Bits Bucket And Craigslist Finds For May 27, 2007
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On the Sarasota Herald-Tribune website the ongoing criticism by readers directed at the way the paper cheerleads the real estate industry takes on a new dimension when the journalist angrily responds.
Make sure you go on to page 2
http://forums.heraldtribune.com/eve/forums/a/tpc/f/3941081465/m/3601060726/p/1
Pretty good summary of the deficiencies in MSM reporting about the REIC on page 2.
I LOVED the postings by “Crunch”, especially on the second page of the forum, he nails it, and he nails WallStreet and the Reporter to the wall … GO CRUNCH!
Catfight!!
OK, Cobradriver, fess up. Which one of those posters is you?
The gauntlet has been cast. Somebody should take Mr. Frater up on his offer. Then when he reneges, you can report your findings here.
——————————————————————————
Dear Mr. or Ms. “Crunch,”
I am the author of many of the housing articles you routinely attack and since, according to you, I am one of “the brain-dead, lazy writers/editors of this paper” who, according to you “do not give us all the information and do some real analysis.”
Since you’re sure we are wrong, I’d like to invite you to submit your analysis of the data released yesterday by FAR. You can find it at FAR.org.
It’s easy to sound off in personal attacks in a line or two anonymously.
I put my name on everything I write and stand by my analysis.
If you are prepared to submit a reasoned counterpoint supported by data, not opinion, I’d be happy to give the readers a sense of what your perspective is in my weekly residential real estate column.
Regards,
Stephen Frater
Sarasota Herald Tribune
Residential Real Estate Staff Writer
stephen.frater@heraldtribune.com
Crunch addresses this on the second page, good stuff…
I’m on Crunch’s side, but I disagree with you. Crunch addresses nothing. He needs to provide supporting evidence for his opinions instead of stating them as fact and asking the reporter to check into the validity. Anecdotal evidence and “sound bites” are worse than useless. A real rebuttal would have been to list a bunch of data and his real name.
“…instead of stating them as fact and asking the reporter to check into the validity.”
And I, in turn, disagree with you, Mr. Viking. Mr. or Ms. Crunch does not get paid to report the news. It is Mr. Slater’s job to report facts supported by the data, and as a consumer of the news, Mr. or Ms. Crunch has every right to expect a good product.
In America, the burden of proof lies with the accuser, doesn’t it? The reporter is innocent until proven guilty, isn’t he? Crunch didn’t provide proof in my opinion. He has an excellent opportunity to step up with his ducks in a row, list his real name and prove his case; he’s not doing that. Why not?
“In America, the burden of proof lies with the accuser, doesn’t it?”
Mr. Viking,
I think you are confusing the American legal system (at least the pre-W version) with the press. Reporters get paid to produce credible news stories, and Mr. or Ms. Crunch was providing a public service without compensation by questioning news reporting that seemed biased. No proof beyond a reasonable doubt is necessary to express misgivings over the steady barrage of slanted pro-real-estate journalism that dominates the MSM. And if you don’t see the bias by now, then you need to read more of Mr. Jones’ posts on this blog.
GetStucco,
I’m not denying the man is biased and I’ve already explained I’m on Crunch’s side. What I’m trying to get across is that the reporter essentially issued a challenge that wasn’t taken up. Crunch has an opportunity to call the dude’s bluff and he hasn’t taken it.
See the comment below by tcm_guy? “I hope somebody in FL takes up this challenge. In essence, it is gonna be the HBB vs. the MSM.” I agree with him: I hope somebody takes up the challenge.
“Crunch has an opportunity to call the dude’s bluff and he hasn’t taken it.”
The reporter essentially wants Mr. or Ms. Crunch to ‘come out and fight like a man.’ But what would be the advantage of doing this to somebody fighting a guerrilla war against the REIC? Any military strategist would quickly point out the folly of giving away one’s position.
I agree that it is wise to support your assertions with actual data (as many posters here do), but not that it is necessary for Crunch to take a public stand; it is more effective for anyone armed with knowledge but without big name credentials to operate in the blogosphere under cover of anonymity.
… and newspapers wonder why they are disappearing? Nothing but commercial garbage and shock value crime reporting. The local news isn’t much better.
How lucky are we in that the internet can provide us with a means to search out real news, and get both sides of a story?
Journalists and Realtors are both an endangered species, and they have only their own corrosion of standards to blame.
You could certainly do it GetStucco.
Why bother casting pearls among swine?
I hope somebody in FL takes up this challenge. In essence, it is gonna be the HBB vs. the MSM.
Got 10% down?
10% of Sarasotans are 6%ers? That’s the scariest statistic I’ve yet read on this blog.
“The housing market has tanked.”
http://www.sptimes.com/2007/05/27/Business/They_ll_buy_your_home.shtml
We’re gettin’ there! In a year I hope to read, “housing market 500,000 ton sack of turd that just slammed into steel fan the size of Texas.”
Did I say “500,000?” I meant a guhjillion.
This article makes the present “investor” look positively brilliant, but I wonder. In the Tampa-St Pete area, it would seem there would be a high probability of getting stuck with the properties after fix-up, and also a high probability that rents could fall, making the next sale a matter of necessity.
