Bits Bucket And Craigslist Finds For March 25, 2007
Please post off-topic ideas, links and Craigslsit finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Interesting article in the WP where it breaks out sales by zip code. Some areas down 100k. Prices are definitely sticky, but since one spring has already gone by, I wonder how many will continue to hold price through another year?
I don’t know who predicted that it would take years for this to play out but it really is beginning to look that way.
” don’t know who predicted that it would take years for this to play out but it really is beginning to look that way.”
It is always years of flatness. Every time.
Then suddenly it’s plus 40% and off to the races again.
How about a little movie?
http://www.youtube.com/watch?v=KlkOPAa4Mao
thanks!
fantastic stuff.
the orriginal site/link is
http://www.homebust.com/
Did you notice the sign at the end that showed a 20% down payment would be required? I say, “perfect”. That inconvenient little relic would shatter this market into a million pieces.
“And where is one supposed to find this saved money?”
Outstanding post..!!!….What about the comment about the “Ample closet space”…
I have said several times, and still belive, if 20% down payments were required tommorow, the market would just seize. It would be a total, overnight armageddon, and home prices would go into a total free fall.
I think they will come back (20% down) but over many, many years. And perhaps not for the most qualified buyers. But, anyone with tarnished credit will find themselves bringing 10’s or 100’s of thousands of dollars to the closing table. How do you think that is going to play out; when we all know that the savings rate is negative?
“I think they will come back (20% down) but over many, many years.”
Good point. More generally, a return to traditional credit underwriting standards will likely occur very gradually (with government intervention in the credit market mucking up the working of the invisible hand), as a quick reversion would cause a deafening implosion of home prices. Add this to the list of reasons (given below) why DL’s prediction that “happy days will return” by late 2007 will prove wrong.
I think 20% downpayments will be back by the time that the current value of that downpayment has declined by at least 75% in real terms. Can’t afford to give prudent savers a real advantage in this market, that would give people entirely wrong ideas.
YES..they tax Interest and dividends even US saving bonds, and allow outlandish amounts of mortgage interest to be deductable.
wacko but not jacko!
oh well, in Netherlands they even tax ASSUMED interest gains, which for the last 6 years was way higher than anything you can get from the bank. Very clever move from our former socialist secretary of finance (now minister-president wannabee, and soon after that probably CEO for a big Dutch-US bank).
At the same time, Dutch HMD is 50% (not only the granite countertops but also landscaping, swimming pool etc. are for 50% paid by the tax office) while gains from selling your home are completely tax free (even if it’s many millions). If there is anything else that can be done for housing speculators and the rest of the RE mob, I’m sure a Dutch politician will invent it
Nice movie, RJ! I am henceforth looking forward to the National Housing Act of 2008, whose “NHA insured mortgage” lets everyone who wants a house buy one “on a monthly payment plan no greater than rent.”
In the 1930s it was great. You’d be neighbors next door to people who shared your same religion, music tastes, and so on. These days you may find your new next door neighbors are a “family” of 12 people blaring (ahem) ethnic music from stereos at all hours, or neighbors using 4 letter words in front of children. In the 1960s my family always had summer evening gettogethers outdoors with several neighbors in a small Sierra Nevada mountain community. We shared similar values and could easily trust one another. We are a balkan society these days. You have to be very selective of where you buy. The neighbors are more important than the features of the house, IMO.
Sunday aladinsane neighbor story:
We sold our house in RPV in aug 05′ (don’t bet against my timing) and we’d lived there for 5 years, and RPV has perhaps the best temps imaginable, year round. It’s always 72 degrees~
When we moved in, we knocked on every door and met every neighbor, within a 6 house radius of our house, @ the top of a cul de sac.
Our neighbors, really never wanted to know us, except for the neighbors across the street, a charming retired pilot and his wife.
In fact, the little i’d see of my neighbors, was from the chest up, as they were driving. Some would force a wave, if so challenged, many would sort of look the other way, in a desperate attempt to not get too close, sort of.
Once we hung out our jolly roger, (in the guise of a for sale sign) people were a little more interested in us, our realtor told us that “all” the neighbors came to our open house…
Well, one day in Sept, we were hanging out on the driveway and our pilot neighbor came over and we were talking and up from the bottom of the cul de sac, roared a bmw, ladden with mom, dad & a couple kids.
The beemer rolls to a halt in the middle of the street and the mom rolls down the window and exclaims “We are going to miss you guys so much” and some other syrupy gibberish that I can’t remember, and managed to say nothing like nobody has ever said nothing, for like 2 minutes, never getting out of the car, and off they went, to destinations, unknown.
At this point, I turned to our pilot neighbor, who I knew, had the most fantastic memory, imaginable, still @ 80, or so.
I said, “Ed, how long have you been living here?”
“38 years, 4 months and 13 days” rolled out of his mouth
I then asked if he had any idea who the neighbors were, that shared quality time with us?
He shook his head, no.
This, in one of the most desireable areas of el lay.
Spend 30 minutes getting to know your neighbor today.
Getting to know somebody @ the same exact time you need their help, is oh so awkward.
Yes it is different this time!
Celebrate Diversity!
What strikes me was the quality of the journalism, not just the subject matter. Not too much over drama or filler like nowadays.
And, I’m real sorry to complain again, but those were some really beautiful houses they were building in the news clip. A Tudor-ish model home? I’m stunned.
Aladinsane, regarding your anecdote on RPV, you are right. Neighbors in big cities hardly ever want to know each other. For good reason, actually. People are more individualistic these days, in the sense of their lifestyles. A colleague at work is “out of the closet” and his house in Chandler was vandalized. I feel sad for him and understand how it feels to be a victim of a crime. But he and his partner probably have been seen out and around the house. Understandably, traditional families who would not want their children to see two grown men in that lifestyle, would be angry enough that they are stuck living in that neighborhood where my colleague lives. My point is that people these days make it obviously known that they are different. Advertising of differences has increased exponentially. Combining this with the fact that people are in more crowded conditions and you get the strife that ensues. In the global scale, this is what the Islamic fundies do not like about America. We enjoy our civil liberties too much (their opinion, not mine).
I don’t think things will return back to the way they were in the 1950s when people conformed. Maybe in pockets of areas. That is why I really don’t think it makes sense to make a house your biggest investment. If you don’t like your neighbors, you are stuck. If you want to raise your children with the fantasy that most people are in traditional marriages, you have to move to rural America in conservative states. But then you will not have top paying jobs.
I posted before that there is a lot of property crime in RPV, PVE, and so forth because most people commute and leave empty houses. Also because they do not have good relations with neighbors.
This society may become more transient and people may become more detached from the communities in which they live. It’s a matter of time before more professionals discover you can make far more money by being unemcumbured by possessions and traveling from city to city for 12 month jobs by being a contractor or consultant. This is partly why I have few possessions. I cannot depend on any neighbor to watch my things while I live in another city. My apartment in Scottsdale was broken into by a neighbor while I was heading back to Los Angeles to work, for example, 2 years ago. Within 2 years, I will get to the financial goal I set out for back in 2000. It will be 2 or 3 years ahead of schedule. At that point I will decide if I still want my mobile lifestyle. The burglary taught me I cannot display my wealth and keep my mobility at the same time. I wear blue jeans, drive a modest economy car, and wear cheap watches. But many of the people on these boards are agreeing that we could be seeing a severe recession ahead of us and it’s wise for me to do what I’m doing - for now!
Just a few thoughts.
Most of us are busy with jobs, children, grandchildren, and aging parents. It’s hard to spend quality time with family and friends, let alone neighbors. We introduced ourselves to new neighbors, and enjoy cordial conversations with them. But people can impose! The son of an elderly neighbor, who himself lives 30 miles away, asked if we could look in on his mother, who we have not met because she is a shut-in with an live-in aide. When I have to drive 300 miles every month to visit my own parents who don’t want to move, I must resist his request to take care of his mother.
I would suggest to Aladinsane that he find a not-too-upscale neighborhood with down-to-earth people.
Bill, your modest lifestyle will pay off in many ways. Not only will you not fall prey to crime, but you will attract people with your values.
“When we moved in, we knocked on every door and met every neighbor, within a 6 house radius of our house, @ the top of a cul de sac.
Our neighbors, really never wanted to know us,…”
If more than 2 people call you a horse, you might wanna buy a saddle….
The film demonstrates clearly that what will ultimately reinvigorate RE and send prices up once more is the FEMALE NESTING INSTINCT. If it was just us guys deciding, the average square footage of homes would still be 1,500 square feet and houses would be wholly affordable.
It’s like in Jurassic Park when they say “Life will find a way”.
So will pregnant women needing their own homes.
“It is always years of flatness.”
This time is different; due to the wedge which was driven between incomes and home prices by the recent influx of liar loans and suicide loans, prices are much more likely to fall than in other correction phases. Refer to the Japanese real estate market from 1990-2006 if you are unconvinced this is possible.
Well, that’s because Japan has plenty of land. We are out of land in S. FL, which is why we are working off an entirely new economic model that no longer relates home prices to income or rent.
Good thing those Japanese have so much land to build on. They are so lucky over there.
If anyone didn’t pick up on it, the sarcasm is quite thick in those comments.
ROFLMAO…….
