Bits Bucket And Craigslist Finds For May 20, 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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Craig’s List in Sarasota is getting to be a very strange place.
I’ve been watching it closely for about 6 months and the changes are dramatic. Tremendous increase in listings (sale+rent), desperation, and nut jobs.
http://sarasota.craigslist.org/rfs/333943082.html
http://sarasota.craigslist.org/rfs/333946965.html
Key Lime, I love those two posts. If I had to guess, both were probably written by people for whom English is not their first language. Even so, what they wrote was pretty eloquent and both are HBBers at heart, even if they don’t post here. The “glutney” post cracks me up.
I am thinking of answering the second ad to tell the poster CA is NOT doing better. At least, not much better.
All we have to do is find the HBB poster that spells nothing as “notghing” and we know who wrote those posts. The search is on.
That’s like half the people here.
And misspelling you’re as your…at least he/she didn’t spell losing as loosing as so many HBB posters do. The thinking is good but the poor spelling and grammer makes them sound uneducated and therefore not so credible.If you’re going to post this sort of debate…at least be able to piece a sentence together people!
“grammer”???? LOL
My favorite: than v. then abuse.
Thanks, I make that mistake all the time and the spellcheck doesn’t catch it.
But th(e/a)n again english is not my first language, I’m fluent in 3 and pretty good in a 4th.
How many languages do you speak?
Then vs. than? there, their, they’re…
Tell these folks to take an ENG 101 class at a local college.
Tangible evidence of Las Vegas housing slow down:
Cabinet maker closes LV plant
http://www.inbusinesslasvegas.com/2007/05/18/feature2.html
I’m not from the States……….but I found this on the net and had to laugh………..hope it doesn’t upset anyone.
http://au.msnusers.com/hbdjr51eom680jhq6u86ni1lu6/Documents/hillary_kfcspecial.jpg
The link you provided asks for an MSN login and that really is insulting. Searching for the image name will find it, but it is just low brow political humor. Making 2007 about the 2008 campaign isn’t necessarily a good idea even on political blogs, let alone here. It is not entirely clear that Hillary is even in the running since she is broadly unpopular in many areas that have primaries at recently upgraded times, and the polls people quote that show her as popular are the same ones that show Al Gore who is not even running as being close behind. Apart from the bad link, seriously off topic flame bait subject matter, the timing being off by about a year, and the target being DOA on the national political scene, what could possibly be the problem?
I smell a rat.
“We are real estate investors who have decided to help others…
“We are not sub prime lenders, or scam artists. We are successful investors who know how to get good deals for you….
“And because we are successful, we want to give back …. to you.
http://sarasota.craigslist.org/rfs/334386977.html
“Eileen or Pam” - two rats.
Our departed Mother Teresa now has competition with these folks trying to act like her doing good deeds. Next they will be telling you that with their profits they will personally go to Calcutta and nurture the starving masses.
It’s been flagged — so what was the scam they were pushing?
“40% of all refinances and purchases in San Francisco in 2006, were made by people who couldn’t afford to pay the principal on their loan.”
http://www.californiahousingforecast.com/commentary/2007/5/14/san-francisco-40-of-last-years-loans-are-io-or-neg-am.html
Lots of NAHB charts:
http://seekingalpha.com/article/35959?source=i_email&u=8613
“40% of all refinances and purchases in San Francisco in 2006, were made by people who couldn’t afford to pay the principal on their loan.”
What better reason for a FB to serially refinance (despite the new loan closing costs incurred at each subsequent drink from the debt punchbowl)? If they had sufficient money to repay principle, I guess there would be no need to borrow more…
Suicide - I can think of no other word. Well after another moment another word - STUPID!
The rules of the game have changed on the FBs and they don’t want to admit it. Between 2002 - 2006 the rule was to buy the biggest, most expensive house, whether you could afford it or not. After 2 years either sell or refinance to pull out cash.
Today they can’t sell and they are praying that they can refinance. They are hoping they can somehow hang on, either in hopes of a bailout or a GF showing up at their door, so they can still make that fortune they initially envisioned. Stubbornness and the remnants of bad lending are the only things propping up many markets. That can last for a long time but not forever.
NYCityBoy,
You have cited the primary reason I believe the high end (at least in San Diego if not other glamor cities around the U.S.) will crash hard. Too much of the demand for high end SFRs was generated by flippers who thought they would make more of a killing by purchasing multi-million-dollar estates than by dinking around with low-end SFRs or condos. But when prices are dropping by 20% YOY (see the examples I posted below), those high-end flips don’t look quite so smart anymore, especially when there are no wealthy end users interested in overpaying to catch a falling knife.
If some wag, in the dead of the night were to change a billbored that was advertising houses, as Falling Water Estates. to say “Falling Knife Estates”…
I’d be ok with it.
This stubborness will be beat out of the system by 2009-10.
“real estate investors” / realtors who are now the proud owners of some houses that are not moving. They came up with an IDEA, propably harvested in the local church about how to gain the confidence of others by disguising themselves as generous good dooers. They have some houses to sell, their own!
With all due respect to HARM, I see debt monkeys…
———————————————————————————–
Keep the Debt Monkey Off Your Back
By JACLYNE BADAL
May 20, 2007
When it comes to borrowing money, caution is coming into vogue.
Financial advisers have long warned people against taking on too much debt. But as debt loads for companies and individuals climb, a growing number of people — from regulators and Wall Street analysts to home lenders and economists — are picking up the cry.
