Bits Bucket And Craigslist Finds For June 10, 2007
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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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In Today’s LATimes, from the WaPo:
Sales commissions inch upward
Agents’ compensation rates are on the rise, as the changing market makes selling homes more time-consuming.
“Hey! Now we really need 6%!”, they whine.
only an economic girlieman would use a realtor- sell yourself, 75+ IQ required
On the contrary, while I agree selling & the process of the RE transaction are easy, all the troll/gatekeepers of the REIC make FSBO a very challenging way to sell the home. They will do everything the can to tank your sale.
The only hope is that after this fiasco unwinds new market efficiencies will take hold & push out the inefficiency of reatlwhores.
Heck, some of them (in the article) are insisting on 7%!
The good news is that 7% of zero is still zero, the last time I checked.
I’m no big fan of real estate agents, but I have noticed that in my neighborhood I see a lot of “for-sale-by-owner” signs that either turn into realtor signs after 8 months or just vanish with no sale being made. I’ve also noticed that most people with “for-sale-by-owner” signs are usually setting the highest sales price in the neighborhood, which is probably why they are failing. Just an observation here in Columbus, OH.
George, we had this discussion about 2 months ago on a weekend. I stated, with no uncertainty, that I wouldn’t buy an FSBO. Those people think they can cut out the realtor and make a fortune. Here is my conclusion. Between the corruption of the realtors, and the stupidity of the FSBOs, it will be hard for me to ever want to buy again. A pox upon all of their houses.
You only need to buy a house once in your life anyway. Do it right the first time, pay it off and enjoy life. That’s my motto!
We were happy payers of 4.5% comish, to get our house gone in Aug 05′…
Looking at our house from the perspective of a realtor, all our abode was really about, was the $58,000 dangling in front of their eyes, and they took the bait, and got rid of our very unupdated 1966 tract home, in good speed.
aladinsane:
This is what a broker REALLY should be used for…to get rid of a old, un-updated or mediocre fixer upper type house, not one that will sell itself.
Exactly! That is when a realtor actually adds value to the process. If your house is the showpiece of the neighborhood then you probably don’t need a realtor.
The problem with being a FSBO, even if your house is the nicest one on the block, is that buyer’s agents aren’t going to show it. Realtors find FSBOs to be a PITA, so unless their client spots the house themselves, it’s probably not getting shown.
“That is when a realtor actually adds value to the process.”
I think the debate is out on this point. I confess to having sold through a realtor twice before, and under one-week’s time in each case. Whether we could have sold as fast on our own is a question I will ponder quickly if I am ever in the position to sell a home again.
With accurate information about recent comps, it would not appear to be very difficult to quickly unload at just under market value, as one could easily conduct a Dutch auction with a starting price just a little below the nearest comp (assuming one is not underwater, of course!). But I am not sure how easy it is to get the full set of comps (including recent auction sale price data). I will ask my appraiser friend the next time I see him…
i asked a question a few weeks ago but the blog was smudgy from overlapping:
we sold our california family ocean view home in 10/05, how much did our realtor make on commision? starting bids… 50k
winner gets nothing!
I have found that most FSBO’S are overpriced. I have seen this in 4 different markets around the country. When I was a realtor in Colorado I rarely charged 6%. At that time (late 90’s) houses sold themselves. My average time to contract was 22 days and I got 99.6% of list price. Many of these listings were at 4.8% and I still paid out 2.6% to the other realtor. I would like to see a total 2% commission to be split with each realtor. With the price of houses today 2% is a lot of money.
Enough to buy a house in Podunk without a mortage!
I used a realtor to sell in Ca because I had already moved to AZ. I emptied my Townhome and cleaned and painted everything. It was listed in April and sold in June 06. Escrow was 15 days. 5% commission. Inspector said my unit was one of the cleanest he had seen! Some of the others for sale were cramed with stuff and looked small and dirty. Cob webs , cigarette smoke, dust bunnies. Looked like the sellers figured they didn’t have to do anything. Ha.
very close
“I stated, with no uncertainty, that I wouldn’t buy an FSBO.”
The FSBO crowd needs to figure out a better way to deal with the “Market for Lemons” issue than the NAR’s membership has thus far. It should not be an insurmountable problem, given the competition’s reputation for lying every time their lips move.
http://en.wikipedia.org/wiki/The_Market_for_Lemons
“I have found that most FSBO’S are overpriced.”
This is another area where the FSBO web sites could potentially kick the NAR’s behind, by publicizing what comparable homes in an area are actually selling for, instead of keeping the data under lock and key.
This is a story printed in a trade journal of the real estate sales industry. Then the article is tarted up and pimped to mainstream media for replay.
This is from an industry that admittedly spends tens of millions of dollars on promoting housing sales.
Now that sales are in the toilet, they are trying to somehow prop of their income levels by attempting to justify an even higher commission. In such priming pieces they hope to create a groundswell.
But their payment has never been based on how hard or easy they work, but on whether they sell the place. Who cares how hard they have to work, they have already signed up and committed to selling your place.
So now that they are increasingly unable to sell it in a reasonable amount of time, we are led to believe that through this failure they have actually earned the right to demand more.
Real estate agents are capitalists my friend, they will charge what the market will bear. Quite frankly, if you can bring a buyer to some Las Vegas stucco palace on a 105 degree day when the for sale inventory exceeds the population of Scottsdale, you probably deserve 15% commission. Show me the buyers, baby!
and a 20% commission when its 117 degrees in the shade
117 in the shade? I would be thousands of miles away. I cannot imagine their electricity bills.
For over 2 years I’ve been here now, I have been beating the drum that Dallas is as overvalued, as bubbly and as unaffordable as any high profile bubble area. People have argued with me. Most of the ones who argue are people from higher cost areas like the East and West coasts to whom Dallas house prices look “cheap.” I charge that people who say that are either dilettantes or local ringers who would like to use this high profile blog to encourage the stupid from the higher priced areas to come to Dallas and “invest” (at a significant premium to historical prices). I’ve seen Dallas, Houston, Austin and San Antonio hyped for well over a year now and every time I see it, it makes me sick.
In that vein, I offer the following from today’s Morning Snooze. I can only guess that the real estate editor of the paper was out drinking when this got through and made its way into print. I’m sure the local developers and realtors are not happy with this:
http://www.dallasnews.com/sharedcontent/dws/dn/latestnews/stories/061007dnentapt_overview.2e85b2c8.html
Highlights of this article (my comments in parens)
In 2005, 42 percent of the city’s households were “cost-burdened,” paying more than 30 percent of their gross income on rent or mortgage expenses. That was up from a third of households in 2002, according to an analysis by the research arm of Dallas’ Foundation for Community Empowerment.
The lack of affordable housing is not just affecting the very poor. It is also having an impact on middle-income households – those making between $53,000 and $80,000 annually in the Dallas area.
“Firefighters, nurses, police officers, teachers, health care workers and other middle-income earners are increasingly finding it difficult to live in the communities where they work,” said a Federal Reserve Bank of Dallas report.
Patricia Saldaña, a registered nurse at Baylor University Medical Center at Dallas, would be priced out of her neighborhood near Belmont and North Henderson avenues in East Dallas if she were looking to buy there today. More and more, the small homes are being torn down and replaced with larger homes priced in the $300,000 to $400,000 range.
Patricia Saldaña, with son Kenji, bought her East Dallas home a decade ago for $50,000. But the registered nurse says she’d be priced out if she were looking to buy there today. She bought her home 10 years ago for about $50,000. Now it’s valued well over $200,000. “I couldn’t afford it today,” (Wait - that’s a 400% increase in ten years in a truly cruddy, blighted inner city area but I thought there was no bubble in Dallas!)
