Bits Bucket And Craigslist Finds For June 18, 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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Dilbert comic that is related to global warming and real estate
http://tinyurl.com/29yskm
Funny you should mention global warming, there was a story yesterday evening on CBS News, if I remember correctly. It was about beach erosion and waterfront property. After hearing about polar ice melt, I wondered when coastal property would start being affected. On the report, it mentioned the rise of sea level. At this time, it is not a big rise, but it is happening.
If it continues at the current rate the lower 1/3 of Florida will be under water by 2030.
I have been watching the weather at Greenland and as the ice there melts, dark colored earth is revealed. This allows for more sunlight to be absorbed and I believe that Greenland will start to warm. And then the rate of ice melt becomes faster and ocean levels rise.
I believe that another concern with Greenland is that the ice melting is allowing water to get between the land and the large ice sheets and act as a lubricant. This would allow the ice to slide into the ocean much faster.
For those who watch the homebuilder stocks and the stock market in general, this was posted at indexcalls.com, where professional traders post their comments:
First poster:
I understand the yen. But how bad are things if the stock mkt has to be micro managed 24/7?
*
Second poster:
imo they are extraordinarily bad. Just think of what Paulson said about housing being offset by stock market gains. The worse housing gets the more they pump the pig. And housing is REALLY REALLY bad, no? It cannot go on forever, but it has gone on so much longer than any would have thought. So now it just seems like a guessing game, not much different than shorting a dotcom in the late 90s. Most of those shorts would have been incredibly profitable, but most who shorted went broke before they tanked.
Green Goodies
http://www.opinionjournal.com/columnists/kstrasselpw/?id=110010213&mod=RSS_Opinion_Journal&ojrss=frontpage
It’s a green dream come true, carte blanche to promulgate endless regulations barring tree-cutting, house-building, water-damming, snowmobile-riding, waterskiing, garden-planting, or any other human activity. The section is vague (”protect,” “assist,” “restore”) precisely so as to leave the door open to practically anything. In theory, your friendly Fish & Wildlife representative could even command you to start applying sunblock to your resident chipmunks’ noses.
I’ve been living on the coast of Maine for almost my entire life (38 yrs.) and I was just at my favorite fishing spot and thinking how, from my own observation, there was absolutely no evidence of rising sea levels. At low tide, there is a ledge in front of where I fish that just barely sticks out of the water mabey 2 inches and guess what? It is still there..all 2 inches of it. That ledge hasn’t been effected by global warming one iota. It is the exact same ledge I’ve seen since I was a small child.
I’m not saying the earth isn’t warming but as far as the water levels rising, I say BS.
It’s possible that Florida is sinking, due to the masses of imported building materials, leading to the discrepancy…
200,000 Dead because of droughts????????
UN Secretary General Ban Ki-moon said that the slaughter in Darfur was triggered by global climate change and that more such conflicts may be on the horizon, in an article published Saturday.
“The Darfur conflict began as an ecological crisis, arising at least in part from climate change,” Ban said in a Washington Post opinion column.
UN statistics showed that rainfall declined some 40 percent over the past two decades, he said, as a rise in Indian Ocean temperatures disrupted monsoons.
“This suggests that the drying of sub-Saharan Africa derives, to some degree, from man-made global warming,” the South Korean diplomat wrote.
“It is no accident that the violence in Darfur erupted during the drought,” Ban said in the Washington daily.
When Darfur’s land was rich, he said, black farmers welcomed Arab herders and shared their water, he said.
With the drought, however, farmers fenced in their land to prevent overgrazing.
“For the first time in memory, there was no longer enough food and water for all. Fighting broke out,” he said.
A UN peacekeeping force may stop the fighting, he said, and more than two million people may return to rebuilt homes in safe villages.
“But what to do about the essential dilemma: the fact that there’s no longer enough good land to go around?”
“Any real solution to Darfur’s troubles involves sustained economic development,” perhaps using new technologies, genetically modified grains or irrigation, while bettering health, education and sanitation, he said.
Sudan is not the only country with such problems, Ban said, and pointed to Somalia, Ivory Coast and Burkina Faso as African countries with “food and water insecurity.”
Khartoum agreed this week to accept 23,000 UN and African Union peacekeepers after four years of fighting, which has killed at least 200,000 people.
“But what to do about the essential dilemma: the fact that there’s no longer enough good land to go around?”
Global warming enthusiasts and real estate agents, both hucksters looking to cheat fools.
Paul
Global warming will increase the supply of available land, by melting away ice layers. Is it still too early to invest in Greenlandic beach front property?
In the silver lining for somebody category there was an article in the WaPo last week where they interviewed a greenlandish hearder who loved the fact that the grazing season lasted a week longer than it used to.
Yeah, tell that to the drowning polar bears…..
“Yeah, tell that to the drowning polar bears…..”
Can you eat a polar bear?
Eat them before they eat you.
“But what about the essential dilemma, the fact that there’s no longer enough good land to go around?”
Warfare settles these problems, as Malthus predicted.
Yep, just read Jared Diamond’s Collapse on the situation that led to the genocide in Rwanda.
Believing in global warming or that real estate always goes up is a handy indicator of a lack of intelligence, better than speech accent, clothes or hairstyle.
Or it indicates you’re a scientist/geek, although speech, clothes, and hairstyle can give that one away too.
Who’s the credulous one? The one who accepts the research summarized in EOS or the one who believes bought-and-paid-for oil industry shills?
Hint: global warming is a fact. Global mean temperature is up over 1 degree C in the last one hundred years. How it happens and why it happens are still being debated, but most physicists think it’s likely that human activity–releasing significant amounts of CO2 into the atmosphere since the beginning of the industrial revolution–is responsible for setting off the current warming cycle.
Climate change has nothing to do with beliefs. It’s just a collection of scientific theories based on the results of experiments and data collection.
Belief is the realm of politics and religion and real estate.
“How it happens and why it happens are still being debated…”
No, that’s the problem. The “debate” on global warming largely has disintegrated into mud slinging. This seems to be the case whenever a new scientific paradigm is evolving. Folks on opposite sides of the abortion issue have more civilized conversations than those on opposite sides of global warming.
The above is an observation on the quality of debate, NOT a statement pro/con global warming or pro/con abortion.
Believing in global warming or that real estate always goes up is a handy indicator of a lack of intelligence, better than speech accent, clothes or hairstyle.
Well Mark, either the world is getting hotter, or the melting point of ice is going down. Take your pick.
I am so confused. I watched Crude Awakening last night and the peak oil evangelists in that movie were blaming control of Sudan’s oil supply for the Darfur conflict not global warming.
I am confused as well. My limited understanding was that it was water. SInce the population is small with a large amount of land but scant water resources, that made sense.
This must be another turning point in the bursting of the Bubble….: making fun of Realtors in the comics
We went to the grocery store yesterday. Wheat germ that was $3.25 last spring was now $4.93. Three weeks ago it was $4.29. A gallon of skim milk was $3.45 up from $2.95. Thank goodness for low inflation.
it was better milk
Easy AL
Did he invent hedonic adjustments?
No more than Al Gore invented the internet.
http://www.hedonic-pricing.com/
“The dependence upon space offers the opportunity to use spatial statistical techniques (spatial autoregressions or kriging) to take advantage of the pervasive spatial autocorrelation among residuals from hedonic pricing models. The use of space helps control for omitted variables correlated with space. Such variables could include crime, air pollution, and other externalities.Insofar as correlations often exist among the omitted and included variables, controlling for space can potentially improve hedonic pricing model parameter estimation and hence estimation of the price of implicit characteristics”
My brain hurts just from reading that. Hard to believe they actually use this crap in their decision making process???????????????
We spend about $800 a month feeding everyone in this house (2 people, cats and dogs). And the two legged beings don’t eat any meat. Now that is ridiculous.
Stop feeding your pets filet mignon!
The solution is obvious - eat your pets.
Not necessary — just eat the squirrels.
Still $7.09 for a gallon of hormone-free whole milk at Wallymart. I don’t want my son to grow a beard and start shaving at 10.
I do. I could put the little buggers to work a few years ahead of schedule.
Got Roids?
LOL!
Ditto, Lou, it’s organic milk in my household too. It’s getting awfully expensive, though. It was $5 or &5.50 a gallon not that long ago.
If drinking non-organic milk would stimulate early puberty, my son would be bathing in it. He’s 12 and not even showing one sign of it. It might have more to do with a little something called heredity than diet.
I buy organic because it doesn’t go bad before I can drink it (my partner is lactose intolerant and therefore doesn’t drink milk).
I guess if I lived in Iowa or something, regular milk would be fine, but where I’ve lived (MA and FL) the standard milk has become absolutely awful–long storage times in store, transport issues, maybe even rBGH all contribute to regular milk being awful-tasting and going bad quickly.
“Still $7.09 for a gallon of hormone-free whole milk at Wallymart. I don’t want my son to grow a beard and start shaving at 10.”
No problem. The hormones are probably estrogen-related… your son won’t have to start shaving for another 20 years.
Excellent point. Every time you watch a financial channel - the commentator exclaims “thank God CORE CPI is low.” On a day to day basis, the increasing cost of gas and food impact my life much more than the price of furniture, calculators, and other durable goods. I really don’t notice (that much) paying a few more dollars for GAP jeans once a month but boy it suck to fill up a $40 tank every week.
What they mean is US workers are not getting raises. Out sourcing is doing its job and Wall street is happy. They couldn’t give a hoot if gas and food goes up, more profit for the companies.
Buy gold bullion, grow your own food and ride a bike to work. You don’t need farmland.
It takes about 1.2 acres to produce food for one person for a year. I have a vegie garden and grow beans, tomatoes, squash, lettuce, cukes, strawberries, chard, etc. Love the flavors and the freshness, but it costs way more to grow it than to buy it, when all is said and done. It would be nice if we were all self sufficient, but it ain’t gonna happen. You really do need farmland. But love to bike.
I wish my milk were that low. I get raw, unpasteurized, organic milk, and it’s $13 a gallon. But it’s so so good.
It’s funny, i get very sick drinking pasteurized milk - even just 8 ounces - but raw milk goes down fine, sometimes drinking a quart a day.
And inflation? Running at least 10%. And we’re in a recession. The classic stagflationary collapse - it’s a long way to the bottom.
Ever try the water buffalo milk products? They are really good. I don’t use cow milk products any more.
Water buffalo? Wow, I’ve never heard of that. Do you get it straight from the farm, or from some specialty shops?
http://www.woodstockwaterbuffalo.com/prod_yogurt.shtml
They have it at Whole Foods.
Ever try the water buffalo milk products? They are really good. I don’t use cow milk products any more.
This is absolutely true. The nutritional content of water buffalo milk & milk products is better, and the taste is much better too. On the production side, water buffalo are much more friendly, dumb and docile compared with cows, so they were much easier to herd & manage than cows.
http://www.crohns.org/media/pr120898.htm
heres some scary stuff about milk.
A question for all you Americans here. The herds that roamed the plains before civilization killed them off were buffalo or bison? I read somewhere that they should be called bison, but I’m not sure I got it right. And where does this water buffalo come from, is it the ones from Africa?
The African water buffalo is different from the domestic water buffalo of India and Asia .
The American “buffalo” is a bison not a true buffalo like the Asian and African buffalos
Thanks, Hoz. I kind of had that vague idea. It all goes back to the times when Europeans were “naming” native animals after others they knew. Same thing happened in South America. To this day, some people call pumas “tigers” and guanacos “deer” because that’s what Spaniards called them.
