Bits Bucket And Craigslist Finds For May 13, 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
Location:Northern Arizona, United States
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Absolute Auctions:
http://sarasota.craigslist.org/rfs/329272079.html
http://sarasota.craigslist.org/rfs/329281955.html
http://sarasota.craigslist.org/rfs/329284652.html
Cash-flow problems?
http://sarasota.craigslist.org/apa/329754787.html
Re: http://sarasota.craigslist.org/rfs/329272079.html
That’s amazing. Why would someone build a 6,000 sq. ft. home in Florida that is not near or on water? This home is a logic gap that cannot be closed.
Casa Litto in Olde Englewood, no less! Le Maison de las casas!
Incomprehensible! I think I bruised my language bone on that ride.
Key Lime keep on eye out for the results of those auctions. Most of the auctions to date have been more of a marketing scheme than a true and proper auction and “Absolute Auction” means “Absolutely Rigged”.
#1 is awesome! What is that really worth?
Is that what you call traditional Florida architecture?
LOL.
What a willing and able buyer will pay for it!
I want the first one, I don’t care if it’s by the water or not! It’s beautiful.
–
“‘Real Estate Solutions since 1934.”
That says something about when auctions business is a great business to be in.
Jas
This kind of stuff is going to go down hard:
http://tampa.craigslist.org/rfs/327688237.html
Yeah that looks like $50K - $75K maximum on a good day but $199K? Bwahhaaahahaha!
LOL, Popper, that was exactly my thought.
“You must hurry though, there are only 6 left!! ”
…and they are going fast!!! Not! They look like future slums. $200K for some truely pathetic townhouse???
Yeah, only six left!!!
http://sawitonline.com/website/photo_large.asp?photourl=/fsbo_photos/9942/townhouse.JPG
The is the kind of stuff that was put together in a hurry to satisfy all those “unqualified” unprepared buyers who would not miss the gravy train for unending appreciation. Trury an eyesore! -The lifespan on this structure? 5-6-7….years?
And only “unqualified unprepared” buyers would get into these dumps not knowing if they can even get insurance. Can you say section 8?
Got 10% down?
Imagine being an FB who bought a place like that and then finding this blog. That’s gotta hurt!
Yep, some of the units in the new pressboard developments around here are being rented Section 8.
Just about any high density rental property built in America eventually becomes section 8. Exponentially escalating costs of maintenance on these carboard buildings is the main culprit. (In Bowling Green, KY I witnessed three story carboard buildings being built WITHOUT A CONCRETE FOOTER across the street from my rental townhouse on Shive Lane.) In fact, the maintenance dynamics of these cardboard buildings is no different than trailer parks.
As we are now seeing, so much over supply of this crap has been built that the usual 5 to 7 year wait to section 8 has been reduced to zero years.
I have posted previously about how the apartment complexes surrounding Greenwood Mall in Bowling Green, KY have slowly gone section 8, one by one. This is what happens to suburban malls in America, they eventually get surrounded by cardboard apartment buildings that attract section 8 type humanity and makes shopping a hazard. Shive Lane and Bryant Way in Bowling Green is now infested with the worst drug dealing homicide crazed humanity available.
Realtors (TM) like to shout about houses near shopping malls as if this is something desirable. But eventually the tide will turn and Americans will start thinking of suburban shopping malls as the epicenter of blight in America.
How do you fix this? You condemn the cardboard crap and raze it and start all over again with better (and much more costlier) construction.
Got 10% down?
I love it - only 6 left. If somebody really wants one of these I say offer 150k.
Are you nuts? Paying $100/sqft for substandard construction? $75/sqft tops, that works out to around $115K or less. I mean they certainly look like the bottom of the barrel.
If it was substandard construction I would not buy it at any price!
They should NOT have put a picture in there.
With books, authors who are butt ugly NEVER have their pictures on their novels.
OOH OOH …how much was that High end super expensive plastic picket fence.
Makes me want to but it on the spot!!!
Big real estate money missing deep in the heart of Texas. Ya gotta love it.
http://www.mysanantonio.com/news/metro/stories/MYSA051207.01A.1031Missing.35ae763.html
This is just terrible.
Not only could they all lose their money, they might then have to pay TAXES on the money they lost since they can’t re-invest and fulfill their 1031.
One of the reasons that America’s economy has done so well in the past is that we had good contract law and commerce laws… thus you knew that your commerce/transactions would occur smoothly. There was also a certain amount of honesty and integrity
These are now all gone. I swear, almost everyone from Wall St to Main St is just out for a short time buck. They will screw everyone and anyone for that buck, and in the shortest amount of time possible.
For god’s sake, you can’t trust ANY transaction anymore. 1031 exchange? oops, sorry, your money is gone. Invest in AAA MBS… oops, they’re not really AAA, your money is gone. Put a down payment on a new-construction home? Oops, the builder is BK and you lose your money. Invest in a stock? Oops, the financials are all cooked and they’ve been pumping and dumping the stock with insider trading.
Not only could they all lose their money, they might then have to pay TAXES on the money they lost since they can’t re-invest and fulfill their 1031.
Yeah kind of like the employees at Cisco with the $95 options.
“For god’s sake, you can’t trust ANY transaction anymore.”
Testify, Housing Inspector! That was why, early on in my blogging here, I stated that the value of our “money” was kaput. Fiat money is only as good as the faith and confidence invested in it. And it is only as valuable as the goods and services it can purchase. Other than the paper it is printed on (or the lines of code needed to store the transaction electronically), there is no value if there is no trust or confidence.
How about China? Buy some cheap hardware and the screws strip if you even look at them. Have a meal out? Could be infected with e-coli.
