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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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Debunking the subprime spill over hysteria.
Which particular hysteria would you like to debunk? That it is, or is not spilling over?
Some are saying spill over, others say no problem. Being that alot of the debt was sliced, diced, pureed, and distributed, who’s to say any spill over will occur. News reports from various sources are contradictory.
Sounds like defining the subprime spillover is a good topic.
Debunking the “subprime is contained” meme which is propagated from above by top U.S. economic policymakers.
Yeah, I’m making a layered cake. I’m starting with PRIME eggs and butter, mixing in Alt-A sugar, flour and yeast then I feel like I will throw in just a smidgen of SUBPRIME dogshit. Because hey, I have to get rid of it and just a little bit shouldn’t hurt the overall product since it is just a small percentage of the ingredients. Any takers on the taste test?
At least the lenders aren’t making as much dogsh!t any more…
Will prime borrowers who could pay the mortgage if they accept perpetual house poverty and a very low standard of living, lower than they would have as a renter, continue to do so if they know the value of their home has dropped?
We’re getting the fraud defaults. We’ll get the payment shock defaults. And we’ll get the usual divorce, illness and job loss defaults. The question is whether or not others will walk away rather than pay 50% of their income for housing.
Here’s another topic:
Which prime borrowers are in a position where they need to ‘accept perpetual house poverty and a very low standard of living’? Other than the ones you listed who will go into default over illness, divorce, and job loss, of course. What percentage of prime borrowers are paying 50% of their income ( or more) for housing?
http://biz.yahoo.com/bw/070402/20070402005469.html?.v=1
Bear Stearns’ Subsidiary EMC Mortgage Forms “EMC Mod Squad” to Help Keep Customers in Their Homes
New Team Will Work with Community Groups and Borrowers to Prevent Foreclosures
OMG. Can I barf now or wait a few minutes? What a bunch of disingenuous supercilious hypocrites.
Our goal is to help homeowners overcome the fear of talking to their servicer.
As opposed to EMC’s fear of having to buy back the loans!
Of course this is in Texas, where everything is dirt cheap and there is no bubble. Then why is this necessary?
LOL!
“What most borrowers don’t know is that EMC Mortgage built its business working with distressed loan portfolios so we have a depth of expertise to alleviate many of the issues these homeowners are experiencing. ”
Would that ‘depth of experience’ include knowing when a borrower’s mortgage is more than his monthly income? Just, you know, a small question based on an article Ben posted yesterday.
EMC= emergency mortgage crisis?
Or E=MC squared?
That just gives you a sign of how truly bad it is. A servicer as your friend come’on.
Important question: Does BS get a government subsidy to help them “Help Keep Customers in Their Homes?”
The is just PR, these guys are enemy number one in this Country, sort of like what the tobbaco companies did when they got nailed.
It’s the rapist providing counseling to the dummy rape victim.
I read about this in the paper yesterday. The cynicism is breathtaking. In the past, foreclosures were due to illness, divorce, loss of job - personal tragedies. These people could have, and arguably should have received some counseling and possibly, help. Now they want to “counsel” people whose illness is good old fashioned greed. Give me a break. Of course, no amount of talking can resolve the problem of not enough income to cover a huge reset.
When I click on the implode-o-meter site I can’t help wondering how the number 1 Subprime issuer with 13% market share - Wells Fargo has not come clean? Or dodged the bullet!
There they are at “ground Zero” {California and in the west}, yet on the site there is NOT one red or blue comment line on #1. on the implode-o-meter site.
New Centruy (OC), Countrywide (40% of its REO’ in Cali, But Wells quietly says nothing!)
The silence is deafening!!
Or have I been missing their “upfront” honesty regarding their 13% market share….
I recall reading that Wells had the largest%of assetstied to real estate lending (direct or indirect) of our major banks….but not a word….
Yet there stock slithers lower?
“The question is whether or not others will walk away rather than pay 50% fo their income for housing.”
I don’t think people will walk until they are forced to walk.
People think their house is valued at the price they paid for it (even more) despite any contrary evidence that is presented to them, hence they will fight to keep their home.
Drilled into homebuyers is the mantra “real estate always goes up in value”, thus any decline in price obviously must be temporary, and even a buying opportunity. If they sell out at a lower price than at which they bought then they demonstrate to themselves that they are something less than the financial astute people they imagined themselves to be.
I don’t think people will walk until they are forced to walk.
I agree, but a different reason. I think a lot of people would feel like losers if they had to go from owning to renting (mind you, they wouldn’t be - but it’s the stigma attached to it). They’d rather sink financially than lower themselves to sign a lease. Sad.
Drilled into homebuyers is the mantra “real estate always goes up in value”
In these situations, I think it’s more likely that the mantra is “homeownership is security” despite what the checkbook register is saying every month.
I don’t think people will walk until they are forced to walk.
—————————–
That may have been the case in the past, but this time is different.
These people have grown accustomed to thinking they are entitled to spend $5,000 on rims, and go out for sushi once or twice a week.
Once the house stops providing that lifestyle for them, they will stop paying. These are NOT responsible people who care about their reputations (that includes their credit scores). Better to rent for half the cost and still be able to party it up.
Rims & sushi, huh?
In my neighborhood, it’s more likely a dream vacation to Disney, a vastly over-sized SUV, and a new kitchen with lots of wood & granite.
That, too!
“The question is whether or not others will walk away rather than pay 50% of their income for housing.”
I can’t imagine many people willingly and knowingly doing this…
what level of foreclosures will it take to……
(1) effect Wall St and the Boyz
(2) Cause the government to act
Or perhaps we should find out what they (WS and the govt, jointly) are up to…that is, if you actually believe in the PPT. I believe.
