Bits Bucket And Craigslist Finds For May 23, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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The Weekly Mortgage Applications Survey is out:
The Purchase Index is 438.1 (4 week MA is up 4% YoY)
The Refinance Index is 2154.7 (4 week MA is up 40% YoY)
release: http://www.mortgagebankers.org/NewsandMedia/PressCenter/54467.htm
charts: http://www.recharts.com/mba/mba.html
Several things at work here. First it is an application index based on a survey of 50% of the lenders. With lenders dropping like flies more applications are flowing to the larger survivors and those are the ones they were surveying to begin with. So up may well be down. It only covers applications - not originations. Quite likely the rejection rates are up substantially with lending standards tightening tick by tick. Do you think panicky FBs facing resets may be shotgunning applications? Do you think potential ho moaners might be making multiple apps as they find out that maybe they can’t buy their dream trap with zero down, no docs and a 580 FICO?
I love this blog! I’m 2 sips into my coffee and I read a post like the one above. I’m in the financial markets and I love reading a short, too the point, and pretty decent analysis of the numbers. Thanks rvdoc.
PS. Here’s to Neil’s’ big weekend. I hope he’s rolling in the popcorn.
grubner - I was gonna say the same thing! I read the orginal post and thought, “WTF?” Then I read rvdoc’s reply, and thought, “Such smart folks on this blog!”
“With lenders dropping like flies more applications are flowing to the larger survivors and those are the ones they were surveying to begin with.”
Very good point.
As a commercial real estate appraiser with 27 years experience, I can tell you that loan processing picks up during the first year or so of a real estate downturn. Most of it is caused by developers tapping equity in other real estate assets to cover their cash flow problems from on-going projects. This time around, we have many smaller residential investors and “flippers” dealing with the same problem. I suspect that many parents are being asked by their children for a bail out.
That explains why 4 week MA is up 40% YoY for refinance, which does not bring new blood into the market.
My neighbor just cash-out refi’ed his house for the second time in four years - he claims they only took out “25% of the equity” but I’m guessing he’s at 80%+ total LTV now. They’re going to redo the kitchen, but I also noticed a third (used) car showed up in their garage last night.
“…more applications are flowing to the larger survivors and those are the ones they were surveying to begin with…”
Classic survivor bias in the survey sample…
Great posts! This blog is really turning into something special.
This blog was something special from day one.
No one with a 1/3 of a brain buys the FED’s inflation #’s. Note the last paragraph, same old drivel. No problem!
http://www.bloomberg.com/apps/news?pid=20601103&sid=ag6EzWcQuiIM&refer=us
Does anybody see the incredible amount of product shrinking lately?
Hellmans mayo 32 oz to 30 oz…tuna fish now 6 oz, even some cat litter was 14 lbs now 13 lbs……..and NONE of this shows up in the CPI, they only use retail prices not unit prices….
Some Skippy peanut butter is now 16.5 oz down from 18, look at all the ice cream at 56 oz, no more 1/2 gallons…..and it goes on and on.
The one thing I pay attention to is the price of milk. When I saw a gallon of “hormone free” milk for $7.08 last week I just about crapped myself.
Oh, $hit! When I was a kid my two sisters and I went through two gallons of milk a day.
You can 2 gallons of hormone free moo juice at Costco for less than $5.
If you’re going to spend that amount on milk, might at well get it straight from the farmer — $8 a gallon at the pricey Dupont Market in Washington DC. I figure it’s better than buying Coke one 20 oz bottle at a time.
Water is even cheaper, and better for you.
I hope the mayo jars keep shrinking. I use it so infrequently that I buy the smallest jar sold and still have to throw 3/4 of it away a few months later.
I buy fresh-sliced deli meat and the avg price seems to have creeped up a little. Maybe $1 a pound?
Fresh fruit and veggy prices (priced by the pound) don’t seem to have changed much in recent memory.
In my drive to be more healthy, I’ve been purchasing more fresh per-weight items and less packaged foods. Maybe that’s why it’s hard for me to tell how food prices are changing.
I’ve seen this written here before on this blog and it is simply incorrect. Quantity changes are routine and easily accounted for.
Please see ttp://www.bls.gov/cpi/cpifaq.htm#Question_8
or, if like me, you’re lazy:”During each call or visit, the economic assistant collects price data on a specific good or service that was precisely defined during an earlier visit. If the selected item is available, the economic assistant records its price. If the selected item is no longer available, or if there have been changes in the quality or quantity (for example, eggs sold in packages of 8 when they previously had been sold by the dozen) of the good or service since the last time prices had been collected, the economic assistant selects a new item or records the quality change in the current item.
The recorded information is sent to the national office of BLS where commodity specialists who have detailed knowledge about the particular goods or services priced review the data. These specialists check the data for accuracy and consistency and make any necessary corrections or adjustments which can range from an adjustment for a change in the size or quantity of a packaged item to more complex adjustments based upon statistical analysis of the value of an item’s features or quality. Thus, the commodity specialists strive to prevent changes in the quality of items from affecting the CPI’s measurement of price change.”
Mr. Huhman — if your quick detailed response means you are with the BLS, could you respond to a concern many on this blog have as well.
In response to concerns that the price of some items are “volitile” and thus unrepresentative short term, the BLS produces indexes without them. In fact, it produces indexes of “all items except” just about everything.
The problem is even items with volitile prices can go up in the long term. For example, if the floor for the price of oil is now $40 per barrel compared with $20 some years back, it has doubled.
How about an index with “volitile” food and energy put on a moving average of (based on the historical record) appropriate duration?
nice post.
Im sure Mr. BLS wont respond.
So, whats the truth….if you dont like the price do to volatile price swings then it gets tossed out, REDUCING THE STATED CPI?
Yeah and what about the substitution of inferior products to keep the inflation figures down?
For me, any measure of inflation without real data for housing, food, and energy are worthless. When trying to predict economic hardship factors among populations, we don’t use any fed data anymore.
Yeah and what about the substitution of inferior products to keep the inflation figures down?
Good point. Even products that are ‘the same’ aren’t actually the same at all. Coca Cola Classic is made with high fructose corn syrup. Coca Cola made before the ‘New Coke’ fiasco was made with real cane sugar - a more expensive ingredient due to corn subsidies in the U.S.. They are not the same product at all even though they are the same size and made by the same manufacturer. Despite using cheaper ingredients and improved productivity (which should lead to reduced cost of production), a six pack today is easily double or triple what it cost 25 years ago.
Oh so now they use the smaller container as the new standard…
Hellmans was $2.99 last month at 32 oz so from now on we use $2.99 at 30 oz as the new standard…and not the new equivalent price of $3.19 for 32 oz.
Gotcha
=====================
Thus, the commodity specialists strive to prevent changes in the quality of items from affecting the CPI’s measurement of price change.”
didnt you read Mr. Bls post? They just plug it in the Enigma CPI machine, and PRESTO!
Its all good, inflations contained, FED says so.
Sounds quite similar to a socialist state. Are you sure you are talking about the US (sarcasm)? A bunch of central planners compile a plethora of data, and then try to find the appropriate decision to keep the economy expanding. How did we get here should be the question.
Why do you single out socialism? What form of government doesn’t do this?
Mikey,
A true capitalist system doesn’t do that. America could be considered capitalist prior to the creation of the Fed.
Watcher - “True” capitalism is essentially equivalent to anarchy, which I’m sure you’re not advocating. All governments attempt to control the economy through spin and other forms of public manipulation.
Watcher - “True” capitalism is essentially equivalent to anarchy, which I’m sure you’re not advocating.
Why not? You have a problem with people who don’t want to be controlled?
Why do you assume a few ‘planners’ can do a better job of dictating how people run their day-to-day lives than the people themselves?
Why do you assume a few ‘planners’ can do a better job of dictating how people run their day-to-day lives than the people themselves?
This is the free-market Kool-Aid argument that has its basis in making people feel satisfied with their menial lifestyles because “they’ve done it by themselves.” Meanwhile, those with money, who let their money work for them are laughing all the way to the bank.
I see you didn’t answer my question. Not surprising.
Haven’t checked this string for awhile. Yes, I think a few planners can do a better job of dictating how many of the sheeple run their day-to-day lives. Case in point: the subprime debacle; had the regulators been on the ball, the predictability in the RE market would have been better, prices would reflect reality, and people who shouldn’t have houses wouldn’t.
Last night, I went to the local Jewel Foods, what a ripoff. Prices are up for a lot of items, eggs, pizza, lunch meat. Time to visit the local Woodmans discount food store near Kenosha WI (a 1/2 hr trip from here) Items are 20%+ lower than Jewel. I also hear a Walmart supercenter is to open in Grayslake, BRING IN ON!