This growing fondness for moderation is fueled by a multifaceted expansion in borrowing:
• Climbing housing debt, along with a sharp increase in delinquencies and foreclosures.
• Record levels of margin debt, or money borrowed to buy stocks.
• Government figures showing that consumers for the past two years have spent more than they made, something that hadn’t happened since the Great Depression.
As a growing number of people get swept up in the borrowing binge, this is a good time to assess your finances and determine how much debt is too much.
http://online.wsj.com/article/SB117961130913908705.html?mod=googlenews_wsj
DebtHog
Just sounds better.
How about no debt??
Since when is carrying a debt load part of the American dream? If you value your time and freedom, debt free is the goal.
I guess that would be too radical for the wsj. Just keep folks at a
“manageable” level of debt so they don’t feel the yoke is too heavy.
“I guess that would be too radical for the wsj.”
They need to promote the interests of their banking constituency.
Hahaha…HARM will like that!
It’s hard to squeeze mortgage payments out of debt monkeys.
——————————————————————————–
Mortgages too much for many
Even working folks despair of making loan payments
Bob Tedeschi, New York Times
Sunday, May 20, 2007
For housing economists, the best gauge of whether borrowers will repay their mortgages is their job status. When unemployment jumps, foreclosures are not far behind.
But according to a recent study by Freddie Mac, the government-sponsored mortgage company, even people with good jobs and good credit are struggling to keep pace with their mortgages.
In an analysis of 2006 figures, Freddie Mac found that among borrowers with good credit, rising health-care costs and personal debts were the reasons behind a growing number of mortgage delinquencies and that far fewer delinquencies were tied to job losses or pay cuts.
“With respect to mortgage delinquencies, unemployment is always a problem,” said Amy Crews Cutts, the deputy chief economist at Freddie Mac. “But we’re paying a higher dollar amount each year for health insurance and uncovered health-care costs, and many people are taking on too much debt. These represent a rising part of why people are getting behind on their mortgages.”
At the end of 2006, job losses or pay cuts caused 36 percent of delinquencies, compared with 43 percent for each year between 2001 and 2005, Freddie Mac found.
Meanwhile, delinquencies caused by too much personal debt, including insurance premiums, rose to nearly 14 percent, up from 11 percent, while delinquencies ascribed to health care and illness rose to about 21 percent, from about 19 percent.
http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2007/05/20/REGNLPTOV31.DTL
http://blog.dhomeandgarden.com/2007/05/17/ftc-looks-at-competitive-structure-in-real-estate-more-realtor-scrutiny/#more-2851
Take the Sixpercenters DOWN.
I wonder if there will be a huge backlash against the Sixpercenters as the market continues to drop. Sure, we see the all the ire directed toward the Sixpercenters on this board (and other similar boards), but I haven’t really seen the same among the general population.
I think if property values drop all the way down to 2000 levels, FBs will be looking for someone else to blame and the Sixpercenters will receive the most of it. The backlash will end up being far more than a 60 Minutes segment or a bunch of posts on blogs. It may end up being the end of the NAR monopoly as we know. Many will be calling for the Sixpercenters heads.
Imagine this scenario: Perhaps you should have known better, but you came out of this bubble owning a residence you will not be living in and cannot seem to rent or sell. Someone who has found some suckers for other nearby properties claims to have someone interested, but wants 6%. Are you going to take the impact of the bubble square in the face, or are you going to pay the fee to unload the asset? These fees do not endure because people love to pay them, but because again and again there are situations where people would love to dump their properties and only an experienced sales agent can find someone willing to pay for them. Relative to the 20% or more that is not at all uncommon for retail mark ups full price agents can be considered a great deal in some circumstances. Remember, the market can stay borked longer than you can stay solvent.
If this was true than why do many other Western nations pay no more than 2 percent to a real estate agent?
“Remember, the market can stay borked longer than you can stay solvent. ”
Someone who gets it…
I’m with you that one. When the market borked after the Reagan tax overhaul, I lost me azz on some commercial property that I couldn’t pay a balloon on. It didn’t help that one of my anchor tenants had an insurance fire, and my insurance company only paid about 70% of the actual structure repair costs. To add insult to injury, a partner went BK on me and defaulted on his obligations. I couldn’t get a loan to refi the balloon, and that was the end of that.
Other than the lesson about how long the market can remain borked, I learned a couple of others: Never count on a partner, never use a loan with a balloon, and always buy in an area with a strong AG that holds insurance companies accountable. A replacement value policy is not what it seems unless you have prosecutors and courts that are not in bed with the insurance companies.
“As a growing number of people get swept up in the borrowing binge, this is a good time to assess your finances and determine how much debt is too much.”
This is nothing new to most of the posters on this board, but it did get me thinking when coupled to one of yesterdays posts on AZ RE and housing prices in relation to family income. Most assume a level to purchase a house maxed at 3X income level, but in the old days of say the 1970’s that was based on the income of the head of household and not the wife working, overtime (that could disappear), etc. In todays climate with a fallout in RE and related industries it would be wise to return to said thinking when deciding at what level to enter the market. Anyone buying a house based on the income level of the head of household of a two (wife) family members (or more) has the ability to weather almost any financial strom headed their way, set money aside for retirement and improve their quality of life.
I totally agree with your assessment. Unfortunately, folks who prefer such a level-headed approach to household finances have been trumped the past several years in the home purchase markets by high-risk borrowers who were enabled to buy houses they could not afford by lax credit standards.