From Palmetto’s post, yesterday:
HANK, WHY ARE YOU IGNORING MY FOIA REQUESTS?
http://www.nypost.com/seven/04032007/business/hank__why_are_you_ignoring_my_foia_requests__business_john_crudele.htm
“HANK, WHY ARE YOU IGNORING MY FOIA REQUESTS?”
I explained this a day or so back, but we are in a War on Terror, and in the interest of national security (which includes saving our homes and keeping our 401(K) balances high), the government has cart blanche to both take extraordinary (if persistent) measures to support asset prices, and also to indefinitely ignore FOIA requests.
Jobs: how job loss, the clustering of jobs w/in an geographical area or the moving of jobs in or out of a geographical area, or changes in industry will change individual housing markets.
I guess beside lay-off discussions, this could include strength of “savior” industries, “savior” state or city economies, “savior” skill sets, and changes in hiring practices (IE: Challenger, Gray and Christmas’ announcement that firms were losing top hires due to housing impact. What areas would end up as Ghost towns, what areas will experience growth due to flight targeting.
Good point.
The bubble is bursting, and this blog thanks to Ben saw it coming. The next logical extrapolation will be, depending on just how deeply the overall economy is affected, how the economic landscape will change. As energy prices continue inexorably higher they will exascerbte the trouble with the exurbs and the soon-to-be ghost towns without a place at the new and smaller table. Where will the pain be the sharpest? Recreational communities like the Tahoes and Vales stand to lose, but will they be better off than the Chicagos and Detroits?
“Recreational communities like the Tahoes and Vales (Vails) stand to lose, but will they be better off than the Chicagos and Detroits?”
Good Question. There is a school of thought that resort areas in places like the Mountain West will be safe, comfortable places to retreat to for the affluent classes. Many Boomers own second homes worth more that their in-city primary residences with a plan to spend more time there than in the city at some point. Might be a worthy topic.
Except today the unemployment rate went down to 4.4%. What is with that, given all the layoffs being reported? Are those people working on commissions getting 2nd jobs since they aren’t bringing in pay to cover their monthly expenses?
I sure don’t walk in stores and see alot of people spending like mad anymore. People are starting to cut back. What gives?
Unemployment has been low for the past ten years now. Part of it has to do with how it is surveyed/calculated. Anyone who is not actively looking for a job is not included in the calculation. This probably leaves out a lot of people, but you can’t prove it. Some economists think that recent low unemployment is mainly demographic. As the population ages, unemployment goes down.
Has to do with “discouraged” workers. If you can’t find a job within a few months, you’re considered “discouraged” and no longer counted as unemployed. More honest accounting from your government.
In Michigan and the rest of the rust belt that probably includes 10’s of thousands.
I am lucky to be very fit at 47 and have very few possessions on purpose, an MS degree, nearly 22 years experience in embedded software, and I can leave within a week to a new place for a software engineering consulting job. I go for the highest pay rate. This is what it means to be alive in the 21st century. The purpose in life is to make living better for everyone, not necessarily to reproduce. These are great times to be alive folks!
There have been dozens of stories in the mainstream media about the ‘victim’ subprime borrower that got an interest-only ARM, took on way too much debt, and is now facing foreclosure. Has anyone seen ONE mainstream media story about the plight of the responsible borrower? The responsible buyer, who believes you should put 20% down and not spend more than 3X income, has been pushed out of the market by subprime borrowers, who put little down, and took on enormous amounts of debt, pushing up prices to levels prudent buyers could not touch. Where is the story on that?
We savers have been punished over the past seven years, as well. Not only do my CDs pay less, but the easy money crowd has pushed up the prices on many goods and services.
I wouldn’t say punished but you’ve not been rewarded for partipation for unchecked speculation.
Don’t worry: they are about to find out about the risk equation part of that reward.
I think this is a good subject, too, and perhaps extremely relevant to this blog, whose posters constantly bring it up. The downside of the housing bubble–the harm it did directly while it was still expanding in place–has been completely overlooked by the Press.
Too boring. Wouldn’t sell newspapers. If there’s no drama, people don’t care.
However, being that I am one of those responsible buyers who believes you should put 20% down and not spend more than 3X income, I would love to see stories about how this mess has affected those like myself. I’d also like to see some politicians give a crap about people like myself.
And I’d sure like to know what I can do to expedite the process towards buying a home. My only options are 1) lowball (but no one will accept the lowballs I offer, believe me) and 2) wait. I’m growing very impatient.
Eastcoaster: I would keep lowballing, if you’re impatient. There’s no harm in trying, and the worst thing they can do is say no. The fun thing about lowballing is that prices will fall, and you’ll have the pleasure of seeing their asking price fall below what you offered months earlier. The only worry is that you might go off the deep end and fall in love with some stupid house, but you sound like you have your head on straight.
And I’d sure like to know what I can do to expedite the process towards buying a home. My only options are 1) lowball (but no one will accept the lowballs I offer, believe me)
Is there anything in your price range? If so, is it habitable?
I think most people on this blog are not believers in the notion of moving to locations that have escaped the bubble crisis, but thats what my family and I did. We were trapped in Hawaii, housing was/is in the stratosphere.
I searched for a month before deciding where to move, and then I took a year to find the house I wanted, then I waited for the listing to expire, then waited another 60 days, then I made an offer.
First listing 199k, dropped over 6 months to 169k, final buy price 150k.
Ans this blog is what convinced me to buy, I think the quote was “How bad can you really f*ck up 150k”
Moral of the story, you cant speed the process up, you have to set a price in your head that makes financial sense, you have to be patient. You have to find a sellers needs that match your buying needs…. I am not sure how to put t really, but hey, I got a 4bdrm, 2 bath,3 story, daylight basement, quarter acre, in town, for 150k, put down 30 % financned on a 15 fixed and pay 900 a month (I was renting a 2 bdrm 1 bath for 725).
It is possible, and they are out there…..you just gotta dig.