What I’ve noticed is that the nominal pricing of most items has increased, but the sale prices really haven’t moved much. For as long as I remember soda for $5 a case was a pretty good deal, and I can regularly get 12 packs at the local CVS 3 for $8 or 2 for $5. The non sale price has risen pretty significantly in the last couple of years.
Saw an article about huge inflation in small countries that have tied their currency to the dollar, and thought it was interesting that we have exported inflation. With China’s dollar link keeping our prices fixed, and other countries getting the inflation link (because they buy far less goods from China).
Been going on for some time…..coffee from 3 pound tins down to 2-1/2 pounds. Tuna from 6.5 oz to 6 oz. Vegetables from 16 oz. to 15 oz. and more water.
Smaller can….same or higher price…..shadow inflation.
Been doing this for about 8-10 years now cutting things back by 1/2 to 1 oz. at a time.
CPI numbers are pure fiction whatever way they want to stretch them.
Arrowhead water changed their 710ml bottles to 700ml bottles about three months ago. I like the new design, but I’m also upset over less fluid.
I just bought a case of Stella Artois at Costco and when I opened it there were only 23 bottles. WTF?
Stellllllllllllllaaaaaaaaaaaaaaaaa!
No one with a 1/3 of a brain buys the FED’s inflation #’s.
You can Roger #1 that, good buddy!
I’m 35 years old, and based on the inflation data that gets released, I’m pretty sure not one thing has gone up in price since I’ve been born.
well, maybe 1% or so
Let’s not forget they have changed the way the CPI is computed over the years.
Thisis a great site for that info:
http://www.shadowstats.com/cgi-bin/sgs?
The GOV has different interests than us working people. They will not show you the truth unless it benefits them (or the corporations that have taken over GOV).
Yup, the final tally at Sam’s Club doesn’t lie. Prices are up, up and away!
One of our grocery stores had a sign basically saying:
“Due to higher costs, our produce prices have been raised. We are sorry for the inconvenience.” (paraphrasing, but you get the idea)
I think they took the sign down a couple of weeks ago, but there’s no doubt prices have gone up much more significantly than the CPI numbers. Those numbers are a total lie!
Kut out the Korporate Malfeasances and have fun doing it…
Try going to a stand alone grocery store for a change. (and plenty of spare change from the savings…)
For you in the city of angles, Sunland Produce, in Sunland is quite the gem, an amazing variety of fruits and veggies, priced at a fraction of what you’d pay the Korpse…
They also have a wonderfully eclectic mix of other foodstuffs~
Back away from the chain supermarket…
I was standing behind an elderly gentleman at Wendy’s last week, and he ordered a cup of chili. The clerk told him it would be $1.35. He said “$1.35? It should be $1.09! It’s been $1.09 for years!!” The manager came out and apologized to the man but explained that they’ve had to raise their prices recently….
What’s especially funny about that is that Wendy’s chili is made with leftover burger patties. They always have patties on the grill, so that the drive thru people don’t have to wait. Once a patty has been on the grill too long it dries out and can’t be used for a burger. They used to toss these, but now they save them for tomorrow’s chili.
You are correct (I used to work there in the 80s in my teens), but there is nothing wrong with the meat. They were doing this even 20+ years ago. It’s not really dried up as much as it’s not exactly right for a burger.
Don’t know if it’s still the same, but back then, we used to get our meat from the local butcher shop every morning and patty it ourselves. All ingredients were fresh & top-notch.
I’d eat that chilli without any reservations. Good stuff!
Fannie/Freddie
http://www.washingtonpost.com/wp-dyn/content/article/2007/05/22/AR2007052200166.html?sub=AR
“Multibillion-dollar accounting scandals that roiled Fannie Mae, of the District, and Freddie Mac, of McLean, in recent years brought demands for tighter government supervision and cuts in the companies’ massive mortgage holdings, now worth a combined $1.5 trillion.
But in House action last Thursday, the bill was reshaped in a way that lessens the power of the new federal regulator of Fannie Mae and Freddie Mac over their mortgage holdings compared with an earlier version that moved through the House. An amendment adopted by voice vote puts some restrictions on that authority.”
I think the idea was to give whatever political appointee heads the new regulatory office less power to carry out their party’s political agenda in the world of GSE real estate.
Gasoline Humor / Cartoons
German Business Monitor / Capital Spending, Hiring…… / Chart
It’s a Mad, Mad, Mad, Mad World / Duffy
http://immobilienblasen.blogspot.com/
I have just been enjoying NAR’s May 15 news release, in which I found a statement truer than they would like to admit:
“In addition to Elmira [NY], affordable markets include the Decatur, IL area with a median price of $76,200 and the Youngstown-Warren area of Ohio and Pennsylvania, with a median of $78,300.”
Great! A true buyer’s market in the rustbelt for those who can afford long vacations abroad in both winter AND summer.
http://youngstown.areaconnect.com/crime1.htm
Yes Cheap housing means a very high crime area, something the NAR is kinda blind to.
Minnesota was the first state to ban equity stripping. So why is it still happening?
Steal This House
by Jonathan Kaminsky
May 16, 2007
Jeff and Donna Rundgren were the perfect marks. A grizzled, 40-year-old high school dropout, Jeff struggles with reading. Donna, 45, has soft features and a tendency to trust strangers. In 2002, Jeff was injured in a car accident, missed six months of work, and wound up owing tens of thousands of dollars in hospital bills. Over the next couple of years, Donna battled breast cancer and emphysema, leaving her with hefty medical debt as well. Before long, the north Minneapolis couple fell behind on their mortgage. By early 2005, they were facing foreclosure.
That’s when they started getting letters and phone calls—as many as 50 a day—with offers of help. In that avalanche, Joshua Schultz’s letter stuck out. It wasn’t the same old sales pitch, and the Rundgrens were intrigued.
…What happened to the Rundgrens has the hallmarks of a shady lending practice known as “equity stripping.” In typical cases, the equity stripper buys the house, charging exorbitant fees at closing, then leases it back to the homeowners with the assurance that they will eventually be able to buy it back. Instead, with the monthly lease set prohibitively high, the homeowners fall behind on their payments and get evicted, losing whatever equity they had in the home.
The practice grew out of the “house flipping” rage in the late 1990s, and came into vogue in 2002, as foreclosures edged upward and housing prices skyrocketed. By 2003, hundreds of families in the Twin Cities had lost their homes to equity stripping…
Full article at
http://citypages.com/databank/28/1380/article15425.asp
Man, there is an unlimited number of sharks out there in the water.
Unlimited and unregulated…
you can put your mort payment on credit card= problems solved
AmEx is the first. Others are sure to follow. Get a bigger mortgage and earn more miles. That makes sense to me.
Why not, I wish i could charge my rent. It makes my cash flow much more simple and I get an extra month of float and I get rewards on the payment. My family has charged almost all purchases (from a gallon of milk to college tuition) and flown all over this fine land for free as a result. Just make sure you pay the bill off each month.
Bluto,
do you have any concerns that your families’ personal details are completely available to the government and to those who sell this kind of info.? Recent congressional testimony on domestic spying and the failure of legal oversight by the justice dept. keep me from thinking this is a good idea. Who knows what future use the government may make of your personal data.
What are you going wrong that you need to hide?
You prodoundly miss the point. So attempting to shield oneself from government or corporate intrusion is now what, evidence of criminal wrongdoing?
This is the sort of response gonzales and co. hope for in the public. Since I value the Constitution, I disagree.
If I have nothing to hide, they don’t need to look.
They will look if they like, and then decide if you have nothing to hide.
You might want to check Comey’s testimony on domestic spying before Congress…your assumption, according to the acting AG, is incorrect.
Costco is having a sale on aluminum foil (tinfoil).
Information is being used to track us. Our buying habits, traveling patterns, etc. The three credit agencies have more information on Americans than the FBI and the CIA combined! In principal, this is wrong and flies in the face of a free society.
This is our information that they sell and make a profit from!
To say “I have nothing to hide,” shows ones ignorance to the fact that this information is easily disclosed to all sorts of scam artists, con men, and identity thieves! Not to mention you assume the GOV won’t abuse thier power and use your information to hound you. The control of information is POWER in modern society.
This is why we don’t get told the truth on the main stream media.
The Constitution is overrated comrades, the gov’t will keep us safe.
The internet is as public a forum as anything yet many of you post anti govt view points on it. Can’t the govt use that against you? If you are afraid of being tracked and “spied” upon then you should get of the net too.
