hand. Increasing supply will do more for affordability than any subsidy or Fed funds policies.
The worst thing you can do, Senator Dodd, is provide a bailout for lenders and/or irresponsible buyers who created the current housing problems. You will perpetuate the problem and you will not be re-elected. The majority of responsible people in the U.S. will find it reprehensible for you to facilitate placing the burden of this mess back on the taxpayer.
By the way, I have voted in every election since I turned 18.
Good letter (and likewise for NYCityBoy).
BTW, my wife and I have also voted in every election since we turned eighteen. I am wondering if there might be some correlation between household financial prudence and the propensity to vote that Senators Dodd and Clinton ought to take into consideration before they get too excited about bailing out speculators and the investment bankers and hedge funds who funneled them the money?
Yeah who in the hell does Senator Dodd think he is wanting to bail out the investment bankers and hedge funds. What he should do is go on a witch hunt for the mortgage broker king pins and start throwing these guys in prison.
He wouldn’t want to discourage his major political campaign contributors, now would he?
I’m no tax man, but I really liked #3.
By the way, in today’s San Diego Union-Trib:
http://www.signonsandiego.com/uniontrib/20070318/news_lz1b18calbrea.html
2007 is going to suck.
-Rent
Dang it!
I KNEW Stucco would get there first (same article posted below at 6:43a).
2007 is still going to suck, though.
-Rent
We Rent, thanks for the posting. The last part of the article got me to thinking, many of the “investors” that were going sub prime will be cut off from traditional financing.
Does anybody on this board have experience with “hard money” lending? I did have a client that did this with a tremendous amount of success. He would loan money out at 15% with 5 points up front. He could care less what your credit was as long as there was at least 20% equity in the property, he would be willing to loan 100% of the purchase price of the house.
I’m thinking there might be an opportunity here. Thoughts?
If you loan 100% of the purchase price, how does the buyer have 20% equity?
By getting a 125% appraisal, of course.
If you loan 100% of the purchase price, how does the buyer have 20% equity?
I’m certain he was going by ARV. He was not financing people flipping pre-construction spec homes. In this part of the country there are many neighborhoods with sales that average 180k for a nice rancher. In some of these neighborhoods, you can buy older homes that need some repairs at a pretty good discount. In short, sweat equity I think is what they call it. I was just curious if anyone had any experience with this type of lending.
Good ideas, Paladin. In #2, you say ” FNMA and FMAC”. You’re right on Fannie Mae, but Freddie Mac is FHLMC.
answer:
New Deal
Geat Society
and lately war w/o gain or plunder
= high taxes
so now mommy has to work
The Democrats have to do SOMETHING, because they know that when voters go to the polls in November 2008 their homes will have lost a ton of money, and the Republicans will be barking about how “everything was right, tight, and out of sight in November 2006…”
That being said, rather than some stupid bailout, why don’t they just pass something like a two year tax holiday on everyone earning less than 200k a year? That way EVERYONE will get some benefit, especially us here because we’ll have more money in the bank, at likely higher CD rates once the FED counters the tax cut with higher rates to check inflation.
This won’t help the FBs much, if at all… And the Dems can say they tried.
The Democrats, being in the political suicide business, are likely to start meddling in the lending business right about the time it looks like the housing bubble will crash to the ground while a Republican is in the White House. This is political stupidity beyond the pale. The Dems can hurry up and share the blame for the fiasco if they get their bailout proposals up and running quickly enough.
P.S. Has anyone heard about the Guiliani, Romney, McCain, Gingrich, Hunter, Hagel or Pataki subprime bailout plans?
No you haven’t. No Republican presidential hopeful is stupid enough (as are Senators Clinton and Dodd) to associate their good names with the ongoing subprime collapse. Only a Democratic politician would fall into this kind of a trap.
Lets make it for the real people - the ones that really pay most of the taxes. Make it for those who make less than 50k. People above that level have accountants and many deductions that allow them to pay little or no tax. Case in point my own taxes. Last year when my taxes were almost complete Turbo Tax said that if I put money in an IRA I may be able to avoid paying the $959 it said I owed. After a few more clicks I had an $1100 dollar refund and all I had to do was put $4000 in an IRA. How many families making less than 50k could come up with $4000 to put in an IRA on April 10? I had not even thought about an IRA before.
WA,
I did the same thing. I was about 500 bucks underwitheld. 1700 bucks into an IRA, and now the govt owes me a few bucks.
Again, not as much money, but the principal still applies. Yes, you can game the system if you have the LIQUID capital to do it. How many people do, especially in the middle class? Not many; that’s for sure!
$2000 off for a $4000 IRA contribution? You are in the 50% tax bracket? Or was that $4000 each for married filing jointly? If not, I’d consider rebooting Turbo Tax
Great letter NYCboy
But i think you all fail to realize how much of this Dumbing down of America, the we want it NOW, and ripping people off has to do with the incessant promoting of Rap and Hip hop music to the masses. Ive done parties in Westchester where the Socca Mom can sing every 50 cent tune with her kid.:
Don’t wanna be your girl I ain’t lookin for no love
So come give me a hug, you a sexy little thug ”
The Livin Large, the all about da Benzjaminz, Christal, bling bling, and the Refusal to read write and speak English, all adds up.
Sure there were Doctors and Upscale Professional people buying into Mc Mansions as a second home, but it seems the vast majority of the scam was to the JSP soccer moms, and hiphop speakin minorities.
This really is “THE MORON GENERATION”
Careful there, honey.
I can sing with the best of them and find the whole culture that is represented in the media as great entertainment but this soccamom ain’t pimpin with all dem fbs.
Amusing observation though!
Hip hop is an enemy of civilization.
I just gotta mention that it’s actually MTV that is an enemy of civilization. There have been plenty of talented hip hop artists with a positive/intelligent message, but they don’t make it on MTV. Check out Fife Dawg, Talib Kweli, Chuck D, Michael Franti, etc. There are LOTS. It’s the guys wearing bling and driving around in Escalades that make onto MTV.
Perhaps the main stream stuff is. There roots of hip hop, and some of the underground stuff is good. Check out Sage Francis “Slow down ghandi” lyrics. But yea, as a whole the main stream stuff couldn’t be targeted to a lower common denominator.
“Hip hop is an enemy of civilization.”
What’s worse, people will call you a racist for stating an obvious truth.
Eliminate the home mortgage deduction.
That is not going to happen just now. The subprime implosion and its ripple effect will put the U.S. housing market into the crapper for a few years, and taking away the mortgage deduction would turn the crash into absolute devastation.
I am not saying that eliminating this REIC subsidy is a bad idea; just that it is currently not politically feasible.
BLASPHEMOUS!!! Hurry, run to your neares realtor, offer sacrifices and repent!
Yeah, I should probably buy some flipper’s POS at 20% above asking price, with an option-ARM, as an act of penance.
Powerfull! Dodd wont read it, but maybe submit it to some of the online newspapers and see if they will publish it.
Such as?
I would try MSNBC.com first. Maybe they will put it somewhere in their real estate section. Also, I am sure Safehaven.com or fso.com would love to take a look at it.
I’ll give it a shot. Thanks.
fso.com looks like a home study site.
sorry,
http://www.financialsense.com/index.html
I like the idea of publishing it…it was a very well written letter NYCBoy.
NYcityboy:
I liked the last paragraph.
Very good letter!
Hey, NYCityBoy! Tell Dodd, Clinton and any other polical animal, the people losing their houses DON’T VOTE. Tell their researcher
department to check it out. These sub prime borrowers were to dumb to know what their finances were to get involved in these bad loans, and they are too busy to care about voting. There is no money for donations and no voting help, so Dodd and Clinton, cut it out. The voters and the money are the people who are not getting foreclosed. Don’t piss them off.
“The Republicans throw us to the big business wolves. Then you come along and pick off any flesh that remains.”
I love that part.
Democrats are carrion birds. That sounds right.
That sums it all up very nicely. I sent a short note to AZ senators McCain, Kyl, my house rep, and Dodd. I requested replies, which, if I get them at all, will no doubt be canned. So far I’ve received no response beyond some mailbot generated campaign puff piece from Dodd’s people.
Here it is, BTW (I sent a separate one to Dodd—an off the top of my head rant that I typed directly into a box on his web site).
Dear_________
I have read that senator Chris Dodd has proposed a bail-out program for homeowners who are facing foreclosure due to escalating mortgage payments. I strenuously oppose such a plan. Most, if not nearly all, of these people knowingly took on debt that they had no possible way of repaying. Their problems are entirely the result of their lack of due diligence in reading and understanding the terms and conditions of their loans. I and many thousands like me who exercise fiscal prudence have been shut out of the housing market because we refuse to overpay for houses that have been driven up to unsustainable price levels by the actions of these people. Bailing them out rewards their irresponsibility, and punishes those of us who live within our means. Those of us who did not participate in the real estate Ponzi scheme of the last several years will be watching the actions of Congress very closely in regard to this matter. I do hope, however, that you along with the other legislators will bring full regulatory pressure to bear on both the mortgage and real estate industries, so that this type of situation can be avoided in the future. For the present, however, the only solution is to let the free market work. The lesson for many people will be a painful one, but it will discourage irresponsible behavior that ultimately damages society as a whole.