Curious as to where you live now. What you paid for your house is pretty much what I’m looking to pay - maximum. There’s nothing in the area I live in that’s in that range.
I think that’s a good topic, simply because we are dealing with a situation right now that touches on this.
My parents are both older & sick (mother given 2-4 months, father in ICU right now). We’ve always believed in caring for our own parents, and had planned, many years ago, to buy a house with some sort of granny flat/guest house (very modest), so we could take care of everyone.
We were looking to trade up in 2003/2004 (had a couple of kids by then, as well), and found ourselves effectively priced out of any reasonably safe neighborhood. We sold to rent, expecting to wait a couple of years. Our rental is a 4/2, two-story house with a half-bath on the lower floor. Can’t take care of our parents as it is, so our choices are:
1. buy a house & compete with suicide borrowers, then watch as our “equity” vanishes over the years
2. buy a low-quality house in a very, very bad neighborhood (NOT!)
3. move our family of 5, plus parents, to another rental, IF we could find one large enough and affordable enough (not likely)
4. modify our current rental by adding an ADA-compliant shower at our expense — will probably cost $5K-$15K (probably what we will do)
Needless to say, we are very bitter about the whole bubble situation. Is the govt going to pay for our losses/expenses? Where’s our bailout????
I agree with your plan of adding the shower, CA renter. It’s very tricky for you because you can’t predict how your parents are going to function. Do they still have their own place? Could you move in with them? or visit them daily? They might be more comfortable with that situation. We’re lucky that our kids are in college and both sets of parents are still independent. But that can’t last forever . . .
They both have their own places, and we would have to sell/rent them out. They would not prefer living with us, but we’re not able to get there every day because we have three small kids & a very busy schedule.
You sound like you’re in that “sweet spot” where kids & parents don’t need tending to. Hope that lasts a long time for you!
I think a good topic would be what will become of all the laid off loan officers in Orange County? Do they go back to flipping burgers, is pole dancing in the cards, do they move back with their parents? Or even a broader discussion about real estate related job loss. Here in Sacramento sales are down from what I hear by almost 50% from peak, this has to have an affect, I think next Christmas will not be very jolly.
I was thinking this Christmas won’t be to merry either. I thought the MSM would cheer all the way there, but I think you can see from retailers like Circuit City that the ranks have been broken and it is every retailer from himself, screw the rest. Prices will be dropping on everything from furniture to cars, to motorcyles to rv’s to electronics. And then the retail layoffs will come rolling in, which will lead to bk’s and broken commercial leases (with high commercial vacancies). We will hit recession by the third quarter, although it will not be officially recognized due to the shady way they calc the numbers.
What impact will civil rights leaders have on the lending industry? Will they force a moratorium on foreclosures? Will they persuade politicians to change lending laws? Or, will they be ignored?
Why should a substantial commission be paid to some lucky real estate agent for essentially doing nothing but presenting an offer?
The answer is here:
http://www.minyanville.com/articles/index.php?a=12535
The RE business model is permanently broken. The end is near, the future is now.
Brokers will have to get with it or starve and be further exposed as the overpaid scammers that they are.
Think it’ll happen?
Here’s another article about BuySide:
http://www.realestatejournal.com/buysell/markettrends/20060406-hagerty.html?refresh=on
“On a $300,000 home with a 3% cut for the broker representing the buyer, BuySide would earn $9,000 and pay 75% of that, or $6,750, as a rebate to the buyer.”
How does BuySide ‘earn’ that $9,000.00?
> How does BuySide ‘earn’ that $9,000.00?
That’s the appeal of the business. For substantially less than a “traditional” broker they still make a very good living.
How does any RE agent “earn” their money? The answer is, usually, they don’t. But they get it anyway. This model cuts the amount given to the buyer’s agent and gives it to the buyer; a real improvement over the present system. Of course, the seller still ends up paying full freight. Hence, the name “Buyside.”
Looks like someone has an opportunity to start a business called “Sellside” using the same model for the sellers!
We sold our house by listing it on the MLS for a flat fee, $300. Sold it in an hour — but that was in 2004 & we do not believe in being greedy. Never needed a realtor, but we did pay the buyer’s agent 2.5%. She was a good realtor, so we didn’t mind.
Personally, I think we need a listing service where sellers pay to list & the listing service could generate extra income by having zip-specific advertising for home & RE-related services.
I do think realtors can be very useful, like in a slow market & when both people work (listing-side). For buyers, a GOOD realtor can come in handy if both people work and/or they are moving from another location.
The problem I have with realtors is that they try to maintain a monopoly WRT listings & statistics. That will be their downfall.
Houston real estate is booming now, according to a report on NPR this morning. “We’re not landlocked here,” one RE person explained, so they can offer houses cheaper than other places.
It really sounded swell.
If this is true, can someone from there confirm this. I want to move there fast and start buying.
I live in Houston and listened to this article. Whilst they did say, property is apparently booming they were disingenius in not discussing pricing. The REI is trying to increase pricing but I’ve seen a fair ammount of property in the 610 loop, just sitting there.
Problem here is that they still have plenty of land every which way you look. More demand means you can just build new housing elsewhere. Especially on the X-burbs, this is the case. I hate going out to these areas as they are characterless places. All with the same blockbuster and restuarant chains.
The ‘just build more housing’ means existing houses don’t appreciate that much as the newer places in theory, have better features.
However, what they didn’t discuss is property taxes in Texas. It is a nasty liability as TX doesn’t have state income tax. I’ve heard from a Relator that many of their clients were selling up because they couldn’t afford the taxes.
Finally, the % ARMs in Houston area is surprisingly high. This supply of cheap money is going away and Houston is not a high wage city.
My opinion is Houston is undergoing an bubble echo. Just like Austin, it will not sustain any price growth.
Hey Houstonstan, I need your opinion. My sister is the executor for my dads estate and she put the house on the market in may of last year, for $299; now its down to $260. Is she asking too much?
