Bits Bucket And Craigslist Finds For May 30, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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Appraiser to stop releasing reports
Crabtree: Real estate insiders against ‘truth’
http://www.bakersfield.com/137/story/152727.html
Recently, Crabtree has also alerted local, state and federal agencies to suspicious real estate transactions that he thinks may be examples of real estate fraud.
His letter bemoans a lack of interest on the part of regulatory agencies in this alleged criminal activity.
His letter bemoans a lack of interest on the part of regulatory agencies in this alleged criminal activity.
Just add it to the very long list of ways honest middle class people are getting screwed in this country.
If you are an accomplice or perpetrator of a crime involving illegal immigration, mortgage fraud, identity theft or any other countless number of things middle class people now have to fear (but didn’t 30 years ago) you are basically guaranteed to get away with it.
And now, at least one (illegal immigration) and possibly two (mortgage fraud, just wait for the bailout) crimes against the middle class are defacto sanctioned by the the government and corporate interests.
“crimes against the middle class are defacto sanctioned by the the government and corporate interests.”
Then they are criminals themselves and should be labelled as such.
It looks like we are the only ones who are upset about the fraud. Looks like the FBI and Ca regulators dont give a rats a$$ about this.
“Looks like the FBI and Ca regulators dont give a rats a$$ about this.”
Why are we paying them, I’d like to know? I’m sick of being blackmailed by criminals masquerading as the law.
Personally I beleive the reason the feds and to a lesser extent the police aren’t doing anything about it is they’re just too stupid. It’s an unfortunate reality that government workers aren’t as quick as their private counterparts. If you multiply the stupidity times 1000 considering government agencies never get rid of the incompetent. You can start to see why we are where we are. Regarding the police in California their union/lobby is just too strong. All it wants to do is maintain everything the way it is. This includes manual paperwork and a computerless enviornment because it keeps the largest amount of people working.
Sigh…
It’s an unfortunate reality that government workers aren’t as quick as their private counterparts.
That’s a gross generalization. I’ve worked in IT for several large corporations and government agencies, and the public university where I am now has much sharper people, much less suffocating bureaucracy and organizational stupidity, and gets more done with less resources and less downtime than any of the corporations.
It has more to do with the degree of centralization and the culture of how people are treated than private vs. public status.
Large, centralized, rule-driven, command-and-control oriented bureaucratic organizations almost always produce dismal results. There are plenty of these in the private sector as well as government.
I do not really know what is the problem at the FBI, but perhaps they do not have the manpower to go after all mortgage fraud at the same time?
Large, centralized, rule-driven, command-and-control oriented bureaucratic organizations almost always produce dismal results. There are plenty of these in the private sector as well as government.
You have described the U S Postal Service, or at least the large mail processing centers. I was a career employee at a large MPC, and at training sessions I was able to talk to other MPC employees from around the nation. These things are all horribly run. The larger the city they serve, the worse the situation for the employees. When I quit this insanity for good I felt sorry for the good people that I left behind. But I have taken valuable lessons with me, and it has made me a more astute investor.
Got 10% down?
This is exactly how governments lose the last vestiges of their legitimacy.
Probably a little late to be worrying about that.
http://www.financialsense.com/editorials/douglass/2007/0529.html
I agree, the government condoning lawbreaking by offering amnesty for illegal immigration, id theft, and breaking employment and tax laws…and the FBI and reg agencies ignoring banking/mortgage fraud…and “protective” agencies like the CDC, and the FDA throwing in the towel on doing their jobs…all of just engenders a general contempt for government and law.
With the bogus prosperity of MEWs and easy credit being drawn down…the ugly social cost of all of this has not yet really been felt. But I expect it will be.
The problem is gov doesn’t believe in firing people if they’re stupid or incompetent. In San Diego we just got a new mayor one of his goals was to reduce head count throughout the city. As soon as he was elected it was amazing to see the difference in city services as they all tried to avoid the axe.
I hate to see people let go but there are times when you need to “trim the fat”.
Contempt for the government and the law is already happening. There was an attempt by the TSA a few months ago to implement new air cargo security regulations. Everyone involved from the shippers to the airlines said, “That’s the stupidest idea we have ever heard. We are not doing it.” (The regulations were not optional.) Within 24 hours upon realizing that no one was going to comply the TSA put a “temporary moratorium” on the implementation. I haven’t heard anything on it since.
Was that rule anything like the rule about taking off your shoes to go through security, even if you’re wearing flip-flops?
i found it interesting last week. FBI investigators looking for terrorists stumbling over mortgage fraud. Lots of law enforcement going into a relatively rare problem encounters a common problem and doesnt really care about it.
Kinda funny department. A brother sold his Philly condo less than a year ago and now the flipper has listed it at a breakeven price using pictures of my brothers furniture in the listing.
Last nite I was talking to a friend who lives in the city. He’s under the impression that the RE boom is never going to end. All he talks about are the re-los who came to PHL from N.NJ and NYC because they were priced out of their home towns.
OK that’s today. What happens when prices decline in North Jersey and NYC? Will the re-los pick up their marbles and go home? I’m already seeing price erosion in the close-in burbs, and your post describes a 2006 vintage flipper who has to list his place at a breakeven price. Why can’t folks read the dang tea leaves?
I don’t buy the relocators argument. Phila is cheaper than NYC and N. NJ, but salaries are also lower; so relocating is probably a wash, especially when you figure in transportation costs: lots of the Jersey and NY folks rely on public transportation and don’t have the auto costs.
There have always been relocators to PA from people who keep their NYC jobs, and the housing price increases have not been so disparate between the two areas as to cause an increase in the number of relocators. That commute gets old in a hurry, I’d bet.
while it’s true that a fair amount of NYC relos think they got the best of both coming to philly, what’s far more scary is that the realtors, particularly in south philly and downtown are still touting boom prices…..oblivious to what we already know. it’s doing nothing but making sellers more stubborn, as the inventories explode around them. NINE houses for sale on my street, out of 80. none have sold in 13 months.
daniel - Small point, but I think it’s the sellers, not the realtors who are oblivious. My experience with selling in Phila with the esteemed “Mike McCann” was that he wanted to underprice the house and sell it quickly. Maybe he’s different than other realtors, focussing on volume rather than max income per unit.
OMG - “Mike McCann the REal Estate Man”.
I worked for his firm. All I can say is big-time caveat emptor if you’re dealing with him. In fact, given the zillions of realtors in the area, just stay away from him and his outfit, period.
If your brother took the pictures then the person using them has violated federal copyright law in publishing them without your brother’s permission. Your brother could sue (if he wants to sue, he should register the copyright with the gov’t first to get better awards–up to $150K statuatory).
And no, there is no way the guy could argue “fair use” or whatever.
China down 6.5%. The last time that happened the markets just went right back up. Can anything derail these markets? We live in a time with so much liquidity that we should just call it Atlantis.
China got the Feb crash party started. This time it might actually stick for awhile.
It’s a new paradigm in China.
Is it time for all contrarians to buy stock now?
‘GETTING GOING
By JONATHAN CLEMENTS
Is It Too Late to Buy Stocks?
Not if You Have Time and Guts
What if I have a bucket of money and a box of stupid? Then what should I do?
…
In addition to the time horizon, give some thought to how much risk you can truly tolerate. If you aren’t bothered by the idea of investing a slug of money and then seeing the market plunge 20%, jump right in. But most folks aren’t that brave, so they’ll want to take it slowly.