The African Cape buffalo, is not a water buffalo. The African buffalo is a large cow-like herbivore. There are two subspecies of African buffalo. The forest subspecies..(and) savannah subspecies… These creatures are aggressive, powerful and fast. They can run at speeds of up to 57 km/h (35 MPH). It is said that more big game hunters have been killed by African buffalo than by any other African animal. Wounded animals are reputed to stalk and attack the hunter. ..
All attempts to turn the African buffalo into a ‘useful’ animal by crossbreeding it with domestic cattle have so far proved futile.http://nature.ca/notebooks/english/capebuff.htm
somarin: is it Claravale or Organic Pastures?
I have OP sent to me via FedEx.
~Misstrial
Misstrial, I get Organic Pastures too - many natural food stores carry it in California. But when I visit family for extended trips I get it UPS’ed frozen like you. Do you notice how there’s always a couple of inches of thick cream on the top?
Yes - love the cream top - just delicious! The best is their 100% cream with strawberries or pumpkin pie
Mine is sent in a Fridge-to-Go that I bought at Bed Bath & Beyond. Sometimes 2 (Fridge to Go) are sent - one whole milk in one & kefir/colostrum in the other. The Fridge-to-Go is put in the freezer overnight and then also ice packs from Big 5. That way it comes to me cold but not frozen. FedEx takes 2 days to get from CA - costs about $40 for the milk & extras for FedEx 2-day delivery.
~Misstrial
” I get raw, unpasteurized, organic milk, and it’s $13 a gallon. But it’s so so good.”
Be careful…I grew up on a dairy farm and rule number one…no unpasteurized milk in the house. Not trying to be preachy but to me the reward vs risk is to great. As long as you understand that then o.k….
Chris
Hmmm, the cleanliness with raw milk is not a concern anymore do to technological advances in dairy science. The primary owner of Claravale Dairy has 2 PhDs (biology & chemistry) and is a professor at UC Santa Cruz and a member of the California Academy of Sciences (I have met with him personally on several occasions. I have also watched him personally test the milk at each and every milking, which he does as a matter of course). Raw milk from the aforementioned dairies is tested daily as opposed to monthly for cooked milk and is very safe.
Arizonans can get raw Grade A goats milk (Fiore di Capra, Inc.)
http://www.goatsmilkandcheese.com
~Misstrial
No wonder you pay so much for milk!
Yep but its so worth it.
http://www.ppnf.org/catalog/product_info.php?products_id=226&osCsid=0bda1f27b
~Misstrial
Hi Cobradriver, take a look at the Organic pastures site, http://www.organicpastures.com. They go into detail how clean their milk is, much cleaner than factory operations and all the cows are grass fed, and never get crowded into dirty sheds for milking.
I’m basically lactose intolerant, but raw milk goes down fine, and it “appears” to be much better for children. If you are interested, check the studies of Weston Price, and the stuff at realmilk.com.
I don’t know who diagnosed you, but raw milk contains lactose as well (for sure!). Also, you can take lactase with lactose-containing products to reduce or eliminate the symptoms (cramps and flatulence because of your inability to digest lactose).
So if you’re having an issue with homo milk :), I’m not so sure it’s the lactose.
Then again, I am not a biological scientist.
I would NEVER give raw milk to a child under 15, because of the risk of e coli contamination. Children do not do well with food poisoning.
And if you haven’t heard, NEVER EVER feed honey to a baby. Honey contains botulism toxin spores–harmless to most adults but DEADLY to infants.
Where do you folks live? Beverly Hills? I pay $2.69 for milk I feed 2 people and a cat for $150 per week. And I do not eat filet mignon, but I do get Copper River Sockeye and tasty T-bone steaks.
$150/wk = $650/mo; txchick57 spends $800/mo because she has plural cats and plural dogs and (here’s the clincher) shops at Whole Foods at least some of the time.
Whole Foods=Whole Paycheck
Whole Foods=Whole Paycheck
In LA I’m closer to txchick for four people, two adults, two kids. I do the non perishables at Costco and the organic fruit when they have it. The rest is Whole Foods. You can feed your family mostly organic at a reasonable price if you are creative. I also buy non organic if it is locally grown for energy saving reasons.
Running $2.18 a gallon here in Minnesota….gotta buy it in 1/2 gallon bags, though and spend two minutes putting it in a half gallon juice container.
I am really a tightwad.
I thought it was illegal to sell raw milk?
Anyway, it should be cheaper per gallon. Milk farmers are getting $20 a hundred weight (about 8 gallons) of milk.
Last year I got less than $12 mailbox check. Last month I got $16.51, this month $17.89. If we experience a minor drought, the milk this winter will go up another dollar (forget about the price if it is a major drought). It is difficult to store hay,meal or corn if its not growing. In the past, a neighbors excess crop was available, now the total US demand exceeds the crop available.
Nah. I used to have the current info on this subject, but there are states that permit the commercial sale of raw milk. CA is one, Oregon is another. Arizona does. NM does. There are other states too as well as those states that forbid its sale based on technology from the 1940’s and prior. Laws need to catch up to technology since milk is not taken from the cow the same as in the past.
Some people cannot drink milk unless it is raw. This is particularly true of Native Americans who, depending upon their descent, lack the gene to process pasteurized milk. there is a book written about this - not sure if you can get it on the internet via eBay or Amazon: The Milk of Human Kindness Is Not Pasteurized by William C. Douglas, MD.
~Misstrial
Oh, another kick in the teeth: Regular gas in northern burbs = $3.30/gal . Go 15 miles north it drops to $2.95 across the Wisconsin border. I am 99.9% sure there are no tax differences. The F$^&* stations are CLEANING UP! Grrrrr
$2.82 in KC
I live in Wisconsin and I have not seen it below $3.00 in months. One of the reasons that the gas price is cheaper at the Illinois/Wisconsin border is that Legal Aliens get Wisconsin business tax breaks that are not available to US citizens. But that amounts to .07/gal. Wisconsin also has several different gas formulae depending where one lives. If in South Eastern Wisconsin - the formula requires 10% ethanol which makes the gas ~a dime more expensive than in the North or West parts of the state where blends are not required.
I am very slightly tempted to use farm diesel (exempt from road use taxes) in my truck, but the penalty is far greater than I could possibly save over the next 5 years.
“I live in Wisconsin and I have not seen it below $3.00 in months.”
That was true when I typed it, went to get gas and it was 2.99 - My Bad!
There are BIG differences in the state gasoline tax from one state to another. Wisconsin could be that much lower than Illinois. There’s around a 20 cent difference in gas prices between NC and SC (SC is less), and I’m sure it’s not a reformulation or distribution issue.
Wisconsin has significantly higher states gasoline taxes than Illinois. However, many counties and municipalities in Illinois tack on lots of extra taxes. I’m sure Wisconsin is the same, but perhaps not to the same degree.
Illinois Bob should be happy he’s filling up in the northern burbs. Inside Chicago, regular gas is about $3.65 a gallon (I walked past one of the very few gas stations in the city yesterday). Quite frankly, most gas station customers in the city are taxis and city dwellers that never go to the burbs. Back when I had a car, filling up in the city was only when I made a planning mistake.
Also, gasoline is cheaper just across the border in Indiana as well. A few years ago the price difference was much larger than it is now; I suspect Indiana increased fuel taxes in the past couple years.
Of course one last note - the major refinery that serves Chicago had an accident last year and is not operating at full capacity. This is the reason the Chicago area has close to the highest fuel prices in the nation so far this year. Perhaps southeast Wisconsin gets their fuel from a refinery that is running smoothly.
Oil companies love them accidents.
Oil companies love them accidents.
Tin foil hat crap. I have loads of friends working in the oil and refining industry, from pipefitter to division head. None of them like accidents. Anywhere. None.
They don’t even like to see accidents at the competition, even though that can temporarily mean more dollars in the pocket. It’s kind of like seeing your rival sports team get in a bus accident on the way to your game. Not something we wish on others.
“It’s kind of like seeing your rival sports team get in a bus accident on the way to your game.”
It’s also kind of like seeing the entire U.S. voter population mobilizing against your industry.
http://en.wikipedia.org/wiki/Exxon_Valdez
EPA requires more expensive summer blends called RFG (reformulated gasoline) for certain areas on the country to reduce emissions. At the fringe of these regions there is a steep price differential. Anyone who lives on the fringe benefits from driving to the gas stations just beyond the EPA-RFG zone/border.
FYI-most gas stations are lucky to cover their costs for providing gasoline services & make a profit on the store items & auto repair. Thus gasoline becomes a low-price leader that brings you in to buy that overpriced pack of gum!!
the stations aren’t cleanign up, for most Gasoline is a loss leader.
So the more they sell the bigger their loss? Not likely.
Actually, very likely… the gas stations get hit with higher fees on credit card transactions. When gas prices go through the roof, the fees on transactions go up as well, sqeezing their profit margins. Most stations make less than .10 / gallon markup. If card fees go up, profit goes down.
Many small gas station businesses are going under for just this reason. Higher gas prices, lower profits, less traffic for high-profit goods like food/lottery/cigs. I’ve studied this business, as I wanted to purchase a turn-key business I could manage part-time while still W2 employed and I’ve seen a number for sale of late. There’s a reason they are for sale.
I do the books for a gas station. We lose on gas when you add in overhead. Right now we are operating on a $.156 margin per gallon with our last load. Out of that comes cashier pay, lights, rent, credit card fees (that alone is almost $.06 a gallon right now). Here’s a hint when prices are going down go to the high-volume station which gets a load every day. When they are rising check the prices at the smaller low volume station that gets a load every 5-6 days. We’re low volume with a repair facility and right now we’re low station on the street.
A quick question since you seem to be familiar with this gas station industry.
When a hurricane (or take your pick of scenarios) hits that raises gas prices, why do gas stations IMMEDIATELY raise their prices? The gas in the storage tanks already have a fixed cost so I assume this is guidance from the franchise or perhaps you can better help me understand this phenomenon? I only ask because my dad and I were talking about this and I would like to report back to him your insight. Thanks!
Hard to say exactly.
But think of it like this. Suppose you buy gold at $400 and sell at $410 every day. Then one day gold goes to $500. Should you sell the gold you bought at $400 at $405? Why?
How about if gold falls to $300…do you think you’ll still be able to sell your “load” at $405? Or do you think you’re going to be stuck with it.
Auger,
Since I started doing the books for this station the gas prices we get at delivery started acting like commodity prices. We get the terminal price sets every night around 6:00. If we get a delivery the next day (we don’t order - THEY just send whether we need it or not) that’s the price. The terminal price will move during the day so the jobber might make (or lose) a few cents. But, back 6 years ago we used to go weeks without price changes. What you have is some high volume stations now moving price in anticipation of replacement cost. The little guys pay some attention to the street price set by the high volume sttions but generally are happy to get their set margin based on what’s in their tanks. For example, today we were $.10 lower than the rest of the area for much of the day because we were working on an older load. Got a delivery (still had about a days inventory) and when time permitted we moved up to match the rest. We’re trying to follow the street to some extent because we get killed when prices drop, but don’t jump hoops to do it.
The oil industry makes about 13 cents per gallon. Government, states and feds combined are north of 40 cents per gallon.
One point frequently overlooked about the oil industry is that oil companies are a vertical monopoly; they own the production, the processing, and the selling. When oil prices go up, they are simply paying themselves more for oil they produce. Pretty nice work if you can get it. Don’t think this is true? Just look at recent oil company profits vs. the barrel price of oil. Supply and demand have (almost) nothing to do with it. Standard Oil was broken up years ago because it was an abusive monopoly. In recent years we have seen the re-consolidation of the oil business into just a few companies. Is this good for the economy? Is it time to break the vertical monopolies again? The Arabs and the oil companies both love it when the barrel price of oil goes up. What’s to hate?