Im in VA and Im not familiar with the Houston market. Below is a link to the house.
Thanks
http://www.zillow.com/search/Search.htm?addrstrthood=3303+parkwood+dr&citystatezip=Houston+Texas%2C+77021&GOButton=%3CSPAN%3EGO%3C%2FSPAN%3E
Zillow shows plenty of houses in this neighborhood valued at about 100k less. Drive around the streets and see how you feel there. I would guess that $260k is the price for a Californian!
Based on the assessed value, and Zillow’s own value range, I’d list it at $220K. It looks like it might be one of the older & smaller houses in the neighborhood, & maybe less well-maintained (????).
After a brief look at some local listings & overview of the neighborhood, it looks like there are some very, very nice houses in the area & that seems to be a fairly exclusive area.
The large (3,500-5,000 SF), colonial-style homes there with large lots (2-3X+ the size of your dad’s) are listing in the $400K-$600K range, mostly in the 500’s.
Your price might not be off, but it’s important to know what shape the house is in.
Good luck!
I don’t know too much about that area but it is in the loop, but south of I59/ East of 288. Being inside the 610 loop is some plus but that alone is not. 288 coridor is nothing special so the area may not viewed as up and coming. I have not had many reasons to venture there myself apart from on bike rides along the bayou. If you take a look at Houstonpress.com (The free alternative newspaper for Houston, you don’t see much restuarant, events it that part of town).
UoH & UofSouthernTexas is not far away from this location so it the medical center. This is good and bad. It has some good salary earners but they may want to live elsewhere such as around Rice University/ North + west med center is where demand is. It is also near downtown but same argument applies. Most downtown workers commute from the burbs.
The local RE website is HAR.com for you to get a feel for what is going, but take it’s prices with a piece of salt.
Never could figure why anyone would move to Houston. Drove through on an airport pick-up, and 6 1/2 hours later, I was headed out of town. aint never goin back. Absolutely murderous traffic. First place I ever saw someone actually turn on the interior cab light in the car, then flip the bird (the light was so I could see it).
ughh
Yep but having lived here now for 6 years, I don’t consider it that bad. Go around Rice Village and you wouldn’t even know you are in Houston. I can get all my favorite beers, food and enternmaint in a relatively small geographic area and my work place is locate against the traffic flow everyday so I have no complaint. Thankfully where I live and hang out, doesn’t suffer too much from Redneckitus.
I can get to the IAH from downtown in ~25 minutes if you know which way to go. Most people stick it out on I45 or 59 but the key to getting quickly to IAH is the using the Hardy toll road. It is very predictable and free flowing.
The worst traffic is I10 around beltway 8. I avoid that place like the plague. But in my opinion bad traffic is justifiable punishment for living in an awful place like Katy. It is a victim of it’s own success.
Houston is toast they just do not know it yet.
An imminent transition to a more arid climate in southwestern North America
Richard Seager
Lamont-Doherty Earth Observatory of Columbia University
“How anthropogenic climate change will impact hydroclimate in the arid regions of Southwestern North America has implications for the allocation of water resources and the course of regional development. Here we show that there is a broad consensus amongst climate models that this region will dry significantly in the 21st century and that the transition to a more arid climate should already be underway. If these models are correct, the levels of aridity of the recent multiyear drought, or the Dust Bowl and 1950s droughts, will, within the coming years to decades, become the new climatology of the American Southwest.”
http://tinyurl.com/2mtr4w
Check out the drought map for California: Toast.
Houston may be toast in the future but like toast it starts out dry and then morphs into french toast all mushy. In Houston, I’ve seen dry that leaves thin cracks baked into the earth that exceeded three feet in depth and a month later 24+ inches of rain in 1 day. West Houston has desert scorpions while East and South Houston have alligators. North Houston has “piney woods”. Three ecosystems in one city. I don’t think Houston will run out of water anytime soon as long as they can pump from the swamps to the cactii. I do agree Austin, Dallas, and San Antonio will be toast.
I agree it is pretty wet here though last few years have IMO, been dry. I’ve noticed a lack of hummidity. Lakes up North fluctuate in their fullness.
Houston’s problems would be in event of warmer climate more susceptability to Hurricanes. Galveston / Greater South Houston would be worst hit.
Field of Dreams: Build It, and They Will Come;
http://wallstreetexaminer.com/blogs/winter/?p=611
Nice one Russ.
Will the post-bubble fallout be different in Michigan or Ohio than it will in Cali or Florida? To wit: Michigan housing is in trouble because the state is underpopulated/underjobbed rather than newly overbuilt. Does it matter that few were speculating on Detroit properties or is it all the same in the end?
It might be different, only to the degree that you can’t lose what you didn’t have in the first place.
Michigan is a vastly underrated state, IMHO. Yes, I know Detroit is the pits, but so are other urban areas. Setting that aside, Michigan as a locale has a lot to offer. It has miles of Great Lakes shoreline and many of the towns along the lakes are just as nice and charming as any you’d see in New England or in the Northwestern coastal areas. It has agriculture (some friends of mine own a cherry orchard there) and I contend that we’ll be finding out that importing food products from other countries is a REALLY bad idea and maybe Michigan can take up some of the slack. It has great manufacturing capability, even though that is underutilized. I’m not just talking about automotive. Grand Rapids used to be THE furniture capital of the US. Even today, I look for used mid-century furniture made in Michigan, because it has great design and construction.
Sure, it gets cold there in the winter, but it has some nice skiing areas, believe it or not. Nothing like the Rockies or New England, but still fun. And you can’t beat the people. Just about everyone I’ve met from Michigan is smart, energetic and has a great work ethic.
Globalization is a REALLY bad idea and it has decimated Michigan. If we can ever turn the good ship US around, Michigan will lead the resurgence in manufacturing and related jobs. It is a state worth salvaging.
