Bits Bucket And Craigslist Finds For June 20, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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“Bloodbath”
http://www.bloomberg.com/apps/news?pid=20601103&sid=akV2sasSGUY8&refer=us
“We’re talking about a two- to three-year downturn that will take a whole host of characters with it, from job creation to consumer confidence. Eventually it will take the stock market and corporate profit.”
Lordy, Lordy! Head for the storm cellar!
The Titanic is sinking and nobody can save it. It is going to get worse. It a long way down to the ocean floor, and there is no rescue ship in sight of the Titanic.
Definitely some vicious circle and feedback effect issues that could come into play — 30 year fixed rates become less attractive and cut people’s ability to stretch their purchasing power while at the same time, subprime and creative mortgate products become less prevalent, and folks become more wary of 3, 5 and even 7 year arm products. A lot of the housing bubble was built on financing that allowed people to stretch their purchasing power and upgrade to “more” house than they could traditionally afford. The snap-back effects of those bubble enablers being eliminated/reduced/limited is going to be far more pronounced than people expect, especially when combined with investors looking to dump, developers looking to unload new inventory coming online, resets and forclosures. I hate to drop an over-used cliche — but we’re getting into Perfect Storm territory here.
Clearly the perfect storm is setting itself up, especially here in Florida where high property taxes and insurance are added to the mix. If we get hit by a hurricane or two this season, things will get REALLY ugly.
It’s amazing, but the MSM is finally catching on. It’s only a matter of time before housing-related stories end up becoming lead stories on the evening news.
I think that improved MSM reporting will *really* drive prices down as the general population starts to realize that 300% increases in six years is not substainable. No amount of NAR spin will be able to refute the current trends.
Except I just saw some blow dried guy on CBS tell us how it’s a great buyers market, and now is the time to buy. Just low ball the price 10% below asking, and make the deal. Prices will go back up next year.
So those $300,000 SFHs I’ve looked at in Queens that they now ask $700,000, I can get for $650,000.
What a bargain. As a buyer I should jump for joy.
Sorry, the MSM is a long way from being realistic about the bust.
It’s the very same talking heads that will contribute to the demise of the old media…
Agents of Zoom
That is the most bearish article I’ve seen in the MSM.
I like the bit about “fire sale” prices about homes… not yet. Ok, maybe some areas of Detroit, Ohio, or Florida… but not yet for the rest of the nation. That won’t be until 2009 (maybe in December of 2008… but that will take good negotiation skills).
Definitely a “Got popcorn” moment,
Neil
Makes me want to try:
Neil’s, “Flaming Hot Popcorn”… with my next ice cold Anchor Steam mug of beer.
The MSM is starting to get really “Bubbly” with their “real estate” related enlightenment.
what a contrast with Europe … the EU market is as exuberant as ever, stockmarkets are making new highs (6-year or alltime high) every week, mortgage rates are still extremely low, crazy lending everywhere and consumer confidence is at unprecedented levels in several countries. Average home prices are still rising at least 5-10% yoy in most EU countries so the biggest RE bullmarket in history seems unchallenged. Some of the Dutch realtors have started talking about a ‘buyers market’ but that’s most of all to lure new buyers in to the market (’there was never a better time to buy’) at prices that are at their highest in history (and 6-10x higher than 15 years ago).
nhz, I believe when the US goes so will Europe, despite the “we are not connected anymore” talk.
For fun I listen daily to Kees de Kort here:
http://www.bnr.nl/ColumnsOfColumnist.asp?Id=10&Context=N%7C1%2C5
He has the US housing-market figured out but seems to think Europe will remain standing if the US stock-market falls. I beg to differ.
What do you think?
I agree with you, mostly … I guess the US housing market has much further to fall (but maybe that will take many years) and it that case it will be difficult to totally ignore it like EU markets are doing now. Also I’m expecting some kind of crash in Asian markets that could cause investors to worry a bit more about the return of their money. As long as things don’t get much worse over there I think the housing and stocks bubbles, will simply ignore it and keep growing thanks to all the free money from the ECB.
I’m still reading glowing articles in Dutch investment and lifestyle magazines about RE projects in the US like Trump Tower Atlanta where 20-25% annual ROI is promised…
I’m confused. I thought we’ve been reading reports that Spain and Ireland are slowing down dramatically.
they are slowing down in the sense that prices are no longer rising at double-digit rates; but they are still rising! Similar to what happened in the rest of Europe around 2001/2002 when even some of the RE experts started calling a housing crash - but nothing happened, prices kept increasing at 5-10% yoy (or even more) and the easy money is still flowing like never before.
I’m not up to date regarding Ireland, but in Spain there are some worries about a potential banking crisis. I have no idea how real this danger is, probably just like in the US there are forces operating behind the markets to keep the impression that all things are well, inflation is contained etc.
How does all this square with the “europe is shrinking” and declining birthrate demographic stories I’ve read over the years?
birth rates have been shrinking for quite some time and in some EU countries (like Spain, Italy) they are far below ‘maintenance’ level. But obviously, that is a problem for home prices at some time in the future, not now. Some EU countries are close to declining population numbers, e.g. the Netherlands might see its first year of net declining population. The shrinking is mostly due to strongly increased emigration (with high home prices as the number one reason to leave). But at the same time some ‘experts’ are still calling for a 10-20% increase from current levels over the next 10-20 years. Apparently all this is VERY difficult to predict.
I think it is just another example of the markets ignoring fundamentals (like supply/demand, declining real wages etc.). For the moment there is no problem with having empty homes lingering on the market, and as long as prices keep rising the more wealthy citizens don’t worry about their second/third etc. homes in other EU countries - they simply keep going up in value. But some day people will take notice and fundamentals like demographics WILL matter; it will enforce the downtrend in home prices that will have started by then.
Thought there was an article yesterday, maybe on Prudent Bear, about Spanish inventory being higher than most of the rest of Europe combined. The article made it sound like Spain is by far the biggest candidate for an absolute crash in prices.
no not inventory, these stories are about the numbers of new homes that are built.
If you consider just simple supply/demand dynamics, Spain would be ripe for a crash. But the reality is more complicated: some EU countries are building small numbers of new homes because their population is hardly growing and their homes have better quality (last longer). Spain is building large numbers of homes because of huge speculation by foreigners over there (the same pattern is emerging in the Balkan, Turkey etc.). At the same time, foreign speculation in some other (mostly northern) EU countries is close to zero. There certainly is far more demand for homes in Spain than in most other EU countries, it is just not the sustainable type of demand. Looking at price gains from the start of the bubble, I think the Netherlands is number one in Europe and probably in the world. But because of very tight market control by burocrats and their developer buddies (zoning, subsidies and all kind of government guarantees), the Netherlands can probably postpone the inevitable correction a bit longer than other EU countries like Spain and Ireland where market forces are stronger.
How much of Ireland and Spain prices are due to a general leveling of European prices? EU integration is probably flattening the peaks and valleys among members. Anecdotally, Spanish prices are being driven up by retirees from the UK. To the extant that unification has made it easier to retire to a cheaper part of the EU, it makes sense that prices across the union would flatten some. Is the EU harmonizing real property laws? This too, could have a leveling effect.
To some extent the same mechanisms as in the US apply like equity locusts from UK and Netherlands that are buying up property all over Europe and driving up prices in the cheaper parts of the EU (to far above what the local market can afford). The leveling is mostly taking place in the big cities as they are the playground for the rich. On the other side, EU integration might stimulate speculation and tax evasion by buying property in other countries. There are huge differences in tax laws that apply to housing or real estate investment funds within the EU; some countries like Netherlands have 50% HMD and huge buyer/rental subsidies, while in most other EU countries it is 0% HMD and subsidies are very limited. In some countries like Spain (and probably eastern Europe) you can still buy property with ‘black money’ or at least get special tax exemptions if you use black money for buying a local home (like in Belgium). And of course other countries like Ireland have lived the good RE life thanks to astronomical amounts of EU money.
What is “black money” in this context? I’m only familiar with the term as used in the renaissance to indicate coinage that was so devalued that it was black instead of shiny.
Not to worry. I’m sure everyone has a few bucks stashed away in a bank savings account against the day when the wolf comes knocking at the door.
“Shirley” you can’t be serious!
However, I think most of us on this blog has a few bucks stashed away in money market funds, CDs, short term treasuries, and the like. The depression will be a nice time for me to take a several years-long vacation beach-side.
I have a hard time believing things will work out that nicely even for those with money. Maybe at first…
Agreed, former.
Things will likely get rough for most of us…I expect some serious social unrest if things get as bad as some say (including myself).
All the Fed has to do is cut interest rates and the problem will be solved.
Just a few months ago the “mainstream media” was denying there was a bubble at all. Then suddenly there was a bubble, but it would be over soon. Now the mainstream media is starting to tell it like it is: “A bloodbath”, “A recession”, and a stock market crash.