Steve,
You are way off. Only the super-majors are even somewhat vertically integrated, and most production is now controlled by national governments. Saudi Arabia, Mexico, Venezuela, Nigeria, all nationalized.
I’d like to see someone accurately divide Exxons last year $50 some (?) billion dollars corporate profit by the total yearly gasoline sales. I tried and got a lot more than 15 cents/gallon.
(The company profits are easy to get. The consumption is much harder. I’ll stipulate I probably made a large error.)
Matt:
It’s hard because XOM does a lot more than just sell gasoline. 40% of their production is natural gas and they don’t split profitabiilty by gas and oil. Assuming they get the same margins from gas as oil, they make about $7.50/barrel or about $0.18/gallon on global liquid sales. Margins on gasoline are higher than that but not much and out of a 42 gallon barrel of oil, about 20-30 gallons of gasoline can be made and the rest becomes fuel oil, tar, etc.
That’s based on their total gasoline sales (they only pull about 1/3 of the oil out of the ground that they sell–they purchase crude from other oil companies (mostly nationalized oil companies of OPEC nations). Far more is made on the pulling the crude out of the ground than converting it from oil to useful products.
Thanks!
All this b*&ching about prices. Solution? Buy precious metals bullion, invest in Argentine farmland, maybe buy TIPS, invest in stocks (they are a hedge against inflation) and no need to complain.
You forgot longer-term Treasurys, which in a rising rate environment are a hedge against capital gains.
LOL!
$2.73/gallon in the Twin Cities (Minnesota). We get a hefty portion of our oil/gasoline via Canada, which is cheaper.
Speaking of which, there’s plans afoot in South Dakota to build the US’s first new oil refinery in 30 years. Refining Canadian oil.
“We went to the grocery store yesterday. Wheat germ that was $3.25 last spring was now $4.93. Three weeks ago it was $4.29. A gallon of skim milk was $3.45 up from $2.95. Thank goodness for low inflation. ”
Thank goodness they strip food & energy prices out of “core” inflation. As we all know food and energy aren’t “core” essentials to human existance, flat screen TV’s are and inflation on them is in check.
Bweek article in passing notes that a key reason why core inflation is tame, but not really is because rent inflation is compensating for higher inflation is other parts of the index. Why is rent down? Because all the HD-fliptards are now HD-floplords!!
on friday when intel was up one dollar i felt rich again and went to buy some new sunglasses. i went to an eyeware boutique where im friends with the owners. first they wanted to sell me some frames at 430.00. no way. i found some cute raybans for much less. i stopped in to another store to save on perscription and found my same glasses for 65.00 dollars less.
out of my mind.
i’ve heard of wholesale and retail, but this “super retail” is nuts. i will never shop on the 101 again.
Someone posted a few days ago, when I questioned the fake government inflation numbers, that I was talking “puke” and inflation numbers are far more complicated than most think. Really? All I know is that when I go to the market, 1 pound of apples costs $1 more than a year ago. Gas is over $1 more than a year ago. Fish is in the price realm of ridiculous. Milk costs more. Movies costs more. $7.50 a year ago - $9.50 now. I could go on and on. However, that drill I bought about a month ago (Made in China) costs $50. Five years ago it would have cost $70.00. On the other hand, I don’t buy a drill every day but I do buy milk, fish, bread, gas and go to the movies once a week.
Oh, yeah. These government figures which are arrived at are far more complicated than we average citizens think. We should obviously leave it to the experts to work out this complicated stuff. B.S. It’s simply government manipulation to obscure the truth. The poster who said I was talking “puke” must be a economist and we all know how correct they can be.
Oh please, yes movies cost more. I haven’t been to the theatre in awhile, 2 cokes and a large popcorn? 17 dollars! Plus the cost of admission.
Why go at all? You’re just making a bunch of Hollywood types rich.
Mike, I agree 100%. BTW, the reason fresh seafood is so expensive is fuel price increases (commercial boats spend big bucks on fuel) and government regulation, i.e. catch limits, days at sea limits, etc. The government, in the name of conservation, is limiting supply artificially, thus driving prices up. I’m not one to complain about responsible environmental management, but the current methods of conservation management are making fresh seafood affordable for only the wealthy. Let the masses have farm-raised talapia…
If you’re curious of the state of fishing in New England, there are now considerable catch limits on dog fish, skates (wings), monk fish (tail), hoddock, etc. The only species going gangbuster these days seems to be scallops (because of recently opened beds).
So you’re saying all the information about overfishing having depleted the stocks to near-unsustainable levels is bunk?
Probably foreign fishing
TJ, I’m saying if you want to know why seafood prices are so high, look to the mismangement by Fish & Wildlife. Depleted stocks are a huge problem, and overfishing is certainly a big part of that problem, but it is an economic issue at heart.
What happens when you tell a bunch of captains/boat owners that you can only catch a certain amount of this stock and can only fish a certain number of days on that stock, etc? The boats expand what they can catch to make up for the shortfall. They start targeting other species: i.e. a lobster boat that twenty years ago made a living just catching lobsters, now sets gill nets on the off season. When the quotas for monk fish get too severe, they turn to dog fish (used to be a junk species, same as monk) and skates. Now all those populations are under severe regulation due to depletion.
Not unlike housing, there are a number of economic factors involved in commercial fishing: fuel prices, labor, interest rates and insurance costs, market prices (i.e. supply and demand), and lastly government regulation. The problem I see is the science behind the regulation is hazy at best, while the economic impact is huge.
I’m not saying the government shouldn’t regulate, I’m saying the government needs to do a better job of understanding cause and effect, of predicting the economic impact of regulative action and of firming up our understanding of fish population dynamics. Imagine the chaos that would ensue if our government made mistakes in other areas they have limited understanding of, but would have profound economic impact… say like setting interest rates too low for too long… oh, they already did that.
Garbage. Inflation is incredibly easy to understand. It’s an increase in the supply of money and credit which dilutes the purchasing power of each unit of money. The idea that inflation is complicated is perpetrated by those who do not want us to understand what they are doing to our money supply.
Refer people who want to understand what money (and inflation) is to this book:
http://www.mises.org/money.asp
There are huge incentives for the gvt to under-report inflation, your eyes aren’t deceiving you. Putting on tin foil hat here- they’re always talking about inflation “expectations”, as if the perception is really the thing they need to manage, rather than the actual devaluation of our currency. Perhaps the poster that called your comment puke was one of the people involved in managing perceptions?
That was me calling your argument names because it was utter junk. Yes, inflation is big and much bigger than the government says. No, this is not a plot or a conspiracy. The methodologies used to calculate inflation along with the mistakes that have been made are all posted. They are mostly measuring children’s toys from China instead of actual core things because they are misguided and because those numbers at one point looked better than gas and milk. If you measure only gas and milk you get extremely spike ridden data that is not only distracting, but almost impossible to base policy on since it jumps around so much.
Look at how convenient it is for you to change your point. First you have a conspiracy that you have found. Now that someone has countered that you merely assert that the calculations are off. I should try to go diplomatic at this point, but I think I am more right than ever. Looking at inflation calculations and numbers and claiming a conspiracy or plot, as you did if you will go back and look at what you said, is wrong, lame, stupid, child puke, you name it. You should know better.
This bubble is not about how pulling numbers out of the air is cool and fun and wonderful. This bubble is about how removing yourself from reality and reason and calculation makes a huge mess. Not cool! Child puke I say again! Just like real estate never goes up in that it is an utterly false intentional distortion of the truth intended to manipulate.
You’re right, the information is out there for all to see. Like the NAR’s mantra, though, it’s the spin that counts because that’s the only thing to which the sheeple pay attention.
DC & Wall Street willingly spew this propaganda because it serves them to do so. Conspiracies require some level of secrecy, and there’s none to be found here.
Floriduh tax revolt gaining speed. These clowns in Tallehassee can’t even make the REIC happy. Personally I’m delighted with the result that will help drive down prices and speed the exit of speculators from the state.
http://heraldtribune.com/article/20070617/BUSINESS/706170889
Yahooooo! It’s a tax free-for-all in Florida.
This story is amazing. The local Florida homeowners are trying to legislate tax reform which ultimately chases away the snowbirds. Result, thousands of additional home sales further drive down the price of Florida housing.
‘Sort of like cutting a hole in the bottom of your boat to let the water out…
The homeowners couldn’t possibly do a worse job than Tallahassee. Actually, the homeowners should get what they want and then have to face the consequences. It would be interesting to hear the point of view of someone who is both a Florida homeowner and landlord.
Why are taxes so high in Florida? Is it to fund the homeowner insurance fund? I know that many insurance companies have pulled out.
Taxes are high there in part because there is no income tax. They’re going to get it one way or the other…
palmetto,
All i know is this. The local governments have freakin screwed the landlords on larger properties like you cant believe.
Cape Coral tried to pass a school tax increase a couple of years ago. The people voted the tax down overwhelmingly. What does the Cape do ??? Double the tax on commercial properties. Think about that…DOUBLE.
It jacked up our expenses so bad on a couple of larger units we had to pass the increase the next month to the tennents. There is a clause in our leases that allows us to jack up the rent the exact amount of the increases.
The tennents were not happy. What was better was i gave all of them a letter explaining the increases and who to contact at city hall. The people in the tax office were not happy.
Then Cape Coral wonders why there are no affordable rentals in the freakin city…WTF ????
Chris
They also want to get rid of young people and businesses.
Great plan.
Get rid of everyone who actually contributes something to the community, or brings new money/life into the area. Let’s also get rid of anyone gainfully employed, and then we can just truly give FL to those sitting here waiting to die.
What a crock; using tax law like this to target certain groups of people is wrong, and was never intended to function in this manner.
Why is selling oil leases out of the question? Dubai has oil drilling rigs/platforms and is a very very high end playground ($6k -30k for hotel rooms). :/
~Misstrial
Because the western folk who run those oil drilling rigs need security and thats why those hotel rooms are so expensive.
The constitutional amendment will not be passed. The state legislature knows that. This is all about buying time and appearing to be doing something about the problem. The vote will be in late January 2008. Taxes are assessed January 1st. If by some miracle it passes the tax reductions will not be realized until the 2009 tax year.
Can someone please explain to me the mind of a seller. We’ve never sold a house so I really can’t put myself in their shoes but i would like to know what is going through their minds these days. Houses are not selling, their slow to reduce prices ( or just won’t) and interest rates are rising. Why is it so hard to figure out if your house isn’t selling…lower the price…hoenstly that’s what I’d do.
Why are they insisting on holding out for a price their not going to get. I understand the trade up mentality. They want to get the most for their house as possible so they can afford more for their new house but come on….when does a seller get it into their head that their house just won’t sell at the current price. Do realtors have any influence on this. Shouldn’t they be the ones pushing for price cuts? Especially at this point in the season.
Not trying to be sarcastic …I really want to know what goes through your mind when selling a house.
Would it be really wrong of me to print this page out and put in the mailboxes of houses I’ve been watching.
http://www.news-press.com/apps/pbcs.dll/article?AID=/20070617/RE/706170316/1014/BUSINESS
You’re not supposed to put anything but delivered US Mail in the box, but there’s no reason you can’t fold it and slip it between the box and the little red flag.
Or he could just mail it there…
I’ve never sold a house either but I can’t imagine it is a lot more complicated than what you already said. They will have some different emotional reasons depending on their situation. An investor/flipper doesn’t want to take less because he is invested in his picture of himself as a brilliant business person who gets x% return on the investment while a person who has lived in a house for a long while may have translated their emotional attatchment to a dollar figure which makes anything else “giving it away.”