Thank you for your attention to this email.
Sincerely yours,
Fantastic letter, NYCboy!!!
You do need to send it to every senator & congressman/woman, and to every newspaper, cable news company, etc.
Thank you!!!
NYCboy, Do you mind if I use your letter to send to my representatives. I will obviously remove your name.
Thanks in advance.
Anybody can send it wherever they would like.
Do you mind if I add expletives?
I had to edit all of mine out but feel free. It was hard not to throw in 50 effenheimers.
That was a great letter NYC. And thankyou for remembering to add the “where were you while this has been happening the past 5 years?”
I might remind the Senator of Mayor Dinkins plan to eliminate homelessness in New York. Just provide a really cheap or free apartment for every homeless person, something the city could afford, by giving the homeless first choice for the subsidzied housing units the city was sacrificing its infrastructure, parks, and schools to pay for.
So the city produced 40,000 subsidized housing units and gave them to 40,000 homeless — and had 40,000 homeless. Those whose rents did not allow them to live well, or who were forced to live with relatives or boyfriends or girlfriends they no longer liked, rushed to the streets — and then to the line for applications.
That is what would happen with any bailout. Limit the money, and it will go to a few lucky insiders. Set the criteria and millions will find a way to meet it. I only hope that if it is means tested, the beneficiary’s income would be full doc, not stated income. And if it is a requirement that the beneficiary be able to afford the house in the long run, that no teaser rate is applied.
OK, ‘fess up. Which one of you bloggers is Alex J. Pollock of the American Enterprise Institute? Because he has two essays over at another website I visit (sorry, I won’t be posting a link, I’m not up for a good flaming today). One is called “Credit Crack-Up” and the other is “Housing Crash”. “Housing Crash” really caught my eye, because much of it is a compilation of many of the same snippets and anecdotes that Ben has reported on this blog, including this little well-known HBB phrase:
“Some housing bubble reports from Wall Street and Washington….”
Looks like Mr. Pollock either lurks or posts on this board and used many of the same excerpts reported here. Which is fine with me. Imitation is the sincerest form of flattery.
I also like two quotes from Mr. Pollock’s “Credit Crack-Up”:
“If private investors want to take credit risk, and borrowers want to take a chance in order to own a house, should they be allowed to, even if it might lead to consequences like the ones mentioned above? I’d say they should.”
“Wall Street analysts and traders are now scrambling to figure out who holds these risky assets. At the same time, as in the past, the specter of political overreaction looms large. Will Congress address this problem with a “Sarbanes-Oxley Act of Mortgage Finance” or some similar punishing of the innocent along with the guilty? That is one road better not taken.”
You tell ‘em, Mr. Pollock.
“Which is fine with me. Imitation is the sincerest form of flattery.”
………… No, it’s called plagerism…. And Ben’s Blog is being ripped off everywhere now that the “bubble” is offically here
After 2 years of hard work, these clowns should not be given the light of day. I call it stealing…
I am happy for anyone in the MSM to “rip off” anything I say here.
“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”
– John Maynard Keynes –
Hey, Stucco! Yeah, when David Leaher steals your material in his next NAR piece, and takes credit for his calling it like it is, you will be more than thrilled to let this jerk off the hook. Screw em!
Dinkins was such an idiot.
I remember him turning the city finances in to a shambles & making racist remarks (defaultng on bonds, “the city isn’t run by a bunch of old jewish men anymore”), attacking the police. The police were investigated so aggresivley for any enforcement action that they basically let almost anything go. People would not go to the cops for assault or robbery because the cops wouldn’t do anything.
What a damn idiot he was.
You always have to be careful about rewarding irresponsible behavior.
Interior design and decor by Bud Weiser:
http://www.ksl.com/?nid=148&sid=268346
A small fortune in aluminum!
In case people forget that this type of situation isn’t new with the 21st century, my parents sold a house near the Idaho/WA state line in 1963. They had to take it back after a year due to non-payment and hire a garbage truck to empty the garage and backyard of bottles. (I guess the garage got full.)
Over the last 2 weeks inventory has been climbing steadily in Rhode Island. I’m noticing prices coming down slightly on the higher end.
They say in the stock market, that the market precedes the economy 6 months out. Since real estate equities like lenders, and home builders have been falling quite rapidly, I think we are about 3 to 6 months out before we start seeing a large deterioation in home prices in the bubble areas.
Some concerns going forward are the dollar, its not to far off from breaking that critical 80 dollar level. The chinese just raised interest rates this weekend which may put alot more pressure on our dollar.
A huge fallacy that I’ve heard over the last few years, is since the dollar is falling, we should buy real estate, which is a store of value. While certainly it seemed this way, it has no basis in fact. Picture this if you will. Foreigners own a great deal of our real estate, either directly through purchasing a property or through treasuries, bonds etc. If the dollar falls 20% and real estate fails to appreciate in value, foreigners have just lost 20% of their investment even if real estate stays at the same price. Now picture if you will for a moment that real estate falls and the dollar falls at the same time. Foreigners could lose 40 to 50% of their money if real estate falls 20% in prices.
The bulls may say, yes but foreigners currency is appreciating which makes our real estate cheaper for them to buy. That is true but if the dollar falls 20% that doesnt mean each countries currency will rise by 20%, the fall in the dollar may be spread out over a vast amount of currencies including gold and silver. A fall of 20% in the US currency may only lead to a 5% rise in say the euro, or a 10% in the YEN.
Lets talk about the yen for a second, if it does rise 10% boy will the boys caught in the carry trade be scrambling.
Some of the land mines ahead do not look good for the US, they seem to becoming bigger as time goes on.
I think it will go a little faster. If NEW closed shop last Friday, say, they’re not lending money on Monday. Unless someone replaces their business right away (doubtful) that house for sale just lost a lot of money over the weekend.
Which of course is the inverse of what was happening 3-4 years ago.
How many people got “RICH” on NEW last week? I had to capitalize my spelling of “rich”. That piece of junk went to the bulletin board and took a jump from $.67 per share to $3.07 per share, at one point. That is a quadrupling in less than 3 days.
Where are you TXChick? Get your ass out of bed. Did you catch the NEW bounce? I’m glad I sold my puts. That is just way too volatile for me. You can go from joy to sorrow in a matter of minutes. After-hour moves can slaughter you.
I shorted NEW at 16.20 and covered at .70 last Wednesday. I was afraid I might have been late to the party, but apparently not…
That’s pretty good.
More folks in the media are starting to sing:
March 17, 2007, 1:35AM
Plenty of home loans but not much sense
By LOREN STEFFY
Copyright 2007 Houston Chronicle
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Three years ago, I put a contract on a new house in the Houston area.
Less than a week before closing, the sale of my home in Dallas fell through. The builder urged me to buy the house here anyway.
I could barely afford either by itself. Owning two was financial fantasy. The builder’s mortgage officer assured me that an interest-only loan would make it not only possible, but easy.
I knew that meant entering the netherworld of high-risk debt. I pondered how my new editors would react should their fledgling business columnist file bankruptcy. I decided to pass.
http://www.chron.com/disp/story.mpl/business/steffy/4639345.html
Something I dont understand.
When prices start falling, what is the best method for buying a home. Should I do it through an auction or approach a bank for the REO list. Since most of these homes were bought through Subprime, traditional banks probably dont have much inventory. Who would own these properties?
cut out the realtor- it’s hard even on REO ,but you can do it
get a net deal w some fix up required
this Christmas eve would be a good day
BTW couldn’t get my mom to sell in RI last fall even though she’s seen this before
This is a great question Bob. I am schooled in all manner of financial transactions, except how to work the system to get a good deal on a REO foreclosure.
I am moving back to San Diego in June, I will be starting to learn how to do this but don’t expect to actually do it until there is a lot more to choose from and there is some desperation out there. Anyone have any insights, or sites, on how to learn how to go about buying foreclosures…thanks…
Look up the REO’s on Countrywide website. There are 100’s in every state. They are listed with local broker’s at fair market value. The only way to steal these, is to make a fairly close to market offer, get a home inspector and document every possible repair and double the fix up cost. As long as the agent and justify, with a paper trail, why he is letting the property go so low, you can get a good deal. Almost all the REO’s from all the bank are listed with agents. You will not stael these without good negotiating skills.
Do not buy unless it turn out to be substanialy cheaper than renting.
Do the math!
Remember, the economy will go down and if you wait things may substantially undershoot IF you have cash to buy.
There are two waves to ARm resets ahead. So, things that are 10% off may seem like good buys but are headed for 35% off.