Excellent point
I agree, but would add that DINKs bidding up houses based on combined salaries is a long-standing tradition around here. Also the divorce rate has skyrocketed since the 1960s, which adds to the risk. What’s only a little more recent is that when dual-income households *do* have kids, it is now most common to hire nannys rather than relying on family members (granny) to raise the kids while the parents work. So now, with granny flats banned, the parents have to support granny at a separate residence, pay the nanny, and pray that they keep their jobs as they hang on for dear life.
Talk about high risk. An extended recession at this point is going to be a nightmare for those who are overextended.
I’ve often thought this to be true. It is very smart financial planning to not assume dual incomes. The issue, however, is that at least in the VT market right now, it is not possible to buy a house based on 1 income, unless the 1 income hovers in the range of $60,000.
We lucked out and bought 7 years ago, were able to qualify on 1 income. However, the house needed considerable amount of work (including electrical, roofing, and foundation issues) and is a 40 minute drive from a large job center.
Right now in the market it absolutely requires two incomes just to qualify (under traditional guidelines) for a similar house. I’m banking on that someday that will change.
I also have to admit that it is extremely depressing to watch people (baby boomers, mostly) who work 9-5 jobs, who have no idea how much work it is to paint, do electrical etc (all done for them by contractors) afford pretty nice houses. We’ve been working our tails off for 10 years between children, business, and a fixer-upper and would not requalify for our still in need of work house on 2 income.
That’s 1 income..
“Anyone buying a house based on the income level of the head of household of a two (wife) family members (or more) has the ability to weather almost any financial strom headed their way, set money aside for retirement and improve their quality of life.”
I know a few folks with two incomes; his income is our income, and her income is her income, which is usually pi$$ed-away on vanity.
Did Merrill, Morgan Stanley Overpay?
By Randall Smith
Word Count: 949 | Companies Featured in This Article: Merrill Lynch, Morgan Stanley, Goldman Sachs Group, New Century Financial, Fremont General, Lehman Brothers Holdings
Some of Wall Street’s biggest players bet heavily on the subprime mortgage sector last year just as it started to head south. Now, investors are questioning whether the firms overpaid to get into a sector that has become less profitable.
Last year, Merrill Lynch & Co. and Morgan Stanley bought subprime mortgage lenders, with Merrill paying $1.3 billion for First Franklin and Morgan Stanley acquiring Saxon Capital Inc. for $706 million.
Matthew Howlett, a mortgage-sector analyst at Fox-Pitt, Kelton, estimates that the pace of subprime lending and the volume of securities backed by such loans may fall by nearly half this year. As a result, Mr. Howlett now believes Merrill may have overpaid for First Franklin by $600 million. He doesn’t believe Morgan Stanley overpaid as much for Saxon because that business includes a mortgage-servicing platform, which he believes has held more of its value.
Wall Street firms are heavily exposed to the subprime market, where lenders make loans to people with weak credit. Brokerage firms bankroll subprime lenders with credit, package and sell bonds backed by their loans, and operate their own subprime lending shops like First Franklin.
In the past year, mounting defaults and delinquencies among high-risk borrowers who received subprime mortgages have forced some lenders into bankruptcy proceedings — attracting buyers on Wall Street hoping to snap up deals at fire-sale prices.
…
http://online.wsj.com/article/SB117953183168008179.html?mod=rss_markets_main
—————————————————————————————-
Da Boyz on Da Street should check out this web site before they attempt to snap up any more deals at fire sale prices…
Latest count of major US mortgage lenders that have croaked since late 2006:
72 lenders have now gone kaput
Last addition: May 19, 2007. Latest imploded: Columbia Home Loans, LLC, Mortgage Tree Lending, Homeland Capital Group, Nation One Mortgage, Dana Capital Group …
http://ml-implode.com/
“Last year… with Merrill paying $1.3 billion for First Franklin…
Matthew Howlett, a mortgage-sector analyst at Fox-Pitt, Kelton, estimates that the pace of subprime lending and the volume of securities backed by such loans may fall by nearly half this year. As a result, Mr. Howlett now believes Merrill may have overpaid for First Franklin by $600 million.”
******
“Yeah, let’s overpay by half to get into a business where we can chase the market down.”
ML leadership = Clowns.
I guess ML and MS never heard the old saying, “Don’t fight the Fed?”
GS -
Actually, I think they’ve gotten so used to the Fed being “easy to read” (the Easy Al put, for example) - they couldn’t fathom it coming back to bite them in the ass anytime soon.
They stopped paying any attention at all to Brazil Americans and got lazy.
“Gotcha!”
“Oops!”
A $40k haircut and counting:
http://tylerliving.blogspot.com/2007/05/update-on-how-low.html
Cut-rate or cut-throat?
By Roger Showley
STAFF WRITER
May 20, 2007
When it came time for José Viesca, 26, to buy a home closer to his commercial loan job in Escondido, he didn’t turn to Coldwell Banker, Century 21 or any of the other traditional real estate brokerages.
(NADIA BOROWSKI SCOTT / Union-Tribune
Redfin agent Erik van Joosten (left) led José Viesca through a walkthrough of his newly purchased condo with developer representative Vena Taylor.)
He turned to Redfin, a Seattle-based online brokerage whose sole San Diego agent, Erik van Joosten, works out of his Del Mar home.
