July 7, 2007

Bits Bucket And Craigslist Finds For July 7, 2007

Please post off-topic ideas, links and Craigslist finds here.

RSS feed | Trackback URI


Comment by Sallie
2007-07-07 04:30:06

Possible job change for husband in the near future which would require us to sell our house and move. We have enough equity that we could list house for an attractive price to get it sold and we don’t live in one of the especially bubbly areas (CA, FL, etc.).

So if we end up moving and renting, what words of wisdom do you have for selecting a rental home or condo?

Thank you!

Comment by flatffplan
2007-07-07 04:42:26

deal direct w the owner and check his mort situation……
cruise the closest grocery store and elementary school for demographic research , hell knock on a neighbors door for a what’s up and look for multi-car homes close by

Comment by scdave
2007-07-07 07:34:08

Sallie;….If you Goggle the city “Detailed profile” (i.e. San Diego Detailed Profile) you will get a wealth of information on the area including some blogs that provide “candid” information about the area…Give it a try….

Comment by palmetto
2007-07-07 04:57:25

Research the area you are moving to as much as possible beforehand. You can start now by surfing the net for information. If there is a local website or newspaper on line with a blog, you can post there to get a feel for what the locals are saying about different neighborhoods. You’ll probably get some very good inside info that way, stuff the Chamber of Commerce won’t tell you. Of course, some stuff you’ll have to take with a grain of salt, somebody might have an axe to grind.

As the time to move gets closer, you can take a trip to the area, maybe stay at a hotel or bed & breakfast and pretend you are looking to buy and have a realtor take you around to get more of a feel for what it is like on the ground. Just be sure you have your answers prepared for the questions the realtor will have for you: Are you pre-approved, what are you looking for, how much do you have to put down, can your breath fog a mirror?

Comment by scdave
2007-07-07 07:29:31

pretend you are looking to buy and have a realtor ???

Anyone else have a problem with this ? I do…No matter what your feelings are about realtors, useing people is just not right…Telling them that you are relocating, need information and help and that when the time comes to buy you will give serious consideration in useing them as your realtor would be the more appropriate approach IMO…

Comment by GetStucco
2007-07-07 06:03:00

One obvious thing we did not do but would if we have to move into another rental: Drive around the neighborhoods you would consider moving into and write down the phone numbers on the “For Rent” signs for any places that look appealing; then follow up with phone calls later on.

We went through rental listings in the newspaper and on the internet, and later learned that many rentals in our neighborhood never appear in official listings.

Comment by Wickedheart
2007-07-07 12:46:53

I didn’t have the best of luck with that method, Stucco. I mostly found FBs. I did much better with Craig’s List. Also, property management companies have many of the listings, check with your local realtor. Century 21 Solymar handles my property.

I was pretty anal about the check list because landlords are pretty delusional about their property. They don’t see how old their sink and tub is and how stained the driveway is, etc, etc. I only missed a couple of tiny things.

Comment by JA
2007-07-07 06:05:03

There was an article posted here about 8-9 months ago about renters needing to do a credit check on their potential landlord.

Owners who can’t sell, rent. The rent doesn’t cover the mortgage and it definitely doesn’t cover the upkeep. A landlord who is loosing a grand a month on the mortgage might not be willing to spend anything on upkeep.

I would look at the landlord’s mortgage to get an idea of where he/she is financially.

Comment by aNYCdj
2007-07-07 06:12:41

Yes I suggested a credit check on the landlord, unless you know they owned the house for years….they still might have Heloc’d the equity so look for NEW SUV’s, or upgrades to their New home, maybe a new boob job for the wife….

If the landlord still drives a 10 year old pickup its probably pretty safe he still has plenty of equity and is solvent.

Comment by Wickedheart
2007-07-07 12:31:08

I rent a SFH from a property management company. The landlords are longtime owners. Weird thing though, they haven’t paid their property taxes

(Comments wont nest below this level)
Comment by fldemise
2007-07-07 06:46:50

i know others may disagree, but i actually suggest using a real estate company property management division which will actively manage the property for the term of the lease. This way, you can assure that your deposit will be held in escrow; and that repairs will more likely be timely. The management company usually holds in escrow extra money from the owner for repairs (you can ask). I know i feel much better this way myself as the owner of my rental is an out of state fb- upside down.

Comment by Cmyst
2007-07-07 07:32:30

I agree. I feel safer renting from a property management company.
The major reason is that I made the deposit check out to them, not to a possibly financially-strapped landlord. Also, most PM’s have a long (and getting longer!) list of very attractive properties in all areas. If something does go wrong, you’ve already been approved by them and they will be highly motivated to find you another rental pronto.
If possible, ask new co-workers or supervisors at the new job about good neighborhoods and schools, and narrow your search to those areas.

