Bits Bucket And Craigslist Finds For July 1, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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56 yr old brother in law up from SW Fla. with 45ish wife. They bought 200K SFH in 06 with Dads help. He earns 15 an hour, she waitresses. I cautiously ask about the house and the state of housing. Conversation eventually gets around to exotic mortgages. I ask what type of mortgage they have and they both shrug their shoulders and almost in tandem state “not sure but we know what our payment is”. Subject change.
Later wife reveals that her 69 yr old mother buys a 650K victorian in Mass early 06. Says she was living in a paid for condo (described as georgeous) valued 300-400K (her estimate). Come to find out the condo has been on the market for 15 months sitting empty. Three price drops. I ask what the HOA might be …. ready? 600 a month. I’ll leave it to your imagination what kind of services I would expect for 600 per.
From here I was basically speechless. That is till I got my wife alone and then we had quite a conversation.
That’s a great post. The stupidity is just endless. People buy houses with less thought than they put into buying chewing gum. Watch people at a Starbucks. It takes them longer to order their latte than it does to decided on a $600,000 house.
Hmmm, yeah I’d like a stated income pick-a-pay LIBOR, ummm recasting 115 is fine, Non-owner occupied, with the 3% seller’s concession and rebating… make that 10% out of escrow, so I’m going to need a hot appraisal. No PPP! Any brokers that do this can take 4 on the back… you think I’m going to keep this place?!
And, room for cream.
Geez loujise, ajas, you sure know the lingo…LOL
“HOA might be …. ready? 600 a month.”
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
DAYYYUUMMMM!!!! The HOA on my rental townhouse in VA is….ready? $59.50; $65.45 if it’s late. I kid you not. I’ve owned this place for 8 years, and the $59.50 was an increase from the original HOA.
$600?? I wouldn’t even entertain the idea.
BayQT~
Matt Padilla has a post up (dated 29th June) on his OCR blog with a couple of very interesting BofA charts.
One is another ARM reset chart, which to my untutored eye seems to show even bigger monthly numbers early next year than the now-famous Credit Suisse chart.
The second is a 20-year equity percentage chart, for both all homeowners and for homeowners with mortgages.
(* Warning: some readers may find the trend portrayed in this chart disturbing. *)
Links:
http://blogs/ocregister.com/mortgage/resetbigchart.html
http://blogs/ocregister.com/mortgage/HomeequityfallingBig.html
I could not get your link to come up. The article with the B of A reset chart is here:
http://tinyurl.com/yrrhek
Thanks.
Looks like the links only work within the article, folks.
Dot instead of slash between blogs and ocregister worked for me:
http://blogs.ocregister.com/mortgage/resetbigchart.html
http://blogs.ocregister.com/mortgage/HomeequityfallingBig.html
Here’s the link you want (the / is killing it):
reset chart:
http://blogs.ocregister.com/mortgage/resetbigchart.html
falling equity:
http://blogs.ocregister.com/mortgage/HomeequityfallingBig.html
Thanks guys. (I don’t have cut and paste on this terminal. :()
The comments to the article were the really scary part.
It’s all scary. I’m nice and snug in a $966 per month apartment I’m renting (with a brat of a cat). Those are great charts and say it all. Neill, where do you get your supply of popcorn? I’m going to get a lot of it in the next 18 months.
Hey anyone: Will their be ARM resets in 2009? 2010?
“HomeequityfallingBig”
That is some great visual evidence on the long-term cumulative impact of the Greenspan ‘wealth effect.’
Re-post of Moyers interview with Gretchen Morgenson of NYT on the potential CDO driven hedge fund/Wall Street meltdown.
http://www.pbs.org/moyers/journal/06292007/transcript3.html
Explains why the SEC has more responsibility than the Fed in this debacle:
“Well, the Fed is interested in the safety and soundness of the financial system, okay? And so in this particular situation, you have loans that are being made, then securitized, made into securities sold on Wall Street. So the bank is not at risk necessarily as much as it was in the old days when a bank might make a bad loan. Now it’s the investor who owns the loan. The Fed is not about protecting investors. That’s the Securities and Exchange Commission’s job. So it’s changed the whole way that mortgages are now sold, underwritten by banks and then securities firms has changed the entire makeup of this market, turned it into a mania, and now we’re feeling the ill effects of the unwinding.”
But let’s not forget the fact that the Fed did fuel this with low interest rates.
I watched that on Friday night. It makes me excited to be holding good sized put positions in October and Sept. index options. That’s every short seller’s fantasy of course, to be short for another 1987 style crash. I’m sure the London terrorist activity this weekend isn’t going to help matters either. Of course someone will say people like me are ghouls for wanting to profit on misery. I would counter by saying that there would not be the misery had there not been the greed driven mania.