“If you’re worried about investing a large sum all at once, invest half right away and invest the other half over the next six months,” suggests Alan Skrainka, chief market strategist at Edward Jones. “That way, you spread the risk a little.”‘
http://online.wsj.com/article/SB118047750701717717.html?mod=home_personal_journal_left
GETTING GOING
By JONATHAN CLEMENTS
… free WSJ Article
lol, thanks Stucco!
Hehehe… definitely if the WSJ’s “contrarian” take says so….. let’s also throw in the purchase of a few Miami and San Diego condos into the mix since those too have obviously bottomed.
If you got a cushion of savings bonds, a good money market fund, and treasuries, why worry? VEIEX at a modest $100 per month is my newest Vanguard fund. I remember in 1998 the Asian Contagian. My T Rowe Price New Asia fund dropped 50%. In 1999 it gained 98%, almost a full recovery. However since then, my balance is double my original investment.
I agree. Why worry, if U.S. stock markets alway goes up, anyway, and they are behaving well, to boot?
————————————————————————
EMERGING MARKETS REPORT
Global view on China: Minor ripple effects this time
Most markets worldwide are relatively unfazed by Shanghai’s latest roiling
By V. Phani Kumar
Last Update: 5:21 PM ET May 30, 2007
MUMBAI, India (MarketWatch) — After yet another Shanghai sell-off that was sparked by China’s latest bid to cool off its overheated market, investors around the world seemed less rattled than they were in comparable instances in the past.
U.S. stocks rallied on Wednesday, sending both the Dow Jones Industrial Average and the S&P 500 to a record close, as the market bounced back from initial weakness after an overnight sell-off in the Shanghai stock market.
The Dow Jones Industrial Average ended up 111 points at 13,633. The S&P index finished up 12 points at 1,530. See Market Snapshot.
“While the sell-off in the Chinese stock market is similar to the one in late February that caused such unrest in global financial markets, the damage this time around has been limited so far,” said Aaron Smith, economist at Moody’s Economy.com. “Equity markets in the U.S. are behaving well.”
http://www.marketwatch.com/news/story/investors-less-rattled-china-sell-off/story.aspx?guid=%7B914E4E9E%2D123D%2D4486%2D8496%2D3120817495A3%7D
http://apnews.myway.com/article/20070529/D8PEBIGG0.html
US man infected with XDR-TB (highly drug-resistant form of TB) ignored (naturally) CDC’s “request” that he not fly on commerical transatlantic airliners. The head of the CDC appeared on CNN this morning blathering about the “covenant of trust” between disease vectors like this passenger, and public health authorities. She was a portrait in non-accountability - basically saying, if we give them the information, it’s up to them to avoid exposing others. Yeah, that’s worked SO well with AIDS, hepatitus, etc. As our Republicrat masters continue to allow every 3rd World cesspool to empty its surplus population into the US, God only knows what other drug-resistant plagues are going to spread in our midst. It was crystal clear from watching the CDC head’s pathetic performance that our government utterly lacks the will and will actively shirk the responsibility to protect the American public from such infectious disease threats.
“As our Republicrat masters continue to allow every 3rd World cesspool to empty its surplus population into the US”
I’m thinking both of these filthy parties have been complicit in this one. Hey, don’t worry about it. It’s their plan to reinflate asset bubbles. Just cough and bear it.
“Republicrat” - got it. That is both of them. Two sides of the same coin.
try this - less taxing
http://www.lp.org
everyone I’ve ever met in the LP has a finance or law degree
Libertarians want to throw open our borders. No thanks!
I may be wrong, but given the libertarian anti-government stance, wouldn’t they 1) support open borders and 2) oppose heavy-handed government regulation such as forbidding sick people from flying?
Libertarians support open borders, but they also oppose the “magnet” benefits that attract poor immigrants.
welfare is the problem w immigration
not the immigrants
read EMTALA = free healthcare for illegals
Libertarians oppose the initiation of force against people. In a truly libertarian world, open borders would not be relevant because all property would be private property, and anyone entering another person’s property would have to do so by invitation of the property owner. The owner would be able to use whatever means were necessary to protect his property.
As far as the airline issue, all airlines would be responsible for providing their own security. No more TSA. Each airline would have a financial incentive to insure passengers were safe. So while they would oppose government regulation insuring that sick people could not be prevented from flying, the airlines would find a way to deal with that issue themselves (perhaps by providing a separate hold for people with infectious diseases).
it appears that Ron Paul supports securing the borders:
http://www.ronpaul2008.com/html/issue-Border_fx.html
Ron Paul is the only candidate making any sense at all. The fact that the MSM refuse to cover him, even though he led in certain polls after the debate, speaks volumes about how this election will be conducted (again).
LP supports borders , but 15 million welfare seekers get $0 under our plan- no gov suppoorted (fha,hud,fnm,fre,) housing bubble either
I have absolutely no problem with open borders. My only problem is the taxpayer-provided health care, welfare, social security, and education to illegal aliens’ children, and ballots written in spanish. I’ve been a libertarian from 1979 to 2001 and somewhere between last year and now I returned to my senses and am a libertarian again. I held a minor office in California in 1982 at age 23. At that time I was the campaign manager of a Ca. state assembly LP candidate.
I’ve been a libertarian from 1979 to 2001 and somewhere between last year and now I returned to my senses and am a libertarian again.
Temporary insanity brought on by 9/11 perhaps?
“Each airline would have a financial incentive to insure passengers were safe. So while they would oppose government regulation insuring that sick people could not be prevented from flying, the airlines would find a way to deal with that issue themselves (perhaps by providing a separate hold for people with infectious diseases).”
NO THANKS - I’m free market economist all the way, but we saw what happened on 9/11 when the airlines were in charge of security. It was considered an EXPENSE item, and a very low priority one at that. At least the TSA people seem interested in their jobs, and all of them I have met could read and speak english. The same could not be said for the wackenhut and temp workers before.
TSA is not an ideal organization but it’s much better than the alternative.
Better than the alternative of letting the passengers carry weapons, as they did before the 1970’s (IIRC) ban? That would definitely cut down on the risk of hijacking!
You got it. Both parties have completely betrayed the working and middle class in this country. There’s not a dime’s worth of real difference between them, yet some toolboxes continue to blindly pull the lever for the lessor of two evils election after election, never making the connection between their choice and the pathetic leadership we’re saddled with.
One always votes for the lessor of two evils, or at best the “least of N evils” where N is small. The smaller “third parties” have agendas that are even more extreme/out of line with what people want than those of the D’s and R’s, and that (not blind ignorance on the part of voters) is why they rarely win elections.
Lest we veer too off-topic, I hasten to add that houses are still laughably overpriced in California and so far are stubbornly refusing to drop at all in San Francisco.
Worryingly, a couple of my acquaintances who should have known better have bitten the bullet and bought million-plus dollar SF houses in the past six months. They are both people who recognize that we’re in the mother of all bubbles, but apparently they gave up believing that prices will drop much if at all in San Francisco. I must say that on my gloomier days I fear that they might be right, but fortunately I can’t afford to buy at current prices so my decision is made for me. Luckily my rent is reasonably cheap for SF and my landlord told me he has no plans to raise it as long as I stay.
Worry not. That couple will go up in flames before long and you will still be the happy renter.
jbunniii - Do you think you’re the only one who can’t afford to buy at current prices? It’s just a matter of time before others realize that they can’t afford to buy. What do you think that’s going to do to demand for housing there? The realization that real estate prices can go down is going to take time to set in, but once it begins it will rapidly gain momentum much in the same way that the price increases occurred during boom time. Yeah, there will be the non-believers, much as there were non-believers that house prices could go as high as they went during the boom. You can’t fight mass perception.
jbunniii - Do you think you’re the only one who can’t afford to buy at current prices?
