Bits Bucket And Craigslist Finds For April 30, 2007
Please post off-topic ideas, links and Craigslist 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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Name:Ben Jones
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Abn Amro “won’t Touch This”, Comparison of UK and US housing markets
including also charts about france, netherlands, japan etc…
Housing? What Housing? I Don’t See Any Housing: Caroline Baum
The Apple iRack / :-)!
China Tightens Bank Credit Again / stocks up 2%
http://immobilienblasen.blogspot.com/
And how about the U.S.?
Here is an excerpt from Jim Sinclair and Dan Norcini’s recent article:
“Economics and political circumstances are in a downward spiral. All spirals go to infinity on the upside and zero on the downside unless major REAL EVENTS OR POLICY CHANGES OCCUR as acts of intervention. The chance of this happening right now does not exist. We have the PPT (plunge protection team) and the RPT (rally promotion team), the Department of Spin which employs a cadre of rogue psychologists. Lies have replaced truth. Falsehoods replaced statistics. Revisions become beards for fabrications. Key indices are hidden from public view (M3) so that liquidity can be pumped in secrecy. A Fed that publicly states that perception exceeds reality. Amorality is the rule of the day. There are no rules for the Authoritarians in the corporate world. Regulations apply to the schleps only. Big money in finance has no regulation whatsoever. Over the counter derivatives and hedge funds represent the greatest front of capital in the history of the world, yet remain functionally unregulated. Sodom and Gomorrah are not cities, they are the unregulated huge financial centers of activity.”
http://www.jsmineset.com/home.asp
Awesome. They said everything I wanted to say.
–
I have said the same in more frank terms:
America — a nation ruled by Bankrupters and Fraudsters of New York City. It is not amoral; it is immoral. Of course, the population has to be trained to accept the rule of Bankrupters and Fraudsters. In the name of supporting the Amerian System we support evildoers. Evils of nationalism writ-large.
Jas
Does it really mean anything when China says they “tighten Bank credit”?
“The things that will destroy us are: politics without principle; pleasure without conscience; wealth without work; knowledge without character; business without morality; science without humanity; and worship without sacrifice.”
Mahatma Mohandas K. Gandhi
Gandhi should have said wealth without productive work. The hedgies must be going 100 hours a week, but in the end that will not save them.
You don’t need to be Ghandi to know we’re completely effed, but it sure helps to have someone with credibility say it.
OT, but, when will we get another Ghandi? or are things so bad that someone like him could never rise to the position he was in?
231 years later…
Anybody up for a revolution?
Periodic revolution, is “a medicine necessary for the sound health of government.”
“The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.”
Thomas Jefferson
My favorite Gandhi quote is his answer to: “What do you think of Western civilization?”
Pretty cheeky coming from a guy who lived in a country with institutionalized racial discrimination (caste system).
I’m not sure the Indian caste sytems is based on race. Actually, doesn’t it work a lot like the social classes in the US (except in India everybody knows about it)?
No wait, everybody can make it big in the US if they work hard…. the proof is American Idol or the reality shows.
The proof is people like my father who lost his coal miner father at age 12, started work in a breaker after high school, saved to go to college, graduated, and built a comfortable middle-class life for my mother and their 3 kids. The three of us used that foundation as a stepping stone to even more financially successful lives.
America is still the land of opportunity. Why do you think we have to work to keep people OUT, when countries like Cuba (workers paradise) have to work to keep people IN?
Gandhi also said, “hate the sin love the sinner.”
I’m not spiritual enough to loves these pukes who are financially raping our country.
Thanks, aladinsane, I wrote it down. It’s beautiful.
Good morning Sopranos fans. Who watched it last night? Carmela finally sold her spec house. It is amazing how that show taps into the reality of the current day. Two seasons ago she bought that land in Jersey when the entire market was steaming like a cowpie in August. Do you remember she paid $600,000 and was so happy just to have the right to buy that golden soil?
Who finally bought her house? After languishing on the market for months she had to sell it to her cousin. Did you hear the comment (I think by Tony) when he said something like, “your mother sold her house. That’s not an easy thing to do these days.” The funniest part is that it was a house that must have sold for nearly $2 million and it was still built using substandard materials. How many rich people have gotten swindled during this disaster? Bwahahaha.
The makers of the Sopranos know that the Jersey bubble has burst in a big way. I wonder how many of their North Jersey fans got it. The people we know in North Jersey were still in denial 4 months ago. I think Jersey is ahead of the curve and moving to the next stage. Good job David Chase.
Television truly is a wasteland, but every now and then, it manages to slip in something worthy, The Sopranos being a prime example.
Not only was the real estate bubble touched upon yesterday, but the perils of gambling were laid bare…
A cautionary tale, from tv.
Last week I was trying out my new satellite TV and King of the hill came on… normally never watch it, but heard the word “Realty..”
As soon as I figured out the red coated real estate agency, full of flippers, was the evil that was ruining the town I flipped it off… but that alone gave me a great laugh!
Oh… this has only begun…
Got popcorn?
Neil
Even better,
did you catch that Carmela’s dad has been building substandard houses for 30 years, because he had “friends” among the building inspectors. Tony telling Carmela that her house was gonna collapse and kill the couple’s baby..and later reassuring her that her cousin had done plenty of rotten things and deserved to have his house collapse.
Carm was nervous until the house closed…worried about the buyer’s financing.
Kudos to David Chase.
Carmela’s house hasn’t closed yet. At the dinner table, she said it had passed the inspection but the deal was still contingent on the buyers getting a mortgage.
During last week’s episode of House, House made a quip about the real estate market being terrible. For those not familiar, House is set in Princeton, NJ.
jb
Yes and he told the RE Agent, Wilson’s ex, to get out of that line of work too. But I think that was because she was apparently a terrible agent. Something about letting the client set the agenda.
Yes - very cool - I guess having a mob boss as a husband really helps at time. It’s nice to know the appraisal and inspenction process went smoothly.
She cleared $600K right??
Yep. Wasn’t that nice of her cousin to take hold of that monstrous hand grenade?
I am not absolutely sure but I think the inspector was the guy Carmela almost had an affair with….the paper hanger converted to home inspector….also recall Tony calling the guy who owned the sporting goods store a degenerate gambler after they busted him out. I recall him telling someone to never have sympathy for a weak gambler.
Question- where did Tony get the money to pay back the $200,000?-Carmela?
Another guy who drew the “degenerate effin gambler” epithet from Tony was the HMO bigwig that he and Chris Moltisanti chased and beat up who later agreed to the MRI claims fraud deal.
The symmetry of Tony living way beyond his means to gamble and consume, ending up further and further in debt despite his more than ample income foreshadows his inevitable decline and increasingly imminent demise with 5 episodes to go.
He’s living on borrowed time as well as borrowed money, and I kept waiting for Hesh or one of the other guys to start plotting to whack him because the gambling, losing, and debting is a sign of weakness and vulnerability and Tony’s supposed pals are just sharks circling looking for such to be taken advantage of. The big show on the outside and the increasingly hollow financial reality is a metaphor of much of American life.
My sister and BIL have a very nice house in a gated community in NNJ. He says the market is pretty safe there because of all the stock broker money.