I’m saying wait till late 09 and for the carnage to settle.
Think of it this way. You are getting leverage returns on waiting it out just like people got leveraged returns on the way up.
A 10,000 downpayment is 1.8% of a 550K home. If it the value drops by 30% then its 2.6% of the home cost. A 50% hair cut (totally possible) you have a 100% return on your down from sitting it at zero percent.
Not to mention if you invest it and get some return the returns are leveraged as well. If inflation goes up you will get higher returns on your cash as well.
Sit. Wait. The seige has begun. You win a seige by sitting a waiting for your enemy to weaken.
Our weapon is hunger.
Cold blooded sit aside and let things fall down.
Bloggers sit outside the guarded development and throw plague rat bodies over the walls… (In comparison to the MSM)
Foreclosures rising in Connecticut, per NY Times. And as Cote predicted, are correlated with divorce.
http://www.nytimes.com/2007/03/18/realestate/18WCZO.html?ref=realestate
What a joke.
I’d take a bullet for my wife; I’d run into a burning home to save her, I’d punch a shark for her. What shallow, horrible people… divorcing because they can’t pay a mortgage.
“Honey, I hate this house. I hate you.”
These types of collateral damage stories will provide me the highest return on my schadenfreude investment.
Speaking of schadenfreude, David Volman looks pretty dang happy.
In the early 90’s I was a small developer, just one or two homes at a time. In the 80’s things were great, but from 1990-97 it was a living hell. I made quite a bit of money, and escaped the downturn with just losing the skin of my teeth.
As a developer many of my friends were in the same biz, and EVERY last one of them went BK, some in spectacular fashion. One guy I know (these were small developers) started out doing one and two homes, and by 1990 had built up to doing a small subdivision with twelve homes, putting in a cul-du-sac, leased Corvettes, fancy home, cute wife…he used to go home and throw up every day. Most got divorced as well, the strain on the marriage is too great.
The divorce rate will skyrocket from here out…the BK rate will go parabolic as well. There are hundreds of thousands of empty homes with billions of mortgages that are collectively eating the souls of these people from the inside out bit by bit every month. There will be people that die from massive heart attacks, people that put bullets in their heads, people that walk out on a spouse and leave their children, and people that cheat on their spouses and find comfort in the bed of other people.
I have seen it all…it is coming again. You do not know stress like I do…it is all consuming. You cannot escape it even in your sleep, your every thought, even in your dreams, is one of pure hell.
““Honey, I hate this house. I hate you.””
Don’t be too hard on him—he might be the guy from the Suzanne commercial….
A lot of women expect a certain living standard.
They can also get rid of their husband and collect “vaginamoney” i.e alimony along with child support. Then they bring in another guy to help maintain their standard of living.
So the money dries up and you suddenly become expendable.
It aint the men pulling that stunt (for the most part)
“It aint the men pulling that stunt (for the most part)”
As you suggest, the men don’t really have the option. The law at this stage of history is basically written to screw divorced men, and let the ex-wife live high on the hog (including the right to live in a supersized, overpriced house on ex-hubby’s dime).
Egads, guys! I think your statements are more a reflection of your choices of women than reality.
GS,
You willing to give up naming rights and “ownership” of the children **SHE** made?
That’s the thing about marriage. It’s a team effort. One provides what the other does not. It’s also why divorce is one of the most destructive forces in our society.
Like others have mentioned, it’s extremely important to marry the right person for the right reasons. There is no topic which should be considered “too unromantic” to discuss.
For anyone who is still single, the best advice I could give is this:
Talk about money!!! Who will make it — when and how — what to do if someone loses a job; how many kids will you have and who will take care of them & for how long? Who will be responsible for birth control before, during and after childbearing years…where/if you are willing to move for jobs or other reasons…
Personally, I think it would be a great idea if every couple was required to create a pre-nuptial agreement. Not the “You can’t have anything if we divoce” kind, but one which details how they would handle money, retirement, children (including childcare/custody & remarriage issues), property, child & parent care, etc. in the event of a divorce.
Marriage can be the greatest of blessings or the most horrible curse. It totally depends on how you approach it (hint: it’s not how “hot” he/she is or how “rich” he/she is that will get you through a lifetime of marriage).
Time to wake up and smell the coffin.
Divorce is no big deal so far as homeownership is concerned. Single women are, in fact, a growing segment of housing demand (and I am sure they all will become entitled to own a $500K McMansion of their own if Senator Clinton wins the election…).
———————————————————————————
Single women playing larger role in housing market
By Jim Wasserman
THE SACRAMENTO BEE
March 18, 2007
Kim Braziel bought her first town house three years ago when she was 26 and a single, working woman in Los Angeles. She recalls the move when she was just four years out of college as a stand for financial independence.
“I just didn’t want to pay anyone else’s mortgage,” Braziel says. “I wanted to invest in my own future.”
Last month, arriving in Sacramento for a new job as a consultant for employment service giant Manpower, she bought her second house – a town house.
Home builders and real estate agents are starting to pay more attention to people like Braziel. At 29, she represents a significant – and growing – segment of the nation’s home-buying market: single women.
http://www.signonsandiego.com/uniontrib/20070318/news_1h18single.html
“I just didn’t want to pay anyone else’s mortgage,” Braziel says. “I wanted to invest in my own future.”
Stupid ________ . She is instead paying the mortgages of her real estate agent, mortgage broker, Goldman Sachs executives, hedge fund parasites. Did I miss anybody?
Another person that is just too smart for their own good. Good luck on your foreclosures.
Yes..
You left out the appraiser, home inspector, closing attorney, moving man, the furniture salesman, window treatment person, hardwood floor guy, the stainless appliance guy, the granite counter guy, the plumber for the Jacuzzi tub, the central AC guy, the lawn sprinkler guy, the pool boy………………..
Last month, arriving in Sacramento for a new job as a consultant for employment service giant Manpower, she bought her second house – a town house.
CONSULTANT???? isn’t that a free lance “job”?
The home repairers for the faulty work.
“I just didn’t want to pay anyone else’s mortgage,” Braziel says. “I wanted to invest in my own future.”
I rent right now because I don’t want to throw my money away trying to rent even more money from the bank.
How many of these divorces have had discussions along the “Oh no. YOU told me Suzanne researched it. You take the house.”
Seriously enough, I knew of one early marriage in 1990’s that went awry based on being wrong side of the market where they held a crappy small 1 bed apartment that was worth less than market. I could see this some of this but not all. Correlation and causation are not the same. Causation is poor money management.
I think BK and divorce often share the same basis: reality starts interfering with fantasy
Absolutely pure greed….. no wonder this house has been sitting for 132 days
Home in Brandon, FL
Wow - Virginia foreclosures have been very low compared to the rest of the nation, but last night they jumped by 200 properties, when they’ve been averaging about 100 properties a month up until now. It should get interesting. I’m trying to record same-house sale price drops and foreclosure trends at my No. VA blog, as time allows.
Arwen, what’s the link to your blog? Sorry if I missed it in an earlier posting.
My wife was in RE in NoVA in 80s and 90s, and we are friends with a couple there. The wife has made a very good income from RE for at least 20 years, but last year (2006) she had just ONE settlement. We’re afraid to ask them how things are going there now. Is inventory still trending up? What’s the trend for single family sales? Prices?
http://novabubblefallout.blogspot.com/
(It’s very new) The links on the sidebar provide some further data. The old Northern VA blogger went away months ago, which leaves just Bubble Meter, but he deals more with D.C. and David Lereah issues.
Actually, things *appear* to be a bit better now in Fairfax County, with less than 4 months of inventory. Prince William is suffering more, with over 9 months. Our landlord’s property is on the market and it’s had a large number of interested buyers right away. (It helps that it’s priced lowest for the neighborhood - it’s priced 100K lower than it would have been in 2004).
Thanks Arwen. It’s in my Favorites list.
WOW, i am tracking them too. What a jump or dump.
“…but last night they jumped by 200 properties,”
This sort of jump occurred in the number of SARs cases reported by Red China a few years back. Turns out the Chinese govt was withholding the bad news on the high number of cases, but then when they could no longer suppress the evidence, there were big jumps in the cumulative reported numbers.
Given that DOC reports cancelled new home orders as “sold” (that is, part of the count of “New home sales”), I am expecting similar spectacular upward revisions to the number of new homes on the market going forward. I can see them in my hood. Yesterday I drove from SR 56 to I-15 along Camino Del Sur. The overbuilding of McMansions over there boggles the mind. I would guess there are 1000+ vacant McMansions in that area, all valued over $1m (which would be $1b worth of vacant inventory). This is, admittedly, a rough guess, but I am pretty sure the number is huge.
So you are saying we could see the real estate Chernobyl at any moment? Remember how the Soviets kept saying, “it’s okay, it’s okay”? Then they came out and said, “this is awful. Help us.” The truth revealed that the Chernobyl meltdown could have wiped out most of the population of Europe.