“I’d definitely recommend him,” said Viesca, as he completed his morning walkthrough at Il Palio, a Carmel Mountain Ranch condo conversion project, and pocketed an $8,000 rebate. “I’d give him a ‘10.’ It’s a new way of doing things.”
Redfin is among a growing group of real estate companies that are upending the traditional way homes are bought and sold.
Using the Internet as their primary means of communications and lead generator, they offer cut-rate commissions or flat-fee payment structures.
Their clients do most of the legwork, from searching for a house to holding their own open houses.
And gone are the calendars, notepads, refrigerator magnets and bus stops plastered with agents’ smiling faces.
“We are re-engineering the entire real estate transactional process, changing from the old to a new paradigm, and in the process of changing, there are births and it hurts,” said Stefan J.M. Swanepoel, an Orange County-based operator of real estate schools.
In his recently released 160-page book, “Swanepoel Trends Report 2007” (RIS Media, $129.95), he identified “paradigm shift” as this year’s top real estate trend.
“Existing brokers still clinging to the traditional model – old compensation plans, large infrastructure and many physical locations – are very likely going to see their market share eroded,” he wrote. He identified Redfin as one of the leading innovative brokerage models emerging today.
http://www.signonsandiego.com/uniontrib/20070520/news_lz1h20broker.html
Il Palio!!! Their signs claim to be “I-15’s fastest seller.” For the past 2 years they’ve been shaming the Sav-on/CVS intersection.
Who gives a crap how “fast” your apartment-turned-condo sells anyway!?
One mile to the east, Poway has banned sign spinners. Thinking about relocating soon.
Don’t buy until the last optimist is silenced by irrefutable evidence that real estate is a terrible investment.
———————————————————————————-
Wealthy markets aren’t as affected
By Jim Christie
REUTERS
May 20, 2007
SAN FRANCISCO – Manhattan real estate broker Dennis Mangone is in a position many in his profession would envy: Clients are rushing to buy as Wall Street money piles into the upper reaches of the island’s housing market.
“People come to me and say, ‘I need a two-bedroom for $4 million,’ ” said Mangone, a broker with the Corcoran Group. “The higher the price for the apartment the stronger the demand . . . Penthouses are the first to sell.”
By contrast, Main Street real estate brokers in many U.S. markets are waiting for the phone to ring as buyers bide their time – partly because subprime mortgage borrowers are defaulting at a brisk pace. Many analysts predict those defaults will prompt foreclosures, which will pull down home prices that had a huge run-up in recent years.
March saw a 7.3-month supply of existing single-family homes for sale in the United States, up from 6.8 months in February, and the national median home price ticked down 0.3 percent from a year earlier, marking eight consecutive falls, amid annualized sales falling 8.4 percent from a year earlier.
Optimists say the data show housing is near a bottom. Pessimists say housing is in store for more slow-going at best. However, they concede some markets will remain resilient, with lofty asking prices persisting despite the drag on the housing market from subprime mortgage defaults.
http://www.signonsandiego.com/uniontrib/20070520/news_1h20wealth.html
“While San Francisco home prices press higher, sales are down – nearly 17 percent in March from a year earlier.
Such a drop in many markets would underscore sharply weaker demand. But in San Francisco it shows buyers are being picky.”
WTF? How could anybody that considers themselves a “professional journalist” write such garbage? There is another profession down the drain in a big way.
I guess it’s different in Manhattan, because the April DataQuick numbers show some eyepopping negative price changes for some desirable San Diego areas.
Examples:
- Rancho Bernardo W (92127)
Median Used SFR Sale Price = $776,500 (-23.9% YOY)
Current Median Used SFR List Price (ziprealty.com) = $1,396,444
Median Used Condo Sale Price = $447,500 (-9.4% YOY)
Current Median Used Condo List Price = $349,000
- La Jolla (92037)
Median Used SFR Sale Price = $1,547,500 (-19.2% YOY)
Current Median Used SFR List Price = $2,595,000
Median Used Condo Sale Price = $600,000 (-19.9% YOY)
Current Median Used Condo List Price = $789,500
- Rancho Santa Fe (92067)
Median Used SFR Sale Price = $1,950,000 (-35.0% YOY)
Current Median Used SFR List Price = $3,595,000
Median Used Condo Sale Price = NA (Not sure what this means?)
Current Used Condo List Price = $1,342,000
http://www.dqnews.com/ZIPSDUT.shtm
P.S. I calculated the current median list prices shown above from ziprealty.com current listings. The gaps between recent sales prices and list prices for some of the areas I referenced clearly appear to be unsustainably large. End users with brains and bank would be advised to wait for those gaps to close before buying.
“I guess it’s different in Manhattan,”
I see so many condo buildings about ready for completion that I can’t believe we are not about 6 months away from a serious glut of condo inventory. The Battery Park area has buildings going up all over the place. The Broad Street monstrosities are well under way. The Park Ave. building near 36th Street looks to be moving along nicely. These are all $million condos. Every one of them (at least in the builders’ minds). I have yet to see a New York street paved with gold.
My favorite architectural abortion fiveninejohn.com looks like they are pulling the plug. You really have to be here to see how stupid this idea was. “The new luxury of Wall Street living” and I am John D. Rockefeller.
Manhattan will tank…it has before, in 89-92 and it will again. When Wall Street faces a downturn, all the ibanks start layoffs at the same time. And beng a 28 yr old with 4 million in bonus money does not make you a shrewd RE buyer.
“And being a 28 yr old with 4 million in bonus money does not make you a shrewd RE buyer.”