Yesterday, someone posted the reason for price run up in Montana is they have run out of land as well. Pretty soon Canada will be out of land so we’ll have no choice but find the lost continent of Atlantis.
San Diego has run out of land as well — NOT!
http://www.santaluz.com/
Possible - just not very likely.
novasold,
At this point, it depends on the motivation of the seller and/if they’re in foreclosure. I’ve been keeping track at my blog of same-property sales in the N. VA region that have been easily pricing 20% lower than prior sales (but that’s usually the foreclosures).
The foreclosures might have the potential to set the market pricing, because if you don’t *have* to sell, the potential seller psychology is probably to hold off for now.
At any rate, we haven’t had any price growth for the last three years. I’ll take it.
The foreclosures will be cleaned up in relative short order as they come on the market. Those buying, will make out. But the idea that they will have an effect on comps is wishful thinking. Once cleaned up, they will be put back on the market at market rates.
And the reason for all of this? There just aren’t that many of them relative the overall market.
Not many *at the moment,* but all it takes is one look at Dimitris’ Countrywide REO blog and the trend of the NODs to see that it won’t be long before foreclosures will soon be a non-trivial proportion.
‘But the idea that they will have an effect on comps is wishful thinking. And the reason for all of this? There just aren’t that many of them relative the overall market.’
Aren’t you the same poster who keeps insisting that prices have never fallen in the US? Hows that working these days?
I believe that foreclosure ratios are at record highs. How about some data to back your assertions? And not that OFHEO junk.
My bet is drentzel is too young to have personally been through one of these cycles…Try LO or CO in 1980….You could not give a house away
Foreclosures are the Draino of the real estate market and will flush out that giant REIC turd which has stopped up the market’s plumbing and prevented lower housing prices.
“Aren’t you the same poster who keeps insisting that prices have never fallen in the US? Hows that working these days?”
Since records have been kept since I believe the 50’s, there has never been a calendar year when nominal prices went down for the year in total on a national basis. It happens in local markets, but not in the nation as a whole.
There is actually a chance it could happen for the first time in 2007, but I doubt it.
2006 was up over 2005:
2004 $195,200
2005 219,000
2006 221,900
The entire spreadsheet can be accessed at:
http://tinyurl.com/yrmn2p
But who cares about ‘nominal’ prices?
That’s like picking the statistics to suit the silliness of the argument.
The fact is that, in real terms, prices have repeatedly dropped, and in the most populous areas (CA, NY, NJ, CT, IL), they have collapsed repeatedly.
I agree that it’s the real prices that do the real falling. I believe it’s the slow erosive effects of inflation that do the real work.
That said, Joe Sixpack ain’t going to panic if his home value falls in real terms. And one reason is he won’t even be aware of it. There is always a hazy period of flatness after nominal prices drop. Buyers come in and think they are stealing the homes but then a couple years later there home hasn’t gone up in nominal value. But then many have had a raise during that period and it just becomes easier to carry. Some buyers do get great deals in the protracted hazy flatness. Some buyers get lousy deals.
Eventually, home prices look affordable again and prices go up. But they tend to go up very fast.
“Eventually, home prices look affordable again and prices go up.”
I see. All you have to do is think homes are affordable and the price goes up. Never mind whether a lender stands ready to hand you the money to buy a place you can’t afford.
Go ahead put them back on the market, but don’t forget this is not about interest rates, subrpime mortgages, or even liar loans. It’s all about AFFORDABILITY!
Drentzel…you are making some BIG assumptions. You are assuming that the rate of foreclosures will remain at a manageable constant, but a look at the rate of foreclosures shows they are increasing in a parabolic manner. If this upward trend continues, and it will based on looking forward at the ARM reset rate schedule, the rate of foreclosures will reach historic highs…you are the one with rose colored “wishful thinking”.
NODs in San Diego (pre - foreclosure notices) were 1,600 last month. That’s almost as many as sales.
So much for “theres not many of them”.
Once cleaned up, they will be put back on the market at market rates.
And by the time they’re cleaned up and re-listed, market rates will have declined a bit…or more.
german commercial real estate 2006 / or how the rolling bubble effects germany
good study on the influence from foreign money and even more important a funny homer simpson clip
http://immobilienblasen.blogspot.com/
Question: What’s the difference between reset and recast?
http://tinyurl.com/ypzurv
“Tanta: Negative Amortization for UberNerds”
Thanks.
Thanks again, Nikki.
I read through most of the link you supplied; now my head hurts. I’m gonna lie down for a while.
Reset or Recast either way your screwed if you cannot make the real payment that the loan actually requires.
http://articles.moneycentral.msn.com/Investing/JubaksJournal/WhyTheDebtBubbleHasntBurstYet.aspx
Thanks, TXChick. That was a good article. It could have been titled “Goldilocks is Recovering Nicely”. That is the gyst of this. The Goldilocks economy is the continuation of the building of risky debt while chasing after ever shrinking pools of investments. As long as this doesn’t implode it is Goldilocks’ time.
Txchick: Very informative article, really points out that the debt bomb is still ticking. Make a killing (when WHAT freezes over)? The debt buyers / pension funds are hoping that an interest rate cut will save them … BUT they are still holding junk that most likely return to the “normal” / historical default rates or worse (think subprime) and it will nuke them IMHO.
“Second, a potential exit door stands enticingly open. If these investors, with their exposure to high yield and long maturity debt, can just hold out until the Federal Reserve cuts interest rates, they’ll make a killing. The prices of risky, high-yield, long maturity debt soar when interest rates decline. The Fed funds futures market put the odds of a June interest rate cut by the Federal Reserve at 48% after the central bank removed any reference to the possibility of an interest rate increase in its March 21 announcement.”
yes, the FED knows this too, and we all know on who’s side they are. Bernanke will do anything to please his Wall Street masters (like the companies that have been snapping up subprime stuff lately). He doesn’t give a damn about the dollar and because the ECB defends the same values as the FED, there is no need to worry about the dollar anyway (certainly not when compared to yen or euro).
Vamos a continuaring,
If let’s say, our rickety, tickety credit system were to tank on us, (Mutually Assured Financial Destruction) because the Chinese, were sick of carrying our water (that would be our debt, 1 1/2 Trillion Dollars and counting) and thought that it was sad, that a once great country had fallen, so low, and they could relate, as they once were hopelessly addicted to opium, leading to their backwardation, as a nation, for a period of 200 years, after much greatness, that was hidden from the west, so we had no idea what great businesmen…
They were, and are now again
Our opium?
Laziness and a sense of false entitlement, combined with hundreds of millions of weapons in the hands of people used to getting something for nothing, when suddenly, there’s nothing.
A cash and carry society. The end of irresponsibility.
We have the feel of a 3rd world country’s debt and the good looks still, of a 1st world country. How much longer can those looks, last?
They needed us, way back when, but they know the game now, and we represent just 5% of the world’s population and they want global supremecy, and let’s be honest, who’s gonna stop em’?
OT but the Chinese were not really addicted to opium in a big way until the British forced them (viz. the Opium wars) to allow its import.
Oh,
And for those of you curious about the transformation China has made, in 35 years?
Buffalo is a shining example…
Imagine prosperous Buffalo of 1925, vs it’s somewhat rustier version, as it sits now.
China did the exact opposite.
Things Change
aladinsane: If let’s say, our rickety, tickety credit system were to tank on us, (Mutually Assured Financial Destruction) because the Chinese, were sick of carrying our water (that would be our debt, 1 1/2 Trillion Dollars and counting) and thought that it was sad, that a once great country had fallen, so low, and they could relate, as they once were hopelessly addicted to opium, leading to their backwardation, as a nation, for a period of 200 years, after much greatness, that was hidden from the west, so we had no idea what great businesmen…
Opium isn’t the cause of China’s decline. The Anglo-Chinese Wars (Opium Wars to the Chinese) were fought in the mid-19th century, when it was legal* around the world, along with most other intoxicating drugs. The Chinese had been smoking locally-produced opium since the days of the Tang dynasty, over a thousand years ago. The Chinese rulers of the time seized upon opium as the cause of China’s weakness because they figured it had to be somebody else’s fault/the result of foreign treachery, since the superiority of Chinese governance/the yellow race was not in doubt (at least in their own minds). The reality is that opium was equally legal around the world, and Westerners took it in the more concentrated (and presumably more addictive) form of laudanum. Arthur Conan Doyle (author of the Sherlock Holmes novel) and a number of other 19th luminaries were consumers of opiates. It is also notable that areas in which opiates were legal in East Asia, but under European rule, did pretty well, drawing large numbers of Chinese immigrants, even while China stagnated. China’s relative decline wasn’t the result of addiction to opium - it was caused by an addiction to solutions that bore no relationship to the problem at hand.
Steelcurtain: OT but the Chinese were not really addicted to opium in a big way until the British forced them (viz. the Opium wars) to allow its import.