The guy sounds like a scuzz to me. I wouldn’t have taken his 165K offer. I’d tell him to go pound sand and lower my price to 220K (similar house on the street sold for 300K in November).
I know a dude that had some nice baseball cards and was looking to sell them. The only offer was way lowball. What did he do?
Got angry, ripped up the cards up and threw them in the garbage.
What a genius!
In a way I get it. Some people refuse to lose to other people. It’s not so much the losing, it’s other people gaining…
I agree, totally stupid, but I also understand why some people freeze up this way.
I think the guy in the story will lose the house to foreclosure. I hope they do a follow-up.
I agree tx, he probably is a scuzz, but it is guys like these that are going to help lower neighbourhood comps quicker and get rid of “bubble pricing”. Even if the couple tell him to “pound sand” they get a free reality check (™?) that will encourage them to lower their price and get on with their lives.
Right. Someone who owes 25K less than this idiot was offering them as a bargain basement price can do better than him. I don’t like people like that trying to live large off others’ misery. I know that people need a reality check but nobody needs to just give money away like that.
If the bank takes the house won’t the bank refund any extra equity after the re-sale? Or will the bank just eat up any equity in “fees” ? If I was the guy I would try and sell it fast and price it right above the ugly house offer.
This guy hurting because he has equity at least for now.
I expect this to change in the future as in less equity
sloshing around. And I also expect Ugly house to be spending more time cleaning up the insides of their vandalised empty homes. Even die hards at work are telling me I’m smart to rent now. What a difference a year makes. Oh and the high end homes are still selling while the middle and lower priced just sit there-not selling. Its a brave new world. Hard to have a large middle class in a service economy it seems.
If people don’t start wising up, then the only people left with money are gonna be US and the CEOs. No middle-middle class left.
Got 10% down?
txchick-
You got it wrong here, the guy is 2 mo’s behind, he has no money for advertising to get the word out for his price and owes 140k on the deal so there’s no Realtor or MLS help coming where he can take advantage of free mass advertising even if he went with with a discount broker. It appears ugly but he should have taken the deal. The market is dead save your credit and live to do a deal another day. He should have took the deal and ran away laughing. Stupid Pride. 80 deals in the neighborhood, you’re 2 months behind and you’re walking away from a deal from a cash buyer. Not me, where do I sign…
“It was so bad the rats had died,” Carcary said.”
Nice — now that DDT is unavailable, this place could have residual little visitors forever. Lots of dead stuff in the attic and in the spaces inside the concrete blocks. Yum.
I’ve never been to the Town N’ Country section of Tampa, for good reason. Gangbanger City.
Hehe, you know, there are alternatives to DDT that don’t cause nearly the harm up the food chain.
I think the opportunity to do this is going away, because none of the FB’s will have any equity left.
Did anyone see Suze Orman last night? She started off her program by saying that real estate isn’t looking too good. She specifically noted that the problem is not confined to subprime, due to the $1 trillion worth of ARMs that are resetting this year. She had on a guest who is paying two mortgages because she bought a new house before selling her old one… in Michigan. Suze told the guest she had two choices: lower her price a lot more, or rent until the market recovers. We didn’t hear the guest’s reply, but just looking at her expression, I suspect she can’t lower the price due to HELOCs.
Suze had some other callers with real estate problems. I don’t think she understands how screwed most of these people are, or she would have told them to sell no matter what. But this is definitely going to increase mainstream awareness that it isn’t just subprime.
She doesn’t care. She loves to brag about her 25M net worth.
It’s not a matter of whether she cares. It’s whether she is spreading the news that there is more to it than subprime.
And by the way, even though I know she is loaded, I’ve never heard her state her net worth. Does she do it on her TV show?
In the NYT article where she came out. I just don’t like these “let them eat cake” types advising people who they wouldn’t hire as household help what to do. I’m weird that way.
The most common thing Suze tells callers is to get in control of their situation. The housing bubble zombies are just a minor variation of the credit addicts that are the most numerous advice seekers. In my opinion the American public is starving for wake up calls and straightforward advice regarding finances. Dismissing Suze and Dave Ramsey and the rest of the genre as “let them eat cake” types does not make any sense at all given the most common advice is essentially to stop eating cake.
You are not “weird that way”, you are occasionally irrational in a way that does you tremendous damage. That is why you putter with small time financial games instead of starting or aiding specific ventures with your capital even though the rewards of development would suit you better. Sorry, but I cant stand people who should know better flinging out criticism the likes of which they should take themselves.
Actually, I “putter with small time financial games” because I have absolutely no ambition and am happy with things the way they are (for me). I know that the average “he who dies with the most toys wins” types would not understand that. Evidently you don’t either.
She complained in an article I read on yahoo about the unfairness of not having a gay marriage because her partner would have to pay millions in taxes upon her death.
Cry me a river.
I thought in one of the next few years the estate tax exemption was unlimited, and then reverts back to some much lower amount the following year? Maybe 2009?
Well she could just move to Canada, which does have gay marriage and has no estate taxes to boot.
She’d pay more income taxes though.