But it does make you a great target to become the last GF in the chain…
I’m not sure what constitutes a “wealthy” market here in SD, but I sure don’t want to pay $800k or more for a 2500sqft box on a 5000sqft lot. Unfortunately, 92130 is still holding up better than I had hoped. My neighborhood has seen roughly a 10% decline since late ‘05, early ‘06 on SOME properties, but 30% drop is looking less likely unless something during the second half of this year causes some serious panic. (I don’t see impending resets affecting 92130 for at least another 12-18 months, if at all.)
“something causes a panic…” Dream on. Reality will set in with “unsold” inventory and housing not selling. Who are the “new buyers”. Job transfers, a few but move ups, first time buyers are all but gone with stricker mortgage guidlines. Equity going down fast will prevent the “move up” to a bigger house. Reality 40 % to 50% drop minimum. Take it to the bank if you can find a lender who will believe the appraiser now.
92130 has a current median SFR list price of $1,199,000 (ziprealty.com), but the median SFR sale price last month was $984,000 — not such a gaping chasm as in 92127 ($1.3m versus $725,000), but the recent sale price still sounds mighty high for an area with massive amounts of new construction.
Does anyone remember this story: http://tinyurl.com/39dn66
I wonder if they ever sold their Orlando home?
The tax records show that they did go ahead with the McMansion purchase for 533,000 back in Oct 2006.
It would be interesting for CNN to do a follow up story on the couple telling everyone how much they are enjoying their new home the double or triple payment, losing their SOH, higher insurance, utility bills etc.
I doubt that home will ever hear the laughter of small children as that couple will most likely be working two jobs each just to keep their head above water.
What fools they are and to think that they had a nice home, in a nice area with a smaller mortgage and plenty of room to raise a family in.
Greed doesn’t get any better than this.
They were about to lose their 28K deposit, geez how much have they lost now?
No small children as money problems are the root cause of most many divorces?
Smoke ‘em if you got ‘em:
http://tinyurl.com/yqubg8
http://tinyurl.com/yvm5wy
http://tinyurl.com/yorylz
http://tinyurl.com/2e2w64
http://tinyurl.com/ywyv7k
http://tinyurl.com/2dsmfc
http://tinyurl.com/yoaly3
http://tinyurl.com/2bwmbe
The rotisserie plan is growing!
Baile! Bail!
http://tinyurl.com/2vdmk4
Everyone wants out!
Wow, $428,000 per year in taxes.
Nice selling point.
How many people do you think actually live in houses like that and are really happy? That’s the sad part of most of these estates or compounds. They generally bring almost no real happiness to the occupiers.
Never too late to drink the real estate investing koolaide, it seems… And don’t believe all the talk — it’s just a bunch of bloggers talking nonsense…
—————————————————————————————————————–
Investing still a good deal
Now may be the time to get into the game
By Kamil Skawinski
BANKRATE.COM
May 20, 2007
Real estate has its market cycles like any type of investment, and lately it’s been getting bad press. Investors may have second thoughts about putting money in this asset class right now, what with all the talk about a bursting housing bubble, the glut of unsold condominiums and homes, declining property values and the growing number of foreclosures.
But this may mean that it’s an opportune time to get into real estate. “Owning some paid-for, income-producing real estate, in addition to having a solid portfolio of other investments, can be a very good thing,” says radio talk-show host Dave Ramsey, author of “The Total Money Makeover.”
For investors willing to invest for the long term, owning properties “can be a path to financial freedom for many,” says Ramsey.
Single-family homes make good first properties because they don’t entail the same hassles associated with multiunit apartment buildings.
“Single-family homes, which can be easily turned into rentals, are also much more affordable than, say, multifamily units such as duplexes, triplexes and so on,” says Robert Sheehan, consulting economist for the National Apartment Association.
http://www.signonsandiego.com/uniontrib/20070520/news_1h20invester.html
And newspapers wonder why they are losing market share. This is one of the most dumb and dishonest articles I have seen. What kind of fish wrapper would print such junk?
No no no… I agree with this statement:
“Owning some paid-for, income-producing real estate, … can be a very good thing,”
If everyone followed that advice to the letter, prices would take care of themselves. It addresses the fundamental issue that RE is not ‘income producing’ right now.
And just which people are in the position to have “paid for” property? Those who are in this position know that their money earns a better percentage in treasuries at the moment.
I read articles from bankrate.com a fair amount through another site. It’s become a cheerleader for real estate in the last couple of years. I’d say it’s roughly 5 to 1 pro buying real estate in some form. The articles on home improvement seem endless. It occasionally gives some good advice, but mostly it’s mindless “buy a house to build wealth” and “isn’t it great that house prices have risen so much” sort of stuff.
That is some of the worst advice I have ever read, other than the nugget of truth that owning paid-for income-producing property is good. But buying SFHs as income property is almost always a bad idea. It just isn’t worth it. Especially in this market, but in almost *any* market that I have seen in my lifetime. Apartment buildings are a hassle, but if you buy right, they actually make money!
Have to wonder if the Ramsey quote was from something written years ago? Yes, owning “paid-for, income producing” property is wonderful. Wish I did. But how may people can put 100% down? Or finance in such a way as to be “income-producing?” In San Diego you can’t buy for anything close to what you will get in rent (or lost opportunity cost when paying cash.) A bad investment is still a bad investment.
I know nothing about Ramsy but have to wonder if he has any recourse if he was quoted in such a way as to sell a product he has no interest in selling right now?