Since the late ’90s, more than 1,500 Dallas homes have been torn down and replaced, including many in East and North Dallas, according to city records. Whole blocks in East Dallas have been leveled – with affordable homes and apartments replaced by upscale townhomes and so-called “McMansions.” (and many of these houses are just high priced slapped together, stock plan eyesores. They have totally screwed up long standing historical pricing in some older, very stable neighborhoods).
Part of the problem is that incomes are not keeping up with home values. Between 1990 and 2005, median home values in Dallas rose 55 percent, but the median household income increased just 32 percent. (Dallas is not a well paying city unless you’re a real estate developer, banker, Highland Park realtor, plastic surgeon or graduated from a top 10 law school in the top 10 percent of your class).
I have been involved indirectly in the Timbercreek project that is written about in this story. As is always the case in Dallas, ordinary people are powerless against the likes of Trammel Crow Co. I’ve seen some correspondence from them in this dispute that would make you puke all over your keyboards.
I’m sure at least someone from California, perhaps that nice gentleman from San Diego who is now a mortgage underwriter here, or maybe Vosilla who I argued with for a solid year about this will jump in to tell me how wrong I am and that DFW is an undiscovered affordable jewel just waiting for their smart money to come in and fleece the local rubes. I would say they are the rubes and “investing” in this area right now would be about the same as going to the 10th floor of a building, throwing your money out the window, and betting you can get down to the street to catch it before the people on the street get it first.
Thank you. Rant over.
Amen sister. Raised in Fort Worth, lived 25 years in Houston, now divide my time between Houston and Hawaii, and no re worth having cash flows here now. I find Houston to be about a year behind Seattle.
EastHawaii
I know Seattle, I have visited Seattle, I have lived in Seattle and Houston is no Seattle and will never ever be comparable to the GREAT city in the Pacific Northwest!
Hehe. Fast times in Dallas… Are the rubes still coming to the slaughter?
I had trouble sleeping last night, so I ended up in schadenfreude mode, watching a flipper show. A family of clowns in San Antonio was profiled, an actual family company built around the business of flipping property. They buy, sight unseen, an ugly old clapboard shack on a busy street and try to fix it for a flip. Turns out the previous owner was smart to walk away and let it go to tax foreclosure, it was a rotten hell-hole. They called it the “Roach House”. The fixup’s not going well, so one of the founders takes his family on vacation and dumps the problem on his brother. They end up going way over budget, but sell at a profit the first day on the market. Although the place ended up looking OK, they didn’t fix anything they didn’t absolutely have to, so whoever bought it is going to have quite a few nasty surprises before long. This was characterized as a success.
One of the most disgusting of these shows I have ever seen. Slimy flippers, even screwing each other as they conspire to screw the eventual buyer, and tried to pull it off without a permit even, while they tried to screw the construction crew on the repair bid.
The funny part was watching several of them run outside and hurl as they tore out some of the worst parts of the rot… even the roaches were gagging and fleeing…
I believe that is the Montelongo Family. The dominant brother is the stereotypical real estate guy. I wouldn’t buy a book of matches from that shyster. The girls use their funbags to try to get what they need. They are an American success story.
You clearly have a better memory for names than I - yes, it was the Montelongos. The only one in the bunch that wasn’t completely disgusting was the brother who actually got the work done. The “dominant” brother was a complete scumbag. The women were cynical Realtwhore types. That show should serve as a warning to anyone who sees a property for sale with the Montelongo name on the sign.
Was this the show where they bought a massive new hq building? Wow - wonder which bank loaned them the $s
They’re the ones who spray-painted a lawn green right before an open house. Yuck.
Flip that House had an episode yesterday of a woman renovating a house that had been moved. The lead-in was, “although the market has cooled in much of the country, Austin, Texas is still hot.” When she was done it would have been a nice $100,000 house. Too bad she got $230,000.
The simple truth is that the bubble was everywhere in the U.S. And I mean every town, village, suburb, city or municipality. A few places went on to an outright mania. Housing is overpriced throughout the country (from Alabama to Wyoming). Places like Austin and Dallas won’t know what hit them a couple of years from now.
Never was a bubble in Cleveland…
Prices not going up did not indicate that there was not a bubble. Some areas should have seen declining prices. Are you sure that Cleveland wasn’t one of those areas?
Prices have been pretty flat in Cleveland and Cleveland’s higher end burbs for most of the century.
I consider it a bubble when prices go up at a faster rate than other sectors, not when prices stay flat. Otherwise we could even define a downturn in prices as a bubble if the sector falls slower than others.
Hello txchick57-
In theory, the Texas cities should be very affordable. However, right now, there is no motivation to build affordable housing when you can build an upscale condo and sell at a huge margin to investors. Especially in places like N. Dallas, land prices are through the roof. In Central Austin, we are building condos on every piece of land available. I spoke to a guy whom builds apartments – right now, the numbers just don’t make sense. Land, labor and materials costs too much. You can’t build a complex under today’s prices and then rent out apartments at $700 – it’s not in the cards.
In Austin, we have an affordable housing program that encourages developers to set aside a certain number of units as affordable. The jury is still out on weather this program is truly effective. I know some people with modest incomes whom have bought nice downtown residences under these rules. But like anything, these programs and incentives can be manipulated and distorted to the developers / property flippers advantage.
Yes, all true but my real point here is that there IS a bubble in all big TX cities and has been all along. If the price in real dollars of a house does not shock someone coming to TX from San Francisco, that is irrelevant. I object to this unbridled opportunism with no regard for the longer term effects. IOW, “gimme mine, let me get this pretentious shitshack built so I can buy my new Corvette” is the attitude of the day around here. But it was like that in the late 80s too and most of them ended up giving the Corvettes back to the bank. I’m sure that will happen again.
TX, I have been watching some Minnesota listings lately. I know exactly what you mean. They might be cheap by Cali standards but they are so far in the clouds it is hillarious. Minnesota is another place that had a bubble dating to 2000. Now they need to take their medicine and it will be one massive gulp of castor oil. Texas will join them.
I was in Austin (on non-RE business) about three years ago, and couldn’t help but notice the high vacancy rates on apartments - at least, higher than what I would want or expect. I noticed at the time that houses were cheap by west coast standards, but I was in no way tempted to buy anything, having had relatives fall for Texas RE in the past.
If Texas is at the point where building apartments no longer pencils out (and by my observation, Austin has been there for some time now), you know there’s a bubble.
I can tell you from experience here that affordable housing programs do not work as intended, unless the intent is to destroy neighborhoods. They do seem to curtail construction in general, and definitely drive up prices for those who do not qualify for the affordable units.
Million dollar Dallas foreclosure. Could this be a Californian who thought he knew better?
http://ntreislistings.marketlinx.com/SearchDetail/Scripts/PrtBuyFul/PrtBuyFul.asp?emailGUID=b7b1e468-7ea7-47b4-ba0c-4802274bc8d9&AgentId=0540778
but don’t anyone worry. The rich and pseudo rich are safe and will skate though all of this. Roddy says there won’t be many foreclosures in Highland Park and University Park. The “rich” know better. Ummm . . . in 1989 there were multiple foreclosures there. It was a hell of a buying opportunity.
FORECLOSURES
Just talked to George Roddy, the man behind the infamous Roddy Report, and he told me that in UP and HP there are still very, very few foreclosures, “when you do see them they tend to catch or your eye because they tend to be very substantial, but generally buyers in UP and HP are not going to get themselves into a bind.” He also said it’s pretty much the same for Preston Hollow, that all three are “pretty stable markets that have not seen a lot of the stress seen in other markets.”
posted by Paige Phelps | June 6th, 2007 12:58pm | filed under Uncategorized
txchick-
How much should that realistically go for?…
Austin will rerun 1985-1992. 2006 or 2007=1985. It was one of the worst busts since the 1930s anywhere in the country. Nothing to do with oil, it was overbuilding and rampant speculation at the time. Even had some early precursors to today’s innovative mortgage products. By 1990, you needed 20% down and money in the bank. The 3-2 boom built rental houses would cashflow for $550 rent by 1990. Most of that stuff did recovery by 1999 and is selling for about 30% over 1985s price today. Hmmm…won’t see 1990 prices again, but maybe 1985’s?