I’m always wondering about the discrepancy between the trillion dollar reset we have heard of so often, and the $600B or so that I get when I try visually to integrate the Credit Suisse chart. Is it the different between first resets and annual resets? I.e., maybe the $1T includes ARMs that already reset some time in the past? And maybe the Credit Suisse statistics don’t include those? But this is just a wild guess. Does anybody here know?
“More than $2 trillion of U.S. mortgage debt, or about a quarter of all mortgage loans outstanding, comes up for interest-rate resets in 2006 and 2007, estimates Moody’s Economy.com, a research firm in West Chester, Pa.”
Gadzooks, ANOTHER total to contend with. Yours does seem clearly to include any interest-rate reset, even cases where the “teaser” rate already disappeared. Since $600B is less than half of $2T, I’m guessing that the Credit Suisse schedule is for initial resets. (???)
That $2T number was printed in the Wall Street Journal in March 2006.
Note it includes both 2006 & 2007… but even then, did most people who reset not try to stay in their house (or those rising inventory numbers)?
Any guess on lag time between ARM reset and forclosure? 9 months?
Economy.com is cited as source on the 2006+2007 number of $2T (published in WSJ March 2006).
More recent, published in January 2007, from same source: Some $800 billion of mortgages outstanding, approximately 10% of the total, will face their first payment reset through the summer of 2008.
http://www.economy.com/home/article.asp?cid=50450
Maybe lots of subprime new loans in past 12 months was reset-avoidance…
Well, one says “Interest rate reset” which would include all those pay option ARMs, since they are constantly resetting… you just don’t have to pay the higher rate yet.
The other one says “payment reset” which isn’t scheduled to happen on the POAs for another few years.
It seems like every journalist who writes about these resets seems to pull their own figure out of a hat.
I gave up trying to figure out how much dough in resets for this year and next. I just know that it is a lot.
But I think what the say about % of resets going to foreclosure are understated. Even if you are in good financial shape and can afford the higher payments at the reset, how many of these people will be willing to continue to pay on $350k of mortgage/heloc debt when the house next door sells for $200k, with no signs of a housing recovery anywhere? It will be a question of ‘is my credit worth $150k?’
Got 10% down?
That’s particularly true here in California where there is no personal liability for purchase money secured debt on residential property (1 to 4 units). Keep throwing good money after bad or get a ding on my credit report? Depends of course on how much the money is. But, I’m willing to guess we all have a price for ding acceptance, particularly when it can be explained away by being a sound business decision in the wake of falling real estate prices with no recovery in sight……..
“…particularly when it can be explained away by being a sound business decision in the wake of falling real estate prices with no recovery in sight……..”
It will also be explainable another way: ‘All the neighbors did it, too.’
So bad credit will be the new normal?
Bad credit will be the new black
Like the lenders couldn’t figure out that if you lend 100% in a state where the borrow can walk without any recourse, you might not get your money back? And by “lenders” I include the see-no-evil MBS buyers too.
Boo hoo.
Yeah I watched it. She had someone call who has a mortgage and lives in CA but purchased a rental house in Nevada. He said he is neg $450/m cash flow on the rental, and if he sells now he will lose $35g (prolly lying about both items). She told him he now has two mortgages for 5-6 years until Nevada recovers and he can get out without a loss.
She gave him terrible advice! He may be a landlord for 15-20 years!
Also, did you get the guy who wanted to buy the french backgammon table for $28,000? Not exactly a multi-millionaire, just a regular working stiff with CC bills and everything. What is wrong with these people? Do they think they are royalty?
Also, yesterday I watched a Citibank commercial on the History Channel. It showed a waitress at a dinner who owns a classic mercedes convertible roadster. ‘Let Citibank make your dreams come true!’
People are buying up EVERYTHING and bidding up the price of EVERYTHING! There is no end to this.
Got 10% down?
Yes, that was very poor advice. Again, I don’t think she is giving bad advice on purpose, but that she really doesn’t understand how bad this is going to be. But she is a lot less cheery about it than most of the MSM.
And her expressions when listening to the morons who want to buy things they can’t afford are hilarious!
Exactly. She has no idea what real people without a 25M net worth are dealing with. Her “advice” is useless. I’d rather listen to Casey Serin myself.
Her “advice” is indeed mostly useless, except when she shouts, “You can’t afford it!” But, watching her show affords US a certain amount of information about what J6P thinks is normal behavior — borrowing as much as one possibly can and always thinking only of “payments” never of principal.
I totally agree. I watched one of her PBS specials one time to see what advice she was giving. She is 40 years behind the times.
Her advice to save and invest to people with low incomes in a time of FED inflation causing rampant cost increases is ridiculous. Most of these people have no money to spare.
And buying RE in a speculative frenzy??
This woman has not the singlest clue. How did she ever get so “popular”??
She got to be “popular” by rehatching whatever it is she has to say every 9 mos in a new book. How many times can you regurgitate the same message?
Here is the only book I recommend for the totally clueless: The Richest Man In Babylon. (Originally published in 1926, I think.)
Got 10% down?
Exactly. She has no idea what real people without a 25M net worth are dealing with. Her “advice” is useless. I’d rather listen to Casey Serin myself.
I believe the same could be said for the likes of Hank Paulson and Ben Bernanke. These guys have spent their entire lives near the top of the economic food chain, and hence have little intuitive grasp of plankton behavior under severe financial stress.
