Bits Bucket And Craigslist Finds For June 9, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Has anyone had problems with illegally modified houses? I am looking at tons of properties in NYC, and everything has a zoning violation that woud cause thousands in fines, not to mention the danger of shoddy work.
What people have all over L.A. are illegal rental units. They put sinks in the garage and toilets in the toolshed, to get tenants.
Speaking of LA rentals. There are over 80+ rental listings so far on LA Craigslist and its only 7 AM
Prices are falling too…wooo!!!
I personally haven’t, but given the number of dumpsters that I’ve seen appear immediately following the “sold” signs, I’d be willing to bet that there has been a whole lot of un-permitted work done. Un-permitted = uninspected.
Having worked in contracting, can tell a big function of permits is to raise cash for the local gov. Lots of inspections involve the inspector driving by. Think of drive by appraisals.
Some local gov’s may use permits and licenses to raise money, but the three I’ve worked for use them as tools to make sure work is done to some kind of minimum standard. Having said that, I’ve done a few drive by inspections in my days. Most were fences, signs and stuff not worthy of spending a lot of time on. Make sure they’re in the right place and look right, and move on. My criticism of city inspections is that the inspectors are given too many inspections per day to do a real first class job. I usually assigned 25/day to my inspectors just to keep up. Like any industry, you have your professional inspectors and then you have your trainees. When you buy a new home you always hope it was inspected by the professional.
oh, I agree, but at least you tell the insurance company that the work was up to code, because it was inspected. It makes it harder for them to deny the claim, after the fire/flooding from shoody electrical/plumbing work/leaking windows, etc., or the lawsuit when the porch/deck collapses, etc.
“oh, I agree, but at least you tell the insurance company that the work was up to code, because it was inspected. It makes it harder for them to deny the claim, after the fire/flooding from shoody electrical/plumbing work/leaking windows, etc., or the lawsuit when the porch/deck collapses, etc.”
Absolutely. I’ve been house-hunting in Denver for the past four months, and the problem here is unpermitted basements. Regardless of quality, if there is no permit, the insurance company can deny any claim you make. Who wants to take that kind of risk? In addition, your property taxes will go up once the city finds out about the remodeling, and they don’t care if you weren’t responsible for the work.
This is a big problem in my area. My home inspections now include a records search from the city and county and a zoning certification. This has caused a lot of anger from the local real estate hucksters because illegal work or illegal uses have to be disclosed to potential buyers.
Every house in NYC has a zoning or building code violation. Lots of illegal added units, even if the zoning permits. Three-family homes required sprinklers, so two-families were built “illegal three” ready. Inside the “fire district” ie. not Staten Island wood decks are not permitted on row houses. Every fireman has one. Etc. Etc. Etc.
When I walked through Queens, a little over a year ago, I couldn’t believe the stuff they were building was legal. The teardowns are replaced by some awful multi-family monstrosity. The house sits about 6 inches off of the property line. It blocks out the neighbor’s home. There must be a ton of stuff in the boroughs that violates both building codes and codes of decency.
Thats NOT the WORST OF IT……
Get a smart tenant like me and i could windup living rent free for months or have you pay me to move out of your Illegal basement or attic apartment.
In NYC is legal for the owner to live in the illegal unit, but you cant rent it out to the public. So what i’ve seen here on my block is they rent the finished basement and 1st together , or the 2nd and finished attic….for a lot more money..calling it a 3/4 bedroom 2 floors…. …this skirts around the law since its not a separate apartment.
The NY Times has an article about Islip trying to crack down on illegal rentals by using real estate agents:
http://www.nytimes.com/2007/06/10/realestate/10lizo.html?ref=realestate
“Some individual investors, who had been flipping the homes among themselves, have together defaulted on almost a dozen homes in the East Valley. Most of those houses are in a new Gilbert neighborhood.”
http://www.azcentral.com/arizonarepublic/news/articles/0609investor0609.html
Ben put up a bunch of good pictures of the Miami condo construction in the photo-gallery. What a mess!!
Here:
http://thehousingbubbleblog.com/js_slideshow/
Holy moly…thats ridiculous. Is there a count for how many units are being built in downtown Miami alone? The thing is you can’t stop development on a project like that once it gets started, so you can only imagine what prices are gonna be like when thousands of new condos go up for sale and incredibly slashed builders prices in the next few months.
That reminds me of what Toronto looked like last summer. The amount of condo building was incredible.
Are there any Canadians out there? The Stanley Cup Finals are over. You can come back to the blog. What is happening in Toronto? I foresaw some really bad things due to overdevelopment.
Would also be interested in what prices are doing? Downtown, in the burbs like Oakville et.
I didn’t care about the stanley cup much, and anyway I’m originally from so cal. A lot of people in Toronto were rooting for the ducks because they hate ottawa.
We hear a lot of “it won’t happen here, that subprime thing is just in the US”
and this:
http://www.blogto.com/city/2007/06/oops_i_did_it_again_the_toronto_real_estate_board_sets_a_new_high/
West Palm Beach looked like that last fall, too. Despite PB County already having more than 3 years’ inventory of unsold SFH/condos.
Reminds me of downtown San diego 2003-2007. At any given time, there were at least 30 cranes up in the 92101.
Years ago, my cousin would refer to the area as “condo canyon”.
Looks like the Manhattanites took their surroundings down to Miami with them. All that is missing is a good mass transportation system - the subways! I saw one picture of a rail line - that’s a good sign.
The best photo in the Miami gallery is the one with the babe in the ad where it reads, “10% down. Prices from the 300s.” That’s a laugh. I’ve spent a lot of time in Miami and it is all about image. Those people don’t seem to save a nickel. And if it says the 300s then you know anything decent is in the 400s. Not everybody in Miami is loaded but the condo developers sure think they are. Bwahahaha. Downtown Miami will become luxury Section 8 paradise.
And this doesn’t even really catch it - you need to drive in from the north on 95 or come toward town from the airport to really appreciate it. And, BTW, all of it is on the $**t (north) side of downtown where you can’t walk anywhere without fear of mugging, boredom, being run over, or heatstroke. They throw up an art center and try to hype the so-called design district, but the real high-end Miami lifestyle will always be south of downtown.
It will not load on my machine - weird - I had no problems before. Anyone else have an issue?
I think a great topic that was sort of started on another thread is: How to have fun at open houses.
Here’s our way: Before going, I pull stats off the net about the house. I gather data, mostly from Ziprealty.com, on other homes selling in the area, the days the home has been on the market, and the recent comps. Then, I pull tax and purchase price data from our county’s tax assessor’s website. If the open house is in a poor school district, I also pull stats that show the poor schools in the area.
I go with my wife and baby. At first, my wife hated my sport, but once she realized how badly the Realtors lie, she enjoys even more than I do now. We figured out that it’s best to act like prospective buyers. We tell the Realtors that “we just moved to the area and are looking to buy.” This makes them much more talkative and produces many more lies.