I guess the stock market can only go up.
“It is testimony to the lack of rationality of a lot of people in the market”
Joseph Stiglitz
“…And yet the stock markets float serenely upwards, as if they had not a care in the world. The great and the good of the financial markets have a rationale for this, which goes as follows. Share prices are high because corporate profitability is high. Corporate profitability is high because the global economy is growing rapidly, with demand more evenly spread around the continents than it was three or four years ago. There may be risks out there, but these risks are both discernible and quantifiable. The chances of a serious market disruption are, therefore, extremely slim and the likelihood is that stock markets will ride out any short-term problems caused by a touch more inflation or slightly tighter monetary policy.
This is a comforting analysis. It may also be hugely complacent. Nassim Nicholas Taleb certainly thinks so. His new book, the Black Swan, is a fascinating study of how we are regularly taken for suckers by the unexpected. Why Black Swan? Well, apparently, before the discovery of Australia it was assumed that all swans were white because nobody had ever seen one of a different shade. It took only the sight of one black swan to disprove a theory based on millions of previous observations.
Taleb argues that there are three attributes of a Black Swan. The first is that they lie outside the realm of regular expectations, with nothing that has happened in the past able to point to its possibility. The second is that they have a huge impact. The third is that despite being unforeseeable, human nature means we construct convincing explanations for the appearance of a Black Swan once it has happened.
Markets tend to work on the basis that Black Swans either don’t exist or appear with such irregularity that they are not worth worrying about. As a result, traders in the City of London went home on the night of August 3 1914 seemingly oblivious to the fact that a world war lasting more than four years would start the next day. Similarly, there was not the slightest suggestion on Friday October 16 1987 that the Dow Jones would lose more than 20% of its value the next Monday. The Nobel prize-winners Robert Merton and Myron Scholes, who put together Long Term Capital Management and convinced their investors that their models made it a sure-fire bet, had failed to factor in the possibility of a Black Swan - in the case of LTCM, the Russian debt default in August 1998. … Extreme price swings are the norm in financial markets - not aberrations that can be ignored. Price movements do not follow the well-mannered bell curve assumed by modern finance; they follow a more violent curve that makes an investor’s ride much bumpier,” Mandelbrot says in his book The (Mis)Behaviour of Markets (Profile Books). “A sound trading strategy would build this cold, hard fact into its foundations. … If I knew what the next Black Swan was and when it was going to glide into view, I wouldn’t be doing this job. If a Black Swan was predictable it wouldn’t be a Black Swan, but the fact that markets can see only white swans suggests that the shock - if it comes - could be profound.”
Guardian
April 30
http://tinyurl.com/yrgzxe
I do not believe I could express it better than “how we are regularly taken for suckers by the unexpected”.
“To expect the unexpected shows a thoroughly modern intellect.”
Oscar Wilde
No, didn’t catch Sopranos, but Saturday nite watched a hilarious skit on Mad TV lampooning typical Italian-American stereotype.
Haven’t seen that show in a while, but they have a pretty good cast right now.
I’ll need to catch that.
remember a few years ago when Tim was the hero of the nation - can’t recall the show, but it was about fixing up your house (This Old House?) - help me out here, I don’t have a tv. What happened to Tim?
You’re thinking of Bob Vila. Tim Allen used to portray a parody of Bob on the sitcom ‘Home Improvement’.
The cult of St. Joseph?
Wasn’t so kind to Jesse James, where he met his demise…
http://en.wikipedia.org/wiki/Saint_Joseph,_Missouri
here in northern new jersey this week. oversized mcmansions abound everywhere. for sale signs on most of them, some with a “new price”. the disturbing thing is how many new mcmansions are going into the ground as we speak, many in horrible locations (busy corners, under high tension wires, etc.). guess the builders didn’t hear that the bubble is deflating.
Margins are still high enough for builders to gamble here in North Jersey. However, the only builders left gambling are those who either weren’t around through the early 90’s slump, or those who already owned land. For those who owned buildable land long-term, the market is still good enough to go forward on those projects. Like I said above, most good builders have enough margin to significantly undercut the existing homes market and still profit.
jb
I lived in the burbs of Denver for 5 years and went up into the mountains via I-70 quite a few times. I still cannot get over all of those big houses that line the interstate around Genesse. I guess maybe people that live next to six lane highways are deaf. Probably dumb as well.
Driving around LA Saturday noticed lots of new condos right up against the freeway, too. One is so close to the 110 downtown that if an accident happens on that stretch of freeway it may end up in their living room; even if it doesn’t, it’ll sound like it.
sort of OT, but I woke up one morning years ago when I lived in Boulder to a crashing sound - someone had missed the curve and a car literally hung out of my neighbor’s garage door (closed) it was a good 6 or 8 ffet off the gournd, just the rear end sticking out, like in a movie. No one hurt. took some great photos.
sorry for all the typoes in my posts, my keyborad (see???) is sticky frm all the spilled coffee from reading the funny and clever posts here
South florida: Important pointers
1.Roughly one-third of the homes in Miami-Dade and about 40 percent of those in Broward aren’t covered by the homestead exemption and cap on assessment increases, available only to permanent residents.
2. ~25% of the current mortgages in SoFla are of subprime variety..US is 15% and FL state is ~20%
3. rentals have become soft and will be SOFTER years ahead (good deals abound)
4. prices in most (except for rich hoods) are at~2004 levels (of course w/ bargaining)
5. 2-3 yr supply..
6. Big supply of condos coming onto the market in 2007/2008 (these projects were started in 04-05 at the ht of the boom)
7. no water.
Got good news and bad news for Florida. The good news is that the water supply will be replenished this summer. The bad news is that it will be replenished by hurricanes.
So the condo supply goes to 50 - 60 months?
“So the condo supply goes to 50 - 60 months?”
Probably, IMO. For sure, if a major storm or two hit Florida this year. Much of the property tax issue will abate along with declining prices/values — year 2000 prices will result in year 2000 taxes plus whatever fat the pols baked in with added recurring costs. But the insurance problem isn’t going away anytime soon and the flippers are unlikely to return for a decade or more, all IMO.
A steak dinner is riding on this: I say the median home prices in Massachusetts will be 50% off the peak by December 2008. My friend says no way. Who wins? I am afraid it won’t be me. I have no doubt prices will be at least 50% off when all is said and done. But in this case, time is not my ally. There is still a lot of denial out there. If and when there is a bail-out and/or a rate cut, I think we will be off to the races again. So why did I take on this wager if I am not confident? Well, I am just putting my money where my mouth is. I sold and rent in 2004 and have been saying ever since that I will be able to cherry pick bargains in 2008.
Think pendulumly…
The natural reaction of a pendulum, when it swings too far, one way or another, is to swing just as far, in the opposite direction.
i.e., in the i.e.:
A house in the i.e. was probably $150k 7 years ago and is now “worth” $500k, in theory…
When the dust settles, that house will probably bottom @ $50k.
Repeat this rinse and wash cycle, in a suburb, near you.
Beef, it’s whats for dinner, but only if you’re a renter…
sorry you will lose your bet…
that said, I would not be surprised if MA RE falls by 50% in REAL (not nominal) terms over 7-10 years.
our govt and the fed will continue to inflate our currency, so that nominal housing values will be able to fall just a little, while real values plunge 5-10% per year. it’s easier on the sheeple this way.