Heck, those who lost their deposits to a builder in BK might be better off than someone who closed on a house from KB, if the house turns out to be a shoddy pressboard shack that starts disintegrating within a few years.
Trust me, that kind of thing was common in the 1989-95 period. Texas is ground zero for scam artists and fraudsters which amuses me even more when all the nincompoopia from California and other places write as if it’s full of rubes sitting on valuable property just waiting to “give it away.”
Don’t mess with Texas.
I was living in TX in 1987 when a Nigerian co-worker was talking to me about a RE investment firm that was involved with finding “good credit” third parties to help people get equity out of their homes. I did not fully understand what they was saying but I knew it was very convoluted and complex so I never bothered with it. The contact in the RE scam outfit was another Nigerian, and of course he was from a “well respected” Nigerian family. Why are so many of these RE scams infested with so many Nigerian/Pakistani/Indian scamsters? Does the USA have a reputation abroad for being a very lenient country for property crimes?
Got 10% down?
I’d say that scams like that are a way of life in those countries and they see no reason to stop just because they’re in America.
This is quite correct. Society in Nigeria, Pakistan and India is corrupt to the core. I’m familiar with those three.
As opposed to united states where the goverment routinely skews inflation numbers, senators are on big company and lobby group payroll and regulators look the other way as wall street scr**s the middle class. I have said it before and I will say it again. We are just as corrupt, we are just good at sugar coating it.
Hey that coworker of yours told me that he would deposit $10 million in my bank account if I gave him my account number and pin!
“Hey that coworker of yours told me that he would deposit $10 million in my bank account if I gave him my account number and pin!”
…so I gave him yours. You can thank me later.
nincompoopia
New English word alert!
I liked “darelict”
I wonder what is the advantage of having a third party “park” the money while waiting for the next phase of a 1031 exchange. I’m sure someone here knows the answer, but to me, middlemen just mean more fees.
The middle man is a facilitator and is generally required to avoid having the exchanging party take receipt of the sales proceeds. If the exchanging party takes receipt of the sales proceeds, then that have to recognize the receipts as gain.
There is hardly ever any advantage to parking your money with a “third party”. Some of these people who have been taking equity out of their homes have been “parking it” in insurance products.
Why?
You can put your money in a Fed Money Market paying about 5%, and there is no cost to you for doing this, and no cost to you for your check writing privileges. Do it youself, using large families of mutual funds with low expense ratios, and save your money.
But when you are using a financial planner, you are generating commissions and fees for somebody when you “release your equity”, generating more commissions and fees when you “park your money,” and even more commissions and fees when you try to dispense your own money.
If you are a foreigner in some other continent reading this I know this all sounds unbelievably stupid, but this is what some Americans will do.
Got 10% down?
So this 1031 provision lets flippers avoid taxes? (a) Wouldn’t eliminating this loophole be a simple way to eliminate a lot of RE speculation? (b) No sympathy for the victims of this scam, if it is one.
Wow… that’s gotta hurt.
Last night on the local news, they were interviewing one of the firefighters in North Florida. He held up a stalk of palmetto scrub to the camera and said “This is the fuel that is feeding the fire”.
It’s all my fault.
Palmetto Reader
AKA the “Burning Bush”. Its getting biblical in Florida! LOL.
Alas, Babylon! Which is also the name of a book written in the late 1950s by the author Pat Frank, about a group of people in North Florida who survived the aftermath of nuclear war between US and USSR. I don’t know if it is still in print, but it’s a helluva good read with lots of great information on Florida’s natural resources and how they could be used in event of an emergency, like a widespread power outage.
The firefighters were speaking the truth twice. They were talking about the wildfires, but Palmetto fuels the fire about the housing bubble bust in Florida.
“Palmetto fuels the fire about the housing bubble bust in Florida.”
Just doing my job.
The Florida blog locusts have taken over! LOL
Here’s one for a feature, Ben:
“I’ve never had that many people walk away from their houses before”
http://www.sptimes.com/2007/05/13/Business/Help_and_hope_or_the.shtml
Your link isn’t working for some reason?
http://www.sptimes.com/2007/05/13/Business/Help_and_hope_for_the.shtml
How do you get an $1800 payment on a $139,000 house?
How do you get an $1800 payment on a $139,000 house?
I was wondering the same thing. I figure the insurance is killer and it must be back-loaded with closing costs. These poor sobs are paying for their mortgage broker’s commish and other fees. When it dawns on people exactly how they got hosed and they’ve been enslaved to the greed of mortgage and insurance companies, blood will run in the streets.
I think sptimes.com is down…
139,000 home could have an 1800 payment if:
1) there’s a HELOC on it.
2) interest rate. Perhaps super subprime borrower?
3) 15 year mortgage.
4) high taxes/insurance.
Example:
15 year fixed rate mortgage at 10% on $139,000 is: $1493.70/month
if there is $300/mo in taxes and insurance…
What’s gonna make this go away? From the article:
“They’re far from alone. The national firm RealtyTrac lists 17,147 troubled properties in Pinellas, Hillsborough, Pasco and Hernando counties. They’re properties in preforeclosure, scheduled for auction or seized by the bank.”
“What’s gonna make this go away?”
I’m wondering the same thing. Before all these PUDs and HOAs, it was a lot simpler. Bank took a property back and sold it off cheap. What I’d like to know is, what happens to a large development that is only half sold, if the builder/developer goes BK? I can’t imagine what a godawful mess that would be, but I can see it coming. What do the residents do when a bank starts selling off the houses at pennies on the dollar? Does anyone know of a circumstance like this?
Almost all the homes I inspect now have some kind of PUD, HOA, Co-op, or shared property agreement like access, shared driveways, overlay districts, conservation easements, you name it. Most folks don’t realize what they’re buying into until the problems surface. I’m planning to write a paper for a trade magazine about property rights that are voluntarily given up by home-debtors and some of the reasons for doing so. Perhaps Ben will post this as a topic sometime so I can get some good examples.