“Importing food products from other countries is a REALLY bad idea”
Palmetto, I know you are right about this. The wheat-gluten pet food poisoning now has the Chinese insisting they never shipped anything to the US despite FDA records to the contrary. Nafta allows countries to use pesticides that are cancer-causing and banned in the US to be shipped here. China has virtually no safety regulations, and who knows what from them is being added to human food, since they still use human sewage as fertilizer.
Globalization has been a disaster on a dozen different levels.
I agree, spike66 and Palmetto. Not only does China not regulate, but their communist government can lie through its teeth to the rest of the world, while their citizens who know the truth can’t speak up.
Testify, everybody! Maybe globalization and its effects would be a good weekend topic, although it is not limited to the housing bubble.
China bites the big one, IMHO, and one of the sorriest-ass days for the US was the day that the US started doing business with China. The wheat gluten issue is just the tip of the iceberg. What about the use of recycled materials that have low level radiation? What about high levels of lead and other toxic materials in their products?
Who knows? Globalization is ugly and it wants to die.
I humbly disagree with your excellent thoughts on globalization. My interpretation is not the idea of globalization being wrong, it is the wage exploitation that is occurring. I frankly should not care if my socks are made in India or the US. I do care because of the wage exploitation. Working in the US under US labor laws is a lot different than working in a sweat shop and living in a factory owned shack with 50 others. That is wage exploitation. I believe wage exploitation is evil. Provide the workers with a decent living wage in their countries (China ~$1.50/hr) and then the US is competitive. Our productivity is higher and we have the best trained work force in the world.
Wage exploitation example:
“Since late January, Gao Xiaoshi has worked in the McDonalds restaurant at Tianhe Book Store Center part-time. She is paid 4 yuan an hour (about 50 US cents) plus 1.3 yuan as a meal allowance. Every day Gao has to work for 6 or 7 hours, sometimes for as many as 10 hours. She is only permitted a 15 minute rest (in which she must eat her meals) every 4 hours. This break is not paid.”
Hoz, you are correct about wage exploitation, but to the degree that it is part of globalization, I’m agin’ globalization. There are also issues of quality control, as I mentioned above. I care where my socks, appliances or food is made, depending upon how they are made and what goes into them. There are other countries that do not care if there’s a “little radiation” in the materials. Heck, during the early 1980s, the US didn’t care, either. We cannot impose our standards on other countries and I don’t think we should. But we can and should impose them here. “Buy here, pay here” is my manta, borrowed from the used car business.
P.S. I had a conversation with an immigrant lady from India and boy,was she HOT about the US doing manufacturing business with China. I gather many Indians feel that way.
I read that article, too Hoz, and I was sickened that it was McDonalds and KFC who are paying below an already ridiculously low minimum wage to Chinese workers. It’s another indication of why, sadly, we need regulations in this country; without them our workers would be just as screwed.
Too true.
The point is, if not for wage arbitration/exploitation, there would be no “globalization”. That’s the whole point, and it’s a major stagflationary force in the U.S., along with importation of cheap labor.
Our workers, are/were skilled tradespeople who were paid decent wages for producing quality goods are being decimated by corporate greed. Their profits rise, and the lower cost of goods in the U.S. does not offset the wage reduction, IMHO.
While products made in China are generally cheaper, we must also remember that what used to last 25 years now only lasts one or two years. Also, we used to have skilled repairmen who could make a living by repairing our appliances (remember shoemakers, TV & appliance repair people?). No more.
I DO NOT think globalization benefits anyone but the corporate pigs & money traders.
I had some tiles made by the Pewabic company up there in Detroit. Old historic tile maker. These are the most beautiful tiles I have ever seen. I hope some day before I croak to be able to actually use them
Pewabic pottery and ceramics are awesome. The US has a long tradition of great pottery and stoneware. I nearly stubbed my toe on a piece of fake Roseville pottery made in China, not just a copy, but actually signed Roseville. I’m not an expert, but something was off about it and another shopper saw me looking over the piece with a frown and he knew all the things to look for in Chinese fakes and helped me out.
Our old house was loaded with Pewabic. When we redid the kitchen (the old original built-in from 1920″s gave up the ghost) we added all Pewabic backsplashes too preserve the house’s integrity. They have our kitchen featured in their file of installations. It was money well spent.
Thanks Palmetto, you had me tearing up. I love this state and also think it has so much to offer. Just like the Canadian Maritimes the economy is passing us by.
GPBlank, don’t give up yet. I have a good feeling about Michigan. The people of Michigan are innovative and industrious, they are what America is all about. If I were a Michigander, I wouldn’t take this globalization thing lying down. If America resurges and I think it can, I truly believe Michigan will lead the way. “The economy” may be passing Michigan by. So, let Michigan turn its back on “the economy” and make its own. I believe the pioneering spirit lies dormant in Michigan and it can be awoken. It is not too late, there are still factories and facilities there that can be revived. Beautiful countryside and shoreline. Fields and orchards of plenty. Great hardworking innovative people. Not to mention creativity, the music that drove America came out of Michigan and it was the theme of my adolescence. These are RESOURCES! Tell your friends who are discouraged of this post. A Floridian believes in Michigan and looks to Michigan to lead the way out of this mess called globalization.
If Michigan would ditch a lot of the union stuff and the regulatory overkill, it would come back a lot quicker. As it is, businesses have little incentive to set up shop there.
As a former representative for a Michigan based, union shop company that did quite well and where the people worked their butts off and profits were made, that’s not the problem. Unless, of course, you’re listening to Bill O’Reilly.
There was a reason the great lakes states were so quickly populated, and so heavily industrialized: plenty of fresh water, plenty of precipitation for crops (one per year), cheap transportation on the Lakes (access to the world), and nearby iron ore sources (Mesabe range).
All these reasons still exist, just not the economic feasibility.