Making money off real estate investing is a piece of cake, right? NOT SO FAST…
———————————————————————————–
Owning rental property takes patience, diligence
By Otesa Middleton Miles
BANKRATE.COM
May 20, 2007
Owning rental property seems like an easy way to generate extra income. But it’s actually not all that easy.
According to a recent survey by the National Association of Realtors, 40 percent of home sales in 2005 were second homes and 35 percent of current investment property owners plan to buy another property in the next two years. Since 63 percent of those questioned by NAR said they bought the investment property for the rental income, it behooves landlords to be scrupulous in their searches for good tenants.
http://www.signonsandiego.com/uniontrib/20070520/news_1h20rentals.html
Ben, I’ve posted another vacant house/arson thread you’ll need to unlock. Thanks!
I can’t believe how many Craigslist ads say they’re already behind on payments. Here are a few samples.
http://phoenix.craigslist.org/rfs/334474136.html
“Hand me a certified check for 25K, and I’ll sign the deed over to you!”
“I’m three months behind on the payments, so you must be able to act fast! If you need comps, then this probably isn’t for you.”
http://phoenix.craigslist.org/rfs/334365747.html
“house is worth $201,000 as-is”
“Our contract is for $175,000 and we’ll sell the contract to you for $5000.”
http://phoenix.craigslist.org/rfs/334401473.html
“I am behind 2 payment and house goes to foreclosure. someone take over my $1250 payment and I will sign title over. currently appraise for $200K and my loan is $156 and I am selling this house for the price of my loan amount. I just want to walk away.
40K below the market. just take my paymente and I will sign the title to you. “
First fool buyer wanted $183 per sq. foot. The next only $215. I just paid $86 per sq. foot.
No Numismatic Immunity…
Talked to a few longtime dealers in round metal discs this past week, and they both told me how utterly dead the market is, for collectible coins.
One friend that plies his trade, quite a bit at coin shows, told me “last week at the bourse, we were just looking at one another, everybody has plenty of inventory, nobody wants to buy anything”
Interesting post. I occasionally buy the St. Gaudens gold MS-65 coins, but not that much. I like them for the aesthetic reasons and to daydream about an era with smaller government and a gold standard…But I’m mostly into modern bullion with no numismatic value beyond the spot price.
My last purchase was circ vf xf $20 libs and saints for the actual meltdown value, no premium…
That’s where you want to be.
What kind of coins? There are various segments - some anti-cycical vs. others. E.G. Early American Colonials and Large Cents vs. Silver Dollars and Gold.
The “right” coins will fare better than run of the mill stuff, but stick a fork, in values, i’ll explain at the bottom…
A lot of the money going into coins the past 5 years, has sadly been generated by slimy telemarketers, on radio & the print medium.
Their gig was this: They pushed the idea of owning gold, real hard, but when you called in, they’d push numismatic coins, a lot of times, using the 1933 FDR order, twisted around horribly, to fit their needs, in selling you much higher markup goods… (bullion= 3% buy/sell spread, numismatic coins= 10-40% buy/sell spread)
And like everywhere else, the money spigot has gone silent running, as in, the hoi polloi and more importantly for the higher end coins, the wall street studs that couldn’t afford a miscreantly created jackson pollock @ $35 million, but they could buy a Brasher Doubloon for $5 million and play big shot in the coin game, aren’t buying anymore.
About Coin Values and why they’ll plunge?
Coin Dealers are freaks of nature, i’ve never seen so many savants of their kind and i’ve glimpsed plenty of them over the years.
Mainly men and now, all of them are approaching 50 to 90? (the Elegant Q. David Bowers as elder stateman) and there is no new young blood to take their place, on the horizon, as coins are a patient man’s hobby, not a video game or a ring tone, something to learn about history and the foibles of mankind and coins are the one item left to document it all.
And as luck would have it, the aged numismatists, of which I describe, tended to be their own best customers, as when I call them coin savants, I really meant it.
I know scores of them that live, sleep, think coins, 24/7.
Got silver for sale - get it now before I put on ebay!
I loved getting whacked selling bullion on eBay…
Listing Fee, Selling Fee and PayPal Fee:
almost 10%
Color me not smart.
Draped Bust Silver Dollars? Yeah, I’m a buyer at even a bit more than bullion…
Another “suspicious” fire…
“The cause of the blaze was under investigation, authorities said.”
http://apnews.myway.com/article/20070520/D8P84ENG0.html
I think that this article from Forbes about being cheaper to rent than to buy was posted a few days ago. http://tinyurl.com/249nbb. This information is nothing new to people that read this blog. The article mentioned Portland as one of the cities where renting makes more sense.
Yesterday, the local Portland ABC station showed the story and the idiot newscasters made comments after the story ran that you “miss out on the investment” and you “don’t get the tax advantage”. Reminded me of a couple of parrots. Just another reminder as to how clueless people are on the purchase of a house. I will probably email the newscasters to enlighten them on their stupid comments to each other, but I doubt it would do any good except make me feel better.
Meanwhile, I have an acquaintance at work that is going great guns signing mortgages on his “investments”. He buys the house and has a contract in place for the tenant to rent-to-own. I am sure those he has under contract are going to be hard pressed to pay 15% more than the mortgage in a couple of years when values have dropped. The saddest part is that this person is probably 50 years old and is hoping to be doing real estate full time in just a couple more years. I told him the kind of money I made on my AZ home I sold in 2006 with the follow up that I think the days of making money in real estate are done for the next few years. Of course he just tells me that Portland is different with the urban growth boundaries and I tell him he’s probably right but that it is strange to see my neighbors drop the asking price as it has been hard to sell in Hillsboro this spring.