Then, we ask lots of questions; my wife usually takes diligent notes on the responses (this also make the Realtors giddy with excitement). Then, we pull out the stats that we printed from the net that refute all the lies. We’re not obnoxious about it; we simply say things like, “That’s weird; are you sure this feeds to A-rated schools? According to this print-out, this house feeds to F-rated schools.” We never really challenge them, we just kindly let them know that they’ve been busted in bold-faced lies.
The Realtor’s back-peddling, blank stares, and embarassment is priceless.
Anyone else have any good strategies for fun at open houses? It time my wife and I mix it up.
Outstanding effort! I like it!
My plan would involve the El Grande Burrito Platter and a plunger.
Hi. I am mean. My friend and I would go during the boom times within last two year. The place would be pack. My friend would pretend to be interested. I would say to the effect are you crazy this was selling for 50% less a few years ago. Then go into the bubble facts we all know. RE agents looked like they were going to die.
I personally haven’t, but given the number of dumpsters that I’ve seen appear immediately following the “sold” signs, I’d be willing to bet that there has been a whole lot of un-permitted work done. Un-permitted = uninspected.
Part of my weekly summary that I wrote to my boss last week:
I scanned Bloomberg for downgrades in the mortgage credit market and discovered that for the one week from May 24 to May 30, there were 347 mortgage credit related products that were downgraded or for review of a downgrade. In the past month there have been 1,062 of these synthetic credits that have either been downgraded or under review for a downgrade.. And some of them were quite spectacular. For example, CDC Mortgage Capital had a tranche from a 2003 CDO rated BBB- by Standard & Poor’s as recently as last April. That CDO is now in default. This is from a group of mortgages aggregated in 2003, before the large runup in home prices.
Or how about TMTS, which issued a brand new CDO just last August? One of the tranches was rated BB+, yet in 9 months, that paper is also in default. In fact, 49 CDO’s fell into default in the past month according to S&P.
But it shouldn’t be a problem as these products have oversight, correct? Wrong. These products are not registered and not regulated by either the Federal Deposit Insurance Corporation or by the Office of the Comptroller of the Currency. There is no regulation, and no published prices. Thus, a piece of CDO paper that was rated BBB when you bought it and has now been downgraded to CC for example, will most likely still be priced at “par” with your local broker or with whomever you purchased it. Only if you try to sell it before maturity do you realize that the value has dropped precipitously and in fact, in many cases there are no bids and no liquidity in the product at all.
While many take solace in the ratings on the CDO’s by the ratings agencies, this too is not to be trusted. While many claim that Moody’s, S&P, and Fitch provide “oversight” on these products, the rating agencies vehemently deny it. They claim not to provide oversight and that they only review the products, make comments, and give a grade.
But the biggest problem is the massive conflict of interest that the ratings agencies suffer. Not only do the ratings agencies get paid to review the CDO’s, according to the Bloomberg article, they get paid 3 times as much as they do for rating traditional corporate bonds. And rating these products accounts for more than 40% of the ratings’ companies revenue, and probably an even larger amount of their profits. Is it no wonder that these stocks have double and tripled in the past 2-3 years? Yet, these rating agencies are reviewing the vibrancy due to the “model” and basically marking to model.
The problem is with the inputs. When housing prices were rising, defaults on mortgages were quite low, as even if you couldn’t service your debt, you could always sell the house, pay off the mortgage and walk away with a bit of pocket money. Thus, the models with which the rating agencies rate these CDO’s assume very low default rates on the underlying mortages. And as I’ve stated here many times before, home prices are headed lower, supply has screamed to the upside putting more pressure on prices, and many homeowners in the past 2 years have put little money down, no money down, built no equity via interest-only mortgaegs, taken out second liens, and made Home Equity Loans against the assumed increasing value of their homes. So the model no longer works because the inputs have changed. Garbage in, garbage out.
No wonder the mortgage brokers who used to send me postcards trying to buy my 9%-10% notes always wanted to get them for 60c on the dollar. (I never sold any. As of today, the only deterioration in these notes is that two long-time clients who usually pay promptly are about a week late–still in the “grace” period.)
A week late..that’s it…send Vinny and Tony over to straighten them out.
Speaking of late payments. I had twice as many late payments this month from my tenants as I normally see. The ground level observation is that the economy may be starting to tighten up. Two guys work for a franchised restaurant chain and they saw their paychecks bounce for the second consecutive time last week. Hmmm.
You HAVE TO let the public and the labor board know about this.
Messin’ with someone paycheck is really the worst thing you can do….and 2 bounced checks means NO more excuses and some serious publicity….
Just think how many of those workers might have bounced their rent or mortgage or car payment..
=========================
Two guys work for a franchised restaurant chain and they saw their paychecks bounce for the second consecutive time last week. Hmmm.
“Speaking of late payments. I had twice as many late payments this month from my tenants as I normally see”
this jingle, is the starting point for the consumers of rentals. i see it getting worse.
Pen,
So funny that you should use the names “Vinny and Tony”. The most unsatisfactory borrowers I ever had were Vicky and Tony. A pair of drunks, and one of them went to jail for DUI just a month after signing my note. They sort of caught up after the sentence was up, but then they started drinking again, had to depart because they couldn’t even pay the electric bill (in Maricopa Cty in July), etc etc. It would’ve been good to have someone who would
“straighten them out” - my lawyer with the big words was useless, because they really didn’t have the $$$.
G’morning,
Is it true that a CDO rated BBB- is not the same quality as a BBB- corporate? I read recently (maybe Bloomberg magazine) that the same quality rating on different types of securities, doesn’t necessarily indicate the same level of risk. I’m am not sure that I completely understood this correctly or not. Do you know whether or not that interpretation was correct? Thanks.
Facinating information. The lending markets are tightening up these days and rates are rising. A home loan rate is .5% higher than a month ago.
The Italians and Gemans are very angry about this situation. They were lecturing the American delegation at the G-8 summit about the poor job done by Moodys, S&P and Fitch’s. They say the U.S. needs more competition in the ratings business.
I smell massive lawsuits on the way. I have predicted for a long time that the Legal Phase would lock this thing up. I am standing by that prediction.
I have always felt the ratings would be challenged .It was clear that when the real estate market was going up the defaults were low, but can you base loan paper risk on real estate going up ? The basic quality of alot of this sub-prime loan paper was junk in terms of long term stability . Investors use to invest in loans for their long term stability .Zero down loans are the highest risk you can have on a loan ,especially when you don’t have PMI insurance or impounds for taxes and insurance . What a joke .
Models always work great in the trend and break down at the turns.
I guess there is a great opportunity for anyone smart enough to figure out how to model the turns, then?
Why would anyone use them when they can use someone who says that it is OK to accept all these new commissions?
What kind of work do you do? Sounds interesting.
Would it be appropriate to briefly summarize the message of your post, “Subprime is contained?”
subprime is contained just to the overall housing market…until it isn’t.
LOL…. Priceless!
I know this has been discussed here before, but I’m interested in an update on your thoughts, so here goes…
Given the most current market conditions, interest rates, etc., how would you identify a buying opportunity if you were in the market now and not waiting for another year or two?