Of course the govt uses internet records to catch and prosecute people for various offenses.
You are correct in that many people who write anti-govt posts might be opening themselves up to investigation now or sometime in the future.
Beware a govt that doesn’t trust its citizens. Hitler was able to overtake so many people partly because he disarmed the populace “for their own safety”. This was when people first trusted him to take care of them.
Only fools believe the govt is in the business of keeping people safe. Ultimately, the govt cares only about the economic value of people (for business’ interests and as a labor force). In the end, it’s all about the money (power).
The problem is not whether one has anything to hide. The problem is whether the government deems what you are doing as somehow offensive. For example, if you visit the Al JaZeera website for an alternate view of world events, the government might consider you a terror risk. Very scary.
“…if you visit the Al JaZeera website for an alternate view of world events, the government might consider you a terror risk. Very scary.”
I go to the Al Jazeera web site regularly for a differnet angle on world news events. No one has ever knocked on my door, don’t give a damn if the govt is watching and not to worried if they are because I’m not out shopping for C4 at the same time.
“Hello, Mr. CIA man!”
Just because you are not doing anything that is considered illegal today does not mean it will be considered illegal tomorrow. Suppose you subscribe to the wrong magazine, or buy the wrong kind of gun on your credit card? Providing the government with minute information about your habits does not seem a good idea. Further, information is shared and sold to private companies interested in your spending, shopping and other habits. What benefit is it to you for them to know these things?
Sorry, the first sentence should say ‘…does not mean it will not be considered illegal tomorrow’. Remember the McCarthy-era witch hunts and black lists? It wasn’t illegal to join the communist party, but in the 50s a lot of people paid a heavy price for it.
“Suppose you subscribe to the wrong magazine, or buy the wrong kind of gun on your credit card?”
What kind of mags and guns are you buying?! I’m gonna go out on a limb and say that subscribing to Maxim and charging a hunting rifle won’t get you on a watch list.
Ahhhhh!! That same specious, oft-refuted argument. Question: What happens when the definition of “wrong” changes with the next regime? Duh!
Things that I don’t want the gubmint or large companies or my health insurance company to know that I am buying and in what quantities:
Booze
Porn (including all sexual…ahem…”aids”)
Condoms
Bacon
Tobacco
NH4NO3 (just kidding Carnivore!)
With “thinking” like yours, I feel that obtaining my false passport and bandoliers of Krugerands were time and money well spent.
Are you now, or have you ever been a consumerist?
Mr Bubble,
Not sure if you were replying to me. If so, it is ironic that you mention Krugerrands, as we all know that gold ownership in this country was made illegal by the ‘gubmint’. Thanks for proving my ’specious’ argument, and enjoy your ’scare quotes’.
http://www.youtube.com/watch?v=Dtf_Gxy9ZRY
At least the government isn’t trying to revoke the writ of habeas corpus or anything. Oh wait… They are.
“There’s blood in the streets, it’s up to my ankles…”
Maxim?
Try “Chunky Asses”. Apologies to Eddie Murphy.
Watcher –
Not replying to you. per se. Just on the side of the Constitution. I really don’t see your point. If the gov’t made owning gold illegal, that would simply speak to my point, no? My “scare quotes” are mostly tongue-in-cheek, but they are meant to wake people up to the lessons of history and the world around them. We are heading down the wrong path. Back to RE. Agreed?
I’m gonna watch “Enemy of the State” now.
“At least the government isn’t trying to revoke the writ of habeas corpus or anything.”
Amazing how Lincoln & FDR get a pass on habeas corpus violations to be routinely viewed as amongst our greatest Presidents. As well that ends well, I guess.
Bad calls then, bad calls now. FDR interred a bunch of Japanese Americans too. You up for that too? Ends justifying the means kind of guy? Not with the Japanese this time, of course. How about the bringing back the Alien and Sedition Acts? Come and stay at La Venda Sexy and disco the night away!
“Enemy Of The State” was released in 1998, a fully 2.5 years prior to 9/11. It was a great Hollywood film - but fiction.
9/11 proved our governments incompetence. If they had the technology and wherewithal that Hollywood portrays, the 9/11 plotters would have been caught long before they left for the airport…
Bring on the “It was the Jews that did it…” or the “Your own government remotely controlled those airplanes to fly them into the towers” etc etc etc.
“Bad calls then, bad calls now. FDR interred a bunch of Japanese Americans too. You up for that too? Ends justifying the means kind of guy?”
I didn’t say I agreed. I’m just noticing that it doesn’t stop them from being celebrated by most of the same people who pan a certain other person. If you want to hold Lincoln & FDR to the same standard they are in the bottom five, not the top five.
Left LA Behind,
I was mocking the tin foil hat crowd on this thread.
Unless, I were to try to live completely off the grid, there are a myriad of ways that almost all my activities could be tracked quite well, even if I paid cash for everything. I’m far more concerned about the level of information Google knows about me (way, way more detailed and personal than a loaf of bread, a container of milk, and a stick of buttah). Unless you are at a random anon proxy every time you surf, there’s plenty more info out there on you than a transaction history. So being in all the databases is sort of a given, and the choice is free stuff or not free stuff.
I got a kick out of a speech Larry Ellison made a few years ago when Oracle was trying to sell the government the TIA database. He pulled out a credit card (Amex Centurian, of course) and explained that credit agencies have essentially the same information as the government database would, but no one bats an eyebrow. So reams of data so I can buy a watch in Switzerland, ok. Reams of data to keep me from dying, complete invasion of my privacy. I don’t like either use, but information has a way of being free.
Oh, and my household is just me, now, so I’m not putting my family at risk.
Here’s one more way to spy on you:
http://www.schneier.com/blog/archives/2007/01/nsa_helps_micro_1.html
“NSA Helps Microsoft with Windows Vista
For the first time, the giant software maker is acknowledging the help of the secretive agency, better known for eavesdropping on foreign officials and, more recently, U.S. citizens as part of the Bush administration’s effort to combat terrorism. The agency said it has helped in the development of the security of Microsoft’s new operating system — the brains of a computer — to protect it from worms, Trojan horses and other insidious computer attackers.”
And maybe a little help with the data-mining tools as well?
OMG, the govt is going to know of my penchant for visiting RE bubble blogs. I’ll certainly be sent to the gallows.
It’s so easy so dismiss the concerns of people who are worried about the nexus of various government agencies and the private sector with the “tin hat” epithet. Why wouldn’t Blue Cross request Safeway’s records to determine how “better” to charge premiums on insurees? Why wouldn’t the government use data in creative ways to manage threats, real or apparent, thus decreasing personal privacy under the aegis of “saftey”. [interesting that we're never at threat level "Clear"]
So you can have “tin-foil hat”. I’ll use “Rip Van Winkle” for those of you who believe that we haven’t taken a turn for the worse. Would you like the last word? Back to RE?
“Why wouldn’t Blue Cross request Safeway’s records to determine how “better” to charge premiums on insurees?…Would you like the last word?”
HIPAA
What are you going (sic) wrong that you need to hide?
Looks like you’re been reading “Quotations from Chairman Mao”. Or was that Stalin?
I agree, I put everthing on one of my three cards. I get points or cash back from each and since I pay each card off in full every month I don’t get hit with interest. Plus, I get a detailed statement of all my spending which I go over and save to my computer in a detailed budget. \
Credit cards aren’t the problem. Stupid people with credit cards is the problem. I always laugh at people who pay off their CC debt and then cut up the cards like it was the card’s fault they were in debt $30,000.
Be thankful for the stupid people. They allow you to get cashback and other rewards!
Chicago… I love double dipping with points when possible. Costco Executive member’s get cash back at the end of the year and also get points using the AMEX card to buy everything at Costco. Lot’s of other opportunities for double dipping if you keep on top of the programs and as you say, ensure you pay off the bill each month.
And then pay off the CC with a HELOC. Problem solved forever. It’s a closed loop!
I like it. Let’s create an LLC and market this concept. You never pay a dime out of pocket for anything!
somebody get this information to Steve and Carol Daimler, they need this type of financial management.
or you can put your credit card on mort payment= problems solved
Got 10% down?
On this am news: American Express to allow users to put mortgage payments on CC. What the hell are they thinking or better yet, drinking? They are owned by Costco. Time to rethink stock investments.
Huh? AMEX earns a transaction fee from the merchant for every transaction. This is a smart move on their part. What would be dumb is if banks start accepting credit card payments for mortgages because the transaction fee would eat up any interest earnings on the mortgage in question.