Then there are just the folks that think the prices are going back up any second now.
and the ones who can’t afford to sell at market price because they don’t have the money to bring to closing.
Agreed. Also, I’ve run into a large number of sellers who just cannot accept that real estate doesn’t always go up. For them, it would be like denying ‘reality’ and ‘common sense’. The idea that they can lose money on RE is one that is violently rejected without a moments thought. They will hold on to their ‘wishing’ prices until they are foreclosed (even when by lowering their price they could sell and break-even).
proving once again that no house is worth the asking price until somebody signs on the dotted line. you just can’t convince anyone with a pulse that they need to pay 300K for a 3 br cookie cutter shack.
A quick anecdotal. I went to visit a friend who is going through a divorce so their house is up for sale. They live in a spendy neighborhood on an upscale golf course SW of Minneapolis. I think we are talking 1.6m and up prices and perhaps I’m on the low side. Anyway, they can afford the house but want to sell for obvious reasons. It has been on the market over a YEAR now with only one person interested (or even looking) and he was a mortgage fraud case (looking for a couple hundred cash back over listing price). My friend was smart enough to shoot that idea down, thankfully.
I also mentioned that at a 3 to 1 ratio of gross to purchase price, he was in pretty rarified air given the number of homes above 1.0m that exist all over the state compared with the number of folks making 300K+/yr. I think he is starting to get an idea that this won’t be a money making transaction. Oh well!
Oh, on the way into his community I noticed that 3 other houses ,out of the ten I passed by, are for sale as well. Some were nicer houses than his but he has the better view.
I asked him about this idea of going a whole year without any bites and he spits back the realtor line about how at this price point the buyer (being rich) is price insensitive and the only thing to do is wait.
I immediately asked him if he thought it would sell for 500K? He of course said he thought it would go the next day. I then said that we have established a base price now he just had to move down from his current pricing until he found a price that would sell in a month or two. The look on his face was priceless!
I personally think that these communities are going to take a HUGH hit in prices going forward. These are recent builds maybe 3 years old or so. I think he has about 25% of fat built into his price before he gets to the mortgage/downpayment money. Not good but he does have some room.
I like spendy for trendy to denote the under-accumulators of wealth (UAWs). I think I’ll use it.
We dealt with a couple in this situation recently. They are determined to “break even” after using their home as a Visa card over the past five years. They were frustrated, confused, angry and exhausted after 5 months on the market with only a handful of visits and our low-ball offer to show for it.
But in addition to serious financial constraints, there was some seriously stubborn psychology at play. After rejecting our offer, they switched from a flat fee listing to full service MLS contract… now they have to get their asking price to even match what they would have taken home with offer sans agent.
A month later, the market has dropped off considerably and they are realistically looking at a $50k shortfall in terms of market value less transaction costs vs. what they owe.
I breathe a sigh of relief daily, grateful that they didn’t accept our offer.
You’re implying that your offer was around 6% below asking. How is that “low-ball”?
I knew a RE agent in the early 90’s who was refusing to take listings if the price was too high. She told me that it wasn’t worth her time and/or money if the price was unrealistic. Sadly, that woman passed away several years ago. I don’t know if there are others like her out there during the current downturn. From the looks of my local classified ads, I think not.
Yeah, Mae Roy, broker of Mae Roy Realty in Gorman, CA.
One of the last of the old-time realtors. She was disgusted at “today’s realtors” and felt that they were out to sell at any time, any price, ethics aside. She has since passed away; may she rest in peace.
I look back at my conversation with her as one of the great moments of my life.
~Misstrial
Mae Roy, broker of Mae Roy Realty in Gorman, CA.
There’s a real estate office in Gorman???
Yeah, used to be. May’s little building was near the split off at Cuddy Valley Road. Now there are 2 main realty companies:
Pine Mountain Realty and Mountain Properties. These 2 pretty much have the market for Gorman, Lake of the Woods, Pine Mtn. Club. there are other realties of course, but these 2 have the most listings.
~Misstrial
My parents bought their house from her in 1977. She was a great gal. That is crazy to see her name on here…
what a small world.
I honestly thought that Gorman was just a gas station.
Amazing not only that there are/were houses out there, but that two people on this blog actually have experience with Gorman Real Estate
I’m speechless
As a kid I was a realtor for a year. My office manager wouldn’t allow listings not supported by comps….which in those days meant hours over a microfiche, ferreting out recent sales, comparing amenities, measuring, taking photos….and arriving at a price as precise as the above could support. Her statement was that overpriced homes simply sold other people’s listings which were correctly priced. As a new kid, I had to run every tidbit of data past her eagle eye.
I agree with polly. I would like to add, after seeing hundreds of vacant homes/condos sit in Las Cruces this weekend, I think it boils down to other factors:
1. Some sellers have a lot of cash/assets stockpiled and are hanging on and waiting for that one dumb FB to come along and pay them what they want. Remember that report a year or so ago that stated 10% of the country owns 90% of the assets? Well, they are drawing on those assets to stay in the game. How??? Well they are draining their retirement funds, investment funds and selling other assets like cars. Do an eBay check and you will find many Cartier watches for sale - much more than usual. (I have been watching Cartier sales on eBay for about 1 year now.) There was an article recently about a Florida couple who are going to run through 160k to support their 3 mortgages and they will run out of cash in less than 6 months (their costs are about 40k per month). Funds that were closed last spring/summer are now open: like Fidelity Balanced Fund - people cashing out to support the RE albatross.
2. Those that are not lowering their price probably know they should but don’t want to take any financial hit, either due to pride (as polly posted) or because they just do not have any cash available to put towards their “investment.” Remember, many borrowers took out toxic mortgages because they intended to just flip these homes. They are not financially prepared to hold these properties for any length of time and will wind up getting foreclosed upon.
~Misstrial
That is a really interesting point - that people may be tapping their retirement accounts to hold on to the real estate. Since retirement savings don’t go into the overall savings rate numbers (someone said here that this is because 401K’s etc are a sub for old defined benefit plans which weren’t counted, yes?) presumable taking money out of them isn’t counted as a negative either. Is this another stealth number as to where the fairly steady consumer spending numbers are coming from? People are raiding their 401K’s and IRA’s to buy stuff to “stage” the house. I’m sure that increased prices on inelastic purchases are the bigger part (see milk conversation above) but we are still in the denial stage of this crash and people do dumb stuff when they are in denial. Besides there are all those TV shows where a well staged house always sells…
Speaking of which, the whole staging thing is nuts. Your house shouldn’t smell bad (who knows if that pet urine is just a recent accident or has soaked into the floors), but can people not imagine what a refrigerator would look like with their stupid magnets on it instead of the owner’s stupid magnets on it.
An infomercial came on late last night, aimed as people worried about not having enough money to retire on. After all the dismal statistics, the pseudohost introduced his partner in crime, some idiot woman who claimed she had bought a townhouse a few years back against everyone’s advice (they warned she was overpaying for it), but that since then, she’s refinanced twice, taking a million dollars out each time, and now her townhouse has been appraised at twelve million dollars! The audience was in raptures. The gist of the program was that everyone needed to get into real estate right now.
This morning I passed two signs proclaiming a seminar or lecture on how to get rich in real estate.
I guess the idiot woman on the infomercial doesn’t realize that at some point she’ll have to pay the two million back, and that the twelve million estimated value is a crock. Or maybe she does, but she’s just trying to rip off the last sucker. For the people offering the seminar, I’m sure they will offer properties (theirs) to their audience at alleged bargain prices, with “instant XXX equity upon signing.”
I heard yesterday that one of the most prestigious architectural firms in town is laying off “non-essential” employees, and postponing the building of its new headquarters.
So much for the road to instant riches–at least in ghastly Tampa.
but can people not imagine what a refrigerator would look like with their stupid magnets on it instead of the owner’s stupid magnets on it.
I think you will find most people have very little imagination when it comes to these things.
Why else would builders hire actors to live in model homes?
“…lower the price…hoenstly that’s what I’d do.”
A multitude of sellers who either tapped into the housing ATM machine too often during the bubble runup, who bought since 2005 at 100% LTV or who exercised their I/O Option ARM at the minimum payment level are currently underwater. These people would rather keep denial alive by keeping their homes listed forever at prices where they won’t sell, than to face the grim reality of lowering the list price to market value and learning how much money they need to bring to the closing table. Many of them will simply wait to be foreclosed rather than schedule their own execution.
Well stated.
~Misstrial
I know people who got within 1 week of foreclosure due to job loss and apparently never even considered selling the gun collection, the photography gear collection, the fancy motorcycle, the three other hobbies worth of toys, etc.
Maybe that is their stash of wealth intended to be used for rent & security deposit when reality strikes…
One Word…entitlement
Totally agreed…
Yeah that’s an interesting word there. It’s evolved a bit over the years. When I originally heard it used, it referred to welfare recipients who supposedly thought a regular check from the government for doing nothing was their right. Interestingly enough, my own personal experience from living amongst the poor when I was going to college was that almost every welfare recipient hated being on it but had(or believed they had) no other options. Gratitude was more the mentality of the day. Not universally, but there was certainly more of a sense of gratitude than entitlement. BTW, this was in New Mexicao in low income apartments(all a starving colege student could afford), so YMMV.
On the other hand, we now have a whole class of people who seem to feel entitled to a lifetime of luxury and opulence for nothing because Paris Hilton has it and they were ever-so-savvy enough to buy some shiatty property on an IO loan. I think many of whom likely take their marching orders from the same windbag who used the term entitlement to refer to the above mentioned welfare folk and thinks said folk should be grateful that ketchup counts as a vegetable in their kids’ school lunches.
Having been on both sides of the ideological fence(I currently sit ON the fence), I now believe the I/O investment genius shares far more blame for a hard working, responsible saver such as myself not being able to get a house to live in at a price that has any chance of being sustainable.
So to all you farqtards out there who lived and promoted the “greed is good” philosophy, I fart in your general direction.
Pilot and retired teacher couple just refinanced on a home they purchased just 4-5 years ago due to his airline pay being cut several times. Refinancing going to keep the kids in Abercrombie, and Mom got some new furniture. This after they were “struggling”. (She never did get that job….thought it would be too much with the 3 children)
Of course, their kids are known as terrorising the non-Abercrombie types in school, clueless to the fact that they themselves are barely hanging on. I think I speak for more than myself when I say it will be enjoyable watching them go down….as well as a few other climbers they hang with.
What may go through their mind is that because of their negative amortization loan they now owe 30K more on the house and do not have the money to bring to closing.
bridgits,
There is a field of study devoted to the kind of question you asked. It is called Google the term and read to your heart’s content.
Sorry, something went wrong with the above post. The term is: behavioral finance.
I looked at the market, with 10-11 months’ supply of houses listed in MLS, and decided to bring the house to market for $10K under “market”, then be willing to drop another $5K within a few weeks if we don’t get many showing. Then another $5K within a few weeks after that… Eventually willing to go to $220K-225K for a house with a “market comp” value of $250K.
Well, the realtor shows up and talks my fiancee into lisiting it “at market”. She (finacee) got more than a little pissed at me for “arguing” with the realtor over what it should be listed for.
After a week, with only 1 showing, I spoke about the need to whack that $10K off the price if we don’t get many lookers at our open house next weekend. Fiancee doesn’t want to hear it. Damange is done my the realtor, attaching my finacee to the “market” price.
Now I’m starting to doubt we’ll ever sell. Fiancee is more and more attached to the house, and the $250K selling price.