How long do you plan on owning the property and how much income are you willing to sell short for?
I would be planning to stay in it for many, many years…not less than 10 yrs, most likely 15+, possibly 20+, but it’s really tough to plan (imagine) that far out
33% down on a well built newer/new home, 30% of gross (PITI), 30 yr fixed (aggressive prepayment planned, 15 yr payoff) - two years total living expenses in reserves, (mtge, taxes, ins, util, phone, cable, food, etc.)
zero other debt, strong saver, etc.
I’m thinking 2001 - 2002 price point out to be about right, here in MA (Hey..hd74)
Right. My criteria is this: I will not settle for a starter home. It’s not custom to my taste. I want my dream home, Like Pen said, something I would live in 15 years or more. At the same time, It won’t cost more than 1/6 of my net worth. If nothing fits that criteria I will continue renting.
You have to kiss a lot of frogs. Immerse yourself in the market and look at a lot of homes until you know what a good deal is. Then you have to find it. Use the web. Use the listing systems to sort by price and look at the lowest priced deals in your target size and area. Lowball, and be very patient. I put solid offers in on three houses a month ago. None of my offers were accepted. One house suppposedly sold for $15k over my offer. It came back on the market yesterday. The best time to by is between Thanksgiving and the Super Bowl. You will save 10% right there.
Doing exactly that and more…
the hard part is assessing what is truly a “good deal”…so I’m thinking, if it’s good for me and the numbers are in budget, then that might be the best way to figure the time is right..
As much as I would like to be able, I think spotting the bottom is impossible…
Spotting the bottom in housing is easy. It is a long low wide trough. Have no fear about the market turning and leaving you behind. Look how long it took to crater. It should have peaked in 2003-2004, but ran on momentum or another 18-24 months. The bottom will be very evident and we have not gotten close to reaching it. Even if we hit the bottom and it goes up 5% the next year, you will be better off then, versus buying today (except on selected deals in isolated situations).
If I were in the market right now I would have other worries, like the fact I had just been anally probed by aliens from outer space. That is about the only possible explanation why I would get into this market at the beginning of what will be known as “The Great Real Estate Crash”.
funny..
Here’s what I’m thinking, I don’t see a 50% price cut on the sort of property that I’d be looking at. What I’d be considering is currently about 15% off from the high of two years ago or so. I’m hoping to target somewhere around 30% off the the high. Of course, as rates continue to climb, I’d adjust that 30%.
I just can’t see a 2,800 sq ft 4 bed, 2.5 ba, 2 car garage colonial, on an .5 - 1 acre selling for $350k (as much as I wish it would). I’m thinking $500k - $600k, down from the mid/high $700ks.
Location?
in between the burbs and ex-burbs, north of Boston,
Do the calculation as bottoms-up, rather than top down. So the question to ask is: How much did it cost to build a 2800 sq ft house?
That’s why they used to sell for 300-400 K .
somewhat true, but that was more than a five years ago and even without the bubble, there would still be some price inflation, wage inflation, subdivision engineering, permitting, “cultured stone”, etc., etc.
The days of building a quality house at $50, $75 a square are gone. I think it would be tough to do even $100 - $125. I’m taking about solid wood floors, hot water baseboard heating, central a/c, plywood sheathing, tile, high quality windows, wood siding/trim, skim coat plaster, real stone/brick, etc.
I’m not tallking about a stucco over cardboard box with some cheap heating and laminate flooring, snap together cabinets, hollows doors, finger jointed millwork, painted drywall, etc. national builder built piece-o-crap.
You will be able to buy below replacement cost by 2009-2010. It happened in 1994, which was 4 years after the 1990 peak, in California. This time it will be worse in many ways. The public HB’s are continuing to build, because they can still make money. They have written down the land, so every sale will release “profitable” deals. Inventory is still building and the market is in the tank. That did not happen in the early 1990s. Only a few publics existed then, like U.S. Home, which ultimately went into bankruptcy.
Jingle’s right!
Cost doesn’t matter, supply and demand does. If the builder or homeowner can’t sell it, the foreclosing bank will.
Ah, but do you see 20% off now and anything between zero appreciation and 3% a year depreciation for 10 more years? If not, then someone may have been slipping you tainted Kool Aid.
Pen: Take a hard look at the historical price trends (last sales) and the price / rent ratio. If you see the identical trends like me where prices have doubled over a 5 year period for a SFH in the northern burbs of Chicago. AND is now down 30%, sales off 40%+ (YOY) OMG !!! be careful! I would like to move closer to the city, but what takes the wind away is the last sale info shows the joker is demanding 2x his cost for a smaller home. Best bet stay away from areas with high appreciation, high inventories, extended time to sell. Maybe find a place on the verge of foreclosure or a REO home in a stable well established neighborhood Also, get a good lawyer to assist
Pen, I see plenty of 3BR apts for rent in that area for $1500-$2000, which suggests to me you could rent the type of house you want for under $3000, so why pay $500K-$600K to buy it?
You are where Nasdaq was in 2000. Like Y2K and IT infrastructure and tech spending, recent years has been a huge misallocation of capital towards Property speculation. Removal of subprime has literally decimated the demand side by taking out at least 10% of buyers. Property is declining in prices and still not selling. Phase 2 will be alt-a lenders.
If you want an opportunity, buy now. It will be an opportunity to make a mistake that you’ll learn something about patience.
Be a proud renter: Say it loud and say it proud: I am a rent boy
Nobody knows when this thing will stop. You will be on the train that is picking up speed in reverse. It will result in a wreck but I can’t tell you when.
Relax. Hold on to your powder. If you are itching to profit from this, look into buying put options on the multiple companies impacted by this. (House builders, financeers, furniture retailers, foo foo shops like Bed bath and beyond..)
State foreclosures increase in May
The latest of those statistics indicates that foreclosure filings in Wisconsin have risen 21% so far this year over last year, to 7,697, according to ForeclosuresWI.com.
http://www.jsonline.com/story/index.aspx?id=617133
‘Molenda, who has owned her south-suburban Milwaukee duplex for 18 years, cited a series of unpleasant events for her dilemma, including a failed attempt at small-business ownership. Meanwhile, her 4% adjustable-rate mortgage reset to a 6% interest rate, raising her monthly mortgage payment $100.’
So how much money did she liberate from her home? Where did it go? Once again, the reporter drops the ball. This FB dug her own grave..no sympathy.
No kidding. What is she doing with an ARM, let alone one that is adjusting from a teaser rate, if she has owned the house for 18 years?
Moreover, if she really wanted to catch up on the payments, surely she could find a few thousand dollars worth of junk that she can sell. Worse comes to worst, sell the car and ride the bus for a while.
My wife and I went over to a friends house in SW MSP area last night. It is a newer middle class hood of about 100 houses or so that is part of a upper class golf community nearby. I think I remember that they paid in the low 300’s, perhaps upper 200’s back in 05 but I could be off to the low side.