Opium addiction had existed in China for a thousand years before the Anglo-Chinese Wars (Opium Wars to the Chinese), along with s*x**, gambling and alcohol addictions. The Chinese government never focused on opium addiction until they started running a trade deficit (i.e., the flow of silver abroad for buying superior foreign opium started approached the flow silver inwards from selling silk, porcelain and tea), which disturbed the the traditionally (and currently) mercantilist Chinese mind. And skilled improvisers that they are, the Chinese started growing foreign breeds of opium domestically, such that imports ended within a few decades. Note that after the Communist victory in 1949, Mao Zedong ended the problem of Chinese opium addiction for a time by shooting addicts. After which tens of millions of Chinese died during the course of the Great Leap Forward and the Cultural Revolution. Once again, a focus on the peripheral at the expense of the essential.
* Drug prohibition in the West was initiated in the early 20th century.
** The Good Earth by Pearl Buck is a remarkably good account of how Chinese families (and dynasties) traditionally lose their fortunes - via the heirs overindulging their s*xual appetites at ruinous financial expense.
Very good point. I think you posted in a previous thread that you have already run for the hills. I prefer to stay in the city where there are police.
I was 20 in 1979 and that was when far more people thought the United States was doomed. We had serious debt back then. It took Volcker to change things around. A lot of pain to go around for all during that time. Rates rose, making it hard on homebuyers. The stock market did not like it until the early 1980s. We need a good 3 or 4 year recession of high federal fund rates for America to become healthy. This would be good for our international relations. It would be good for savers in government securities. It would drive down the price of precious metals. The big dose of high interest rate medicine will be followed by a 20 year stock boom. But politicians are short term thinkers. American public has no patience for much needed medicine. A good example at that is that we want the war on terror to end now, even though we’d be sitting ducks.
I agree, except for maybe the last sentence….I almost lost everthing because of Volker but It was necessary given inflation at the time….I just think interest rates could have been raised more slowly giving business people ample time to plan….
I would like to see a healthy respect - fear even -concerning the consequences of taking on massive debt.
People think nothing of signing their names to documents they do not understand that commits them to extreme financial risk.
I expect Adam Smith’s Invisible Hand will soon bitch$lap some financial sense into these people’s thinking.
Then maybe it won’t; some people just never learn.
Only in America can a joker who makes 40K a year, with trashed credit go out and “buy” a 500K home for no money down, get a Hummer through creative financing (HELOC | cash out), have the great financial machine (Goldman Sachs, Merrill, …) package, slice & dice the dough into MBS / CMO and sell it as a highly rated security to the Chinese! We are overdue for a total meltdown.
We are overdue …..
I agree….
They still need us to buy their junk so we can fill our garages with it. And besides what is more of a problem 5% of the world hurting or 25% of the world hurting because nobody buys their junk anymore? I would want to keep all of those people happy.
http://www.palmbeachpost.com/business/content/business/epaper/2007/03/23/m1a_REALTOR_COMMISSIONS_0325.html
Realtors’ 6% cut continues dip, but big prices lift pay
EXCERPT:
Real estate commissions are steadily falling, and the oft-cited, oft-debated industry standard of 6 percent is becoming a distant memory, according to little-noticed numbers the nation’s largest real estate broker released this month.
Realogy Corp.’s annual report shows that the average “commission side” - the amount paid to either the seller’s or buyer’s agent - dipped below 2.5 percent in 2006.Assuming that agents for both sides equally split commissions, that means the average commission was less than 5 percent.
“That’s good news,” said Stephen Brobeck, head of the Consumer Federation of America, a group that has criticized real estate commissions. “It shows consumers are increasingly negotiating.”
I’ve always thought that RE commissions were ridiculously large. 6% probably made sense when the cost of the average home was less than $100k. But with today’s RE prices, they should be giving some kind of a discount.
Say a realtor sells an $800k home. They’re going to make $48k in commissions? You kiddin’ me?
in Netherlands commissions are in the 1-2% range now (or even lower for internet realtors) and I can assure you they make lots of money with this. Just look at all the SUV’s, Porsches etc. in front of the average realtor office … Most people who started their own office in the last 15 years made enough money to retire, some even after just a few years in business.
When my sister sold her home in 2005, she negotiated the seller’s commission down to 4%. There’s so many realtors out there, they are desperate for your business.
I’ve been gifted with the power of observation, perhaps an adjunct that comes with observing wilderness and wildlife, for oh so long.
In my travels, I couldn’t help but notice vast legions of my fellow citizens overseas, that couldn’t leave their country behind and embrace other cultures, most of them are easily identifiable, as they wear all white tennis shoes and stick out like a sore thumb, (clothing tip for the uninitiated, you’ll thank me some day)
and refuse the maxim: “When in Rome, do as the Romans” with all their might.
I love this country, but it has severely disappointed me, and i’ve seen better ways.
Many of my fellow citizens live in a stereotypical myopia, that our country is still the world leader, (well we are, we have a giant armed forces, that have proven useless against freedom fighters that refuse to wear identifying uniforms)
and that the rest of the world would jump through hoops to get here, and the 3rd world wants in, certainly…
But the rest of the 1st world is increasingly worried that we’ve lost our minds and we must resemble that overbearing uncle, Sam, that always talks way too loud and has put on quite a few pounds and dresses like a slob, and is embarasing to be seen around.
It’s no fun having your house being hoisted on it’s own petard (your crappy loan will suffice, in lieu of an actual bomb)
http://en.wikipedia.org/wiki/Petard
Interesting times, for sure.
My rules of travel clothing:
(1) Wear black.
(2) Unless it’s southeast Asia, where black is too hot. Then wear white.
(3) Unless you’re hiking, never under any circumstances wear shorts or sneakers outside the US.
“In my travels, I couldn’t help but notice vast legions of my fellow citizens overseas, that couldn’t leave their country behind and embrace other cultures, most of them are easily identifiable”
Other than uptight people who have no life, who really gives a sh**? I am sick and tired of bashing Americans over petty nonsense.
I can easily spot the European tourist on a crowded Manhattan sidewalk. Most of us can. Should their families back home be critical of them because of the way they dress here in the US? Are German tourists bad because they are LOUD and boisterous and have a great time when they travel? Are French tourists bad because they lose their fashion sense when it comes to dressing for hot, humid climates like Orlando in August?
The pettiness America-bashing has sunk to is way past old.
I’ve suffered oh so many fools, in my travels and hate me for having a good time and getting to know different cultures, in fine detail, verses the booboise, I too often saw, that were pissed that things aren’t like they are back in the states.
My poster child, would have been a woman from Houston that was screaming at the top of her lungs, in a National Westminster bank, in London, about 20 years ago.
There’s a good reason when people ask where i’m from, I say “California”
Sort of like, after WW2, it was fairly normal for embarased Germans, to suddenly become *poof* Austrians
“I’ve suffered oh so many fools,”….
Of course, your obviously soooo much smarter than the commoners, it would figure that you have sooo many more fools to suffer…
The limbo stick game of playing “Let’s find the lowest common denominator” lifestyle of this country has to stop.
Where is my Adlai?
There’s a good reason when people ask where i’m from, I say “California”
So when it’s time to pay your hotel or restaurant bill when you’re overseas, do you pay them with currency minted in California? Had no idea that CA had its own legal tender.
Whatever the world’s population thinks of Americans, I have yet to see a merchant, restaurateur, hotelier, or black marketeer turn down the USD. They may laugh up their sleeves at us, but they sure do love our greenbacks.
I’m a fairly frequent traveler to Europe, and never have I been ashamed to say I’m American…if anyone ever even gave a rat’s azz to ask. In the past I had considered getting an Italian passport in addition to my American one, only because the lines at customs seemed to go faster for the folks holding European documents.
I’m American. BFD.
Great post Lou. It’s easy to spot the Europeans in New York City. In large part, they look dirty and unhealthy. I am amazed at how sickly Europeans look. Their manners are often poor. They don’t know how to tip. But every talks about “ugly Americans”. There’s a reason the word “Eurotrash” was developed. I won’t bother discussing the manners of most Asians. They would have to have some manners to even have that discussion.
I agree with Lou and, I still have a good pair of white tennis shoes from the 70’s.
Unless someone want’s to buy me a new pair…tough sh*t.
“I still have a good pair of white tennis shoes from the 70’s.
Unless someone want’s to buy me a new pair…tough sh*t.”
If you were coming to visit me and planning on staying for awhile, I’d probably buy you a new pair. But since you’re not, hey, keep on truckin’!
P.S. Don’t flame aladinsane too much, guys. Many of us boomers are saddened to see the institutions of our youth fading and sometimes it makes us a bit critical and curmudgeonly. I myself am tired of US self-bashing, which actually has been ingrained by the MSM and by the wheeny-whining of other countries that are indeed little better off. AA Gill has a great article in Vanity Fair this month on “Brits Behaving Badly” in New York. Hysterical. Since he’s a Brit, he can bash away, of course.
French tourists smell bad.
Dutch tourists are the absolute worst. I would take British soccer hooligans over Dutch tourists. Dutch tourists on holiday in the Alps are the loudest, drunkest, rudest, most obnoxious, worst dressed, cheapest tourists in all of Europe.
Americans do dress pretty horribly but as far as being loud and obnoxious they are not even in the same league as the Dutch. I try to avoid resorts in the Alps that attract a high percentage of Dutch and special “Dutch Weeks”. For my fellow Americans the lower priced resorts in Austria tend to attract Dutch.
as someone from Netherlands I can agree about the bad Dutch dresscode (there’s a joke that if you are at an airport and need to find the gate for the airplane to Amsterdam, just look for the row with the worst dressed people). Regarding ‘hooligans’ I think that is only correct for certain destinations (ski resorts, beach resorts at the Spanish Costa, French Riviera etc.) and yes - mostly the lower priced ones, because they attract a certain kind of people.