I’m sure it is different for different areas and different projects.
In Colorado Springs there was a project that went under the early 90s. All the roads, sewer, elec, water, etc was in, but only 1/10th the houses were built when the company went under.
What followed was a decade long court battle between the lenders that had leans on all the land, subcontractors that had built the homes but had not been paid, and the homeowners that didn’t want to have to pay $1000 a month on top of their house payments. Seems there was a clause in their original purchase that if the company went under, the few homeowners there had to pay back for ALL the land and infrastructure.
Anyone in, was locked in as NO ONE wanted to buy into this. Even if you let the bank foreclose, the contract held you responsible for paying back the bankrupt builders debts. No company would come in and finish the project with the battle going on.
Eventually, the city stepped up. It sold some bonds, and paid off the debt to free the title, then sold the land to a developer that finished the project. The city placed a special collection on the property to pay off the bonds. So, anyone buying there had to pay much higher property taxes, reducing the “value” of the houses. So, people took a bath, but at least they finished the project and could finally get out.
Right now in PHX there have to be 50 major projects underway. Heck, I see one company advertising they have 17 projects going on, so no matter where you want to live, we have a new house for you.
If (when) they start crashing while only partially built, NO WAY could anyone step up and clear the bankruptcies, and complete the projects.
Go here, then click on the “Money” section and click on the article title “Crushing Payments”. The web site is working, just not the link
http://money.tampabay.com/
great reading in the ny post on a sunday morning
as i pack for my move to my beautifl new rental
happy mothers day to all the moms
http://www.nypost.com/seven/05132007/business/harsh_realty_business_tracy_byrnes.htm
“….market probably will not hit bottom until sometime in 2008..” That is pretty optimistic. Funny how everyone forecasts a bottom just around the corner…..try 2010, then flat pricing for 5 more years, eaten away by 3% inflation for another real loss of 15-20% thru 2015…
last bottom was right after the 2006 super bowl
see how people forget !
I agree with your projections, as it is in keeping with the last slide. The post article maybe indicating a more rapid drop and then a shorter trough. The gave no numbers to their time horizon in terms of magnitude of losses.
I’m lovin’ the article and I hope every would be seller is reading it and feeling the sting HOWEVER…. does anybody take the Post seriously anymore…or ever.
Danni of Long “It’s different here” Island
Thank you. I’m at my mom’s and my kids are here too. When everyone wakes up it should be a fun day.
Is San Diego still “running out of land” anymore?
———————————————————————————-
No surprising development
Housing market decline forces some big builders to sell land bought during boom
By Mike Freeman
STAFF WRITER
May 13, 2007
Near the peak of San Diego’s housing boom, home builder D.R. Horton purchased a steep, nine-acre hillside along Friars Road across from Fashion Valley mall for $22 million.
The land was earmarked for Fashion Walk, a trendy, 161-unit condo project. D.R. Horton spent $1.5 million on a 46-foot-high retaining wall to hold back the slope. The company graded a flat shelf for the condos, hauling away tons of dirt. It poured concrete foundations for elevator shafts.
But this March, D.R. Horton walked. It sold the property to apartment developer AvalonBay of Newport Beach. The price: $19.2 million.
…
Today, home builders are focused on slashing their inventory of homes and lots – not on purchasing more land, Douglass said.
Falling demand for land, at least is San Diego, runs counter to conventional wisdom that the county suffers from a chronic shortage of available home sites, which results in sky-high prices for buyers.
Any decline in land costs will play a key role in whether the county’s housing prices come back to earth. Land can make up as much as 40 percent of expenses for home builders.
So far, though, bargains have been hard to find. Most landowners are holding firm and refusing to sell at a discount – particularly in master-planned communities.
…
At 4S Ranch in Rancho Bernardo, developer Newland Communities has held off releasing 288 lots because of soft demand from builders.
“We’re going to test the market this summer to see if builders are interested in paying a reasonable price for the lots,” said Mike Rust, a vice president with Newland. “Over the past year, they’ve only wanted to buy discounted, fire-sale-type stuff.”
http://www.signonsandiego.com/uniontrib/20070513/news_1b13develop.html
D.R. Horton has pulled a D.B. Cooper…
not too dramatic- I was thinking lots of land deals are at 50% off by now
-usually 4 to one on finished prices ,so if RE is off 12% raw lots should be off close to 50%
Since the land horders are flush with cash (and presumably, debt free), they can hang on forever for top dollar.
From the article:
————————————————————————-
So far, though, bargains have been hard to find. Most landowners are holding firm and refusing to sell at a discount – particularly in master-planned communities.
At San Elijo, HomeFed has denied most requests from builders for concessions. It is moving ahead with sewer, water and grading for all the 480 lots remaining in the project. Many are large, “view” parcels that will command premium prices if, and when, the market recovers, HomeFed said in its regulatory filing.
“What I’m seeing is guys not going forward on options or closing on deals, which is a function of residential demand,” said Mick Pattinson, president of Barratt American. “But I’m not seeing a lot of distress among the landowners.”
Most suburban master-planned communities don’t have to cut discount deals, real estate brokers say. Well-capitalized and flush with profits from sales during the 2000 to 2005 housing boom, they have the wherewithal to maintain prices.
“Every master-planned community had a crazy run-up in value,” said Graham Weiss, president of GW Realty Co., which specializes in residential land. “So if you don’t have to sell, don’t in a down market.”
“We’re going to test the market this summer to see if builders are interested in paying a reasonable price for the lots,”
That should be a lot of fun! When DR Horton pulls out that should give someone else time to pause.