I hope you make a pantload of $$. If I could do it, I would.
and you know what? If I do, I’ll give a lot of it away. I don’t want or need it.
And I know some of it will go to help animal shelters, which is where my extra $$ go when I have them. Make as much as you can TXchick! Rake it in hand over fist!
Greed driven mania is not to be underestimated. It is bigger than all of us. Bigger than everything, apparently. I’m afraid there will be no crash, not even a small meltdown - just more hype and rampant speculation. There is no stopping this diabolical relentless train of ugly blatant greed. Reality does not stand a chance.
You’re wrong.
The 1990s tech bubble where unprofitable companies were rolled out to the stock market and shot to stratospheric levels was eventually brought down by reality. Reality = a company can’t be unprofitable forever or it goes bankrupt. A stock of an unprofitable company can’t be high forever because the value after bankruptcy is $0.
This mania can’t continue forever because it will be taken down by foreclosures. Long term, home prices can’t stay above peoples’ ability to pay.
It’s not so much that the company has no money, that line was usually crossed months ago. The big collapse happens when nobody will continue to lend them money. Then it’s “everybody take a chair home, that’s your last paycheck.”
Are these SPY otions?
Wake up Palmetto. This should make your day. Please do not read this while you have sharp objects on the table.
http://tinyurl.com/272×8n
This may be the part that angered me the most. Now, we have to pay for added bureaucracy. How about we just provide these things ourselves.
“Other legislators, including Representative Rosa L. DeLauro, Democrat of Connecticut, are calling for the creation of a new federal agency to oversee all food inspections. Such an agency would replace the current system, which splits responsibility among the F.D.A., the Department of Agriculture and other agencies.”
They just like that high trade deficit. It keeps the Chinese buying junk paper from us and allows the whole party to continue. “Welcome to the jungle, we’ve got fun and games…” This is how the housing mania was constructed.
http://www.nytimes.com/2007/07/01/business/01imports.html?_r=1&hp&oref=slogin
Try again!
Interesting article, thanks for the link. Just print the source of the food ingredients. Let the people decide. No need for more agencies, etc.
Hi Palmetto,
No, I think we do need a new agency that actually does something to protect consumers from poison, pathogens, etc. The FDA is almost useless, and the Dept. of Agriculture is even worse. When huge corporations place profit above all else, including life, somebody needs to step in and say enough. Publishing the originating countries of ingredients won’t help, since most people can’t read, and the labels are printed by lasers to make everything as tiny as possible.
Since companies today are only interested in increasing the price of their stocks, not actually producing anything to support those prices, there may come a time in the not-too-distant future when nobody in this country is actually producing much of anything, and we will have become nothing more than a consumer society buying (i.e, charging) low-quality products at high-quality prices.
If you can’t get current agencies to work, what makes you think you can get a new agency to work? We always think that giving it one more try will magically cure all ills. We have the FDA, SEC, FHA, EPA, etc. etc. They don’t work. Creating new versions of these monsters won’t work. Fix what we have or live without seems to be the only solution.
“Fix what we have or live without.”
You just coined the new catch phrase for the coming recession.
How can the people make rational decisions without relevant &accurate information? The country of origin isn’t enough. The agencies’ job should be to obtain and verify the information for people to make their decisions.
I tried to discover where Colgate made my Total Whitening (tooth) paste. The box for it says, “Dist(ributed) by Colgate-Palmolive.” But that doesn’t tell me WHERE the toothpaste was actually manufactured. I called the number Colgate gives out for questions, “1-800-468-6502″ and got someone on the phone with a Chinese accent. She couldn’t tell me where this toothpaste is actually manufactured. I’m determined to find out.
Just print the source of the food ingredients. Let the people decide. No need for more agencies, etc.
————————
Totally agree, Palmetto!!!
Like i said before:
We got Tons of sick and dead cats and dogs over some bean counter at Menu Foods wanting to save ONE CANADIAN CENT per can.