As Julie Andrews sang in Mary “RE Bubble is” Poppins:
Just a spoonfull of steath inflation helps the medicine go down, the medicine go down, medicine go down.
That’s classic….LOL
HIC…
Luv the Poppins~
I HATE YOU !! (YA sure) Cue the media player… It now singing “a spoon full of sugar …”
Wasn’t a bank failure one of the main plot points in Mary Poppins?
Yep, they had a bank run in that movie. Forgot all about it until I watched it with the kids a couple of months ago.
The absent-minded father was a banker.
HIC, I think he likely lose the bet, but only because of the short timeframe and not the price. As we’re always noting here, the inflation hasn’t made it into incomes and isn’t likely to.
December 2009 would have been a winner, IMO.
You are on the right side of the bet. But whether the fall is 50% or 45% or 40%, it will be substantial. And falling prices won’t end in 2008. Just as they did in Japan, they will slide and slide and slide until well after 2008. Unlike Japan, we have the sword of Damacles over our real estate markets head…the looming massive re-set of the adjustable rate mortgages. Our next few years will be extremely painful to ARM borrowers.
also, we’re a debtor nation ,personally and nationally while Japan saves
not fun to think about
I think that Japan might be the nation that funded all of our construction. In the end we will have the homes and they will lose their investments. So much for savers!
Be careful what you wish for….A 50% broad based decline in real estate valuations (even off the peak) would spell big trouble for ALL America IMO….Even the renter is not safe if they don’t have a job….
It’s not a wish, it’s an unfortunately likely reality. Best prepare for it now.
Last time it happened was 1929….Have you ever sat down and spoken with someone that was a adult in 1929 ?? Much more meaningful then reading about it…
scdave,
In during the last downturn in LA, many homes lost 40%+, even nice homes in nice neighborhoods. That was in **nominal** dollars, BTW.
Of course, this time will be worse — and much more drawn out as the PTB try in vain to stem the tide. Those resources could be put to much better use (like stimulating the job market, healthcare & education). Let’s hope the politicians see the light & choose not to back RE in a foolish attempt to artificially prop up housing prices.
Sorry for the typos!
1990-93 ??
my dad wrote a book about growing up in the depression on a Colorado ranch. Everytime I read parts of it I’m amazed at how they survived and I’m also amazed at how much survival do-it-yourself knowledge we’ve lost in just one or two generations.
I talked with my great-grandmother who is turning 100 later this month about the great depression in Texas and the stories she told me were very troubling…
Most kids today don’t know how to tie a proper square knot.
scdave,
Yes, the 1989-1996/1997 downturn (different areas topped/bottomed-out at different times).
I believe you said you were a RE broker (???). If you can get access, check out Beverly Hills, Malibu, Woodland Hills, Tarzana, Sherman Oaks, Studio City, Burbank, Glendale, Pasadena, etc. These are some of the best areas in LA, and I’m certain you will find plenty of examples of same-home sales where prices were down **at least** 30% from the peak to trough.
it all depends; the Netherlands had a 1.5 year, -40% home price crash around 1980. It cured speculation with empty homes and some other economic distortions and hardly had any effect on the real economy or employment rate.
The problem with the current bubble is that it’s not just about high home prices, but there are many, many other intertwined bubbles that could burst at the same time and make things messy. But I still think a quick -50% crash would be much better for the average citizen than 15 years of watertorture.
I think Eventually you will win, remember millions and millions, of people don’t have to move or sell or they might be forced to die in their now depreciating homes. And die broke….
My landlord has owned this house for 40 years, so whats his yearly cost on a paid off home?
Plus don’t forget people like my Landlord has a lot MORE PROFIT then the $250,000 cap gains exemption on this house…. so he would have to pay taxes, and then what? buy a smaller high priced kondoze And you know those kondoze never have a big enough garage for a kaddylack….
He is from the old school, who cares about $3 gas, if i get in an accident I’m walking away from it with my kaddy! No Prius for him!!!!
50% by December 2008, eh? Ouch. I’m not optimistic about prices holding up out there. Yes there will be big drops, but I think you will lose anyway. Time is indeed not your friend. There are very few markets where you might see a 50% adjustment. (South Florida maybe?)
Now as Clouseau said above, if you went for a longer term AND went with real instead of nominal prices, then you might have a good shot at it. Otherwise youre talking real housing disaster. Oh wait, that was your point, eh?
Of course you will be the winner if he is sitting on a house that has ONLY dropped 20,30 or 40% while all you are out is a steak. Light the grille!
Local observation in my neighborhood in SW Kansas City (Olathe). REO’s and short sales selling like hotcackes along with a well priced normal listing….Everything else is sitting for months and months. This is in a location where median income and housing is at the 3x mark. I find that telling in a market that isn’t out of whack as CA FL and AZ.
corn belt is like the oil patch
both strong for now
Since this is the Bits Bucket, just who is buying all that corn (not just the futures)? I have yet to meet one person who will pay 50% more per mile driven, to put ethanol in his vehicle’s tank. The BS in the media has been that ethanol demand is driving up the price of corn (along with, to be fair, increased demand from abroad). Just where is this end-user ethanol demand today?
Unless you’re driving a diesel. it is in your gas tank. ‘Gasoline’ is now required to be formulated with 10% ethanol.
Got a link for that? Also, when did this requirement begin? The corn price spike began only within the last year.
Just read the pump
Kansas isn’t really the corn belt….generally not enough rain, especially from the Flint Hills west. And is there any agriculture left in Johnson County?
I was at the gym on Saturday. I over heard a woman tell her friend, “We’re talking our house off the market. The realtor said she expects the rates to come down some more this summer and then we can relist it. At worst she said this would turn around next spring.”
I got a better ab workout from holding in my laughter than I did on the Nautilus equipment.
Bet cha….She will put on 20lbs next year and cancel her gym membership……
Bernanke doesn’t truly know where he is going to throw the rates, but realtors do? Folks take realtor’s advice without a second thought–on one of the most important financial decisions they’ll ever make. Astounding.
What amazes me is that people seem to think that it’s the RATES that need to come down. The two main factors in home affordability are rates and prices. Rates are new all time lows, so what does that tell you about prices.
Rates are at all time lows? You been listening to sleazy mortgage ads, or what?
Rates are rather low in historical terms right now, but the real lows were actually set a couple of years back, with a modest uptick in long term rates since then and hefty uptick in short term rates.
I meant to type, “rates are NEAR all time lows” sorry. Which is true.
I forgot to add, though: I completely agree with you that the prices are the problem right now, NOT the rates. The modest uptick in long term rates adds a couple hundred a month to a house compared to the low point a couple of years ago; the price bubble adds many times that, based on pre-bubble pricing.
This worries me a bit. When prices come down, how high will rates go up? are we going to be in the same boat? inaffordability due to rate hikes?
“When prices come down, how high will rates go up?”
I think that when prices come down, unoccupied inventory will be reduced — that does not apply upward pressure to rates. When an unoccupied living unit sells, either someone moves into it — likely creating another unoccupied unit — or it is a second/multiple dwelling. There is a huge and growing inventory of unoccupied units.