I generally agree with you.
However, I wonder about the close-in quality neighborhoods. Highland Park for example…1920s-30s type of place that is “rare”. How well will this hold up in Dallas. I’ve got a feel for Austin (in the past on Pemberton and Enfield) and am getting a view in Atlanta (Morningside and Ansley).
It all depends on whether a recession ensues and if so, how severe. In the early 1990s, for instance, Dallas, Houston and Austin law firms laid off a lot of people, partners, associates and staff and that put pressure on those area. Didn’t affect me, I was in the bankruptcy section. We were busy as hell. The commercial real estate business went in the tank as well. This already is starting to happen again. A couple of larger firms have already totally imploded (Jenkens & Gilchrist for instance). So, those areas will hold up so long as the job base for high paid professionals holds up. I also read somewhere that Dallas is the third largest hedge fund locale behind NY and San Fran. That suprised me and probably contributes to some of the “support” and high prices.
A bunch of lawyers in a soup line. What does that rate on the sympathy scale?
Your exactly right Chick…….It all boils down to jobs….If we have another recession the fall out this time could dwarf 1981-82…
Austin had a much smaller scale of that type of employment when I lived there…more is high tech. There also was a lot less of that type of housing (closein quality 1920s-30s) in Austin vs Atlanta and (presumably) vs Dallas.
Nevertheless, Pemberton / Enfield went down 20-25% (in contrast to the burbs and boom housing which went down 40-50%. It recovered pretty quick. I recall buying in Pemberton in 1992 (right near the bottom) for $235K and selling for $330K in 4 years which was approaching it’s 1985 price of $350K-370K.
Oh, and yes, this one was down more than 20-25% because it needed some cosmetic work, landscaping and new HVAC. House was in excellent condition under the light cosmetics though.
The sad, but true part about that article is all you have to is change the city name and plug in almost any town or city in America to replace and it’s the same story…
… or almost any city in Europe or other parts of the anglosaxon world (except that the bubble hasn’t burst yet there, but rest of the story is nearly the same).
nhz~
That’s what I find so fascinating about this bubble. I’d guess 99% of our citizens have no idea how huge (huuuuuuuuge) it is and how worldwide it’s tentacles, have reached.
A Quote from Pliny the Elder:
“From the end spring new beginnings.”
“From the end spring new beginnings.”
Nice one. I expect bubble price declines to lead to new beginnings some time around 2012 or later…
oh yes … nearly 370 years after tulipmania the Netherlands is still a leading producer for tulips and tulip bulbs (although I guess that it is now mostly distribution and not actual production).
P.S. for aladinsane: I’m reading from time to time that more Dutch emigrants are coming back from New Zealand because of high home prices in Kiwi country! Some of them are cashing after making a nice gain, others find that they are priced out in NZ (if you pretend to not have any money left and return to Netherlands, there are always government agencies that will provide a nice free home for you; the NZ market is a bit less forgiving).
It’s hard to believe how much a house costs in NZ…
Looking to pick up a nice bach, somewhere in the South Island, after the crash~
Yes, but no one has argued that there is no bubble in Europe, New York, California, etc. They have been arguing that Texas is cheap and there is no bubble. Yes there is.
people on this blog know all that, but talk about a housing bubble to an average EU citizen and they will give you a blind stare just the same. ZERO coverage of housing bubbles in the average EU newspaper (except for the UK and lately some tidbits about Spanish bubble cracks), just like two years ago in the US. According to 95% of the Dutch, there is no housing bubble in the Netherlands, maybe just a well-deserved boom for property owners. I think that is similar to Texas: the bubble is everywhere but locally it often is not recognized or simply denied because things ARE supposed to be different there.
“The council was elected by people who don’t want affordable housing.”
So…it’s economical … and it’s political…and it’s an issue that affects the working poor…
(Bernie Mac voice)…Listen America…shut up and find a shack…’cuss there ain’t nothin’ that the white hat cowboys of Dallas are going to do for these folks…nothin’…you hear me America, doggone right, nothin’ …plain and simple.
this also sounds very similar to Europe. Local government in the Netherlands (and in many other parts of Europe) thrive on the growing housing bubble and the land speculation that goes with it. Seems that over the last ten years or so the only thing that mattered to local government was pushing home prices up into the sky, demolishing all affordable housing in the area (to make room for luxury villa’s and condos) and inventing new zoning laws, crazy financing an subsidy rules every year. The real political agenda is set by developers and powerful housing corporations, the politicians themselves often do simply like they are told by their masters.
Debate about demolishing huge tracts of affordable housing (there is nothing wrong with these houses, the people who live there are happy, it just isn’t perfect for the RE mob and city finances) has been raging in the local newspapers for some time, but politics will not listen until the bubble collapses. A similar debate is developing on the national scale, about the current policy of building luxury homes everywhere in what remains of Dutch nature (also a problem because increased flooding risk). A think tank now suggest to confine new development to the Randstad (high density population areas), but big developers will do anything they can to prevent this - they have been buying small strips of nature and agricultural areas all over the country so they can cash in bigtime whenever the zoning rules change somewhere. It’s all about big money
“Nearly half of the households will need housing assistance – either in the form of direct subsidies or city programs that create more affordable housing. “They’re coming,” said Theresa O’Donnell, Dallas’ development director, referring to new residents. “Either we stick our heads in the sand, or we find a way to provide for them.”"
Here’s what is driving housing costs through the roof. What ever happened to Adam Smith’s invisible hand?
TxChick: Same thing here in northern burbs of Chicago. In the former hometown of Northbrook IL the re-habbers have replaced the simple 1 story ranches that sold for $125K in ‘99 with a 1.15 Mil McEyesore
http://www.forsalebyowner.com/listing/06B1E
A typical teardown candidate is:
http://homes.realtor.com/search/listingdetail.aspx?mlslid=1179249&ml=3&typ=7&sid=e748401037ef4a0b8ae587a1725bc3d2&lid=1061956031&lsn=1&srcnt=1#Detail
As you noted, this has priced out the middle class (like me !)
I deeply desire to live 1/2 the 40 mile distance to the city in a real town but at these INSANE prices ? Naaa
The silver lining is sales in Northbrook are DOWN 56% in the 4thQ of ‘06 (YOY). The McSh*(t boxes are just sitting, buyers here are finally getting their heads straightened out. Hope the cure spreads to TX too
Bob
Also from the LATimes, Petruno’s Take on the Global bubble in Everything.
“Former Federal Reserve Chairman Alan Greenspan helped trigger the latest flutter in share prices, particularly in emerging markets, after he said of the wild rally in Chinese stocks, “There is going to be a dramatic contraction at some point.”"
“That’s an old economists’ trick: Describe the event, but leave it open-ended. Someday you’re bound to be right.”
Petruno’s own analysis pretty much fits his description of Greenspan’s trick. As usual. Petruno is not a dope, but I never found his commentary provided me with any insight. What do you think?
I read Petruno to get the conventional wisdom of the moment. No insight given or expected. But it helps to have a barometer of the conventional wisdom, especially if one aspires to be a contrarian. Interesting, the elephant seems to be entering the popular consciousness. Maybe even several of them.
I read Petruno to get the conventional wisdom of the moment.
Dead on, sm. Petruno’s a hack, spending all these past years actively denying and/or rationalizing the reality unfolding right in front of him. Flanigan’s no better, either.