I THOUGHT that little cutout from the hillside across from the Cheesecake Factory was taking a long time to complete. Nice wall, though.
Totally. I told my wife a year ago, “That project is a dead-end.” We know someone just up the road who bought one of those ‘detached condos’ across from costco for 650k. I’m just stunned that people ignore signs as obvious as ‘Fashion Walk’.
anyone have a link on income growth from 2000 to 2007
50k to 75k earners
- bet it’s not good
http://www.nytimes.com/2006/11/28/business/28tax.html?ex=1322370000&en=fd84bcc13c1bba9c&ei=5088&partner=rssnyt&emc=rss
Good thing U.S. home prices and the stock market always go up, because incomes don’t…
“’04 Income in U.S. Was Below 2000 Level
Article Tools Sponsored By
By DAVID CAY JOHNSTON
Published: November 28, 2006″
So much for wage inflation, eh?
Here is a fascinating look at the tradeoffs involved in the China-U.S. symbiosis.
I am not sure about the accounting point Calbreath raises (imports from U.S. firms which have outsourced operations to China contribute to the trade deficit). Does anyone know whether this is the case? That is, would a bottle of Coca-Cola add $0.50 to the trade deficit if it were bottled in China and shipped back to the U.S., even though the profits were “domestic” to the U.S. economy?
——————————————————————————-
DEAN CALBREATH
U.S. trade deficit isn’t just about the Chinese
May 13, 2007
…
Since 2000, factory jobs in San Diego have dropped nearly 20 percent, partly because of companies shifting to China, Mexico and other low-cost markets. When we buy goods from those companies, we’re often adding to the trade deficit because the goods have to be imported from foreign factories.
Economists see a silver lining in the factory-job losses, saying that it’s a necessary stage in making the transition from being a manufacturing economy to a service economy.
But if San Diego County’s any example, when people say “service economy,” what they really mean is “servant economy.”
Out of the 1.1 million local jobs classified as being in the service sector, 17 percent are working in wholesale or retail; 14 percent are working in hotels, restaurants and amusement parks; 7 percent are working as temps, groundskeepers or security guards; and an unknown amount are working as secretaries and office help.
Those don’t sound like the white-collar jobs that the phrase “service economy” conjures up.
http://www.signonsandiego.com/uniontrib/20070513/news_1b13dean.html
Economists see a silver lining in the factory-job losses, saying that it’s a necessary stage in making the transition from being a manufacturing economy to a service economy.
I don’t know why this is such a good thing, outsourcing all manufacturing. makes me nervous really all these Phd economists saying the manufactoring worker will switch over to work at something more productive. I think the US will need one big military to make sure all its imports keep flowing in. Like imperial Rome 2000 years ago. Mecenaries next?
“makes me nervous really all these Phd economists saying…”
Makes me nervous at least one really smart one is backpeddling…
————————————————————————-
Free Trade’s Great, but Offshoring Rattles Me
By Alan S. Blinder
Sunday, May 6, 2007; B04
I’m a free trader down to my toes. Always have been. Yet lately, I’m being treated as a heretic by many of my fellow economists. Why? Because I have stuck my neck out and predicted that the offshoring of service jobs from rich countries such as the United States to poor countries such as India may pose major problems for tens of millions of American workers over the coming decades. In fact, I think offshoring may be the biggest political issue in economics for a generation.
http://www.washingtonpost.com/wp-dyn/content/article/2007/05/04/AR2007050402555_pf.html
Yes thats right, all that internet bandwidth makes it easy.
Also why I beleive the dollar will have to fall to even out the wage difference. So the US will have Commodity Inflation without wage inflation. Whats that Staflation? Thanks for the link.
It’s going to mean poverty 19th century style for a growing number of Americans.
I also bemoan the loss of factory jobs. I grew up in Detroit near the steel mills, chemical factories and auto plants. People worked hard and long, but they had a lot of pride in what they did. They’re hurting now.
And the mercenaries have arrived.
http://www.signonsandiego.com/uniontrib/20070429/news_mz1ed29top.html
Phd economists saying the manufactoring worker will switch over to work at something more productive.
Did it ever occur to these PhD’s that a lot of workers can’t switch over to somethng productive? They either don’t have the money to get the necessary education to do anything other than manual labor, or, they don’t have the smarts to do anything except manual labor.
And “service” economy, my butt. Any service, even ones that need college degrees, can be outsourced as long it’s just a computer job. Call centers, X-ray reading, tax-form prep, medical transcription…
“Those don’t sound like the white-collar jobs that the phrase “service economy” conjures up.”
Wells’ future struggle of the eloi v. morlock?
WHOOOOOOO HOOOOOOOOOOOOOOOOO!!!
You can’t offshore Video taping and DJ’ng a WEDDING!!!!!!!!!!!
maybe i should stop wanting to find a real day job, and be a dj for the rest of my life.
I hear that in Italy, the Catholic church is losing so badly that only 1/3 of the young couples are married. The Vatican seems to be getting a bit strident lately.
I call BS on this yahoo marquee’
these markets aren’t “hot” by any means
http://finance.yahoo.com/retirement/article/103016/Where-Home-Prices-Are-Hot-Now
I agree, Flat. The numbers they quote in the article compare 2005 to 2006 - not a word about the drops that have occurred since then in many of those areas.
Sounds like this Lawrence Yun will be just as bad as his predecessor.
I cried “foul” on this yesterday.
1) Median price is rigged as distressed sales aren’t included.
2) Comparing 4th quarter 2006 to 4th quarter 2005.
So, the article should be “Where rigged housing prices WERE still statistically and hypothetically climbing upto 20 months ago, but with the lending collapse of the last few months, we’re now in a whole new world”.