AMEX is the smart one. However any bank of mortgage company that starts accepting credit cards of any type for mortgage payments needs to have its head examined.
In any event, if I could put my mortage on my Alaska Airlines Visa I’d certainly do so. I’ve never not paid the card off in full every month and putting the mortgage on it would earn me a free trip to Latin America or Europe about every year.
AMEX earns a transaction fee from the merchant for every transaction. You’ve got that right, Kent. And AMEX also charges a monthly fee for the “privilege” of accepting their card.
But I recently dropped AMEX from the list of cards my business accepts. Why? Well, for one thing, very few people use it. And I also got tired of their “fee for this, fee for that” way of doing business. Visa and Mastercard don’t operate that way.
I’m sure American Express just wants to help people stay in their homes; I’m sure there’s no upside for them. Golly geepers, they must have some really nice people running their company.
American Express is a public company. Costco as a way to control costs (credit card fees are one of the fastest growing expenses for most retailers) exclusively links with a single credit card (it was Discover a few years ago).
American Express replaced Discover Card in 1999. With HELOC money drying up CC debt will rise, much of which will end up being written off when FB can’t pay the tab and that will have an effect on Costco’s balance sheet.
Costco doesn’t own either credit card, they just sign an agreement with the credit card company to be the exclusive card used at Costco (and pitch the cards pretty hard), in exchange for a lower interchange fee. Discover and Amex normally charge a fairly high interchange fee (3-5%) but costco probably pays under 2% due to the exclusivity, but they don’t own either card. American Express is a public company owned by many stockholders (Costco isn’t even a minorty stockholder). Discover is owned by Morgan Stanley (it was the brain child of MacKinzie to solve the problem Sears had of declining retail business), which got spun off with Dean Witter and bought by M-S).
If people don’t pay their bills, Costco’s balance sheet isn’t going to be directly hurt. They might see sales slow if not paying their bills also means they stop buying stuff from Costco.
Two news from CNN
http://money.cnn.com/2007/05/22/real_estate/subprime_melltdown_yielded_fast_changes/index.htm?postversion=2007052308
Ok, they didn’t see it coming (pooorrr guys) note they have pushed the “recovery” date from mid 2007 to end 2007 (yeah! winter market is the new spring market). It has no logic, if the subprime meltdown took them by surprise…how it is going to improve before the reseting of all the subprime mortgages from 2004, 2005 and 2006 (and earlier ones if they got 5 y ARM)
http://sportsillustrated.cnn.com/2007/golf/05/22/golfcart.death.ap/index.html?cnn=yes
This is kind of funny in a creepy way..read the whole thing, karma?
Another top tick. I’ve had this in the old IRA since the mid nineties as well. Buh bye:
http://www.dallasnews.com/sharedcontent/dws/dn/latestnews/stories/052307dnbuscrescent.9556b423.html
I’ve had this in the old IRA since the mid nineties as well.
Me too. Good enough for Warren B., it was good enough for me.
Time for some Guiness stock.
While doing research for my blog, I kept noticing foreclosures on “Camdenhurst Dr.” in Gainesville, VA (D.C. exurb). Prince William County, VA, currently has 13 months of inventory. In Summer 2005, prices peaked. Yet these flips took place in 2006 for incredible amounts. I’ll submit them to the FBI.
18097 CAMDENHURST DR
List Price: $525,000 (Bank Owned)
Prior Sales:
$595,000 10/24/2006 FREMONT INVESTMENT & LOAN XC
$715,000 2/2/2006 MANGAT MOHAMMAD
$607,250 10/6/2005 KHAN SADEK M & MD S ALAM SURV BB
18162 CAMDENHURST DR
$700,000 11/2/2006 HUSSAIN SEFDAR X
$620,000 4/14/2006 KAMRAN ARIF
$497,190 5/26/2005 HUSSAIN SAKHAWAT BB
18174 CAMDENHURST DR
List Price: $459,900 (Bank Owned)
Prior Sales:
$590,000 2/6/2007 CITIBANK NA TR XC
$703,000 5/17/2006 QURESHI AMIR X
$563,000 9/26/2005 SINGH KULDEEP BB
$485,590 6/17/2005 TALIB MOHAMAD & LIAQAT ALI SURV BB
18182 CAMDENHURST DR
List Price: $440,000 (Bank Owned)
Prior Sales:
$705,000 6/16/2006 ZAEEM CHOUDHRY F X
$610,000 10/7/2005 ASHRAF MOHAMMAD BB
$495,840 5/31/2005 AHMED IJAZ BB
18186 CAMDENHURST DR
List Price: $504,900 (Bank Owned)
Prior Sales:
$695,000 4/18/2006 KHAN ASAD X
$560,000 11/14/2005 JAHANGIR MOHAMMAD BB
$494,990 5/31/2005 MAFIL ARA BB
Prince William County RE stats:
http://www.recharts.com/mris/mris_11.html
I ran an OFAC check on those transactions and my computer exploded.
LOL! I wonder if they financed these homes using “suicide” loans?
What if the new Al Qaeda training video is telling terrorist cells here to buy a house and then pull out all the equity to make bombs? While they are at it, they can turn the house into a bomb making factory? Probably is not that far fetched after reading all the home sales in DC.
Your Right. I realized their was a pattern by the time I got to the second name, their all middle eastern names.
DC area cabbies no doubt.
Nope, then they would be Ethiopian or Eritrean.
These are not middle eastern names - they are probably south asian names (bangladesh / pakistan / india)
Yes, most likely Pakistani, but could aslo be Indian/ Bangla Deshi Muslims.
In similar cases in CA, one come across Hispanic names, one after another in the transactions.
Jas
The FBI should probably investigate this. This is fraud at a minimum something worse probably- 700k for 2000sf house!!
You’ve got to love the $100k appreciation in price in just 4 months. Clearly there is some sort of scam involved with these properties.
I just sent an email to policedept@pwcgov.org about this. Wonder if they could do anything.
RE’s it’s time to shed your tin foil hat and get true protection with your new “Isabodywear”.
Someone’s in bed with the big builders. With everything that’s going on in the market recently, why on earth does this story even matter? When it comes to houses, more are living large
http://www.msnbc.msn.com/id/18806103/
And as for this comment, “U.S. homes are also becoming more expensive. The median home value jumped more than 40 percent form 1990 to 2005, to about $167,500.”, that can’t be right can it? 2005 median of $167,500? I thought it was in the $200s…
Your coastal bias is showing. Here in Texas $167 grand would buy a pretty nice house. $125 would be more typical for something like a new 1600 sf 3 br 2 ba ranch in a generic subdivision.
Does that figure include condos, zero-lots and other multi-unit dwellings, or is it only single family houses?
From an article in 2006: However, from the fourth quarter of 2005 to the first quarter of 2006, median prices nationwide fell from $225,300 to $217,900, a drop of 3.3 percent. It’s the second consecutive quarter that prices showed a sequential decline; in the fourth quarter of 2005, prices fell 1 percent from the third quarter.
Interesting if you look at single family stats vs. condo/apartment stats.
http://money.cnn.com/2006/05/15/real_estate/NAR_firstQ2005_home_prices/index.htm
To me the story matters because it confirms how the income chasm in this country continues to grow, such that in the wake of the subprime explosion on the underclass, the privileged class continues to buy, and buy more and bigger. And that’s a good thing because the rising tide raises all ships (and old tire tubes).
So, the rich don’t save either…
“…HSBC reports that people with more than $250,000 in household income, who constitute the top 1.5% of U.S. households, report facing many obstacles when it comes to saving. Indeed when HSBC asked what prevents them from saving more, the top answer was the need to pay everyday bills, with 34% of respondents of those who earn more than $250,000 concurring…
…These days, I bet a lot more people wish they had a bigger savings account instead of a bigger house. ”
http://www.marketwatch.com/news/story/its-not-just-you-rich/story.aspx?guid=%7BE1EBD794%2D0F2E%2D4D6E%2D9BAB%2DED2629609EC2%7D
Why would anyone want to have a big savings account when a War on Savers is in progress? Far better to own stocks, but also to have a stethoscope held to the heart of the market for advance warning on unforeseen developments.
By savings account, I think he means “liquid savings” and not necessarily cash. Of course, there are people who are deathly afraid of the stock market, and keep all their cash in a passbook account that pays 2% interest.
I don’t think investments in the stock market are quite the same thing as a savings account in most folks’ imaginations.
“liquid savings”
Stock market investments are perfectly liquid provided prices keep going up.
How many people do any of you know that you could hit them up for $10,000, and they’d be able to lend it to you, without doing anything more than writing a check?