Anyway, one of the dinner guests was a friend of their family and she casually mentioned that she was having a hard time selling her house and that they (husband and her) were having to pay 3 mortgages (original, new and bridge loan which is the expected down payment coming from the sale of the 1st house after paying off 1st mortgage). She went on to say that her realtor said that from the 1st of the year until present, only 7 houses sold in the 4 town area that she tracks. I believe the inventory was quoted at 700ish.
I kept my mouth shut since my views were well known by my friends but it was a struggle.
Oh, almost forgot, there was one new house being built (5 builders build in that development) within sight of my friends house. The lady with the house being sold also mentions that the house next to the one being built is in foreclosure as are several in the upper class hood golf community. She thinks that the banks are not being very aggressive in getting these on the market as she has seen several that are just sitting empty.
Sounds like there is a hidden inventory problem in this area as well. From the numbers above, I’d say this area has seized up. Going to be one hell of a drop in prices when the whole shebang lets go.
700 houses for sale. 7 sold in the first quarter. Hey, relax. The inventory will clear in……….25 years!
Nope, not 7 in the first quarter–I read that as 7 in the first 5 months of the year. That works out to clearing the inventory in 41 years! Ignoring the shadow inventory, of course.
What does MSP mean?
Minneapolis-St. Paul?
yes,sorry (MSP is the airport identifier, old habit)
I knew what you meant - I have the same old habit of using airport codes!
Wikipedia to the rescue ! Nice resource … free !
http://en.wikipedia.org/wiki/Main_Page
MSP can refer to:
* Microsoft Project, project management software program developed and sold by Microsoft
* Microsoft Installer Patch Files, files that are downoladed from updating applications installed with Microsoft Installer and have the .msp file extension
* Member of the Scottish Parliament, title given to any one of the 129 individuals elected to serve in the Scottish Parliament
* Minneapolis-St. Paul, the twin cities of Minneapolis and St. Paul and the surrounding area is the most highly populated area in Minnesota, USA
o Minneapolis-Saint Paul International Airport, IATA airport code
o Midway (Amtrak station), in St. Paul, Minnesota, United States
…
It’s getting fun in the SW MSP suburbs- my favorite Bubblelicious neighborhood is in Chanhassen- a 6 McMansion Subdivision next to HWY101- all built at the same time, all asking 850K+ and they have all been for sale for at least a year with no takers. Two of the homes have been shown as SOLD for at least 9 months, but they still have lock boxes on their front doors. (?) The homes really are the epitome of McMansion- 4000+ sq. feet on tiny little lots, right next to a busy highway. What does Neil say? Got popcorn?
The Chanhassen Dinner Theatre must be a huge draw to the developers. Minnesota is screwed. I would guess 20 - 30 percent drops in most areas.
I think more than that with a 25 year inventory!
I kept my mouth shut since my views were well known by my friends but it was a struggle.
Do they *really* know your views? I mean, like, did you offer to buy them a round???
p.s.: Sorry, auger, you’re never going to live this one down!
Refinancing just got a whole lot tougher in the space of just 3-4 weeks. I closed on a 6.25% 30 year fixed with 0 discounts on May 4. At that time the average 30 year rate on Yahoo finance was 5.82% now it is 6.29%. Wow what a move almost 50 basis points. I would bet that if I tried to get the same deal I got a month ago it would be 6.75% or almost $75 more per month based on the recent US average home price.
“almost $75 more per month based on the recent US average home price”
too bad this fictional average house doesn’t really exist..and if it does, it is nowhere near the average income…
Anyone work in retail and notice a cimb in declined credit cards? I run a website that does about 100 charges a day and I notice people are having to switch to a new card way more often than 1 year ago. Same level of sales we have. I noticed as I have to confirm this isn’t one person using a pile of stolen cards; but it is different people.
Now that people can’t use their 4 walls and roof as a credit card, they have to go back to that piece of plastic. I bet those pieces of plastic are stretched further than Paris Hilton at a Sturgiss Rally.
I think people are doing balance transfers to low-rate credit cards.
…as long as they keep making the payments in a timely manner. Late once and those cards will do them in.
Went to the barbershop yesterday and the barber was telling me that he now had three jobs to make ends meet and asked if I wanted to buy a van or a travel trailer. No RE problems up this way, this is quality living.
..two years ago, he was probably giving investing advice…
Funny…
What, are fewer people getting their hair cut? My guess is he’s been refinancing and HELOCing to support a lifestyle and now the well has run dry.
I might check this out…
http://www.jpking.com/index.asp?aid=2511&p=2511
Not to buy, just to gauge desperation. BTW, Sabal Point is a failed conversion. Check out the reviews from when it was apts.
“Ghetto living at it’s finest!”
http://www.apartmentratings.com/rate/FL-St-Petersburg-Sabal-Pointe.html
That is a terrible web site. It moves in slow motion. Most of us don’t have time to wait for 5 minutes of their premier logo download junk. Just give me a list of properties I can review. Later.
Grocery prices continue to rise. Everybody is starting to see it now, RE isn’t the topic because people up this way are still in denial but the hot topic is grocery prices. Yesterday I went to the grocery store for a bottle of pickles that normally sells for $1.49 to $1.89 and found them marked at $3.15. When I saw the price I blurted out loud $3.15 for a bottle of pickles, not on your life. The women shoppers in the aisle just looked at me in shock.
medium (9 ounce) bag of chips and two tomatoes = $4.75
so much for sandwiches….
Soon it will be more cost-efficient to eat dollar bills than it is to eat cold cuts.
They still have a solid role as one ply green, white and black pieces of toilet paper…
good fiber…
grow your own tomatoes
3 good ones will set you back 5-6 bucks easy. THAT sucks!
“When I saw the price I blurted out loud $3.15 for a bottle of pickles, not on your life. The women shoppers in the aisle just looked at me in shock.”
Careful there, Ron, or you will spark an inflation panic in the grocery store aisles.
Old Revolution: No taxation without representation
New Revolution: No overpriced pickles
Or a pickle bubble?
In seattle:
$3.99 for 1/2gal Silk Soy Milk ($2.49 in 2003, San diego)
$1.99 for apples, non organic (always remember .99c)
$4-5 Cereal
Where, oh where have the .99c big macs gone?
I never look at food prices when I buy groceries. Food is a need, a sports car and an ocean view house in northern California are wants. I don’t quibble over a $5.56 box of Total cereal.
Here in boom-town Edmonton (Alberta) inflation is rampant. Increasing home prices (50% YOY) and rents (10-20%). I had a similar moment when some medium size common cereal boxes were breaking the $10 mark for the first time. This is with a 94 cent Canadian dollar.
You can still get the super sized boxes of cereal at Sam’s for around $6. They might not have the brand you want, but they do have more than corn flakes and rice krispies.
buy malt-o-meal cereals in the bags. Same stuff, much less $$$ - per consumer reports magazine
When we moved to Toronto three years ago we were surprised by how much the prices were in comparison to California and upstate NY. Now last time we went to NY a month ago, prices are a lot closer to Toronto prices. I’m comparing US prices in US dollars and Canadian in Canadian dollars so it isn’t the US dollar’s fall that’s doing it.
celery- 2.50 a bunch!