Not at all, in fact according to conventional financing guidelines, almost everyone in the entire state of California is now priced out of the real estate market.
Common sense says that this must and will correct itself, dramatically, statewide, even in the epicenters of denial such as San Francisco and Los Angeles.
But I for one am going to breathe a lot more easily once I see price drops actually begin in SF and LA. Right now they remind me of the cartoon coyote who has run past the edge of the cliff and is suspended in mid-air for longer than seems physically possible - and longer, in particular, than they remained suspended after the previous peak in the late 1980s.
You and I and everyone else on this blog know that it’s NOT “different this time,” but most of us would like to get past the previews (i.e., central valley and inland empire) and for the actual movie (LA, OC, Bay Area) to get rolling!
“There have been 17 U.S. XDR-TB cases since 2000, according to CDC statistics.
Three-quarters were people from foreign countries. One case was a Russian man who arrived in Phoenix last year. He was jailed after he stopped taking medications and went unmasked to a restaurant and other businesses, threatening the health of others.”
Be sure to thank your elected representative for doing NOTHING to stop these disease-infested foreigners from coming into our country.
They care about us. Obama and Edwards want to make sure we have universal health care. I have a better plan. If you can’t afford to raise your own kids then stop *%#$ing.
Or get “fixed.”
And let’s hope that’s not adjustable.
AMEN TO THAT !
If national health care goes through, we have plans to quit. If free health care for our kids is forced upon us, we’ll move to western PA and work part-time at Wal-Mart. I’m not going to be stupid and work harder than freeloaders.
Having actually lived in places with universal health care, I can tell you that one of the nice things about it is that it gives you the freedom to be a slacker. Especially if you have a family, medical insurance is one thing that really ties you into the full time work scene, so you’re stuck on the treadmill.
But with universal health care, you can get med services “free”, so you can take whatever slacker job interests you, just as long as it pays the rent. Not incentive to work hard, I found. Not only that, the state health care setup often puts a nice marginal tax burden on you to discourage you even further from full employment if you are so (un)inclined.
Baloney. The opposite is true. In the US, people stay in jobs that don’t suit them just to retain the medical coverage. In other countries, people are free to pick the job that best makes use of their talents or become self-employed without worrying about medical insurance. Also companies have no reason to turn down talented workers just because they might have some medical condition that could increase their health insurance rates.
Switzerland has universal health insurance, and I assure you they work their asses off compared to Americans. Japan too. And need I mention that it seems half the US workforce doesn’t perform any real work anyway but just plays with other people’s money. A country that cannot pay its own way on either an individual or collective basis has no business lecturing the world on being slackers.
BWAHAHAHA. This must be the ‘comedy minute’ on HBB…
“If national health care goes through, we have plans to quit. If free health care for our kids is forced upon us, we’ll move to western PA and work part-time at Wal-Mart.”
You are in luck! Working for Wal-Mart, if you just give up your assets, you can get Medicaid now. Don’t let the door hit your butt on the way into Penn.
“But with universal health care, you can get med services “free”, so you can take whatever slacker job interests you, just as long as it pays the rent. Not incentive to work hard, I found. Not only that, the state health care setup often puts a nice marginal tax burden on you to discourage you even further from full employment if you are so (un)inclined. ”
Countries with Universal Medical coverage: Europe west of Czeck republic, Italy and Poland; Nordic countries, Australia, NZ, China, Brasil, Canada, Japan, S. Korea. Yep, good thing these countries are so full of slackers that we are kicking their economic butts! No wonder this is the American Century!
Hmm, by this reasoning, once you get a job in a company with heath insurance, you will never want to work hard for a promotion since everyone has the same health coverage. There MIGHT be a universe in which that is the case…
Incidentally, in the U.S. the present system encourages slacking, because if someone earns enough money to get out of poverty, they lose their health coverage…
Well said, AK Ron.
The vast majority of people we know who oppose universal healthcare have absolutely no experience with or understanding of it. They just repeat the hype spewed by the healthcare industry & uber-capitalists who profit from disease & sickness. No conflict of interest there, no sir!
Interestingly Russia requires foreigners to provide proof that they are HIV free in order to obtain visa’s for a period of time greater than 3 months. I get tested every year as part of the application process for my Russian visa.
If the US tried that we’d be labeled as a homophobic nation, probably by Rosie O’Donnell.
Actually HIV is one of the health reasons that can be used to exclude immigrants.
REALLY?! That surprises me in this politcally correct society we are in.
I wonder how many people take the full course of medications for TB? My youngest daughter was exposed to TB.
She had to take medicine for an entire year.
A lot don’t. I once knew someone whose entire job was basically to go around the city and visit a caseload of people each day and watch them take their TB medication, and document it.
Tuberculosis kills about 1.6 million people annually, with the highest number in Africa. It is spread through the air when infectious people cough, sneeze, talk or spit.
http://www.reuters.com/article/email/idUSN2934397420070529?pageNumber=2
We have a guy here in AZ that caught drug resistant TB in Russia. He repeatedly ignored orders to follow protocol to avoid transmission. So, they locked him up for public safety.
He remains in an isolation ward in the jail.
The media is now reporting the TB patient is in enforced isolation. First time in 40 years. The story is still unclear as patient is claiming he was not told not to fly.
However, The Today Show is reporting he admitted to flying to Montreal and driving back into NY/States to avoid the authorities that had been trying to contact him sinch he was in Europe. (They reported he was on his honeymoon…now there’s a gift for the new wife)
This story depressed me too but I saw it as correlating to our housing bubble “victims” that need government bail-outs saying they were “tricked” into their financial mess when really their situation is a flip gone bad.
From my perspective, this is a fine example of the fact that in our country, at all levels, laws and authority are now optional.
We’ve often discussed how this attitude has undermined the infrastructure meant to protect our economy. This CDC story just shows another system deteriorating from the same largesse.
What makes you think no terrorist groups have plans to send in some of their own as suicide carriers? Everyone always looks for the spectacular.
The Flat House Price Myth
http://wallstreetexaminer.com/blogs/winter/?p=803
Thanks Russ, I look forward to reading your well informed blog every day…
china finally tanking down 7% on this news
China Triples the Tax on Stock Trades
why did it take so long to act seriously……… now the damage is already done……interesting to see how the markets will follow up tomorrow……one point at the day 200 from 300 stocks of the csi 300 were limit down (10%)!
Erlanger reports only 3 of 24 sectors have more than half their components above the 50 dma. In the banking sector, it’s only 16%. Confirmation of what I said yesterday, this totally bogus “rally” is all ETF/ECN/futures stuff.
We should have tripled the tax on real estate transfers and mortgage recording in 2003. Perhaps those communists know something about capitalism we don’t. We’ll see if it stops the mania.
45 of the (Australian) S&P ASX50 were down today (it’s now after 11pm in Eastern Australia).
I guess we should expect the U.S. markets to soon follow suit and levee a 7% tax on stock trades, as our headline indexes have also been spiraling upwards for no good reason since about June 2006?
Bad news per front page of the WSJ (online subscriber only), working class Black folks who had paid off homes in nicer sections of Detroit are losing their houses as a result of Subprime cash out loans. Decreasing maintenance may cause these communities to deteriorate like the rest of the city.
Good news not in the article — once the Alt-A thing gets rolling, perhaps some of those evicted will be able to afford to rent homes in middle and upper middle class White suburbs.