The only thing different about PDX is that it was late to the party on the ‘appreciation’ side and is a bit behind the curve on the crash. It is, however, going to catch up with the rest of the bubble market by the end of the year. Just look at all the crapshacks they are putting together all aloing the MAX line and the dozen-plus condo towers in downtown. I was out on a drive in Bethany, West Hills, NW PDX (23rd Ave) and Beaverton, and the For Sale signs have mushroomed all over the place. Even on the NW Germantown Rd over the mountain.
A buddy of mine moved back to PHX (F32 seed) and despite having had a lot of discussion over the last few months about the crash in PHX, promptly bought himself an alligator. I’m guessing he’ll lose a good $50-80K within the next 18 months before the market in PHX gets anywhere near a bottom in nominal prices.
Interesting, I was just talking to an acquaintance who is getting ready to go back to PHX in June. I told him it may not be a bad time to rent for a while to see what is going to happen. He seemed to agree - but we will see what happens.
In the meantime, he just purchased a brand new escalade here in OR to save the sales tax of AZ. I didn’t ask him if he used a HELOC to buy it, but have a feeling he did.
http://www.ocregister.com/ocregister/money/article_1701128.php
“I admit I’m partially to blame. But at the same time I don’t believe people should be taken advantage of.”
PARTIALLY?!?!??!?!
Can someone confirm that this guy has only an elementary school education? I am having trouble understanding this sentence: “Sadek says he stopped attending school after third grade.”
How can you be a leader in the financial industry if you can’t understand a fraction like: 1/12, let alone equations with exponents like: V = P*(1+i)^n ?
Because he is tough - he will make it. He made it out of a war torn country and became successful. Many on this blog would have just died.
Thought experiment: We send all this blog’s readers to Lebanon and move all elementary school drop outs from the Middle East to California.
I would expect this to result in Lebanon in 2020 achieving first world economic status, while California in 2020 slides backwards into a pre-industrial state of ignorance and violence.
AGREE! (w/SDMisfit)
Then came to this country and f’d thousands in $hitty loans.
Looks like he brought a lot of the “old country” way a thinking to America! Go home scumbag!
Yes, if you grow up in a war zone, get shot, etc., then little things like ethics and laws don’t have quite the same importance in your business conduct.
Daniel Sadek played Orange County’s subprime lending boom like a card shark dealt the ace and jack of spades.
Just five years ago he was selling cars.
Then, in January 2002, he anted up $250 for a state lender license and started selling home loans through his company, Quick Loan Funding.
Wow.
“China has agreed to take a $3 billion stake in U.S. private-equity giant Blackstone Group, which marks an unusually aggressive start to the country’s long-anticipated campaign to diversify how it invests massive foreign-exchange reserves.”
“American investors, having seen the dollar weaken and foreign stock markets consistently outperform the American market, are putting record amounts of money into overseas securities, The New York Times reported Saturday.
Figures released this week by the Treasury Department showed that Americans spent a net 40.3 billion dollars on overseas securities in March, making that the second-heaviest outflow ever, trailing only the 48.7 billion dollars for last December.
For the 12 months through March, Americans bought a record 277 billion dollars in foreign long-term securities. …The popularity of foreign stocks has come as foreign markets consistently have done better than the American one, said the report.”
People’s Daily online (english)
http://tinyurl.com/2md2yk
Let’s see China gives Blackstone 3B to buy US index futures and sucks up 200B in CAS as well as billions of US investors’ dollars in the Chinese exchanges.
3B is chump change to China.
Someone earlier talked about hurricanes in Florida - so here is some predictions from Accuweather.com
“Overall, we will see more powerful storms across the board than we did last year. We will not get anywhere near the amount of storms that we did in 2005, but it is the intensity of the storms we do get that will be of major concern. It goes without saying that if I were living along the Gulf Coast, Florida, or the Carolinas, I would do all I could to make sure that my family and I were prepared for the possibility of a landfalling tropical storm or hurricane. This is always prudent, but it is especially so during times such as this season, when we are likely to see above-normal storm activity.”
Estimates to repair aging US infrastructure over next 5 years - 1.7 T
Don’t look for RE tax cuts.
Well worth the read but caution 69 pg PDF
Urban Land Institute
Infrastructure 2007
prepared by Ernst and Young
A brief note from the report
“…50 billion is needed immediately to fill the gap for basic maintainance of roads with an additional 50 billion needed for necessary improvements. People gradually will come to grips with the reality of higher driving costs to pay for infrastructure, including tolls and higher fuel taxes.” ….
100 billion here, 100 billion there pretty soon we’re talking about real money.
link
http://tinyurl.com/2lokur
Repairing broken windows is good for the economy, right?
http://en.wikipedia.org/wiki/Parable_of_the_broken_window
In my opinion, our economy is clearly dying. The capital that once put it’s faith in America’s immigrant-based work ethic now sees greater return elsewhere. The plugs are being pulled on those sectors which were kept for awhile on life-support. The government is addressing symptoms, not root cause.
Infrastructure should be maintained and even improved only when a thriving economy justifies the cost. Sure, there’s a bit of a chicken-and-egg issue, but creating government-backed sectors to fix broken windows is not helpful and will only hasten our economy’s demise.