Why not go below $220K? Because I think the house will be worth $150K 2-3 years from now. With 10% costs, $220K is really more like $200K, and moving a few times, renting for a couple years, risk of buying at a much higher interest rate, etc. is not worth less than $50K to me. It seem to her that it isn’t worth it unless she’s (finacee) is getting at least $80K.
We love the house and don’t “need” or even want to sell. Possibility of selling for obscenly inflated price is the only thing motivating us.
That’s an interesting story. Wonder if there’s a lot of it going around. (Listing just to try to get the obscene price.) Too bad we can’t diagnose what fraction of listings are like yrs.
I’d really reconsider if I were you, if youre cost basis is that low, why not just keep it? Moving, dealing with a Realtor, and re-timing the market would not be worth it if I already had a low-cost basis. Esp. if it starting to hurt your relationship.
“Why is it so hard to figure out if your house isn’t selling…lower the price”
The simple answer is - for a variety of reasons, they can’t.
Maybe they have another house on contract that they’ve agreed to pay $650k for. They’ve qualified for a $500k loan, and are counting on $150k “profit” from their current home to make up the difference.
Or, they’ve HELOCd the shiite out of their current home, and for some reason, can no longer afford the payments. Selling at a lower price would end up with them owing the difference if they can’t get the bank to agree to a short sale. If they do get a short sale, they end up with tax liability on the amount of the debt forgiven by the bank.
These are two that come to mind immediately. I’m sure there’s more.
“Why are they insisting on holding out for a price their not going to get.”
They simply don’t believe they won’t get their price - not until they’ve acquired some months of experience from *trying* to sell at that price and failing.
Also, one heckuva lot of folks haven’t a clue that RE is tanking right now. The concept is inconceivable. Everyone knows that RE is the best investment you can get into, and ‘best’ does not translate into ‘marking my house down in order to sell it’. So a suggestion to mark the price down for a fast sale is seen as idiotic, ignorant advice.
It’s driving me nuts, how many of my relatives and coworkers are jumping into the market _right now_. They’re making all the mistakes we’ve talked about here. Not a single person researched market trends before making the decision to shop/sell. Once they’ve committed themselves to entering the market - especially once they’ve made an offer or listed their home - they do _not_ want to hear the grim news. And they *don’t* want to change their plans.
On the other hand, the folks who thought they’d been priced out forever, and who have thus been following market trends, are rejoicing. Those people will be the RE winners in the next few years.
I have a relative in FL who wants to sell and move to the Carolinas, closer to his grand kids. Instead of being realistic about his price, he is telling his daughter he will be moving “if it is meant to be.”
He is not a FB; purchased more than a decade ago and is sitting on 100’s of g’s in equity. But still, his mind has been poisoned with the idea that the building is his retirement lottery ticket.
He will prolly keep chasing the price down year after year until his grand kids are in HS, and only then will he realize how irrational he has been.
Got 10% down?
I used to be a realtor and I can tell you that when a seller gets a price in his head, it’s hard to change his mind. I used to bring a homes guide with me and point out houses that were the same price the seller was asking and ask them which house they would buy for the same sales price. Some would lower prices, but most would not. I used to tell them, we’ll try your price for one month and if there’s no action then you need to lower it to the price that the market will bear, or I’ll give the listing back. The ones that don’t lower the price are the ones you’ve seen go thru 3 or 4 realtors, after a year lower the price, then end up getting way less than they would have had they priced it right in the first place. Everyone thinks their house is special. What they don’t get, is that it is special only to them. No realtor should want an overpriced house, unless they just like to see their names on signs. Zero sales is zero commissions.
I agree ghostwriter. Every single person I know who’s put their house on the market this year has plenty of equity in it. They can afford to lower the price and still make a ton of money. They are not “stuck” (yet!).
However, all feel their house is “special” (ahem….er…) and there seems to be a bit of egotism and narcissism involved.
So they stick with their plan of optimum riches and lower the price every so often. What’s really interesting to me is that they don’t seem to make the connection between their having to lower the price and an inkling that perhaps the market’s tanking and it might be time to sit up take notice and deal with reality effectively.
So, while there may be people out there who “can’t” (??!!) lower the price, there are many others who simply *won’t*. The classic death by a thousand cuts.
I’ve gone through this several times…including the big Austin bust in the late 80s. Basically, people want to move up in their next house to as high quality/location as possible or get as big of a pile of money along with downsizing. BTW, if you can pay off the bills and accompish either of these, that’s a big plus too.
So, what happens when you don’t get your wishing price? Denial, anger, etc… you know, over the course of about 1 year. If you need to sell, you get rammed through the process faster. If you don’t need to sell, you hang on and on and on.
The interesting thing is, even if you lose money, if you get out, you probably can find an equally good or better deal (reduction) on the next house you want depending on your exact situation. Indeed, find someone who capitulates later and into a worse market than you.
Of course, if you are upside down…there are only two painful paths to take - pay it down or foreclosure.
If you want to big retirement cash windfall…too late….sorry, keep working.
Then there is this entire entitlement and mine is better than my neighbor’s thing. It’s my house so it’s better than anyone elses. Esp if you lived there 10+ years or so… Went through this with my wife when we sold in Westchester Co in 2005 (lived there since 1996 bought at $325K + $70K of maintenance/improvement over time). House appraised for $550K in 2004. Went to sell in 2005…realtor says $750K (heh?!?). Wife says well $799K !! I say $650K-$699K, I mean I want to move…sometime within a year right?
$750K for 2.5 months….lot’s of showings, no offers. (in a pretty strong market, but one that was peaking - NY Magazine ran headline in May 2005 - Is your house like a .com stock!) End of July - my turn…cut to $689K….two weeks and two offers later…contract at $670K with more follow-on interest.
Today it is worse….the foreclosures will be depressing, even if you are not selling. If you are…you have to cut down to those prices with some potential for a little more if your house is immaculate and problem free (not even a loose doornob). We will soon run out of GFs…or at least they will become rarer…plus they never show up when I’M selling anything anyway
…
They become personally invested in their house price. It’s part of their ego. If they sell for less then they feel like they’ve lost something and possibly been taken advantage of.
“I’m not going to give it away!” is what these people say, even when talking about selling a house for 4x what they paid for it 10 years ago.
It’s the same with stocks, people often hold losers and plan to sell just as soon as they get to break even.
An interesting debate taking place in our state assembly regarding credit ratings and premiums:
Insurance companies would be prohibited from considering a consumer’s credit report when deciding whether to issue auto and homeowner policies or set premiums, under legislation proposed in the state Assembly.
http://www.jsonline.com/story/index.aspx?id=620817
regulation = stupid
always has negative effects
So now everyone will pay a higher price.
looks that way…yup
Insurance companies have checked credit for a long time. Stats show that people with bad credit will file more claims. However, here’s another crinkle in the housing market. If the buyer or seller of a property has filed claims, called and asked about covered damage, or has bad credit, the insurance on the property to be sold will either be sky high or denied altogether. Even if you do not file a claim, but call to ask if a water leak is covered, it is considered a filed claim and put on your and your houses record. One girl I worked with found this out the hard way when she paid for damage, because the estimate was not too high, but she had called to ask if a burst pipe was covered. When her insurance rates went up and she called, they said just because she called in, even though they did not pay, it was considered a claim. We had a seminar with an insurance company and she asked about it. They told us definitely this is done all over the country and standard practice. Some insurance companies don’t like it, but it is required to treat an inquiry as a claim. So beware of calling before you get estimates.
I call BS. Maybe the stats show that, but as long as insurance is required by law, only things directly related to a driver’s driving ability should be allowed to be taken into account.
Don’t like gov’t regulation? Ok, take away the regulation that forces me to pay for insurance(aka the mandatory tax paid to the collective oligarchy know as the insurance industry) in the first place, then you can talk about not regulating them.
Just because someone had a horrendous unexpected medical expense that their medical insurance wouldn’t cover does NOT make them a bad driver.
If this is true - insurance companies treating an inquiry (as to what is or isn’t covered) as a filed claim - then this would make the insurance industry the world’s largest Mafia, surpassing the American and Italian Cosa Nostra by at least one order of magnitude (in terms of revenues).
The FEAR of even inquiring about repairs would be no different than the FEAR of not paying extortion to the Cosa Nostra. In either case, there is a price to be paid. (Much higher premiums, or broken legs.)
IF what you are writing is true. Can anybody else substantiate this?
Got 10% down?
I think txchick57 has a point there.
The house across the road from us was put up for sale last spring as a FSBO for $550K. This spring, they got a realtor and had an open house. It’s still not sold, and the price is now $450K, but it’s too late. They chased the market down and failed to catch it at any point in the run.
This is a piece of country property, and it’s value is pretty subjective. It’s hard to find good comps, but I have to think either they are *very* stubborn, or their realtor was a Newb and didn’t see what was going on.
Realtors with some experience on them see the writing on the wall. If they were selling homes in the last buyer’s market (roughly 1992 to 1998 in our area), they know how bad it can get.
A lot does depend on the realtor. My wife and I have noticed that one realtor in town ALWAYS pegs her listings so that they accept an offer within two weeks. ALWAYS. This woman is so reliable that is has become a running joke between us. My guess is that half of the actual sales in Pullman this spring have been listed with this woman.
I’m also willing to bet that she turns down listings when sellers aren’t realistic. Thanks to this single realistic realtor, we still have a few sales and documented evidence of falling prices.
Funny ha ha. She gives the unproductive clients to the competition and her properties get to look underpriced by comparison. What about this isn’t understood by the competition? (Except for getting less commission on the non-sale that is.)
Paraphrasing a classic: “Let me do the math: 6% of nothing, carry the nothing…”
The article idented below has a very impressive lists of reasons that the U.S. is on the brink of recession (or worse). Anybody know anything about the authors of this article?
http://www.fxstreet.com/fundamental/analysis-reports/market-comment/2007-06-15.html
Mike Shedlock (Google “Mish”) has been predicting a bad recession/depression for several years now. Given enough time, his forecast, like any forecast, will come true. But will it be six weeks, six months or six years?
I will go on the record predicting bad earthquakes at some future point in time for both San Francisco and Los Angeles (assuming these cities still exist as political entities by then…).
“…like any forecast, will come true.”
I forecast that the entire universe will eventually turn into a giant umbrella. Can you provide an idea of when this will happen (because you said any forecast will come true, given enough time)?
Regarding the recession outlook, this is the eighth time since 1950 that residential construction has fallen off by 25 percent or more (currently off by forty percent +/- error). If we don’t go into recession within the next year or so, this will be the first time since 1950 that a 25+ percent drop in residential construction was not accompanied by a recession in the overall U.S. economy.
Given enough time, this exception to the historical relationship between residential construction and the overall U.S. economy, like any exception, will come true.
It’s like predicting the future of a meth addict. M3 is the meth of this economy. Can’t blame Mish for not nailing it down precisely.
What you’re saying was stated often and vehemently by RE bulls on this and other blogs for a while. Let’s see how long you’ll stick around - cuz we don’t see BeaconSt, LV Landlord and the likes here anymore.
From the WSJ:
They claim that ONLY 1.5% of the bonds backed by first-lien subprime mortgages from 2006 are in default. From what has been posted here (think Florida) they havn’t seen NOTHIN yet!
lls Deepen in Subprime-Bond Arena
More Downgrades Seen
As Foreclosures Ripple
A few weeks ago, the market for bonds backed by risky home loans looked like it was calming down. Now, problems are quickly mounting.