Be sure to tune in to the sixpercenters tonight and spread the word. We need to take the industry down.
I kinda like “sixpercenter” instead of “realtor”.
‘60 Minutes’ puts Realtors on defensive
Report airs Sunday on alternative sales methods and commissions.
By MICHAEL POLLICK
michael.pollick@heraldtribune.com
Using an Internet-based business to slash real estate commissions gets the CBS “60 Minutes” treatment on Sunday, prompting the Sarasota Association of Realtors and its national counterpart to do some advance coaching of their agents.
The local association sent out a set of “talking points” this week that originated at the National Association of Realtors.
“Bottom line is that we don’t expect that the segment will make Realtors happy, but it could have been much, much worse,” the NAR said in the memo. “Be glad that it’s Mother’s Day and the show will probably draw fewer than its average 14 million viewers.”
According to the CBS News Web site, the segment — dubbed “6 Percent” — reports on the premise that “Realtors’ sacrosanct commission rate of 6 percent may be in jeopardy due to emerging online competition from Internet real estate sellers and buyers.”
Kathy Roberts, who runs both the Sarasota Association of Realtors and the Sarasota Multiple Listing Service, confirmed that her local group picked up the NAR’s pointers for dealing with local media and passed them along to its 600 member firms and 4,100 Realtors.
“There has been a lot of pressure on real estate commissions from alternative business models and from consumers and all different fronts,” Roberts confirmed.
I’ve done buys and sells w/o a realwhore- takes no talent at all
can’t imagine how much of an economic “girlieman” you have to be to leave that kind of $ on the table
Investing these days seems to be all about finding reasons to remain confident in the market. Good luck with that search for evidence that the U.S. housing slump may be over…
———————————————————————————
Investors look for reasons to be confident in market after big one-day drop
By Herbert Lash
REUTERS
May 13, 2007
Investors will likely look for evidence the U.S. housing slump may be over and for signs of moderating inflation this week before deciding whether the rally in U.S. stocks has come to an end.
Last week, the steepest one-day drop in U.S. stocks in two months gave investors pause, but signs of slowing retail sales and slowing inflation on Friday encouraged a return of confidence.
“On a short-term basis, the market is very vulnerable to a normal 3 percent, 5 percent correction,” said Al Goldman, chief market strategist at A.G. Edwards in St. Louis. “I would think we would probably have a normal pause to refresh coming up.”
But when or what might spark a pullback is impossible to predict, he added.
http://www.signonsandiego.com/uniontrib/20070513/news_1b13week.html
the dollar moving up might do it
txchick —
Do you know what Goldman is talking about when he says “pause to refresh?” Does he mean we should “buy the dips” when the market drops by 5%?
BTW, in case you want to “buy the dip,” a 5% drop would be a decline of 13,326.22 * .05 = 666 points on the DJIA, to a level of 12,660. Get your purchase orders ready tomorrow…
I prefer to “dump the bump” on anything housing related. After some tactical adjustments this strategy has proven pretty profitable this year (so far).
I don’t think the US housing slump is over. loans are too hard to get compared to how it was a year ago. I think the stock market is going up because the dollar is going down so investors are buying stocks to protect against the inflation of a falling dollar.
I think the dollar is going down because the money supply is too big and will stay big until the housing bubble is resolved. That could take awhile.
So really it looks like the FED / Government is blowing another bubble this time back in the stock market. But why US bond rates are so low? It must be there is all this extra money looking for a home even at these low rates. Inflation = too much money cashing too few goods except I don’t think the average Joe has too much money, but someone must to make all these idiotic home loans and buy all these companies and take them private.
So we all pile into stocks to try and stay even with the next bubble. Many are going with Foriegn stocks as the dollar looks weak. I’m guessing this will go on as long as the housing looks weak. Now if overseas housing breaks down also ……..
“But why US bond rates are so low?”
One possible story: Recession fears balance inflation fears to keep l-t Treasury yields on a permanently-low plateau.
Thats what I thought- inverted yeild curve , housing bubble , etc. I sold all my bonds though a couple weeks ago. I think the FED is pumping the economy and we will get inflation and a lower dollar. Treasury Money market pays the same as a bond fund and I don’t think rates are going down anytime soon. The FED has to pretend its fighting inflation with 5.25% rate. bank of England rasied their rate and will raise again I read. have to plan my buy back into RE again in the next couple of years anyway can’t blow all my cash on the stock market if I’m wrong and it decides to dive.
Caveat emptor:
Watch out for financial cluster bombs when you shop for a home…
————————————————————————————
NATION’S HOUSING
KENNETH HARNEY
Inflated appraisals are root cause of surge in country’s foreclosures
May 13, 2007
WASHINGTON – Have inflated appraisals helped fuel the current surge in foreclosures by credit-strapped borrowers? Are they at the core of many mortgage fraud schemes?
The four largest trade groups representing appraisers say yes – and they are asking federal financial regulators to crack down on lenders and loan officers who pressure appraisers to raise valuations to allow overpriced deals to go through.
Led by the 22,000-member Appraisal Institute, the groups told regulators April 11 that subprime lenders experiencing high rates of foreclosures often have been guilty of “systematic inattention” to the accuracy and the sources of the valuations backing the mortgages they funded.
Such lenders:
Bought loans with zero or minimal down payments without taking hard looks at the qualifications and track records of the appraisers supplying the numbers. Yet in softening housing markets, accuracy on property valuations is essential whenever down payments are tiny and borrowers’ credit histories are shaky. A zero-down mortgage made to unqualified buyers on a house worth thousands less than the appraisal in a depreciating market is a financial cluster bomb waiting to explode.
http://www.signonsandiego.com/uniontrib/20070513/news_1h13harney.html
“A zero-down mortgage made to unqualified buyers on a house worth thousands less than the appraisal in a depreciating market is a financial cluster bomb waiting to explode.”