Here’s a list to show how many companies are involved in this:
Cat Food Recalls
Americas Choice, Preferred Pet
Authority
Best Choice
Blue Buffalo Co (RICE GLUTEN)
Cats Choice
Co-Op Gold
Companion
Compliments
Demolulas Market Basket
Demoulas/Market Basket
Despar
Diamond Pet Food (RICE GLUTEN)
Doctors Foster & Smith
Doctors Foster & Smith (RICE GLUTEN)
Eukanuba Cat Cuts and Flaked
Eukanuba Morsels in Gravy
Evolve
Evolve
Fame
Feline Classic
Feline Cuisine
Fine Feline Cat
Food Lion
Foodtown
Giant Companion
Giant Eagle
Hannaford
Harmony Farms (RICE GLUTEN)
Health Diet Cat Food
Hill Country Fare
Hill’s Prescription Diet
Hy Vee
Hy-Vee
Iams Cat Slices and Flakes
Iams Select Bites
J.E. Mondou
La Griffe
Laura Lynn
Li’l Red
Lick Your Chops
Lick Your Chops (RICE GLUTEN)
Loving Meals
Master Choice
Medi-Cal
Meijer’s Main Choice
Natural Balance (RICE GLUTEN)
Natural Ultramix
Nu Pet
Nutriplan
Nutro
Nutro Max Cat Gourmet Classics
Nutro Max Gourmet Classics
Nutro Natural Choice
Nutro Products
Paws
Performatrin Ultra
Pet Pride
Pet Pride / Good n Meaty
Pounce
Presidents Choice
Price Chopper
Priority Canada
Priority US
Publix
Roche Brothers
Roundy’s
Royal Canin (RICE GLUTEN)
Royal Canin Veterinary Diet (RICE GLUTEN)
Save-A-Lot Special Blend
Schnucks
Science Diet Feline Cuts Adult
Science Diet Feline Cuts Kitten
Science Diet Feline Cuts Mature Adult 7+
Science Diet Feline Savory Cuts Can
Sophistacat
Special Kitty Canada
Special Kitty US
Springfield Prize
Sprout
Stop & Shop Companion
Stuzzy Gold
Triumph
Wegmans
Weis Total Pet
Western Family Canada
Western Family US
White Rose
Winn Dixie
Your Pet
Dog Food Recalls
ALPO
Americas Choice, Preferred Pet
Authority
Award
Best Choice
Big Bet
Big Red
Bloom
Blue Buffalo (RICE GLUTEN)
Bruiser
Cadillac
Canine Caviar Pet Foods (RICE GLUTEN)
Champion Breed Lg Biscuit
Champion Breed Peanut Butter Biscuits
Co-Op Gold
Companion
Companion’s Best Multi-Flavor Biscuit
Compliments
Costco/Kirkland Signature (RICE GLUTEN)
Demoulas Market Basket
Diamond Pet Food
Diamond Pet Food (RICE GLUTEN)
Doctors Foster & Smith
Doctors Foster & Smith (RICE GLUTEN)
Dollar General
Eukanuba Can Dog Chunks in Gravy
Eukanuba Pouch Dog Bites in Gravy
Food Lion
Giant Companion
Gravy Train
Grreat Choice
Hannaford
Happy Tails
Harmony Farms (RICE GLUTEN)
Harmony Farms Treats (RICE GLUTEN)
Health Diet Gourmet Cuisine
Hill Country Fare
Hy Vee
Hy-Vee
Iams Can Chunky Formula
Iams Can Small Bites Formula
Iams Dog Select Bites
Jerky Treats Beef Flavored Dog Snacks
La Griffe
Laura Lynn
Loving Meals
Master Choice
Meijer’s Main Choice
Mighty Dog
Mixables
Mulligan Stew Pet Food (RICE GLUTEN)
Natural Balance (RICE GLUTEN)
Natural Life
Natural Way
Nu Pet
Nutriplan
Nutro
Nutro - Ultra
Nutro Max
Nutro Natural Choice
Nuture
Ol’ Roy
Ol’ Roy 4-Flavor Lg Biscuits
Ol’ Roy Canada
Ol’ Roy Peanut Butter Biscuits
Ol’ Roy Puppy
Ol’Roy US
Paws
Perfect Pals Large Biscuits
Performatrin Ultra
Pet Essentials
Pet Life
Pet Pride / Good n Meaty
Presidents Choice
Price Chopper
Priority Canada
Priority US
Publix
Roche Brothers
Royal Canin (RICE GLUTEN)
Royal Canin Veterinary Diet (RICE GLUTEN)
Save-A-Lot Choice Morsels
Schnuck’s
Schnucks
Shep
Shep Dog
Shop Rite
SmartPak (RICE GLUTEN)
Springfield Prize
Sprout
Stater Brothers
Stater Brothers Large Biscuits
Stop & Shop Companion
Tops Companion
Triumph
Truly
Weis Total Pet
Western Family Canada
Western Family US
White Rose
Winn Dixie
Your Pet
Ferret Food Recalls
Ultra-Blend Advanced Nutrition
And there are more not on this list. The FDA site has links to follow if anyone is interested.
Thanks for the post.
URL terminated, but I get the idea, NYCityBoy. Like the Defartment of Homeland Insecurity.
How does this have to do with the housing bubble or even the economy? Problems with source substitutions have been hitting various industries for a while. Among the worst and most frequent offenders have been American companies. The housing bubble is something we did to ourselves, just like the nationwide distribution of salmonella into salad bowls by way of the Salinas Valley.