Here comes the storm…
The problem with the comments by the guy from PIMCO, is that PIMCO is not always correct. Bill Gross & PIMCO have been betting that the Fed would cut rates for several quarters now. So you have you use some “Kentucky Windage” on their predictions!
Nobody is always correct. You are right, however, that there is a problem with PIMCO’s forecast - as a bondfund, they have financial interest in lowered interest rates.
I think PIMCO’s bet is that Ben does not have the “nuts” to raise rates in the face of inflation “Ala Volker circa 1981″…
“I continue to believe that we haven’t seen the bottom in the subprime market,” Viniar said on a June 14 conference call with reporters. “There will be more pain felt by people as that works through the system.”
Captain Obvious nominee
Thanks for posting that. Very nice.
Several times on these blogs I predicted the bottom of the RE market won’t be reached until 2012. Someone, perhaps Misstrial or Carrieanne predicted the same, but that the prices will stay flat after that for 5 or ten years. I’m thinking they will probably be right. The yield on some home building stocks (of the surviving builders) ought to be peaking around 2011 or 2012 and I think that’s when I will start buying them. It will be the bottom of the cycle. It’s interesting to see an authoritative source such as PIMCO thinking the RE downturn will continue for 3 years. The number of years in their estimates are increasing. The HBB folks here have been spot on.
I’m one of the posters who thinks we may not see 2005/2006 prices (inflation-adjusted) in our lifetimes… How’s that for bearish?
It may be several generations before we see 2005/2006 prices in real dollars. Just look a the Shiller historical chart and how far that peak was above the long term FLAT trend.
Bank of America Corp. Chief Executive Officer Kenneth Lewis yesterday said the U.S. housing slump is almost over. “The drag stops in the next few months,” said Lewis, whose bank relies on the U.S. market for almost 90 percent of its revenue. “We do not see a recession. Because that drag stops, you’ll see the economy begin to pick up in the third and fourth quarters.”
Excuse me, but aren’t we just about heading into the 3rd quarter. Anyone see a turnaround…anyone?
They callEd me at dinner time tonight to sell me insurance. Time to move the minimum balance to the competition for over 3 times the interest…
Not to worry — it’s all good! The steepening yield curve is a sign of a strong economy, according to the geniuses at marketwatch.com:
——————————————————————————-
Steeper yield curve may signal improving economy
But some analysts point to subprime meltdown and foreign developments
By Leslie Wines, MarketWatch
Last Update: 2:37 PM ET Jun 20, 2007
NEW YORK (MarketWatch) — In recent trading sessions, the Treasury-market yield curve has steepened, thrusting the yield on the 10-year note above that of the 2-year note and placing the 30-year bond’s yield above the returns of both shorter-duration securities.
The steeper curve reverses the inverted condition that’s marked the bond market during much of 2007, with 2-year yields richer than 10-year yields. The steeper curve brings back the motive for lending money over longer terms.
http://tinyurl.com/36ksqn
WOW this is huge from the MSM.
Millions of people effected is enourmous. Denmark only has 5 million people. Imagine a whole country ruined by an ARM loan, thats what we have within our empire called the US+guam/puerto rico. lots of pain in ARM country.
i agree it good to see this article, but it is a little less mainstream than i’d like. after all, joe six pack probably isn’t reading bloomberg everyday.
top foreclosure zip codes:
http://tinyurl.com/2vvxzo
Good link. I counted 18 of the 500 in my county (Broward County, FL). That’s amazing.
What’s even more amazing is the HUGE number of Atlanta-area zip codes that are included in that list. This just goes to show that the foreclosure crisis is much more about moronic lending practices than it is about price. The Altanta metro area is one of the least expensive of the major cities in the U.S.
Check out the following: http://www.housingtracker.net/affordability/
This shows that the income/price ratio (2.4) and the rent/price ratio (140) are both very moderate in Atlanta. Compare that to Ft. Lauderdale where the ratios are very high (6 and 280 respectively).
In other words, you would expect terrible foreclosure problems in Ft. Lauderdale, but not in Atlanta.
The Cruel-Aid was half price, but it was still Cruel-Aid. To be fair, in Atlanta most of the properties going under at this point are low-end. I’ve been watching that market and waiting for the good stuff to groan. Takes patience.
the same data sorted by filings per total population in the zip code:
http://www.recharts.com/misc/500topforeclosuresbyzipcodes.htm
Nice post….
I’m not surprised to see Cleveland on the list. I was there for a wedding last weekend. My grandmother lives in a nice part of Shaker Heights (44122), and her street has at least 3 vacant houses. The house next to her has been vacant for 2 years. My aunt’s street in Cleveland Heights (44120) has at least 4 vacant houses.
http://www.forthecause.us/media/ftc-video-CNN-AmnestyBillsWorstProvisions_070523.wmv
After watching this short clip contact your representatives.
If this bill passes in its present form our country will be changed forever.
I’m not anti-immigration. I’m all in favor of opening up legal immigration and a guest worker program.
NO WAY should we let people that violated our laws to come to this country illegally stay.
“It’s not amnesty because they have to pay a $5000 fine.”
NUTS!!!! Any bill that let’s illegal immigrants stay, IS amnesty!!!
That 5k fine is supposed to cover all the back taxes they never paid. The admin has stated that trying to figure out what they correctly might owe is too hard for the IRS.
How many American citizens would like to settle their disputes with the IRS for a flat 5k payment.
Citizenship is being thrown in as a freebie…
Tinfoil Hat comment:
What folks around the U.S. are having a hard time coming to grips with is the FACT that the fix is in on this bill. It WILL pass regardless of the wishes of the american people.
The MSM is re-wording poll questions so that there seems to be widespread support for this amnesty bill. This should dispell any lingering doubt that there is a widespread effort by the MSM to manipulate the news towards a predetermined point of view.
I’ve posted here before about the SPP legislation that is a backdoor attempt to dissolve our sovereignty and borders. You will note that this legislation is given FAST TRACK approval in this bill.
http://www.eagleforum.org/column/2005/july05/05-07-13.html
You may also note that the U.S. tax payers will be picking up the tab for border security on Mexicos SOUTHERN border. That’s right, SOUTHERN border. Gee, I wonder why?
Basically what I am saying is that our representatives are totally controlled by some other organization/group that has the ability to make them vote against their wishes when it comes to these “big picture issues”. What else would explain how this will be passed against RECORD outpouring of dissent against the bill? There WILL be a North American Union. There WILL be an “Amero” currency that mirrors the Euro and there WILL eventually be just one or two currencies that allow the banksters the ability to totally obfuscate the effects of currency inflation. That is what they are seeking, total control of the world through a single currency. Expect to hear talk of an Asian block currency surface shortly.
What this Amnesty bill represents is an easier implementation of “plan B” for when the dollar collapses and just another step towards the banksters long term plan for the world. The fact that they need the SPP to be “fast tracked” is interesting as well.
Watch and see how this vote unfolds, the manuevering and obfuscation will be unbelievable. Go back and research how CAFTA was passed if you want to see how votes are recorded against the will of legislators.
Augur-in,
as ever thanks for your post. Given the manipulation that has been documented on this blog, and the collusion of the MSM, it is impossible not to believe that larger forces are at work.
Besides, they’ve now had 6 years to test the public’s response to greed and fear manipulations, and have seen that largely the voters will abandon their civil rights and constitutional protections without a whimper.
Got land in Paraguay?
it sounds very familiar to what is going on inside the Euro zone regarding more power to EU burocrats and big companies, and less power for small countries and normal citizens. Two of the few EU countries that were allowed to vote about the new EU constitution voted against it. Most of the EU citizens were not allowed to vote at all but polls show that many of them are not happy with what is going on (except in the new EU countries where many thought they would gain access to paradise - guess they have woken up by now with their own euro inflation). But the burocrats are not impressed, the train continues running at high speed in the same direction of total control 1984-style. Politicians are talking all the time on TV about how their are listening to complaints and fears from the voters, but nothing is changed except that the new EU laws are no longer officially a ‘constitution’.
I left a third world country where my standard of living was far higher than the standard I currently enjoy, but it was at the expense of being able to leave my house without looking over the back of my shoulder to see who was going to rob, stab, kidnap, or otherwise threaten my life and property. Needles to say that this was south of mexico, and things have gotten worse since I left. I left because of the exact same kind of people that are coming here as illegals. I am not an illegal, or even legal immigrant, as my parents are US citizens that worked for a multinational corp. I was born a US citizen, and through my life that made me an outsider. You will not believe the hatred that the latin american community harbors to their northern neighbours. They believe that all their life they have been taken advantage of, and needles to say, being an American in foreign territory is extremely humbling.
Now, for all this amero stuff. this will last exactly as long as the oil south of the border. Do not deceive youselves as to the purpose of this. The US is a vegetarian to those who live here, but for the rest of the world we are akin to a T. rex. We have vested interests south of the border, cheap labor, oil, food, and lots of tequila. Trust me when I tell you that those in Mexico will oppose this almost as fevereshly as they immigrate, one thing is to take advantage of the dumb americanos, and another is to see the motherland overrun with drunk americanos. The first thing that would happen is that baja would fill up with oceanfront condoz.