“Yet look at what the world’s stock markets have overcome in recent years: record-high oil prices, rising short-term interest rates, devastating terrorist attacks in Madrid (2004) and London
(2005) and, most recently, a serious U.S. housing slump.”
Notice that the POV argument states: “…the world’s stock markets have overcome” and… by inferred extension: “people in general”
Bugs to Tom: eh, I don’t think so…
“There should be a fundamental reason stock prices have forged ahead, and here it is: The global economy has continued to expand. Consumers and businesses have continued to spend, which in turn has underpinned corporate earnings.”
To which he adds in the very next paragraph: “Consumers and businesses have continued to spend”
To which the I retort… with the wisdom of Ben’s HBB:
“I see debt people”
Daffy to Tom: Now that housing is dead for instant use as a low interest ATM cash machine…I’m supposed to charge my excesses on my 29.8% credit cards…that’s dissssssssspeciable!
The America middle class going forward is not anywhere near the America middle class that brought us to where we are today.
The American middle class going forward will not bring the same social results as the one that preceded it…unless “something happens” that forces them all into a situation that makes savings more of a benefit than debt.
I wonder what that “something” will be?
…just wondering along …where the earth curves…
Haven’t heard much about Charlotte lately, especially about the once soaring prices up around Lake Norman. Are those places still holding their own wrt price?
Lake Norman was ridiculously priced years ago. Charlotte will continue to do well as long as all Yankees consider the Carolinas to be paradise, even though most of them have never been there. I wish I had a nickel for every Yankee that has ever muttered, “we will just pack up and move to the Carolinas”.
How is South Charlotte holding up? The amount of building is staggering and the gridlock there must be awful by now.
South Charlotte traffic is bad, especially along the little side streets off Independence (a Kunstleresque nightmare). Building still continues apace though: two new subdivisionettes are going in right down the street from me (”low $300,000s”). This in an area where fatback is a big seller at the grocery. Surprisingly, the Observer had another front page article on foreclosures in Beazer developments — 41 out of 107 “homes”. Of course, the FBs disclaim all responsibility. See http://www.charlotte.com/109/story/153857.html
Northwest Charlotte may as well be the South Bronx. Beatties Ford road has many disgusting areas. Just look at that picture and you will understand the area perfectly. My favorite quote was:
“Chris carried his bride over the threshold.”
- He must have invited some buddies over to help him with that task.
NOW maybe people will see the wisdom of RENTING very quickly, and getting a signed 2 year lease Before you get the foreclosure on your credit report.
And also from the LATimes, the unfunded costs of public retiree health costs, will send taxes zooming in Cali.
“The nonpartisan California Health Care Foundation projects that, thanks to skyrocketing healthcare costs, an upcoming surge of retirements and lengthening life spans, the price to governments of continuing to provide coverage at the current rate will increase 15% a year over the next 15 years. Even if public employers had many billions to invest — which they don’t — insurance costs will continue to rise much faster than investment earnings, the foundation says.”
http://www.latimes.com/news/local/la-me-retireemainbar10jun10,0,5307525.story?page=2&coll=la-home-local
“Frankly, they [SD County govt retirees] are getting the cake and eating it too,” said San Diego County Supervisor Dianne Jacob.
Hey, how about Dianne Jacob for President?
Way to raise my blood pressure AZ. An article about more “victims”. They wanted something for nothing. I am so sick of all these stupid people. This little girl wanted to go to an expensive school (Tufts) and then go do a mission. Who did she expect to pay back her bills? That’s right. She thought her tab would be miraculously picked up by you and I.
The dumbest thing in the world is to spend $100,000 to graduate college and get a $20,000 a year job. If you are going to pay top dollar for your education you should make damn sure you can make top dollar when you come out. This story could easily have been about home “buyers” with how whiny it is.
“When a student signs the paper for these loans, they are basically signing an indenture,” Mr. Nassirian said. “We’re indebting these kids for life.”
They are indebting themselves. This is their decision, not mine.
My post was a response to the NY Times student loan article. I shouldn’t drink this early in the morning but sometimes you have to.
The dumbest thing in the world is to spend $100,000 to graduate college and get a $20,000 a year job. If you are going to pay top dollar for your education you should make damn sure you can make top dollar when you come out. This story could easily have been about home “buyers” with how whiny it is.
Better thing to do is go to a cheap “state” college for an undergraduate degree and graduate degree, and make a ton of money in your field. It pays off many times over. At 18 I did not realize it at the time but the payout for an engineering degree from attending a state university was not significantly different from the payout an engineering student at, say, Cal Tech or USC would get. It’s just another lesson of value investing! The first indication that the college location didn’t matter was when I realized we used the same text books written by professors at top colleges that the students at top colleges used. What a ripoff for those students!
By the time one is in his 40s and working in his field he attended college for, the source of the degree never really matters. Income tends to catch up. In some cases it all depends on ones own philosophy of personal finance and savings habit than income. I worked alongside people with degrees from University of California for most of my career, as well as degrees from the California State University, USC, and one from Harvard. The most down to earth people I knew came out of the state college system and the down-to-earthiness stays with them for a long long time. Humility is a great trait and people naturally feel comfortable among humble people. Getting along with colleagues at work is a big factor in why I’m in my 51st month of a consulting contract - they usually last about twelve months. No end in sight.
Excellent points!
I agree Bill…I went to a Cal State U for my undergrad and grad degrees and work alongside folks who went to fancier schools as well…they don’t make any more than me and my school loans are paid off
And don’t forget, doing your lower division course work at a California community college really reduces the expenses. Something about that $20/unit cost that makes this a worthwhile route. Just too bad they can’t do anything about textbook costs.
WAman and ockurt,
…so I ask myself why some parents these days are so obsessed in trying to get their kids into a big name school? People stress themselves out too much about getting their kids into college. The same people buy plasma TVs and gas-guzzling SUVs.
People like us here on the blog took the red pill.
bill…i know…it’s one thing if your kid gets a scholarship or is a genius (then I guess he/she would get a scholarship anyway) or your family has connections at a certain institution then it’s understandable. For other folks, I don’t think it matters.
sc…excellent point…I actually did that…1st 3 years at Long Beach Community College (oops, should have finished in 2 years)
My niece is going to a community college in central California. It’s a great deal. We pay enough California taxes to support that educational system so why not take advantage of it and get more bang for the buck?
That’s the way to go, sc. My wife and I both went to USC and what a complete waste to do all the basic coursework (first 2 years) at $2000/unit when we could have done it at a community college.
Unfortunately, I feel like our higher education industry is largely preying on young people with promises of “if you get a degree from here, riches await!”.
It’s like Bill in Phoenix said. We all know successful people who went to Harvard and ones who went to UC Riverside. The issuer of the degree might make a difference in the first job offer, but after that it’s pretty much about the character and performance of the individual.
The big scam that my friends are falling for right now is the MBA. None of them are going because they are genuinely interested in learning. ALL of them are going because they believe that there’s a pot of gold waiting at the end of their $100K debt rainbow. Too bad that MBA’s are suffering from the same thing that plagues the housing market. Too much inventory!!
When my wife was an investment banker with Merrill, she said it was easy to spot the bad bankers. They were the ones with the MBA’s. If you were a true star, you didn’t need to go back to school. That was reserved for the ones that couldn’t rise fast enough.
So why can’t these people rely on medicare like ordinary mortals?
Does medicare cover it all?
From the article, many choose to retire early…they put in their 20 or 30 or whatever,to be fully vested, but they’re years short of medicare. Also, the system is more generous than medicare.
Its nice that some people can start collecting fat, taxpayer paid pensions when they are in their early 50’s. What’s even funnier is that they think EVERYBODY gets the same deal where ever they work.
In the NY Times, in language that might have been swiped from this blog,
a heads-up to those who think subprime is “contained”. You have to pay to read, but the substance is nothing new to folks here.