“little intuitive grasp of plankton behavior under severe financial stress.”
Really smart observation, GS. Sleepless_near_seattle posted this yesterday…guy lost house worth @240, and he had put 50K down…probably his life’s savings. Trashed the house, and left pigs in it. I can understand the guy’s feelings about losing everything…and there you have it. Another angry and alienated American–another casualty of the lies and spin put out by NAR. And we can multiply him by thousands.
http://tinyurl.com/2n4ceb
No argument here. These people use the plankton to sell books and feather their own nests.
Doesn’t she have a little boy toy on the show that reads emails? Is his name jeff? I think suze services him on the breaks from what I see.
I give Suze some credit for encouraging people to invest in low expense index funds. I have sisters who know they have to save but could not. But one of them listened to what Suze Orman said (at least “listened”) and told me that she wants to invest in an index fund. She never did though. If Suze can make a slight impression on a material girl like my sister (low income, high spending), she can’t be all bad.
Suze has absolutely no use for boy toys.
“…guy lost house worth @240, and he had put 50K down…probably his life’s savings. Trashed the house, and left pigs in it.”
That story is earthshaking, and does not bode at all well for GFs who buy homes sight-unseen at foreclosure auctions.
‘Repossessed house turns into pig prison
Like an expected 1.5 million Americans this year, an (?)
Saturday, May 26, 2007
JESSICA BRUDER
When police arrived at a foreclosed Eagle Creek home Thursday night, it looked as if the place had been hit by a twister.
Part of the front foundation and wall had been ripped away. Torn-off chunks of the house littered the yard, along with trash, tools and abandoned cars. A load of dirt had been dumped on the roof. And an unpleasant aroma leaked out from smashed windows.
But the strangest scene was out back, where a concrete porch had been reduced to rubble, and three sets of beady eyes and nervously snuffling snouts were peeking out from the door frame.
Police believe they know who was responsible. The name “Shane” was scratched in 3-foot-high letters on an outer wall.
Shane Lovett, 33, who owned the house until it was repossessed in January, is one of an estimated 1.5 million Americans who will lose their homes this year to foreclosure, most of them victims of declining home prices and a tightening credit market, especially for high-risk borrowers.’
http://www.oregonlive.com/oregonian/stories/index.ssf?/base/news/1180155303269110.xml&coll=7
Did you catch the advice she gave to the underwater flipper? Hold onto the LV property at a slow $500/mo bleed rather than take the $35k loss for a quick sell. I thought that was pretty stoopid advice.
Maybe these Floridians from the article can gin up the housing market with easy money from Coast Financial……..Oh I forgot they just got a Cease and Desist order
On the Sarasota Herald-Tribune website the ongoing criticism by readers directed at the way the paper cheerleads the real estate industry takes on a new dimension when the journalist himself responds.
Make sure you go on to page 2
http://forums.heraldtribune.com/eve/forums/a/tpc/f/3941081465/m/3601060726/p/1
Dear Mr. or Ms. “Crunch,”
LMFAO!
Uh, I don’t wanna “out” Crunch, but I think he’s one of our own…
SMOKESTACKS & GERANIUMS
Foreclosure viewpoint: It’ll get worse
Smokestacks and Geraniums
By ROGER SHOWLEY
May 27, 2007
NELVIN C. CEPEDA / Union-Tribune
Rob Gertz, a graduating senior at UCSD, explored the default and foreclosure market in his urban studies and planning class.
Economists from Wall Street to the Federal Reserve are scratching their heads trying to parse the future of housing in light of worsening default and foreclosure rates.
But they might have saved themselves some trouble if they had consulted Robert Gertz, a 21-year-old senior at the University of California San Diego.
For his urban studies and planning thesis, he examined the trends in San Diego County, considered by many to be the bellwether of the nation’s housing markets, and predicted doom.
“San Diego will likely face the worst foreclosure rates in its history in the coming three years,” said Gertz, a Sacramento resident who plans to go to graduate school in real estate or public health.
What’s more, Gertz, who based his predictions on mathematical models that he verified using historic data, said the peak number of 7,605 foreclosures he projects for 2009 represents a “best case scenario” because of the possibility that such failures could tip the local economy into recession and result in more distressed sales.
http://www.signonsandiego.com/uniontrib/20070527/news_lz1h27smokes.html
Good article GS. Interesting how the head of the CA Building Industry Assoc doesn’t agree with this kid’s research. The thing that Nevin, from the BIA, doesn’t get is that even at 6.2% which he quotes as 30 year rates that will NOT allow an average buyer to purchase a decent home in SD, therefore, more suicide financing…but wait…they are now clamping down on that…so much for Nevin’s theory.
Maybe the CA Bldg Industry Assoc head is counting on an FHA bailout to save the day (see my posts on this below)…
“What’s more, Gertz, who based his predictions on mathematical models that he verified using historic data, said the peak number of 7,605 foreclosures he projects for 2009 represents a “best case scenario” because of the possibility that such failures could tip the local economy into recession and result in more distressed sales.”
Put that in your RMBS/CDO pricing model and smoke it!