California and the Southwest lack of the most important of these resources- plenty of fresh water. The great lakes population sustains itself with water. California and the Southwest do not.
This difference will become more imporant over the next 10 or 20 years. Then the trends will start to reverse. Cali will becoming increasinly poor, while Cleveland, Detroit, Toledo, Erie, even Gary, will experience a real revitilization.
I think that the automobile collapse in Detroit has its origins more in bad management decisions than union problems, though, admittedly, health benefits are hugely expensive for the Big Three. I used to make excuses for American carmakers in the 80s, thinking that they eventually could come up with products that people would buy. But even 30 years after the first oil crunch they still produce gas guzzlers that appeal to management, rather than the smaller, fuel efficient, well engineered cars that Americans crave. Now Toyota has surpassed them all.
I also agree that unions have nothing to do with the demise of U.S. manufacturing. Just as Ford was wise enough to understand, your workers should be able to buy your products, if you’re trying to market a product to the general public.
No doubt in my mind, the demise of our economy is due to the “grow at all costs” mentality and the expectation that hoarded money should return a high profit at all times, even when nothing productive is being done with that money.
The anti-union rhetoric is used to brainwash the sheeple into losing their power to challenge those who would like to exploit the workers with as little resistance as possible.
“…is it all the same in the end?”
High risk lending will prove a great equalizer in the end.
why would i buy when i can rent the exact same condo for half of what my mothly nut would be if i bought? and still have my dp in the bank collecting 5%?
well we are going to look at a brand new place today where i amy do exactly that. i will let you know what happens
why buy now?
Because you are a stinking unpatriotic commy. Get out now and buy 4 condo’s and support the American dream.
How about:
How’s that recession shaping up?
And … when/how is the US mess really going to start hitting Canada, Aus and UK bubbles? Canada is still in “its different here” deep-denial mode.
My topic for discussion would be the slowly changing reporting by main stream media. NPR seems to be discussing ARMs and using term “Housing bubble” almost daily. NPR article on 20% declines expect http://marketplace.publicradio.org/shows/2007/04/05/AM200704051.html
Another NPR article on subprimes: http://marketplace.publicradio.org/shows/2007/04/05/PM200704054.html
Bloomberg has a special report on “subprimes” that is updated daily and has been there a few weeks.
This will have a drip-drip effect of of the thinking of the crowd. Get mad collectively but recover sanity one by one.
NPR? NPR is for the intellectual elite. I listen to NPR and I am the most out-of-touch guy around. They don’t drive (or inform) mass opinion. But, they might have an effect on the money (banker) set.
NPR drives mass opinion in a trickle down fashion, as those who listen to the station are in positions of power and influence.
That would explain why I can’t listen to them.
Front Page of the Ventura County Star reports that the Grocery store lockout is probable starting as soon as April 13th, Friday the 13th. Albertson’s worker’s are to strike and Ralph’s and Von’s will lockout their workforce if this happens. U.F.C.W. says that some 59,000 workers will be affected here in alifornia from San Diego to Bishop and 3,500 here in Ventura County. The last strike happened in 2003-4 and lasted for 141 days. I thought this topic is relevent as to the sure timing of this market and the combination of income and property taxes deadline coming up.
California
Next boom?
“Busts point to boom in indoor pot farms: In the last year, crops worth $100 million have been seized in the state. Two homes were raided outside L.A. this week.”
So, how many are in your neighborhood?
These things are pretty easy to bust. They don’t admit it in the the article, but the police find these things by data-mining utility bills. The power usage profile is very unusual due to the grow lights and irrigation systems.
On the thread of the effect of responsible savers:
There probably is real tragedy. My wife is ashamed to admit she is renting. She is wonderful and frugal, but the peer pressure is getting to her. We are a single income family and doing OK, but watching lots of other people in nicer houses.
Personally, I hope a few of our peers are foreclosed on so she can see the fate we avoid. But, really most people who are doing well just bought before the boom and have lower housing costs.
I’m sure this peer pressure has helped speed up a few divorces for financially conservative couples (and think of the children).
My wife is ashamed to admit she is renting. She is wonderful and frugal, but the peer pressure is getting to her.
Before I began reading this blog, I had no idea that renters had to face the disdain, contempt and faux sympathy of their friends, co-workers and even family. This is not the America I grew up in. Yes, people started out in a rental and their goal usually was to purchase a home - but not at the peril of losing whatever savings they had accrued.
And what is this defensiveness on the part of renters - what has your wife done to be so shamed? Is she on the local sex offender register? Does she go door-to-door in old people neighborhoods and scam the residents out of money? What misplaced values.
Your wife needs to get an attitude. I don’t know how you do that if you don’t already have one. Why would anyone feel inferior just because they’re not in hock up to their eyeballs?
I’m sure this peer pressure has helped speed up a few divorces for financially conservative couples (and think of the children).
Actually there was a link to an article recently about an attorney who expected a foreclosure tsunami because so many new divorce clients were coming to his office. Divorce follows overextended couples and playing rich before you can pay rich.
I hope I haven’t sounded harsh. I feel for you. Figure out some way for your wife to get some self-esteem, at least.
?????
posted wrong.
supposed to nest under LI Lost. 2007-04-06 09:04:22
I grew up in a very rich community (and my family was well-off enough to fit). I learned the necessary arrogance to deal with this sort of thing. It is hard…she doesn’t have the advantages I do, and it is hard to learn. And, one really can’t say “I rent but I have 3 years living expenses in the bank and no debt.”
Of course, the snappy male responses (”I was playing catch with my son while my landlord cleaned the gutters and fixed the broken shingles.”) don’t work for females. And, I have peers that are snobby about other (irrational) things … like speed, strength, intellectual firepower. It’s a pity the last doesn’t count out here (the wife speaks 3 languages).