The REIC will soon have their Chernobyl moment.
Getstucco,
I was on Camino Del Sur late last night coming home from a party in Rancho Santa Fe.(no I don’t live there, I’m a Tierrasantan)
What part of America’s finest city do you reside in?
92127 (Santaluz is in my zip)
Ah, RB. Hey neighbor.
Went to Parade Of Homes yesterday.
Traffic was lighter than normal, but only slightly lighter, maybe about 90% of what I’m used to.
To my consternation and confusion, a lot of the high end stuff we went and saw was SOLD.
The “Carlyle” is a cool building, a new sky-rise condo tower in downtown, it had around 250 condos priced from $480k (small 1BR on lowest floors) to the millions. It was 90% sold. (for real, not just offers, but closings). that said, it is one of the better projects around town. Also, the pricing was decidedly LESS than I thought it would be for that building. I was thinking 1 BRs would start in the 600k range, so I think they’re dropping the prices. (some of those sales could be flippers though who can’t sell right away?)
We saw 2 other multimillion $ properties in Mpls, and they were both SOLD (this is atypical in my experience with Parade Of Homes, that so many were sold).
Saw a tacky Mc-Mcmansion (wasn’t even as elegant as a mcmansion) in a weird neighborhood selling for $900k. surrounded by very low end post-war bungalos, and shares a yard with a house surrounded by chicken-wire. good luck with that.
We then went way out into a horrendously ugly farm ranch in woodbury, asking price 2.5 million for 20 acres (it is in middle of nowhere). That one hadn’t sold.
Thus, I was surprised by the numbers of people out and about there, as well as the number of SOLD properties. Asking prices were all over the place. I think the smart guys are lowering prices and selling, the small timers or the stupid builders are adding 10% to last year, and sitting.
We also drove by so many high rise “condo pits” (the hole in the ground where a new “luxury” tower is supposedly going to be built) that we lost count.
They all had stupid sounding names like “Pinnacle” and “Track 29″ and “the Loop” and “skyscape”
the salespeople there are desperate.
I’ve noticed that even though subprime seems to be going belly up in the news, I’m still getting the same old refinancing phone calls. You can also go to any financial site and you still see the ads for 500,000 mortgages for 1500.00 a month.
Perhaps we are a bit premature to say that subprime is dead.
It’s like a chicken without the head.
It just doesn’t know it’s dead yet.
Remember, a mortgage broker has to broke deals, or s/he is broke! A lender has to lend to someone, or they go belly up too!
thus, they’re going to woo you with “get a mortgage for $1 a year” enticing offers, but when you actually go through the process you’ll find out that you qualify for something totally different.
It’s like a housing development where homes “start in the $100’s!!”. You get there, and they all cost way more.
Or brake jobs “$49.95 per axle”. Nobody gets out for under $300.00
You know the place, “we specialize in all makes, foreign and domestic.”
Got 10% down?
LMAO…Please refer your friends who own Volvo’s, BMW’s, Porsche, Mercedes…some models may require additional charges.
“Perhaps we are a bit premature to say that subprime is dead.”
I know the big Wall Street investment banks are trying to convince everyone they will keep the party going, but the reality is that the subprime lending business model depends on giving people loans to buy homes they cannot afford, and cutting out all those pesky underwriter fees in the process. This approach to lending has suddenly become tremendously unpopular among politicians.
“subprime lending business model depends on giving people loans to buy homes they cannot afford…”
Yes, and as you know GetStucco; It also depended on rising house prices. As long as the equity goes up you can refinace out of the toxic loans at a later time . That’s how these loans were sold to a majority of people. The sub-primes were making money hand over fist.
By virtue of the invetory glut alone, this party is over! And that’s why were seeing so many BK’s (both lenders and borrowers.
PS:
NYCdj:
I responded to your “do you live in St. Louis Park” question in the other thread.
As a laid back person, I was amused!
As the snobby Lake Harriet person I really am, I was insulted! (totally kidding, it made my day hearing your very good, although slightly erroneous outline of me)
Actually, it wasn’t the dj. It was me. Your story about the Russian made me figure St. Louis Park since so many Russian Jewish immigrants came to that area after 1990.
How much does a house on Summit Avenue go for, nowadays? I can’t even imagine.
Minnesota is in for some serious hurt. Prices are getting way ahead of themselves. I hope it doesn’t get too ugly.
Say hi to Billy’s on Grand if you ever go over there. I’ve been kicked out of that place more than once. I used to like Sydney’s “the pizza cafe”.
“Actually, it wasn’t the dj. It was me”
oops! You big city types, I can’t tell you apart!
“Your story about the Russian made me figure St. Louis Park”
Yep, it’s still very Russian and jewish over there. They still call it “St. Jewish Park”. the Russian is from there too, but he’s branching out!
“How much does a house on Summit Avenue go for, nowadays? I can’t even imagine”
$1 to $3 million.
It’s harder and harder to find a place there now though, a lot of those homes are being broken up and “condo’d”. Hooray. (sarcasm). Still a beautiful street though.
I never go to Billy’s on Grand. Too many hooligans getting kicked out!
Seriously, I usually go to La Cucharacha, or Dixies, or Ice Cream on Grand, etc. No bars for me… my bar days are behind me.
“It’s harder and harder to find a place there now though, a lot of those homes are being broken up and “condo’d”. Hooray. (sarcasm). Still a beautiful street though.”
You rotten bastard. You just made me start crying. They are turning those beautiful homes into condos? That is the saddest thing I’ve read in a while.
Dixie’s is great, especially if you are a meat lover. We used to see Norm Coleman in that neighborhood quite a bit. He would pick up dinner for his family from the local restaurants like Dixie’s and Ciatti’s (now Bonfire, I think).
For anybody that doesn’t know, Summit Ave. is in St. Paul and has the largest stretch of old Victorian homes in the country. Walking up and down that street is amazing. The fact that it is going condo is just awful. I need a Kleenex.
Here is one reason why SD-area residents thinking about becoming homeowners should not buy yet:
——————————————————————————–
DEAN CALBREATH
No denying mortgage crisis likely will worsen
SD Union Tribune Business Section
March 18, 2007
Most people, it is commonly said, go through five stages when dealing with doom: denial, anger, bargaining, depression and acceptance.
As far as San Diego bankruptcy attorney Mark Miller is concerned, many homeowners are only in the “denial” stage regarding the subprime lending crisis, although they may soon slip into “anger.”
Miller deals with the crisis every day. In the past eight months, he has watched as clients lost about 150 homes through foreclosure.
“We’re seeing a ton of people come in with their shoulders sagging, wondering what they should do,” Miller says. “The numbers are going up month by month.”
Although the worst problems right now are concentrated among subprime borrowers – people with impaired or low credit ratings – it appears increasingly likely that the problems will spill over to the rest of the housing market.
“The whole mortgage market has cancer,” says Peter Schiff, head of Euro Pacific Capital in Newport Beach. “It’s just that the subprime market is showing the first lesions.”
http://www.signonsandiego.com/uniontrib/20070318/news_lz1b18calbrea.html
“The whole mortgage market has cancer,” says Peter Schiff, head of Euro Pacific Capital in Newport Beach. “It’s just that the subprime market is showing the first lesions.”
The big question is whether the cancer has spread to the lymph nodes of the financial system or not.
Symptoms of pancreatic cancer are already manifested (1-year survival rate = 10 - 15 percent).
“It’s just that the subprime market is showing the first lesions.”
No, the subprime market has been proclaimed dead and is currently being embalmed. The Alt-A market has been diagnosed and the tumor is metastasizing to more vital organs. The prime market is still whistling “Dixie” while cells in its colon are wildly morphing into another form.
The oncologist has been called to check out Alt-A. After a thorough checkup he told the attending, “I can’t do anything. You need to contact a priest.” He then called his broker and told him to move all of his money out of the stock market.
“No, the subprime market has been proclaimed dead and is currently being embalmed.”
Actually, I am thinking it is turning out more like the Terry Schiavo situation. And the big policy question, IMO, is whether our top govt economic leaders (e.g. Paulson and Bernanke) are meddling in the free market. Is it fair to NEW shareholders if LEND shares are propped up by coordinated intervention?
http://en.wikipedia.org/wiki/Terri_Schiavo
————————————————————————–
Last Week
Why Worry When You Can Buy?
Sunday, March 18, 2007; Page F02
By the end of last week, financial markets were at one of those fascinating resting points.
For much of the week, Wall Street had been roiled by concerns over the subprime mortgage, particularly after the Mortgage Bankers Association reported a big jump in delinquencies and foreclosures. In the United States, stock prices plunged, led by shares of banks, investment banks, mortgage companies and home builders. Banks began to withdraw credit lines to subprime lenders, while securities tied to subprime mortgages were dumped on the markets. Market analysts began to warn of a spillover to other credit markets, not just for mortgages but for junk bonds and other high-risk securities. Economists trimmed their forecasts for economic growth, while some in Washington began to talk about the need for some sort of relief for homeowners facing foreclosure.