On the other side, I can assure you that it’s easy to identify american tourists in my city by their totally ridiculous dress code. They sure stick out like a sore thumb, especially when they are dropped off from a cruiseship with 100 at a time.
Ha! Instead of a Bernanke helicopter drop, you’ve got an American cruiseship drop!
Re: fashion, I’ve no idea why aladinsane is the White Sneaker Nazi all of a sudden. Last time I was in Italy, the teenagers had picked up on “gangsta” attire and the footgear, a lot of it based on sneaker style, was innovative, to say the least.
The white sneaker crowd, continually caused me to lower the grade standard for tourons…
What I like to do is, whenever I meet someone, figure out how they differ from me, then hate them for that.
perfect! LOL
They were probably Dutch not German. I have always found Germans to be fine although I will give you that German children between the ages of 4 and 9 are pretty loud and bad mannered.
“freedom fighters”
What kind of crap is that?
Don’t put your family through hell. Walk this way. Afterall, it’s cheaper to rent. From USAToday:
The lack of bids gives Tim and Angela 75 more days to move out. They hope that will be enough to find a buyer who’ll satisfy their lender, and keep foreclosure from staining their record.
But even if that doesn’t happen, the couple has reached an unexpected truce with failure. After two years of fighting to hold on to a house, there’s soothing relief in losing. Finally, there’s a chance to rest, to crawl out from under the pressure.
They can stop shouting now, the Snearys say. They can give the time they’d spent working to the kids. They’ll find new jobs, a place to rent, and try to save.
http://www.usatoday.com/money/economy/housing/2007-03-24-subprime_N.htm
“Greed is good.”
– Gordon Gekko –
————————————————————————————
Greed caused nonprime mortgages to falter
By Holden Lewis
BANKRATE.COM
March 25, 2007
The nonprime mortgage business is in a mess because during the boom years, hardly anyone had an incentive to say no.
The people who take applications, the companies that lend the money, the appraisers who check property values, the investment banks that sell mortgages to investors and the investors themselves – as long as each participant said yes to risky borrowers, everyone made money.
“It’s like we were originating willy-nilly, with abandon, and the consequences be damned,” says Christopher Cruise, who trains brokers and loan officers.
The siren song of bountiful paychecks drowned out the murmurings of conscience. “Are there individuals and folks in the supply chain here and there that don’t care, or don’t necessarily have the borrower’s best interest at heart?” asks Jim Svinth, chief economist for LendingTree.com. “Yes. But that can be said about just about any industry where people are paid on commission.”
Problems are developing with subprime mortgages, which are home loans for people with flawed credit histories, as well as Alt-A mortgages. Alt-A loans are for borrowers who have so-so or even good credit, but who don’t document their income or assets. A lot of interest-only loans can be lumped into the Alt-A category, too. Together, subprime and Alt-A are known as nonprime.
The mortgage industry’s participants chase after profits while dumping the risks onto someone else. The chain of buck-grabbing and buck-passing starts with mortgage brokers and loan officers – the people who work directly with borrowers.
For brokers and loan officers, there’s no profit in telling an applicant that he has no business buying a house, and no consequences if their customers later fall behind on their house payments.
“For us, as front-line originators, there isn’t a direct correlation between loan performance and compensation, so we’re disconnected from these failures so long as there’s no fraud,” Cruise says.
http://www.signonsandiego.com/uniontrib/20070325/news_1h25mess.html
Fraud was the name of the game however in a high % of these loans .Usually borrowers do not know how much it takes to qualify for any given loan and who gave them the inflormation that happened to end up on the stated income loan ?
For the front line loan agents and realtors to act like they didn’t know the real income of these sub-prime borrowers in most cases is BS to me . For the REIC to act like commissions justified them closing their eyes to the fraud that borrowers were willing to commit is just wrong .The fraud was encouraged by agents saying ,”This is how much you need to qualify”,just like it was said to the appraiser ,”This is how much the appraisal needs to come in at .”
Do we accept excuses from bank robbers that they just could not stop themselves because the money was good ?
What about the underwriting staff that was suppose to check the front line agents/realtors /borrowers for fraud ? Did everybody just say,” Real estate going up will cover all sins “? What about escrow officers and the title company that would know about some pretty weird checks written?
It’s shameful how homes and loans were sold to to sheep from 2003 onward .People were paying prices that the market should of taken 10 to 15 years to get to and that is not a good investment .
“Fraud was the name of the game however in a high % of these loans”
I wonder if this fact has registered in the minds of Democratic presidential candidates Clinton, Dodd and Obama, who are collectively off to the races in their campaign to save Americans’ homes. How will they come up with a subprime bailout scheme which does not inadvertently funnel tax dollars into the hands of Casey Serin and his peers?
————————————————————————–
America’s housing market
Cracks in the façade
Mar 22nd 2007 | NEW YORK AND WASHINGTON. DC
From The Economist print edition
America’s riskiest mortgages are crumbling. How far will the damage spread?
CASEY SERIN knows all about the excesses of America’s housing bubble. In 2006 the 24-year old web designer from Sacramento bought seven houses in five months. He lied about his income on “no document” loans and was not asked for anything so old-fashioned as a deposit. Today Mr Serin has debts of $2.2m. Three of his houses have been repossessed; others could share that fate. His website, Iamfacingforeclosure.com, has become a magnet for those whose mortgages are in trouble.
http://economist.com/finance/displaystory.cfm?story_id=8885853
Funny how the silence is deafening from the Republican bashers / Socialist cheerleaders on the “off topic” of all the leading Demo candidates proposing to bail out the greater fools.
You won’t see bailout plans - impossible. But opposition parties always point out problems with the current administration - especially after they capture a branch of government, like the Democrats have. Plus it’s good for people other than those on this blog to find out what’s going on.
What are you talking about?
I posted links to opensecrets.org, exposing the hypocracy of Dodd and others who list as their top campaign contributors investment banks.
You’re the one that blindly looks the other way when a Republican president squanders 10 billion dollars a week in a war of choice.
It’s already started.
http://www.bloomberg.com/apps/news?pid=20601015&sid=asu8RitVhBIE&refer=munibonds
Hey, Bill,
“Socialist” here… I’ve already written to Dodd and Clinton, and will write Obama early this week. Will continue to write to everyone I can to end the ridiculous talks about the bailout.
The fact that some of us believe in being humane and caring for those less fortunate does NOT mean that we approve of bailing people out of their speculative investments and foolish decisions.
” Democratic presidential candidates” Hey, Gekko, why don’t you stick that question to the Moron in Charge, who still has 22 months to fiddle while Rome burns. Is this clown getting a free pass on the real estate meltdown becuase he is so incompetent? Take your beef to the current Republican administration before bashing the Democratic hopefuls who are able to produce ideas that might solve a problem.
I would criticize Republican presidential candidate bailout plans just as vehemently as I have the Democrats’ plans, but the Republican candidates are not stupid enough to propose them. The Democrats, on the other hand, seem bent on living up to their historical reputation as the Political Suicide Party.
“What about the underwriting staff that was suppose to check the front line agents/realtors /borrowers for fraud ?”
Wizard — The subprime scam was fueled in large part by cutting out underwriting fees.
http://www.nytimes.com/2007/03/23/business/23speed.html?em&ex=1174795200&en=82af063952451822&ei=5087%0A
GS….They cut out underwriting fees but added a higher adjusted up rate to make up for it . You can’t have lending without check and balance .Sure, some cookie cutter loans can be determined by a computer but many loans need the eye of a underwriter . They were willing to pay loan agents a absurb commission amount to put together a package and push toxic loans yet they were not willing to put money into check and balance .
I read an interesting article in April’s Vanity Fair magazine, entitled “City of Fear”, in which a prison gang brought the city of Sao Paolo, Brazil, to its knees, last May. I’d provide a link, but when I went to the website, either I’m missing something, or the article is not one of those available on line.
Anyway, talk about real estate! Wow! They had a photograph of the city, nothing but skyscrapers and condo towers as far as the eye can see. A city of 20 million people.
One of the points that came up in the article was the rampant tax evasion that exists in Brazil and the inability of the police to control the situation. Another point was that Sao Paolo was a “globalized” city and that the incident that happened there was a situation that, if repeated elsewhere, might render the borders of countries obsolete.
It occurred to me that, on the other hand, this might cause a reversion to the “city states” of ancient Greece (Athens, Sparta) and inevitably render the income tax obsolete, in favor of sales taxes as the only practical way of collecting revenue for local governments. In fact, as I read the article, I was surprised that Brazil had not instituted a national sales tax already, given how the tax evasion is so rampant.
instituted a national sales tax already….