As for the defensiveness, remember that one rents while saving up for a house. Renters our age (40) were the sort that never could save enough and earn enough to buy. When houses were 2-3x annual income, renting was a sign of poor financial ability. And, culture has not caught up with reality, which is the opposite.
It doesn’t help that the rental market is thin here and our rent is well below our means (because it is “throwing money away”) so the place we are in is not the greatest.
Self-esteem is partially driven by our peers. It’s a fact of life. Part of it can come from inside. But, if _all_ of it is internal, then one is probably psychotic (unwilling to follow society’s rules).
As for the defensiveness, remember that one rents while saving up for a house.
Before I sold my home 18 months ago I was envying renters because I was starting to tire of the maintenance required on a 4000 sq ft home on two acres. And my house was owner-built, fairly new, so it didn’t have the issues that an 80 yr. old house would have. It was built like a fortress and still there was always some part of the structure that needed attention.
After I sold, friends etc. always asked how my house hunt was going. Most of the time I replied that I was going to rent for a while because I didn’t want to be saddled with a house again. (this was before I found out that prices were sliding. Now I”ll rent for as long as it takes.) Whenever friends would state that I was “throwing my money away by renting”, I would reply, “Really - well, it’s my money. Talk to me when I start throwing your money away.” Finally one of my friends who led the throwing money away chorus admitted that when she was younger, a very wealthy man she knew told her that the smartest financial strategy was to rent your primary residence. She also was raised in the country club set, yada yada yada.
But, if _all_ of it is internal, then one is probably psychotic (unwilling to follow society’s rules).
I agree we’re all subject to peer pressure to some extent but this statement is a little off the wall.
I agree with Phillygal. If you educate your wife about what is going on, her frugal nature will kick in and she will look forward to the coming day when she will have her house without the crushing debt. Then you and she can “high five” when her idiot friends can’t afford squat.
And rental vacancies are on the rise, so at least you can avoid rent increases while you’re waiting.
http://www.bloomberg.com/apps/news?pid=20601170&sid=aLB3rmP8Ukv8&refer=home
My wife would never submit to renting. Actually, I expect to be separated before summer is over because I refuse to spend more than our take-home pay. Things are at the breaking point already.
Bill
My wife would never submit to renting.
Honestly, Bill, if you said something like: My wife would never submit to wearing a ball gag while the local Hell’s Angels chapter gang raped her, I would see her point. But not submitting to - renting a house?
I expect to be separated before summer is over because I refuse to spend more than our take-home pay
Again, how does one respond to this? Where does your wife expect the house money to come from if it’s more than your take-home pay? You are so lucky that she’s ready to bail. Don’t worry about her, I’m sure there’s some McTrump waiting in the wings for her.
Paying the mortgage is no problem. I’m pretty conservative with money. It’s the entire living large lifestyle that she wants… several nice vacations per year, many changes and updates to the house, very expensive car(s), etc. She wants to take money out of the house, or out of savings, and I refuse.
Because of this, she’s pissed off most of the time. She has little incentive to bail, as I help pay the bills, cook, clean the house, etc. I will be the one doing the bailing.
Yes, I am a fool for getting into this situation. We knew each other for over two years before getting married. I’m sure I probably missed some warning signs, but she was also careful to not demand too much before we were married.
Bill
Well, you’re certainly not the first male animal to be fooled by the old “bait and switch”…:-)
Hopefully you’ll figure out a way to protect your assets before you make your move. Your wife sounds too self-absorbed to even notice you may be cooling toward her.
Good luck, and remember…buy no house before its time!
Thanks for the well wishes. We both know the marriage is not going well. We’ve tried to negotiate some financial agreements, but there is just no middle ground to be found.
There’s not a lot I can do to protect assets short of things that are illegal, which I will not resort to. I will be the loser, financially speaking, but it’s survivable. I’m just ready to move on and be happy.
Bill
Bill, what I’m going to say may sound terrible, but I am almost sure it is true. Your wife has a void that nothing will fill, no matter how big a house you get her. If you are a good husband and a good provider, she should not put her “needs” before the stability of her marriage. I am a “bitter renter” not because I don’t want a house, but because I refuse to accept that my husband would have to work himself to death and miss seeing his children so that I could have a house. Yes, I would love to buy a house, but other things come first.
cassiopeia,
Yes, you nailed it on the head. I could tell a very long story here that validates your observations, but this is certainly not the appropriate forum.
Bill
Been there……done that…..finally bailed
Bill: you can do a lot better. Your wife needs to get a job and learn how to stick to a budget. I hope you don’t get hammered financially, or that you are young enough to recover. Next time marry someone with her own money!
Sorry to hear that but I went through a relatively early divorce on incompatibility of life’s goals. I learned quickly that Men from Mars and she was a freaking quick tempered Nutcase
Seriously I was lucky in that my ex wasn’t a golddigger but Texas is state where pre-marriage assetts are still yours.
Last night one of my neighbors knocked on my door to tell me the guy down the street is getting his house ready to sell. He wanted to let my wife & I know, because he said all the neighbors like us and want us to stay in the neighborhood. Pretty cool, I thought. We may be renters, but we’re always the first on the block to shovel our sidewalk and rake our leaves.
So maybe you won’t mention to them that you’d rather die than buy a house in their neighborhood?
Mentioned this yesterday…
“Why We’re Headed for a Greater Depression”.
“What percentage gain has your residence (owned or rented) experienced since 1997?”
“Did the week of 2/19 mark the top of the stock markets?”
I like all of those topics, tj. I just got so frustrated listening to a radio business report on my way home from the office. I didn’t hear the name of the government official who was talking, but he was spouting that “there is no danger of recession.” They’re doing everything they can to prop up the stock market, and so far they’re succeeding.
Long-time lurker, first-time poster.