“He estimated that 90 percent of black buyers and 80 percent of Hispanic buyers took out ARMs, and projected that 19.8 percent of recent African-American buyers and 17.6 percent of Hispanic buyers would probably face foreclosure.”
Now we know why Mozillo has that deep, dark, savage tan—camouflage for when the riots break out!
NATION’S HOUSING
KENNETH HARNEY
Borrowers in distress may get some much-needed help
May 27, 2007
WASHINGTON – With rising numbers of credit-stressed mortgage borrowers falling behind on their payments, will Congress step in and throw them a lifeline?
Will it transform the most consumer-friendly home mortgage program for moderate-income buyers into a serious alternative for refinancers heading for default and foreclosure in high-cost communities coast to coast?
Both questions put the spotlight on major legislation now pending on Capitol Hill – the long-awaited modernization of the Federal Housing Administration’s mortgage insurance programs. The House Financial Services Committee passed a reform bill earlier this month, and the full House is expected to take it up in June. Then it’s over to the Senate, where similar legislation crashed and burned late last year.
But that couldn’t happen again, right? This year is different: The subprime mortgage market is in tatters, thousands of borrowers are facing personal financial crises triggered by “2/28” and “3/27” adjustable-rate loans originated in 2004 and 2005. The artificially low monthly payments during the introductory periods of those mortgages are now scheduled to reset upward – many of them in September, October and November, according to mortgage industry experts.
…
Even though FHA reform is a broadly bipartisan issue – the White House favors passage and the bill’s co-authors are two of the most liberal Democrats in the House, Rep. Maxine Waters of California and Financial Services Committee Chairman Barney Frank of Massachusetts – some Republicans are not fans of deeper federal involvement in the mortgage market. They are predisposed to look for portions of the bill that they can attack or seek to remove, potentially stalling its consideration during a tight legislative calendar.
One of the provisions drawing fire at the moment is a proposal by Frank that would divert some of the additional revenues generated by an expanded FHA – the agency has sent billions of dollars in profits during the past decade directly to the Treasury – and spend it on counseling to help financially troubled or unsophisticated applicants before they become homeowners.
…
Lurking in the background are proponents of private mortgage insurance, FHA’s competitor in backing loans to home buyers making minimal down payments. Although a spokesman for the Mortgage Insurance Companies of America insists the group “has no position, we have nothing to say” about FHA reform legislation, lobbyists from some mortgage insurers played pivotal roles last year in sandbagging the FHA bill in the Senate, keeping it bottled up in committee and off the floor calendar.
http://www.signonsandiego.com/uniontrib/20070527/news_1h27harney.html
Isn’t it curious how the FHA, a program whose purpose is to help low-income buyers purchase homes they otherwise could not afford, can also generate billions of dollars in profits out of thin air which get sent back to the Treasury? Small wonder an FHA expansion enjoys bipartisan support.
The only pols in opposition are the ones who are honest and financially astute about the fact that the FHA relies on a back door federal tax, in the guise of an unfunded insurance program. This is why the primary mortgage insurance industry opposes an FHA expansion, as the result would be to steal profits from a private insurance industry which honestly charges a premium to cover the liability created when you offer mortgages to poorly-qualified buyers at over 80% LTV, and transfer the unfunded liability to the U.S. taxpayer. I applaud the efforts of the PMI industry and the few politicians who are sufficiently principled to oppose an FHA expansion into federally-insured 100% LTV subprime lending.
P.S. Isn’t Fannie Mae’s unfunded, unreported and unacknowledged too-big-to-fail government guarantee enough of a systemic risk burden on the U.S. taxpayer without building up another similar unfunded liability at the FHA?
Fannie Mae is not government guaranteed.
“…unacknowledged too-big-to-fail government guarantee…”
A Fannie Mae guarantee would require an act of Congress, and I’m not too sure that both Congress and the White House would be willing to take on an Iraq War-sized price tag, to save the behinds of the Chinese and the hedge funds. Maybe the latter alone, but there’s no way to bail out just the domestic bondholders - no foreign entity would ever lend to the US again. Indeed, making the Chinese and hedgies eat their losses would go down well with the voters.
P.P.S. For anyone who finds my argument a bit technical, I have two words:
“ENRON AGAIN.”
I think S&L collapse again is a better anology. That one added $50 billion to the national debt. Allowing banks to refi all their “crazy lending” troubled loans into FHA loans could cost the treasury $1 trillion.
In both the Enron and the S&L cases, liability was hidden from view in order to deceive future bagholders about the true costs up until the day the fraud schemes collapsed.
And to further the point I believe GS is making, I would add the fact that Fannie has not been delisted after 3 years of not submitting SEC req’d documents (my understanding is that the law states delisting after 1 year). A recent revelation (to me anyway) that the head of the SEC is a member of the Working Group on Financial Markets (AKA PPT) (Sorry, don’t have the link handy) as well as the fairly recent and obscure law that president Bush signed which states that the SEC can waive req’d reporting and other such legalities should the national interest be better served by such a waiver (again no link, sorry just too lazy). I would add this all up and come to the conclusion that Fannie is being supported by Gov’t/FED action. I would also submit that this is just the tip of the iceberg with regard to market intervention, IMO.