Sorry for the rant…
My experience living in Latin America mirrors yours to a great extent. Like you, my dad worked for a multinational (known down there as trans-nationals) which put us in a pretty comfortable standard of living (servants, etc.).
I think that the US wants Mexico more for its cheap labor pool than for its oil (which everyone knows is running out). Once China stops accepting dollars/ameros/etc. as payment we will need a new source of cheap consumer goods.
Canada on the other hand is a natural resource bonanza, which I believe is the reason they want to gobble up Canada.
Of course, the implications for the US middle class are dire. Wages will collapse to 3rd world levels for most people.
Nice to see I was not the only one who thought about how weird it was to live south of the border. i too had servants my whole life, and coming back here was a harsh reminder of the differences. I also would like to venture a little remembered truth. It is the middle classes that do most of the consumption of the products that are produced. Take them away, (or like right now, take their home appreciation away) and you start seeing problems in the economy. Raising inflation in food and gas will ultimately take away purchasing and consumption power. Outsourcing of jobs and manufacturing, will undobtedly take away even more of that purchasing power. After all the top 1% of the population buy thier prada or whatever bags at 40000 each, but that hardly equates to supporting an economy. We do live in interesting times, and Bernacke and company forget that even if they are successful at saving the banks, it is the middle class paying their visas with 18% interest rates that make money for those same banks….
In a way I was “lucky” as I lived in Mexico City in the 70’s, before it became very dangerous. The last time I was there was 1987, and I don’t have any intentions of going back ever. We were almost mugged at Teotihuacan (the big pyramids near Mexico City). We noticed that we were being trailed by a group of 4 or 5 shady looking types. We saw some security guards. They told us that they would have a “chat” with the thugs, and they advised us to leave, which we did.
A month ago, I talked to a couple of priests, whose beat was in the back of beyond, down Mexico way…
They had a string of 3 mission churches, all accessed by the same dirt road, 3 hours, 4 hours and 3 hours drive, away from one another.
They’d been at their gig for 15 years and knew much.
I asked about how Mexicans feel about “tweeners”? (children of immigrants, born here and citizens. They typically revere all things Mexican, but have never been there)
One of the padres laughed…
He said the all too typical result, was one of these tweeners drives down from estados unidos, with a car full of consumer goods to distribute to relatives in the town their parents hailed from, and by the 3rd Mexico army checkpoint, all they have is a car and clothing left.
“Have you declared this”? is a typical way to declare a change of ownership, for even the lowliest private, with a m16 backing up his rights to plunder.
Tweeners don’t fit in in our country, or their ancestrial home.
They told me that the recent increase in tortilla prices is raising havoc and upsetting the perilous precarious art of barely getting by, amongst the lower rungs of society there, which means most of them…
Trust me when I tell you that those in Mexico will oppose this almost as fevereshly as they immigrate, one thing is to take advantage of the dumb americanos, and another is to see the motherland overrun with drunk americanos.
Its very true that the Mexican on the street isn’t keen on Mexico being gobbled up by the US. Unfortunately their leader, much like ours, don’t give a rat’s patotie about what their constituents think or want. Case in point: most Mexicans were opposed to NAFTA (AKA Tratado de Libre Comercio) but it was shoved down their throats (just like here).
I left because of the exact same kind of people that are coming here as illegals.
It’s refreshing to hear the truth from someone who has lived on both sides of the border.
I agree, there is no way this does not pass. It’s actually pretty scary to watch.
In a weird way perhaps the best thing that could happen to us is that the next Mexican president and congress be controlled by the socialist PRD party (they came within a cat’s whisker of winning the presidenc last year). There is no way the Perredista’s would ever agree to a NAU.
IMHO, the whole idea of branding someone a “conspiracy theorist” or “extremist” (esp regarding govt issues) or “tinfoil hat…crazy”, etc. is because they want to discredit those who might throw a wrench in their plans.
You have been on top of this, auger, and I can see no valid reason to dispute your theory.
What’s really scary (if people believing home prices increase 20% for eternity isn’t bad enough) is how Americans are putting up no fight at all where our civil liberties are concerned.
Had a debate with someone the other day because San Diego PD put up cameras along a popular beach. When the reporter questioned people about it, nobody was opposed. Tagline was the city wanted to “blanket” SD with cameras over the coming years. I seem to be the only one who is very freaked-out by this.
Are we living in Wonderland????
George Orwell, call your office.
visit London, UK for the shape of things to come. The number of security camera’s installed in the City is counted in hundred thousands, and total numbers for the UK are around 5 million. Nobody seems to object, except when they find a security camera is spying inside their own home.
nhz said everything I wanted to say, and then some.
I have often wondered who monitors those millions of cameras? They wouod need hundreds of thousands of people, maybe even more. Or do they have offshored spy centers in India?
Oh, almost forgot the latest insult to our so called “sovereignty” and “freedom”. How would you like the idea of an international entity being able to impose a tax on you?
http://www.augustreview.com/news_commentary/general/bush%27s_new_world_order_legacy_2007060365/
to Colorado:
all security cams are watched and videotaped from control rooms in the UK (probably really lousy, lowpay jobs …). They are trying to switch to robotic oversight, just like most of the EU is trying to implement fully automatic recognition of ‘criminals’ (probably most of all those who forgot to pay a parking ticket) with face recognition, passports that can be read automatically from a certain distance, all kinds of new biometric requirements in travel documents etc. Combine this trend with the new robotic guards that are developed in South-Korea and Japan and we have a really nice system for keeping the average citizen in check, maybe even in case there are mass riots as a result of severe economic problems (I’m sure the authorities don’t give a damn about frequent errors in these surveillance systems).
I read somewhere that they were going to put come kind of chip in US passports, too. (can’t find source right now, so cannot verify it is true, just wanted to throw that out there).
Scary stuff, no?
CA, they already have them. It started last December if I am not mistaken.
Not just a chip. A very short range radio transmitter.
http://www.rfidjournal.com/article/articleview/1951/1/132/
Wow. Was hoping it was some far-away plan that would get buried in beaurcratic schlep.
Why is it that the govt can manage getting these things done just fine, but can’t take care of New Orleans, credit regulation, infrastructure, etc.???
That was ugly…
I meant bureauocratic schlep. (still looks wrong)
Had a debate with someone the other day because San Diego PD put up cameras along a popular beach. When the reporter questioned people about it, nobody was opposed.
People think that this is a high tech “cop on every corner”. But as the London subway bombings showed, they won’t stop criminals. But its a great way to keep the honest people in line.
exactly; I don’t have any doubt about the real purpose of these systems.
Auger, you are on top of things as always.
i agree nhz,
i´ve heard the the first dax call 10.000 for 2008!
here the 1 year dax chart….
http://index.onvista.de/snapshot.html?ID_NOTATION=20735
sorry.
should be a reply to nhz
the DAX is starting to look like the Shanghai index …
Who would have thought that the Germans could get into such an exuberant mood?
the germans are not the driving force behind this.
the percentage of germans who owns stocks is declining for years…..
England. Bank of England. Hiding behind the big skirts of the US. We fought a revolutionary war to get rid of these t*rds. Guess we never really succeeded. Pip-pip and all that rot.
Although, the Royal Fambly is German. “Mountbatten” my arse. Battenberg.
House of Windsor = Saxe-Coburg-Gotha
Their German name was used right up to WWI at which point the royals’ Hanoverian ancestry became more than a trifling political problem. Presto, they picked an impeccable WASP sounding name like Windsor, and all was well.
A-MEN! This is not particularly common knowledge. For the most part, the “English” are made up of Germans, Italians and Celts. I like to say the British Empire never really fell, it just went subterranean, but you could back that up even further and say the Roman Empire never really fell, it just moved to England, to get away from the German “Barbarians” who overran Italy. But the Germans were too smart, they just changed direction after sacking Italy and infiltrated England. Really, when you think about it, the Revolutionary War was fought against a German hegemony. And here’s the kicker, which dovetails neatly into this current illegal immigration situation: Germany and Mexico aligned against the US back in the day:
http://en.wikipedia.org/wiki/Zimmermann_Telegram
Interesting that the goal of Germany back then is the goal of Mexico today.
In the UK, during World War 1, you couldn’t very well have a German Shepherd for a dog, could you?
So they were renamed “Alsatians”
Putting a little mayo on my Freedom Fries…
adding the ownership records for the US FED is another interesting twist to this heritage story …
Got a link, nhz? My understanding is, BOE and affiliates. But I suspect you have something more interesting. Really, I think it is high time that Europe and the US woke up and smelled the “coffin” and isolated England, the biggest irritant on the planet.