I have adopted a zero tolerance for sympathy. Adults should make adult decisions. If they don’t, regardless of their race, sex or creed, they can kiss my rear-end. Blind sympathy leads to bailouts and more bad behavior.
Whenever I have the urge to kick people who are down, I always remember the market mantra shoved down the throats of people wanting a slice of the American Dream: ‘ Buy now or be priced out forever!!’ or in this case ‘Consolidate your credit debt into one low monthly payment!’ and all those realtors, bankers and brokers, and their friends in the press, who profited so obscenely from the scam. These are the ones who not only should have known better, they often had a fiduciary duty to their customers to know better.
Zero tolerance is best applied to con men, not the conned. Only by holding the con men to account can we ensure the burden of a busting market isn’t passed on to the taxpayer (because you know these scammers are lobbying as we speak to socialize these losses).
I agree with both of you up to a point. We aren’t raising adults in this country, we are raising children who can’t resist a cookie that is offered to them.
Nonetheless, fraud and cons that take advantage of human frailty are still frauds and cons.
Jesus was right. Most people are sheep, and right now Madison Avenue is the one and only shepheard.
“Whenever I have the urge to kick people who are down, I always remember the market mantra shoved down the throats of people wanting a slice of the American Dream: ‘ Buy now or be priced out forever!!’”
And I always remember the mantra repeated by mothers worldwide. “If everybody else was jumping off a bridge, would you?”
And I always remember the mantra repeated by mothers worldwide. “If everybody else was jumping off a bridge, would you?”
And yet, people continue to jump off of bridges. The media is dominated by advertising because it works. People have been pursuaded by clever talkers for thousands of years; they will never change. Successful people (in the capitalistic sense) leverage that fact.
That’s how we got in this mess isn’t it, though? Everyone jumped - that’s what a mania is about. (Come to think of it-that’s how we got into this mess in Iraq as well). I’m not saying flipper types didn’t get greedy too -just that a lot of non flippers were taken advantage of. And venting bile at them does absolutely nothing to solve the problem or ensure it won’t happen again.
I came to this blog ready to buy a place back in 05 — knowing in my gut something was wrong but having no idea -thanks to a complicit press and a predatory market - what was going on. Affordability was so out of whack, there was no way for me to purchase anything WITHOUT a risky loan. I am deeply thankful for this blog and others like it because I am not so arrogant or judgmental as to think I couldn’t have been there too.
Very good posts, housegeek. I agree 100%. The burden should mostly lie with those who are in the business and have a fiduciary duty not only to the borrower but (most importantly) to the investors who are buying the loans.
We can all “caveat emptor” all we want, but that will never make Joe Sixpack wise to the market changes (like suddenly qualifying everybody — regardless of his/her ability to pay). J6, who’s buying his first house was looking to the “experts” (Realtors, mortgage brokers & appraisers) for advice for which he believed he was paying a very high price (tens of thousands of dollars in commissions).
Those in the REIC **knew better** (or should have) because that is their job.
That being said, J6 needs to learn an expensive lesson & lose the house(s) to foreclosure & take the resultant credit hit. But that should be the extent of his loss.
I can remember when Ted Kennedy was running against Jimmy Carter in the 70’s. TK was making the case for more expanded credit for African Americans. Even at that younger age, I knew that more credit availability would be one of the worst things that could happen to the African Americans. The less access you have to credit in America, and the more “cash buying” you do, the better off you are. But most people do not see it this way. Now all ethnic groups have been snared by the debt trap. Even the Asian Americans, thought by many to be smart and wise about money, have fallen for this new “debt=wealth” crap.
I am looking forward to that period in time when most people will realize that debt is an equal opportunity enslaver. But they won’t realize it until it becomes clear to them that they are now trapped in a lifetime of debt servitude to their creditors. This may very well be the largest transfer of wealth in America ever. Some people pay more in interest than all of their local and fed taxes.
Better to be on the other side. My Citigroup stock is paying me a 4.95% div yield, based on my purchase price.
Got 10% down?
“My Citigroup stock is paying me a 4.95% div yield, based on my purchase price.” And true inflation (gas, food, housing) is running about 8%. Wouldn’t call a 4.95% dividend a worthy place to put my money
Where are your facts that the “true” inflation rate is running “about” 8%? URL please?
I disagree. I am getting a 4.95% div yield PLUS the opprotunity for cap appreciation. Compare that to the 5.15% yield on my cash with a Money Market fund which has ZERO opportunity for cap appreciation.
Div paying stocks are a positive cash flow investment with the opportunity for cap appreciation, IF you buy your stock at the right price. No hassle returns - that is to say no renters, no insurance, no accountants, very little paperwork, no property taxes, etc… No carrying costs (other than the opportunity cost of doing something else with your money) if you do not use any margin.
Got 10% down?
Plus, C has increased the div twice since I bought it, about 10.8% a pop. Try doing THAT with your rental property.
Got 10% down?
…when most people will realize that debt is an equal opportunity enslaver.
Awesome post.
IMHO, the typical subprime borrower is very unsophisticated and prone to the pressured into ungodly expensive loans. What a shame to have to lose one’s home. The sharks really cleaned up on these folks
A margin of 9.125% over Libor !!! No wonder the MBS are sooo attractive.
For many who already owned their homes, offers of easy credit came at a time when a severe economic downturn had left them in need of money to maintain middle-class lifestyles. Since the year 2000, the decline of the auto industry has cost the Detroit metropolitan area about 20,000 jobs a year, helping turn the shopping areas near West Outer Drive into scenes of defunct businesses, payday lenders and liquor stores.
According to the latest data from the Internal Revenue Service, households in the 48235 ZIP Code reported an average adjusted gross income of $32,902 in 2004, up slightly from $32,817 in 2001 but down 6% in inflation-adjusted terms.
April Williams was feeling the pain of the downturn back in 2002, when she saw an ad from subprime lender World Wide Financial Services Inc. offering cash to solve her financial problems. At the time, production slowdowns at Ford Motor Co. were squeezing her husband’s income from an assembly-line job, and they’d heard rumors that more cutbacks were coming.
Still, after a loan officer from World Wide paid a visit, they became convinced they could afford stainless-steel appliances, custom tile, a new bay window, and central air-conditioning — and a $195,500 loan to retire their old mortgage and pay for the improvements. The loan carried an interest rate of 9.75% for the first two years, then a “margin” of 9.125 percentage points over the benchmark short-term rate at which banks lend money to each other — known as the London interbank offered rate, or Libor. The average subprime loan charges a margin of about 6.5% over six-month Libor, which as of Tuesday stood at 5.38%
“IMHO, the typical subprime borrower is very unsophisticated and prone to the pressured into ungodly expensive loans. What a shame to have to lose one’s home.”
And because we are so much more sophisticated and intelligent we should really make their decisions for them. Then if we are lucky they will breed more and create a larger constituency for us. And then another party will take advantage of them and they will turn even closer to us. If we coordinate with that other party we can both stay rich and powerful forever. And that is how a two party system works. Excellent!
Not subscriber only. I guess this article was just too substantial for the WSJ editors to “contain.” (And BTW, perhaps I just overlooked it, but I could not locate the word “contained” anywhere in this lengthy piece about the ravages of subprime lending in low-income and minority communities.)