But as often happens, while some see danger, others see opportunity. And by week’s end, some of the biggest names on Wall Street were buyers again, declaring that the sell-off had been overdone.
http://www.washingtonpost.com/wp-dyn/content/article/2007/03/17/AR2007031700080.html
This article is SHOCKING to see on the Union Tribune, the greatest Real Estate Shill newspaper of all time. I almost fell down dead when I saw this in the UT.
I have now 3 friends in what I call “pre-preforeclosure”. One has a house in SD, he cannot afford it (spoken of him before). Well, he stopped making payments on his old SD house and he now lives in San Francisco. So it’s empty. No NOD yet (wonder why?)
I have 2 others who are realizing that they can rent for 1/2 of the cost of their mortgage even after that great “tax deduction”.
One has now stopped paying her mortgage (on advice from the above person in SF) and is waiting to be kicked out. She is saving her Mortgage non-payment in the bank as future rent payments.
the others are a couple raiding their 401k to “get them through until the spring selling season”. That alligator ate well.
“Well, he stopped making payments on his old SD house and he now lives in San Francisco.”
At least he did not leave the country
“One has now stopped paying her mortgage (on advice from the above person in SF) and is waiting to be kicked out. She is saving her Mortgage non-payment in the bank as future rent payments.”
Doesn’t getting ‘kicked out’ have implications for one’s credit rating (a decent credit rating comes in handy when looking for a place to live in)?
“Doesn’t getting ‘kicked out’ have implications for one’s credit rating (a decent credit rating comes in handy when looking for a place to live in)?”
I thought that as well, Stucco. And there is something else to this that people just don’t seem to think through when they so gladly let their credit get destroyed. More and more businesses are running credit checks on employees. Anybody in a responsibile field will need to have good credit. This is another way the FBs will lose.
I love the fact that their arrogance is truly going to destroy them. Eventually it will mean bargain-basement real estate for me and less competition in the job market. Who is an employer going to trust with their data, some FB that has proven they don’t care about anything or “me” who has never been late with a payment and never bounced a check (and I mean “NEVER”). Hard times will be brutally hard for these idiots.
By the time his unravels, a bad credit record will be meaningless. I remember when a BK was talked about in whispers and nobody did it.
I like to listen on occasion to both ends of the talk radio spectrum and there is very little the 2 sides share with one another, except for having the very same advertisments…
Those advertisments?
All about getting out of debt, consolidating debt, bankruptcy, et al…
They’d have you believe that making just “one” payment a month will make the hurt go away~
“Doesn’t getting ‘kicked out’ have implications for one’s credit rating (a decent credit rating comes in handy when looking for a place to live in)?”
that’s why she is going to stop making payments, save those payments (for future deposit for rent).
You have to understand, these people have small condos with PITI/condo assoc. fees that are around $3,000/month. Comparable rent would be about $1,400/month or so.
These people only make between 30-40k/year. so their PITI is MORE than they bring home.
there really is no other option.
They
-cannot pay the PITI payment
-cannot sell to cover the mortgage
-cannot refi
all of these homes are probably worth $100,000 LESS than original purchase price. (putting them down about 20% or so).
These people don’t have $100 in the bank, much less $100k to bring to closing.
so in the end, it is BY FAR the most financially savvy thing to do now that they’ve screwed themselves.
Stop throwing good money into a house you can never buy/afford.
Live in house for free for a good 3-6 months.
Save up that money for your next rental
foreclose and go BK
start over.
FWIW: the woman was a so-called “Alt A” product I think, she wasn’t even subprime. (her credit score was like 800).
this just proves what others have been saying: a high credit score doesn’t help you make payments on a house you can’t afford.
“Doesn’t getting ‘kicked out’ have implications for one’s credit rating (a decent credit rating comes in handy when looking for a place to live in)?”
Pocket the mortgage payments, and get a rental *before* the foreclosure or late payments get put on your credit record. “Why yes, I have a house right now, but I’m thinking of selling it or renting it out. I was just looking to ‘downsize’ for a while”.
Even better (if you are a lie and a cheat perhaps) is to get into a rental now, then rent out your soon to be foreclosed house (month to month), and just pocket the rent, without making the mortgage payments.
“No DOD yet (wonder why?).”
My bet is the DOD processors are swamped.
Here in the SF Bay Area, the SF Chronicle ran no less than 3 articles about the subprime mess in the Business section, all front page. How subprime is expected to spread to AltA, how it will knock out a lot of buyers at a time inventory is increasing due to foreclosures, how this should take 2 years to shake out. First time I’ve seen our local paper drop the “market will rebound this Spring and all will be well” mantra.
Pensacola News Journal has an article about the Top Ten Home Buys of 2006 with pics. My title would be either Top Ten Home Boys in 2006 or Top Ten Suckers in the Pipeline in 2006.
“Got a couple-million bucks and then some?
It’ll take at least that much to buy one of the area’s most expensive homes.”
Uh, actually no. If a person could fog a mirror in 2006 they could buy a million house. Ask Casey. Ask the janitor. Ask the pizza delivery boy. Ask the bread baker. Ask your barber. Hell, you didn’t have to have a job, be a citizen, speak English or pay taxes. Just ask Pedro.
http://www.pensacolanewsjournal.com/apps/pbcs.dll/article?AID=/20070318/NEWS01/703180321/1006
P’Cola, I lived in P’cola from 1967 till 1980. At one time I used Bayou Blvd to go to work. I will never forget the occasional fish kill in Bayou Texar, it smelled worst than the St. Regis Paper Mill.
Pensacola in those years reminds me of Mary Hopkin’s 1968 song “Those were the Days” and indeed they were–I miss them.
Bill Bonner incredible explanation of sub prime loans.
http://www.321gold.com/editorials/bonner/bonner031707.html
Now, for readers who may be as unfamiliar with mortgage backed securities (MBSs) and collateralized debt obligations (CDOs) as we are, we supply the following elucidation of these two life-enhancing inventions: Imagine the entire mortgage market as a giant pig and the financial industry as a rendering plant. After the best lenders have taken the AAA++ hams and ribs, there remain many body parts you might show to your daughter only if you wanted to see her make a face and hear her say ‘eeewwww.’ In the mortgage industry, as in the slaughterhouses, those cuts do not get the ‘prime’ label. In lending, they are known as ’subprime.’
The low-priced stuff is too disgusting for most people to put directly on the table, so the unidentified scraps are typically run through the grinder. Then, they are packaged into old-fashioned, pure pork mortgage-backed sausages. Even at this level, the investors never met the borrowers (and often not even the lenders) and were never privy to the particular lies that coaxed the animal into the abattoir in the first place. Nevertheless, the markets are familiar with these things; they know more or less what is in them… and have some slim idea of what they are worth.
But then the St. Augustines, the Newtons, and the Poincares of our time go to work. The tranches of meat are repackaged according to the latest scientific formulas - mixing the parts together ever so carefully so that they don’t go bad all at once. Then, they are resold as CDOs, either of the regular or synthetic variety. The whole is better than the sum of its parts, they claim.
For mysterious reasons, the rating agencies have agreed. And the buyers, with neither the time nor the competence to double-check the assumptions or carefully inspect the sausages - tend to go along too. And thus it is that the crème de la crème of the financial industry finds itself in the same position as the subprime lenders themselves - taking the liars at their word.
Homer Simpson: Wait a minute, wait a minute, wait a minute. Lisa, honey, are saying you’re never going to eat any animal again? What about bacon?
Lisa Simpson: No.
Homer Simpson: Ham?
Lisa Simpson: No.
Homer Simpson: Pork chops?
Lisa Simpson: Dad! Those all come from the same animal!
Homer Simpson: [Chuckles] Yeah, right Lisa. A wonderful, magical animal.
Just remember, my fellow bloggers, “you don’t win friends with salad”. You win friends with pork, big slabs of it generously doled out to all of your fat-cat buddies.
Randall Forsyth writes in Barrons about subprime.
For those who do not have online subscriptions, I recommend picking up a copy of Monday’s issue. It examines the subprime implosion from a number of perspectives.
Saw Ben Stein on CBS Morning program. He said this will all blow over soon. He said to watch what the smart money guys are doing. Gold Sachs etc. are buying the subprime lenders. They must know something about the future.
I’m thinking if GS buys a subprime they could hold off from writing off all their losses,and pray this is just a short term correction…But if New century files BK, they would have to write off the losses this quarter.
“They must know something about the future.”
They must know something; not sure what the future has to do with it though. I think the fact that the former CEO of GS is now head of the Working Group on Financial Assets may have a lot to do with what they know, however.
GS:
Agreed. Although it won’t go as smoothly for the big guys as we think.
The big boys are likely in a corner right now. It’s a Mexican standoff. If subprime implodes, it will drag them into BK.