“Double Trouble” and “Freefalling Prices”. MSM *has* awoken…
http://www.kiplinger.com/magazine/archives/2007/07/subprime.html
Ok. this guy buys a triple decker in Attleboro. There is a reason why attleboro is cheap. Schools are so-so, and it has a large migrant population that leads to a lot of crime. Also, most triple deckers are in neighborhoods that are not all that good, little green, and small lots. In essence these things are cramped, even though they might, and I mean remote possiblilty might, be large 2 and 3 bedroom apartments. Also rents are about 650 to 800 for a 1 to 2 bedroom apartment, and in some places like close in to the hospital, even less. You would have to contend with the immigrants of unknown legal status and no english though.
He just thought that he was getting a bargain without doing his research….
Places like Attleboro, Brockton and Taunton did not recover from their 1989 highs until 2003. If you adjust for inflation they are still even, or at a loss at 2005. It is at least 70 years too late to invest in these old New England Mill towns - 1929 was probably the inflation-adjusted high.
Question about mortgage rates. Since the t-bond crashlet, the rate on the 10-year has pulled back considerably. Have mortgage rates come down as well?
If not, the T-bond recovery isnt’ a re-evaluation of the threat of inflation. It is a flight from credit risk, with mortgages what is been flown from.
up to now it’s nothing more than a pullback after a first breakout of a downtrend in rates of 20 years or so; I don’t think mortgages react to such day-to-day market action. Things get interesting when we go below 5.0% or above 5.3-5.5% for the 10-year bond.
They are down slightly -
http://tinyurl.com/2hqo9s
Last night on the Lehrer report, Ray Suarez did a segment about the fall in housing starts. He had four commentators, one from New England, one from Texas, one from Detroit, one from So Cal. The New England guy seemed fairly honest, acknowledging that the outlying “second-home” areas are badly over-supplied, while the Boston market suffers from unaffordability. The Michigan commentator said the Michigan market is terrible and will not recover until/unless the US auto industry revives. The Texas guy talked about how Texas prices are still rising strongly due to influx from other regions. The asshat from So Cal talked about the great strength of RE in western cities, and how it’s a great time to buy; had this guy not been obviously black, I could’ve sworn it was David Lereah’s clone. I think his surname was Bostic, at least that’s what it sounded like.
Texas prices rising strongly, my ass.
I spent all day yesterday debating whether Texas is a “value” or not with a hedge fund guy in Houston. These people are incredible. Top 1/2 of 1% income wise and they think their perspective is relevant. Their buds come from California and think it’s so “cheap” because they can buy a 5000 square foot McMansion for $800K vs. 2M in L.A. I keep asking the same question: what happens when the coasts finally crash and these people want to go back. Who will they sell these Texas McHouses to? Nobody here can or will pay those prices. Are they willing to lose money on these places?
Oh, he says the newly minted energy millionaires in Houston will take up the slack.
Yeah right. Like they did in the last energy bubble in the 80s?
I remember vividly the trustee sale of John Connally’s personal possessions. I was at V&E at the time.
In my post I was thinking of asking you directly to comment on the TX situation; glad you did so.
I think we’re in another energy bubble. All most people focus on is “peak oil.” They have short memories.
The guy in Houston told me that energy people don’t believe in this energy move and are banking the money. At least the smart ones are.
Energy bubble? When was the last big Texas oil find? Texas oil production is a ghost of its past, trending toward zero. Want to know what oil is worth, check the price of Brent.
It’s not as if the price of WTI is uncorrelated with the price of Brent.
However, in the US, WTI is the standard price quote.
Energy production by state:
http://tonto.eia.doe.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_a.htm
Texas is still the biggest producing state.
Jay,
Here is Texas oil production over time. They aren’t making any more oil.
http://tinyurl.com/gh6n9
And India and China’s oil consumption forecasts look like an NAR price growth projection graph, with the difference that the Asian numbers are real.
Here is Texas oil production over time. They aren’t making any more oil.
A reduced supply of Texas oil doesn’t necessarily mean they’re running out of oil. It might mean it’s cheaper to get it from somewhere else. It also might mean there is collusion involved in suppressing the supply of available oil. Certainly, you’d agree that oil is an industry that is subject to extreme manipulation, both by corporations and governments. It’s not as simple as looking at a chart tracking production and saying “they’re running out of oil”.
Hey,
Looks to me like production has droped overall from 2000 onward…yet prices have increased…significantly …ummmm, you’d think “they” would want to pump and sell as much as they can at high prices…
Also,…who do you think “owns” oil storage production worldwide?…hint…it’s NOT the oil companies.
We need to switch to fuel efficient cars and fast. I was reading an article on how the Ford Mondeo diesel (very popular in Europe) gets nearly 50 mpg. The Mondeo is not a tiny car either.
Running out of oil has nothing to do with it. We’ll probably never actually “run out” - the event is peak oil - the point at which oil production peaks and begins its decline. By most accounts, we’re already there.
Virtually every oil producing nation in the world has peaked with the exception of some OPEC nations who do no release that information.
If you think about it, you can track the success and failure of our country back to oil. Why were we the industrial powerhouse that we were? Oil. When did our country start to go into economic decline (when did we go from the largest creditor nation to greatest debtor nation) — when we peaked in Oil in Dec. 1970 (look up Hubbert’s law)
Humans may have had a chance if they started finding an alternative solution in the 70’s or 80’s. I’m afraid we may be too late.
Look around you. Everything you see is due to sweet, cheap crude oil. Electronics, clothing, carpet… and especially the food you eat. That requires petrochemicals for fertilizer, pesticide, cultivation, transportation and so on.
http://www.theoildrum.com
Had to get an address today. Used the Tarrant Appraisal District site. This poor taxpayer’s house bought last year was socked with a +50% valuation increase from 2006 to 2007 (+ $150,000).
(We have “homestead” exemptions in Texas, which provide a +10% per year cap on property tax assessment increases, so purchasing a house is a big boost to the local tax base. He sold an even more expensive house in the same city. TAD should give him a medal.
)
He was from Lusk (USC). I expected him to hold the party line.
But he was pretty awful wasn’t he?
Finally something UCLA can lord over USC. If USC faculty like Bostic continue with pollyanish forecasts the more sober comments of UCLA will have them eating crow. Imagine the taunts in a few years. If you want to have fun and watch football, go to SC, if you want to get smarts and keep your home go to UCLA.
AZ,
Eveyone came out with their opening line and then the Michigan said “things are awful” and most started to loosen up. I was frustrated because they touched on the demographic shifts as an unintended product of higher prices/lower affordablility and then they had to end the segment.
big screen tv’s are flat
guess everyone is putting an old tube tv in their 2nd and 3rd homes
Presumably you’re referring to:
http://tinyurl.com/yvqh4r
“MINNEAPOLIS (AP) — Best Buy Co., the nation’s largest consumer electronics retailer, lowered its 2008 profit estimate on Tuesday, blaming a softening economy that’s steering shoppers away from high-margin items like flat-screen TVs.”
But since you watch TV in your house it’s still considered part of the housing sector and not the general economy right? Right?
Thanks for the ‘bloodbath’ link. I recently doubled down and signed a 2-year lease in Pinellas County, FL. I was having second thoughts (maybe FL will unwind in 1 year) but now I think 2-3 years sounds about right for me.
I am driving through the Deep South, and I can tell you this, I didn’t see many ‘For Sale’ signs in rural Mississippi. I did see a lot of ‘Land for Sale’ signs in Western Tennessee. Also, I lived near Nashville in ‘98 and now it’s a total ATL-style cluster-f. Not to mention a ton of crazy drivers and monster truck handymen parked at all of the motels. Does Nashville go the way of South Florida?
I’ll tell you this, it was nice, cool and dry this morning when I woke, something I haven’t felt in Florida since January. I predict the half-backer exodus is going to be huge. Yeah, there will still be a rise in foreclosures and price erosion, but Middle Tennessee will get swamped either way.
my old man moved to Cent TN
can’t give his FL house away
As I recall your dad has a place on a canal, yes?
For any boomer considering Florida, flatffplan’s dad’s actions should be very telling. A nice plan on the water in “paradise” and he moved to Tennessee.
Again, the psychology of all of this is fascinating. If you’d told someone in New York 10 years ago that you were going to move to Middle Tennessee instead of Florida, they would have hummed dueling banjos and wished you luck.
America, home of the restless.
3 years ago even - just before the “big 4″ of Charley, Frances, Ivan, and Jeanne - and when prices were *really* taking off in Florida.
Was noticing water temps in eastern Gulf this morning - one of most important metrics in early season ‘canes. Not overly warm. 84 in Clearwater Beach. Recall 90 in June in either ‘04 or ‘05.
It’s that polar ice melt. Keeps the water temperature down.
Having live most of my life in MI, NY, NT State, VA, and visiting FL often, I now live in TN. FYI, I luv, and I ain’t going North or South! FYI, my son from VA just visited, and he caught a 31″ Catfish in the Tennessee River. He’s planning on relocating ASAP!! “…and that’s all I have to say about that….”