“…tip of the iceberg with regard to market intervention…”
Dodd’s trial balloon on govt bailouts a couple of months back sunk like a lead anvil. Stealth bailouts are more likely to occur when there is little political support for above-board measures.
Ha! I nearly made a deal two weeks ago. The house was 350K, I was going to put down 150K and get a FHA loan for the rest . When I saw the list of BS fees and charges on the GFE, I told them to shove it. I think now I look for excuses to back out
Wait for the bailout program to pass before you get your FHA loan. You might get a better deal than what is currently available. Some U.S. citizens might even be tempted to lose their incomes in order to qualify.
The FHA expansion proposal fits the profile of politically acceptable means of taxation without acknowledgment in the post-Reagan era, which made honest taxation politically untenable. Other politically-viable forms of stealth taxation include inflation taxes (under the Fed’s purview), lotteries and federally-subsidized crop insurance.
As well as allowing inflation to raise wage earner revenue to higher taxation tiers and AMT qualification, while at the same time deriving the wage earner an equivalent benefit to the increased revenue. As well as reducing the value of the savings of the citizen.
Deliberate, planned inflation by the government and the Fed is an insidious ongoing,relentless, unavoidable tax increase.
I thought Reagan had indexed the tax brackets with inflation? Are you saying somewhere along the line this indexing was broken, and/or that they are using bogus inflation numbers?
Unfortunately, the AMT has never been indexed to inflation, that I know of. So now more and more millions of “rich people” are falling under the AMT. (And to think, the AMT was introduced to fishnet only a few hundred tax payers initially.)
As I recall, indexing of the income tax brackets to inflation was one of Reagan’s call to arms when he was running. I wonder if anybody will be making the same battle cry for the AMT this time around?
Got 10% down?
“Deliberate, planned inflation by the government and the Fed…”
The best way to accomplish this without notice is to continually insist you are committed to the exact opposite policy. Expressions of great concern without sufficient follow through may inadvertently increase inflation expectations rather than serving to rein them in.
And I have a few hints to offer Pedro at Reuters in his diligent search for signs of inflation:
1) Gasoline prices
Prices of art and other collectibles
2) Food prices
3) Home prices
4) Medical expenses
5) College tuition costs
6) Equity prices
7) Precious metals prices
9) Prices of yachts (see “Flip That Yacht” post in yesterday’s bits bucket)
10) Value of the $US on the foreign exchange market
11) Burgeoning household, city, state, federal and trade deficits
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Gaming the stats: Where is U.S. inflation hiding?
Fri May 25, 2007 1:43PM EDT
By Pedro Nicolaci da Costa
NEW YORK (Reuters) - U.S. inflation appears to be ebbing as the economy slows, but the trend may have more to do with systematic undercounting than newfound purchasing power.
The gap between policy-makers’ price barometers and the reality experienced by consumers is nothing new. Americans are often bemused by headlines saying inflation is under control even as their cost of living seems to keep climbing.
Yet this divergence has implications beyond puzzled news readers. Monetary officials know that misjudging inflation could result in an acceleration of price increases that might prove difficult to rein in.
This is why the Federal Reserve continues to express greater concern over a pick up in inflation than an economic downturn, even as the markets forecast just the opposite.
http://www.reuters.com/article/reutersEdge/idUSN2547499220070525
“Are you saying somewhere along the line this indexing was broken, and/or that they are using bogus inflation numbers?”
Refer to the Reuters piece I just posted for your answer:
“Gaming the stats: Where is U.S. inflation hiding?”
I posted up the same article down below a bit. Nice to see that some members of the MSM are starting to pull back the curtain a bit. Just a bit.
politically acceptable means of taxation without acknowledgment in the post-Reagan era, which made honest taxation politically untenable. Other politically-viable forms of stealth taxation include inflation taxes (under the Fed’s purview)
Post-Reagan, you say? Who appointed Greenspan? Who was the president who thought that deficits didn’t matter? Who was the only president post-Carter who had a balanced budget? Oh by the way, who appointed Volcker and why wasn’t he re-appointed?
Keep on whitewashing St. Ron’s tomb, guys.
Big news from Fannie.
This is the sound of a tightening noose.
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new fannie guidelines (PDF)
Effective for all mortgage loan deliveries made on or after August 1, 2007, MCM pricing will include a loan-level price adjustment of 1.00 percent to be assessed on all MCM loans.
…
Also effective with the release of DU Version 5.7 loans underwritten with DU that receive an EA-II recommendation will no longer be eligible for delivery to Fannie Mae as MCM loans.
…
Area median income (AMI) estimates are calculated by the U.S. Department of Housing and Urban Development (HUD) and provided to Fannie Mae annually. HUD uses the estimated AMIs to determine Fannie Mae’s compliance with its regulatory housing goals.
Because many of the AMI estimates for 2007 are lower than the AMI estimates for 2006, certain mortgage loans underwritten as Community Lending loans using the 2006 income limits may no longer be eligible as Community Lending loans based on the 2007 income limits.
Could you (or anyone else in the know) please elaborate on the following points for those of us (like me) who don’t know anything about MCM loans, DU Version 5.7 loans and EA-II recommendations?
Thx,
GS
“1.00 percent to be assessed on all MCM loans”
“EA-II recommendation will no longer be eligible for delivery to Fannie Mae as MCM loans.”