The FHA bailout proposal would force the U.S. taxpayer to insure these financial cluster bombs.
We know that a lot of incompetent people recently became real estate agents and mortgage workers and contributed to much of the runup. How about appraisers? Did their numbers spike? Was it easy to get into?
Yeah… There have been several articles about this. There was a system where a new trainee had to work under an experienced guy for a long time before getting a full license. Sort of an apprenticeship type system.
When the boom took off, too many jobs for the licensed guys to get to all of them, so they altered the laws to let the aprentices get full licenses and work on their own, almost immediatly.
Fessin’ up time:
Which of you blogsters answers to the name of Gary Crabtree?
How is the cash-back scam described in Harney’s column (pasted in below) any more illegal than that of a builder selling homes with a current market value of $450,000 using incentives valued at $75,000 which are included in the sale price of the home (and the loan proceeds)?
——————————————————————————-
Gary Crabtree, president of Affiliated Appraisers in Bakersfield documented the practice recently for the FBI and state financial and real estate regulators. The basic scenario, said Crabtree, involves realty agents who’ve listed houses that aren’t selling. To move the properties, they entice buyers – or friends – to “submit an offer (for the home) that is $30,000 to $100,000 above the current list price,” with the promise that they’ll get substantial cash at closing.
The realty agents then amend the Multiple Listing Service asking price upward to the artificially inflated offer price. A house that had been sitting for months with no takers at $450,000, for example, might be relisted by the agent at $525,000.
Then, working with a cooperative appraiser who has promised to “hit the number,” and an unscrupulous mortgage broker who simply wants the commission, they “change the (loan) documentation to reflect the (artificially inflated) sales price.” The loans typically are for 100 percent of the price of the house. The seller nets the price he or she had originally listed – $450,000 in this example – and the buyer gets a portion or all of the $75,000 inflated differential as cash at closing.
The wholesale lender purchasing the loan from the broker doesn’t look hard at the appraisal, and funds the excessive loan amount none the wiser. Public records do not reflect the $75,000 slush in the transaction. The realty agents and loan brokers pocket their commissions; the buyer pockets the cash from the closing proceeds, makes loan payments for a while and then stops. Within months, the property is headed to foreclosure.
“It’s total fraud, of course,” said Crabtree, who is documenting 32 cases of alleged appraisal hanky-panky for state regulators and the FBI. “You can throw a dart at just about any large subprime lender, and something like this (scheme) is going to stick.”
There is no difference in what the builders were doing GS . You know the old Housing Wizard has been bitching about this for a long time also . IMHO this was the way many realtors were marketing homes when the market took a turn ,( they had the sub-prime slime with their “special appraisers ” to support this fraud .) Appreciation in real estate ,no way ,fraud.
A accurate appraisal is the single most important factor in weighing loan risk .
“A accurate appraisal is the single most important factor in weighing loan risk.”
Similarly, a fraudulently-overstated appraisal is a key factor in creating loan risk.
Palidin was working on that as I remember, uncovering fraud. He must be pretty busy I haven’t seen him post in awhile.
GO PALIDIN
You can register to get an email notice when Palidin’s website is up and running by sending email to:
paladin@paladinreports.com
As a kid , my little sister used to buy the comicbook MAD Magazine religiously. They always had a cartoon called “Spy vrs Spy” with each one trying to out do or kill the other one off by mischief.
With ALL the Crime and Shenanigans out there, perhaps the Sharks at NAR should put out monthly a “Flipper vrs Flipper” or “Hustler vrs Hustler” Cartoon to spark some INTEREST and HUMOR for the next FISH in THEIR Dead Sea of Housing.
Happy Mom’s Day
Mad Magazine was the very first thing I read, circa 1965…
I read MAD Magazine any chance I could get. Hilarious. What, me worry?
Buyers get VIP treatment
Incentives rule housing market
By Lynn Adler
REUTERS
May 13, 2007
NEW YORK – Los Angeles Lakers fan? Buy a house in Rancho Cucamonga, listed for $925,000 and the seller will toss in four sixth-row tickets facing the Lakers bench, VIP parking and use of the “Royal Room” private lounge.
Sellers are getting more creative, aggressive and sometimes desperate with incentives to lure buyers to a massive supply of unsold homes in a bleak U.S. housing market.
http://www.signonsandiego.com/uniontrib/20070513/news_1h13deals.html
Yeah, that’s a pleasant drive from Cuucamonga to the Staples Center.
The other day at “Coconut Cay”
http://www.drhorton.com/corp/GetCommunity.do?pr=43356
Reasonably nice homes on tiny lots (50×100 feet for a standard lot) for around $500K or $200/sqft +-.
Double pane windows, more efficient HVAC system can be added as options. With 10% down and about $20K in closing costs (yes, this is Miami, huge city, huge closing costs) the monthly payment comes out to about $4200/month on a 30 year loan at 6.375%, including insurance, home owner’s dues and taxes. In short, you have to show up with about $70K at closing and then pay $4200/month. I don’t know about ya’ll, but to me $4200/month is not chump change.
Obviously many potential buyers share that opinion ‘cos now they are offering a $50K incentive on homes that are finished but haven’t sold. According to the sales guy that’s the last chance to get in before prices will go up again later this year. I told him I’ll wait until they offer a $75K incentive later this year. He just laughed and left. Suppose he didn’t appreciate that comment plus he seems to be in total denial about the state of affairs. Really, how many families can afford to spend $4200 a month on housing? The houses are nice but really nothing special.
“50×100 feet for a standard lot”
Land Baron! LOL!