——————————————————————————
DAY OF RECKONING
‘Subprime’ Aftermath:
Losing the Family Home
Mortgages Bolstered
Detroit’s Middle Class –
Until Money Ran Out
By MARK WHITEHOUSE
DETROIT — For decades, the 5100 block of West Outer Drive in Detroit has been a model of middle-class home ownership, part of an urban enclave of well-kept Colonial residences and manicured lawns. But on a recent spring day, locals saw something disturbing: dandelions growing wild on several properties.
“When I see dandelions, I worry,” says Sylvia Hollifield, an instructor at Michigan State University who has lived on the block for more than 20 years.
Ms. Hollifield’s concern is well-founded. Her neighbors are losing interest in their lawns because they’re losing their homes — a result of the recent boom in “subprime” mortgage lending. Over the past several years, seven of the 26 households on the 5100 block have taken out subprime loans, typically aimed at folks with poor or patchy credit.
Some used the money to buy their houses. But most already owned their homes and used the proceeds to pay off credit cards, do renovations and maintain an appearance of middle-class fortitude amid a declining local economy. Three now face eviction because they couldn’t meet rising monthly payments. Two more are showing signs of distress.
http://online.wsj.com/article/SB118047548069017647.html?mod=pj_main_hs_coll
Don’t miss the street-level map detailing the carnage.
http://online.wsj.com/public/resources/documents/info-launch.html?project=detroitsubprime07&w=980&h=530
For those who have a WSJ Online account, here is the link.
DAY OF RECKONING
‘Subprime’ Aftermath:
Losing the Family Home
Mortgages Bolstered
Detroit’s Middle Class –
Until Money Ran Out
maybe this china drop will lead us into the summer doldrums for the us markets
It’s not a drop, it’s a 6.5% one-day slide (according to the shilled editors at the WSJ…).
Chinese Stocks Slide on Tax Increase
By James T. Areddy
Word Count: 894
SHANGHAI — The Chinese government’s first direct action to trim a surge of stock-market investment offered another sign of Beijing’s growing concern about the run-up and led to the market’s second-biggest decline this year, but it may not be enough to cool things down.
Acting on orders from Premier Wen Jiabao’s cabinet, China’s Ministry of Finance early Wednesday tripled a trading transaction charge, called the stamp tax, to 0.3% from 0.1%, effective immediately. The government is keen to promote the healthy development of the country’s securities markets, the official Xinhua news agency said.
http://online.wsj.com/article/SB118049191316718116.html?mod=home_whats_news_us
A case of Shanghai shivers………..?
http://www.marketwatch.com/
Nothing there a little plunge protection can’t fix. I expect the U.S. headline indexes to close the day in the black.
This might have been covered yesterday, but from the Yahoo finance website:
“In corporate news, Pulte Homes Inc. said late Tuesday it will slash about 16 percent of its work force, or about 1,900 jobs, to save the homebuilder an estimated $200 million a year before taxes.”
Good thing this won’t effect the broader economy…
“
Renters beware
http://www.sptimes.com/2007/05/30/State/Renters__too__face_mo.shtml
And yet another renter foreclosure story from Leesburg, VA.
I mentioned on this board some time back that a friend of mine was relocating here wanted to rent in Maryland. We actually looked up what the landlord paid and what kind of mortgage he has.
Since this friend doesn’t want to move again soon, he wants to make sure the landlord is actually making money; otherwise, the place could be foreclosed or (perhaps more likely) eventually sold out from under him if the investment isn’t panning out.
How’s that for a turnaround, when renters WANT their landlords to turn profit? What’s the world coming to?
I love one of the quotes in the WSJ article:
“The loan carried an interest rate of 9.75% for the first two years, then a “margin” of 9.125 percentage points over the benchmark short-term rate at which banks lend money to each other — known as the London interbank offered rate, or Libor. The average subprime loan charges a margin of about 6.5% over six-month Libor, which as of Tuesday stood at 5.38%.
“I knew better than to be stupid like that,” she says. “But they caught me at a time when I was down.”
No. You. Didn’t.
So, what have we learned from this story? It seems that black people are just as stupid as white people. Surely no surprise there.
PULTE- that 16% doesn’t include lots of folks that were swinging hammers for the subs
the 80’s
I could buy 10-20% down and be cash positive 1st year
any cities reporting those numbers as we “bottom out” ?
The Shanghai shivers will not lead to a fever…
I expect this drop is due to the news leaking that the tax on the stock market TRIPLED; it went from 2% toal (1% total price each to buy and sell) to 6%. This created cover for some to take some profits.
There is so little to invest in with such a low barrier to entry. Millions invested in property during the early ‘aughts but that has slowed and soured recently (and requires a 40% down payment!). Now folks have shifted back into the stock market.
Secondly, if you keep your money in the bank the interest is about 3% at best…not something that inspires confidence given China’s inflation in education, housimg, and healthcare costs (sounds like the ‘ol USA).
Combine that with a prediliction for herd mentality in humanity (Whaddaya mean yer not in the market?) exaggerated by Asian communal culture [and before you jump on me I lived in China for 5 years from 2001-2006 and could list lots of anecdotal evidence] and this thing in Shanghai still has legs…
Bank schmank. Don’t forget Republic of Iceland 7.25% notes priced to yield 8.9% to (05/17/13) maturity, in a currency that has held up well against ours. Probably 1% to get in; 0% to get out if you just hold them 6 years. AAA, no default risk.
How long can the Fed stand pat when other nations’ CBs are tightening?
AAA does not mean “no default risk”. It means that an agency (that is paid by the borrower) has put a stamp that says “AAA” on the security. In some cases, the stamp is due to the borrower paying a third party for “insurance”. Those third parties include MBIA, which has a very dubious AAA rating itself. See this article originally from Fortune magazine about this issue.
Missed last night’s Cali thread. One remark: Norcal Ray said something about “Ameritrade and other subprime” outfits, then Cinch said [incredulously?] “Ameritrade in subprime business?”
I guess Norcal Ray meant Ameriquest, not Ameritrade. Slip of the mental tongue, I imagine.
Brother in law in Pittsburgh finally sold his house after ~4 months on the market, for $155K, down from the original asking price of $175K. I think he’s lucky and smart to have received an offer & taken it.
Original purchase price was 155K, but he did put in a lot of sweat and materials into improving the condition of the house.
“he did put in a lot of sweat and materials into improving the condition of the house”
Yeah, that’s OK if you want to do it for your own personal enjoyment, but as of late people have been doing this type of fix up thing because of the ‘investment’ value. Most that tried it here in the Midwest would have been better off with the renovation money in a money market account & the time spent to do the work lying on the couch reading a good book.
So I found a new AM radio show in my area (Hampton Roads / Norfolk - Newport News - Virginia Beach, VA). It was hosted by the Tidewater Association of Builders, some realtor association, a mortgage somebody was there. Lots of really, really bad information was given — and they weren’t very good at running the show.
So I called in.
I said I disagreed with what they were saying. As a young professional, housing isn’t affordable. I got in there that it was a mania, 100% price increases with no salary increases. Declining population in the region, many of my young professional friends are looking to move. I got in there that Austin and Raleigh are both better regions. Their comeback? We have a Symphony and arts stuff that Raleigh doesn’t have. (Raleigh has a symphony too). I pretty much pwned them on their own show. They were going on about how rentals will increase and all of this. The one guy starts talking about how he bought 6 years ago, and couldn’t today afford what he has. DUH!
My last comments I got in, which was right before they pretty much killed me… was that I’ve been tracking — and a friend has been working on software that scrapes the current apartment prices and quanities and builds statistics, and there are more availible now than the past 7 years, and the prices are going down.
It was *GREAT*. The next caller was a professor at the local college (TCC) saying that her students are all looking to leave the area because of the very low salaries.