Ft Lauderdale mentioned HBB-themed popcorn bags as novelty merchandise on yesterday’s Florida thread.
Hmmmmm, not a bad idea; just the thing to hold snacks at open houses.
Well, we have another awful idea brewing in the neighborhood. Check out districtny.com . That is on William Street and Fulton Street. This is located right at the Fulton Street subway stop. That is one scummy little area. They have 163 residences, beginning at $500,000. What a deal. I did notice that the units listed are listed for under $1,000 per square foot. It also lists that you get the 421G tax abatement. I guess that makes everything all right.
The website is great. It is so sexy. I rarely see people in that neighborhood that look like that but those are just details. The other monstrosity down the block at fiveninejohn.com looks to be dying. I have contacted them to verify if the project has been pulled. The Fulton Street station does not really jibe with a luxury lifestyle, except in the minds of some greedy developer.
NYCityBoy question for you. How much do you expect NY to drop. I had a job offer there. Did not take because of high rent. Did not want to commute from other boroughs. I found I would pay about $2K or $2.5K per month for a nice studio of Jr One bedroom. But I saw on Park Ave a really nice white glove (post war) 24 hr. doorman building apt for $350K asking. The maintenance was steep about $1100. It sat for a while. I figured if I could get for $300K put 20% or 30% down. With tax benefits, it would pencil out close to $2500 rental. Do you expect studios and one bedrooms around $300 to take a big hit?
Honestly, I didn’t know there were studios or one bedrooms in Manhattan for $300k. I have never seen that. Last week we stopped to look at listings at a real estate office near the Natural History Museum. I was surprised to see some listings at $429,000 and $449,000. Look at the website at districtny.com that I put up there. A 2nd floor loft with awful layout is asking $540,000. That is facing Fulton Street which is very noisy.
New York is a wildcard. It is going to take a pretty big recession to really knock it down. I think we will have that recession, right as a lot of this inventory comes online. I still see a 30 - 40 percent hit for a lot of stuff here. My apartment is $2,600 + for rent. It would sell for at least $700,000 (or ask that). Obviously rents are nowhere near owning. And I think rents are being held up artificially high by the Bank of Mommy and Daddy. Once their houses in Long Island, Jersey, Westchester, etc take a hit, it will ripple throughout the market and they won’t be so eager to fork over the dough for their snotty little brats to live in the Big Apple.
In summary, I would not buy in Manhattan for at least a few years, if ever. Oh yeah, what if another major act of war takes place here? What does that do to this real estate market? People don’t want to think about that. If I’m still alive, I can pack up and move to another city.
Thanks for feedback. As for $300 studios, I look at NY Time RE section. Most are not nice but the Park Ave $350 studio was beautiful. But did sit for a while. I think you’re right will take a maj. recession to dent the market there. Or major wall street / stock market slowdown. This week might have been beginning. Did not expect stock market correction until the fall.
I don’t understand why none you would consider sunnyside queens, i had a beautiful view of the WTC from my picture window…yes just 15 minutes to midtown…about 6 stops from Grand Central…
Good old rental stock, lots of 2 family homes, nothing fancy but then not overpriced. Plus lots of homes have parking/garages for 2 cars maybe you will get lucky and find a landlord who lets you park off the street.
OK OK its not Manhattan, i agree we lived on 61st and 1st ave for 5 years, and yes lots of things to do a 2 am…in that area. but when we moved here it was $300 a month less in rent, and i had parking for my car.
aNYCdj
Nothing wrong with housing stock or neighborhoods outside Manhattan, I just like to be able to walk to work. Have had it with commuting. Transit strikes, delays, bumper to bumber traffic. Like to be able to go home for lunch or go home for nice dinner take a 10 minute walk back to the office if there something I want to complete. It’s just my quirk that luxury is a five or ten minute commute on foot.
That $300 a month less in rent would more than get eaten up by having to have a car. My wife and I probably save $1,000 or more per month by not owning a car. Everybody talks about how great it is living in the boroughs and then I hear them complaining every time a snowflake is in the air. The subway gets screwed up with any hint of bad weather. I hate the 7 train with a passion.
Manhattan is Manhattan. It is a great place to live. I don’t mind paying the rent but there is no way I will pay twice as much to buy something here.
AHHHHHHHHHHHh but NYC boy, im still a DJ weddings so its not much of an expense for me. Plus its 10 years old, paid for,and i have safe drivers. So all in all its a nice thing to have.
It was a hassle to get the car at my parents house in Norwalk CT, even though i could walk from the south norwalk train station………Also Since it was a tax write off i didn’t mind paying $250+ to park the car around the block in a garage for one month for my December Holiday parties, Then on New Years day drive it back to CT and let it sit for months.
Now you all ask why i don’t move elsewhere to find a decent a job during the week, well the GF is a NYC girl, never drove in her life. Major life change and added expenses there.
Financial engineers joining MBAs as Wall St. stars
Fri Jun 8, 2007 11:11AM EDT
http://www.reuters.com/article/reutersEdge/idUSN0820956720070608?&src=060807_1544_FEATURES_future_of_trading
—————–
Financial engineering programs didn’t exist in the mid-1990s, but now they graduate an estimated 500 students in the United States every year, and one expert sees the number of programs growing by some 30 to 50 percent over the next five years.
The programs are meeting demand from banks and hedge funds that need thousands of quantitative experts for their trading desks as financial markets have grown more complex and trading strategies more abstruse.
Algorithmic trading, or trading based on complex formulas executed by computer programs, accounts for about a third of U.S. equity trading volume, a percentage that is growing rapidly. The London Stock Exchange estimates that around 40 percent of its trading is algorithmic.
I bet most of us concluded housing investment after 2004 was idiotic, without any help at all from complex algorithms.
It is going to be great fun to watch a bot-driven market crash. It is not a question of whether, but when.
Wasn’t what was then quaintly called “program trading” the oft-mentioned scapegoat for the 1987 crash?
Bot trading with extreme leverage!
Randy Newman
——————-
The great bankers of Wall Street
They gathered on the shore
They conquered what was behind them
And now they wanted more
So they looked to the mighty ocean
And leveraged the mortgage sea
Great bankers of Wall Street
In the 21st century
America’s finest city
To San Diego first they came
They let loose the subprime juice
And prices went insane
There were natives there called Savers
Middle class by the score
Flipped with ease by ARMs and YSPs
Soon there weren’t anymore
Hide your wives and daughters
Hide your groceries too
Great bankers of Wall Street coming through!
Some anecdotal information. I watched the shuttle launch at Jolly
Gator Fish Camp last nite with a good friend. He owns a boat dealership here in central Fl. He said this time last year he was starving for inventory…This year he can cherry pick from a ton of boats and he is getting phenominal deals…He also said business is great too…Lots of buyers…This kind of shows that the high end still has money and is not affected by the housing crash, but the low and medium are.