Somewhat real estate related — tensions over over-crowded houses in Fairfax County, Va. — obviously a hot-button immigration issue, tied into how people feel about their neighborhoods and real estate values.
http://www.washingtonpost.com/wp-dyn/content/article/2007/05/12/AR2007051201585.html?hpid=topnews
Harry Gault doesn’t think of the small ranch home next door as a hot-button political issue in this year’s Fairfax County election or realize how frequently his complaint is heard throughout the region.
“I don’t mind an Hispanic neighborhood,” said Gault, 73. “But they’ve turned a three-bedroom, two-and-a-half-bath home into a nine-room boarding house.”
Long a source of tension in the suburbs, where high prices force many immigrants to pool financial resources and share housing, residential crowding has generated a surge of complaints in Fairfax, a county where one in four residents is foreign-born.
The local council there is totally in the pockets of local businessowners who employ immigrants for slave wages. When the city made a half-hearted attempt to pretend to enforce occupancy laws in the late 1990s, all the restaurant owners screamed about how the city was persecuting their busboys. Of course, the taxpayers who were picking up the tab for the huge wave of crime and social services costs generated by all the illegals and their dependents never had a say in the matter, because they stupidly chose to continue to vote for Republicans and Democrats, i.e. the whores and swindlers who threw open our borders.
The race is on for SD’s ziprealty.com inventory to cross the 20,000 mark. We should be there by some time in August if the rate of 200 net new listings per week (since Feb 1) holds up.
“Your search has returned the first 200 of 18221 homes”
Pension issues are finally making top news, at least on biz section (of L.A. Times):
Rest later; check pension plan now
You may have money in hedge funds or other risky bets. They can win big or lose big, as San Diego learned the hard way.
Unfortunately, LATimes didn’t touch on MBS, CDO/CDS, REIT, subprime/prime lenders, and other real estate related stock & bonds as pension packages which are set to implode….
I think Mbs CDO Reit Pension issues are NOT a big problem compared to the amount of New NON-SMOKERS hired today.
They live longer and collect more pension money. So we have to make new hires pay 4-6% of their income to the pension, and eliminate all 20 years and out union type benefits. even 25 years at full pension may not save the system…30 years will probably do it…….
Major union resistance i fear!
The LA Times is doing the right thing. Good to see a major newspaper getting this issue out in front of the public. It would be great to see some follow through on this issue by other players in the MSM. Hint, hint…
As with the housing bubble itself, San Diego’s only the beginning. Most cities, counties and states are in the same boat.
San Bernardino Sun’s top of printed news: School enrollment puzzles
This academic year was the first on record and perhaps in history that San Bernardino County saw enrollment fall in public schools. The drop was small - 48 students out of a total of more than 427,000 - but it was a reversal of earlier fortunes. In each of the previous five school years, the county added between 3,851 and 13,266 public-school students.
Declining enrollment is a statewide trend. In the 2005-06 school year, 574 districts in the state experienced a drop in enrollment, according to the California Budget Project.
And so, the Real Estate related implosion slowly gains momentum. Even the gov workers will not be immune….
Irony Alert…
http://www.latimes.com/news/nationworld/la-na-wolfowitz11may11,1,4402780.story
Can someone please just put this wolf down? And use a silver bullet to make sure he stays down.
How is Maine enhancing its retirement industry?
By Charles Lawton
Sunday, May 13, 2007
Nearly a decade ago, the Maine State Planning Office issued its call for us to roll out the Welcome Wagon for a new generation of seniors. Its report — “A Golden Opportunity II: How Maine Can Enhance The Retirement Industry” — was issued in December 1999 and called for the state to institute fiscal, housing, cultural and recreational policies to keep Maine retirees in the state and to induce retirees “from away” to come here. The reasons justifying such policies were fourfold.
First, “the retirement industry offers significant multiplier effects.” Translation, retirees have lots of money and spending it here supports lots of jobs.
Second, “retirees put little pressure on our State resources.” Translation, retirees don’t bring school children.
Third, attracting retirees is “one viable strategy for addressing Maine’s labor shortages.” Translation, some retirees can greet and retrieve stuff for other retirees, they can be part of their own multiplier effect. And, besides, most retirees already have a good work ethic.
Fourth, the nation’s demographic structure ensures a large and growing supply of seniors, so retirees constitute a growth industry. Translation, better to invest our tax dollars here than waste them fighting the downward trends in our traditional industries.
While Maine never adopted any formal “Retirement Industry Development Program,” I thought it would be interesting, particularly in light of my recent columns highlighting our aging population, to see how we have done with the retirement industry. One way of getting at least an initial look is to examine data compiled from tax returns filed with the Internal Revenue Service.
In 1997, 28 percent of individual federal income tax returns filed in Maine included retirement income (income from Social Security, pensions or annuities, self-employment or individual retirement plans). This income amounted to over $1.6 billion or about 8 percent of the state’s total adjusted gross income (AGI). By 2004, 34 percent of Maine returns included retirement income, and it amounted to nearly $2.6 billion, or about 10 percent of total AGI. Maine’s retirement income grew by 32 percent over the period, well ahead of the national increase of 27 percent.
Whether this growth reflects success in building and attracting a “retirement industry” or just the natural progression of our demographic structure and work history cannot be determined by these data alone. To answer that question, we would have to look at the addresses of these tax returns to see if Maine is winning or losing in the retiree attraction game.
Some indication of the nature of Maine’s retirement industry, however, is evident in the distribution of taxable retirement income by source. Consider the table above.
In Maine, retirees are overwhelmingly dependent on traditional pensions and annuities. These sources of retirement income are found on 51 percent of Maine returns listing any retirement income, and they account for fully 64 percent of reported taxable retirement income. Taxable social security payments, in contrast, are listed on just 25 percent of retirement income returns, and it accounts for only 17 percent of reported retirement income. This relative distribution is explained, at least in part, by the fact that the Maine State Retirement System, that covers state employees and most teachers, serves for its participants as an alternative to Social Security.