Will seller financing become the ultimate selling tool? Will seller financing become the way for sellers in glutted markets to stand out from the crowd. Even if your purchaser defaults after a year or two, you will be better off than if your house sat on the market for 18 months waiting for a qualified purchaser while prices were dropping 10% or 15%. (Obviously, this will only work for the sellers who have equity and don’t need every last penny for their next house.)
My opionion is “no” as too many individual sellers do not have the equity or option to sell at lower market prices / true market value. Many could not support a negative cashflow in enviroment of rising outflows (ARMs + holding costs getting higher).
However, since distressed properties will be ultimately owned by finincial institutions, could a time come for when REO property supports this? Possibly. They will have to stimulate the maket somehow if properties just languish on their books. Negative cash flow will not only impacy individuals but the finance houses themselves.
It was not discrimination, because lending standards were equally abandoned across all races and ethnicities.
——————————————————————————-
Last updated April 5, 2007 8:23 p.m. PT
Groups call for freeze on subprime foreclosures
By YALMAN ONARAN
BLOOMBERG NEWS
A coalition of U.S. civil rights groups asked mortgage lenders to freeze foreclosures for borrowers with weak credit ratings, saying “reckless” lending practices to minorities caused their predicament.
Lenders, loan servicers and investors in mortgages should agree to a six-month foreclosure moratorium, said a group including the National Association for the Advancement of Colored People, the National Council of La Raza and the National Fair Housing Alliance in a joint statement Wednesday.
http://seattlepi.nwsource.com/business/310534_subprime06.html
How about a topic on the best way to watch this train wreck from the fence if you want to jump in at some point and actually buy. I see many posts from folks who are just chompin at the bit. Thanks to the wise members of this community they are calmed down and pointed back to the fence.
Should we just track wishing prices or look at foreclosure listings or simply wait until the MSM is saying RE is the worst investment one could ever make?
Is there going to be a time when the prices have bottomed out and interest rates actually go lower to make for a prime time?
Should we be out there lowballing, but then subject to the siren song of the kool aid kids?
What about the agents posing as distressed/foreclosure listing sights that try to suck you into buying with the same old BS? What are reputable foreclosure sites?
We have discussed tightening lending standards at considerable length here. What about when the tables are turned, and tightening client acceptance standards underwrite subprime lenders out of the market?
———————————————————————————
Lifting the Lid: Auditor’s subprime exits show risks
Fri Apr 6, 2007 8:23AM EDT
By Emily Chasan
NEW YORK, April 6 (Reuters) - The sudden resignation of Grant Thornton LLP, the No. 5 U.S. auditor, from two subprime lenders this week shows it may face a risky battle in gaining equal footing with the “Big Four” accounting firms.
The Big Four — PricewaterhouseCoopers [PWC.UL], Deloitte & Touche [DLTE.UL], Ernst & Young [ERNY.UL] and KPMG [KPMG.UL] — audit about 80 percent of all U.S. public companies and 97 percent of the largest companies with more than $250 million in annual sales.
But Grant Thornton’s quick entry and exit from the subprime lending industry suggests that to gain access to larger firms and compete against the Big Four market dominance, smaller auditors may be picking up the unwanted leftovers of their bigger rivals and taking on additional risk, analysts said.
On Monday, Grant Thornton resigned as auditor for Fremont General Corp. and Accredited Home Lenders Holding Co., saying the two companies that make loans to home buyers with poor credit histories “no longer meet our requirements for client acceptance.” (Ouch!)
http://www.reuters.com/article/governmentFilingsNews/idUSN0534402320070406
“Carlos Fuentes, who presides this year over the Greater Tampa Association of Realtors, said buyers haven’t turned out as expected this year. He blames the standoff mostly on sellers fixated on reaping top dollar for houses that have depreciated.”
Unscrupulous realtors used fear and a sense of urgency to con numerous “clients” into buying overpriced houses in 2003-2006 - “Buy now or be priced out forever!” Now, with inventories expanding and sales contracting, I can imagine these same realtors - those who want to eat, anyway - telling numerous “clients” - the sellers, this time - to “lower your price now and sell the damned thing before the bottom drops out, or you’ll be underwater forever!”
While most realtors deserve only contempt, those that see the writing on the wall might end up being allies of convenience. We don’t want to overpay, and they’ve got bills to pay - a convergence of agendas that doesn’t bode well for greedy sellers and overpriced real estate.
Sammy, I know for a fact that this is happening. Here is an except of an email I received from an agent a few months ago,
“The key is, there are several sellers who need to sell now. Do they want their home to sell now, or do they want to take a chance and chase the market. That makes my job a bit easier. I create that fear in their minds. They either sell it for less now and cut their losses, or they chase the market.”
The tables have turned and the predators have the sellers in their gaze now. While that will help drive prices back toward the levels most of us bears feel they must go to, beware that potential buyers are still prey as well. When I was up front with my bearish position recently with another agent and I mentioned I expect a 40 to 60% haircut the response was swift and full of bravado … and I paraphrase … “We’ll never see that deep of a discount. I’ve been in this business for 20 years and … blah blah blah”. Suffice it to say I was diplomatic and said I was willing to wait and see.
The Subprime Meltdown and the Ownership Society
By Dean Baker
Saturday, April 7, 2007; Page
A huge percentage of the easy-money mortgages issued to low- and moderate-income families in the past few years are going bad. This has led to bankruptcies for the big lenders in this market and millions of dollars in losses. The chain of defaults has also raised concerns about the mortgage and housing market more generally, and a growing number of economists view a recession induced by a housing crash as a distinct possibility.
The full effects of the collapse of the subprime market remain to be seen, but it is not too early to talk about the policies that got us here. In particular, the government policy of promoting homeownership should be examined.
http://www.washingtonpost.com/wp-dyn/content/article/2007/04/06/AR2007040601522.html
Love to see that topic discussed in more detail. We should also examine ways to prevent it from happening in the future.