They came back with talk of some really low priced property in Portsmouth, $500K on the water. $500K. The median household income is $55K in our region, and that is only recently (what happens when the building all stops).
Man I wish I had a recording. I need to start recording these shows. I’m going to get on next week too.
Bravo. We all need to openly debate the REIC, and when commonly necessary ridicule their idiocy.
It is simple human psychology for the masses to be easily swayed by groupthink and popular opinion. We need to supply the contrarian viewpoint.
I just went back on yesterday’s thread and read Mark in Dallas’ response to my off the top of the head listing of Texas bubbles.
I’d say ol’ Mark is a developer, homebuilder, realtor or mortgage broker in Dallas and doesn’t want the bad news about the TX bubble out on this widely read blog. Bad for bidness.
Sorry, Texas bubble is as bad as any. Any place that has not gotten overheated is a hellhole that you couldn’t get anyone to buy. Granted, a large part of the state fall into that category.
Weird - my post seemed to have disappeared. Here it is again -
From the washington post - an article about the housing ATM running out of money (requires subscription) -
http://tinyurl.com/yplstq
Interesting stat was that out of the approximately $1 trillion take out each year during the boom (peaking at $1.4 trillion in 2005):
36% used for other home purchase
29% used for stocks and other assets
23% used for consumer spending
12% used for home improvements
So over 50% of about $1trillion annually over the past few years has been pure vapor home equity extraction, put into the non-housing economy. Yes Gladys, this will affect the over economy - a lot.
You would think that given San Diego’s religious preoccupation with the housing market and home prices that always go up, this story would have been front page news, or at least a headline story in the business pages, but instead it was buried on p. C4 under a misleading byline. Given today’s front page WSJ article on the ravages of subprime lending in Detroit, it is a bit disconcerting to see that San Diego is neck and neck with Motown in the running for “largest YOY home price decline.”
———————————————————————————
Consumers regain confidence in economy
Slumping housing market remains major worry along with gas prices
By Anne D’Innocenzio
ASSOCIATED PRESS
…
Yesterday, Standard & Poor’s housing index showed that U.S. home prices fell in the first quarter compared with a year ago, the first time since 1991 that prices have shown such a decline.
“We still don’t see anything that looks like a clear bottom,” S&P index committee chairman David Blitzer said. “We’re still headed down.”
The quarterly index dropped 0.7 percent from the fourth quarter of 2006 and was down 1.4 percent from the first quarter of 2006. Detroit and San Diego posted the biggest annual declines, at 8.4 percent and 6.0 percent, respectively.
“The fall of the national index into negative territory, after more than 15 years of positive annual growth, is a reaffirmation of the pullback in the U.S. residential real estate market,” said Robert J. Shiller, chief economist at MacroMarkets LLC. “The national index was yielding solid returns as recently as a year ago. First quarter 2006 growth rates were up 11.5 percent versus Q1 2005, a sharp contrast to the returns we are seeing today.”
http://www.signonsandiego.com/uniontrib/20070530/news_1b30economy.html
“…the returns we are seeing today.”
Shiller is a victim of the irrational exuberance which he chronicled. I predict that twenty years from now, the next generation will be puzzled by language that referred to residential housing as though it were some kind of financial investment, instead of a money trap.
The city fathers don’t want any bad news in the paper. Also as one realtor, who owns her own office, said, “we give them[SD. Union] a lot of money for advertising and we do not appreciate negative news”. Reality is coming “big Time” in San Diego and when homes drop 60% in value as to correct the number 1 bubble in USA, then only then will the “truth” be told as the history records will show on how to make a real bubble “pop”.
Terrible Vita
2004-05 comparable price for a 2200 sqft - $510k
2007 comparable price for a 2200 sqft - $379.9k
Ouch.
Home builder to cut jobs, restructure
ASSOCIATED PRESS and BLOOMBERG NEWS
May 30, 2007
DETROIT – Facing a grim housing market, Pulte Homes Inc. said yesterday that it is cutting about 16 percent of its work force, or about 2,000 jobs, as part of a restructuring.
Pulte, the third-largest U.S. home builder, said the restructuring will save an estimated $200 million a year before taxes.
“The home-building environment remains difficult, and our current overhead levels are structured for a business that is larger than the market presently allows,” said Richard J. Dugas Jr., president and chief executive.
Pulte said it expects to take pretax charges of $40 million to $50 million for the restructuring, mostly in the second quarter of 2007.
Bloomfield Hills, Mich.-based Pulte reported losses of $85.7 million, or 31 cents a share, in the first quarter of 2007. It earned $262.6 million for the same period last year, or $1.01 per share.
http://www.signonsandiego.com/uniontrib/20070530/news_1b30pulte.html
“The home-building environment remains difficult, and our current overhead levels are structured for a business that is larger than the market presently allows,” said Richard J. Dugas Jr., president and chief executive.
This is the first time I have heard this, “structured for a business that is larger than the market presently allows,” most of the time it is “we are returning to a normal market” and no problems, no layoffs, equal commissions, etc.
“structured for a business that is larger than the market presently allows,”
That is only a temporary condition, as we have been assured the building sector will make a strong comeback by year-end 2007.
Should we expect the homebuilder share prices to continue falling in place on this bad news for their creditors?
———————————————————————————-
Centex, DR Horton, Pulte may bust bond terms -S&P
Tue May 29, 2007 1:13pm ET143
Market View
CORRECTED - Centex, DR Horton, Pulte may bust credit terms -S&P
Centex, DR Horton, Pulte may bust bond terms -S&P
By Al Yoon
NEW YORK, May 29 (Reuters) - At least three major U.S. home builders suffering from the housing slump may soon violate contracts meant to protect payments on some $11 billion in debt, Standard & Poor’s analysts said on Tuesday.
Centex Corp. (CTX.N: Quote, Profile , Research) , D.R. Horton Inc. (DHI.N: Quote, Profile , Research) and Pulte Homes Inc. (PHM.N: Quote, Profile , Research) are three of six home builders whose debt rating outlooks were revised on Thursday to negative from stable by S&P.
The three are “all close” to breaking bond covenants, which typically require that earnings before interest, taxes, depreciation and amortization are equal to at least twice the amount of interest owed on the bonds, S&P analyst Jim Fielding said on a conference call.
Weak earnings at home builders during the prolonged housing downturn suggest that the interest coverage measures may weaken further for quarters to come, S&P said in its reviews last week. The analysts are using a base assumption that the U.S. housing slump will last for another year and a half, analyst Lisa Sarajian said on the conference call.
The home builders are mostly sapped by excess inventories as cooling home-price appreciation and tightening lending standards curbed sales, the analysts said.
“We’re operating under the assumption that another shoe could drop (in the U.S. housing market) and become more severe,” Fielding said.
http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070529:MTFH96877_2007-05-29_17-13-52_N29328984&type=comktNews&rpc=44
Bankers in Distress
Bloomberg today says, The biggest winners from the global buyout boom are hiring distressed-debt bankers in Europe at the fastest pace in five years.
“When the turn does come, it will be unlike anything we have ever seen before,” said Iain Burnett, 43, managing director of Morgan Stanley’s special situations unit in London. “The scale of it could be considerable because of the size of some of these leveraged deals,”
“Restructuring groups are growing faster in Europe than in the U.S. as companies in the U.K., France and Germany pile on record amounts of debt, according to Standard & Poor’s. European companies borrowed a record $252.6 billion in loans and bonds rated below investment grade.”