In markets past, when rates declined, prices rose because people largely based their purchase on the monthly payment. In other words, people bought a house they could afford. Where this bubble blew things apart is that a LOT of people bought homes they cannot afford, even with lower rates. If mortgage rates rise in the near term, it will be due to factors unrelated to price declines, IMO.
chicagobb -
I’ve seen a few homes pulled off the market around here also. You’ve just given the explanation for the change of heart.
and this -
I got a better ab workout from holding in my laughter than I did on the Nautilus equipment.
Yeah, Nautilus got nothin’ on Realtor Hijinks and Hilarity.
Patricia-
Rising interest rates are your friend. The higher they go, the lower the price of houses. The lower the price, the better chance you’ve got of actually paying that house off quckly and getting rid of the mortgage payment all together.
Personally, I’m hoping rates go to previously unseen record heights. I’d rather put down a huge downpayment on a 200K house at 20% on a 15year mortgage than pay through the nose on the same house at 600K/6% interest for the rest of my life.
I want to OWN my house some day. Not keep paying for it in dribs and drabs to the bank for the next 30 years. The lower the price, the better chance you’ll own it quickly.
I bought my first house in the 80’s at those record high rates. The house was so cheap, I put 30% down after just 1 and 1/2 years teaching High School. It was completely paid off within 7 years and when I sold, I kept ALL the profit.
High rates drive prices down. The higher they go, the better. Period.
Foreclosure: an auction adventure
http://tinyurl.com/272wdk
ock:
Thanks for the link…
Auctions are for pros, not the booboise.
Step away from the bidding paddle and nobody gets hurt.
Krynen was disappointed but not disheartened. She picked up some pointers about buying a house in foreclosure and is eager to test what she’s learned. “I hope another opportunity comes up,” she said.
She’ll have another opportunity, all right, especially if she does buy one of those “bargains”: she’ll get to see what it looks like on the other side.
So true - I have seen foreclosed houses with basically the guts torn out!
Made a trip out to western Wisconsin where the Twin Cities suburban development has jumped the St. Croix river and 30 miles into Wisconsin hundreds and hundreds of homes are for sale….nothing seems to be moving either….most are of the 300-400K McMansions…..you can tell the market is drying up farther you are in the ex-urbs (gas = price =travel).
Wonder now with Bay Bridge into Frisco out what suburbs in East Bay will do?
Bart tripled the number of cars but its still going to be a nightmare…
Reader since summer 2004, only rarely do I post…
I’ve seen lots of debate here about how far prices will fall on 300k+ homes, condos, impact on rental rates, etc. But what I haven’t seen much of is how homes in flyover country that haven’t bubbled and are 200k and under will fare. Our neighborhood has seen about 4% appreciation per year over the past seven years - not very bubbly at all. It is a middle class neighborhood in the city.
We’ve been looking forward to moving eventually to something more in the country (not a McMansion - just a nice basic house with a little land). Now I’m starting to wonder what might happen in the years ahead to our neighborhood. Could a neighborhood like ours become increasingly attractive because it is in town, older solid homes built primarily in the 1920’s, and available for what is really a very attractive price compared to a lot of the unbelieveably overprices shacks I see linked to here and elsewhere?
I’m thinking rising gas prices, increasing failure of McMansion developments in surrounding areas, etc. could bring about a major revitalization of many city neighborhoods in the next ten years.
What do you think?
Sorry, that should have been summer 2005. Momentary time warp…
I also live in flyover country in the Midwest. Things are quite slow in my town (30,000 people). Things that are priced right sell within a few months. Things that are overpriced are not moving. One house in my neighborhood has been on the market for over a year. I think it originally listed at 140K, went down to 120K, had a bunch of work done to it, and was re-listed at 128K. I expect that if I had to try and sell this year, I’d list my house at the same price it was listed for in 2001 when I bought it (I didn’t pay list), and be happy if I broke even.
“I also live in flyover country in the Midwest.”
Been there a number of time (usually United Airlines). Read recentl;y that some small towns in Nebraska have 40% of their houses on the market - not from the bubble, but from the falling economy - no jobs.
I live in flyover country too and there has been housing price inflation here, nothing like elsewhere but prices are still out of whack with what people can afford. A friend who thought she had sold her house had it fall thru because the buyers had a contingency to sell their house, and they didn’t. My friend says the market is dead now - no one is looking at the house (this is in SW MO near Branson).
In my town, between Joplin and Springfield, I talked to the Mediacom guy as he was disconnecting the cable from an empty house now for sale. He says 1) Half the houses for sale are empty. 2) Many people who put their houses up for sale (and didn’t have to sell) have taken them off the market. 3) It’s very slow. 4) He knows quite a few people that bought a new house before selling the old one and now they are very sorry…
Feet on the street info. This is in a small country town of 4,000 people where the local contractors put up a few McMansions and a couple hundred cheap starter homes and a bit of everthing in between. The housing stock ranges from Fake French Chateau to trailer trash (often next to each other).
Saratoga;…Having lived in the bay area my whole life stories like the one you just shared seem wierd to me…Even in tough times a home priced correctly to the market does not take more than 3 or 4 months to sell…I have a friend in Michigan that took him almost two years to sell his house….It seems like (In Fly Over Country) its easy to get in but hard to get out ??
In a small town the number of potential buyers is so small that lack of liquidity results in market gridlock much more quickly and easily than in the city. In the city I assume there are *always* buyers if the price is low enough? In a small enough town there can be literally *no* buyers during a downturn. A “couple hundred” extra houses in a town of 4000 is a huge oversupply. I imagine the excess will eventually be used to house drug production or livestock or just host keggers on the weekends.
During a downturn years ago in the small town I grew up in, one of the guys in the band I was in had a mom who was a real estate agent. We got to use a nice middle-class house as our own personal practice studio for as long as we wanted it. I have no idea where the owners were…
I think that how the lower priced markets will fare will depend a great deal on their job markets. If the local job pool consists mostly of low paying McJobs ($10/hr), then a 150K house is expensive.
A good comparative illustration would be to compare Larimer county (Fort Collins, Loveland) with Weld county, which are neighboring counties in northern Colorado.
Larimer County has an average household income that is substantially higher than Weld (about 15K IIRC). This difference is perhaps one expalanation why Weld has about 5-6X as many houses in the foreclosure process as Larimer, even though Larimer has a much larger population. House prices are somewhat lower (say 10%) in Greeley than in either Loveland or Fort Collins, and are falling while Larimer prices are holding steady.
Prices will fall everywhere. Not to the same degree, of course, but the economic fallout from the bubble markets will ripple outwards in terms of tighter credit, fewer jobs, etc.
Sallie — since you asked — I would research the property records to see what a house, similar to any you will consider buying, building or selling, sold for in the year 2000. Add a bit for building (but nowhere near the markups in 2005-06), no markup for existing.
What you might find is that there was more of a bubble than you thought. It just sort of sneaked in there. I live in Florida and have been researching houses in Mississippi, Alabama, Georgia and South Carolina. In all of those, when I go to the tax records I find price increases, since about 2000, much greater than the 3%+ that is the long term norm. In places where the real estate agents say they’ve seen no bubble, prices rose 10% a year.