War on savers? Gee, no wonder no one likes me.
Roidy ;(
Stock market investments are perfectly liquid provided prices keep going up.
I consider them liquid because they can be easily converted into cash, even in a bear market (unlike houses). Sure, their price might go down, but you can bail on short notice.
“I consider them liquid because they can be easily converted into cash, even in a bear market (unlike houses). Sure, their price might go down, but you can bail on short notice.”
The oldfangled definition of liquidity is limited to the condition that you can dump the asset on short notice. But the more modern view is that you can get out something close to what you put in (i.e., not get stuck unloading at fire sale prices thanks to unanticipated volatility that moved against you just when it seemed like the right time to unload…).
“A liquid asset has some or more of the following features. It can be sold (1) rapidly, (2) with minimum loss of value, (3) anytime within market hours.”
I guess you might counter that fiat-currency-denominated savings accounts might not seem too liquid in the event of a devaluation.
And I would counter your point by noting that houses can be unloaded immediately, even in a bear market, provided the seller is willing to lower the list price (or reserve price if selling by auction) to a level where a buyer is forthcoming.
I would also point out that stock market liquidity can also seize up (as on Black Monday — Oct 19, 1987 or during most of the year 2000 if you were long the NASDAQ). Sure you could unload your stocks, provided you didn’t mind taking the 95% haircut. I guess those episodes won’t repeat, now that we have a plunge protection team standing along the market’s sidelines with firehoses in hand, ready to supply whatever liquidity is needed to keep the market aloft.
http://en.wikipedia.org/wiki/Liquidity
“How many people do any of you know that you could hit them up for $10,000, and they’d be able to lend it to you, without doing anything more than writing a check?”
Well, all six of my immediate adult family members, and my boss, and several close friends of the family… I guess we are all on the wrong side of the War on Savers?
But the more modern view is that you can get out something close to what you put in (i.e., not get stuck unloading at fire sale prices thanks to unanticipated volatility that moved against you just when it seemed like the right time to unload…).
Which is incorrect. Liquidity just means that you can sell an asset immediately at a known market price. It has nothing to do with volatility, which means the market price can change rapidly. Indeed liquid assets are often the most volatile - compare stocks (liquid) vs. housing (illiquid). But a liquid asset might also have no volatility at all - like a US Savings Bond.
“A liquid asset has some or more of the following features. It can be sold (1) rapidly, (2) with minimum loss of value, (3) anytime within market hours.”
(2) doesn’t mean a minimum loss of value from whatever you paid for it. It means you don’t have to drop the price below market to sell it quickly.
Indeed when HSBC asked what prevents them from saving more, the top answer was the need to pay everyday bills
It amazing how two car payments (say a Mercedes and a Beamer), expensive vacations and frequent trips to Nordstroms and fancy restaurants can do that, huh?
Actually, this is nothing new. I remember reading similar stories in the 80’s about senior (not upper) managers living high on the hog, spending every penny they brought in and having to retire on their pension and SS.
A silly article. It doesn’t say that “rich” people do not save. It just says they don’t save as much as they wish they could, and the reason is that they have expenses.
This is just a puff truism expanded to fit enough words into a deadline.
I would wager that everyone in the world would save more if they did not have to use some of their money to pay for things. (No, the article did not say the money is wasted on Mercedes cars or anything frivoulous, such as the 50% of their revenue paid to the government).
(Note: This is an old article, but the U.S. savings rate is still negative so far as I know…)
=====================================================
U.S. savings rate hits lowest level since 1933
Consumers depleting savings to buy cars, other big-ticket items
FORD KAMINSKI
Americans have been buying big-ticket items such as cars instead of saving their money.
Updated: 9:10 a.m. PT Jan 30, 2006
WASHINGTON - Americans’ personal savings rate dipped into negative territory in 2005, something that hasn’t happened since the Great Depression. Consumers depleted their savings to finance the purchases of cars and other big-ticket items.
The Commerce Department reported Monday that the savings rate fell into negative territory at minus 0.5 percent, meaning that Americans not only spent all of their after-tax income last year but had to dip into previous savings or increase borrowing.
The savings rate has been negative for an entire year only twice before — in 1932 and 1933 — two years when the country was struggling to cope with the Great Depression, a time of massive business failures and job layoffs.
With employment growth strong now, analysts said that different factors are at play. Americans feel they can spend more, given that the value of their homes, the biggest asset for most families, has been rising sharply in recent years.
http://www.msnbc.msn.com/id/11098797/
Posted 3/1/2006 10:51 PM Updated 3/2/2006 12:06 PM
How long can households sustain negative savings?
By John Waggoner, USA TODAY
Never have so many spent so much and saved so little.
The nation’s dismal savings rate is the focus of a sharp debate: This can’t go on forever, some economists say. We spend and borrow too much, we save too little, and in the long run, it spells trouble for individuals and the nation.
Nonsense, others say. We might be dipping into our savings, but that’s a deep well: Household assets — swollen by rising home equity — stand at $62 trillion, according to the Federal Reserve.
Only a long economic downturn is likely to settle the debate about whether Americans are saving enough. But the low savings rate can’t be entirely waved away. Americans can go on spending merrily until hard times come: a lost job, a recession, a health emergency. Then, assets and income will fall — and those without an emergency fund will be in danger.
“We have a real savings shortfall,” says David Wyss, chief economist for Standard & Poor’s.
“If you would be wealthy, think of saving as well as getting,” Ben Franklin advised. But now, saving seems to be the exception more than the rule.
http://www.usatoday.com/money/perfi/general/2006-03-01-savings-cover-usat_x.htm
“Someone’s in bed with the big builders.”
Chicago Tribune news : Business columnists
Paulson gives lift to housing market. Stocks closed mostly higher Tuesday, after upbeat comments about the housing market by Treasury Secretary Henry Paulson.
http://www.chicagotribune.com/business/yourmoney/chi-wed_watch0523may23,0,2752849.column?coll=chi-business-hed
Today the Street seems unconvinced, though…
http://www.marketwatch.com/tools/industry/stockchart.asp?bcind_ind=bc_top&bcind_o_symb=&bcind_sid=4922&stockchartmanual.x=14&stockchartmanual.y=17&bcind_period=1da&bcind_compidx=aaaaa%7E0&bcind_comp=&bcind_compind=3728%7E171546
The latest excuse for kiting up the worthless HB stocks:
Paulson (ex CEO of Goldman Sacks) is a lying Sack Of S%!#)
Shares of Homebuilders Jump After Treasury Secretary Says Housing Slump Mostly Over
NEW YORK (AP) — Shares of the nation’s largest homebuilders rose Tuesday after U.S. Treasury Secretary Henry Paulson said the housing slump is near its end.
In an interview on CNBC, U.S. Treasury Secretary Henry Paulson said the housing slowdown is “largely” over and “contained,” according to a report from Dow Jones Newswires.
After five years of record sales volume and prices, the housing market turned sour last year as the supply of houses outpaced demand and tighter lending standards has reduced the pool of potential buyers. The Commerce Department reports Thursday on new home sales for April, while the National Association of Realtors reports Friday on existing home sales for April.
Here is how the stocks of some key homebuilders fared Tuesday:
M/I Homes Inc., up $1.57 at $29.51
Standard Pacific Corp., up $1.15 at $22.20
Hovnanian Enterprises Inc., up $1.18 at $25.63
Meritage Homes Corp., up $1.59 at $36.24
Toll Brothers Inc., up $1.39 at $30.20
DR Horton Inc., up 94 cents at $23.76
Beazer Homes USA Inc., up $1.63 at $36.65
Pulte Homes Inc., down a penny at $14.04
http://biz.yahoo.com/ap/070522/sector_glance_homebuilders.html?.v=2
I some times wonder if plans are not already in motion to start dropping interest rates and other bailout plans. This would allow Paulson to say the housing bust is about over (because he know what is about to happen). I think the surprise for him and others might be that those actions might not restart the housing market.
Well if he said it it must be true; after all, he works for the federal government. You know what sucks? You can’t take anything that comes out of the government at face value - you always have to look for the underlying motive. For that matter, you can’t take anything from anyone at face value anymore - everyone has a freakin’ angle.
“You know what sucks?”
Another thing: They never bother telling us why the slump is over — they simply declare it is so, and leave us to anxiously ponder the vast disconnect between reality on the ground and official statements.
But it’s their insistence that bothers me. Like they know something we don’t…
BTW, how are higher-end sales doing in your area, GS? Here in south CBD, sales are quite brisk — seem better than any time since mid-2004. In talking to CBD Jim, things are doing very well.