I meat “lived” and NY State, and “I luv it…” I guess I was too exuberant for my typing fingers!
I meant “I mean.” Sheeeeessssss!!!!!!!!!!!!!!!!!!!
To Hixson Rick or other Chatt. area posters
What’s a (say) 3 BR 1200 sq’ house in Hixson or other Chattanooga suburb/residential area go for? How does Chatt. compare to Knox. or Nashville?
canal,pool and boat lift
1.1 down to 750k
WHHHHHHHHHHHHOOOOOOOOSHHHH
If it gets down to 400k we may have to talk!
Ditto.
Well, there’s the price. TWO bidders!
I’ve been wanting to get out of CA and move to NC, TN, or KY for years. My friends still tell me that the church lady is going to burn a cross on my lawn if I go (I’m an athiest). Most Californians have no clue what the rest of the country is really like.
Yeah, be careful (I’m also a Godless Capitalist who is pround to commit the sin of enjoying life). I hear the same about the south. Why not try New Hampshire?
I believe Bill is correct Gwynster….Non-believers don’t sit well down there….One of my best friends moved there and was transformed…Not saying thats all bad…Just piggy backing on what B form Ph just said…
I’m atheist as well. I lived for a decade in Colorado Springs… Home of Focus on the Family and many, many other Evangilistic organizations…
Never had a problem.
I grew up in TN, and I’m an atheist. Although atheists were definitely in the minority, I can say that at my high school (1980s) the “God Squad” folks were seen as freaks.
lived here in Nashville almost all of my life. been an atheist for several years now & its never been a problem. although people do feel free to ask a lot of questions about why?
I think there are still a lot of misconceptions out there about all parts of the country. I went to NY last year on a weekend visit, & was told that I should not carry a purse, not go out past dusk, & have mace in my hand at all times.
Lexington is as far north as we’ll go unless we’re talking pacific northwest. Snow is the unnecessary freezing of water in my book.
I have to be near a Univ to make a living and anyplace on the east coast that fits those requirements is freaky expensive.
As to the religious thang, I live in the central valley and the Jeebus crew is strong here. You just learn to live around it and filter it out.
What it boils down to is that I’m just a chick who wants to work, make a decent living, and buy a smaller starter home without bankrupting myself in the future to do it. You’d think I was asking to become financially independant in 3 years or something else as crazy.(couldn’t resist the jab at the Temecula christian 3 ring circus - best post on the BMIT blog ever)
scientology never stopped anyone from moving to Clearwater, FL …Just keps them away from down town.
Can’t “give it away”? Didn’t he have a canal house up for sale in the 3/4’s of a million dollar range? What did it go for in 2000? Not meaning to blow you sh*t but holy smokes, 3/4 million is still some ca-ching in most places.
Not just Florida. Friends in Rockville MD have now lowered their price three times in the six weeks or so their house has been on the market. Total reduction about 12%. Still no interest. What’cha think, another 25% or so to get it sold?
Of course, the retirement house they bought in Florida in Spring 2006 has already dropped about 20%, based on current For Sale listings in their community. And the trend is solidly downward.
There should be some good country music lyrics coming out of all this.
LOL!
The words “good” and “country music” should not be used in the same sentence, much less right next to each other.
I don’t have the time to compile house fires again today, just google news “vacant house fire.” I wonder what the arson problem will be like in another year or two.
The insurance fire is back.
Wait until people realize that vacant houses aren’t normally insured…
http://www.youtube.com/watch?v=dgtpxBPYnvE
This is a real interesting video.
Just wait until similar pieces air in Southern California.
Not an if, but a when..
Anyone with predictions?
You gotta check out the film clip “Real Estate Crash” to the tune of Bad Moon Rising. It’ll give all you bloggers out there a lift.
Recent Weekly Mortgage Applications Survey -
data: http://www.mortgagebankers.org/NewsandMedia/PressCenter/55210.htm
charts: http://www.recharts.com/mba/mba.html
Bear Stearns Tangled Web
http://wallstreetexaminer.com/blogs/winter/?p=844
Two Big Funds At Bear Stearns Face Shutdown
By Kate Kelly, Serena Ng and David Reilly
Word Count: 1,763 | Companies Featured in This Article: Goldman Sachs Group, Bank of America , UBS
Two big hedge funds at Bear Stearns Cos. were close to being shut down last night as a rescue plan developed over several days fell apart in a drama that could have wide-ranging consequences for Wall Street and investors.
Merrill Lynch & Co., one of the hedge funds’ lenders, said it would move to seize collateral — much of it mortgage-backed debt — from the two funds and sell it, according to documents reviewed by The Wall Street Journal. At the same time, the funds’ managers worked with a handful of other key lenders, including Goldman Sachs Group Inc. and Bank of America Corp., to pay off the funds’ $9 billion in loans, according to a person familiar with the matter.
As of a few weeks ago, the two Bear Stearns hedge funds held more than $20 billion of investments, mostly in complex securities made up of bonds backed by subprime mortgages — the relatively risky home loans made to borrowers with troubled credit histories.
http://online.wsj.com/article/SB118230204193441422.html?mod=hpp_us_pageone
With military-sounding names like Blackstone, Fortress and Citadel, I am wondering if Neocon advisors handpicked the rescue firms?
Subprime puts Bear Stearns fund on brink
By Ben White and Saskia Scholtes in New York
Published: June 20 2007 00:03 | Last updated: June 20 2007 00:03
A highly leveraged Bear Stearns hedge fund that made bad bets on the subprime mortgage market was on the brink of failure on Tuesday after Merrill Lynch rejected a proposed rescue plan and prepared to auction off $850m of assets that the fund had pledged as collateral.
In addition to large losses for investors and lenders to the Bear Stearns fund, some analysts feared that a failure of the fund could accelerate losses in the subprime mortgage-backed securities market and perhaps trigger a loss of confidence in the wider market for complex structured finance securities.
That, in turn, could lead to heavy selling and losses for investors, including Wall Street banks that hold some debt instruments before they are packaged and sold to investors. The Bear Stearns fund, which raised $600m from investors and borrowed at least $6bn more, presented a rescue plan on Tuesday to Merrill and other creditors.
Under the plan, banks such as Citigroup and Barclays Capital would have invested $500m in equity capital to help the fund meet margin calls. Bear Stearns itself, which has little direct exposure to the fund, would have put up $1.5bn on a fully collateralised basis.
The plan, presented by advisers from Blackstone, the buy-out firm, would also have required creditors not to make margin calls for 12 months.
Merrill rejected the plan, in part, because of the 12 month requirement, people close to the matter said. Merrill late on Tuesday circulated a list of assets it planned to sell to potential group of investors thought to include firms such as Fortress and Citadel.
http://www.ft.com/cms/s/f92171f6-1eb7-11dc-bc22-000b5df10621.html
Blackstone is moving it’s IPO date to price this Th. or Fr. instead of next week. Is it because?
a) The threat by congress to tax them at 35%
b) The Bear Stearns Hedge fund blow up
c) They are concerned that it’s all unraveling fast
d) ALL THE ABOVE
I was thinking the same thing! The Blackstone managers want to get the hell out of Dodge before sundown.
Is this just another way that the Chinese will be left holding the bag, or do they know darn good and well what they are doing?
I’m trying to imagine if I’m the Chinese govt, and I’ve got all this US currency losing value…but the risk of trying to dump it is just too high…maybe I do some strategic things with it knowing full well I’ll be taking huge paper losses? Maybe I can get “more bang for my bucks” that way than just letting it sit and lose value.
Yeah… I think they’re trying to create a stock bubble to get back some of the money they are losing in bonds. Unfortunatly, it doesn’t seem to be gaining any momentum. Typical American still doesn’t trust the stock market, and brining garbage like Blackstone to market isn’t going to strengthen anyone’s trust in stocks.
Google seems to be the ONLY bubble stock with any momentum.
“Is this just another way that the Chinese will be left holding the bag, or do they know darn good and well what they are doing?”
This way… China gets Taiwan for free…it’s called a “leveraged” takeover… in “some circles”
So they act as the new PPT (at a big loss in dollars) in return for us looking the other way? If that’s the case I hope they at least wait a little while longer. I’ve got friends in Taiwan this month. At this point us threatening to go kick their asses might be seen as humor rather than as a credible threat.
Former FB,
Just remember 1 thing. 3RD Marine Division,Okinawa. They are kept there for a reason…Also our air assets in Japan(Iwakuni/Cadena/Etc.). The Marines do not have to win,just hold em at bay. From the studying i have done China’s naval/amphibious threat really isn’t much…It is getting better though.
Chris
Former Marine…
Russ says:
“Any reading of the classics on manias and panics such as Charles Kindleberger shows that historically that’s exactly what happens, a big player finally peals away from the madness.”
Merrill leading the way!
The clowns are leaving the circus… and good for them.