To me, it’s like a disease that takes a long time to notice, and then it’s too late for an easy. Unless your town outlawed cash-out refinancing, home equity loans and lines, and no-down or super-low down home purchases, prices there likely are still “bubbly,” just not as much so as areas like Florida.
Sallie: Could a neighborhood like ours become increasingly attractive because it is in town? What about your neighbours? are they in good financial shape? My guess is that they are, that you trust them, well most of them. I’m guessing that you have a rail line through your town, that’s a good thing.
Panama has no central bank and has one of the best working financial systems in the world.
Good article. Good stuff
http://mises.org/story/2533
roguevalleygirl;…..Nice post…Thanks…I am going to go to Panama soon and may consider buying there…My understanding is that they treat Americans prety well there….
By the way…Have family and friends in the rogue valley…
and remember Mogadishu: no government at all and many problem, but they have the latest communications technology and telephone rates are among the lowest in the world. That’s what you get when there is no government and central banksters to mess up the markets like they do in the US and Europe.
Panama does have a central bank - the US Federal Reserve.
Panama’s economy is directly tied to the US Dollar.
“US dollar as its de facto currency” And they forced silver coins out of circulation by decree.
No fiat currency?
hehehe
This just makes it one more US state economy.
We’ll crush together.
This gas thing is a real wild care. I actually heard some talking heads say it would have no impact on the country. Spoken like a true mass transit commuter.
I see it as a huge emotional barrier to a lot of things and a big part of deciding where to live. I think it will boost the close in and hammer the far out. At $4 a gallon I know I will be thinking about long runs. Heck, each gallon is equivalent to a nice cold cocktail. Now that is plain unamerican. I guess a drink will now go up. The horror.
I guess a drink will now go up. The horror.
This is going down as Joe Sixpack is having the cold one pried from his clammy hands.
And yet… the resets do not start their stride until June. They build until Christmas… Patience folks, patience.
Got popcorn?
Neil
“And yet… the resets do not start their stride until June. They build until Christmas… Patience folks, patience.”
That is somewhat comforting for the still-too-few LA doom and gloomers such as myself. Was at my in-laws house this sunday and actually did vent my views on the inevitability of LA bubble collapse. Everyone in my family still in denial or saying stuff like” RE will go up again” or “RE is always a good investment”.
Problem is that three of the married couples there(one of them my sister and BIL), own homes, 2 in long Beach and one in Santa Ana, so naturally they need to keep being deluded or in complete ingnorance/denial. FOR sure my BIL is a complete spendthrift idiot when it comes to financial matters and buys all kinds of useless crap instead of saving and investing.
I actually got my points across about the sorry state of the current CA RE Market after some animated, somewhat raucous discussion. Having been a daily consumer and occasional contributer to Ben’s Blog for over a year now I have plenty of ammo to argue-counterargue with the disbelievers in LA, the last bastion of RE bubble stupidity.
Peter M, I wonder what your brother-in-law calls you when you aren’t around. Probably not anything good.
I can hear it - tightwad, doesn’t know how to live for today, never has any fun, doesn’t he know he can’t take it with him, ever see a hearse pulling a U-Haul -on and on. I know, cause I used to use the same words myself about my tightwad friend who has money in the bank - but now I’m one of the converted, bruther…
“I know, cause I used to use the same words myself about my tightwad friend who has money in the bank - but now I’m one of the converted, bruther… ”
I enjoyed that statement!
How many of us are converted who used to be spend-o-holics too until we started to see the big picture?
“How many of us are converted who used to be spend-o-holics too until we started to see the big picture”
My conversion came rather late if my life, after I turned 40. Up that time i enjoyed life to the full, made ton’s of money but blew it all on trips, stupid bling, parties, and did essentially all of lifes adventures to the full. After i turned 40 i had to think about investing, saving for retirement, making wise financial decisions. Been thru some really hard knocks as far as making stupid business/investment/life choices but experience is a hard teacher.
I do admit to living somewhat frugally but have had my fun and all the splurging one could ever do: now is the time for saving, investing and belt-tightening.
Fortunately i do have a good nest-egg in my fully paid-off LB home, which has plenty of equity and will not be used as a cash machine for useless crap. Only in case of of a catastrophic medical bill will I think about tapping into it, and before that i will run up my $100,000 in available credit on my CC’s.
I find that most in LA think…the usual…’it can’t happen here…because it’s different here’ After all every body wants to live here…right?
Everybody in Oaxaca does.
yeah but the bettings good.
I’ve got a steak dinner bet that Manhattan Beach prices will be lower in two years than they are now.
My husband says to make sure it gets on the calendar.
Be patient.
The number of listed (on foreclosure.com) foreclosures went up from 2,095 on 3/30 to 3,280 on 4/30 in LA county. Almost +60% in one month.
But it has a long way to go. The Preforeclosures stay at 12,600, only slightly higher than a month ago. The ratio is about 0.26, but going up quickly.
For comparison, in San Diego county, where the crush is maturing now it’s 0.73. In Sacramento it’s 0.82. Similar in Riverside.
What keeps the LA and Orange county afloat are still high prices, that allow for short sales. But it is temporary. Since the number of available foreclosed properties keep growing it will make short sales much harder, which will increase the grows of the number of foreclosed properties - a chain reaction.
On the other hand, Sacramento county is close to the situation like in Chicago and Detroit, which I would call a black hole of demand. They do draw the demand from neighboring counties, but the supply is so huge it does not make any difference for their markets.
Look at what’s going on in smaller counties around Sacramento: Yolo, Solano, San Joaquin, Sutter, Placer. They are quickly getting close to the situation in Sacramento. From them it speads further, to Contra Costa and Alameda.
We’ll see the same thing in LA and Orange counties within a year. Only then the prices will start crushing and for a lot of time we’ll have a lot of houses that must go, but can’t. Some may end up cmpletely demolished or burned, like in Detroit.
Remember all RE bubble is local, but the bubbles are interconnected. When one deflates, the air starts getting there from it’s neighbores, which busts their bubbles.
Prices really jumped again this weekend. Just refilled at $3.59/gallon for premium in Burbank at one of the consistently cheaper stations (Shell). We’ll see $4.00/gallon regular this summer for sure.
p.s.: Saudi production down 8%, Mexican production down 17%.
Mexico’s Cantarell field and the big black monster Ghawar in Fraudi Arabia are both past peak, particularly Canttarell.
Visualize Mexico with no oil and no war to export their population since the construction jobs in “El Norte” are gone with the Bubble.
LaRevolution….
As Neil would say, make popcorn.
L.A. Revolution?
Yes, it will get interesting if you live in the southwest by 2020….
One nation in open revolution….other in economic woes…both running out of oil and water…..
By 2050, I expect a big depopulation in that part of the world from L.A. to Salt Lake to Denver to West Texas…..too many people…not enough water or gasoline or funny money to paper it over.
I think that this is one reason why there is a push to unify the 3 North American Economies into 1. I think that by 2020 there will be a strong hispanic seccessionist movement in the SW. I think that they are hoping that North America can become a major exporter of natural resoures (lumber, minerals, cattle, etc.) and use cheap Mexican labor to make the stuff we won’t be able to buy from China due to lack of hard currency.