I’m getting worried tha NHZ is right & that the bubble will keep growing and growing and…
Time to say “to heck with it” and go all long? Hard to swim upstream during times like these.
I don’t see much evidence of brisk high-end sales in my hood (92127) — in fact, SFR inventories are up 30% since Feb. 1, and almost 90% of the homes on the market were built since 1998, which appears to me to be evidence of flippers trying to cash out. I also don’t believe the inventory figures take into consideration the large number of new homes either recently finished or currently under construction, and priced on the $1m+ range.
The other evidence of a market in distress is the huge gap between the April median existing home sale price ($776,500 according to DataQuick, $725,000 according to Sandicor) and the median list price ($1,150,000 for April according to Sandicor, and $1,349,000 as of today based on ZipRealty.com’s current SFR listings). I believe such a large gap between median list prices and sale prices is neither typical nor sustainable, and is likely to be resolved in the direction of lower sale prices, given the recent tightening of lending credit.
In my area, KHOV is just about the only developer showing any movement on the western end of Sacramento. This is because they seem to have changed their focus and are offering smaller homes (1200 to 1700 sqft) with no HOAs and very little Mello Roos while seriously undercutting the resale maket.
Once those products were released, everything else came to a stand still. Beazer and KB have some smaller homes for sale too but the MR and HOAs eat up any savings. People seems to be getting a little more saavy.
This is because they seem to have changed their focus and are offering smaller homes (1200 to 1700 sqft) with no HOAs and very little Mello Roos while seriously undercutting the resale maket.
———————–
Now, THAT could make me interested in buying a new home…especially if they could forsake the pergraniteel and build good quality structures…and a little privacy, please (single-story only)!
Dutch auction in the Chicago suburbs:
http://chicago.craigslist.org/wcl/rfs/336306411.html
The sellers probably got tired of the 24/7 traffic jam on Butterfield. Oh, and the construction project that’s got it down to half a lane in each direction for the last 3 years. Hey at least they have easy access to the Interstates. Just don’t try to drive anywhere at rush hour, that particular intersection of highways is a mess!
Well, at least the new owner will be close to a shopping mall. Talk about culture!
It says price will drop 10k every week…I might buy it next year (52 weeks!)…just kidding.
Btw, how bad is traffic at Butterfield from 355 toward 59? we are thinking to rent a townhouse next year around that area (Wheaton south).
We just refuse to give 100% appreciation (for the last 5-10 years) to sellers in Wheaton.
Sold in 2001 for 384K. Now on sale for 689?!? That’s a real steep upgrade by Chicagoland standards. Property taxes are 8200 and will skyrocket much higher unless it’s sold for close to that.
Elmhurst ain’t a bad place to live but it’s not exactly shangri-la. Much better school systems around. They’re in trouble.
That’s ONLY 79% appreciation in six years. Other parts of the country see that in one year so there’s no bubble here.
I can believe I typed that with a straight face.
“yard never needs painting”
god, i would hope not. i can’t imagine how you would paint the yard anyway.
Pave it over and paint it green. I’ve seen it done in FL.
Target profit up 18% in first quarter
http://biz.yahoo.com/ap/070523/earns_target.html?.v=3
Revenue up 9% from one year ago. Sales at stores that were opened at least a year are up 4.3%.
Wonder if Target is fudging its figures….the 8 Targets I have been in the recent weeks have been tombs.
First quarter was good, april is down.
“Earlier this spring Target made some investors nervous when it reported that same-store sales dropped 6.1 percent for April because an earlier Easter pushed sales back into March. But results for February and March were strong.”
Rats leaving sinking ship; claiming each other were captain.
http://www.msnbc.msn.com/id/18804054/
“”Who made this mess?” Robbins asked. “The short-term folks. People who get a commission when the deal happens. For them, it’s the number of loans that counts. Good loan? Bad loan? Who cares? For them it’s all about their commission,” he added.”
Local realtor- Bakersfield is different:
Bako’LovetoBlow”Bubbles,.. you should travel the state and report back. Bakersfield has ALWAYS,… and WILL ALWAYS never feel the economic pressure that the rest of the STATE does. Based on the rest of the State, Bako will continue to see the growth, the jobs and the BOOM that everyone has spoken of. THIS hiccup is is nothing.
Why are there still MAJOR land investors sniffing around the market? Must be something here…
I have criticized you before for this…. Smarten Up.
http://people.bakersfield.com/home/Blog/Bakersfieldbubble/9754
“Why are there still MAJOR land investors sniffing around the market?”
Sniff. Sniff. I smell weed!
LOL!
For the first time ever than I can recall the Washington Redskins have put box seats (season tickets) up for sale on their website. I have been on ticket waiting list for 20+ years and am currently number 12,000. Very unusual…people leave tickets to their kids in their wills here.
I just thought I would relate a little story that makes very clear to me what an investment is, and what a house as an investment is.
I teach for a large, for-profit university which tends to offer a large part of their courses online (there are a surprisingly large number of these universities. Where they all come from, and why they exist, is beyond me). Recently I was informed that my contract was not going to be renewed because the University was “reevaluating its cost structures” (read this as, “adjuncts, particularly ones in poor, overseas countries, are cheap”). I have a real good friend who also teaches there, whose contract expires at a different time than mine.
Anyway, a few years back I thought about house prices in my area, and thought they were out of whack. Because I was online, I left the area and moved to a much cheaper area of the country, banking the difference. My friend stayed in the higher priced area. At the time he had a much higher net worth than I did.
Move ahead to today. I had sold my house, bought a nice home in a very small town (which I LOVE), and invested the difference in a relatively low risk investment portfolio. My friend still has a lot of his “wealth” in his house. But it has lost value as my investments have appreciated, so we are basically within a few ten’s of thousands of dollars of each other in net worth.
As I am getting laid off, I am thinking of traveling the country, taking 1 year visiting faculty positions until I retire. I have a enough savings (having sold my house at a good time) so that if I can basically cover expenses, which should be possible even with visiting faculty positions (I live cheap), I will be fine when retirement rolls around. And I am going to be able to enjoy the next several years of my life traveling to new places. And not just run into a town and run out, but get to really see new things. And if things do not work out for a semester or something, I have stuff I want to do anyway, money in the bank, and I am not going to starve or lose my home, which is paid for anyway.
My friend realizes he probably faces the same situation when his contract expires that I face now. He says he would love to do what I am planning to do. But he has his wealth in his house. Not only is that wealth not useable except as a place to live, it has other consequences. His taxes are higher. Plus he has a life style, commensurate with his life, to consider. Even though are net worths are very similar, as are our living situations, the choices our wealth provide are very different. He has a very nice house, but very few options.
This made me realize something about “wealth” when you are talking about a house. A house is a life style choice. While it generall is not a depreciating asset (in fact, often it is an appreciating asset), it is a millstone, not something that empowers you. To me an asset is something that you can use, that provides you with choices. A house actually removes choices, limits opportunities, and forces life style decisions.
In addition a house is also an expense. He has a wonderful house, but with that comes large bills for Home Owners Assoc., taxes, and upkeep. I have these on my house, but they are a fraction, maybe 25%, of what he faces. So not only does his wealth provide fewer options, but it also entails a bigger drain on his assets, futher limiting his choices.
I guess I want to wrap up by saying when I sold my house during the height of the boom, I was told by some I was crazy, I was going to lose hundreds of thousands of dollars in appreciation. But when I moved to my current house I was so happy that I it would have been well worth it. When housing then hit the breaks, I was amazed at how intelligent others suddenly thought I had become (I know, though, I was lucky).
Now as I face the next chapter in my life, I an estatic at my decision years ago to down size my life. I have a home I absolutely love and will be able to retire to, and a chance to travel and enjoy life for a few years!
And to think I could still be chained to an expensive house in yuppieville, USA. You know, it makes me believe that maybe there is a God in heaven. And since I consider myself a nice person (and one heck of an educator!), it makes me think that you don’t have to be an SOB to finish first. Let the SOB’s have the money for a day, and a lifetime of the consequences of it. I think this is a story where the nice guy is going to finish first (at least in my book).
The housing market slump is officially over. How do I know?