Comment by NoVa RE Supernova
2007-07-07 07:56:20

Based on personal experience, I would absolutely use a reputable property management company over a private landlord, unless the latter can prove that they are not “feeding an alligator” and on shakey financial ground.

Comment by vile
2007-07-07 16:21:28


Get background on a particular city at this forum.

Comment by Schnooks
2007-07-07 19:39:43

this site has some good info on various cities and where to live.. post a question or just do a search for what you’re looking for.

Comment by CA renter
2007-07-07 23:45:36

Agree with all the above, especially about checking out the n’hood at different times of day (early morning, mid-day, evening & nights). You might be looking at a house on a tranquil street & find it’s a shortcut for commuters at rush hour (we’ve seen this a few times), or a school is down the street & you can’t get out of your driveway in the morning.

Also, check for multiple cars/crowded streets at night & someone gave good advice re: checking out the local grocery store — I think this is one of the best ways to get a feel for the area, in addition to checking for liquor stores, pawn shops, tatoo parlors, check cashing, etc. Those are usually signs of a fairly rough neighborhood.

Another thing we did (and are very glad about it) is speak frankly with the LL. Tell them that you intend to be there for multiple years & see how they react. Are they planning to sell any time in the near future?

Definitely do a credit check, or if you want to pay, a full background check is highly recommended.

Good luck!

Comment by tcm_guy
2007-07-08 12:04:41

I do not understand. How do you do a credit check on a landlord? I have NEVER met a landlord willing to give me their SS number. Most have asked for mine, but all are insulted when you ask for theirs.

Got 10% down?

(Comments wont nest below this level)
Comment by CA renter
2007-07-08 21:27:59

Do a background check — go through a P.I. or use one of the databases available online (need to pay). You can usually see if there are any financial problems, court cases/lawsuits, etc. Also, can check criminal background, marital history, etc. All of this can help ascertain how stable the LL is, IMHO.

Comment by NYCresident
2007-07-07 05:16:55

1. A rental home where the landlord isn’t a FB, so you aren’t disrupted by foreclosure.
2. A rental home were the landlord will appreciate a good tenant, and won’t jack the rent because he can always get another tenant if you leave.
3. A rental home that isn’t going to be converted to condos or market rate rental (still a possibility in NYC)

Good luck as a bubble sitter, as your timing appears pretty good.

Comment by Chik
2007-07-07 05:17:13

Same boat here, Sallie.

Moving to Richmond VA.

Anyone have any insight on West End area for houses?

Comment by ric
2007-07-07 07:17:32


It depends on your situation. Do you have kids? Where are you going to be working, and do you want to rent or buy? Richmond never got outrageously overpriced (not saying it isn’t, just not ridiculously so).

The west end is a good bet, but if you have kids I would look in the Henrico County area not the city part. The schools are much better and the taxes are less.

Let me know a bit more of your situation and I will do what I can to help.

Comment by Chik
2007-07-07 11:27:56

Thanks Ric,

2 small kids (toddler and infant). We are looking to rent for a year (at least) thanks to this blog.

We were considering Henrico. We don’t want one of the brand new houses though. I have read to many horror stories here on HBB about shoddy construction.

Anyhow, out of the city, maybe Glen Allen area. Near Short Pump.

I hear the schools are great there.

I can’t seem to find many links or sites that deal with rentals. Also, I can get all sorts of data to track the NOVA or VA Beach housing prices/sales. But there seems to be a moratorium on Richmond.

Any info you know of would be of great help.



Comment by ric
2007-07-07 13:05:39


You are right about the absence of comprehensive information on Richmond. I have no idea why that is, but it does keep the place under the radar a bit, which in my opinion is a good thing. The OFHEO has pretty good overall long-term data, and it shows the area somewhat overvalued; maybe 15 percent or so, which I tend to agree with based on my own opinion and experience. Prices here are roughly half what they are in Baltimore and a third of NoVA.

ZipRealty does not cover the area, so realtor.com is pretty much your best on-line mls resource. For purposes of real estate, the area is divided into “areas”, and you will see the area provided in the mls listings. North of the river, the better areas are 22 and 34, with 22 being the better of the two, but that’s just my opinion. Stay away from anything east of I-95.

I highly recommend the rent first strategy, not because prices are going to implode, but because it will enable you to get acquainted with the area before you commit to anything. We rented a small house for six months when we first moved here 13 years ago.

You do not have to take on a suicide load to buy here. You can find reasonable housing in the 200-250K range. 350K will buy you a nice 2,500-3,000 sq ft, 4-5 br’s, 2-3 baths on a half an acre in an excellent school district.