Give it a few more months, and the high end of the boat market will get sucked into the vortex of the maelstrom. I can tell we are near a boat bubble top when the WSJ is running articles with titles like “Flip that Yacht.”
——————————————————————————
THE WEALTH REPORT
By ROBERT FRANK
Flip That Yacht
Rich Buyers Sell Unfinished Boats, Reaping Millions in Profits
Terry Taylor, a Florida car dealer, has purchased five yachts since 2001. But don’t expect to see him anchoring off the coast of Cannes this week. Mr. Taylor is boatless, having sold all of his yachts to other buyers for huge profits.
“I wouldn’t feel too bad for Terry,” jokes Felix Sabates, a partner in Trinity Yachts of Gulfport, Miss., which built Mr. Taylor’s boats. “He’s probably made more money off those boats than we did.”
Mr. Taylor is part of a new breed of wealthy boat buyers: yacht flippers, who sell their costly purchases often without taking them on a single cruise.
http://online.wsj.com/public/article/SB118004846052414031-LWTe6TrhDhTxm72ZZYmfaiwOMi4_20070624.html
The uber rich will learn soon to hide their wealth away…
Buying 69 foot boats is not a good way to go about doing it.
The perfect storm has moved to within view of the shoreline, as reported in so many words in the front page right column lead article in today’s WSJ:
Economists See Housing Slump Enduring Longer
By James R. Hagerty, Jonathan Karp and Mark Whitehouse
Word Count: 1,613 | Companies Featured in This Article: J.P. Morgan Chase
Economists are giving up on the idea that the U.S. housing slump will be quick and relatively painless.
Instead, more are concluding, the downturn that began nearly two years ago will last at least through the end of 2007, remaining a major drag on the U.S. economy. The culprits: a glut of homes for sale and growing caution among lenders who now regret being so free with their mortgages during the boom.
Most forecasters still expect the economy to regain some momentum this year after a slow first quarter. Recent data have shown manufacturing, business investment and trade on track to help offset the negative effects of falling home values on consumer spending. Even so, some economists expect economic growth this year to remain tepid, largely because of the weak housing market.
This worry coincides with a surge of inflation anxiety that has roiled stock and bond markets in recent days. Yields on 10-year Treasury bonds, which influence the cost of various forms of borrowing throughout the economy, have risen above the psychologically important 5% level to the highest point in nearly 11 months. That in turn has led to a big drop in stock prices: Both the DJIA and the S&P 500 fell nearly 2% for the week after hitting all-time highs early on.
The rise in interest rates is only adding to the gloom. The average rate for 30-year fixed-rate mortgages stood at about 6.65% Friday, up from 6.35% in early May, according to HSH Associates, a financial-publishing firm in Pompton Plains, N.J. Though that rate remains far below the average 8.2% of the 1990s, the recent jump makes it harder for many Americans to afford new homes. “That’s putting more pressure on housing and delays its ultimate recovery,” says Andrew Tilton, a senior economist at Goldman Sachs in New York.
Federal Reserve Chairman Ben Bernanke acknowledged in a speech Tuesday that the housing market remains weak, and warned that residential construction “will likely remain subdued for a time, until further progress can be made in working down the backlog of unsold new homes.”
http://online.wsj.com/article/SB118136019056730007.html?mod=home_whats_news_us
I believe there is a great deal of confusion in the financial press surrounding the issue of absorbing that glut of homes against a backdrop of rising interest rates. (Chairman Bernanke contributes to the confusion by occasionally making remarks to suggest that absorbing of the glut will somehow happen automatically.)
For example, consider this passage from the article quoted above:.
“The average rate for 30-year fixed-rate mortgages stood at about 6.65% Friday, up from 6.35% in early May, according to HSH Associates, a financial-publishing firm in Pompton Plains, N.J. Though that rate remains far below the average 8.2% of the 1990s, the recent jump makes it harder for many Americans to afford new homes.”
Suppose, for illustration, that you could have bought a comparable new home to one that now sells for $1.5 million for a price tag of $300,000 back in 1990. (The difference in prices is not due to inflation, because home prices don’t inflate — they appreciate.) What would be your annual interest carrying cost on the full price tag then and now?
– 8.2% of $300,000 = $24,600
– 6.65% of $1.5m = $99,750
And then there is also the issue that home prices were fairly stable back in the early 1990s. Those who probe the bowels of the SD Union-Tribune business section recently learned that the S&P 500/Case-Shiller index dropped by 6% between Q1.2006 and Q1.2007, which would add a capital loss of $90,000 on to the interest rate carrying cost on that $1.5m McMansion.
Just in case anyone is interested in buying a beautiful new $1.5m home, this is the place to find them:
http://www.laingluxury.com/index.asp?utm_campaign=print&utm_medium=redirect&utm_source=sdut
Another useful illustration: What effect does a 30 bps increase in mortgage interest rates have on the interest carrying costs on a new mid-tier SD home priced at $1.5m?
0.30% of $1.5m = $4500.
That is the amount by which annual carrying costs went up over a couple of days’ time last week. Try not to catch yerself a falling knife, investers.
Shoppers for Mortgages Say ‘Ouch!’
By Michael Hudson and Jeff D. Opdyke
Word Count: 810
The drop in U.S. government bond prices this past week is expected to cause pain for some homeowners and mortgage shoppers, and bring fresh opportunities to income investors.
The yield on the 10-year Treasury note, which moves in the opposite direction to the price, jumped above the psychologically significant 5% threshold, ending Friday at 5.119%, up from 4.955% a week earlier. The 10-year’s yield is now at its highest level since July 2006.
If yields continue to rise, investors in long-term bonds could see real losses if they sell, something bondholders haven’t felt in more than a decade.
http://online.wsj.com/article/SB118134454675329632.html?mod=home_whats_news_us
The WSJ article sums up a lot of the points posted here like, but is still too optimistic IMHO
1) Downturn will be longer than the widely quoted 2 years time frame and likely extend through 2008.
NO ! try 10 years & 30 - 50 % down in kited areas (CA, Florida, Nevada …) Only when prices are locally affordable will be NEAR a bottom.
2) Economic spillover: Oh, this will shave .2 % off the GDP next year ?
More like 1%, ask Wally Mart, BB&B, HD, lumber, cement, lenders, RE brokers.
3) Recession ??? if price decline 30%+ more like DEPRESSION. Anyone who bought after ‘04 even with 20% down will be “priced in forever”
4) Economists at Merrill Lynch admit it is hard to predict how the slump will play out from here. “We are not sure how deflating a $23 trillion asset class — the value of real-estate assets on the household balance sheet — will end, but we doubt that it will end well,” Merrill economists wrote in their recent report.
OH we can predict better than YOU no more home ATM = spending COLLAPSE.
5) AND you forgot to mention the NAR cheerleading that whipped buying and brought “investors” into the cesspool “Buy now ! or be priced out forever” / “They are not making land anymore”
“1) Downturn will be longer than the widely quoted 2 years time frame and likely extend through 2008.”