However, if they “voluntarily” agree to do the bidding of the Fed/PPT/Working Group, they may be assured survival.
Not too dissimilar from LTCM. That was privately engineered, but I’ve heard from people that the big boys went in kicking and screaming, and Greensprick told them “follow and survive, or disobey me and you’re done”.
It’s like the rich who had gold in when FDR did his infamous gold theft. He told them: Turn in your gold, and lose 35% of your wealth immediately but you’ll come out ok (wink wink), or don’t turn it in, and you’ll lose everything
“Although it won’t go as smoothly for the big guys as we think.”
Inspector — I never once believed that it would go smoothly for the big guys; hubris gives rise to false optimism among those who succumb to its effects.
first post lost to cyberspace:
GS:
although there is no doubt that some form of “intervention” is in the works, this does not mean that it is going to be easy on the Investment Banks.
It could be like LTCM. Greensprick got them all together and said “do what I say, and you’ll lose a lot of money, and survive. cross me and you’re done”. So they did what he said in order to let LTCM unwind, and they all took some losses.
I would gander that a similar process will occur. Paulson will sit them down and say “here’s where we are, you are all going to fail. do what I say, and you’ll all make it out alive. broken but alive”. and they will do it.
They know the hand that feeds them. And they know that even when they need to take a slapping that the hand will come back and pet/feed them again in the future.
I remember Ben still touting stock as the markets was beginning to tank in the spring of 2000 - how this guy can continue to present himself as a financial expert is beyond logic.
Read these comments from Stephen S. Roach | from Beijing
“….Were it not for a serious policy blunder by America’s central bank, I suspect the US economy could have been much more successful in avoiding the perils of a multi-bubble syndrome. Former Fed Chairman Alan Greenspan crossed the line, in my view, by encouraging reckless behavior in the midst of each of the last two asset bubbles. ….
Fearful of a Japan-like outcome, the Federal Reserve was quick to ease aggressively in order to contain the downside. The excess liquidity that was then injected into the system after the bursting of the equity bubble set the markets up for a series of other bubbles – especially residential property, emerging markets, high-yield corporate credit, and mortgages. Meanwhile, the yen carry trade added high-octane fuel to the levered play in risky assets, and the income-based saving shortfall of America’s asset-dependent economy resulted in the mother of all current account deficits. No one in their right mind ever though this mess was sustainable – barring, of course, the fringe “new paradigmers” who always seem to show up at bubble time. It was just a question of when, and under what conditions, it would end. …”
I’ll have the sausage omelet from Homers magical animal.
link, Doh!
http://tinyurl.com/2xyg9c
or
http://www.morganstanley.com/views/gef/index.html
“Sub-prime is today’s dot-com – the pin that pricks a much larger bubble. Seven years ago, the optimists argued that equities as a broad asset class were in reasonably good shape – that any excesses were concentrated in about 350 of the so-called Internet pure-plays that collectively accounted for only about 6% of the total capitalization of the US equity market at year-end 1999. That view turned out to be dead wrong. The dot-com bubble burst, and over the next two and a half years, the much broader S&P 500 index fell by 49% while the asset-dependent US economy slipped into a mild recession, pulling the rest of the world down with it. Fast-forward seven years, and the actors have changed but the plot is strikingly similar. This time, it’s the US housing bubble that has burst, and the immediate repercussions have been concentrated in a relatively small segment of that market – sub-prime mortgage debt, which makes up around 10% of total securitized home debt outstanding. As was the case seven years ago, I suspect that a powerful dynamic has now been set in motion by a small mispriced portion of a major asset class that will have surprisingly broad macro consequences for the US economy as a whole.”
Goldman cashed in last year paying huge bonuses out. Their bonds are junk but the partners got their money beore the blow up. You will see them obsorb very little of this crap paper.
From the LATimes today:
A hard fall for Irvine mortgage lender
When the sub-prime lending business came crashing down, few fell harder than New Century.
The Tubes had something to say about the New Century lifestyle, have a look in this previous thread and search for “Loan Pimps on Coke”.
Meanwhile, the LATimes Business section has two pieces on CDOs, TCW, and the risk acid test:
Test for bonds tied to loans
Getting a handle on CDOs is a complex challenge
and the real estate section of the la times had an article to the effect of “la prices strong in the face of downturn and subprime crisis”, as if it’s all behind us and we can breathe easy.
I was just about to post that link - the Times is having a very schizoid personality these days, they can’t let go of their RE customers, but can’t ignore the news, so they print articles contradicting themselves almost every day now:
L.A. housing market holds its ground
Never mind a sales slump and now sub-prime uncertainty, prices are on the rise.
http://www.latimes.com/classified/realestate/news/la-re-market18mar18,0,685578.story?coll=la-class-realestate-news
How come the kingpins let NEW fall? How is it fair that LEND gets special protection while NEW shareholders are allowed to take a total loss?
Barrons has a follow-up on NEW. Basically an “I told you so”.
I’m not sure that LEND is getting special protection, may they have just staved off the inevitable a bit longer.
There have been recent news stories in the financial press about big NYC investment banks contemplating a move to “snap up” subprime lenders (including LEND) at “fire sale prices.”
In April 2005, Gotschall and his wife, Susan, gave $3 million to Mission Hospital in Mission Viejo to expand the trauma center. Hospital administrators who trumpeted the donation, then Mission’s second-largest, said they would name the trauma center in the Gotschalls’ honor.
Wow, what foresight on Susan’s part…there will be alot of “NEW” “Trauma patients” waiting in line…do they take people on COBRA?
When you endow a trauma center, do you have to write a check like, then, or is it on some kind of a payment plan? (I guess if you have to ask you can’t afford it.) Or perhaps it was in stock
The new statistics are out for Madison, Wisconsin. House prices are down 4.6%, confounding all the believers that home prices could never fall in the state capital!
http://madisonhousingbubble.blogspot.com/
“Lunar Embassy” CEO back in court
BEIJING, Dec 19. (Xinhua) — A Chinese man, who once sought to sell the land on the moon and the World Cup air, obtained a compensation of 6.6 yuan (about 0.84 U.S. dollars) from an insurance company on Monday.
The Chaoyang District Court in Beijing ordered the China United Insurance Property Company Beijing Branch to compensate for the loss of Li Jie, chief executive officer of the Beijing Lunar Village Aeronautics Science and Technology Co. Ltd., as this insurance company’s sales promotion calls cost Li additional cell phone fees.
Li said the insurance company called him repeatedly from April 14 to April 26, trying to sell the automobile insurance to him. Though Li repeatedly declared his car had been sold to others, the company’s salesman continued to call him.
Though the court favored Li’s demand for a compensation of his cell phone fees, it rejected Li’s claim for an apology and a compensation for his mental damage, defining the requests has no legal basis.
Li, 42 and a water resources major from Shijiazhuang, capital of North China’s Hebei Province, hit the headlines several times these years.
He registered his company in September, 2005, offering to sell an acre of the moon for 298 yuan (37 U.S. dollars). His company, previously known as “Moon Embassy in China”, later applied to commercialize World Cup air.
These two sales plans were both rejected by the local administration for industry and commerce. Though Li sued the authority for a revision, the lawsuits all concluded with rejections at the court.
http://lunarembassy.com/
“The extraterrestrial real estemarket”
I think the terrestrial market looks pretty extraterrestrial already..
Well…
I invested rather heavily in the Glengary Glen Ross development, in The Nation of Celestial Space, a few years back~
http://en.wikipedia.org/wiki/Nation_of_Celestial_Space
Havent had a chance to see my holdings yet, though.
I believe they are all located somewhere on Uranus.
ha
When a mobile execution van pulls up in front of this guy’s house, he will no longer be in the mood to pull swindles in China.
Imagine there were no credit cards
It’s easy if you try
no hell, in the way of monthly payments
You’ll pay cash, or be denied
Imagine all the people
Living within their means?
Imagine there’s no global korporate mentality?
It isn’t hard to do
We used to be productive
Now, it’s how much you spend, that makes you, you.
You may say that i’m a dreamer
But i’m not the only one
We’ll see oh so many ex-middle class homeless
Busted credit, no job, looking like 1930’s bums
Imagine less possessions
I wonder if you can
Because of greed, not hunger
We wonder about what will happen, when the sh*t hits the fan
Imagine all the people
Sharing misery?
You may say i’m a dreamer
That the housing bubble has really been fun
And not to worry that helocs constituted 6% of our gdp last year
Stick a fork in it, it’s done.
Don’t you know it’s gonna be all right. All right. All right” ! - David Learah, I think.
Maybe I’m just a jealous guy ?
Forestalling foreclosure
Lender might help when you’re behind on mortgage
By Kathleen Pender
SAN FRANCISCO CHRONICLE
March 18, 2007
Behind on your mortgage?
Talk to your lender, or more commonly, the company servicing your loan.