It’s related to the houseing bubble as yet another example of the rampant greed that drove the bubble.
This is the nucleus of the housing bubble. We sent all of our manufacturing to China to capitalize on low-cost labor, sometimes slave labor. This allowed us to keep inflation low. It also allowed the Chinese to buy American treasuries in record volumes, with their cash reserves, creating a liquidity glut. This liquidity glut turned into the bad lending that was looking for ever larger returns for investors. That was what allowed all of the subprime lenders to actually lend to a bunch of deadbeats. That has led to the foreclosure crisis that the MSM is finally writing about.
We seem to forget that much of the low price world that China created was created by taking a lot of shortcuts. What you buy at Walmart and the grocery store is one of the cornerstones for this mania. Most of it is junk like the funny paper it helped to create.
The hip bone is connected to the leg bone…….
Well said, NYCBoy!
Additionally, whether we outsource jobs or insource **cheap, foreign labor** (salmonella poisoning) the cause & effect is the same — trying to exploit naive, uneducated, non-American wage slaves & being “surprised” that they don’t produce the same quality as higher-paid, better- educated American workers.
General Motors closing down part of plant of Opel in Antwerp, Belgium(Europe)
2.841 people layed off
1.160 men and women from 50 and older go on pre-pension, with behold of 82 to 89% of their last salary until the age of 65, when they officially retire.
The other 1.681 workers get up to 144.000 euros to quit their job.
The unions think they got the best deal possible.
http://www.hln.be/hlns/cache/det/art_509988.html?wt.bron=homeArt1
First Volkswagen, now General Motors…
But no problem, all those people will easily find other employment in this world’s miracle economy…
Should GM continue to pay their full salary to sit around and do nothing?
They probably lose a lot less money by having them sit around and close the plant then actually working producing cars..
Its no different then closing the last diner in Manhattan because the land is worth far more then the operating business.
http://www.ny1.com/ny1/content/index.jsp?stid=8&aid=71265
In Belgium(and most of old europe) a preretired or prepensioned person is considered as unemployed and gets unemployment benefits from government(taxpayer). The extra prepension fee is payed by the last employer(with certain maximum limits)
A prepensioned person is considered unemployed but does NOT have to search for work or to accept work.
Would you like frites with that?
I had a car assembled in Belgium once…
As long as the hot topic of the morning is corporate indecencies, this will fit right into line. I had a hard time reading this whole thing without busting my monitor. I hope there is a hell. The hedge fund managers have earned a special place and it’s not in the Cayman Islands.
http://www.nytimes.com/2007/07/01/business/yourmoney/01cay.html
“With some of the other jurisdictions, there’s an island mentality,” says Michelle Kline, a principal at Genesee Investments, a hedge fund based in Bellevue, Wash. “The thing that’s different about Cayman is that the regulators realize that hedge funds are a business, rather than just something to regulate.”
Up yours, Michelle Kline.
That’s where you go to short sell the IPOs. Or Canada.
Chick, your view a few months ago was not to short CFC. Do you still have the same opinion? It seems like they have a mountain of problems ahead. I think the mortgage business will survive but it will be an entirely new list of players that are created. I think CFC will somehow be liquidated (sold, maybe) and emerge as another entity. What are your thoughts as the meltdown gains momentum?
How about shorting Cayman real estate in the post-Hedge era? (I’m not too hopeful. The genetic and environmentally raised pirates always seem to survive.)
No, the Caribbean and Central America are going to become a safe haven for wealth - if anything, that’s where the next boom (bubble?) is.
Probably safest just to rent an apartment in the US, drive a modest car, wear modest clothes, don’t be flashy. Fewer chances of being preyed on by a desperate mortgage slave. And buy T-bills & 2 year notes, also buy gold bullion and put it in a safe (and forget about the paranoid posters who say safe deposit boxes are not safe, there will be a well-advanced warning for you to empty the contents and store elsewhere before the stormtroopers take over).
Great article. Thanks for posting it!
Interesting that the timeline for explosive offshore hedge fund growth matches the timeline for the credit bubble (beginning around 2001).
—————–
Some 8,500 investment funds are registered in the Cayman Islands, according to the agency — a near-tripling since 2001.
No fewer than seven articles on mortgage and appraisal fraud in today’s Miami Herald. Multiply these examples by thousands, what a mess:
http://www.miamiherald.com/business/
The story about the buyers “duped” into foreclosure is simply amazing.
http://www.miamiherald.com/103/story/156990.html
“John Oral, a straw buyer for 4501 SW 13th Ter., said he fell into a depression and lost almost 20 pounds after discovering he had been duped.
‘My credit report means everything to me,” said Oral, who has since moved from Coral Springs to Central Florida. “I’m the breadwinner of my family. . . . I’m not eating. I’m just totally distressed.”