——————————————————————————–
US Stocks Gain, Led by Hoteliers; Paulson Lifts Homebuilders
Bloomberg - 19 hours ago
Mortgage lenders climbed after Fremont General Corp., whose loans to risky borrowers helped trigger the subprime mortgage crisis, agreed to sell its …
http://www.bloomberg.com/apps/news?pid=20601087&sid=ahUpUuaUTEMA&refer=home
Treasury chief’s words lift homebuilders’ stock
http://www.app.com/apps/pbcs.dll/article?AID=/20070523/BUSINESS/705230339/1003
Optimistic outlook on housing helps boost most shares
BLOOMBERG NEWS
05/23/2007
New York — Financial and real estate companies led most stocks higher for a third day Tuesday after Treasury Secretary Henry Paulson said the slump in housing is “largely” over.
http://www.stltoday.com/stltoday/business/stories.nsf/moneymarkets/story/1B6A650A5D5DF80B862572E40008D5C5?OpenDocument
US economy to mostly dodge mortgage woes - Bernanke
Reuters
Waves of mortgage delinquencies should not seriously hurt the US economy even though loan foreclosures are likely to rise even more this year and next, Federal Reserve chairman Ben Bernanke said.
http://www.timesofmalta.com/core/article.php?id=262113
Bernanke: Subprime Mortgage Woes Won’t Seriously Hurt Economy
Sectors:Financial Services
Companies:New Century Financial Corp.
By AP | 17 May 2007 | 10:34 AM ET
Federal Reserve Chairman Ben Bernanke said Thursday that he didn’t believe the growing number of mortgage defaults would seriously harm the economy, and also noted that banks share significant risks when financing private equity deals.
http://www.cnbc.com/id/18718555
Question for anyone old enough (and lucid enough) to remember:
Did the Treasury Secretary and Federal Reserve Chairman play cheer-leading roles to try to prematurely end previous housing slumps, or is this a first?
Didn’t after the 1929 market crash officials come out and tell it was “contained”? Someone compiled a great timeline of quotes from that era, all the way to the dark bottom. It has to be somewhere on the net, hilarious stuff.
“The fundamental business of the country is on a sound and prosperous basis.”
–HERBERT HOOVER, Oct. 25, 1929
http://www.lawlessdecade.net/new1929-3.html
Simply amazing. And, most of the housing stocks have continued going up today. Why would so many investors take the word of the Treasury Secretary when he clearly has a vested interest in cheerleading the sector? What’s next; are investors going to rush out to buy even more when the NAR president says the housing slump is over?
I guess if they all just keep repeating “the slump is over” enough, people will start to believe it.
There must be a real stinker of a new housing sales report coming out this week is my conclusion.
Preemptive cheer leading?
Yeah.
Push the HBs up so that when the report comes out their stock prices fall back down to their acceptable lows from which point they will be pushed back up just in time for option expiration in June.
How come they never pre-announced the upswing in housing prices is essentially over?
“They” would probably argue that the upswing has not ended; we are merely in a temporary lull that is scheduled to end in resumption of a high rate of housing price inflation at year-end 2007 (off of an unaffordable base, no less!).
Whew!
Thanks GS, for a while there, I was thinking this housing bust thing was going to be a problem.
Man, am I relieved…
My question for Mr. Lamont and anyone else who proclaims “Bernanke will be wrong,” with respect to his sanguine attitude towards the subprime problem, is why wouldn’t the Fed chief take measures to prevent a widely foreseeable disaster?
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Investment Flash: Derivatives Say Bernanke Will Be Wrong / Housing-Market / US Housing
May 22, 2007 - 09:55 PM
By: Paul_Lamont
http://www.marketoracle.co.uk/Article1069.html
Regulator decries home-lending practices
Treasury official recommends federal action to rein in subprime lenders
WASHINGTON - A high-ranking Treasury Department official on Wednesday chastised mortgage lenders for too-often failing to verify the income of borrowers with blemished credit histories, blaming the practice for rising defaults and foreclosures.
Comptroller of the Currency John C. Dugan said federal banking regulators need to give the industry guidance for improvement in this area, though he did not offer a specific remedy.
“Sound underwriting and, for that matter, simple common sense suggests that a mortgage lender would almost always want to verify the income of a riskier subprime borrower to make sure that he or she had the means to make the required monthly payments,” Dugan said in a speech to a New York housing group.
http://www.msnbc.msn.com/id/18819771/
Except, as was pointed out so adroitly yesterday, what do the lenders care when their loans are going to be sliced and diced and sold to someone else who then becomes the bagholder?
Then again, maybe it’s right for Dugan to cry over spilled milk, despite the fact that the gov.s inflation numbers still say that it hasn’t gotten any more expensive…
“…what do the lenders care when their loans are going to be sliced and diced and sold to someone else who then becomes the bagholder?”
They didn’t when prices were rising, and they don’t now that prices are falling. The problem is that investors are no longer so eager to purchase loans which are likely to end in default at values below the origination amount, which makes it far more difficult to profitably slice and dice high-risk mortgages and resell them as MBS. When investors balk at purchasing subprime MBS, it is like a clogged drainpipe, which backs up the whole origination chain.
Talk is the cheapest commodity on earth (second only to blog posts like this one…)
————————————————————————————-
Despite Bernanke’s remarks, subprime shakeout causes pain in variety of sectors
Updated: 11:13 a.m. PT May 18, 2007
NEW YORK - Federal Reserve Chairman Ben Bernanke has repeatedly said this year’s mortgage fallout is likely to remain “contained,” but there is plentiful evidence the credit problems plaguing home lenders have hurt companies across a much broader range of the economy.
The mounting defaults in the mortgage industry have created ripples throughout the economy, helping to prolong the housing slump, squelch consumer spending and weaken credit quality.
The mortgage shakeout has led many lenders to set aside money anticipating unpaid loans, hurt retail sales in a number of sectors and stanched a big source of revenue for some investment banks.
http://www.msnbc.msn.com/id/18741574/
Burst US housing bubble could hurt South Africa’s growth
Published: 16 Mar 07 - 13:18
The US housing bubble has begun to burst and there will be repercussions for the global economy. There is a likelihood of a recession in the US that will reduce global levels of demand. South African policymakers have to develop a strategy for responding to these potential changes in the US and the global economy.
Contagion in US financial markets from the crash on the Shanghai Stock Exchange set off some serious introspection in the US housing market. Some recent US headlines were: ‘Sub-prime housing game is over’, ‘Voodoo debt and the coming recession’, ‘The housing ATM rot is just the beginning’, ‘How housing masked a weak economy’ and ‘Has a market meltdown begun?’. The reason for the concern about the US housing market is that a huge share of US gross domestic product (GDP) and the wealth created in the US economy over the last few years is attributable to the housing market.
http://www.engineeringnews.co.za/article.php?a_id=105132
Subprime housing game is over
What’s remarkable is that Wall Street was surprised by the implosions of lenders NovaStar Financial and New Century Financial. What we don’t know is how quickly this mess will impact the economy.
By Bill Fleckenstein
http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/SubprimeHousingGameIsOver.aspx
Speaking of spurious inflation #’s, has anybody noticed how much prices at Costco have climbed in recent months. A 4-pack of OJ that went for $8 in January is now $10; 36-pack of soda that was $6.50 in January is now $8.50.
Inflation not a problem? Yeah, tell me another one…my energy and grocery bills certainly don’t agree.
The 36 case of diet pepsi has been 8.59 for us (Sac) for a long long time.
Inflation has been especially noticeable at the warehouse clubs. This is not surprising, as no doubt their suppliers are passing the higher costs to them (because their margins are razor thin). They can’t threaten to switch suppliers (say OJ) because the other suppliers are also quoting higher prices.
Warehouse clubs are a particularly good place to measure inflation, as their purchasing strategy avails them to price competition among many suppliers.
The Diaper in Costco went up from 29.99 to 34.99 per box this year.
A “mere” 12 percent increase. Aren’t you just looking forward to your 2% pay raise?
Speed of subprime bust surprised lenders…
President of House Buyer Network, a specialist in short sales and foreclosure prevention, said one of the real estate agents he works with had six deals blow up within four days because, “The loan originator told him, ‘We’re not offering [these products] anymore.’”
http://biz.yahoo.com/cnnm/070523/052207_subprime_melltdown_yielded_fast_changes.html?.v=2&.pf=real-estate
My God!
When did the median price of homes in Tucson go to over $200k???
That doesn’t sound right. I moved to Tucson from L.A. in ‘83 because houses were affordable there.
Inventory at twice the normal amount in Tucson:
http://www.azstarnet.com/business/184287
oops
My God!
When did the median price of homes in Tucson go to over $200k???
That doesn’t sound right. I moved to Tucson from L.A. in ‘83 because houses were affordable there.