Beware of Exploding Mortgages
By GRETCHEN MORGENSON
“A tsunami of interest rate increases on adjustable-rate mortgages is coming, meaning that the worst of the subprime lending fiasco is far from over.”
http://select.nytimes.com/gst/tsc.html?URI=http://select.nytimes.com/2007/06/10/business/yourmoney/10gret.html&OQ=_rQ3D1Q26refQ3Dbusiness&OP=727c7149Q2FQ27Q26zIQ27i5FEEiQ27C,,GQ27,Q7CQ27Q23,Q27IS5xQ3Az55Q27vESFQ5BEQ3AzvQ27Q23,pFziQ251iQ5Bm
One NY Times article today that you can read without paying is called “Private Loans Deepen a Crisis in Student Debt.” Go to
http://www.nytimes.com and click on that headline (or any other).
This student debt cannot be discharged in bankruptcy, I believe. Or at least a lot of it can’t. Truly a way to workaround the 13th Amendment.
Another in the NY times today titled “On the Block in California” describes the USHomeAuction.com in Riverside. It is an interesting read, but nowhere does it mention the auction company can bid against the buyers up to an undisclosed reserve price. Bidders are left wondering how the prices were bid up so fast and so high! Rebecca Farley Raney (writer) missed the most important aspect of this story. These are not auctions, they are Shill Auctions.
Oh, and one important detail she did include: There is a 5% bidder’s premium paid to the auction house on the first property and 15% premium paid on any subsequent properties you buy! There is irony, paying a company to screw you over a threshold!
“Shill Auctions”
Truly dispicable, but these won’t work anymore once the credit cesspool is drained. You need to have buyers in the crowd with boxes of stupid and buckets of money in order for fraudulent bids to affect the outcome.
One of the reasons I am experiencing bubble-reader attrition, is because I am really tired of reading about the numbers side of the bubble. I know this sounds ridiculous, so let me say it this way: there are endless stories about people being priced out, kids moving back in after college, teachers, cops & firefighters skimping to get by, erosion of the middle class and so on… but what I keep reading is a bunch of savvy people with money still gaming the housing market. I don’t even really know what that means or if it’s true. I’m just disappointed that the face of the bubble-sitter more-and-more seems to be just another quick-buckster who missed the boat.
I am not a jealous, bitter renter. I am an upset community member. I really care about the people that bus my plate when I eat out; the police who keep us safe; the pizza delivery man; the whole freakin’ spectrum. I understand that there is not enough to go around.
Has anyone noticed that crime is on the rise? Has anyone noticed the wanton entitlement our teenagers have? Super-commutes? Road rage? We can’t maintain sanity in a future-gamed society. I heard there were people in Florida who bought protected land in hopes that certain protections would be lifted. Hello? Is that how we want to allocate our resources? Go to city-data dot com and click on the North Carolina forum. NC is fixin’ to equity locusted and land abused Flooreeduh style.
I’m bummed because more and more I see that Joe-bubble-sitter doesn’t really want to solve the problem, but is merely upset that he/she missed the boat and is simply biding his/her time until the next buying opportunity.
The U.S. will become a country where every product is gambled and gamed 24/7. Sounds like fun.
Oh yeah, rant off. Lol.
simply biding his/her time until the next buying opportunity ??
I have been through many boom times, good times, bad times and desperate times in the real estate business and I can tell you, in desperate times, which is what most on the blog think is going to happen it is down right “scary”…1981-82 comes to mind….Who is going to “Buy” when mortgage rates are 13% + and the prime rate is 18% ??…The economy freezes and people hoard their cash…Why buy a piece of real estate when you can buy a goverment bond or CD @ 12% ?? I for one, “Never” want to see those times again even though at this point in my life I can survive them…Its just a blood bath and is not any fun for anyone…
America has ALWAYS been like that. When they were building the railroads in the 19th century, nobody cared about trains. They just traded and pumped and dumped the railroad stocks. Wall Street played the suckers like they always do. America, indeed being an American, means taking economic advantage of your fellow man ANY WAY you can. It has always been that way, and it always will be. Stupid, uneducated and ignorant people will always be relieved of their money.
“America, indeed being an American, means taking economic advantage of your fellow man ANY WAY you can.”
I can hear it now, at your funeral, a long procession of friends a colleagues saying what a great guy you were. “George really knew how to take advantage of the uneducated and ignorant. He was a real stand up guy. The country could use more guys like George.”
I disagree that it is right to actively promote the evolution of the middle-class US into a banana Republic. I have a problem with hucksters and scammers of all stripes and status. Honesty and fairness are not exclusive to profitability.
Hi, Muggy, and TES-TI-FY!!!! I, too, am really bummed about this bubble, especially since I have to experience the effects of it each and every day, as I drive around SouthShore Tampa Bay and see the destruction of quality of life that has come hand in hand with the bubble. A formerly pleaseant area with plenty of open space, farmland and a lovely little river given over to cheap, gulag housing. There’s been a shift in population, too, and an increase in illegal population. However, the new high school, which should be the heart of the community, looks like a forlorn ghost town warehouse complex.
I am disturbed by the rise in violent crime. And yet, in a funny way, I can understand it, especially when I drive past the new Centex development going up.
What really gets me is how the “enlightened” love to dis the 50’s, which was a time when housing was affordable, middle class jobs were plentiful and personal debt was low.
Yeah, it was a great time if you were a caucasian male. Not so much if you were a minority.
My parents were not exactly “wasp” in the 50’s, but did OK. My dad was a tool and die maker and my mom was a bank teller. They were solid middle class.
And my mom is Hispanic (of the legal variety) and spoke with a thick accent.
Yeah, it was a great time if you were a caucasian male. Not so much if you were a minority.
It was also a great time if you were a caucasian female who was happy to stay home taking care of the kids, like my mom!
I agree with you but sometimes get pleasure from watching certain smug people taken down a peg or two. For the most part, though, I have no desire to see the people around me damaged by this mess. Even some of the guilty have innocent children and I worry about them a lot.
I meant to add something about bubble sitters. My only complaint is that someone on another site frequently comments on the stupidity of people like me. I own a home and learned about the bubble exactly two years ago when my b-i-l suddenly owned two houses. I could have sold my house for a huge profit and we even discussed it as a family. My son burst into tears at the thought and my husband and I finished the conversation later.
Look, we love our home and our neighbors are wonderful - the best you could ever hope for. We have a 30-year fixed and the payments are low - much lower than it would cost to rent a similar house or even a lesser house. Some of you may think we’re crazy or stupid but we bought this house because we wanted a home and sometimes it’s not just about the money. We’re staying put.
“We’re staying put.”
Nothing wrong with staying put in a home you love and which you can afford. That is the way the housing market is supposed to work, in fact!
I think that a lot of people on this blog discount the emotional connection that people have to their homes. For the people who truely can’t afford their places but don’t quite realize it, this connection will hurt them. They won’t arrange a rental and turn in the keys right away; they will attempt to hold on and lose the house later with no cash ruined credit and no rental pre-arranged. But for pre-bubble buyers like you? No problem at all. Your son’s happiness is worth losing out on a potential windfall.
For people like me who just got settled in a situation where I want to buy, I suppose things might have collapsed a little more quickly if you had participated in the whole frenzy - if you has sold at a huge profit to a person who could only afford your house in the first 6 months of a suicide loan. But I don’t even know your son and I think his happiness is more important than you helping to accelerate the collapse of this bubble too.
Just save good and hard for his college. I think a lot of things may get cheaper as the easy money of the bubble collapses, but I have an odd feeling that college tuition is going to be sticky at this price point. I may be wrong, but I fear I am not.
Why in the world would you buy into the idea that you somehow screwed up? You own a house you can afford, and you’re happy there. Please don’t be intimidated by people who think that everything is about money.