Don’t San Diego home shoppers know that higher rates reduce purchase demand, and lower demand leads to lower prices? Try not to catch yourself a falling knife.
Mortgage-rate hike may impel buyers
Consumers not too worried about quarter-point increase
By Emmet Pierce
and Roger Showley
STAFF WRITERS
June 20, 2007
* Building of new homes fell in May
* Study says home prices at risk in San Diego, state
A spike in mortgage interest rates that’s putting new pressure on homeowners with costly subprime loans may also bring an unexpected boost to the market as buyers rush to beat more rate hikes.
“Some people have been on the sidelines waiting for rates to start rising or waiting for home prices to drop,” said Keitaro Matsuda, Union Bank of California senior economist. “People who have the means to be in the housing market but have chosen not to, those numbers may prompt them to re-enter the market.”
http://www.signonsandiego.com/uniontrib/20070620/news_1b20loans.html
I remember in 2004 there was indeed a rush that appeared to be triggered by the expectation of rising rates, and not by the actual low rates (which had been in place for about 2 years).
It’s always hard to tell though if that’s what really triggered it, or it was more just being caught up in the speculation wave due to the price curve accelerating upward. I do remember some talk about getting in before it’s too late with regards to the rates, so I think that’s some factor.
Another possible contributor to a dead-cat bounce, and yet again just prolonging the pain.
I don’t get how a “dead cat bounce” can occur here. Home prices were already falling and unaffordable before the bond market crash. Now they are still falling, but even less affordable. Where are the bids going to come from to drive the DCB?
Prime borrowers making stupid investment decisions.
It’s happening in some areas of Florida as we speak. Witness the recent articles of people who got “deals” in auctions, trying to time the market and thinking the bottom is here. The median price in the hardest-hit areas of Florida has level and even upticked over the last few months, but we all know it’s not the real bottom. I’d almost bet the same will happen in SD.
It’s happening in other bubbly areas too. I see the same in the DC burbs where I live - sales and median prices have stopped declining and actually risen some, but the fundamentals are still way out of whack.
“Prime borrowers making stupid investment decisions.”
I am skeptical that there are many prime borrowers out there who do not already own falling knives.
ha ha..
according to real estate bible (red-white-blue book from the venerable inst. of NAR)
when rates go higher: it will prompt buyers…another version is “buy now as rates are going further higher”.
when rates tick lower: buy now as rates are lower than has ever been. buy now as rates may go higher.
The fact of the matter is (as Dobbs likes to say ): rates and asset valuations (house prices) move in opposition as they should (discounting mechanism) just like bond yield and bond prices.
Long-Term Rate Rise
Prompts Strategy Shift
As Yield Curve Returns to ‘Normal,’ Investors Start to Ditch
Short-Term Bonds, While Home Buyers Reconsider Options
By JANE J. KIM and RUTH SIMON
June 20, 2007; Page D1
The recent bond market rout is prompting some fixed-income investors and mortgage shoppers to rethink their strategies.
http://online.wsj.com/article/SB118230552514241477.html?mod=hpp_us_at_glance_pj
Yeah, I am buying double the amount of LT bonds this year compared to last year. I’m also finding some of my dividend stock prices are falling, and that means their yields are rising, so I’m adding more to my holdings in them - example: utilities stocks.
“Yeah, I am buying double the amount of LT bonds this year compared to last year.”
Are you quite confident the bear market in l-t Treasuries will be contained?
I’m never confident in any single one of my investments, GS. I am confident in my portfolio though. It keeps amazing me that most bloggers laugh at people who bet their lives on real estate, and turn around and say they have all their money in bonds, or gold, or stocks, or whatever. That’s America, the land of the obese and “super size” it.
In investing, I’m by no means an extremist. Oh, as a “coincidence” (sarcasm intended) my net worth just gets better every year and I have confidence that I will broach $1 million between 18 months and 5 years in my net worth.
Bill —
I think your diversification strategy is wise overall. I do, however, question a decision to increase the share allocation to l-t T-bonds at this stage of the game.
But your point is well-taken that there is no way to predict the way the many cross currents buffeting Wall Street these days will resolve, so dollar-cost-averaging into a little bit of everything is probably a better strategy than sitting on one’s hands or stuffing the cash under the matress then watching its value get inflated away.
GS and Bill the problem is not making money, th problem is will the money be worth anything. If Inflation is 3% and the individuals total tax rate (state, federal) is 40% a L t bond yielding 5.25% has a return after inflation and taxes of
I find it amusing that in a world wide 8% interest market the US treasuries and bonds yield less than 6.5%.
The current “Carry Trade” is yielding 11.17% with a standard deviation of 8.95% and a Sharpe ratio of 1.25. In an average week with this type of carry the current weekly profit on 10K investment for the next few months will be ~$57.00. Either the interest on the “carry trade” will come down or US Treasuries will go up. I suspect the latter as inflation is a much greater concern than the slowdown in the economy. I do not care if bonds stay were they are, go down or go up. Either way the position is fully hedged and the interest rate locked for the next 3 months. Very rarely have the international bond markets been this out of skew - the last time this happened the Yen rallied 30% in 3 months when the “carry trade unwound”.
Richard Fisher, Federal Reserve Bank of Dallas President (Alternate Voting Member)
“Our job in terms of dealing with expectations or underlying forces that give rise to inflation impulses will continue regardless of what happens in the marketplace…If the Fed does its job, then we can accommodate economic growth and keep inflation down.” – June 14, 2007
Jean-Claude Trichet, European Central Bank President
“It would be naïve to think that the effects of globalization on inflation go in one direction only,” referring to the “upward pressure on prices for mining products and fossil fuels as well as in some areas of agriculture.” – June 18, 2007
I do not catch falling knives.
I have four comments on the PMI study:
1) It seems rather quaint to “forecast” lower prices “over the next two years” with a probability of 55% in San Diego, given that the S&P 500 / Case-Shiller index shows prices are already falling. (Kinda like “forecasting” rain when it is raining outside!)
2) Page 6 of 12 in the study shows prices decelerating at double-digit rates in many markets formerly referred to as a bit frothy; I wonder where that is headed?
3) I don’t believe the study reflects the effect of the recent bond market crash on making mortgage rates go up, which will put further downwards pressure on prices.
4) Try not to catch yourself a falling knife.
Select this link for the full publication (in .pdf format):
Economic and Real Estate Trends (ERET)
6/19/07 Summer 2007 Economic and Real Estate Trends Report
http://phx.corporate-ir.net/phoenix.zhtml?c=63356&p=irol-Publications
Did the writer mean to say “worth less” or “worthless?”
Study says home prices at risk in San Diego, state
By Jeremy Herron
ASSOCIATED PRESS
June 20, 2007
NEW YORK – Some homeowners in California, Florida and the Southwest now face more than a 60 percent chance their property will be worth less in two years, according to a new study by a mortgage insurer.
The PMI U.S. Market Risk index, released yesterday by PMI Mortgage Insurance, found that 15 of the nation’s largest metro areas – including San Diego – have a greater than 50 percent chance of seeing price drops. Eleven of those markets are in California and Florida. These are areas that enjoyed some of the largest price run-ups during a five-year housing boom that ended nearly two years ago.
The index predicts a less than one in 10 chance of price depreciation in markets such as Dallas, Houston and Indianapolis. Pittsburgh is the safest, with a 6.4 percent risk that home prices will fall.
“What the markets with the greatest risk of decline have in common is a history of price volatility: rapidly rising rates of price appreciation above the long-term average followed by a recent sharp slowdown in the rate of appreciation,” said Mark Milner, PMI’s chief risk officer.
The riskiest of all metropolitan statistical areas or markets are Riverside, Phoenix, Las Vegas and West Palm Beach, Fla. – each with a greater-than-60 percent chance of depreciation.
San Diego County ranked 10th in riskiness with a 55.5 percent chance that home prices will be lower in the next two years than they are today. Top-ranking Riverside has a 65.2 percent chance of lower prices over the same period.
http://www.signonsandiego.com/uniontrib/20070620/news_1b20pmi.html
“Again because prices have already been adjusting downward, the probability that prices will be lower two years from now is not as high as in the MSAs that have seen a sharp recent trend reversal.”
(from the pdf)
I love statistics. Just ‘cuz it went down, it won’t continue to go down.
These guys need to look up “positive serial correlation” in their undergraduate econometrics text book.
http://www.investorwords.com/4496/serial_correlation.html
Shepherdstown, West Virginia. Far, far DC exurb, but it’s got a train stop on the way into DC, which is a selling point for some commuters. And here’s one data point on how housing is shaping up:
A friend of mine was interested in buying a house there 18 months ago. It’s a long commute into the DC burbs for his job, an hour or more on a SUNDAY morning! But he said the prices were much better way out there, and he wanted a “big, nice house” — read McMansion, and going that far out was the only way he could afford it.
Price in late 2005 for the model and options he and his wife wanted: $480,000
Price in mid-2007 for the very same one, new: $330,000!