Personally, I think the North American Union will be too little, too late.
Not to sound too Mad Max or New World Order’ish anything, but the state of Colorado will just turn off the water fountain and Vail to LA will dry up. You think gas is expensive? Wait until fresh water is $10 a gallon.
Actually, Denver may find itself to be in a pickle. A very large portion of Denver’s water is extracted from acquifers (wells) that are projected to run dry by 2020.
As for Colorado river water, there are all sorts of treaties that specify who gets how much from the river. Colorado has no legal authority to shut the tap dry. People who live along the river banks are not allowed to extract water from the rivers for their properties (unless they water rights).
how could they turn off the water fountain? now there’s a gubmint question for you. How in heck could you stop the Colo River from flowing - a half-dozen Glen Canyon Dams probably couldn’t do it. You’d flood half of Utah/Colorado before you could stop the river. Except during drought years…then, only God knows…
There are major issues with refineries and imports keeping up with demand and inventory is dropping at an unprecendented rate and most of what’s left is what’s needed to keep pipelines and distribution running. It is quite possible that there will be gas shortages sometime this summer even without a gulf hurricane. Watch what happens with Denver - right now because of a pipeline leak and earlier refinery issues there are some spot shortages there now.
Chad — glad you differentiated between refinery problems and oil-supply problems. Tin-foil would make me think that our slimy politicians have been bought off from pursuing the refinery issue. If they were hot after solving it, seems like we’d be reading more about that.
When I got my driver’s license, gas was 30c, smokes were 30c and silver was about a buck. They all seem to have the same relationship. $4 gas isn’t really that expensive, a 1/4 gallon dollar is pretty cheap though.
Goes back to my observation that most things have went up 12 times since 1965 and 20 times since 1945.
We have a 5 cent dollar now compared to the 1928 dollar.
Thank you Federal Reserve…..save them pre-’65 dimes and quarters, kiddies, you will need them again.
A pre-1965 quarter is now worth about 10 times face in silver - and hence a 2007 dollar is a 10-12 cent dollar compared to a 1964 dollar.
Last I heard a U.S. nickel is now worth 9 cents in melt value (maybe down slightly from that now). It’s now illegal to melt them, but someday it probably won’t be, or will be ignored.
“In a few years’ time, people will find that inflation- targeting is flawed,” he says. “The Bank of England’s inflation focus has been too narrow. It’s too late to engineer a soft landing now.”
“paradox of credibility”
http://www.bloomberg.com/apps/news?pid=20601068&sid=azKW.ik2JECg&refer=economy
Alright, I’ve reached wit’s end with the misinformation and bad advice given by Washington Post real estate editor and cheerleader Maryann Haggarty in her semi-monthly r/e “chat.” I’ve created a blog to track her misinformation:
http://maryannhaggartywatch.blogspot.com/
I used to send that hag examples of re-listed properties that I was exposing in Southern Maryland and asked her to address the deceptive practice in her column. Never once did she respond. Take her sorry butt to the cleaners, because in my opinion, she really works for the classified ads department at the Post.
It’s funny that the Washington Post is providing a link to my critical blog right on their website. If you go to the original chat on the Post’s website, they have a “who’s blogging” box that lists “Maryann Haggarty Watch”…
http://www.washingtonpost.com/wp-dyn/content/discussion/2007/04/13/DI2007041301860.html
Good job exposing Hag and Razz!
Maryann Haggerty bugs, big time. What’s the point on an online chat if you never really say anything?
I miss Daniela Deane, who was at least honest.
Maine tax burden explained
The “tax burden” to which the reports refer is a percentage figure that comes from adding up all taxes collected by state and local governments and then dividing that number by the total income of all Mainers. But not the income of “out-of-staters.” In other words, Martha Stewart’s taxes count but not her income. So whenever you hear “tax burden,” remember that there are two parts to the calculation — taxes collected and personal income. Each is equally important in determining the result.
Almost 10 percent of Maine’s tax burden is borne by out-of-staters, mostly through the sales tax and local property taxes. This is one of the highest rates in the country. It is believed that Maine exports more of its tax burden than most states because of the high percentage of real estate that is owned by non-residents.
Unlike Maine, many states have chosen to significantly increase user fees rather than taxes to pay for governmental services. If we charged user fees for government-provided services at the average rate of other states, our tax burden would fall at least another 10 places among the 50 states.
http://business.mainetoday.com/news/070430rand.html
Anyone following this NPR series on Florida’s largest developer/landowner? Your thoughts?
After reading the article, I went out the Chamber of Commerce website, and then on to a local real estate website. Man, I couldn’t believe the prices down there for lots and houses…
I thought that, seems like sometime around last September, St. Joe announced that it was, for the most part, pulling out of the development business and selling much of its land holdings in the Panhandle.
Lots of news from all over the world this morning. This morning
“…Bernanke is missing “the linkage between residential housing investment and the broader economy,” Jan Hatzius, chief economist at New York-based Goldman, the world’s most profitable securities firm, said in an interview. “The housing downturn is of the first order of importance.” Hatzius says the Fed will cut rates three times this year, to 4.5 percent from 5.25 percent.
That should be bullish for bonds, says David Rosenberg, chief economist at New York-based Merrill, the world’s biggest brokerage firm. He expects 10-year Treasuries to produce the best returns since 2002.
`Economic Malaise’
Yields on 10-year Treasury notes have barely budged this year. The yield on the benchmark 4 5/8 percent note due in February 2017 fell 2 basis points, or 0.02 percentage point, today to 4.68 percent.
“The housing-led economic malaise has spread to the business sector,” said Rosenberg, who anticipates the Fed will cut its target rate four times to 4.25 percent this year, in an interview. “The economy is still on a slowing trend.”
The U.S. economy grew at a 1.3 percent pace in the first quarter, the slowest in four years, the government said April 27.
“House prices could decline as much as 10 percent,” said Maury Harris, chief economist at UBS in New York, in an interview. UBS, based in Zurich, is the world’s biggest money manager for the wealthy.
Fed research doesn’t agree. The central bank reported “signs of stabilization in housing demand in most regions of the country,” according to the April 11 report. “Home-buying attitudes improved and continuing job growth could be expected to support home sales.” …
“Forecasting an administered rate that’s set around a mahogany table is no easy task,” said Merrill’s Rosenberg. “It’s not the same as forecasting a market rate.”
The Fed has “backtracked” on the more bullish elements of its forecasts, Rosenberg said. “They’ve cut their forecast on capital expenditures and they’ve extended the timing of the housing recovery.”
The Fed’s so-called Beige Book released April 25, which compiles observations and forecasts from 12 regional banks, offered a more pessimistic picture of the economy than previous pronouncements, he said. Rate cuts have not been forthcoming because “the Fed is handcuffed right now by the lack of any slackening in the labor market….”
Bloomberg
http://tinyurl.com/382ow7
Hoz:
Kudos to you for recommending “Reminiscences of a stock operator”…
Enjoyed it thoroughly~
More like Mr. Rice’s famous book from the 20’s and 30’s, “My Adventures With Your Money”!!