Thats where I think we are headed even though I don’t have a clue on how we get there….Tax evasion is rampant in America…
” I don’t have a clue on how we get there….Tax evasion is rampant in America…”
How we get there is how Marco Rubio, Florida’s speaker of the House, is doing it. First it happens on the state level. If he gets his bill through and I think he will, you’ll see other states begin to follow suit. When that happens, the Federal government will go into panic mode, realizing that if they don’t institutue a national sales sales tax, power will aggregate locally. So they’ll try to work out some sort of deal with local governments to submit portions of revenue to the central governments. I always get flamed by Florida posters who are opposed to sales tax replacing property tax. But it is a visionary solution to the increasing intrusion of the Federal govmint and the possibility of one world global corporate government.
Marco Rubio is a true visionary. In fact, he’s brilliant and at first, I didn’t much care for him. But his approach is how states take back their power from the Federal govmint and reverse the negative effects of globalization. Marco truly loves Florida and has its best interests at heart. He loves the US, too, but recognizes the importance of state’s rights and the evils of a strong central government and weakened local governments. He saw what went down in New Orleans during Katrina and he can see the aftermath. Florida is vulnerable to the same thing.
I have been against globalization, but now I can see that in fact, in a funny way, one of the effects will be to have stronger local governments. States, counties and municipalities that work to make themselves more attractive and livable will be the winners.
Interesting Palmetto. Do you have any good links on Rubio and the state sales tax issue that you could share? Thanks.
This has been mapped out extensively and the details are on the Fair Tax site. Properly handled a national sales tax could replace existing taxes, though some property taxes are likely to remain as well. Perhaps if property taxation were converted to a Henry George inspired Land Value system then these innovations together would help bring the government under control? This could also potentially help with tax evation as transaction taxes are inherently easier to track than income taxes.
“the rampant tax evasion that exists in Brazil and the inability of the police to control the situation.’
The city OF Los Angeles, right here in the good OL’ USA, has about 25-40% of it’s economic transactions UNDERGROUND. The STATE OF CAL, CITY OF LA, IRS LOSES BILLIONS AND BILLIONS YEARLY IN TAXE REVENUES THRU THE WORKINGS OF THE LA UNDERGROUND ECONOMY. ON THE OTHER HAND, 10′S OF BILLIONS OF CAL TAXPAYER DOLLARS GETS SOAKED UP BY THE INNER-CITY VIA SECTION 8,LAUSD SPENDING FOR NEW SCHOOL CONSTRUCTION,GANG INTERVENTION, MEDICAL CINICS,SUBSIDIZED ER TREATMENT,ET.
There is a big problem with studies that claim one group was charged more for their mortgages than another. If the costs are not properly adjusted for individual-level credit risk, the conclusions are spurious.
Nondiscrimination in lending requires that applicants with similar credit risk be charged the same price the same without regard to race, not that everyone gets the same interest rate regardless of respective credit risk. One group paying more on average than another could simply indicate that group one faced more credit risk on average than the other group. This in turn is related to individual behavior — if one group lives more beyond its financial means, on average, then group one will also face more credit risk (and higher prices for credit). We are not talking about buying tomatoes at Ralph’s here; the price of credit is endogenous.
There is no way to tell from this article whether individual credit risk was taken into consideration, but judging from the organizations leveling the charges (California Reinvestment Coalition, etc.), I would venture to guess not.
———————————————————————————-
Home loans were more expensive for African-Americans and Latinos
By Robert Schroeder
MARKETWATCH
March 25, 2007
WASHINGTON – African-American and Latino borrowers are paying more than whites for home loans in six areas around the country, a study released recently showed.
The report by the California Reinvestment Coalition, Community Reinvestment Association of North Carolina and four other groups said that home loans are more expensive for minorities in Boston, Charlotte, Chicago, Los Angeles, New York City and Rochester, N.Y.
In all six areas, the report found, African-American borrowers were almost four times more likely to get a higher-cost home loan than white borrowers. In those same six areas, Latino borrowers were also almost four times as likely to get a more expensive loan, the report said.
http://www.signonsandiego.com/uniontrib/20070325/news_1h25minority.html
When holding people accountable is shouted down as “racism” society is in trouble. Accountability for all, special treatment for none. That is how you kill racism but the Politically Correct d-ckheads don’t care. They make points with loudmouth pronouncements, not logic and reason.
I’d say that poorer people tend to have lower credit scores and therefore, are more likely to get subprime mortgages. It’s no stretch of the imagination to say that certain ethnic minorities are generally poorer than the general population. As such, these poor folks, who are also minorities, tend to have lower credit scores, and therefore, more likely to get subprime mortgages. I don’t think there is any racism in the above statement; in fact, the empirical evidence for my claim is the article above.
Yes, but you have to go farther.
If you stop where you did, you will find Blacks paying more than Whites ‘when adjusted for income, credit, education, etc.’ Then you get the racism charge again.
The fact of the matter is that races also will differ in their most basic behaviors; their ability to be responsible, to minimize their own risk taking, to pay their bills. Any study that discounts this possibility will ‘adjust’ for the other factors, and then be left with a difference that ‘must be racism.’
“I’d say that poorer people tend to have lower credit scores and therefore, are more likely to get subprime mortgages.”
I’d say that poorer people as a group tend to have less financial acumen, and hence more easily fall prey to newfangled subprime predatory lenders who are eager to talk them into buying a home they cannot afford at a high rate of interest that is hidden from view behind a 1% teaser rate. Despite the apparent deception, it is not really discriminatory for these households to pay a higher interest rate, as there really is a much higher probability you will get foreclosed if you buy a home you cannot afford.
How about a topic on how to play the stock market to profit from the housing bust.
Is anybody buying Countrywide and Wells Fargo puts? Any publicly traded companies that will profit from foreclosures?
I made some money on buying puts on NEW, LEND, and DSL. I also have positions in WM and WFC and CFC and a good number of the HB’s). Most of the puts I hold are long term (Jan 08), but I have made lots in the last 45 days with some March and Aprils. I am very interested in sharing information and ideas and would appreciate a referral to sites that blog or chat on this topic.
Point of Recognition Coming This Summer
A bit about Lee and the Wall Street Examiner. I know him through Cyberspace for a number of years. WSE is primarily a stock discussion site where Lee is proponed of JM Hurst. Hurst was an electronic engineer who applied himself to studying market cycles. Anybody familiar with telecom signals will see the analogies of carrier and info signal of different applitudes and frequency within the signal. Hurst looked at market price and volume in this context. (I’m an EE and that is my way of best explaining it).
Lee used to be Real Estate agent in Florida but has focused on running web-based independent investor information for number of years. He analyses multiple inputs to the market where one big factor for direction of the market is recycling of fed funds. (Ongoing Repo’s - meaning repurchase of Govt bonds not reposessions, is one thing analysed).
Lee has been talking about RE market for a number of years. He analyses the Mortgage market and split it down by # of new vs existing mortgages but also # fixed vs ARMs. I learned a lot about what was going to happen from Lee’s analysis.
Lee has also commented about the Florida RE market, especially appraisal and mortgage fraud, way before I read it here.
Excellent post, Lee. I agree 100% with your conclusions.
Global credit bubble double speak (compare bold-highlighted text below):
——————————————————————————-
Authors show how to profit from the bubble
By Robert J. Bruss
March 25, 2007
Only serious real estate investors, brokers, sales agents and homeowners will read “Beyond the Bubble” by Michael C. Thomsett and Joshua Kahr. This is a serious thinking-person’s book explaining so-called local real estate bubbles and how individuals can profit from them.
BOOK REVIEW
BEYOND THE BUBBLE
By Michael C. Thomsett and Joshua Kahr (AMACOM Publishing, New York), 2007, $16.95, 216 pages; available in stock or by special order at local bookstores, public libraries and Amazon.com.
The media, such as some newspaper writers, TV and radio commentators and other book authors, have loosely used the term real estate bubble to refer to escalated prices that may or may not be justified by sustainable demand. This new book explains, after emphasizing that all real estate is very local (rather than statewide or national), the major considerations that cause property values to rise rapidly beyond normal market-value appreciation. Glaring examples of recent real estate bubbles becoming hyperinflated and then rapidly declining, such as South Florida, are showcased.
The theme of the book is “greed drives economic bubbles,” applying to real estate speculators who create an artificial demand; the bubble feeds itself until it cannot grow any larger and then it bursts. The recent South Florida speculative pre-construction condominium bubble is a classic example where speculators drove up demand without any intent to occupy or even rent the condos after completion. They hoped to profitably resell before construction was completed. But thousands of units came on the resale market at the same time and buyers disappeared, causing the bubble to burst.
http://www.signonsandiego.com/uniontrib/20070325/news_1h25brubook.html
NAR sees recovery ‘likely’ this year
By Ruth Mantell
MARKETWATCH
March 25, 2007
WASHINGTON – A recovery in the nation’s housing market is “likely” this year, though problems in the subprime lending marketplace and unusual weather have posed challenges in assessing conditions, according to a recent forecast from the National Association of Realtors.
Total sales this year will be “fairly close” to the prior year because “last year started high and ended low,” said David Lereah, NAR’s chief economist, in a statement.
Existing-home sales for 2007 are projected at 6.42 million, improving to 6.66 million in 2008. These figures compare with a total of 6.48 million existing homes sold last year.