Oral, an insurance-claims investigator, said he first heard about the deals over a round of golf with Ramiro Ramis, his colleague and friend. Ramis put him in touch with his relative, Gonzalez.
Oral said he understood he was making a real estate investment in a company, SeaSide Advantage, that bought, renovated and resold down-in-the-dump houses, renting them in the meantime to cover the mortgage. He agreed to provide his signature and Social Security number on loan documents, in exchange for $7,000.
Oral went to an attorney’s office in Miami for the closing. He left without keys, without documents and without the address of the home he had just bought for more than half a million dollars. It was 4501 SW 13th Ter.
”As smart as I am, I had no clue that this was a scam because my best friend is telling me his cousin is doing it,” Oral said. “Marlon — he was intelligent, persuasive, reassuring, confident.”
All I can say is, wow…he leaves with no documents, no address, no keys…how stupid can one smart person be? I mean, seriously….
BayQT~
This had me shaking my head in wonder as well, BayQT. What are these people thinking when they enter into “deals” like this? If this guy had senile dementia he might have an excuse, but this guy doesn’t have a leg to stand on if he expects pity.
Sorry if this has been posted: looks like Kunstler is plugged into the bubble blogs, also - he very dark about the future…
http://kunstler.com/mags_diary21.html
That is pretty cool stuff. The underlying theme that McMansionland is not sustainable, and should never have been built in the first place, seems pretty obvious to some of us. I don’t see a single candidate that I would walk across the street to pi$$ on if they were burning. None of them are leaders and this Kunstler definitely shines light on that.
Kunstler is an agendist who has trouble with math. Joel Garreau looked at the same issues and found that suburban fringes tend over time to grow into full blown employment centers. Lots of gold rush towns dried up and blew away, but San Francisco endures. Sustainability is not as simple a characteristic as it first seems.
Where are ya, Muggy and how’s it going? LOL, every time I see the name “Kunstler”, I think of William Kunstler, the liberal lawyer from back in the day.
I am splitting my time between Finger Lakes towns and Rochester, NY. Weddings and funerals.
I spent some time in Mississippi, Tennessee and Ohio on the drive up. I can’t believe how out-of-control housing is everywhere. I got my haircut at a rural barbershop in the Finger Lakes. I got some interesting advice from my barber: by a house and flip it! That’s what he’s doing.
Umm, yeah. I’m just looking for an actual haircut.
Muggy I posted late in a thread that you should check out Manlius (NY) for some real western style bubble photo ops. Not sure if you had seen the comment. Driving thru reminds me of the days I first discovered the blog and was looking at Bens photo link from what was going on in CA and AZ.
OK, folks, Muggy just found JP Morgan’s shoeshine boy - it’s happening!
Is the San Diego economy in a recession?
S.D. economy down on weak job growth
By Mike Freeman
UNION-TRIBUNE STAFF WRITER
June 29, 2007
San Diego’s index of leading economic indicators dropped sharply in May, mostly because of a weak job growth and sluggish residential building.
Four of the six categories that make up the index – a snapshot of the local economy – fell significantly last month, said Alan Gin, an economist with the University of San Diego who compiles the data.
…
The housing slump continues to weigh down the local economy, Gin said. Residential permits, the largest part of the local construction market, have declined for nine of the past 10 months.
“Construction activity has softened because of the weak housing market,” Gin said. “The slump in housing has begun to affect other parts of the economy.”
Consumer confidence also declined, Gin said, which he attributed to record high gas prices in May.
But weak job growth was the leading culprit that dragged down the index.
“You’ve got big problems in the labor market,” Gin said. “On a year-over-year basis – May 2006 to May 2007 – we added 4,200 jobs. That’s the worst year-over-year gain since June 2003. Last year, we added 18,000 jobs.”
Earlier in the year, most of the job losses locally were in housing related industries – such has home builders constructing fewer homes, mortgage lenders downsizing and real estate agents leaving the industry. Construction and real estate shed 9,000 jobs year over year, Gin said.
In May, real estate job losses accelerated, and the labor market weakness has begun to spread to other sectors, including professional and technical services, as well as leisure and hospitality.
“The unemployment rate is still pretty low, but the job growth has really weakened,” Gin said. “While there’s still job growth in these previously strong sectors, the rate of job growth has slowed considerably.”
USD’s economic index has now fallen in 13 of the last 14 months.
http://www.signonsandiego.com/news/business/20070629-9999-1b29sdecon.html
NATION’S HOUSING
KENNETH HARNEY
It’s back to basics for buyer and seller
July 1, 2007
WASHINGTON – If real estate finance is the art of the possible, what’s possible right now for home buyers and sellers worried about rising mortgage rates, Wall Street bond market jitters and soft home prices?