My husband and I sold our home in northern California in 2005 and have been looking back wistfully ever since. My children were born there. We were heavily involved in our church & school communities and had many friends. It was a wonderful place to live.
I don’t regret the decision to leave because his tech company was down-sizing every quarter, and even though our house was affordable, we would have had it very rough if he’d lost his job. That said, it was the best place we’ve ever lived. We’ve moved twice in the past 2-1/2 years, and I’m beginning to doubt we’ll ever find the kind of community we had in CA. Yes, we’ve made a lot of money, but I feel like a vagabond.
So, take it from me, sometimes the money just isn’t worth it.
Yeah. If you are happy in your home, that’s where you should be - not renting!
I am sorry if you read any of my posts being pro-rent and anti-owning. Owning is not my cup of tea yet, but one day I will own. I’m a traveling engineer and my livlihood keeps me away from my primary address most of the time, sometimes as much as 2500 miles away!
Minimum wage increase will price even more 16-21s out of the job market. Not only will fast food joints become even more disgusting trash heaps and cesspools than they already are, but roaming bands of unemployed youths will become more and more emboldened. This is already happening on the beaches of Florida around the big cities - Jax Beach, South Beach Miami - where you might be lightly accosted (e.g., “got a light?”) by a member of a roving gang of punks. Notice how all the budget motels have been taken over by welfare types and tattooed thugs? Crime is a huge and growing problem in Florida. If Jacksonville was a core city like Miami and Atlanta (i.e., didn’t incorporate huge tracts of suburbia and exurbia into its population) it would likely have the highest murder rate in the nation. Crime will cause as many to flee Florida as high prices. Also, Panama City (and eventually Havana) will become the new Miami for Latins who are fed up with immigration hassles as well as the crime and high prices.
Unpaid contractors place liens on Indigo Bay hotel-condo project
or
http://www.keysnews.com/373482797602849.bsp.htm
Which gives a good explanation on why builders are still building, the contractors and sub-contractors are doing work and not getting paid.
Boomers who thought their home would provide money for them in retirement, face a cold reality.
“…she—like many Americans—drew comfort from her home. Over the years, she watched its value rise, and subconsciously it provided a sense that she would be fine—even if other forms of saving lagged.
Now that retirement has arrived—earlier than she expected because of the job loss—she is discovering that tapping your home to cover basic living expenses is easier said than done. She is starting to envision her 70s and 80s, and wondering where cash will come from when her nest egg is locked into countertops, walls and floors that can’t easily be turned into grocery money.
http://www.chicagotribune.com/business/yourmoney/chi-070610homedangerous-story,0,2689737.story?coll=chi-bizfront-hed
This article raises (again) the point that a lot of Baby Boomers (now 47-61) were also counting on cashing in their houses as their retirement nest egg. A Dartmouth professor says a further decline in the housing market could impair that plan, and says the housing market “should be watched carefully.” I think it’s a no-brainer: you hardly have to watch at all, you KNOW that if a huge number of people were counting on cashing in an asset that they don’t really need (too much house), the market price of such assets will continue to go down and down and down. In fact, my usual thinking that the bust will be over in 2012 is challenged by the thought that boomers will still be trying to cash out all the way through 2030. Hmmm.
We are well on our way to being part of the mysterious “2nd World”…
What? There is nothing mysterious about the World designations. It’s just that most people don’t understand their roots and always get it wrong. The terms came about in the 1950s and being called a “3rd World nation” was supposed to be a compliment.
1st World: Western capitalist democracies (U.S., Canada, Western Europe, etc.)
2nd World: Communist nations of the 1950s (China, Soviet Union, Cuba, etc.)
3rd World: Formerly colonized nations (mainly African and Asian nations)
It is no more possible for the U.S. to be a 2nd World nation that it was for Russia to be called a 3rd World nation.
Communist Russia was a 2nd world country, no doubt about it…
Russia in it’s present oil rich condition, without those pesky provinces that always took more than they gave, is closer to 1st World, nowadays.
Things Change
Perhaps “4th world” nation would now apply?
4th world: Previous Western capitalist democracy, now a communist nation.
Auger, are you in Minnesota? I think you are. What is your assessment of the Twin Cities market?
I’m in the SW corner of the Twin Cities until early July. I posted on a conversation with a friend of a friend the other day. Seems like the RE market is SLOW to seized up in the prior lake, lakeville, savage area.
There are a growing number of unmarketed foreclosures in the area as well.
I’ve heard that the Woodbury area is still doing OK but the condo market all over is bust.
I’ve a couple of friends with high-end (1-2M) homes that have been on the market for over a year with very little traffic (minnetonka and Prior Lake).
Still lots of delusion and denial depending on who you speak with but everyone agrees that it has slowed down. I’d say that by fall there will be an epiphany by even the most vehement RE bull.
I’m in the SW corner of the Twin Cities until early July. I posted on a conversation with a friend of a friend the other day. Seems like the RE market is SLOW to seized up in the prior lake, lakeville, savage area.
There are a growing number of unmarketed foreclosures in the area as well.
I’ve heard that the Woodbury area is still doing OK but the condo market all over is bust.
I’ve a couple of friends with high-end (1-2M) homes that have been on the market for over a year with very little traffic (minnetonka and Prior Lake).
Still lots of delusion and denial depending on who you speak with but everyone agrees that it has slowed down. I’d say that by fall there will be an epiphany by even the most vehement RE bull.
“Russia in it’s present oil rich condition, without those pesky provinces that always took more than they gave, is closer to 1st World, nowadays.”
Umm… most of the Soviet Union’s industrial capacity went away with those “pesky provinces”. All they have left is oil and other natural resources. Russia is “first world” in three ways:
1. Lot of oil money sloshing around.
2. A bunch of weapons left over from when they had industrial resources.
3. A permanent seat on the UN Security Council.
Economically, Russia is like an enormous Venezuela located in a swamp of Superfund sites.
4. Putin
If you’ve ever been there, you’d know that only central Moscow and St. Petersburg (the pre-Communist parts now inhabited by the new money crowd) are “first world”. The rest of Russia is third world - think of Brazil with snow as a model.
And by the way, the old 2nd world was just the Soviet bloc. China considered itself 3rd world, indeed the leader of the 3rd world countries.
I think its more like the entire world is becoming one homogenous “world”, partitions are breaking down…
I’m a boomer (53), and I’ll be looking to buy my first SFH when it looks like prices have settled at the bottom. I want to retire in a bought and paid for SFH. If the kids want to be landlords, they can manage the apartments, otherwise I will finally sell.
kids want to be landlords, they can manage the apartments, otherwise I will finally sell.
My thoughts also landlord…….The only difference is I have a SFH…..I am not confident that my kids can manage properly or is willing to put the time & labor in to learn how too…Selling, paying the tax, re-deploying the cash I agree is worth considering…
A lot of baby boomers are 42 years old. They keep extending out the end date…
I think a 42-year-old would be a Gen-Xer. As I understand it, Gen-X extends from 1965-1975.
All I know is wikipedia, and it lists baby boomers as extending thru 1964. A person born July 4, 1964 is 42 years old.
“A decline in the housing market may generate substantial losses,” she said. “The behavior of this market should be watched carefully.”
Another reason I sold, everyone can’t retire rich off their homes. And so many boomers told me that was the plan I knew it was only the first out that would profit. When this RE deflation stops I’m afraid to even guess.
Pretty soon everyone else will start figuring out what you did, and will head for the exits attempting to preserve whatever they may have left — regardless of how long they had originally planned on staying where they were.
My wife was not very happy when we sold our Sarasota house in 2005 and bought the cheapest house (a foreclosure) we felt comfortable living in up here. But now that she sees how R.E. is tanking, and sees the liquid assets we now hold, she’s happy as a clam.