“Although existing-home sales will be marginally reduced due to subprime lending restrictions, they should be gradually rising this year and next,” Lereah said.
http://www.signonsandiego.com/uniontrib/20070325/news_1h25nar.html
Another set of lies by NAR. The adjustable loans are disappearing faster than Aunt Barbara’s chocolate cake: http://articles.moneycentral.msn.com/Banking/HomebuyingGuide/GettingAHomeLoanJustGotHarder.aspx
So just when supplies are growing more and more, the number of qualified buyers is dwindling. Prices in areas such as Los Angeles have barely dropped. So a person earning $40,000 per year trying to buy a $500,000 POS will have to first come up with $100,000 down payment and be able to handle 30 years of mortgage payments of perhaps $3500 per month (or more) for the remainder. Fat chance! They will just have to rent instead!
From the MSN article: “No-documentation or low-documentation loans will be considerably harder to find. “We are going to crack down on the use of these low-documentation products,” says Sharon McHale, spokeswoman for Freddie Mac, the congressionally chartered nonprofit corporation that works to create housing affordability.”
Why is Freddie Mac involved with no-doc or low-doc subprime loans? That negligent form of underwriting should never have been permitted in the first place. I’m sure this is where the talk of “systemic risk” comes from.
Is there some motherlode of qualified buyers who can meet the new restrictions on mortgage lending and have not already bought one (or six!) houses that we don’t know about? This guy is a loon.
“This guy is a loon.”
No, TXChick. A loon is the state bird of Minnesota. Lereah is a lying sack of $hit, worthless, rotten, scumbag, jerkoff, a$$hole.
Please don’t insult loons.
some motherlode of qualified buyers ??
NO !! Without the easy money, the pyramid game is over….
There a number of reasons I can offer off the top of my head why the NAR “prediction” is likely to fall on its face, which the MSM has ignored thus far:
1) Regardless of Wall Street investment banker assurances that “subprime lending will always be with us,” it has suddenly become politically unpopular to lend folks amounts of money that are unlikely to ever be repaid (maybe that explains why so many subprime outfits are no longer with us!). In light of this, lending standards to eliminate liar loans and suicide loans have already tightened, and are likely to continue tightening for the foreseeable future. But it was exactly this kind of reckless lending that allowed prices to get driven so far out of line with incomes. It seems logical to conclude that a cessation of reckless lending will result in prices dropping back to affordable levels.
2) Demand is likely to be weak as a result of 1); it is not just about a sudden dearth of high risk borrowers, but also about price deflation, since more creditworthy buyers are smart enough to not try and catch a falling knife as home prices realign with incomes.
3) The abnormally high rate of monetary inflation, driven by hyperstimulative monetary policy back around 2002, spurred a building boom at the high end (e.g. $600K-on-up McMansions in various California cities, including San Diego). Without liar loans and suicide loans, there really is not much support for the offer prices of recently constructed California McMansions. But as McMansion prices fall, the prices of less desirable older used homes will get squashed down.
4) Every other time in housing market history, it has taken four or more years for the market to bottom out after a correction started, in part because of the braking effect of misleading official denial of the correction from the MSM, industry shills and government leaders. Since we are coming off the largest and most protracted period of irrational real estate price exuberance in U.S. history, I expect this correction will be dragged out until 2012 or later.
5) People like David Lereah, who repeatedly call the bottom in a correction without providing any explanation why, tend to lose credibility after their predictions repeatedly turn out wrong. Does anyone have the current count of how many times DL has already called a bottom on the current correction, only to be blindsided by reality on the ground? I have lost track…
monetaryhome price inflation(There may well have been high general inflation as well; hard to trust the CPI these days, but home, gold and fuel prices all provide a hint…)
Should we start an “over/under” on when the NAR throws in the towel on 2007, and starts saying “2008 will be a recovery year” instead of the current line that Lereah has been handing out that a recovery in 2007?
My take: they will wait until July. By that point the spring “buying” season will be over and the results will be so dismal they will have to run up the white flag on 2007.
There’s a lot of Lereah bashing on this board, and it’s justified. But quite frankly, I don’t think Lereah has got a lot of voice on this thing. He’s like Alberto Gonzalez (with the NAR being George Bush). He’s going to say what the boss tells him to say, and right now the NAR wants him to keep repeating the mantra “2007 WILL be a recovery year”.
“He’s going to say what the boss tells him to say,”
And god forgive him for that. He is a junior Joseph Goebbels. That is no cause for any sympathy. He has chosen a paycheck over integrity. That is his choice. But he can suffer the consequences of his choices. One of those is the complete destruction of his name and reputation.
Son, have you been through HBB boot camp? The NAR NEVER runs up the white flag. David Liar and Leslie Applehead will shill to the bitter end and that is exactly why we have to have a “take no prisoner” attitude on this board when we storm the NAR stonghold!
“2007 WILL be a recovery year”.
Never going to happen. Recovery may begin late in the year, but the year will not constitute a recovery.
Also, recovery in my estimate simply means price drops halting. We are then likely to see flat prices through 2008 and possibly 2009 before the next upcycle.
RE is usually slow in going down, followed by flatness. The upticks tend to be more pronounced. At least in NY’s good suburbs.
At a party yesterday. 2 realtors were there. Talk turned to houses. All roses and sunshine at the party talks around here (between both the realtors and the party guests). Really can’t wait for the day when no one wants to talk about real estate. My blood just boils listening to people blather on.
Nobody brags about real estate around San Diego any more these days…
I don’t know California all that well, but one of the realtors said to me - when defending prices after I tried to talk about fundamentals and all, “It’s just a matter of how much you want a home. I’d easily pay $1 million for an 800 sq. ft. home in Coronado because that is my dream lifestyle out there!” I stared at him blankly then excused myself to refill my beer.
Is a million on Coronado a deal?…
I guess that depends on whether your realtor friend meant last year or this year. According to DataQuick numbers, the median SFR resale price on Coronado is down 50% YOY:
http://www.dqnews.com/ZIPSDUT.shtm
I doubt that realtor would easily pay $1 million for anything.
A $million on Coronado is a deal…if you have $5,000,000 in other assets (stocks, t-bills, municipal bonds, CDs, precious metals).
MSM Alert:
I just saw where ABC News is going to do a piece on Monday’s evening news report, called “Home Wreckers”, about the American dream of homeownership and the mortgages that are destroying families.
Charles Gibson will be hosting it….
Time? The 6PM news show?
Thx!
This will be on the 6:30 pm national broadcast (5:30 central and mountain times, I believe)…
Bring_Out..:
hilarious handle!
Sunday Challenge…
I’ve always thought outside the box (there’s much more outside than inside) and would like to see if you can think, along with me?
Some of you are new to the blog and it’s cool to tell us of values decreasing on a given house, in a given area, but…
Tell us something that isn’t common knowledge?
I thirst for info and every once in awhile, a nugget comes out of nowhere.
Do tell.
(aside: are you going to Vegas in September?)
“General notions are generally wrong” Lady Mary Wortley Montagu
and
“I never hesitate to tell a man that I am bullish or bearish. But I do not tell people to buy or sell any particular stock. In a bear market all stocks go down and in a bull market they go up. I don’t mean of course that in a bear market caused by a war, ammunition shares do not go up. I speak in a general sense. But the average man doesn’t wish to be told that it is a bull or a bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesn’t even wish to have to think.” Jesse Livermore
We do an amazing anybody can do it kayak trip on the Colorado River in the spring and sometimes fall…
It has the look and feel of being 500 miles away, like the back of beyond, but is only 20 miles from the strip.
Not uncommon to see a dozen Desert Bighorn Sheep, plying their trade, running up and down sheer canyon walls, on your 11 mile cruise, downriver.
About 25 natural hot springs are on either side of the river~
That’s my kind of Vegas, baby.
OK, I’ll try.
The otherweek, I had lunch with a collegue who’se wife recently completed her MBA. He said she doesn’t want a real job, so has been looking at becoming a Realtor ! I laughed at this, as both of us are bearish on the economy.
He is not so sold on Houston RE market crashing as his house, as in his area, he says it never really appreciated. He thinks Energy still has room to grow Houston. We agreed to differ as I counter argue that greater Houston is not short of land and we are overbuilding in the X-burbs and in the inner loop, with 400k+ townhouses with no land. (Texas RE Tax shock will constrain prices of properties). I believe Houston is in peaking stages of an echo bubble.
My collegue os ok with his Mrs doing RE as a ‘hobby’ job just to keep her quiet and get her out of the house. He will be continue to be the major salary earner and he views it to better than staying at home.
Who knows, with # of agents not being able to make a predictable living, there may be opportunities for people who can live with variable and slower earnings.
Wifey went into RE with the idea of buying foreclosures and flipping, but after studing foreclosure laws in TX, she decided the liabilities of buying foreclosures were huge. The problem is the liens that may surface AFTER you buy the foreclosure. Even though someone else was on the deed, the buyer of the foreclosed propery could still end up having to settle something not specified in the sale documents, like unsettled landscaping bills.
The other tidbit that she has learned from her RE training is that Houston influx is growing but the surprise is that they are older folks. Aparently Houston is becoming the new mecca for retirement !!!! Cheap housing, pleasant winters and excellent medical services from the Texas Medical Center.
So I guess, the snow birds got blown off course. Look out Florida. Houston, we got a problem : the replacment of newly wed market, with an almost dead market.