Plenty. Although certain aspects of today’s post-boom marketplace may look scary on any given day, most of the traditional problem-solving tools of real estate finance are still at your disposal, whether you’re a buyer or a seller.
http://www.signonsandiego.com/uniontrib/20070701/news_lz1h1nation.html
Brokers chafe over regulatory proposal
By Lew Sichelman
DOW JONES NEWS
July 1, 2007
SEATTLE – A battle is brewing over a plan to create a national registry that would license mortgage brokers and suspend those found guilty of predatory tactics and other wrongdoing.
http://www.signonsandiego.com/uniontrib/20070701/news_1h01mortgage.html
Don’t buy yet…
Americans remain upbeat
ASSOCIATED PRESS
July 1, 2007
…
Nearly three-quarters think they could sell their homes within the next six months at a price they set, and 63 percent feel that real estate is a good or excellent investment. The survey also showed that more than two-thirds of those surveyed said the current housing market has no effect on their spending.
http://www.signonsandiego.com/uniontrib/20070701/news_1h01survey.html
So…if 3/4 think they can sell their homes within 6 months, how come I’ve seen for sale signs on the same houses in several parts of Phoenix (on my way to work) for longer than 6 months?
Bill, you live in an anomolous area, that’s all. lol
And if they set the price right they can. I’m guessing the price is somewhere between $1 and $1,000,000.
Ignorance is bliss.
Eroding of homeowners’ equity is ignored
Borrowing against houses is booming
By Louis Uchitelle
NEW YORK TIMES NEWS SERVICE
July 1, 2007
The wonderful world of leverage has lifted homeownership in America to near-record levels, and we thump our chests with pride at the prosperity and middle-class life that possessing a home implies.
Hovering in the background, however, is a glaring statistic: Never before have homeowners actually had such a small ownership stake in the houses they occupy.
The reason is debt. Home prices have gone up a lot, but borrowing against homes has gone up even more in almost all of the past 20 years. “Owners’ equity,” as the Federal Reserve calls the difference, is gradually eroding – a detail that millions of families ignore, focusing instead, perversely, on the rising dollar value of their homes.
“People believe their homes will continue to appreciate in value,” said Mark Zandi, chief economist of Moody’s Economy.com, “so that even if they take out money and reduce their equity, it will all come back very quickly.”
http://www.signonsandiego.com/uniontrib/20070701/news_1b1equity.html
All the recent official data I have read suggests that Utah home prices continue to rise, but I have some contrary evidence from the front lines. Sister-in-law and hubby own two homes in Utah County. They had the one they are selling on the market for months at $535K (a level at which comparable homes were selling last year) with lots of looky loos but no nibbles. Recently they relisted at $485K. This resulted in two offers, but as of yesterday, it turns out one of the offering parties is only willing to pay $435K (a $50K lowball below the reduced price) and the other is also lowballing by a sizable amount. More generally, the word is that prices have dropped considerably in the hood where they are selling, and an average of one For Sale sign per block suggests the reason.
Stucco, shame on you. How can you, of all people, be using the word “lowball”. It appears to me that any offer of $435,000 can’t realistically be called a “lowball” offer. It appears your sister has received two offers that are borne out by the market. To call them “lowball” seems pretty MSM to me. I know it’s early in the morning so you are probably not properly caffeinated yet.
“This resulted in two offers, but as of yesterday, it turns out one of the offering parties is only willing to pay $435K (a $50K lowball below the reduced price) and the other is also lowballing by a sizable amount.”
“I know it’s early in the morning so you are probably not properly caffeinated yet.”
It’s far worse, really. I am on travel in Utah, where caffeine almost qualifies as a controlled substance.
I track RE in the resort town of Moab (pop 8000) - there’s very little for sale, but what there is is just sitting unless it’s priced under 275k. I think Utah’s a bit behind, just like W. Colo. But even the little towns in Utah were hit by the bubble, though instead of huge subdivisions, we’re seeing small-time speculation (a house here and there). Looked at a house in the cute old railroad town of Helper that was selling for probably double what the owner paid 5 years ago (in Utah, sales prices aren’t public record) - talked to the owner, she was from Denver (schoolteacher) and it was a second home. She was anxious to sell, said it was hurting to keep it uip.
Where does leniency on subprime deadbeats leave the hedges who bet on the certain demise of subprime borrowers who bought houses they cannot afford?
Banks told to show subprime leniency
By FT reporters
Published: June 29 2007 20:45 | Last updated: June 29 2007 23:58
US regulators on Friday told banks to be more lenient with subprime mortgage borrowers in difficulties, potentially compounding uncertainties in the troubled mortgage securities market.