Mortgage companies always have been willing to work with tardy borrowers, but one survey shows that roughly half the people who lose their homes through foreclosure never talked to their lender.
As delinquencies rise, many mortgage companies are reaching out and urging stressed borrowers to contact their lenders before they reach the point of no return.
Many will cut borrowers more slack than they would the last time the housing industry suffered a downturn – in the early to mid-1990s.
http://www.signonsandiego.com/uniontrib/20070318/news_lz1b18pender.html
Don’t worry subprime is a good thing according to this article
Is the Philly Inquirer really owned by Toll brothers …I guess it is.
http://www.philly.com/inquirer/business/20070318_On_Personal_Finance___On_other_side_of_the_coin__millions_have_joined_ranks_of_homeowners.html
\
Not to worry, sheeple; HP has assured us the subprime problem has been “contained.”
———————————————————————————-
Mortgage Woes Cloud
The Stock Outlook
By GREGORY ZUCKERMAN
March 18, 2007
Will stocks be hard hit by the aftereffects of easy lending?
The housing boom of recent years was aided by generous lending to all kinds of borrowers, even those with poor credit histories.
But now many of those borrowers are running into difficulty making their mortgage payments. And that is sparking concerns in the financial markets that their problems could impact the already sputtering housing market and even the overall economy.
Last week, the Dow Jones Industrial Average fell 1.4% and the Nasdaq Composite Index fell 0.6%. They’re both in the red so far this year, with the Dow industrials down 2.8% and the Nasdaq down 1.8%.
A big reason for the recent weakness: Troubles among so-called subprime borrowers, or those with scuffed credit, are raising worries about a potential slowdown in the overall economy. At year end, 4.5% of all subprime mortgages were in the process of being foreclosed — up from just 3.3% a year earlier, according to the Mortgage Bankers Association. Meanwhile, 13.3% of subprime borrowers were behind in their payments, the highest level since 2002. Looking at the entire mortgage market, foreclosures hit a record high.
Subprime Stocks Tumble
There’s been a startling decline in shares of companies that make subprime mortgage loans, such as New Century Financial (NEW) and NovaStar Financial (NFI), in just the past few weeks.
Things could get worse. Many new mortgages in recent years were adjustable, with an initial low interest rate that moves higher over time. The rates on many of these loans have only recently jumped, putting new pressure on the borrowers.
How worried should investors be about the plight of subprime borrowers, assuming they’re not in that category? Weakness in subprime loans could serve to crimp the already shaky housing market as more foreclosed homes hit the market and as a class of potential home buyers is eliminated.
That suggests that investors should steer clear of housing-related stocks for now, and be more wary of a slowdown in the overall economy. Recent relatively weak economic data has served to add to the nervousness.
http://online.wsj.com/public/article/SB117416487226740625.html?mod=sunday_journal_primary_hs
All I can say to that, Stucco, is “Doug Kass kicks a–”. Now that’s what reporters should be reporting.
http://www.thestreet.com/_yahoo/markets/activetraderupdate/10344962.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
“Indeed, Jim (Cramer) takes the subprime issue one step further, noting that the mortgage house of pain will have a salutary market and economic result, as it will hasten the Federal Reserve’s path toward monetary ease. Shockingly (at least to me), many others can’t comprehend the link between mortgage availability and consumer spending, claiming that the correlation between the two variables is unclear.”
Cramer is part of the Wall Street cargo cult that assumes lower Fed funds rates are in the bag once the housing market weakens. I guess they are ignoring higher-than-expected headline inflation numbers, $3+/gallon gas and repeated warnings from the Fed since BB has been chairman that they view keeping inflation under control as a key concern?
Thx for the link to Kass’s piece. He shoots straight from the hip, really nailing down the massive (and under-reported) imbalance and distorting effect housing has created in the U.S. macroeconomy since 2001:
‘It is important to understand housing’s disproportionate role in terms of buoying employment and industrial production from 2000-06 in order to appreciate how violent the reversal’s effect might be on aggregate economic growth. As I wrote back in October 2006:
- The real estate industry has been responsible for 40% of the job growth since 2001.
- The rise in home prices has provided for 70% of the increase in household net worth since 2001.
- The increase in consumer spending and real estate construction spending has contributed to 90% of the growth in GDP since 2001.
Not only did new home construction embark on an era of unprecedented growth, but the broad rise in national home prices gave way to the concept of the “Home as an ATM” — a source of cash, a substitute for savings and an enabler of the consumption binge (which was above and beyond the income means of the average consumer).
During the 1990s, mortgage equity withdrawals averaged between $20 billion to $80 billion per year, or only about 0.50% of GDP. By contrast, average yearly mortgage equity withdrawals climbed to about $230 billion, or 2% of GDP, over the last five years and peaked at nearly 3% of GDP in the second quarter of 2006 — or at an annualized yearly rate of almost $400 billion!’
I printed that article last week and showed it to folks at work who fancy themselves as stock market savants and watch Cramer every day and even they got worried.
Doug Kass on AG:
‘But even as Greenspan was taking interest rates to levels that encouraged the egregious use of mortgage debt and exhorting the opportunities in creative and variable mortgage financing, there were some smart cookies out there who recognized the risks; here are quotes from two of the smartest who warned of the danger in the mortgage market.
“When I took economics in World War II, and we were studying the Great Depression, one of the reasons given were all the interest-only loans that came due. They were an indication of an economy getting into unsound lending. Ever since then it’s been a rule that when you go into interest-only loans, you’re very substantially increasing the risk of default.
— L. William Seidman. Former Chairman of the Federel Deposit Insurance Corporation and Chairman of the Resolution Trust Corporation
Our own Robert Marcin put it even more precisely (and vividly) in his prescient warning back in mid-2005.
If Greenspan had a clue (remember, he didn’t have one in the tech bubble, or maybe he did), he would jawbone the banking industry to tighten or even strangle lending standards for residential real estate. He should not kill the entire economy to slow the real estate markets. Now that bag people can buy condos in Phoenix with no down payments, maybe the Fed should get involved. You can’t expect mortgage bankers to do anything; they get paid to lend money. But like Greenspan’s unwillingness to raise margin rates in 1999, I expect him to do nothing until the market declines. Then, the taxpayers will be on the hook for the stupidities of the real estate speculators. Remember, I expect a sequel to the RTC in the future.
— Robert Marcin, Making Money Before Housing Crumbles.
Greenspan will go untouched and will continue to give speeches at $200,000 a pop.’
Why doesn’t Zuckerman mention the PPT? Must be he’s in their pocket.
Guys, I don’t know if this is online, but the print version of today’s SD Union Trib has a story in the Home Section titled: FHA PICKS UP THE SLACK IN SUBPRIME MORTGAGES
Notes:
- FHA = Federal Housing Administration
- FHA’s bonds are backed by the federal government so there is no shortage of mortgage money
- FHA has seen a doubling of customers refinancing from subprime
- FHA’s max loan amounts are likely to increase; bipartisan legislation to raise the loan ceiling ($417K) likely to pass this year
- FHA is speeding up the process and cutting red tape
- Small downpayments and income verification still required though (but won’t deter our talented fraudsters I’m sure)
This will do little to help the situation in California (aka subprime central), where many of the subprime buyers went no doc (lied about their stated income on the application), and very few financially-strapped subprime FBs will be able to come up with a 3% downpayment (= $15,000 on a $500K house). Not only that, good luck at finding a California starter home priced below $417K that does not come with the risk of gang violence as part of the deal.
Here is the link to the article:
http://www.signonsandiego.com/uniontrib/20070318/news_1h18harney.html
Front page story here in the Sunday Ventura County Star regarding the subprime meltdown.
Link to VC Star story: Subprime loan fallout worries real estate experts
“The situation has many who sell real estate in Ventura County worried. By some estimates, at least 20 percent of first-time buyers in recent years have needed 100 percent financing. Such loans are still available, but qualifying is a lot tougher, and that could reduce sales — and home prices — in a market that has been in a slump since early last year.”
Political solutions for yet another National crisis of “irrational exuberance”:
1. Bill of Rights
2. Mortgage Bill of Rights
3. Consumer Bill of Rights
4. Airline Travel Bill of Rights
5. Tax payer Bill of Rights
6. Medical care Bill of Rights
7. Clean Water Bill of Rights
8. Stock Investor Bill of Rights
9. Credit Card Bill of Rights
10.
11.
12.
13.
My memory is not what is used to be…please fill in the rest for yourselves…
What’s the 800 # for the National Crisis Ombudsman?
I think it’s same as the IRS
Erie, PA:
http://tinyurl.com/29hksc
quote:
For 40 years, Erie lawyer Will Schaaf has been there when the dream of home ownership came to a train wreck of a conclusion. He has bought hundreds of properties at the monthly real estate auctions held by the Erie County Sheriff’s Office.
Schaaf was there again Friday. This time, he bid successfully on five homes — paying back taxes and costs in each case — to reclaim those properties for the banks that financed them.