I am coming to growing awareness that most financial journalists either don’t have ‘the vision thing’ or else choose not to exercise it. This is understandable — who wants to be the publicly visible messenger who gets killed?
Real Estate Sky Won’t Fall: Here’s Why
Jun 07, 2007, 12:03 pm PDT
Real estate hasn’t made much of a case for itself lately and it’s not getting much help from any of the sub industries, such as builders and mortgage makers. Just in the past few weeks, so called experts from the mortgage industry, the building industry, and the resale real estate industry have all been quoted as saying that the sky is falling.
Nice job guys!
And while real estate’s reputation as the number one investment is on the ropes, the general media and other investment categories have stepped up their attacks on real estate value.
————————————————————————–
Yahoo had this article from Realty Times on its main screen yesterday evening. Here is the Link: http://realestate.yahoo.com/Real_estate_news/story?s=rytimes/item-4bcc1fc619fd6bf106034420ddf198de.html
It is worth a good laugh, no word if the guy also writes for HIGH TIMES as well. This guy would be a good politician.
“Just in the past few weeks, so called experts from the mortgage industry, the building industry, and the resale real estate industry have all been quoted as saying that the sky is falling.”
I believe the bond market sent the loudest message of all:
http://tinyurl.com/37fl3y
And the Fed has sent a loud message, too; despite their discomfort with current inflationary pressures, they are in no hurry to tighten, according to marketwatch.com . I guess they prefer to let long-term Treasury bond investors do the heavy lifting?
This is probably not a bad idea, as long as the inflation risk premium is not artificially suppressed. On the other hand, if ’some entity’ artificially suppressed the l-t Treasury yield (say by aiming the liquidity fan at the long-term end of the duration spectrum in the bond purchase market), this could constitute a spiking of the punchbowl which would encourage investers to buy more (unneeded) $1m+ homes and builders to build more $1m+ homes into an increasingly-obvious real estate glut. That would stand “The Wisdom of Crowds” on its proverbial head
( http://en.wikipedia.org/wiki/The_Wisdom_of_Crowds ). It is about time for the invisible hand to have its say again in the U.S. asset markets, IMO.
“June 9, 2007 11:34 A.M.ET
BULLETIN
Fed in no hurry to hike again
The Federal Reserve is uncomfortable about inflation, but unlikely to act anytime soon.”
http://www.marketwatch.com/
If he were a politician he certainly wouldn’t get my vote! He doesn’t even make an effort to back up his lies with factoids.
Some finger pointers have taken the gloves off. This creates a new conundrum for Chairman Bernanke, who rode into his position on AG’s coattails when it was all good. Will Bernanke feel compelled to address this critique, or will he choose to play mum?
Did Greenspan Add to Subprime Woes?
Gramlich Says Ex-Colleague Blocked Crackdown
On Predatory Lenders Despite Growing Concerns
By GREG IP
Alan Greenspan was arguably the country’s most powerful financial cop in his 18 years as chairman of the Federal Reserve. But Mr. Greenspan’s regulatory record has received far less scrutiny than his management of the economy.
That may be changing. A former colleague says Mr. Greenspan blocked a proposal to increase scrutiny of subprime lenders under the Fed’s broad authority. That added scrutiny might have helped curtail questionable lending practices now blamed for soaring defaults by mostly low-income borrowers. Democrats in Congress are now turning up the heat on regulators, especially the Fed, for failing to do more to stamp out those practices, and the Fed appears increasingly likely to overhaul its approach.
Edward Gramlich, who was Fed governor from 1997 to 2005, said he proposed to Mr. Greenspan in or around 2000, when predatory lending was a growing concern, that the Fed use its discretionary authority to send examiners into the offices of consumer-finance lenders that were units of Fed-regulated bank holding companies.
http://online.wsj.com/article/SB118134111823129555.html?mod=home_whats_news_us
It’s Not Your Parents’ Mortgage Market Anymore
Author(s): Edward Gramlich
Posted to Web: April 06, 2007
Permanent Link: http://www.urban.org/url.cfm?ID=901063
A mortgage executive in Washington gets busted for fraud.
http://seattletimes.nwsource.com/html/businesstechnology/2003740898_metmortgage09.html
Baby boomers retiring. There are 77 million Americans born between 1946-1964. One-third have zero retirement savings. The oldest are 61. The only cash they have is equity in a house, so they must sell.
Here’s a quote I found on the web. If it’s true, and really I think the number is higher than 1/3, anyone who thinks boomers are retiring to the south or anywhere better start looking for other buyers. I’d say half are going to be living on social security and working a part time job to make ends meet. I think way more than half have heloc’d their houses way beyond what they are worth. There won’t be any equity to cash out of them.
I think there is some truth to this. What’s going to make it worse is that in some industries once you reach age 45 it’s very hard too keep a job and almost impossible to get a new job. This is true in hi-tech for instance.
Huh. Guess I beat the odds. Made it to 60 in telecom biz. Then the meltdown hit (2001-02).
Glad I’m enjoying retirement now. Each week consists of six Saturdays and a Sunday.
congrats Bill
I think there’s a lot of truth to this. It’s not just that many folks in this age bracket have little saved, it’s that they’re in debt, big-time cc and HELOC debt.
Add in the many folks who delayed having children, and you have people in this age range paying for college, or at least part of it.
Unfortunately, this is the age where health problems can start to kick in…and you have lots of folks with inadequate or no health benefits.
Ozarkian,
I’m 48 and when I was 40 I used to have that fear about age discrimination. Yet my career went high octane after turning 41 and becoming a traveling consultant. I am more flexible than many people half my age because I do not have a wife / kids / house keeping me in one place. I get calls from headhunters all the time on engineering contracts. On my current gig I keep getting extended. I’ve been working that one since March of ‘03 and I’m good through the end of December.
I must admit I will be relaxed when I get to the point where my stock dividends and government securities combined yield at least $50,000 annual, and that’s outside my tax deferred investments, which are alll in aggressive growth stocks. At that time I would still be a traveling engineering consultant but occasionally take 3 month vacation gigs in exotic locales.
As for my age group, I agree a lot of them will have to postpone retirement and take whatever jobs they can in the areas where they live. They are stuck and they stuck it to themselves. I’m okay on living a simple life if that is warranted. But I’m in far better shape than a lot of them. I just never got greedy.
The only cash they have is equity in a house, so they must sell.
Especially when they realize their retirement is quickly evaporating.
A lot of factors to keep people out of the home buying market. We way overbuilt for the population that’ll be buying houses.
“Big Spender” was just on A&E. The Spenders were advised to sell their house because they couldn’t afford it. They moved into a rental for a lot less. Ummm, a financial advisor advising to sell a house? What happened to the best investment you’ll ever make?
UPDATE: AIG’s Subprime Unit Offered Inappropriate Mortgages, U.S. Says
Dow Jones
June 08, 2007: 04:23 PM EST
SAN FRANCISCO (Dow Jones) — A subprime-mortgage unit of American International Group offered inappropriate loans to some borrowers and charged fees that were too high, the Office of Thrift Supervision said Friday.