At Bear Stearns Cos., a group of hedge-fund managers at the Wall Street firm spent the weekend scrambling to line up new investors or lenders to keep afloat their fund, called High Grade Structured Credit Strategies Enhanced Leverage fund. The fund, which invests in many securities that are backed by subprime mortgages, suffered heavy losses in recent months.
The latest moves by Moody’s affected around $3 billion worth of bonds, which represent less than 1% of the over $400 billion in subprime mortgage-backed bonds that were issued in 2006. Still, it was the most aggressive action taken yet by any of the ratings companies — which some critics say have been slow to address the housing downturn — and could weigh on the already fragile subprime bond market. Some investors may be forced to sell bonds whose ratings were cut to “junk” from “investment-grade,” and some may have to write down the values of the downgraded bonds in their portfolios.
Around $36.5 billion in securities backed by second-lien loans were created by Wall Street last year, less than 10% of the $483 billion in securities backed by subprime loans that were issued, according to data from Inside Mortgage Finance, an industry newsletter. Most subprime bonds are backed by first-lien mortgages, which take a longer time to realize losses because their borrowers have to go through the foreclosure process, which could take months or years.
http://online.wsj.com/article/SB118213138637138666.html?mod=home_whats_news_us
“From what has been posted here (think Florida) they havn’t seen NOTHIN yet!”
To summarize that long post, are you saying subprime is still contained?
http://tinyurl.com/2vnrr4
Park Ridge agent Paula LaBree said higher interest rates may be, perversely, just what the housing market needs to get rolling again.
“I think the best thing is that interest rates could tick up,” La Bree said. “There’s no sense of urgency [among buyers]. If something else could create a sense of urgency — a third party, like interest rates — there would be a viable reason to buy now.”
Chicagoans Mike and Kristin Egan shopped for more than six months before making an offer about a week ago on a house in Libertyville. Though rates were a factor in the first-time buyers’ decision to act now, they were secondary to just purchasing something.
“We knew we needed to buy because we’re losing our shirts on taxes by not having any deductions,” Egan said. “But we’re trying to work on the best rate possible. Rates went up about half a point a few days ago. I am not pleased.”
“Lynette Briggs, who teaches classes for first-time buyers at the DuPage Homeownership Center, said the rate changes would be felt first in areas that already are nearly unreachable for lower-income families.”
“Look at someone who makes 80 percent of the median income, with a family of four, just under that $60,000 income range,” she said. “What they could have afforded a few weeks ago at 6.25 percent might have been a home for $238,000 or $240,000. That $238,000 was already a struggle in DuPage, where the median is more like $357,000.
I make $60,000 a year, have no kids and I wouldn’t extend myself out to $240,000 for a house. $210,000 tops! She wants someone with four kids to buy a house four times their salary.
–
Bernanke hints at thinking on housing
By Krishna Guha in Washington
Published: June 15 2007 21:13 | Last updated: June 15 2007 21:13
Changes in house prices could have a bigger effect on consumption than the traditional “wealth effect” suggests, Ben Bernanke said on Friday in comments that offer some insight into how the Federal Reserve may think about the continuing problems in the US housing market.
The Federal Reserve chairman told a conference hosted by the Atlanta Fed that, in addition to making homeowners richer or poorer, changes in house prices might influence the cost and availability of credit to consumers.
This is because people with equity in their homes have more at stake in avoiding default. That, in turn, reduces the premium char-ged by lenders owing to their imperfect knowledge of their borrowers’ financial circumstances.
If this theory is correct, Mr Bernanke said, “changes in home values may affect household borrowing and spending by somewhat more than suggested by the conventional wealth effect”.
http://www.ft.com/cms/s/4a24c1ec-1b67-11dc-bc55-000b5df10621,dwp_uuid=5aedc804-2f7b-11da-8b51-00000e2511c8.html
And this is a new idea to him?
Polly,
Fed Chairmen are always lagging indicators and they simply confirm what others have known 6-24 months prior when it comes to negative “news.”
Jas
With HELOCs generating 1+ Trillion $$ per year ($1.4 Trillion in ‘05), the U.S. homeowners have been on a spending spree that in unparalelled in U.S. history!! A recent article in the WashPost seemed to suggest that as much as 29% of HELOC $ was going into investments (Stocks?). Recently i read an article that at the current annualized rate, ‘07 HELOCs were on track to be “only” $151 Billion. To me, that looks like a reduction of about $1 Trill per year. The U.S. economy is in for some interesting changes.
“A recent article in the WashPost seemed to suggest that as much as 29% of HELOC $ was going into investments (Stocks?).”
What’s going into stocks now that the home equity ATM machine is shut down?
‘Changes in house prices could have a bigger effect on consumption than the traditional “wealth effect” suggests, Ben Bernanke said on Friday in comments that offer some insight into how the Federal Reserve may think about the continuing problems in the US housing market.’
Should we take this comment as indication that the Fed will work hard behind the scenes to quickly restore high rates of home price inflation (aka the home equity wealth effect)?
“Should we take this comment as indication that the Fed will work hard behind the scenes to quickly restore high rates of home price inflation (aka the home equity wealth effect)?”
*******
Yes, I would think so.
The comment by Helicopter Ben is cover should he and the “Do Nothing” Fed not raise rates in the near future.
In part, he’s posturing in opposition to remarks like those in The Economist recently that speak to central banks around the world who are in a tightening mood - with one obvious exception.
Has anyone else noticed a massive increase in lease-to-own or rent-to-own offers out there?
My wife and I went to a few open houses this weekend and some of the sellers were pitching rent-to-own options. We also notices hand-written signs nailed to telephone poles all over the place. These signs looked suspiciously like the “Real Estate Investor Seeks Apprentice” signs that covered telephone poles all over South Florida. I’ve also seen these ads in the newspaper and on Craigslist, for example:
http://fortlauderdale.craigslist.org/rfs/353333363.html
http://fortlauderdale.craigslist.org/rfs/352423170.html
Are these just FB’s that are trying any angle to get out of their homes or are there other scams going on here? What protection would the lease-to-own suckers have if the owner goes into foreclosure? I’m sure the smarter “buyers” would require the seller to put a portion of their rent into escrow, but I doubt most will think about it.
I guess now that the subprime market is drying up, sellers and Realtors® are figuring out new and creative ways to screw clueless buyers.
“…sellers and Realtors® are figuring out new and creative ways to screw clueless buyers.”
Is it whatsoever surprising that Realtors® in retreat would employ scorched-earth tactics?
http://en.wikipedia.org/wiki/Scorched_earth
Notice ad #2 has a San Diego phone number.
I’ve actually been considering approaching an owner with a proposal to lease option at a price to be set by a neutral and realistic appraiser named in the agreement in 24 months, with 100% credit for rent paid. Worse comes to worse, I don’t buy, and if prices continue to crash and have settled in two years, I go in with 2 years rent as my downpayment.
All I need is a homedebtor desperate enough to get someone in there to agree to it, but who doesn’t owe so much on the place that he won’t be able to sell at 2009 value, and an maybe an agreement not to mortgage the place further while I’m in it. (Not a real estate lawyer, need to check on whether a recorded lease option is enforceable against a subsequent mortgage holder… hmmm….)
Let me know what you find. I’ve considered that too.
If you did this, wouldn’t the owner still be able to get a HELOC up to 100% of the assessed value and then simply allow the property to go into foreclosure?
To prevent you from getting screwed in a situation like that, you’d have to convince the seller to put all rent into escrow. I doubt they’ll do that if the owner has to continue paying PITI.
I doubt that I would ever consider a lease option, but I certainly would never consider a lease option unless 100% of my downpayment money went into escrow.
Personally, I think that many of the sellers out there offering lease options are FB’s that will take the rent money until their foreclosure goes through and then will skip town.
I think (but don’t know, big disclaimer, none of this is legal advice) that the interest of a mortgagee who came in after a recorded lease option might be subjugated to my rights as option-holder; that is, they would know that my right to buy the house would be subject only to prior mortgages, not later ones, such that their only recourse would be to go after the former owner for the debt if I exercised the option. Have to ask around with the real estate guys about this.
Just tossing around ideas here, don’t know if it would work, but you could also potentially insert a no-new-mortgages clause in the lease, and if recorded, and a new bank was paying attention, they’d see that any new attempt to withdraw equity would be violating an existing agreement, and run from the situation. (Heck, I wonder, you might even be able to claim tortious interference if they issued the mortgage with actual notice that it would be assisting the owner in breaching… hmmmm…)
Or in other words getting the house free and clear because of intent to defraud? LOL
No no, you wouldn’t be getting the house free and clear - first of all, you’d take it subject to the pre-existing mortgages in any case (this has to be paid off as a part of closing, per standard practice), you are a bona fide purchaser for value.
The idea is that (maybe) no bank would write a NEW mortgage on it if they knew that the mortgage could not be enforced against the property, and/or that they might even incur claims against the bank for inducing the owner to breach the lease option agreement.
I think the sticking point would be: “price to be set by a neutral and realistic appraiser named in the agreement” — does that mean you would BOTH definitely agree to make the purchase at the price the appraiser comes up with? I can’t imagine being bound to an appraiser’s price some time int eh future — as a buyer OR seller.
My nephew just transferred to Michigan and rented a condo for $1000/mo. Brand new and the builder told him he would apply half the rent toward the purchase of any condo in his development. He’s not ever interested in buying there, but the rent was reasonable for the area and a nice condo. I told him, if the builder is doing a lease/purchase, he’s hurting. Builders do not rent out their newly built properties if they’re doing ok.
–
http://online.wsj.com/article/SB118212541231038534.html?mod=todays_us_opinion
The Coming Credit Meltdown
By STEVEN RATTNER
June 18, 2007; Page A17
The subprime mortgage world has been reduced to rubble with no lasting impact on another, larger, credit market dancing on an equally fragile precipice: high-yield corporate debt. In this fast-growing arena of loans to business — these days, mostly, private equity deals — lending proceeds as if the subprime debacle were some minor skirmish in a little known, far away land.
How curious that so many in the financial community should remain blissfully oblivious to live grenades scattered around the high-yield playing field. Amid all the asset bubbles that we’ve seen in recent years — emerging markets in 1997, Internet and telecoms stocks in 2000, perhaps emerging markets or commercial real estate again today — the current inflated pricing of high-yield loans will eventually earn quite an imposing tombstone in the graveyard of other great past manias.
…
Jas, are you saying subprime is still contained?
–
Stucco,
I just posted what someone says. IMO, no.
Sub-prime is just the leading edge of the storm. I mean category 5 hurricane.
Jas
Jas — Please mark my sarcasm.
GS
They’re not oblivious. As with the subprime mortgage thing, they feel that they’ve modeled and derivatized risk away. I thought it was so interesting, that guy from some hedge fund who posted here only once saying that they had accounted for everything but the fraud factor. What will be the fraud factor in the corporate debt/buyout binge.
This is a couple of months old but relevant
Todd Harrison
Feb 14, 2007 8:31 am
“My God! The Dukes are going to corner the entire frozen orange juice market!”
-Louis Winthorpe III
Billy Ray Valentine once said that the best way to hurt rich people is by turning them into poor people. In one fell swoop, Fortress Investment Group made a lot of wealthy folks wanting for more.
I, like so many others, watched with bated breath as FIG opened for trading last week. As a former hedge fund manager, my career path has morphed from trader, to a trader that writes to a writer that trades. I left the stress of big money management a few years ago, conscious that I was likely leaving some meaty pay days on the table.
Not even I could imagine the opportunity cost.
By now, we all know the numbers. On the first day of trading, the Fortress IPO posted an eye-popping 68% gain, valuing the hedge fund at over 30 times last year’s earnings. Lofty numbers to be sure, particularly when juxtaposed against Wall Street pace-setter Goldman Sachs, which currently commands an eleven multiple.