I predict car insurance rates will go up. Don’t know what is worse. 1/4 of uninsured drivers or the thought of those pensioners doddering around Houston freeways. 610/59 has 6 lanes with unforgiving ‘it is my road’, no indicating, beered up, pick up drivers. Anyobdy who has driven on TX freeways will know what I mean.
I guess I’ll avoid avoid sundays.
Looks like the bailouts have started. Ohio is going to offer fixed interest loans at 6.75% to subprime borrowers in over their heads.
http://tinyurl.com/2s9wq3
Too bad the reporter talks about issuing muni bonds instead of putting it in plain English: the state government will take money from your pay check and use it to pay the mortgages of other people.
I’m sure we will see many creative ways of bailing out the FB’s (and the big players in the mortgage market) in the next months.
in Netherlands we already have free loans for ’starters’ and other speculators without money of their own. The loan is free of interest for the first years, you only pay interest when your income goes up. And the loan only has to paid back if you sell the home with enough profit to cover the loan amount, otherwise the government will eat the loss for you. The only catch is that these loans officially cannot cover more than about 25% of the purchase price (but I’m sure there are ways around that).
Privatize the gains, socialize the losses. Especially the socialists in Netherlands are extremely good at inventing this kind of scams.
Interesting. How much would $100m represent ? I don’t know Ohio market but if median property is $250k, that would only be about 400 borrowers @ 100% financing.
If the bond issue goes ahead, I don’t see how Ohio voters would be on the hook unless it was written into the issuance, that the Ohio taxpayers would buyback in event of bond default.
One of the key flaws with this muni-bond issuance is who would buy it? It is not tax exempt. That is a big attraction for bond buyers. Without that tax exemption, It is just a MBS by another name.
I wonder what return this bond is offering ‘investors’ if they are only going to charge sheeple 6.5% ? Assuming the bond is offered @ 6.3% (assuming .2% admin), non-tax exemption will drop that down to below 6%. Why not just buy treasuries which are safer and more liquid.
Can anyone out there describe possible outcomes from such a state-wide bailout? How is it financed? Would they reappraise the homes to current lower values? That alone would save these owners’ butts, not to mention the lower interest rates. Prices would stabilize, hurting future buyers. And I wonder what Ohio is doing to regulate lenders, if anything.
Other countries may also be looking nervously at the U.S. and it’s about time. An American recession would scarcely be welcome, even if for the moment Asian and European economies seem to be doing nicely on their own account. However, the true cause for concern is that just as America’s housing boom was part of a synchronized global binge on cheap money, its bust may be part of a global story too.
Listen around the world and you can hear echoes of U.S. difficulties, even if prices have not yet started to tumble.
http://tinyurl.com/2vhr8f
bubble tidbits from Europe:
Don’t know if it was mentioned previously on the blog (difficult to keep up with the huge volume of posts) but there were large protest rallies in Spain a few days ago against housing speculation. Many people in Spain (especially the young) are totally priced out and living in extremely small and expensive rental apartment without any chance to buy, while many hundred thousands of homes are sitting empty on the market, making money for their owners. Speculation has ruined the social fabric in Spain (same in Netherlands, but I’m sure authorities here would NEVER allow a protest march against housing speculation).
other tidbit: Dutch newspaper NRC reports that the US ambassador in the Netherlands, Arnall has invested in his company Ameriquest (together with Citigroup), which seems to break the rules that he signed on to when he became ambassador. In 2005 he promised not to engage in any business activities for the next 3-4 years. The US Ministry of Foreign Affairs (he is on their payroll) sees no problem because it is ‘just an investment, and not a corporate decision’.
Id like to fly out there and join the protests. The global economy is being manipulated by Wall Street financial engineers to benefit wealthy crooks, mortgage hooligans, snakes, speculators, hyenas, real estate fraudsters, schemers, etc… If you are a simple person who just wants to buy a modest house and live like a normal human being then you are SOL.
Today’s history lesson.
Bank Holiday.
Show me your homework.
… all bankers on a special holiday to Argentina with the company?
A festive occasion where people who have lent money (whether real or imagined) to banks discover that they can’t get it back when they really want it.
THE REAL ESTATE GENERATION GAP
With baby boomers soon ready to retire and the state’s population growth stagnating, who will be around to buy our houses when we’re finally ready to sell? Experts predict a dangerous glut in real estate inventory is possible - but there is some hope.
By MARY CARMICHAEL | March 25, 2007
Bill McInerney had a million-dollar house, and he hated it. The 1½-acre lot that constantly needed raking and mowing and shoveling, the multiple bedrooms and big kitchen that were too much for one person, the half-hour commute from Dedham to downtown Boston – none of it suited him. He didn’t even like the quiet. “I’m a city boy,” he says. “I want to hear cars and fire trucks and ambulances.” So a little more than a year ago, approaching his 60s and rattling around the halls alone, he started thinking small. McInerney found a one-bedroom apartment in Brookline under the shadow of the Citgo sign, a “lower end” place in the high $300,000s that he nonetheless loved for its location, with “13 restaurants and the streetcar right across the street.” He sold his white elephant in Dedham to a family of seven for a little under a million, “just as the real estate market started to go down the tubes.” He never wants to live in a big house again, he says, and he doesn’t miss his old one either.
http://www.boston.com/news/globe/magazine/articles/2007/03/25/the_real_estate_generation_gap?mode=PF
As a recovering McMansion Owner, I can understand completely. Someday I would like to own a house again but never a house that is too large. Too much work and expense.
If the boomers don’t beat you to it.
Most of the boomers I know already own McMansions and are assuming any home equity they have not cashed out and spent on exotic vacations and SUVs will be left to fund their retirement when they sell in a few years.
Is this a real person or a mannequin?
http://profile.myspace.com/index.cfm?fuseaction=user.viewprofile&friendID=12119572
“I am a REALTOR and a loan officer. I’m specializing in mid-century homes for the cool cats and kittens out there. I’m different from other realtors because I work for the screwed, stewed and tattooed. I still do hair and make-up on the side as it is my passion”
Take off, eh
http://www.amazon.com/Blue-Highways-Journey-into-America/dp/0316353299
Dr. Siegel is the Professor of Finance at the Wharton School of the
University of Pennsylvania and the author of two investment
classics, “Stocks for the Long Run” and “The Future for Investors.” … spoke
today. He provided updated information on the total real returns
(adjusted for inflation) of various asset classes for the period 1802-
2006. According to his research, for each dollar invested, this is
what it would have grown to with dividends reinvested and adjusted
for inflation:
Stocks $754,511
Bonds $1,243
Bills $300
Gold $1.95
Dollar $.06
In the long run…
We are dead.
Did Professor Siegel inadvertently omit the best investment* from his comparison?
*That would be real estate, of course.
that depends; judging from experience in the Netherlands, from 1802 until about 1970 the return would be similar to that of gold (but corrected for carrying costs, the return would be hugely negative). From 1802 until 2006 the return would be somewhere between bills and bonds.
if one adds the wisdom that an investment that has been outperforming for the last years (far above longtime average returns) is usually a bad investment, I think we know where real estate belongs in the list
Careful.
Stocks that are tracked on indexes (indices?) are the stocks that survive. The stocks that don’t survive are dropped from the index and are replaced with stronger stocks. This distorts the index’s true return.
Local observation but it could be most anywhere and will happen with great frequency: my husband’s asked to help move out a couple that are currently in husband’s friend’s newly purchased home. My husband goes to help. Couple-to-move-out have not packed a THING. Wife is crying. Several folks there to help move out that couple. My husband doesn’t get the full story - he thought it was maybe a foreclosure. Mover-outers leave a LOT of stuff behind - their moving van is headed to Colorado (from upstate NY). Age of couple? Young, 30s. Can’t see that marriage lasting much longer.
Regardless of how stupid/greedy/confused these people who are in over their heads are, the effect of these foreclosures on society will be mind-boggling. Too bad the cure is going to be worse. Well, if shopping malls close because of lack of business, that might not be so bad, but where will all the mall-workers get jobs?
“but where will all the mall-workers get jobs?”
Mexico.
The LA Times real estate section has many “non headline” bits about “what do I do when I owe more than my house is worth”, and “why isn’t my house selling”:
‘Short sale’ brought them relief — which IRS is going to tax:
http://tinyurl.com/369cas
Don’t expect a bailout if you overpaid
The lender won’t reduce the note just because values dropped and the house is worth less now.:
http://tinyurl.com/2nfqs6
Can’t sell? Stop trying — better yet, figure out what you’re doing wrong
http://tinyurl.com/2ttbo5
Letter: Math’s right — but is the conclusion?
http://tinyurl.com/33jujq
—–
My favorite is the part is from “Don’t expect a bailout if you overpaid”, where someone says “My mortgage was for the full appraised value. I want to stay in my house, but I don’t want to pay for a mortgage with a balance that is more than the house is worth. Is there any way I can get the lender to reduce my note to the real value of the house? I thought about selling, but the new appraisal is for considerably less than the mortgage balance.”
Heh, heh, heh, “I don’t really want to be paying this much for a house, can I tell the bank ‘just kidding’”?