Ryan Homes not only slashed base prices but all the expensive options are now half off (showing how overpriced they were to begin with). So it’s a $150,000 cut in price. That’s a 31% drop. OUCH!
Fortunately, this guy never did manage to sell his original house at his wishing price, so he wasn’t able to sign on for the new Shepherdstown house. At the time, he didn’t know how lucky he was, but he sure knows now.
And you can bet that the people who bought in that development back at the peak in 2005 are really steaming now!
LOL, people commute from West Virginia to DC??? Crossing 2 state lines just to get to work in the morning isn’t going to last long once gas hits 5 bucks a gallon. These people are screwed.
I don’t know if any of you bloggers listen to Tom Leykis. Yes, many people think he is a misogynist, but c’mon… It is entertainment. He is a very bright guy and occasionally does some timely topics.
I am in Europe for the summer and use iTunes Podcasts to keep up with his show.
If you get the chance, listen to “The 2 Income Trap” dated the 19 of June. He talks about many of the issues we discuss here…
Its all going mainstream baby!
Common wisdom has it that women started entering the workforce in great numbers in the ’70s due to the high inflation we had then. The household could no longer make it on just Dad’s income.
In my opinion, cause and effect were reversed. It was the relatively rapid growth in household income (as more women entered the workforce) that caused the high inflation. Classic case of too many dollars chasing too few goods.
I agree with you Bill. There were many reasons for women joining the workforce in greater numbers, most notably the women’s liberation/equal rights movement. There was inflation in this country prior to the 70s, yet women did not go to work in droves. I’ve always said that the women ruined it for themselves; the economy adjusted such that for many families the women must work to be able to afford the desired lifestyles.
IMHO you are both way off base.
No person in their right mind would wish to work unless it was necessary. During WWII there were millions of women working, replacing the men fighting overseas. And yet after the war most of these women quit. The primary reason was one person could make enough money to have a high standard of living. This was not so true in the late 1960s and by 1975 the dream of a single earner income had vanished with the buffalo (aka Bison).
The standard of living drop in the US has been so large over the last 40 years that those of you under 55 would not remember that mortgages were 15 years, car loans were 2 years, Leland Stanford room and board was 2,300/yr. Who needed 2 incomes to send their children to college and buy a car and a house?
It is inflation that increased these goods, it is the drop in the Standard of Living. It is not women’s lib or women deciding that it was time to work. In all probability, women’s lib was an outgrowth of women having to work and not receiving fair pay.
My wife is going to go back to work once the kids are all in school. Why? So we can buy a bigger house. We don’t need a bigger house, but everybody else has one (because they all work) so she’s going to work. When I went to school in the mid-60s, all of the girls were being taught to prepare for a career, not be a housewife.
I’m a female, and agree with Bill, Mikey and Hoz.
The expansion of credit AND more women entering the workforce have both driven cost inflation to spiral upwards…which forces more women into the workforce and more people to use credit, which causes more people to enter the workforce and more people to use credit…etc…etc…etc.
IMHO, if everyone stopped using credit (or only used it sparingly) and if women would attempt to stay home, everything would become more affordable again — after a very painful, agonizing depression, though.
Can’t discount the social acceptance of divorce in making more women willing (even eager) to work outside the home. A divorce is absolutely **DEVASTATING** to a middle-aged SAHM.
IMHO, if everyone stopped using credit (or only used it sparingly) and if women would attempt to stay home, everything would become more affordable again — after a very painful, agonizing depression, though.
So women are to blame for housing being expensive? Why not men?
Can’t discount the social acceptance of divorce in making more women willing (even eager) to work outside the home. A divorce is absolutely **DEVASTATING** to a middle-aged SAHM.
I’ve seen too many SAHMs, including my mother, become improvershed divorcees when Hubby changed his mind about marriage. I would never in a million years suggest that a woman drop her career to raise a family.
The only> cause of inflation is expansion of the money supply. An expansion of the work force, whether by women entering the work force as in the US, or by global outsourcing of labor as we see today, results in more competition for jobs and lower wages and is deflationary.
Isn’t that obvious?
You are correct, yogurt. I suppose though, some of that “increased money supply” comes in the form of debt and some comes in the form of…”increased money supply” (whether anyone readily admits it or not).
I’ve always claimed that women in the workforce has caused wage deflation as well.
Two sides of the same/similar coin: wage deflation/cost inflation simply means less purchasing power and a lower standard of living.
Thanks for your post, yogurt!
Liz,
I mention women because they were the ones who made a shift into wage-earning jobs. Men, for the most part, were already there.
Forgive my use of the term “attempt” to stay home. In order for women to stay home in any numbers, divorce laws would have to be re-written so they would be financially protected in the event of a divorce. I’m a SAHM (homeschooling parent & small-time trader), and we have a post-nuptial agreement that is intended to protect the innocent party in a divorce (fault is clearly defined in the documents). It’s still very scary, as I’ve seen reality as well (middle-aged women dumped at exatly the time she can’t get a job OR a new husband). Different blog topic, but very relevant, IMHO.
This is way off base. Inflation is a monetary phenomenon. The main reason inflation is bad is because it makes capital markets less efficient since the nominal variability of inflation expectations (and thus interest rates) increases, increasing risk to both lenders and borrowers.
better: change “and thus interest rates” to “and thus real returns on investment for both lenders and borrowers”
Nixon pulled the dollar completely off the gold standard in 1971. Think that might have had something to do with the rampant inflation of the 70’s?
After 1971 and removal of the gold standard, banks[federal reserve] printed dollars with little restrictions and now it’s snow balled out of control. Billions and billions of new money created out of thin air has caused this inflation where the dollar bill has lost 75% of its value since 1971. No wonder it takes two incomes now in a family just to stay even in trying to maintain a household. Prices/inflation are going up as banks “print” and put into circulation more dollars. No one has the power to stop this process until the dollar becomes worthless. History tells us this game has been played before but today our characters like in a movie don’t seem to know the ending.
None of these comments is incorrect, and none is wholly correct either. Unintended consequences are simple to diagnose in retrospect. Women having the right to earn “equal pay for equal work”….which we have not yet achieved… was and is a matter of survival first, then growing beyond teaching and nursing as the two socially acceptable occupations for the “weaker sex.”
Mother Jones (not my favorite periodical!) has an interview with the author of a book by that name. She makes a similar point, how two incomes have “bid up” the price of houses, among other things. A good read.
http://www.motherjones.com/news/qa/2004/11/10_400.html?welcome=true
Mother Jones has made some remarkable concessions over the years. I remember their publishing an extensive expose on the corruption of tSandanistas in the early ’90s that absolutely shocked this young lefty.
Question for all of you…. Here on Long Island prices really havent come down much at all, in fact people putting their homes up are adding their 15-20% annual appreciation to their prices!
WHY is it that listings are still 100-200k OVER their zillow estimates?
why why why arent prices actually starting to recede? Ive been waiting for years for things to turn around …. how soon is now?
-liz & smudge
Perhaps a year or two. Remember, it took seven years from the stock market crash of 1987 to my home purchase in 1994. Basically, it’s 1989 now. If were on the same schedule, the real price move is between now and this time in 2009.
The housing market sure moves slow on the downside, compared with the upside.
Perhaps a year or two. Remember, it took seven years from the stock market crash of 1987 to my home purchase in 1994. Basically, it’s 1989 now. If were on the same schedule, the real price move is between now and this time in 2009.
The housing market sure moves slow on the downside, compared with the upside.
What little I know of LonGisland is from the folks I went to school with: they all came from wealthy families and were used to spending whatever they had to to get what they wanted. A lot of people there (with older children perhaps wanting to settle down where they grew up) with limited room for development translates into a continuous demand for homes there.
I’d bet that those working in NY are still getting their pay raises and bonuses, and with the stock market still going crazy, there’s lots of money flowing into the area. I think the ripple effect needs to set in - people are doing too well on the Island to be affected by the immediate impact of the subprime woes.
So none of them were dumb enough to ARM or teaser-rate their way into something they can’t actually afford at fixed rates? It only takes a few…
L&S - you didn’t mention whether the higher prices to which you refer are “asking” prices or “closed sale” prices. If the former, they are just adding to inventory and most of those likely have low motivation to sell.
Californians’ confidence in economy sinking fast
High gas, grocery store prices blamed
High gas, grocery store prices blamed for sinking confidence in California’s economy.
The Desert Sun
High gas, grocery store prices blamed for sinking confidence in California’s economy.
Debra Gruszecki
The Desert Sun
June 19, 2007
Californians’ consumer confidence in the economy took a dive in the second quarter of 2007, plunging into the pool of pessimism by 19 index points.
Economist Esmael Adibi called the drop “astonishing” - the steepest he’s seen since 2002 when Chapman University’s Gary Anderson Center for Economic Research of Orange County began sending surveys to California residents.
Pain at the pump, despite recent price drops. Uncertainty over the housing market. Sticker shock in grocery stores. Those are among the conditions Adibi cited for the cold-water splash.