Granted, the management team at Fortress is a sharp collection of proven producers. To prove that point, or perhaps because of it, the top five managers spent the weekend worth an estimated $10 billion dollars. In the uber-competitive world of hedge funds, you can bet that many of the 9,000 players in the space spent some time with a calculator before thumbing through the Robb Report or perusing timeshares at Marquis Jet.
I’ve learned through the years that the basis of valuation on Wall Street is a matter of psychology. That, no matter the metrics assigned or assumed, a company is worth as much as someone else is willing to pay for it. Just ask Mark Cuban. Or the lucky ducks at YouTube. Or the sorry lads from Enron. At the end of the day, supply and demand validates a vision or a venture. Capitalism in its purest form.
In a recent interview, I was asked my take on the current state of hedge funds. My response was that I want to be “long the quality and short the quantity.” That would seemingly support a bullish stance on Fortress but there’s a subtle yet important difference between investing in a hedge fund and buying the stock of one.
As an accredited investor, you’re bound by uniform lock-up restrictions. As an equity holder, the exit doors are left unlocked and odds are that the public doesn’t fully understand the inherent risks.
A stock is essentially a call option on earnings. That “option” is valuable when a company has a source of growth and a reasonable risk of attaining it.
How does a hedge fund retain and grow earnings? Two sources: management fees (typically 1% of assets) and performance fees (industry standard is 20%). The only way to grow management fees is to constantly grow assets. But as a hedge fund grows assets, it becomes harder to make money, sort of like a cruise ship trying to navigate a turn in a narrowing canal.
That leaves performance. But performance is risky: a hedge fund can lose money as well as make it. Additionally, the primary expense at a hedge fund is compensation. To retain intellectual capital, the fund must pay them a large percentage of what is made. That creates a law of diminishing return, either for the fund or for the talent. Neither are positive for shareholders.
This isn’t a knock on Fortress. The people there are undeniably intelligent and have a track record to prove it. And it’s not to say that the fund is the second coming of the Long Term Capital Management or Amaranth. Those were bad eggs and from what I can gather, the FIG Newtons are running a tight ship. They very well may be best in breed but, at the current multiple, there is precious little margin for error.
Paradoxically, while all eyes fixate on the battle for a Wall Street pecking order, the implications for the broader market war is vast.
If Fortress is the first of many hedge funds to tap the public appetite for risk–and more follow suit–the capital raised by these funds can then be leveraged, creating even more liquidity in the global marketplace. It could build to the point of exhaustion, but not before befuddling the bears who can’t fathom the price action.
Somewhere in the back of my mind, nestled between unspoken jealousy and worn wisdom, I can’t help but sense that we’ve all seen this movie before.
Recent quote (via the Washington Post) from Greenspan at an event hosted by the Commercial Mortgage Securities Association in New York:
Million dollar question: By “something else happens”, does he mean something other than what he intended to happen? Isn’t it part of the FR chairman’s job to induce market changes, akin to a cowherd’s job to keep the herd from running off a cliff?
Pay no attention to the man behind the curtain…
for proper citation’s sake, a link to the source.
Let’s do a short recap.
Mid-year 2003 to mid-year 2004:
The panicked Fed (trying to ensure W’s re-election, among other things), led by our Dear Chairman, earns his “Easy Al” nickname by pegging the FFR at 1%.
Easy Al, on February 24, 2004 (deep into that one year of 1% FFR; paraphrasing):
“Hey, you property buyers out there - you can benefit by using interest only products.”
This at a time when the blunt instrument of the FFR was highly unlikely to go any lower. And, in fact, began going higher by June of ‘04.
“Influence”? He asks? “Market changes”?
Who the hell on the Street or in the REIC didn’t hear those words or was not impacted by them?
The “influence” and the “market changes” were historic in nature - I say this in light of the Ivy Zelman (the anti-Blodget of this debacle) - Credit Suisse reset chart…
Many apologies to TxChick for stealing her post from yesterday:
http://www.slate.com/id/2168417/
Even since the war went bad, the intellectual promoters of America’s Iraq adventure, from Donald Rumsfeld on down, have been asserting that the faltering situation is stabilizing, and will improve soon—perhaps in six months or so. Six months later, progress having failed to materialize, they unironically repeat the same projection. The blogosphere has dubbed these six-month blocks “Friedman units,” after New York Times columnist Thomas Friedman. In housing, I give you “Lereah units,” after former National Association of Realtors chief economist David Lereah, who would pronounce the end of housing’s brief slump—and then make the same incorrect pronouncement a few months later.
I missed it….Glad you re-posted GS…..
It almost looks like some bears were waiting to ambush the early-Monday liquidity blast?
http://www.marketwatch.com/tools/marketsummary/
There is a weird technical glitch in that marketwatch.com price screen. At the top left is a stock chart in which the DJIA is shown a few ticks ahead of the rest of the market. On the top right of the screen (just below the ad box) is an interactive stock chart where you can see current prices by sliding the cursor over the index name (DJIA, Nasdaq, S&P 500, Russell 2000, Nasdaq 100).
The odd thing is the two stock charts are out of synch — the one on the right side shows all five indexes in the red, while the top left chart shows only the DJIA in the red…
The 30-yr T-bond yields are upwardly mobile again today. Good luck with that, permabulls!
http://www.marketwatch.com/quotes/?sid=11421
BOND REPORT
Treasurys drop ahead of housing market index
By Leslie Wines, MarketWatch
Last Update: 10:41 AM ET Jun 18, 2007
NEW YORK (MarketWatch) — Treasury prices declined Monday, driving yields slightly higher, continuing to react to recent economic data that heightened fears over global inflation and higher interest rates.
The “bear market for bonds remains a key theme in financial markets,” said Charmaine Buskas, economist at Moody’s Economy.com.
“The recent correction in the U.S. bond market is the deepest in nearly three years, but is still tame compared with the corrections in 1994 and 1999,” she said. “And expectations for a continued firm tone in the economic data suggest little change.”
Government bonds sold off earlier last week, propelling the 10-year Treasury note’s yield above the 5.25% federal funds rate.
The benchmark’s yield moved as high as 5.3%, its loftiest in five years.
Along with inflationary worries, much of the recent selling spree in government bonds was linked to hedging strategies as mortgage-backed securities portfolio managers sold Treasurys to compensate for souring mortgages.
http://tinyurl.com/3b8lw7
Good thing energy prices don’t count as “core inflation.”
——————————————————————————
Crude futures rally past $69 for first time since September
By Myra P. Saefong
Last Update: 2:39 PM ET Jun 18, 2007
SAN FRANCISCO (MarketWatch) — July crude was last up $1.15, or 1.7%, at $69.15 a barrel in New York, about to close at the contract’s strongest level since Sept. 18, 2006. “The bulls are running as the last lines of resistance have been shredded,” said Phil Flynn, a senior analyst at Alaron Trading. “It seems that the market is worried about ever-tightening supply because of Nigeria disruption fears and an obstinate OPEC.”
Treasury Rout Is Muffled by Reserves, Tame Inflation (Update3)
By Deborah Finestone
June 18 (Bloomberg) — The steepest decline in Treasuries since 2004 is convincing even the most bullish investors that U.S. government bonds are now in a bear market.
Bill Gross, the manager of the world’s biggest bond fund at Pacific Investment Management Co., and Dan Fuss, whose Loomis Sayles Bond Fund has been the best performer among its peers the last decade, are preparing for higher market rates after yields on 10-year Treasuries, the benchmark for home mortgages and corporate borrowing, rose to a five-year high last week.
While the rout wiped out more than $550 billion from the value of government bonds during the past month, investors don’t anticipate the losses of the last two bear markets, in 1994 and 1999. The combination of demand from overseas investors, who have $5.4 trillion in currency reserves, a four-fold increase in derivatives that spread risks among a wider group of investors and the slowest inflation rate since March 2006 increase the chances that this decline will be muted, they said.
“This correction is comparatively modest,” Jack Malvey, chief global fixed-income strategist at Lehman Brothers Holdings Inc., said in an interview in New York. “In historical terms, it’s like a rainy afternoon, not a category 5 hurricane.”
http://www.bloomberg.com/apps/news?pid=20602007&sid=ajZ8LcSqnpUs&refer=rates
Went to an open house at the Riverview Apt. next to Astoria Park in Queens.
http://pistilli.backhomeadvertising.com/
Two bedroom with faux veneer wood floors, a small (barely room for two people to stand) kitchen with crappy “rental unit” appliances and formica counters. Monthly charge is $1 p/sf (so the 1700 sf apt was $1700 a month!) $150 for parking. Laundry room in the building and not in the apt. Price $600,000 - $700,000! No wonder only 40 out of 186 units sold.
For that much you can buy an overpriced SFH in Astoria.
Looks like very bad layouts too, foyers long useless hallways in the studio apt…. I guess they expect everyone to have a plasma TV and a laptop
And no real furniture or heck are so clueless they never thought some people love sleeping (etc. hint hint) in a king size bed…
and don’t forget, the bathroom (next to front door) is far, far away from the bedroom! we saw these apartments a couple months ago, and boy, were we disgusted!
pistilli’s website says 24-hour concierge, but when you’re there they say doorman is there 7am to 10pm. there are many discrepancies between what’s advertised and what’s reality.
i’m amazed they found even 40 suckers!
Pistilli Condoze $90K in Astoria back in 2000
he retail stores will be set back about 50 feet from 21st Street. They will be topped by some apartments and on the roof of that section of housing will be “a sky park,” Pistilli explained, with trees and outdoor furniture for the use of all the tenants as a place to relax.
Pistilli said parking spaces would be provided in the retail area and it was planned to have “a major bank and other professional type occupants that will not generate traffic or disturb the community.”
Apartments will range from studios to three-bedroom units. Prices for the co-ops would range from about $90,000 to $275,000. Pistilli said he hoped monthly maintenance fees would” be kept low.”
The Pistilli Realty group, located at 37-08 28th Ave., Astoria, is owned in partnership by Joseph Pistilli, 47, his father, Michael, 69, and brother, Anthony, 43, who is the president of the Group. The firm owns and manages real estate throughout the metropolitan area. Michael Pistilli is a long-time Astoria resident who raised his family in Astoria. The elder Pistilli, by an odd coincidence, once worked in the Eagle Electric building which he and his sons now propose to transform into apartments.
http://www.qgazette.com/News/2000/0927/Front_page.html
The Next Big Thing in housing - the minihouse - 510 square feet for 230K.
Go to homesdatabase.com
and type in this number: BC6446948
Heh.
Lowest priced house in Santa Clara (IIRC) last year was $400,000 (An 800 sq ft adobe).
Anyone know the state of the Bubble in Austin, TX?
My brother just moved there, and like a Damn Fool, bought a home there before selling this $750k McMansion in Sonoma County.
I tried to tell him, and now I’m afraid to talk to him, ’cause of what I’ll say.
some people won’t learn, but my brother! fergudnesssakes!
paul
What is it with these DAMN FOOLS…they gotta desperately buy a house…..any house when they move
Is renting in your brothers mind like: we come so far in this life, we cant go back to being trailer trash and renting again.
It really is clueless. Like moving is really that much of a pain.
If I moved to a new city, I’d always rent for a year at least before I bought. You must know the area before you buy, or you’ll just be taken advantage of.
Sigh.
Its just not Your brother, friends of our sold their condo in Stamford CT for at least a$300K gain, just 25 miles to Danbury,CT and buys a Bigger condo! He got Tired of the EASY reverse no traffic driving everyday.