Heir-apparent to Irving Fisher? (Of course, saying the DJIA will reach 16K is a bit less extreme than claiming the stock market has reached a permanently high plateau…)
——————————————————————————–
Why Market Optimists Say This Bull Has Legs
By E.S. Browning
Word Count: 2,016
Vernon Smith, a Nobel laureate economist, is so bullish on stocks that he’s put money in small drug companies — investments he “wouldn’t have touched in the late 1990s,” he says. Louise Yamada, a longtime Wall Street market analyst, sees the Dow Jones Industrial Average climbing to 16000 as part of a bull market that she compares with the post-World War II boom. Fritz Meyer, who develops investment strategy for AIM Investments, a $149 billion money-management group in Houston, sees stock gains stretching as far as the eye can see.
http://online.wsj.com/article/SB117985628323111066.html?mod=todays_us_page_one
Post-WWII boom was - rising incomes for the working class, America the bastion of the trans-Atlantic freedom, the government paying-off its wartime debt.
Post-WWII boom now? Yeah right.
More like this:
“Nobody wanted to look. America was in the Big Bull Market, getting richer minute by minute since 1924, save for only an occasional setback. Now stocks only went one way–UP– and there was no reason why they shouldn’t keep going that way.”
http://www.lawlessdecade.net/new1929-3.html
Some more condos on the rotisserie plan in San Diego.
http://www.signonsandiego.com/news/metro/20070523-0650-bn23fire.html
The stock market right now feels like the residential RE “market” of 2004. I stayed out of that and I’m staying out of this other than what I have already. Oddly enough the puts aren’t declining that badly considering the move the market is making. It is frustrating though.
Not sure if anyone has commented on it yet and I just missed it. But take a look at the chart on my blog. For those of you who are technically inclined, we are at what I would call “last ditch” technical support on the long bond contract. Natrually, since prices move inversely to rates, this means interest rates are headed higher and close to breaking out of a multi-month range…
http://interestrateroundup.blogspot.com/2007/05/bonds-at-last-ditch-support.html
Also means 30-year-fixed mortgage rates are headed up (they move in lockstep with long-term T-bond yields). Good thing almost nobody can afford to buy homes with 30-year-fixed at current prices…
In Denver:
Grieving home loss, woman puts a face on foreclosure
“Debra Dotson was dressed in black, clutched a black rose and fought back tears when she discovered the hard truth Tuesday, that the house she has lived in for 10 years was no longer hers. ”
“Dotson’s home, which she bought for $117,000 in 1997, was auctioned to World Savings Bank for $159,333. She has to be out of the house in July.”
http://tinyurl.com/23f3pz
This is from an email I got today from Tokyo Lofts in Downtown Los Angeles (LA):
Now that summer’s approaching, it’s time to take a closer look at Little Tokyo Lofts. Although we’re close to selling-out, you can still get a great value on a highly desirable loft residence.
For a limited time, loft unit #223 is sale priced at $398,000 - that’s $70,000 less than other comparably sized lofts in LTL!
It won’t last long though. This loft is open and spacious and with lots of light streaming through the steel-framed windows. In addition to hardwood floors and gourmet kitchen, this loft features a separate bedroom area and a Jack and Jill bath that connects it to the main living space. One enclosed garage parking space is included and an additional space is available for purchase. Hurry to make an appointment to see this loft - since it will move quickly. To view this floorplan click here and choose the second floor then click on unit #223.
$70K Haircut for the idiot who bought right before! Who says LA prices aren’t going down?
A little plunge protection, please…
http://www.marketwatch.com/tools/marketsummary/
Why is the DJIA suddenly tanking this afternoon?
One man’s guess: For the same reason it just hit a record high (no reason)…
Greenspan put the evil eye on the Chinese Stockmarket.
http://tinyurl.com/2dybbs
Does it really take a Delphic oracle to make the following observation?
“In the last five years, the world as a whole is a growing faster than at any time in the world’s history,” he said. “It can’t last and it won’t last because it’s a one-shot adjustment.”
It’s terrible for bubble markets when people express honest opinions…
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Blue-chip run-up stumbles
Greenspan jars Street, says China stocks are due for correction
Stocks reverse daylong gains following comments by former
Fed chief that China stocks are due for a big contraction.
http://www.marketwatch.com/
‘To be sure, holders in the region have plenty to digest on the heels of a rally that has tacked on 54% this year and 248% since the beginning of 2006 (Ahem…).
There’s nothing wrong with meteoric growth, mind you, particularly for those savvy enough to have made that bet a few years ago. China is the motor that powers the world economic engine. They are, in many ways, what the United States used to be.
That’s a blessing, but it may also portend a curse.
When I heard these comments, my mind meandered to the immortal words of Alan Greenspan, who first whispered “irrational exuberance’ in 1996. He was prescient but early, missing the meat of the historic stateside blow-off.’
http://www.minyanville.com/articles/China-US-Shanghai-Globalization/index/a/12913
Does it seem like every time the stock market starts to take a “breather,” it magically gravitates back up to the opening bell level by day’s end? I guess stocks really do always go up, or at least don’t go down (except for occasional and temporary large drops…).
As you pointed out earlier this month after a year of posts by Ben and commentary by the peanut gallery TOL is still trading at its May 2006 price. The HBs are coated with Teflon!
Yet another corporate merger in the offing? (Gulp…)
——————————————————————————–
U.S., China emerge from talks with smiles
By Greg Robb, MarketWatch
Last Update: 1:49 PM ET May 23, 2007
WASHINGTON (MarketWatch) — Two days of closed-door talks between the United States and China on economic issues have yielded “tangible results,” Treasury Secretary Henry Paulson said Wednesday.
His counterpart, Chinese Vice Premier Wu Yi, said that the talks between the two economic superpowers were a “complete success.”
Paulson said that the dialogue with China will continue in a cooperative spirit. He added the talks would resume in China later this year and focus on “capturing the benefits and managing the challenges of global economic integration.”
http://www.marketwatch.com/news/story/us-chinese-officials-emerge-talks/story.aspx?guid=%7B7165ECAA%2D86CC%2D4D73%2D89F7%2DF163793315B6%7D
OT- Very interesting this morning, looks like the U.S. will soon hold exercises off the coast of Iran. It seems the Navy brought a few friends along with them (9 ships total) with lots of fire power. Wall Street’s reaction will be interesting to see, maybe gas prices will start to creep up before the busy summer season…
Oil rises as Iran tension mounts
REUTERS[ WEDNESDAY, MAY 23, 2007 07:24:03 PM]
LONDON: Oil rose towards $70 on Wednesday as US warships put on a show of force off Iran’s coast, coinciding with a United Nations agency report on the Islamic republic’s nuclear programme.
http://economictimes.indiatimes.com/Oil_rises_as_Iran_tension_mounts/articleshow/2069779.cms
Nothing like baiting them to take a shot at you, if you want to create a reason for a war.
May 23, 2007
Margin and Bubbles — Not that Anybody Cares
Nifty report today from Portales Partners on brokerage margin debt, which at $318 billion is 14% above its highest level reached in March 2000 — the year the dot.com bubble burst.
http://blogs.marketwatch.com/greenberg/2007/05/margin_and_bubb.html
There’s your answer to why the market doesn’t do what you think it should do: “animal spirits.”
The idea is to have those animal spirits work to your advantage.
“The idea is to have those animal spirits work to your advantage.”
Amen, Brother Brad. That is why I stay clear of the stock market during these blowout phases like the current one. How about you… do you prefer to buy when everyone else is buying and sell when everyone else is selling?
JANE LINDHOLM: If you’ve ever been to a cattle auction, you’d be well prepared for a housing auction. Except instead if discussing hoof quality and bloodline, it’s all about square-footage, bathrooms and garages.
HOUSE AUCTIONEER: All right, number 34 in the brochure folks. This is at 39859 Chippewa Circle in Murieta. It’s a four-bedroom, two-and-a-half bath. It’s $219,000 starting bid. Here we go: 219, 250, 219, 250 . . .
At the Riverside Convention Center an hour outside of Los Angeles, about a thousand people with brochures and paddles sit in folding chairs as the bidding starts. On a big screen is a picture of a two-story house with a market value of $420,000
Two minutes later . . .
HOUSE AUCTIONEER: Last call for 300,000, 290 now 3. Anyone else at $300,000? And I haaaaaaaaave sold that $290,000 subject to confirmation.
The 98 houses at this auction have gone through foreclosure and are being sold by the lenders who now hold the titles. Auctions like this are happening more frequently these days as the number of foreclosures is rising.
http://marketplace.publicradio.org/shows/2007/05/23/PM200705234.html
Looks to me like the market value was $290,000 (31% below the official estimate…)