It’s a growth business.
…
So who’s to blame for all these foreclosures?
Schaaf said the rise in divorce rates has something to do with it, but points most of the blame to runaway use of credit cards.
…
Schaaf said he would prefer not to buy so many properties for the banks he represents.
“When I get the assignment, I always write the people a letter. I tell them I get well paid for doing foreclosures, but I don’t like doing them,” he said.
“I tell them, ‘isn’t there some way you could work something out with (the bank) and make a deal?’”
Check out the pic with the article: the Sheriff is wearing his gun during the auction.
http://bigpicture.typepad.com/comments/2007/03/bracketology_ma.html
The Gold Window
1945-1971 for Nations
1975-2007 for Citizens?
The window for the average joe to buy gold, may just shut down and a scramble may ensue, not unlike the rush for life preservers… as a ship is sinking~
Why will this window close?
I’ve been a goldbug for about 20 years now and gold has frankly, been a rotten investment, vs either the stock market & the real estate market, in that time span. Wall Street hates gold, (because of the very nature of it’s very credibility and accountibility) and they’ve done much to act as if it doesn’t even exist and they’ve been very successful. Just a handful of you has ever seen gold, in bullion form… let alone own any.
The physical holdings of gold that are out there, are in quite strong hands, many of which, like me, have been waiting a long time for it to perform in the way that only gold can do, in times of grave uncertainty.
The time will be upon us soon and once things start to crumble and gold shoots upward, a sure signal that our erstwhile leaders have lost control, you will all want to put your money into something “safe” and guess what?
We’ve been waiting for the ogre that is hyperinflation, anticipating it greatly, to be honest.
When it suddenly jumps in price by leaps and bounds, over a period of a few days and desperation sets in and you want to trade your fiat Dollars, there will be nobody to sell you gold.
Trust me~
I essentually agree with you. But it’s possible that after inflation there will be a deflation and the price of gold will decrease. However, that is not to say the value of gold will decrease. I personally own gold and silver both on paper and physically. Gold has done great the last two years of that 20 your talking about.
One more thing. Don’t forget the gold/silver confiscation of 1933. This is not to say that the GOV came around to everybody’s house taking their gold. The GOV set the price, then told people to turn it in at that price. Then made it illegal to transact after that. There was some exception. And that was pre-1933 legal tender gold and silver coins. This exception was upheld in the courts in the years that followed (not to say it can’t be changed). This is what money looked like at the turn of the last century (in fact it was the money).
I highly recammend a stash of these in your emergancy planning. I didn’t buy investment grade, but junk grade to save money. But the choice is yours.
The Chinese, who probably own quite a bit of the yellow metal, won’t be sellers, either…
58 years earlier, those that had gold, got a ticket out of Mainland China, to Taiwan and freedom. No cultural revolution, no great leap forward, to have to endure.
I worked for a substantial player in the bullion biz and they did an amazing amount of business on Guam, in 1975, only buying gold.
The ticket for your passage out of Saigon? 24k Gold thin Taels, lots of em’. Those that had gold, ended up in Orange County or Louisiana~
Those that didn’t? they got to stay.
Here’s China’s clash with hyperinflation:
China went through the worst inflation 1948-49. In 1947, the highest denomination was 50,000 yuan. By mid-1948, the highest denomination was 180,000,000 yuan. The 1948 currency reform replaced the yuan by the gold yuan at an exchange rate of 1 gold yuan = 3,000,000 yuan. In less than 1 year, the highest denomination was 10,000,000 gold yuan. The highest denomination by a regional bank was 6,000,000,000 yuan issued by Sinkiang Provincial Bank in 1949
Amen. The public will final “see” the results of printed money and then then all hell will happen . To bad most did not study history. O, I forgot. Public schools don’t teach history anymore. Why read old news? It over. It doesn’t effect us now!
They can use their treasure trove of in depth knowledge of britney spears and paris hilton, for something, surely?
Lenders cease to amaze me
OCR
Fremont’s regulatory rebuke highlights some of subprime lending’s excesses.
http://tinyurl.com/yof2fv
Mortgage CEO defends New Century
OCR
The head of Impac Mortgage Holdings Inc. says investment banks have overreacted to the Irvine lender’s delinquency problems.
http://tinyurl.com/yqg337
I believe Impac Mortgage is related to Gary Watts of “15% in the bag” fame.
I’m sure everyone’s read about Ben’s interview with JL…sorry if this was posted already…been out a couple of days
Lansner blog: Insider Q&A chats with 3 housing bloggers
http://tinyurl.com/lzgbg
WOW! A housing bubble blogger single-handedly brought down the Billings, MT real estate market?! Who could have seen that coming??
“Doug Armknecht, Billings, found contradicting information frustrating when he began research to determine whether it would be a good idea for him to move from the ranks of renter to home ownership. Out of that research he developed a video report which he posted on the internet. As it’s made its rounds within the community it has spurred much discussion of its own.
Reporting about anything is not Armknecht’s forte. He is a GIS Technician for the City of Billings. After doing his research, however, there is nothing intrepid about Armknecht’s report. Critical of both media and real estate “experts,” he had no problem concluding “the Billings residential real estate market is the weakest it’s been in a long time.”
Such blatant, negative statements make real estate people blanch.
Not only could such negative comments trigger a downward market, some believe that’s what impacted the Billings market this summer.”
http://journal.bigskybusiness.com/index.php?name=News&file=article&sid=10
Doug had better hire a bodyguard before the realtors put a hit out on him!!
Unfreaking believable…
Don’t we have a poster from Billings? Is that him?
http://bubbletracking.blogspot.com/
New info on subprime borrowers Eddie Oruna and Kerman Rogers who were featured sympathetically in the LA Times as “struggling to pay their mortgage”
They bought mid-2002 with $150 down and then refined multiple times cashing out $140,000 by 2005, followed by more HELOCs in 2006.
How come only the bloggers are getting the real story details right?
I have written several news papers and media outlets calling for no Govt BAilout. I suggest everyone do the same! Write your Senators and Governors as well!
could it be T in U?
Yep, it sure is. He is one powerful force up here…
“Berson of Fannie Mae Sees U.S. Housing `Going Up’ in Six Months”
http://www.bloomberg.com
Would you believe that that someone from Fannie Mae thinks that housing is going to go UP in 6 months. My God, where do they find these people ! What the hell is it going to take to get people to acknowledge the situation we are in !
Housing prices haven’t really gone down yet ! Inventory is ballooning, foreclosures are skyrocketing, sub prime money is gone, ARMs are resetting. What the hell could possibly cause house prices to go up ?
REIC economists like Lereah and Berson will keep periodically predicting a bottom for years ahead, regardless of overwhelming evidence to the contrary. It is part of what they get paid to do.
This is from the Billings Housing Blog, Doug did an excellent job of documenting the propaganda being spewed from the area realtors during the 1980’s bust.
It would be interesting to similarly chart current and future NAR, Fannie Mae, etc. “cheerleading” reports and compare them with reality of the current bust.
http://www.topoimagery.com/billings/2006/11/what-did-realtors-say-during-last-bust.html
http://www.topoimagery.com/billings/images/inflation/inflquotes.jpg
http://www.topoimagery.com/billings/2006/11/what-did-realtors-say-during-last-bust.html
This is an excellent graph showing the local realtor’s cheerleading during the 1980’s bust here, Doug did a fantastic job documenting their propaganda versus reality back then.
It would be great to do something similar to what he’s done on a national scale, just to see how pathetically far off the NAR, Fannie Mae, etc. are from reality.
This looks like a joke, but one never knows.
http://orangecounty.craigslist.org/rfs/296097324.html
This looks like a joke, but one never knows.
http://orangecounty.craigslist.org/rfs/296097324.html
Hillary Clinton supports a Bail Out! Read about it and blog your dissaproval here:
http://www.hillaryclinton.com/blog/view/Default.aspx?id=2555
Can someone explain why a house would sell 3 times for $1000 each time?
http://www.zillow.com/HomeDetails.htm?zprop=26009038
March 16, 2007
So Las Vegas, Arizona, Southern CA will fight for water. What about
all the new houses built last few years in these areas? Why built houses
when we don’t have water for them?
http://www.weather.com/blog/weather/8_12028.html?from=wxcenter_news
Dr. Greg Forbes
SOUTHWEST DROUGHT
Dr. Greg Forbes, Severe Weather Expert
The most recent assessment of drought across the United States (shown below), does not bode well for Southern California and Arizona this spring, summer, and fall. Extreme drought affects a large part of the area. This will strain water supplies and make the area very vulnerable to wildfires.
The figure below shows the drought pattern about a year ago, on February 28, 2006. You can see that drought conditions have worsened in the Southeast, Wyoming, western North Dakota, South Dakota, and Nebraska, northern Minnesota, southern California, and western Arizona. Drought has lessened in the central United States except for south-central Texas.