Parting shot and cautionary tale…
You will all need to disconnect from everything that tore us (electronical doohickeys and fossil fuel inspired follies) apart and reconnect, with Mother Nature, (always bat’s last) as the ride ahead has no historical precedence for us.
I’m thinking it’s going be of the twisty, turny roller coaster variety, but hey, your guess is as good as mine.
I’ve been watching things happen, things you wouldn’t catch, because your senses have been dulled so, that you can’t see the forest for the trees.
Here’s a glimpse into my world:
An area I like to hike to gets a lot of ladybugs and they should be coming in any day now, (Whoops, my bad~ they came already and have been gone for 3 weeks now) and unlike us, wildlife has been doing exactly the same thing, for longer than you could ever know.
Those millions of ladybugs that came and went?
Life is a big feeding mechanism, when you get right down to it.
I mentioned the other day, how for animals, bugs, everything other than us, aside from your pets, life is a 24/7 struggle to find something to eat.
Whatever was counting on noshing down on those ladybugs is strictly sol, and right up the food chain it goes. Missed meals.
Mother Nature suddenly doing things, in patterns other than we are used to?
Reconnect. She won’t bite you.
She’ll let some of us survive.
Why not you?
I…I…I…I have no response to that.
Ditto
“I mentioned the other day, how for animals, bugs, everything other than us, aside from your pets, life is a 24/7 struggle to find something to eat.”
What?
I think you need to “observe” nature a little closer…..IMHO
Not really related to anything, but like everyone else we notice the big Realtors push during the NCAA Tourney.
This is a last gasp at trying to keep the bubble sales alive. The budget was what, 40mil for this campaign? It has to be just about spent by now.
The non-bounce in the spring & summer will consist of less bubbly quotes from the NAR and they might even go silent for a while…
Come this fall, the NAR will emerge firmly on the side of the buyers… a huge pool of “buyers” are gone now with sub-prime tightening… there has been enough press about the sagging market to put most people on the sidelines indefinitely and at some point we’ll start seeing more and more about the affordability problem.
I base that on the fact that the best bubble blogs have been ahead of the curve so far and mainstream coverage is lagging… the NAR has to eventually realize that their commissions are gone unless prices become affordable again.
We’ll still see the optimistic quotes from local Realtors, but I am guessing that come this fall we might see some things from the NAR slamming prices hard in their next attempt to bolster sales, maybe in the form of a “historical pricing” research report. Right now they’re just preaching to an audience that is gone.
Just trying on my tin-foil conspiracy/future-teller hat right now.
I do channel switching or go on this blog during the NCAA gamebreak commercials or timeouts. Hate TV commercials, period.
Note that the Final four teams all come from extremely overbubblicious states/cities or regions already in a RE/foreclosure meltdown(OHIO State).
1 Florida
2 UCLA(los Angeles)
3 Georgetown(Washington D.C/North Virginia region)
4 Ohio State.
I had picked florida,kansas,Georgetown, and Ohio State as my original Final four pick. Still have Florida to repeat as champions.
Interesting take by Calbreath on the top end of the SD market:
“DEAN CALBREATH
Expensive homes in county gain in value
March 25, 2007
After a year of declining home prices and shrinking sales, real estate agents in San Diego County can still take comfort from one segment of the market where price tags are jumping.
The richest people in the county continue to get richer, meaning that the most expensive houses in the county are getting even more expensive.
In four out of San Diego’s five priciest markets, home prices either remained steady or rose last year, with two neighborhoods raking in double-digit increases even as prices slipped in less costly areas.
Although the median price of a home in Del Mar was basically flat at $1,234,000, the median La Jolla price rose 12 percent to $1,044,000, Coronado rose 6 percent to $1,299,000 and Rancho Santa Fe’s 92091 ZIP code rose 12.5 percent from $2,006,000, according to data compiled by DataQuick, a real estate information service.”
I can’t quite square Calbraith’s information with DataQuick’s numbers, which show a 50% YOY drop in the SFR median on Coronado:
http://www.dqnews.com/ZIPSDUT.shtm
This part sounds at least partly right:
“Here’s how it works:
Step 1. Millionaires who cannot find a home in the millionaire enclaves move to other neighborhoods half a rung (or more) down the prestige ladder, such as Carlsbad, Kensington and Hillcrest. Until recently, they have paid top dollar for their homes in those neighborhoods, jacking up the median home prices.
Step 2. Speculators also start snapping up homes in the jacked-up neighborhoods, under the unrealistic expectation that prices will keep shooting up. The influx of speculators was a reason for the dramatic jump in countywide home prices from 2001 through the summer of 2006.
Step 3. Although those neighborhoods are nice, there aren’t enough home-buying millionaires to justify a widespread rise in prices. After all, millionaire households in San Diego represent only 3 percent of total households and probably a lesser percentage of total home buyers.
Step 4. The 97 percent of San Diegans who are not in millionaire households find it hard to move into neighborhoods with jacked-up prices. Sales activity stalls and sales prices fall. This helps explain why sales prices have declined between 4 percent and 9 percent in neighborhoods such as Kensington, Hillcrest and two-thirds of Carlsbad. (The priciest ZIP code in Carlsbad rose nearly 9 percent last year, another example of how the richest areas are faring.)
Step 5. Non-millionaires who have been priced out of the upper-middle tier turn to lower-cost neighborhoods, jacking their prices up. That helps explain why neighborhoods such as Logan Heights and Golden Hill experienced price gains last year.
This is an extreme oversimplification, of course. There are plenty of other reasons for the recent fluctuations in San Diego home prices. But the continuing drip-drip-drip of millionaires trickling out of their enclaves is having a clear impact on home prices.”
I think Calbreath underestimates the influx of speculators armed with liar loans into both the millionaire enclaves and the next tier down. Unless Dodd’s efforts to put together a taxpayer-funded bailout of speculators armed with subprime loans proves successful, a sudden lack of speculative buyer pressure in the high end will result in an inventory overhang. In fact, this is already present in the high end of the San Diego market, as anyone who bothers to check on ziprealty.com can quickly discover for themselves.
The other bit that Calbreath misses is that an influx of speculators at the high end drives up the bids which the millionaire households had to make to get into the homes they purchased in recent years. With an inventory glut of high end homes sitting on the market for over a year already, multimillionaire households can find the better deal, which drives down the comps. I am guessing that multimillionaires like to lose money even less than the rest of us — otherwise, they would not have made such a diligent effort in life to get so wealthy.
http://www.signonsandiego.com/uniontrib/20070325/news_1b25dean.html
much of this sounds similar to what I see in Netherlands; inventory of ‘millionaire homes’ has increased strongly (partly because the average price of all homes has increased strongly), but prices are still rising, often at double digit rates. It is always challenging to explain what is happening behind these housing statistics. One major difference for the rich compared to the usual FB’s: sellers can wait many years for the best offer, they are in no hurry (unlike those who are aspiring to join them). Maybe the rich will be less patient when prices start to decline seriously, but in Europe that seems to be unlikely for the next years. The other issue is: the millionaires who are cashing out, where are they moving? In my country some of them move to the periphery (1-2 hours drive from the big cities) and drive up prices in the smaller cities. Others move out of the country to get even more ‘bang for the buck’ (you can still buy a small castle in France, or a huge estate in Eastern Europe, for the price of an average Dutch townhouse).
I still claim that Calbreath underestimates the effect an incursion of flippers armed with liar loans can have on driving up prices to unsustainable levels, even at the very upper reaches of the price distribution. There are at least two channels by which this can ultimately lead to a crash at the top:
1) Builders have overbuilt the top and near-top tiers of the market, in an attempt to cash in on the mania. W/o subprime, these extra multi-million dollar homes will hang out to dry forever, as there are not enough millionaires to buy them all (contrary to Calbreath’s bogus assertion that there is a shortage of high-end inventory).
2) Competing with flippers ARMed with liar loans forced the guys with real wealth to overbid in order to win the choice properties. With the exit of flippers, overbidding will give way to lowballing.
Some high end markets in California have already seen the damage.
NASCAR-Mortgage-Imlode-O-Meter: 1
Ameriquest, the mortgage company that became the primary sponsor of Greg Biffle’s No. 16 car this season, has asked Roush Fenway to sell off the final two years of its contract, which expires in 2009. The lender’s struggling parent company recently announced a second round of layoffs, and Ameriquest last week pulled out of a 30-year deal as rights holder to the name of the Texas Rangers’ ballpark.
China Raises Interest Rates.
http://PacificRimInvesting.com/
Interest rates seem to be rising everywhere. This should limit Bernake’s options somewhat regarding the Fed Funds rate.
mortgage rates and rates on savings accounts are NOT rising and still near the lowest in history in most of Europe, despite a 1.25% increase in ECB rates over the last year. Rates on business loans have started increasing lately, so there are some signs of normal market action.
Here is a commentary on “subprime economics” from someone who is clearly not educated in economics and has also likely never visited California.
http://washingtontimes.com/commentary/20070324-100652-2256r.htm
“Why speculate about hypothetical consequences of falling home prices? Some try to justify such predictions by suggesting lenders are too stupid to distinguish between good and bad credit risks”
Ask the MBS investors if the entire lending chain was too “stupid” (aka “greedy”) to distinguish good and bad credit risks. It’s all fun and games until someone can’t sell for more than they paid for…