Yes he didnt buy a SFH with some land just a condo with a little backyard, but 3 bedrooms 3 baths, for the 2 of them and their 4 cats.
Misstrial: I’d like to visit with you about those two raw milk dairies and don’t want to clutter up this thread. Email me off line if you don’t mind.
gymnastgal 32 at yahoo dot com. Thanks.
Wall Street Analysts More Bearish Than Ever; More Accurate, Too
http://www.bloomberg.com/apps/news?pid=20601087&sid=aj9Stdj50pUo&refer=home
I talked to my sil, she’s an underwriter for one of the large banks. I asked her if her bank still does stated income, subprime, she said everyday. Still doing it. So she gets a loan for some guy who works at McDonalds. Says he makes 5000 a month. She suspends the loan. She said the loan guy came to her saying I thought we were in the business of making deals. Her boss comes in and says it sounds reasonable, the guy is a manager, works overtime, yada yada. So they tell her to push it through. The auditor caught it, called to verify, the guy made a grand total of 7000 dollars last year, he flips burgers, not management, and she got written up.
This is where lending breaks down. Your SIL should have received her managers override of her loan suspension in writing and the manager should have been written up. Instead she gets written up because the manager puts the verbal pressure on. The entity doing the write up needs to put more stringent controls in place that force documentation of suspension overrides and place the blame where it more accurately lies. Was her suspension of the loan documented somehow? That would show that she at least tried to stop it and should lead to the question of why the suspension was changed and with what authority.
It’s the same kind of pressure I imagine the appraisers get. Stop the loan, lose your source of income. Not right at all.
Need some help from you guys if you don’t mind.
Here in Seattle, people actually -still- think the old cliche’ “it’s different here”.
Would you mind posting your favorite region and why, they too, though they “were different”
Seattle - “Our massive industries will keep our job market strong. Duh, we have Microsoft and Boeing!” or “There’s just no more land. We’re surrounded by water… heck, it’s almost like NYC or SF!”
San Diego - “There’s just no more land. We’re bordered by mountains to the North and Mexico to the south. Of course land will just keep going up, stupid!”
Florida - “florida is where everyone wants to be! OMG! We have the best climate! Prices will always go up because so many more people want to live here!”
Japan has 120m people packed into a tiny amount of habitable land. Same for 7m Hong Kongers. Residential real estate prices have been falling for 15 years in Japan, 10 years in HK.
When prices get ridiculously over-pumped on the back of silly borrowed money, they eventually come down.
Japan has 120m people packed into a tiny amount of habitable land. Some for 7m Hong Kongers. Residential real estate prices have been falling for 15 years in Japan, 10 years in HK.
When prices get ridiculously over-pumped on the back of silly borrowed money, they eventually come down.
Saratoga (Silicon Valley) CA - just saw a house. 1969 ft2, 50 years old, basically original. $15k of termite repairs needed. But, nice cul de sac lot, good neighborhood, good schools. Asking $1.35m. It’s been on the market for a week, taking offers today, and there’s 8.
It’s different for now at least, but we’ll see if this continues.
Sure we could live in a similar house in Iowa for 1/10th as much. But, last weekend, we went to Big Sur. 2 weekends ago I went to Yosemite. 65-75 degrees year round. It’s pleasant, and for me I like to do something other than hunkering down and watching DVDs most of the year, even if it means I end up in a smaller house than I could get elsewhere.
I don’t think there will be continued appreciation, but as long as there is not a 2001-style tech recession then I don’t see house prices in a place like Saratoga falling by 50% either. (But if there is all bets are off!)
There’s 11 offers on this place. Top was $1.55m but with contingencies, so they might take the 2nd one at 1.475m. $125k-200k over asking. Very unusual to have this 50 square mile island of bubblicity.
I would but I miss civilization too much to concern myself with the quaint local customs like clam digging, noisy jet boat racing and real estate fables.
Of course, if I ever return, I’ll be renting anyway…
A New Deal for Globalization
Kenneth F. Scheve and Matthew J. Slaughter
Summary: Globalization has brought huge overall benefits, but earnings for most U.S. workers — even those with college degrees — have been falling recently; inequality is greater now than at any other time in the last 70 years. Whatever the cause, the result has been a surge in protectionism. To save globalization, policymakers must spread its gains more widely. The best way to do that is by redistributing income.
“….For example, from 1966 to 2001, the median pretax inflation-adjusted wage and salary income grew just 11 percent — versus 58 percent for incomes in the 90th percentile and 121 percent for those in the 99th percentile….
…Today, with unemployment at 4.5 percent, the United States is at or near full employment. But looking at the number of jobs misses the key change: for several years running, wage and salary growth for all but the very highest earners has been poor, such that U.S. income gains have become extremely skewed.
Of workers in seven educational categories — high school dropout, high school graduate, some college, college graduate, nonprofessional master’s, Ph.D., and M.B.A./J.D./M.D. — only those in the last two categories, with doctorates or professional graduate degrees, experienced any growth in mean real money earnings between 2000 and 2005. Workers in these two categories comprised only 3.4 percent of the labor force in 2005, meaning that more than 96 percent of U.S. workers are in educational groups for which average money earnings have fallen….
….The growth in total income reported on tax returns has been extremely concentrated in recent years: the share of national income accounted for by the top one percent of earners reached 21.8 percent in 2005 — a level not seen since 1928. …”
How do you define recession? 96% losing income? 1% getting 21% of the total income?
I hope you all read this article.
Kenneth F. Scheve is Professor of Political Science at Yale University. Matthew J. Slaughter is Professor of Economics at the Tuck School of Business at Dartmouth and Adjunct Senior Fellow for Business and Globalization at the Council on Foreign Relations. He served on the White House Council of Economic Advisers from 2005 to 2007.
Foreign Affairs July/August 2007
http://tinyurl.com/2z4r9m
I don’t need to read it. Everyone that I talk to confirms it. Nobody is getting raises, or if they do they are tiny.
Read it. Their best idea seems to be increasing the progressiveness of the FICA tax. This is taxman-speak for lowering the social security payroll tax on the lower incomes and socking it to the moderate and higher incomes. They hear a lot of amplified whining now from the hedge fund partners about closing their FIT loophole. They won’t need a megaphone to hear the sonic blast from those near the current FICA cap limit.
Only thing worse than protectionism for my tax bracket is progressivism.
Sucking more money down the SS rathole while ensuring insolvency by myriad other policies is _simply unacceptable_ .
At first glance, this rise in protectionism may seem puzzling
Only if you are a wealthy fat cat.
“Globalization has brought huge overall benefits, but earnings for most U.S. workers — even those with college degrees — have been falling recently; inequality is greater now than at any other time in the last 70 years.”
So, what are the “huge, overall benefits”?
That inequality is greater now than at any other time in the last 70 years.
While its always good to be a fat cat, now is a great time to be a fat cat.
Yes, and even in this environment of falling real wages - so many still think its a good idea to tie themselves to overpriced RE - ensuring they remain wage slaves forever.
Two points: foreclosure can hurt more than the humans involved; and you really have to be careful shopping for a foreclosed house to buy:
Dog carcasses found in empty house
The Associated Press
06/18/2007
BRADFORD, Pa.—A real estate agent stumbled onto the decomposing carcasses of two Great Danes behind a nailed-shut door and called authorities, who found the remains of 21 other dogs.
The vacant house had been occupied until several months ago by a woman who bred the large dogs, authorities said.
Police said they were searching for the woman, and said she had been cited in the past for neglecting dogs.
Real estate agent Jack Buckles said he went to the foreclosed house last week to estimate how much cleanup it needed before it could be sold. He found the dogs’ bodies in a small building at the back of the property, apparently a kennel.
“They had no way of getting out because the door leading to the kennel was nailed shut,” Buckles told The Bradford Era.
Police wearing protective clothing and masks found the remains of adult and younger dogs on and near the property. The dogs were estimated to have died three to nine months ago.
Foreclosure wasn’t the problem. This lady had already been cited for animal neglect.
Perhaps a relative of Michael Vick??
I hope they find her, jail her in solitary confinement, then “forget” about her for three to nine months.
Okay, which one of you is this?
http://tinyurl.com/2lnb4l
I should put on like that in Flagstaff or Sedona.
Picture of a pile of cash…. nice touch
Speaking of water buffalo. This is an amazing video
http://www.youtube.com/watch?v=LU8DDYz68kM
Unbelievable! I take back the “friendly, dumb & docile” comment.
Their are a couple of different types of water buffalo and the Cape (african) Buffalo is very dangerous. A member of the Big 5, you don’t want to screw around with these guys at all. They tend to go get their families and come back to stalk you if threatened.
The other docile kind are very easy to handle, or so I’m told.
They tend to go get their families and come back to stalk you if threatened.
That’s exactly what they did in that video. They got reinforcements and came back for the calf. I suspect that calf didn’t make it in the long run, though. But it goes to show how far solidarity can go in the wild. Awesome.
awesome, absolutely awesome. It’s hard to be a baby water buffalo, but it’s also hard to be a lion….
Sorry if already posted, plus it’s later in the day and I’m on the road. I love the doublespeak, “Rochester remains insulated from the real estate gyrations being experienced across the nation… Some new construction has a lot of inventory out there. So if you’re moving into the market, you have a lot of variety in housing.”
You see everyone? We’ve got it all wrong. There is no bubble, just a lot of variety in new construction.
Whoops, here’s the link - from the area realtor association, of course.
http://rnews.com/Story_2004.cfm?ID=50218&rnews_story_type=18
I’m seeing some homes that went inactive and are no longer listed on the MLS are still for sale. They still have the realtor sign and they are not pending either. Anyone know what’s up with that?
I wouldn’t be suprised if both the seller and the Realtor® have absolutely no idea that the property expired on the MLS.
I have also see the same thing only to see the home reappear on the MLS with an new MLS number (showing as a brand new listings).
That has been going on for a long time now. Also, I might be wrong because I’m still learning how to use Redfin, but if you do a search there it looks like there are more houses for sale than you see signs. I’m not sure I’m right, though.
According to Wikipedia, US median household income is $46000.
According to the US Census, the median for new home sales in April was $229,100. Existing homes had a median of $220,500.
According to my calculator (you can check this at home) the latter figure represents 4.8 times income!
Ouch!
Looks like the entire country has become “house poor”.
I apologize in advance if someone already posted this, but I thought this email from Zip Realty was entertaining.
Hi ___,
State Legislators passed a two-prong plan which will immediately cut property taxes on Florida real estate and also create a super exemption for homesteads effective in 2008.
What does this mean to the real estate market in Florida? It means that more buyers will be getting off the proverbial fence and be BUYING NOW…likely causing an end to the historic buyers market we are currently in.
We have already seen increased sales in our ZipRealty office by over 50% in the last few months in anticipation of this property tax cut. The amount of buyers requesting to see homes has doubled in the last 2 weeks.
These are clear signs that the market is really heating up. The media hasn’t reported it yet but as agents we see the first signs of a turn-around. The lenders are the second to see it as they process loan applications. The press generally knows when the “sold” figures come in which won’t be for many months.
If you have been “waiting and seeing” this is your wake up call…NOW is the time to buy…before this historic buyers market shifts back to the seller side. Interest rates are still low, but creeping up, inventories are high but beginning to drop, and sellers are willing to negotiate, but this will change when the market gets flooded with more buyers.
If you are ready to take advantage of this last great opportunity to buy real estate at rock bottom prices in South Florida…please give me a call or send me an email.
___________
REALTOR (R)
ZipRealty, Inc.
Licensed in Florida