Individual IRA distributions showed up on 21 percent of retirement returns, and accounted for 16 percent of reported retirement income. Self-employment plan distributions accounted for about 3 percent of both returns and income. These plans, however, showed the second highest income per return (just over $12,000 in 2004) and by far the highest rate of growth per return since 1997. This growth clearly reflects the increasing importance of these plans for those not covered by a “traditional” pension/annuity program.
In summary, these data do not allow us to say whether or not Maine has been successful in exploiting its “golden opportunity.” They do, however, underscore the fact that retirement income is increasingly derived from several sources and, thus, that retirees are likely to be increasingly involved in managing their retirement income and thus increasingly sensitive to state and local policies designed to attract them.
The opportunity still lies before us, and, at a minimum, we should revisit the 1999 study to see how many of its goals we have met.In Maine, retirees are overwhelmingly dependent on traditional pensions and annuities. These sources of retirement income are found on 51 percent of Maine tax returns listing any retirement income and they account for fully 64 percent of reported taxable retirement income.
http://pressherald.mainetoday.com/business/bottomline/070513chuck.html
There are two words that describe why this won’t be successful: New Hampshire.
Foreclosure frenzy
Auction draws more than 1,200 bidders on Southern California houses, condos
By Emmet Pierce
STAFF WRITER
May 13, 2007
The bidding on foreclosed homes was so fast and furious that Candace and Curtis Friedman were still feeling an adrenaline rush as they were escorted out of the auction to sign a purchase agreement.
(This is a description of a captioned photo that accompanies the article…
JOHN GIBBINS / Union-Tribune
“Ring man” Jeff Johnston showed his disappointment after a bidder lost an auction for one of nearly 100 foreclosed properties in San Diego and Imperial counties. Johnston’s job is to build excitement in the crowd.)
“You don’t have a lot of time to think,” said Curtis, a stay-at-home dad from El Cajon. “It’s the fastest $200,000 we ever spent. It’s over before you know what happened.”
His wife, a business owner, quickly agreed. “It’s been a whirlwind.”
The Friedmans, who already own a home, plan to rent out their newly acquired three-bedroom dwelling in El Centro. They were among more than 1,200 people who came to the San Diego Convention Center yesterday morning to bid on nearly 100 houses and condominiums that had been reclaimed by lenders. Many others had the same idea. Traffic was backed up at the entrance to the convention center at 9 a.m., an hour before the event began.
Reflecting the recent national surge in home loan defaults, the dwellings from San Diego and Imperial counties were put on the block by Real Estate Disposition Corp., a company based in Irvine. It was the first of three such events planned in Southern California this month. REDC’s goal is to sell 300 homes that have gone through foreclosure.
A record number of San Diego County homeowners lost their homes in the first three months of the year, as default and foreclosure activity rose throughout the state, DataQuick Information Systems reported. Locally, 1,182 foreclosures took place from January through March.
That was nearly eight times the amount reported in the first quarter of last year. The previous record was 1,059 in the third quarter of 1996.
(Another captioned photo is described here:
JOHN GIBBINS / Union-Tribune
Bill Conti (left) got ready to hug his daughter, Nicole, after Jim Buzzella (right) told them they were the high bidders on a house in Escondido. More than 1,200 people attended the auction.)
http://www.signonsandiego.com/uniontrib/20070513/news_1m13auction.html
“‘Ring man’ Jeff Johnston showed his disappointment after a bidder lost an auction for one of nearly 100 foreclosed properties in San Diego and Imperial counties. Johnston’s job is to build excitement in the crowd.”
Used to be that someone in this role was called a shill.
–
From yesterday (sorry, got busy):
Anyone in need to build more land for housing can contract with me. I know how to do it. — Jas
Comment by WAman
2007-05-12 09:11:12
Volcanic eruption?
No, by building roads and other infrastructure where there is none now. Prisons in SoCal that were built in outlying areas needed roads and infrastructure and within few years homes started to get built all around the roads.
Jas
“How does it become a man to behave towards the American government today? I answer, that he cannot without disgrace be associated with it.”
Henry David Thoreau
I know that this is OT, but how in the world does anyone expect a democracy to be formed in 2-3 years? It took over 10 years for this democracy to be formed in the late 1700’s. And there also was not a civil war going on!
http://news.yahoo.com/s/nm/20070513/pl_nm/usa_iraq_republicans_dc_1;_ylt=AkFPP.NExDHd2_SbG8Ex4EIUewgF
Except, of course, that America is not a democracy. It’s a republic, and not a particularly pure republic at that.
It WAS a republic. Now it’s an empire ruled by the most arrogant and ignorant cabal we’ve ever seen, elected by drooling idiots.
http://wealthtrack.com/
It was interesting listening to the comments by Riad Younes. Comments about how we are likely to see a repeat of Nasdaq 2000 in the next two to three years. Real Estate and Equity Funds are driving us into dangerous territory. Commenting that he believes the US is following the wrong strategy for the interest of the US economy as opposed to the Global economy. I.e. the US is controlled by the Corporations and these Corporations are Global Entities. A funny comment was that Corporations are the best bookies in the world, covering all of the odds. That’s why the billionaires are the Hedge Fund Managers and CEO’s and the average American is basically getting the shaft. He did state that in the short term the slow down in the US economy will be temporary and that it will pick-up in the second half of ‘07, but this will only make the eventual correction even worse. He then went on to reference the Japanese Real Estate market of the 80’s and 90’s.
We’ve heard all of this by others and by those here on this blog, but it’s always interesting to hear it from these guys.