This one was on mining properties but could be applied to the housing bubble, also.
I loved that book as well…
Not too many people know about that one aladinsane……this guy Rice kited more spurious Gold, Silver and Copper mines on slick paper than you could shake a stick…think he went to prison for awhile in the 30’s.
I read a bit more than the average joe…
don’t you mean - the average joe sixpack?
Glad you enjoyed a timeless book.
“There is only one side of the market and it is not the bull side or the bear side, but the right side.”
Jesse Livermore
Aladin, I’ll be in Jo city in a month, I have some investments on the JSE.
While looking up some coastal RE, outside of Cape Town prices ranged from R20M to R45M for 3 bedroom ~(R6/$1.00). JSE is up ~25% for the year.
From todays SA news:
“House-price growth levels off in February
Nominal house-price growth of 15,4% year-on-year was recorded in February from a revised 15,4% in January, according to the latest Absa house-price index. This brings the average price of a house in the survey to R891 700 in February this year. However, the researchers pointed to growth potentially levelling off again later in the year.”
Mail & Guardian online
http://tinyurl.com/22y65s
Welcome to the World Wide credit/asset bubble.
Gonna be sort hot there when it turns into Zimbabwe/Rhodesia with all the weird one-party racial government.
I would not have property in So. Africa if I was pumped full of drugs…except for a gold mine….
I write off most of everything south of the Med and west of Suez when the collapse comes.
Hoz,
I’ve never been to South Africa…
Someday.
“While looking up some coastal RE, outside of Cape Town prices ranged from R20M to R45M for 3 bedroom ~(R6/$1.00).”
Those sound like Bantry Bay and Sea Point prices. If you go east past Hermanus, to gorgeous areas like Wilderness, the prices should be much, much less for properties with an unobstructed view of the ocean. Me, I think I’d like a place in downtown Franschoek, or in Paarl near the Grande Roche. But I’d long-term-lease it — sadly, there is nothing to indicate that corruption and crime will lessen in south Africa. The folks with money still send their children away at college-time and tell them not to plan to return.
Again trying to link pieces together.
from Gulf News Dubai (mostly regarding oil)
“”High building prices will remain for the time being, at least until 2011-12, because of low capacity and strong growth in China,” STX Pan Ocean CEO Lee Jong Chul said at an event in Singapore….Shipyards have also raised prices for very large crude carriers by 67 per cent since 2004 to an all-time high. The price of bulk carriers that move iron ore and coal has increased by about 30 per cent this year, according to an analyst. Despite the costs, shipowners are still buying. Hyundai Heavy Industries said on April 2 it had received orders this year for 47 more vessels. That brought its backlog to 270 ships valued at $ 26 billion, representing three years of work!…”
http://tinyurl.com/2fh37x
Japan, China and South Korea will produce so many vessels that shipping costs, now at an all-time high, will fall 40 percent by 2010, according to futures contracts traded privately between banks, transportation companies and hedge funds. …
Chinese shipyards are building enough carriers to haul 48 million tons in the next five years, equal to 15 percent of the nation’s annual iron-ore imports, according to Galbraith’s. The new ships are 26 percent bigger than the merchant fleet produced by the U.S. after the bombing of Pearl Harbor in 1941.
Lower costs may benefit China’s Baoshan Iron & Steel Co., Arcelor Mittal of Luxembourg, the world’s biggest steel producer, and other companies that hire ships to carry grains, coal, ore and similar goods….
The Chinese have added the equivalent steelmaking capacity of Japan and Korea in five years, and that can’t continue,” said Martin Stopford, 59, head of research at Clarkson. “It leaves you with a problem if and when steel slows down.”
Bloomberg
April 30
http://tinyurl.com/2m8k3l
still working on connecting the dots, the pieces are in place.
Anybody else notice that when things go bad, they go bad spectacularily?
The Bay Bridge kerfluffle couldn’t have happened 2 years ago, no.
Yes, infrastructure collapse in critical areas are a sign that things are not well and getting worse….fire and collapse in the most critical areas of a main transport artery….would not be able to evacuate Frisco (versus The City…that place of civility is long gone) if the need arises say in an earthquake or attack.
Have to go down San Mateo and the peninsula, Golden Gate or back way through Hwy. 1. Have the San Mateo and Dumbarton Bridges but they will choke fast.
The Bay Area is a deathtrap waiting to happen
“Yes, infrastructure collapse in critical areas are a sign that things are not well and getting worse…”
Concrete’s strength is in compression areas. The bottom side of most concrete structures rely on steel bars for tensile strength. However steel rapidly loses its strength when subjected to heat. Thus, the collapse.
Looks like NAR will need a new spokesman - I wonder if Baghdad Bob is available?
Leading Real Estate Economist, David Lereah, Joins Move, Inc. as New Executive Vice President and Chairman of New Venture
http://news.move.com/phoenix.zhtml?c=192403&p=irol-newsArticle&ID=992808&highlight=
Bad hire.
I think move.com is owned or partnered with NAR. This sounds like a way to take DL off the front lines without him leaving the “family” - and to give someone else a shot at chief spin-meister.
Economist Lereah to leave Realtors for Move Inc.
http://www.marketwatch.com/news/story/economist-lereah-leave-realtors-move/story.aspx?guid=%7B400443CB-51C2-4690-9132-C392B1D62488%7D
David Lereah Watch
http://davidlereahwatch.blogspot.com
Coward.
Question: My husband and I have a considerable chunk of change sitting in an HSBC account, awaiting a 40% reduction in prices (fingers crossed) in SoCal.
I’m VERY worried about Bernanke dumping more liquidity into our economy. What would you recommend that I read (Everything I know about investing, I learned from HBB) in order to educate myself about diversifying our money into something slightly more inflation-proof?
I respect you all greatly, and appreciate all your advice — even the goldbugs. ; )
Go yellow. Make sure you take physical delivery.
Diversify into other currencies, not just dollars. Yen, Euro, Pound, Renminbi, Swiss Franc - they don’t pay high interest, but insure against loosing principal.
Read “Crash Proof” by Peter Schiff
http://www.amazon.com/o/ASIN/0470043601/103-4292641-2695824?SubscriptionId=1TQGWW5AERA6VAF4N2R2
This got a laugh last time I mentioned it, but the new “forever” stamps sold by the U.S. post office are a great parking spot for cash. They’ll track true inflation long term. Might be a pain to re-sell though, so I wouldn’t buy more than my own family might need over the next 20 or 30 years.
I also recommend precious metals, and TIPS are worth checking out.
One bit of misinformation that is driving me nuts (from constantly hearing it) is how “unemployment is low and wages are up”. The Economist even states that “But spending has been resilient mainly because unemployment is low and Americans’ pay packets are still fat. The jobless rate is 4.4% and real incomes have been rising even faster than spending.”.
Just who are these people getting these fat pay raises? Everyone I know seems to be getting 1-2% raises (if they are lucky).
it’s all about averages, just like home prices … I guess you do know that management incomes are rising at 10-30% yoy (that’s in Europe, so in the US maybe even more).