I cannot claim it was all done with the foreknowledge that the bubble would burst. Instead, leaving Florida in 2005 was due to my aversion to hurricanes, and buying this place was due to my cheap nature.
I’m a boomer, and I don’t consider the equity in my house in my retirement plans at all. Of course, that is partly because my house price hasn’t gone up that much. But if I lived in a bubble area where I could sell for a quarter of a million dollar profit or more, you can bet I would have sold already. The word for people like those polled in that article, who are counting on their home equity but won’t sell is “moron”.
Time and time again, I point out that for more than three decades, Money Magazine was publishing articles that say investing in real estate produces lower returns than investing in stocks. Boomers had access to Money Magazine and the like. Personal finance magazines for the masses were saying for years that It’s reasonable to expect a 10% annual return on a broad mix of large company stocks held more than 15 years. It is reasonable to expect a 4% annual rate of return on real estate in, say, Phoenix. It’s unreasonable and thus a gamble to think real estate will give you a 10% or more annual rate of return. I think there was a massive relapse into the marijuana highs that people in my generation (47 and up) must have had to impair their good judgement in planning for their retirement. The dope they smoked in the 70s got back to them. Many of the people who are my age or older were economic socialists in the 70s. Perhaps they will revisit their youthful politics and use politics to rob the responsible savers to pay for their financial planning mistakes. That’s where my a certain part of my portfolio will come in handy. They cannot get capital gains on it. Years ago in laying out my investing philosophy, I anticipated a blatant robbery attempt by the use of political force against my property in the future. It could come in the form of reversing the Reagan-inspired income tax cuts in 1981 (where the Democratic-controlled Congress cut the maximum rate from 70% to 35%). It could come in the form of increasing capital gains taxes. A Democrat-controlled Congress is not necessarily bad for wealth, but I think it could depend on which era - Reagan era or Hillary (upcoming) era.
Thanks for the deletion, Ben.
What are you talking about?
Alright, either you’re messing with me or Firefox has gone haywire. Either way, sorry, I woke up on the wrong side of the bed.
I was at a party last night - I was so good, I promised my wife I wouldn’t bring up real estate… and I didn’t, I just listened - and everybody was talking about getting out of St. Pete and moving to Austin, Knoxville, Asheville blah blah…
Hey Muggy,
the herd mentality at work. Now ” everybody” has the same handfull of destinations in mind for their escape. and when the herd moves, all the services required (schools, cops, firemen) will be added to local prop. taxes.
When homeowners start yelling, local sales taxes will go up.
I’m a renter so I don’t care. Wouldn’t buy and move anywhere until it’s clear how local costs–taxes, insurance,schools–shake out.
It’s easy to exaggerate when writing on blogs, but I am not exaggerating: people here are starting to rev up the flight instinct.
I can’t believe the change in one year. Now everyone wants the “change of seasons” and “the mountains, they’re just beautiful” and “it’s God’s country up there.”
The group-think is unbelievable. All of the sudden sunshine, sandy-white beaches and world-class fishing don’t matter anymore.
Basket weaving in Chattanooga is blowin’ up!
I spent last winter in Ohio and trust me “Gods country” was a living hell. Ice storms, snow storms, wind chills 25 below zero. I’m sick of it. It’s great April-Oct. Otherwise there’s not much to do, because of the weather. You can ski if it’s not 25 below or if you can even get out of your driveway to get anywhere. This winter definitely did me in.
Remember that in another 10 years when the other 3/4 of the country are out of water and crops won’t go. That winter snow in Ohio leads to spring and summer rain. Crops don’t need snowmelt or irrigation.
There’s a reason why Ohio and the Great Lakes region were quickly settled while the plains and the central cali valley and arizona were sparse, and that reason is water.
Florida was different. It had lots of water. Lots of it is all gone. Soon they will declare a public emergency so that they can start to suck out the Everglades.
Got GLOBAL WARMING?
I grew up in Ohio. You get used to the winter weather, because there is truly nothing like a midwest autumn, or spring for that matter. Absolutely gorgeous country! And, you can grow anything in the rich black soil of the Ohio valley, including the best sweet corn imaginable.
Not missing the mosquitoes, though. Yikes!
lived in New Jersey for ten months. I’m a California boy so it was kind of odd. But I survived the weather fine. I actually did enjoy the NJ snow - it was beautiful. My parents were from Ohio and yes, Ohio is a beautiful state. My dad was happy to move out. My mom still loved the snow and all. I’m a westerner at heart and would have to have a bachelor pad in Las Vegas to balance out a 10 acre spread in New Hampshire, which is my top choice in the 2013 time frame.
I’m sick of the terms used for this phase in our economic history. They didn’t want to say there was a bubble. Now the euphemisms for the destruction of the bubble are:
- Downturn
- Softening
- Correction
- Adjustment
- Soft spot
Call it what it is. This is a “crash”. We are at the beginning of the largest real estate crash in history. What are some of the other stupid terms being used?
A buying opportunity! Or an investment opportunity, more smoke and mirrors, but then mirrors break and smoke clears. It is going to be a show for sure. This is just talking the RE bubble but there are also other factors that will play into the general decline in this country. Lots of them and they are all interconnected to each other so the web of connections will come undone and continue to spiral down. Where it will stop is anyone’s guess, factors determining where people work, live, and shop will change, it will be a different world soon, but like a slow motion train wreck.
Think of what’s going on now as more akin to the “Phony War”…
http://en.wikipedia.org/wiki/Phony_War
The subprime imposion, being the opening of the war, and there’s a lull of 6 months and all hell breaks loose suddenly!
Your description matches my sentiments exactly. This summer does have a halcyonic feel to it - kinda like 1939. Lotsa of big stories breaking while J6P takes the kiddies to watch anthropomorphic penquins romp about.
“A buying opportunity!”
Well it certainly is a buyer’s market — every realtwhore who gets in front of a camera these days says so immediately without prompting.
“factors determining where people work, live, and shop will change, it will be a different world soon”
Enough can’t be said about the collateral geogrphic fallout of all this Renterinaz. Although changes to our cities and towns have been going on throughout U.S. history, this latest of capitalism’s spasms will likely mark the end of the idealized postwar world that so many homebuyers counted on to ensure returns on their “investments”. There’s not much need for Mayberrys, Hootervilles, and Bedford Falls in the global age - except perhaps to house cheap foreign labor or meth labs.
This is exactly what I fear most. People who may not be able to summarize it as gracefully as you have sense that change for the worse is coming. Much of the grassroots opposition to the amnesty bill, which reportedly stunned Wash pols., came from this feeling…that the world we know and grew up in is eroding, and what’s coming will be ugly.
Renterinaz,
You have a good point. There are two forces at work. The real world is one force. It’s presenting more and more change. The information age is providing people with more facts at a faster pace. The other force is people who are unwilling to accept those changes. Only one of those two forces will win in the end. It always astonished me about people who have this positive ideal that they buy a nice new house in a neighborhood without caring what type of neighbors are there already or what type of neighbors will move in. One young man I worked with a few years ago bought a $250,000 house with his girlfriend (before the big runup in Phoenix real estate prices). He had to commute about 25 miles to work, so had to go to bed early and wake up early to beat the traffic. He was complaining that the teenage boy next door was racing up and down the residential street at 11:00 at night on a motorized scooter. Well that certainly would annoy me. But he was stuck. The kid’s parents did nothing about their son. Hopefully the colleague and his girlfriend sold the house to some GF and went to renting instead. Lesson learned.
‘This is a “crash”.’
It is a historian’s job to decide whether we are in a crash or a panic or something else, much as it is up to the NBER to decide whether the economy had already entered a recession by Q1.2007. Highfalutin muckety-mucks can only recognize such developments through the lens of the rear view mirror. Only a few seers and revelators (including bloggers wearing tinfoil hats with special cosmic ray detector glasses) can see these things in real time.