I’m not “in the know” but this is what I’ve read. MCM (My Community) is a Fannie program for low-income/bad-credit/FTHB types that wouldn’t have a prayer of getting a traditional loan, but who can document income. DU is a software program that takes in all the various debts, assets, incomes and credit history, along with the loan being applied for and spits out a recommendation. Approve, EA-I, EA-II, EA-III or fail. AFAIK, EA-III was pretty much failing already, and now EA-II is officially junked also.
Also, assessing points on the loan… that’s normally what the broker does to earn a commission (”on the front”, meaning the borrower pays, versus YSP which is paid by the lender for closing at a higher interest rate). I guess fannie decided they were giving brokers too sweet a deal and decided to take a little bit back.
I don’t know that this program would really save any of our current crop of FBs, but it is certainly an avenue for prospective FBs that is narrowing.
Back in December or so they warned that they would stop accepting idiotic loans… in this coming August. Nice to know they are so responsive to economic conditions.
Why do I get this Wiley Coyote bug eyed and 10 feet off the cliff feeling? People need to stop looking for their “earnings” and start checking the dumpster for Acme crates.
NAR will not be happy with Susie Orman especially considering her clout. She did a good public service last night…real estate for dummies; basically said, “no folks its NOT getting better.”
As foreclosures and abandonments increase there may be opportunities for groups of people who want to create Intentional Housing neighborhoods to do so. I have seen many discussions on this board about developments that were almost completely unoccupied during the last bust. I am wondering if we will see IC communities spring up in these tracts? I guess it all depends on location and current residents/Associations. I personally have no desire to move to Temecula or the high desert, but given the right property here in coastal OC and the right group of folks (members of the HBB for instance) I would consider something along these lines. I am skeptical of any form of collectivism though and so this may not be a good fit for me. It seems plausible that a small group of families could pool resources and do what these folks have done up near San Fransisco. Heck, if Kobe goes we could buy his place (being sarcastic, have never seen it).
http://www.cohousing.org/creating_retrofit.aspx
If the whole point of buying property to live in is to buy something that you can really enjoy, then pooling resources to buy an outstanding estate with killer views may make sense.
Cohousing is a great idea, very hard to get off the ground though.
CA renter -
This is in reply to your inquiry about my new rental (I figured you might hit this thread, but possibly not the one from yesterday). It’s a townhouse, one of only 16 in the development, most people living there are the owners, I’m renting from a (seemingly) very cool couple who’s daughter had been living there with her husband and young child. Daughter’s having another baby so they bought a place and moved out. There were a lot of people interested in this townhouse, but they rented to me because they adored my son (and wanted to help a single mom out). I have a good feeling about it all (and when I get nervous, I remind myself - “Hey - that’s the beauty of renting! If it doesn’t work out, you can easily move in a year!”). But I think it’ll be good. Much quieter than my current apt. It’s an end unit so I have a side yard. And, of course, a washer/dryer (so many people take that for granted until they have to use shared, coin op laundry). I had considered buying a townhouse in this development at one point so this will be a good test drive just in case… Thanks for asking!
As I tell everybody A LEASE WORKS BOTH WAYS
If they sell the house the lease goes with the sale, and if they want you to move they will have to PAY YOU to break the lease…….
Plus They cant charge you for most damages to the apartment, because most owners want to change things anyway, so a Stain in the carpet is OK for a rental, but not for an owner move-in and the owner pays for the carpet. Its called a “Rental standard” and it is lower then an “Owner standard”.
Glad to hear about it & hope that this works out well for you guys! A good landlord is priceless. Enjoy!
Anybody want to retire to Mexico? Ykes!
http://www.dallasnews.com/sharedcontent/dws/dn/latestnews/stories/052707dnintlnewshead.e1764a.html
Yeah, I can hardly wait for the open border policy to become official so we can get more of this type activity in the northern 48!
http://www.eagleforum.org/column/2005/july05/05-07-13.html
Now that’s frightening. You’d think people with kids would be concerned with this stuff…pretty much guarantees them a crummy future.
Mexico has pretty much become a Colombia style narco-state. By most measures Mexico has become what is known as a “failed state”.
http://en.wikipedia.org/wiki/Failed_state
http://iamfacingforeclosure.com/231/larchmont-foreclosure-sold-at-199k-after-failed-short-sale#more-231
OK, I know Casey Serin is a sleazeball and that posting a link to his site will only encourage him, ergo, that makes me a crap weasel of the first order. However, his posting from the 24th has undisputed entertainment value. Whatever bank was stupid enough to front this clown and his “invester club” pals $330K on an overpriced McMansion, circa 2006, just took it up the nether region for upwards of $130K. Ouch!!
If there’s anything better than watching flippers sizzling like the Sunday sausage, it’s watching their enablers - the lenders - get burned even worse. The bank turned down a short sell of $220K (original loan: $330K) thinking that was too low, but ended up getting only $199K at auction - BWAHAHAHAHAAHAHHA!!! Kind of redefines the whole “insulting lowball offer” thing.
I will now go and perform some sort of humiliating penance for posting a link to Casey’s website.