Generally, if you work north of the James River, you live north in Henrico or Hanover county, and if you work south, you live in Chesterfield. Stay away from the city itself, as it has high crime, high taxes, and really bad schools (although many of the elementary schools are supposedly really good).

One of the better sources for rentals is the local rag, the Richmond Times-Dispatch. Housing stock is quite varied, ranging from post-WWII brick ranch homes to new McMansions. Most of the new stuff is big, on small lots and overpriced just like everywhere else. The new construction is not that bad; I think because there was never really I hyper-bubble here. The growth has been far more measured.

Among anything that’s older than 10 years, don’t expect a garage or a basement. Tri-levels are very commonplace.

I see lots of rent specials at apt complexes when I drive around and many are really quite nice. As far as rental houses are concerned, you should be able find something nice with 3-4 bedrooms between 1,000 and 2,000/mo. Anything under 1,000 is probably not going to be very nice nor will it be in a very good neighborhood.

If you like your neighbors plain, white and vanilla, of the HOA variety, and generally slightly over-impressed with themselves, the planned developments of Wyndham or Twin Hickory (brand new) are good bets. If you like a little more variety, then neighborhoods in the Godwin HS district are a better bet.

Really, if you find a rental house or apartment somewhere in area 22 or 34 for around 1,500/mo, and can get a 6 month lease, you can simply not go wrong. Then just move in and drive around the area exploring the different neighborhoods.

I hope all that helps somewhat.

Welcome to Richmond!

(Comments wont nest below this level)
Comment by ric
2007-07-07 13:47:38

Look at these houses as an example from realtor.com. I don’t know what your budget is but these are both good, very convenient to everything neighborhoods with really really good public schools k-12. They are for-sale houses in zip 23238. The second two are pretty much high-end homes in the 500+ range. The first two are more reasonable.
mls 2716116
mls 2721796
mls 2723559
mls 2713864
And no, I am not a realtor. :)

Comment by NYCresident
2007-07-07 05:28:53

I predict the next trend has got to be “rent to own”. Once the reo community figures out that the demand for homes is too low to make a dent in for sale inventory, and once financing options are substantially diminished, this is the likely solution. Although another way out of the imbalance is for wealthy investors to buy blocks of homes, and become “permanent” landlords to bubble sitters. 75% of NYC residents are renters and housing costs are expensive. Why couldn’t the decline in the dollar most investors are predicting, lead to a decline in living standards, and lower percentage of homeowners?

Comment by GetStucco
2007-07-07 06:04:18

‘Although another way out of the imbalance is for wealthy investors to buy blocks of homes, and become “permanent” landlords to bubble sitters.’

I am expecting lots of Chinese national landlords on U.S. soil about ten years from now.

Comment by yogurt
2007-07-07 08:52:01

No way, being a landlord is enough of a pain in the a** when you live in the same town. Wealthy people are not interested in it, they have much better things to do with their time and want better returns - they know full well that RE will be the worst investment class over the next generation. The Chinese will just keep on doing what they’ve always done - lending the US money.

The houses will be bought by local investors when prices drop enough that a rental will cash flow with 20% down and conventional financing. Just as they always have. Oh, and by owner-occupiers with 20% down, too. All housing markets will clear when renting becomes cash-flow positive with a safe margin.

Comment by bill in Phoenix
2007-07-07 20:20:17

Hey Yogurt,

My best buddy has an uncle who got wealthy from RE investing. Lives in Laguna Beach, CA. So my buddy is overweighted in RE. I think equities do better in the long term. Most of the friends I have who are landlords complain to me about their tenants. It is a pain in the a$$. I think if a wealthy person wants to take part of gains in real estate, they are better off in REIT ETFs.

(Comments wont nest below this level)
Comment by tcm_guy
2007-07-08 12:13:41

I agree. I have never invested in REIT ETFs in 1/4 century of investing in securities, but I may invest in my first REIT ETF maybe in another five years. By then they will be selling for a fraction of current prices and price/multiples, and their dividend yield should still be very attractive.

Got 10% down?

Comment by bill in Phoenix
2007-07-08 20:57:51

About 5 years from now is also when I figure to get into those investments.

Comment by Hoz
2007-07-07 10:24:30

I expect Chinese, Japanese, Opec, Russia buyers of US companies, but not real estate. (unless the US decides to sell its National Parks)

Comment by WAman
2007-07-07 06:13:48

My wife and I moved out of a townhome thinking what a great idea it would be to rent it out especially because it was cash flow positive from the start by about $300. Then came the calls in the middle of the night. First one of the renters was drunk and had lost her key. A few weeks later a call at 2:30 in the morning from the police. Our renter was drunk again and was fighting with neighbors. That was enough. I can not imagine wealthy people buying up large blocks of houses and becoming landlords.