Hubbie just got under 4% after being told his team’s numbers were the best in the country, and he was really getting noticed by the powers that be! ;-{
(Gee, thanks, inflation will only take 3-6% out of our pocket this year and that’s before the increase in health premiums)
I think the people they’re talking about w/those numbers are recent graduates. My SU professor friend has a student in her class that’s headed for a $100k position on Wall Street w/merely an undergraduate degree.
Subprime Swoon Sparks an FHA Revival
By Laurie Kulikowski
TheStreet.com Staff Reporter
4/30/2007 7:29 AM EDT
Lenders hit by the collapse of the subprime market are shuffling back to an old faithful: residential mortgages insured by the Federal Housing Administration.
While a number of lenders already make FHA loans, several others, including IndyMac (NDE - Cramer’s Take - Stockpickr - Rating) and Bank of America (BAC - Cramer’s Take - Stockpickr - Rating), are starting to make a bigger push into FHA lending.
“Because underwriting has tightened so significantly, you’re going to see people turning back to FHA to get first-time buyers into homes,” says Kurt Pfotenhauer, the senior vice president of government affairs for the Mortgage Bankers Association. “We do think we will see some increase in FHA volumes in the coming year.”
http://www.thestreet.com/_googlen/newsanalysis/businessnews/10353441.html?cm_ven=GOOGLEN&cm_cat=FREE&cm_ite=NA
At the end of the article, the agenda is revealed:
> Among the issues that proponents say are in most need of reform are the elimination of a mandatory 3% minimum down payment for an FHA-backed loan, an increase in FHA loan caps to conform with the generally rising prices in the housing market, and the creation of a new insurance-premium structure that would match the credit profile of the borrower instead of a standard premium amount. “The bottom line is that as lending practices have evolved and modernized, the FHA has not had the ability to fully adapt to the new marketplace and become a viable alternative to subprime loans without congressional approval,” says Stephen O’Halloran, a spokesman for HUD.
In my words:
As private underwriting standards have deteriorated, the FHA has not had the ability to compete with those loans, because those loans were unsustainable, but now we want to make FHA loans into widely available subprime loans with congressional approval, because the current house prices need unsustainable loans and the government will guarantee the loss.
Nothing like wide availability of 0%-downpayment govt guaranteed loans to respike the housing bubble punch bowl. Too bad there is already a McMansion building glut which would get far worse with substantial respiking.
…a new insurance-premium structure that would match the credit profile of the borrower
Maybe not.
A rationally priced insurance policy (reflecting the true risk) would price out a lot of GFs, too.
“A rationally priced insurance policy (reflecting the true risk)…”
FHA insurance is about free policies for high risk borrowers to be provided at the taxpayer’s expense. This does not sound very rational to me, unless you are the homebuyer who qualifies for the free insurance policy, or you happen to work for the REIC.
people underwater on their car.
http://www.washingtonpost.com/wp-dyn/content/article/2007/04/28/AR2007042801297.html?hpid=sec-business
Water wars heat up
“Water woes are striking cities across the country, leading to lawsuits between competing areas, and in some cases choking off growth.
Florida is trying to gain control over water in Georgia’s Lake Lanier and the Chattahoochee River. Georgia is locked in a three-way fight with Alabama and Florida over the water — Atlanta’s primary source of drinking water. Dallas, meanwhile, is locked in a classic water war with the Federal government, The Dallas Business Journal reports.
In the San Francisco Bay Area, similar concerns about water availability could impact growth as well, the East Bay Business Times reports.”
Full story at
http://www.bizjournals.com/bizoutlook/
One of the beefs that I have with the Sierra Club is that they are pro open borders. How can we preserve the wilderness and the environment if we are going to pave over the country to accomodate what could eventually be hundreds of millions of immigrants? Resources are already strained. What will it be like by 2050 if we really do hit the 500 million mark in population?
The sierra club was a useful organization once upon a time…
They lost their way, long ago.
“Every great cause starts out as a movement, degenerates into a business, and ends up a racket.” Eric Hoffer
“One of the beefs that I have with the Sierra Club is that they are pro open borders.”
You can’t really have it both ways; wilderness and environmental preservation and open borders don’t mix. These facts won’t stop liberal wackos from spouting politically-correct nonesense, though.
Open borders is reason #1 why I’m not going to join Sierra Club anytime soon.
They are just an awful organization, post David Brower.
I went to look up that article in the “Atlanta Business Chronicle.” The water article teaser on their main page refers back to itself.
Home valuations slacken
Double-digit growth in Milwaukee property assessments slows to 5%
“For owners of single-family homes and duplexes, assessment notices that began landing in mailboxes Saturday will show an average increase in value of less than 1%.
City officials said that they were generally satisfied with this year’s figures, noting that in some other places, the housing slump has meant declining property values - something that raises more fears for homeowners than the standard complaints of too-high increases.
Ald. Michael Murphy, chairman of the council’s Finance and Personnel Committee, said officials expected the smaller increases in value.
He is concerned about what the future holds, citing reports indicating more foreclosures on properties. “We don’t want to see a large number of board-ups in the neighborhoods and across the city,” Murphy said.”
Full story at
http://www.jsonline.com/story/index.aspx?id=598434
How does the PPT manage the stock market? I suspect it is through a volatility-containment policy. Here is a bit of suggestive evidence (which anyone who cares to look up the numbers can check for themselves).
Period Percent of days w/ > 2% movement on DJIA
1/1/97-10/1/03 10.09%
10/2/03-3/31/07 0.23%
Volatility died after 10/1/03. Quite a conundrum, neh?
P.S. Needless to say, 2004 was an election year…
P.S. Supposing the DJIA is “managed” to keep volatility low. Doesn’t that potentially create a perpetual money machine for those who are in the know, at least until the machine breaks down?
Absolutely. Any kind of government intervention is a gift to anyone who knows about it ahead of time.
And I suspect you’re right about this. But it also seems possible that an overabundance of short term trading acts to keep volatility down (for a while…). As Templeton said, the stock market is “broken”. Everyone is focused on short term returns, and so looking to exploit any edge. Meanwhile they’re ignoring long term results, except to make sure they’re not too different from everyone else’s. It’s a perfect setup for an eventual huge crash. And it’s amazing to me that no one seems to have learned anything from the dotcom era — and now from housing as well! Fundamentals matter, people!
“But it also seems possible that an overabundance of short term trading acts to keep volatility down (for a while…).”
Only a member of the Working Group on Financial Assets could confirm the existence of a volatility-management policy, but
the sudden dearth of volatility beginning on 10/2/03 (heading into campaign season) seems very suspicious. The predicted result of killing volatility is to make stock prices go up, as lower risk increases risk averse investors’ willingness to purchase stocks.
An acquaintance is moving up to a larger home, but can’t sell his current place. He plans to secure financing for the new home, and just let the old home be foreclosed on. How badly will this screw him. in terms of credit, IRS, etc?
Badly. Hope he doesn’t need to buy again soon after that.
Eddie Flom, who has worked with developers on conversion projects in the Tampa Bay area, sums up the situation in one word: greed.
http://www.tbo.com/news/money/MGBHTWJ651F.html
What happened to the thread about no more Lereah and about the “God wants us to have this house” ?
Which part of Revelations discusses Lereah?
Lereah’s presentation august 2006
http://tinyurl.com/mefvp