“People have been forecasting a meltdown in credit in the next 12 to 18 months,” said Michael Gibbons, head of the special situations desk at Paris-based BNP Paribas. “We tend to crash when we least expect it, rather than when we forecast it.”
“We tend to crash when we least expect it, rather than when we forecast it.’’
So does he mean the chickens will be coming home to roost sooner, or that the orgy is going to last longer than the forecast?
Is it just me, or does “special situations unit,” have a vaguely ominus ring?
Any input on the following credit services stocks (or do you know of any others good for cashing in on the massive debt burden everyone seems to be taking on these days):
COF
AXP
AEA
ADVNB
MA
I wouldn’t be extremely bullish on debt service companies. They’re going to need to hire massive numbers of people to keep up with the workload. That’s going to increase salaries. Then they have to spend some time training new hires. And don’t forget about all the inefficiencies involved with large and fast headcount increases.
They aren’t going to go bankrupt or anything - I just doubt their profit margins are going to be much better than they were previously.
Out in the street, didn’t pay for over a year.
http://tinyurl.com/yp4xqa
OT- I just had a thought and maybe this is already understood by some on this blog.
Taking a bearish stance on the economy with the housing recession, I haven’t understood all of the M&A activity between businesses and private equity. I realized, maybe this crowd is so bullish because they still view the stock market as a leading indicator? If so, they are gravely mistaken as the recent market ascent, beginning in August 2006, is due to money shifting out of real estate reserves into stocks. I see it as a preference change in asset classes, while the fundamentals of the economy are slowly deteriorating.
Any thoughts?
“I realized, maybe this crowd is so bullish because they still view the stock market as a leading indicator?”
Maybe they get some kind of unannounced govt subsidy? Plunge protection services would be an example — if the Fed floods the markets with liquidity on days like today when a global financial crisis is looming, then the bulls are getting a form of free insurance at the cost of an inflation tax on anyone foolish enough to be long dollars.
I assume this “plunge protection” refers to the Fed reducing rates some time this year or next. If so, are you saying the market is substantially pricing in rate cuts?
I think the Fed can’t afford to lower rates, look at how high oil and gold prices are, the Fed had the luxury of much lower commodity prices to reduce rates in 2001. Additionally, why on earth would the Fed lower rates when we have a massive savings shortfall, i.e. personal negative savings, whereas we still had a positive savings rate of 2% (not much) in 2001.
I think the Fed knows we’re in deep sh*t, and they are playing the bluff pretending the economy will accelerate later this year while maintaining high rates to choke off the craziness.
“If so, are you saying the market is substantially pricing in rate cuts?”
No. I am saying the market is substantially responding to suppressed long-term T-bond yields — capped at 5%.
http://www.bloomberg.com/markets/rates/index.html
I see it as short on the USD. In an inflationary environment, you want to own assets outside of cash.
Hmmm, assets like real estate???
Yes. Real estate is an asset hedge against inflation. However, huge caveat, you need to be able to afford the money you borrow until inflation whittles the original price tag of the property down. Additionally, the asset you buy must not also be hugely over valued or with or without inflation its value will fall.
Same caveat applies for money borrowed to invest in stocks, as many margin loan investors learned during the 1929 stock market margin calls.
I concur. If you don’t believe the dollar will actually get as much inflation protection as promised, then it is not at all a bad idea to go short dollars and long real assets (stocks & houses), as the dollars you need to repay your debt will be worth less (or, in the worst case scenario, worthless).
I concur. IMHO, the rising stock market is a hedge against inflation. If I weren’t such a contrarian, I’d be all in. Probably going to regret this conservative stance, just as I regret being conservative by not “releasing the equity” in our house and going long houses back in 2001 when a friend wanted to work together on flips. I thought the RE market in San Diego was poised for a downturn in 2001 & stayed out. Also stayed out of most of the dot.com runup for the same reason.
We don’t lose much, but we don’t gain much, either. Probably losing when taking true inflation numbers into account.
Soon to be heard: THUD!
——————————————————————————–
Wednesday, May 30, 2007
Robert Reich
Supply, demand . . . and an impending thud
Commentator Robert Reich says if you want to understand why the stock market continues to be bullish, you have to go back to Econ 101.
…
Now look at the big picture. Last year, corporate buybacks and leveraged buyouts totaled about $600 billion. That was roughly 3.5 percent of the whole value of the American stock market. At the rate buybacks and buyouts are going this year, the total is going to be close to about $900 billion. That’s another 4 .5 percent of U.S. market capitalization taken out of circulation.
With the supply of publicly-traded shares shrinking like this, and with lots of global money out there to buy the shares that remain, it’s no wonder the stock market is going like gangbusters.
Yet at some point, this bubble will burst. You see, the whole reason for companies buying back their shares, and for private-equity firms doing leveraged buyouts, is to put all these shares of stock back onto the public market at some point in the future at a higher price than before.
But if stock prices are now rising largely because the supply of publicly-traded shares is shrinking, and if companies aren’t really investing for the future what happens when all this stock comes back on the market? The loud thud you’ll hear will be the sound of shares falling back to Earth.
http://marketplace.publicradio.org/shows/2007/05/30/PM200705305.html
Need your help. I finally talked my friend into selling her house in Pomona. She will walk with about 200k. Her family is asking her why she wants to do it, (uh, maybe because its gang-infested, but thats my opinion) They tell her that her house payment is only 1000 a month, she should stay put. IMO, housing will come down, and she can move to a better neighborhood. I don’t want her to sell, and then not be able to get into another house. I told her she could rent for awhile, and wait for housing to come down, which sounds reasonable to me. I know I am preaching to the choir, but tell me I’m right, convince me again, because now I’m getting nervous. Thanks
Details… at what price did it sell?, what are comparable rents, etc…?
She put the house up for 389. Houses in the area are going for 400 and up, but not moving. I told her to sell at a reasonable price, to get it to move. The sign just went up today. Rents for houses are 1800 in a good area. Houses for sale in nice area are 500k and up. Again, they are not selling. So I figure if she rents for a year, she should be able to buy something nice for substantially less than if she bought now. Whadda ya think?
personally, at a thou a month i wouldn’t be moving anywhere.
personally, at a thou a month i wouldn’t be moving anywhere
The current mortgage payment is irrelevant. You need to take into account the 200k she’d have in the bank after selling. If I inherited a million dollar house in L.A. right now, I’d have a payment of zero, but that wouldn’t stop me from unloading it in a heartbeat at today’s prices.
I think she’s very lucky to have a friend like you.
Don’t sweat it — your reasoning is spot on. When you can rent for half the price of owning or less, prices are just plain too high, and you’re financially much better off renting. Simple as that.
I have a friend in Van Nuys who just took her house OFF the market, against my advice. Maybe I should have her talk to you
She can make enough interest on a CD or Government Bond to pay for the $800 difference. If the true difference after taxes, repairs, HOA, etc is less than $800 then she is coming out ahead each month. Regardless, when her house starts depreciating even at 5% a year, she will lose more than that $800 difference each month in opportunity cost.
So its worth the stray bullet? jeez, c’mon.
why’d she buy in a gang-infested area? if the only reason was for expected appreciation… well, she got that. time to get out.
no, her parents bought in the 50’s. Remember on I Love Lucy, when they went to Hollywood, Fred said they were going to Pomona to see the orange groves. Used to be nice, like a lot of places.
Anybody else reading Little House on a Small Planet? Much food for thought…
http://www.amazon.com/Little-House-Small-Planet-Possibilities/dp/1592288685
Sounds great, AZslim…I read the 5 rave reviews.