The first loan was at $264,000. So the offer of $220K plus my $50K promissory note would have given the first lender most of their money back over time.
Ha! The lender didn’t go for that $220k short deal because a promise from Casey Serin to pay $50,000 is like a promise from The Donald not to break contracts and renegotiate everything!
These banks are learning.
Got 10% down?
Didn’t we just recently have a discussion about this? Which one of you guys works for Reuters?
Reuters exposes the war on savers:
“John Williams, a private consulting economist who got so tired of looking at the official figures that he started compiling a set of his own. Using the same methods the government employed in 1980 Williams estimates that inflation is actually running around 10 percent per year.
That’s a far cry from inflation readings reported by the government, which are currently hovering between 2 percent and 3 percent.
If Williams is right, it would mean the dwindling number of Americans who still manage to sock some cash away in a savings account at the end of the month are actually losing money in real terms.
By shifting its attention away from a constant basket of goods to one that allows for the substitution toward cheaper items, officials at the Fed effectively redefined inflation.
“Now you’re looking at a cost of living for a declining standard of living,” said Williams. “But people want to be able to maintain a standard of living.”"
http://tinyurl.com/2gxgq6
“By shifting its attention away from a constant basket of goods to one that allows for the substitution toward cheaper items, officials at the Fed effectively redefined inflation.”
I personally view this point as a red herring. Certainly nobody who posts here thinks that buggy whips (an important consumer good in the early 20th century) should stay in the consumption basket used to compute the CPI?
So far as I am concerned, the CPI does not appropriately reflect housing prices (25% or so of all consumer expenditures, unless you are a hapless GF who bought in 2005 and pays over 50% of all consumer expenditures towards housing).
Otherwise, I am pretty sure that a doubling of housing prices over a five year period would have shown up as a 25% increase in the overall CPI (5%/year), even if inflation of all other goods had averaged out to 0%!:
0.25 * (100%) + 0.75 * (0%) = 25%.
And now that the cost of housing is in a long term multi-year decline, look for housing to sit PROMINENTLY with GREATER EMPHASIS in the basket of goods from now on. They will defend this with the argument that housing costs are now a higher % of consumer expenditures.
Got 10% down?
I can follow your line of reasoning as it applies to items that have been made obsolete by technogical progress or changes in taste or behavior however the substitution of inferior products for superior products is one way that the authorities game the system i.e. hamburger for steak, dry milk for fresh milk, etc.
At the end of the day inflation is grossly understated. No one needs a microscope, a telescope, a pair of binoculars, a magnifying glass, a monthly bogus pronouncement from the authorities, or a mathematical formula because real inflation is visible to the naked eyed.
P’cola Popper — your point is taken. The chain-weighted index procedure is defensible on technical grounds. The goal is to get a closer approximation to a Fisher ideal price index through avoidance of inherent biases in the Paasche and LasPeyere indexes. This is achieved by using a geometric average of the two fixed-weight price index choices with annual updates to the expenditure weights in the consumption basket.
But like any other complicated black box statistical procedure subject to political influence, there is pressure to fine-tune the procedure in a direction that biases it in the direction which supports current political objectives.
I wonder how they’re going to account for the high price of digital televisions? Once the analog transmitters are turned off, there is no alternative, so is this really an improvement, or something entirely new, or it is a flat-out price increase?
Or how about this: the new “digital” set-top boxes could be said to have increased functionality and therefore value. However, they do not work as well for basic functions such as changing channels. The old analog tuners could change channels instantly, the new ones - well if you have one, you know what I’m talking about. I would say that they have lost value.
How about the fact that none of the new televisions are what we used to think of as “cable ready”. You now need an extra box that goes with each television to use them on cable. Is this a value-add? Maybe to a government statistician, not to me.
“…there is no alternative, …”
This is the rub w/hedonic adjustments — they can mask forced increases in the cost of living when the only alternatives a monopolistic market has to offer are in the Grande, Venti or Tall order sizes. For instance, I would prefer to live in a four bedroom home a bit larger than 2000 sqft, but the new home market in San Diego primarily serves up 4br homes in the 2500+ sqft size range, with Tall order prices.
So far as I am concerned, the CPI does not appropriately reflect housing prices
It’s not supposed to, any more than it reflects stock prices. The “C” stands for consumption. Buying a house is an investment (I didn’t say a good investment). The value of living in a house is consumption, and it’s called rent, which is included in the CPI.
If you pay more for a house than the value of the rent, that’s your problem.
it would mean the dwindling number of Americans who still manage to sock some cash away in a savings account at the end of the month are actually losing money in real terms.
Maybe so, but I’d personally rather have a large savings account that suffers a negative real interest rate than no savings account at all. So the “dwindling number” of us who are savers are still infinitely better off than those who are not.
And if you’re saving money to buy something that is getting cheaper, like you-know-what, you are still coming out ahead.
“The chain-weighted index procedure is defensible on technical grounds. The goal is to get a closer approximation to a Fisher ideal price index through avoidance of inherent biases in the Paasche and LasPeyere indexes. This is achieved by using a geometric average of the two fixed-weight price index choices with annual updates to the expenditure weights in the consumption basket.”
LOL. GS, I will need to do a little research on this one before I get back with you.