HOWEVER, allowing capital to flee to locales that permit slave labor and environmental ruin is clearly ALSO not the answer. When Perot kept venting about “the big sucking sound” back during the ‘92 (?) elections, I thought he was a bit over the top. I now regret the devastation that the “greedy algorithm” of global wage arbitrage has wrought. All my life I have always argued for meritocracy, but the “lack of conscience” of major capital has weakened my belief in a level playing field for those of us who participate and work for a living. I am quickly becoming more and more protectionist - if such measures hasten a global recession, perhaps that’s the medicine needed to cure the credit mania that will ultimately end in global depression IMHO.
No problem. Road and infrastructure improvement are planned to be included in the next round of WPA programs which are to be announced about 2009 or so.
http://en.wikipedia.org/wiki/Works_Progress_Administration
we have finally gotten there, foreclosure protests in the streets!!!
http://tinyurl.com/24tlzz
Yeah, they should nail the scammers. But also put THESE people to work doing community service wrt fraud research, remedial financial classes, and then have to teach those to others for free…. 200 hours seems fair.
Why post idiocy like this, when are people going to learn. I have no sympathy for these a$$hats. Not only where they playing in Real Estate but Iraqi currency, is there no limit to the greed and then cry and want to protest when it doesn’t work out. Caveat Emptor dumba$$
Is it really possible to ethnically cleanse the lending industry of private subprime lenders while also containing the damage to the overall economy? Just curious whether anyone who reads and posts here buys this theory, and if so, how they envision the scenario which supports this outcome?
http://ml-implode.com/
As We See It: Defined by a price: Housing figures evidence of endangered working class
The biggest shift in Santa Cruz County over the past couple of decades is not in environmental policies. Nor is our traffic, at least not directly.
It is the cost and availability of housing.
…
There’s another reason lower-priced homes are not selling as well, even in highly desired locations such as Santa Cruz County. Many lenders have tightened loan requirements. In addition, would-be borrowers who didn’t have enough money for a conventional down payment or who had marginal credit histories used to be able to get “subprime” mortgages from lenders who specialized in such loans. But because many of these borrowers have been defaulting on those loans, the lenders have either disappeared or become much stricter in their lending policies.
The trend of people struggling to keep up with their mortgage payments is happening here, too: Defaults are up 63 percent in the county and there have been three times as many properties foreclosed upon compared to a year ago.
And still, the big money comes in and the prices rise.
http://www.santacruzsentinel.com/archive/2007/May/20/edit/stories/01edit.htm
Mortgage defaults hurting housing market, economy, Fed chief says
By Bill Barnhart, McClatchy-Tribune News
CHICAGO - To hear Ben Bernanke talk about the housing slump, you might think the Federal Reserve is still in need of a one-arm economist.
In a speech to a banking conference in Chicago Thursday, the Federal Reserve chairman said “the cooling of the housing market is an important source of this slowdown” in the economy.
In particular, he said, new curbs by lenders on mortgages for less creditworthy homebuyers, so-called subprime mortgages, “are expected to be a source of some restraint on home purchases and residential investment in coming quarters.”
On the other hand, Bernanke said, “we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expected significant spillovers from the subprime market to the rest of the economy or the financial system.”
As a result, financial newswires wrote apparently conflicting headlines, including “Bernanke Says Subprime Woes to Hurt Housing Market,” and “U.S. Economy to Mostly Dodge Mortgage Woes.” Traders in stocks, bonds and currencies found no direction in his remarks, leaving markets little changed for the day.
This apparent double-speak - call it nuance or equivocation - was commonplace under Bernanke’s predecessor, Alan Greenspan.
http://www.thesouthern.com/articles/2007/05/20/business/20322820.txt
“Traders in stocks, bonds and currencies found no direction in his remarks, leaving markets little changed for the day.”
Damn he’s good! Planted a fairly good CYA and nobody is the wiser. Way to go Heliben!
I guess if you want to contain the subprime crisis, it makes sense to employ an expert on the source of the problem…
Banker Described As Predatory May Join Federal Reserve, a Test for Senators
Byline: Matthew Lee of Inner City Press
NEW YORK, May 20 — The newest nominee to the U.S. Federal Reserve Board, recently under fire for inaction leading to the subprime lending and foreclosure crisis, comes from a notorious subprime lender, Capital One.
Larry Allan Klane, whose nomination was announced on May 15, before that worked at Deutsche Bank, whose involvement with lenders sued for predatory lending such as New York’s Delta Funding has like Capital One’s record been an issue considered but not acted on by the Fed.
With Fed chairman Ben Bernanke alternately promising greater scrutiny of and calling for restraint in restricting the subprime lending field, there are serious questions raised by the nomination of a longtime subprime lender to the Board. Whether these questions will arise in or even derail Klane’s consideration by the U.S. Senate remains to be seen.
http://www.innercitypress.com/fedwatch052007.html
Oh, man! Better get your $112,000 lots on Red Lodge (MT) golf course while they’re hot. Cause they’re going to get hotter!
“Price will go up again soon”
http://phoenix.craigslist.org/rfs/334904457.html
They don’t bother to tell you it’s a condo.
I lived across the street form this place fo 4 years. $550 rent for 1-bedroom, then upgraded to 2-bedroom for $650.
Hmmm…. Should I buy for $225K? What is that? $1800 a month? About tripple the cost of rent, and I’M on the hook for repairs and maintenance.