Don’t forget “plateau”
Latter-day version of Volcker’s conundrum:
Tighten the reins and crash the economy, or let inflation run amok?
DEAN CALBREATH
Inflation’s ill effects depend on Fed’s action
June 10, 2007
Last week, investors on Wall Street were caught by surprise by news that most people in San Diego – or, for that matter, anywhere else in the country – could have told them months ago.
Inflation isn’t a myth. Prices are rising. And even though wages haven’t been keeping pace, that could start happening soon, pushing inflation even higher.
The inflation alarm on Wall Street – triggered by some stern words from Federal Reserve Chairman Ben Bernanke, a forecast of rising wages and a jump in yields for the 10-year Treasury note – sparked a three-day selloff that took more than 400 points off the Dow Jones industrial average.
True, the selloff was temporary. By Friday, the market was staging a comeback.
But the specter of inflation remains. Yields on the 10-year note have hit their highest point in nearly a year now that Wall Streeters have abandoned their misplaced hopes that the Fed will soon cut interest rates.
The Fed is facing a dilemma: leave interest rates where they are and allow inflation to worsen or raise rates and throw the economy into a slowdown.
http://www.signonsandiego.com/uniontrib/20070610/news_1b10dean.html
The most compelling article yesterday was the article about skyrocketing pork prices in China. If China can’t contain their manufacturing costs a widespread wave of inflation will spread through the world. I believe that is probably happening as we blog today.
I didn’t see the article, but I can affirm that China’s economy will exhibit all manner of economic disequilibrium for years to come. You really have to see it (or at least read about it) to believe what’s going on there - they’re jumping from what amounts to fuedalism into the 21st century in a very short period of time (historically speaking). You can’t have a new middle class emerging as rapidly as China’s is without severe disrpution of the economy. I admire the Chinese for how well they have handled it so far, but they have a long way to go before they correct the historical misallocation of resources and the destruction of the educated class under Mao.
about the pork prices, it’s some strange year this year where people need to buy a lot of pork for religious reasons or something.
“Inflation’s ill effects depend on Fed’s action”
They are trying to make it seem as though inflation is a force of nature that occurs all on its own, instead of the reality that it is the Fed itself that is manufacturing and prolonging the inflation in the first place.
From Milton Friedman’s ghost:
“…inflation is always and everywhere a monetary phenomenon.”
http://en.wikipedia.org/wiki/Monetarism
Bring on the higher rates! I was 20 in 1979 when bonds and notes yielded double digit. If I was smart back then and had money, I would have bought them up. Slam dunk!
Geez, Stucco, didn’t we here practically write that article back in ‘05???
Yes. I have to say the instances of blog deja vu in MSM articles these days is rather impressive. A motivated financial reporter could uncover a career’s worth of article topics by mining the archives of this blog.
Low crime, high prices, no mystery
Columnist Jon Lansner ponders how crime rates and how prices intersect.
http://tinyurl.com/29ovvh
Mortgage Insider: Q&A on cleaning up the mortgage biz
Reporter Mathew Padilla covers the lending industry in the Mortgage Insider blog.
http://tinyurl.com/26dahk
big surprise…not
Lending’s legal landscape neglected
In Washington and Sacramento, there’s little action or sense of urgency when it comes to reining in lenders.
http://tinyurl.com/22dexj
Time to rethink the wisdom of buying a vacation home?
- The article reflects a sudden awakening to the carrying cost burden on the family budget.
- But there is no mention about valuation risk (Robert Shiller recently conjectured that vacation homes may drop by 50% in value as the bubble unwinds…).
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REAL ESTATE
Summer lovin’
It’s easy to fall for a vacation locale, but is it wise to buy a home there?
By Amy Hoak, MarketWatch
Last Update: 5:18 PM ET Jun 10, 2007
CHICAGO (MarketWatch) — When the Hohnstines became true empty nesters — their children finished with college — the couple bought a vacation home. They figured if they enjoyed their vacations near the Delaware shore, they would eventually retire there as well.
As it turns out, the home near the beach has been like a magnet in attracting their children and grandchildren, and because the home is only a three-hour drive from their primary residence in Virginia, many weekends have been spent there since they bought in 2002, Lyle Hohnstine said. Soon, the home at the Village at Bear Trap Dunes in Delaware will be their primary home.
http://www.marketwatch.com/news/story/seven-things-think-about-before/story.aspx?guid=%7B53902754%2D3C96%2D4E25%2DB7F9%2DE2C959A52195%7D
At least one banking regulator thinks it might be wise to hold the kingpins accountable for the subprime mess they created. She has made the first sensible statements on the subprime mess that I have heard from any public official thus far this year. We need more principled public servants like Ms. Bair in order for our country to survive.
Chairman Stirs Up FDIC Pot
Sheila Bair Draws Controversy
In Her First Year — and Gains
Some Unlikely Supporters
By DAMIAN PALETTA
WASHINGTON — One of Washington’s most vocal supporters of strict new bank-lending standards is neither a Democrat nor consumer activist, but a Republican, White House-appointed Capitol Hill veteran.
During Sheila Bair’s first year as chairman of the once-sleepy Federal Deposit Insurance Corp., she has irked some Republicans and many in the banking industry with calls for tougher government regulation. Among other things, she froze efforts by Wal-Mart Stores Inc. and Home Depot Inc. to start up federally insured banks. More recently, she caused a stir by suggesting that some Wall Street investors bear responsibility for causing the blowup in the market for subprime mortgages.
All this comes at a critical time for the banking industry. Its 8,650 federally regulated banks have enjoyed a relatively light regulatory hand for much of the past decade. But control of Congress by Democrats, who support more oversight over bank lending, and rising defaults by subprime borrowers have raised questions about how long that might last.
In breaking with other federal regulators, including the Federal Reserve, Ms. Bair is pushing for changes that would have broad ramifications for millions of homeowners and companies. She has urged the Fed to assert its authority and to extend tougher lending standards over companies that operate without federal oversight, such as the state-licensed mortgage lenders that proliferated during the subprime boom. Such a move could make it harder for high-risk borrowers to obtain a mortgage, but could also drive down foreclosure and delinquency rates.
“I don’t work for banks,” Ms. Bair said in an interview. “I’m a public servant. My job is to make decisions that I think are the right public policy.” Ms. Bair said she embraces an innovative banking system, but added there must be oversight and regulation when markets falter. “I very much believe in the market, but I think you have to set rules for the market — and markets don’t always work the way they should,” she said.
http://online.wsj.com/public/article/SB118151058173730507-Ae1Se5w1w2LFQbkPMkpYxJa4rEA_20070710.html?mod=tff_main_tff_top
Wall St banks limit subprime losses
By Ben White in New York
Published: June 10 2007 18:17 | Last updated: June 10 2007 18:17
Wall Street investment banks are expected to report strong second-quarter earnings, as equity capital markets, advisory and asset management revenues offset a decline in mortgage-backed securities issuance.
Industry executives and analysts expect especially strong performances from Lehman Brothers, which reports on Tuesday, and Morgan Stanley, due next Monday. Observers are more cautious about Goldman Sachs and Bear Stearns, both of which report Thursday.
Brad Hintz, analyst at Sanford Bernstein, noted that while mortgage-backed securities volumes were down 19 per cent in the quarter, a result of the meltdown in the subprime sector, equity capital markets volumes were the highest since the first quarter of 2000. And mergers and acquisitions volume continued to be strong.
http://www.ft.com/cms/s/72071726-1772-11dc-86d1-000b5df10621.html
The Financial Times is doing a better job than the U.S. press corps in reporting on the subprime fiasco. Their extensive collection of articles on the topic is available here:
http://www.ft.com/indepth/subprime