Very timely for me as it seems all the 4000 - 5000 sq footers in the near vicinity have sold to empty nesters. They joke the cats enjoy the extra space. Perhaps they plan on hosting the family for Christmas or something.
Now Playing:
Robert Shiller: Vacation home prices could plunge
The current decline in home prices could continue for “years and years.” So says Robert Shiller, Yale University economist, noted author and architect of the Case-Shiller Index. He tells John Wordock we could see “substantial” declines for the next year. Shiller warns prices for vacation homes could suffer the most. In some places, he says, getaway home prices could plunge as much as 50-percent.
http://www.marketwatch.com/tvradio/player.asp?guid=%7B8BB87F9A-DA8B-4B3B-8F3A-7EDCAD1A51DE%7D
“There could be a collapse — we’ve seen it before.”
What else is there to say?
HBB posters to Money Magazine: WE TOLD YOU SO.
———————————————————————————–
Are home prices really so crazy?
They sure look nuts. But the fact is, your home — even today — is still a great investment.
May 16, 2005: 11:47 AM EDT
By Pat Regnier, MONEY Magazine
NEW YORK (MONEY Magazine) - Think we’re sitting on top of a real estate bubble just waiting to go pop? You aren’t alone.
About 42 percent of MONEY subscribers agree that home prices have risen too high, too fast, according to an April poll. Only 39 percent are confident that today’s prices make sense. And if you’re looking for red flags, they’re certainly easy to spot.
Nationally, home values climbed 14 percent last year, according to real estate consultant Case Shiller Weiss. (You can see CSW’s forecasts for top metro areas by clicking here.) That’s nearly double the 8 percent of 2003, when the bubble talk began in earnest.
http://money.cnn.com/2005/05/11/real_estate/buying_selling/re2005_pricecrazy_0506/
“About 42 percent of MONEY subscribers agree that home prices have risen too high, too fast, according to an April poll. Only 39 percent are confident that today’s prices make sense. And if you’re looking for red flags, they’re certainly easy to spot.”
That informal poll reminds me of something I saw in recent financial news which has the bulls salivating like Pavlov’s dogs. I am wondering what the ‘basic driver’ might be to which Mr. Fisher refers?
—————————————————————————–
Short sales soar on NYSE
By Daniel Hauck and Michael Tsang Bloomberg News
Published: May 29, 2007
NEW YORK: Short-sellers are betting against U.S. stocks like never before as the Standard & Poor’s 500-stock index approaches an all-time high. That is making some of the biggest bulls even more optimistic.
“What the short-seller appears to be doing is doubling down,” said Kenneth Fisher, chairman of Fisher Investments in Woodside, California. “You love to see it, because if you believe there is a basic driver to the bull market, they’re going to get run over.”
The amount of shorting - where traders sell borrowed stocks expecting to buy them back after prices fall - jumped to 3.1 percent of the total shares listed on the New York Stock Exchange this month. That is the highest level since at least 1931, according to Bespoke Investment Group, a research firm in Mamaroneck, New York.
The wagers represent billions of dollars that could be invested in equities if short-sellers closed their positions.
http://www.iht.com/articles/2007/05/28/business/bxatm.php
I don’t know if I should laugh or cry about this.
How’s this for dingbat reasoning…
“Janice Bowdler, housing policy analyst for Latino advocacy group the National Council of La Raza, said, “Even high-income Latino families get more subprime loans than do low-income white families.”
The real estate sections of local newspapers add to the problem, according to Bowdler. She pointed to The Washington Post, with a mostly white readership, which features ads for prime loan originators. The ads often have a clear box of the latest rates from various lenders, and the text is laid out to help borrowers comparison shop and save money.
But the ads in the real estate section of Washington D.C.-area paper El Tiempo Latino are quite different. They’re primarily from mortgage brokers and they stress - not price - but how borrowers can get loans despite little credit history or documentation.
“Already, you’re put into channels that lead to subprime loans,” Bowdler said.”
So, the info is available in the newspaper, on line, and for free in your public library. Reserach the value of the loan and your options or get taken taken to the cleaners. That’s life in a free-market.
If you don’t like it…leave.
Fed sees housing correction dragging on
By Krishna Guha in Washington
Published: May 30 2007 21:17 | Last updated: May 31 2007 00:00
The correction in the US housing market will “probably persist longer than previously anticipated”, Federal Reserve policymakers judged at their last meeting, according to minutes released on Wednesday.
The minutes show that Fed officials meeting on May 9 were concerned by the decline in new home sales and the rise in the inventory of unsold homes relative to the rate of turnover.
Most of the members of the Federal Open Market Committee felt that weak residential investment would “continue to weigh heavily on economic activity through most of this year” – longer than expected.
http://www.ft.com/cms/s/c1586a86-0ee5-11dc-b444-000b5df10621.html
“Asia shrugs off Shanghai
Asian stocks trade broadly higher Thursday as China bubble worries are outweighed by new record highs for U.S. indexes. Shanghai index, still tender, slips more than 4%.”
http://www.marketwatch.com/
Quid pro quo theory: HP brokers a deal where CH gets long U.S. equity positions just before defluffing the Shanghai index with a surprise tax increase. Plankton who dutifully funded the stock index portion of their 401(K) portfolios get to become the spendthrift saviors of the US (and CH) economies.
I need some opinions here. Since you all are so financially savvy (and prone to tough love) I want to throw something out that I just discovered this week.
I’m engaged to be married in September. My fiance told me years ago that she had quite a bit of debt but would never discuss the actual amount with me. We finally discussed it last week. First, let me tell you a rough estimate of my financial position. I have about 100k in non retirement assets and about 140k in retirement assets. I have no debts (rent, car is paid for, etc.) Anyway, I just learned that she has 65k in high interest credit card debt. Wow! How the heck does that happen?! I want to be angry with her, but she did this a long time before I met her and she’s been treading water ever since. I really can’t be angry. Instead I can either accept it or not.
My original plan was to let her tread water for a few years (want to make sure she learned her lesson) and hopefully by then that balance will be a lot lower of a percentage of my net worth. Obviously, from a cash flow perspective that is not the best move but I just can’t see myself handing over 65k right now.
I told her about a year ago (before I knew the amount of course) that declaring bankruptcy might be the best move. I don’t believe in bankruptcy but I also don’t believe in running up 65k in debt or handing over 65k to someone else.
Note: I was married before and dealt with a similar situation. I told myself at that time I would never destroy my financial future for someone who is irresponsible with money. At least in this case I trust that this woman has truly learned her lesson - something my ex is truly incapable of doing.
Well, I’m not one of the financial geniuses on this board but I do have experience in this area.
My husband was horrible with money and was in debt when we first started dating 15 years ago. He was self employed and had changing income levels and cashflows. He was also undisciplined about paying his bills first.
Now this obviously takes a healthy ego and an amazing amount of trust on the debtors part but: He allowed me to take over his entire paycheck. And we were just dating!
I held his checkbook where his entire paycheck went, and paid his debt/bills down with a budget he agreed was workable for him. Each month I showed him how his money was being applied. It took less than a year to get him out of debt.
Now he’s more disciplined about spending than I am. I think it was the relief of finally being out from under that pressure….very motivating.
I wish you luck with this. If you can work this thing out in a healthy way, you’ll have a nice strong emotional base which will be with you in whatever you do.
She should have paid some of it off, right? look at her statements and see how well she repaid the debt. Your best bet would be for HER to declare bankruptcy before you get married.
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