Wilmington Finance Inc., a subsidiary of New York-based AIG (AIG) , provided extensive loan-origination services for AIG Federal Savings Bank from July 2003 to May 2006, but the bank failed to manage and control its activities in a safe and sound way and didn’t consider consumer-protection issues appropriately, the U.S. regulator explained.
Wilmington originated subprime home loans that were inappropriate for some borrowers, and the firm didn’t properly consider their ability to repay the debt. Some were adjustable-rate mortgages with low “teaser” rates and the OTS was concerned that once the rates reset, borrowers would be unable to afford the payments and could lose their homes to foreclosure, said Kevin Petrasic, an agency spokesman.
Other loans originated by Wilmington came with larger mortgage broker or lender fees, OTS said.
To fix the problems, AIG agreed to provide affordable loans to borrowers who were offered inappropriate mortgages. The giant insurer also agreed to reimburse borrowers who paid the large broker or lender fees when their mortgage was originated, the OTS said.
“Some loans were due to reset in some way, and our concern was that a lot of folks would not be able to pay the higher rate and would enter foreclosure,” Petrasic said.
http://money.cnn.com/news/newsfeeds/articles/djhighlights/200706081623DOWJONESDJONLINE000824.htm
“AIG’s Subprime Unit Offered Inappropriate Mortgages”
I am wondering if inappropriate mortgages are somewhat like inappropriate relationships, in that somebody takes it in the mouth?
Caveat emptor!
Wow, I could’ve had a prime mortgage
Why many borrowers who qualified for prime-rate loans wound up with subprimes instead.
Les Christie, CNNMoney.com staff writer
May 30 2007: 4:27 PM EDT
http://money.cnn.com/2007/05/29/real_estate/could_have_had_a_prime/index.htm
Ben Bernanke’s Post-Horse Barn Door-Locking Strategy for Real Estate
by Gary North
Ben Bernanke’s June 5, 2007 speech on the real estate market was an exercise in futility.
He did not refer to the obvious: his predecessor’s monetary policy, which created a real estate bubble. Instead, he promised new regulatory measures, which are in fact the old measures, which failed to prevent the bubble.
He admitted that the present economic slowdown was heavily dependent on the fall in the real estate market: about one percentage point.
http://www.lewrockwell.com/north/north535.html
How to Fix, Not Break Up, the Subprime Business
By Jack Guttentag
Saturday, June 9, 2007; Page F08
The federal government is under enormous pressure to do something about the subprime mortgage crisis. The proposals that have emerged appear to reflect concern for abused borrowers in or approaching foreclosure, a desire to punish those responsible for their plight, and the usual urge to score political points.
This is not likely to generate thoughtful reforms that look to long-term consequences. Doing nothing is also an option, and, in my opinion, a better one than most of the other proposals. Here are some principles that reform advocates should observe:
http://www.washingtonpost.com/wp-dyn/content/article/2007/06/08/AR2007060801289.html
It looks pretty broken up already from my vantage point…
——————————————————————————-
Imploded - Ailing - News - Forum - About
Since late 2006 82 major U.S. lenders have “imploded”
http://ml-implode.com/
Help is on the way! (Strike up the Lone Ranger theme song music…) Who was that masked man? And how is that balance sheet looking behind the mask?
Associated Press
Help for the Subprime Loan Market
Associated Press 06.07.07, 5:00 PM ET
Related Quotes
FNM 64.35 + 0.91
FRE 64.63 - 0.78
Fannie Mae and Freddie Mac are riding to the rescue of the subprime lending market.
The two large housing finance agencies are beefing up their business of guaranteeing subprime loans at a time when slack lending standards and falling home prices have translated into rising delinquencies and foreclosures among subprime borrowers.
Their involvement will provide alternatives for borrowers anxious to refinance out of existing mortgages that have or will reset to higher monthly payments.
Fannie Mae (nyse: FNM - news - people ) and Freddie Mac (nyse: FRE - news - people ) aren’t lenders themselves, but guarantee loans made by those who adhere to the agencies’ underwriting guidelines.
U.S. taxpayers are not an insurance company themselves, but they implicitly assume the risk of the toxic mortgage guarantees provided by Fannie Mae and Freddie Mac.
http://www.forbes.com/feeds/ap/2007/06/07/ap3800412.html
Money & Business
Lenders Crack Down After Subprime Collapse
By Alison Go
Posted 6/7/07
Since the beginning of the subprime mortgage industry meltdown early last year, the online Mortgage Lender Implode-O-Meter, run by Emory University librarian Aaron Krowne, has recorded 76 outfits that have “gone kaput.” (82 as of today, but who’s counting?
http://ml-implode.com/)
As for the lenders left behind, they have been causing headaches for borrowers and mortgage brokers alike.
Lending horror stories have filled online message boards: borrowers who were denied refinancing until they boosted their scores, or self-employed home-buyers put through rigorous underwriting and ultimately levied high interest rates. Most frustrating, perhaps, is that many of these people could have easily received loans and refinancing only months ago.
http://www.usnews.com/usnews/biztech/articles/070607/7subprime.htm
‘When the US Economy Quartette begins to play “Nearer my God to Thee,” expect the RE guys to talk louder and louder, and continue to do so until all you hear is “blub, blub, blub.”‘
I expect a citation for that one.
Oops — misfire; this was meant for the Itulip story linked in below. (I am flattered they picked up my Titanic reference in this great piece!)
Will the flying pigs fall back to earth along with the turkeys?
Turkeys fall back to earth
June 7, 2007 (iTulip)
Don’t forget, it started with real estate
An old expression reappeared during the 1990s stock market bubble to explain how Internet and telecommunications companies with no apparent prospects, and run by children, were able to go public and then see their stock prices shoot up: “If the wind blows hard enough, even turkeys fly.” A gale force wind of money has circulated the planet for the past few years, putting everything from large public companies to large empty office buildings to flight. As inflation increases globally, the Wall Street backed American Association for the Prevention of Cruelty to Flying Turkeys has been lobbying the Fed for if not a rate cut at least forbearance on hikes. But recently the bond market started telling the Fed that time is running out, and stock market investors are taking notice.
http://itulip.com/forums/showthread.php?t=1421
There are truly some spectacular housing bubble documentary videos out there in cyberspace at the moment. I am deeply impressed by the talent of some of the original artists who are telling the real story behind the scenes, through YouTube productions, beyond the reach of the MSM’s censors. Kudos!
Case in point:
“Our Economy Right Now” (set to music of Van Halen)
http://www.youtube.com/watch?v=-rLYph0J7vc
Here is another YouTube masterpiece. Watch Dumb and Dumber try their hardest to drown out the voice of reason:
http://www.youtube.com/watch?v=yoZV5jt9puc&mode=related&search=
Check out the C.A.R. ‘experts’ trying their best to bamboozle the sheeple…
http://www.youtube.com/watch?v=QQU3Q1t6rrE&mode=user&search=
Shout-out to the California AARP artist community for a GF:
http://tucson.craigslist.org/apa/349675821.html