“There could be even more of a slump in the next quarter,” Adibi said, as the survey of California residents reflects diminished enthusiasm on the part of consumers in the state to buy big-ticket items over the next six months.
http://www.thedesertsun.com/apps/pbcs.dll/article?AID=/20070619/BUSINESS/706190312/1006
Nice post Stucco….Used car sales should give some indication…I spoke with a used car dealership owner who specializes in European used car sales….He said sales as of two weeks ago have stopped…He has cars coming out his rear end..Has no room on the lot and is parking the extra on the street…He is quite worried….
“Economist Esmael Adibi called the drop “astonishing” - the steepest he’s seen since 2002 when Chapman University’s Gary Anderson Center for Economic Research of Orange County began sending surveys to California residents.”
What’s probably really “astonishing” to Chapman University is that “New Century” & “Ameriquest” are just 7 miles as the crow flies…don’t think they’ll be seeing that much $$$$$$$$ “corporate sponsorship” in the coming years.
Bear Stearns bailout flounders:
http://tinyurl.com/yuufxu
Greed is good, until it turns ugly.
Merrill said to seize $800M from hedge funds
A plan to restructure Bear Stearns’ funds heavily invested in securities backed by subprime mortgages gets thrown into doubt.
June 20 2007: 9:44 AM EDT
It’s going to be fun to watch the Brobdingnagians as they turn on one another…
Is this the end of Bear Stears?
I wish.
June 20, 2007 6:34 P.M.ET
BULLETIN
Stock profit-taking snowballs
Rising bond yields start the wave of selling; Dow down triple digits
Losses accelerate late, sending all markets deep into the red.
http://www.marketwatch.com
Try not to catch yourself a falling knife.
June 20, 2007 10:07 A.M.ET
BULLETIN
Stock indexes stretch gains
Lower bond yields, Morgan Stanley results underpin an early rise.
• Movers & Shakers — Home Depot, Best Buy, Morgan, Nuveen
http://www.marketwatch.com/tools/marketsummary/
Have you ever seen a pressure cooker on full boil with the lid clamped down tight?
http://www.marketwatch.com/quotes/?sid=11421
Scroll down this page for another excellent view of the levitating lid on this pressure cooker…
http://www.bloomberg.com/markets/rates/index.html
The first derivatives of headline U.S. stock market index levels are decreasing and decelerating to boot.
These rapidly evolving marketwatch.com headlines are a source of constant amusement. (I also like the “Countdown to the close” feature; makes it sound as though the marketwatch.com cheerleaders are hoping the markets can survive another day w/o a major meltdown.)
—————————————————————————-
Countdown to the close: 18 min 40 sec
June 20, 2007 3:41 P.M.ET
BULLETIN
Blackstone IPO hangs tough
Blackstone says its price range will be between $29 and $31 despite possible problems with tax treatment. Private-equity firm stands to raise as much as $4 billion in biggest stock debut in years.
ummm…
Mortgage Rate Rise Pushes U.S. Housing, Economy to `Blood Bath’
http://tinyurl.com/37m97q
What is pushing down the 1-Year ARM rate? Is it that everyone suddenly wants to refinance into fixed rates?
CURRENT/1 MONTH PRIOR/3 MONTH PRIOR/6 MONTH PRIOR/1 YEAR PRIOR
15-Year Mortgage 5.99 5.57 5.44 5.44 5.97
30-Year Mortgage 6.29 5.87 5.68 5.68 6.26
1-Year ARM 5.55 5.67 5.32 5.31 5.32
http://www.bloomberg.com/markets/rates/index.html
Zero $ Down, and it’s grotesque siblings (read NegAM, ARMs, etc.) only worked when the word was out on the street — “There’s free money” (read Stated Income Loans). Any market can go up if everybody can get ‘free money’ - Imagine what property prices & houses would be in a game of Monopoly if every player had access to lots more money!!
“Imagine what property prices & houses would be in a game of Monopoly if every player had access to lots more money!!”
I like that analogy — it is a good one with which to explain the bubble to the clueless.
Apparently, all is well in Texas regarding housing: http://www.pbs.org/newshour/bb/business/jan-june07/slump_06-19.html
“MARK DOTZOUR, Texas A&M University: Hello, Ray. It’s good to visit with you. We down here in Texas we have a real, unique situation going on right now. We’ve got a combination of very strong job growth. It’s basically double the national average. We’ve got home price appreciation that’s going up at an increasing rate in many of our metropolitan areas.
And at the same time, we’ve got population growth. I noticed just last year we had 570,000 new people come into the state of Texas. And at the same time, the home builders have cut back on production, as well, like you’ve previously heard. And so we’re in kind of an interesting position, where home builders are cutting back on their building, but inventory levels of homes for sale are quite low. And that’s why we’re seeing the good rates of price appreciation in many parts of Texas.”
I personally know a RE agent in SA, Texas that just gave up on selling HIS OWN HOUSE. He bought it before the bubble and it actually rents for enough to more than cover all the expenses, so he’s hanging onto it rather than lower the price even more. Doesn’t sound like “all is well in Texas” to me.
Bullshit.
I have to stop reading now and pile up all the Texas “Land For Sale” circulars stuffing my house and put out the trash. If you don’t hear from me for a week, please break down the door (Don’t forget to jump aside.)
A refresher course for those of you not around in 1907…
http://en.wikipedia.org/wiki/Panic_of_1907
Not to worry, the Fed has learned all the lessons that could be learned on this subject.
Home Depot Shares Surge on $22.5 Billion Stock Buyback Plan.
Hey, didn’t the home builders (HB) do something similar last year?
http://www.youtube.com/watch?v=dgtpxBPYnvE
Go to the “real estate crash” video. It’ll give you all a lift. It’s filmed to “Bad Moon Rising”
Damn, powerful piece, needed to be aired on national news channel. Was just up that way this past weekend for a graduation in Davis but the graduates had a rental appartment in Natomas.All the home building looked ugly and I didn’t care for the area enough to even look at housing. I did go to the Ardan and downtown malls which had very light foot traffic. Went out for meals and had the worst service ever; the waitress was dripping the coffee from the cup all the way to the table and it arrived half full. Went to Joe’s Crab Shack, waited 45 min to be seated and then another 45 min for the meal which was lousy. Anyone want crab go to Moss Landing in Monterey Co. and eat at Phil’s.
China warns IMF over renminbi
By Richard McGregor in Beijing
Published: June 20 2007 19:41 | Last updated: June 20 2007 19:41
China has issued a pointed warning to the International Monetary Fund not to back US pressure for a faster appreciation of the renminbi in a planned review of global exchange rates.
The People’s Bank of China, the central bank, said in a statement on its website that the IMF “should carry out its duties based on mutual understanding and respect”, especially for the views of developing countries.
Without directly naming the US, the PBoC said the IMF should step up supervision of member states issuing “major reserve currencies that play a pivotal role on the global systemic stability”.
http://www.ft.com/cms/s/4f8c027e-1f5b-11dc-ac86-000b5df10621.html
Colbert Report…
http://www.timesdaily.com/article/20070619/NEWS/706190323/1011
“We’re dangerously low on water,” Slay said. “This drought has hit us hard. This is the worst I’ve ever seen in my 62 years.”
Jun 13, 2007
Page 1 of 5
THE INTEREST RATE CONUNDRUM, Part 1
Economics of denial
By Henry C K Liu
Suddenly this summer, all eyes are trained on rising interest rates around the globe. The prospect of central banks tightening to ward off impending inflation has abruptly interrupted the spectacular rise of all stock markets driven by abnormally ample liquidity, but has yet to precipitate a market crash. Under normal conditions, rising rates lower bond prices as well as equity prices. But in the current liquidity boom that has produced a persistently inverted yield curve, high short-term interest rates have crashed bonds but have left equity prices higher than market fundamentals could justify.
http://www.atimes.com/atimes/Global_Economy/IF13Dj01.html
Associated Press
Stocks Drop on Rise in Bond Yields
By MADLEN READ 06.20.07, 3:56 PM ET
Wall Street dropped sharply Wednesday as bond yields surged, stifling investors’ initial enthusiasm about declining oil prices and Home Depot Inc.’s stock repurchase plan.
The Dow Jones industrial average fell more than 120 points as the 10-year Treasury note’s yield soared to 5.15 percent by late afternoon from 5.09 percent late Tuesday.
Because high rates can slow down business, the stock market started reacting violently to Treasury yields two weeks ago when the 10-year yield surged past 5 percent for the first time since last summer. Wall Street has been trading more mildly in recent days as yields retreated from last week’s peak of nearly 5.30 percent, but Wednesday’s advance reignited worries about them spiking again.
“People are watching this 10-year, and it looks like it might want to go back to 5.25,” said Todd Leone, managing director of equity trading at Cowen & Co.
http://www.forbes.com/feeds/ap/2007/06/20/ap3841418.html