The bank regulators issued guidance urging lenders to work with borrowers, for example by modifying loan terms.
http://www.ft.com/cms/s/c8c5139c-2672-11dc-8e18-000b5df10621,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2Fc8c5139c-2672-11dc-8e18-000b5df10621.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
Better link to the above article:
http://news.moneycentral.msn.com/provider/providerarticle.aspx?Feed=FT&Date=20070630&ID=7110288
There was one word I was looking for in that article which I did not see - which could be considered surprising, since it’s definitely the preferred alternative to the situation many subprime house “owners” face.
It’s too bad almost no regulators or anyone in the MSM can find it in themselves to admit or report on such a thing.
*********
v. rent·ed, rent·ing, rents
v. tr.
To obtain occupancy or use of (another’s property) in return for regular payments.
v. intr.
To be for rent: The cottage rents for $1,200 a month.
UPDATE 1-Bear Stearns shakes up asset management unit
Fri Jun 29, 2007 11:41AM EDT
Jobs, subprime mess to rule July 4th week
Oil rises to $71 on drop in U.S. fuel stocks
Wall Street drops on credit concerns
NEW YORK, June 29 (Reuters) - Bear Stearns Cos. Inc. (BSC.N: Quote, Profile, Research) on Friday replaced the head of its asset management business after two of the investment bank’s hedge funds hit rock bottom by making bad bets on risky mortgages.
The meltdown of the hedge funds embarrassed Bear Stearns, widely known for its savvy in handling mortgage risk. The funds buckled on wrong-way bets tied to subprime loans, which are made to people with weak credit.
Jeffrey B. Lane, a veteran senior executive at Lehman Brothers Holdings Inc. (LEH.N: Quote, Profile, Research) and Neuberger Berman Inc., replaces Richard Marin as chairman and chief executive of Bear Stearns Asset Management.
http://www.reuters.com/article/bankingfinancial-SP/idUSN2935330520070629
Bear Stearns likely to face hedge fund lawsuits
Thu Jun 28, 2007 4:15PM EDT
Jobs, subprime mess to rule July 4th week
Oil rises to $71 on drop in U.S. fuel stocks
Wall Street drops on credit concerns
NEW YORK (Reuters) - Investors in two struggling Bear Stearns Cos. (BSC.N: Quote, Profile, Research) hedge funds that made bad bets on risky mortgages will almost surely file lawsuits in hopes of recouping losses, but legal experts say they could have a tough time proving their case.
Already, some investors in the funds are talking to lawyers about bringing cases. Potential lawsuits likely would hinge on whether investors were fully informed of risks, lawyers say.
Ross Intelisano, an attorney who handles investor cases against financial firms, said his law firm has been contacted by two investors in the Bear Stearns funds — a fund of funds and a small institutional investor he would not identify — about possibly bringing lawsuits.
http://www.reuters.com/article/ousiv/idUSN2837431620070628
And these won’t be like lawsuits from the little guys, hedge fund investors typically have lots of money. Well, maybe HAD lots of money - LOL
Jobs, subprime mess to rule July 4th week
Sat Jun 30, 2007 11:26PM EDT
NEW YORK (Reuters) - Investors are hoping the coming week brings some answers to the question of whether an improving U.S. economy unleashes inflationary forces, and one place to look will be in the June payrolls data.
At the same time, the potential for defaults in subprime loans to spill over to the general economy remains a concern. Nervousness over the availability of financing for buyouts prompted investors to sell banks’ and brokers’ shares on Friday, which helped cut short a morning rally.
http://www.reuters.com/article/hotStocksNews/idUSN0135773520070701
Wall Street drops on credit concerns
Fri Jun 29, 2007 5:32PM EDT
NEW YORK (Reuters) - U.S. stocks fell on Friday as banks and brokers retreated on concerns about the impact of tightening credit on takeovers and the subprime mortgage industry.
Early gains evaporated as oil rose to $71 a barrel and investors booked profits before the quarter’s end and the July 4th holiday week. That offset data pointing to moderating inflation and economic growth.
News of a probe into two Bear Stearns Cos (BSC.N: Quote, Profile, Research) hedge funds heavily invested in subprime mortgages increased worries that the potential fallout could spread throughout the banking industry. Bear Stearns shares fell 2.8 percent. Merrill Lynch & Co. (MER.N: Quote, Profile, Research) also dropped 2.8 percent and ranked among the biggest drags on the Standard & Poor’s 500 Index.
“There was a significant intraday decline today. The market started out in pretty good shape — the combination of inflation and economics was good this morning,” said Phil Orlando, equity market strategist at Federated Investors in New York. “And then you get word leaking on the SEC stepping up the Bear Stearns investigation, prompting the market to correct all of its gains.”
http://www.reuters.com/article/hotStocksNews/idUSN1224232320070629
Here’s one you guys will love:
Local Hyundai dealer (Billy Fucillo who has dealerships across the country) is giving away a Ryan home as part of a recent sales promo to sell cars.
I guess we’ve moved past the car gift premium given w/the house. Now the house is given away with the car.
Crisp & Cole defaults now at 40!! BAHAHAHHAHH! Who could have predicted this would happen, oh the humanity:
http://www.bakersfield.com/hourly_news/story/178280.html
Crispy, now slow down here bud, the neighbors will wonder what’s going on with all that mad laughter…LOL
LOL
The total in the print edition is over $24 million!
LMFAO. What a joke.
40 is also the number of people recently let go by The Bakersfield Californian. They blamed the staff cuts on a sharp decline in advertising by the local real estate industry. Maybe now they’ll rediscover something long lost called ‘independent journalism’, and start telling the truth about the local real estate industry and market.
Forgive me if you’ve seen this here on this blog before.
Study says Florida, California home prices likely to drop in 2 years
http://www.sun-sentinel.com/business/realestate/sfl-0619housing,0,806320.story?coll=sfla-busrealestate-headlines
So if this article gets around to every prospective home buyer in California, Phoenix, Las Vegas, and Florida, you will see a massive increase in inventory and a significant drop in buying for the next 2 years. Sellers don’t want this article seen!
This was posted here before, but thanks for bringing it back.
The 233 comments (as of today) are priceless. I just took a quick look and there’s people all bent out of shape by the property tax assessments and another saying something like “next thing you know, they’ll tell us gas prices are higher. Duh!”
One thing you should note is that PMI has been (very conservatively) predicting lower house prices, in their quarterly updates, for probably a couple years now in some of the most bubbly coastal markets.
They did a fair market valuation of house prices vs. rents sometime in 2005, IIRC, that showed all kinds of major markets still not being fairly valued (vs. rents rising at historial inflation rates) as far out as 2011 or 2012.
It told a very simple story that once appreciation stops, house prices do have a very long ways to go - in order to be in a “normal” range again.
Thought I’d share something with ya’ll that a friend of mine heard leaving the San Diego airport for Las Vegas. Seems a couple of highly-motivated young men were discussing their mortgages with more than just a little consternation. One was quoted as saying “I think I may be in a lot of trouble”. Classic stuff! I envied him for the chance to listen in!
And he’ll likely be in even more trouble when he sobers up after his trip to Sin City.
Please Help! Yesterday my sister told me that my brother-in-law (who is an ass) went to a realtor’s seminar where they pitched him on something called the Money Merge Account System that is supposedly catching on like wildfire. He (BiL) seems to have bought the spiel hook, line, and sinker. I did some basic research and to me it looks like snake oil, but I really don’t know enough it to be able to point to something that might trigger red flags. He (BiL) tends to be very dismissive of me as a “conspiracy theorist” and believes this new “system” will allow him to buy. While I’d love to see him fall victim (again) to his own smugness and arrogance, for my sister’s sake I don’t want that to happen - she is way too passive and tends to go along with whatever harebrained scheme he comes up with, despite her misgivings and my advice.
There are lots of smart, knowledgable folks on this blog, and I was wondering if any of you with direct knowledge of this “brilliant new system” that sounds too good to be true, would be able to educate me on its pros and cons.
It’s a scam. In fact, you can teach your sister how to google “money merge scam” and she can discover all the facts hidden on the internet about the next way her husband plans to bankrupt the two of them. Here’s the link…
http://tinyurl.com/38fdle
I just had to talk an otherwise intelligent friend of mine out of one of these accounts last month. He’s bound and determined to screw himself purchasing a house in Vegas and I’m tired of arguing with him. Whatever he comes up with next, I’m going to stay silent and let what happens in Vegas, happen to him.
Thanks a million, Ivrenter. I e-mailed my sister and directed her to the links you provided. This just doesn’t pass the smell test.
Whoops, this link is better:
http://tinyurl.com/2lvm3r
Sorry about that. This second link breaks down the “ALOC” you have to take out to make the plan work. Big fees, adjustable rates, and they are holding all of your money in the account (yes, your paychecks are direct depostied into it) so when this bank fails, your cash vanishes. Also, it may or may not be significant, but they sell these through MLM. I work a lot with MLM (I design the sets and lighting for their big sales conferences - paid up front) and I’ve never been tempted to purchase anything they sell. It just always comes across as sleazy and more focused on recruiting for the ponzi scheme than really selling anything.
DIY sprawl outside Albuquerque — “No roads. No power. But that’s not stopping an explosion of illegal homes from being built just southwest of Albuquerque on Pajarito Mesa…From abandoned homes to broken down vehicles, the county says the code violations are countless…[The county building code officer] says another big challenge is often when families are told to clean up their mess they just move somewhere else, leaving everything behind.”