Comment by Bye FL
2007-07-07 07:21:48

My dad used to be a tenent when I was a little boy. This wasnt a bubble back then and the rent was very high vs. the cost of buying. Frankly a much better deal to own than rent back then but for some reason, he soon had zero vacancy. Well the tenents were a nightmare. Most did not pay the rent or only a part of the rent. He had to evict one pratically everyweek. Some of them trashed the place and the costs of fixing added up. He was actually losing a little money every year so after 2 or 3 years he gave up and resold the apartment complex for the same price he paid(no bubble, so no appreciation)

Dad will never be a landlord again and he tells me its more hassle than worth it and that there probably won’t be any profit in renting.

Comment by Rintoul
2007-07-07 08:16:49

Back then you probably had to have 20% down - a lot of folks didn’t (don’t) have that kind of scratch. The majority of Americans, don’t forget, are nearly always broke (or in debt - worse).

(Comments wont nest below this level)
Comment by Bill in Carolina
2007-07-07 09:56:48

A guy I knew at work many years ago practically had a nervous breakdown dealing with his tenant. At that time, Maryland laws favored the tenant (they could make up practically any excuse as to why they weren’t paying the rent) and the guy spent a lot of time, money and emotional capital getting the renter out.

Comment by Ghostwriter
2007-07-07 07:31:15

My nephew just transferred to MI and he rented a condo that a builder has a rent to own policy. Half your rent is applied to your down payment on any condo he has available when you want to buy. He isn’t interested in buying there anyway, but I told him that builder is in a world of hurt, because he has tons of units like this. If something goes wrong and he has to move because of the builder, he really doesn’t care, because he was paid $11,000 to move and he did it himself and only spent about $1000. He said it’s nicer than apartments, because the rooms are bigger, huge kitchen with granite center island, and an attached garage. He’s 35, worth tons of money, and was going to buy, but I talked him into waiting 2 or 3 years until prices bottom out. He was going to pay cash, but I told him I didn’t want him to lose part of his equity. He’s waiting.

Comment by CA renter
2007-07-07 23:52:14

Yea! A success story (talking someone into waiting). Congrats! :)

Comment by JimAtLaw
2007-07-08 08:28:17

Yeah, seriously, congrats on that. I’ve been talking to one of my colleagues at the office a lot about not buying in a falling market, but her “nesting instinct” (perhaps more aptly called a “lemming instinct”?) is apparently strong enough that she does not care if she pays an extra $200k-plus to settle permanently right now instead of in another year, and will thus probably soon be making the plunge on a $1M place. {Sigh}

Comment by oc-ed
2007-07-07 05:32:45

More on the hedgies from the UK …


Comment by cheezbubbler
2007-07-07 06:17:53

interesting read. thanks for posting. I love the guy in the comments section:

“I’m well-read, I have two degrees in engineering, a good understanding of science, I can build computers and I daily use very complex maths. But I didn’t understand a word of that. Come again?”

Comment by Hondje
2007-07-07 07:43:32

Thanks for the link; the part about Hungary facing a looming monetary crisis got my attention….I lived in Asia during the 1997 monetary crisis, and saw first hand what happened there to real estate values….I’m thinking Budapest would be a great place to buy a flat at fire-sale prices.

Comment by GetStucco
2007-07-07 06:18:25

Can the hedgies and banksters cover up fund rot indefinitely? Or now that the cat is out of the bag on BS hedgies, are more blowups soon to follow? The situation is beginning to take the appearance of a lagged effect of the mass shuttering of the subprime lending industry (94 and counting out of business since late 2006:
http://ml-implode.com/ ).

We learn that investors in the Bear Stearns Enhanced Leveraged Fund are getting offers of just 5 cent on the dollar for their stakes. A wipe-out, in other words.

The Bear Stearns rot goes much deeper of course. When Merrill Lynch forced a fire-sale of assets, it revealed that even A-grade tranches of these CDO mortgage debt securities were worth just 85pc of face value, and the B-grades nearer zilch.

The creditors orchestrated a quick cover up, but the CDO cat is already out of bag. We now know that some $2 trillion of subprime and ‘Alt A’ mortgage debt is falsely priced on the books of banks and funds worldwide. Worse is surely to come. Bank of America warns that $500bn of adjustable mortgage debt in the US will be reset upwards in the second half of this year by an average 2 percentage points, and a further $700bn next year.

For now, bears are all watching the yield on that 10-year US Treasury bond – the benchmark price of world money, the Christmas Tree upon which all the other baubles hang: property booms, the emerging market bubbles, leveraged buy-outs, hedge funds and private equity, those $410 trillion in derivatives contracts (seven times global GDP) and that $2.5 trillion of debt packaged as “structured finance”.

The yield surged 65 basis points from early May to mid June to nearly 5.25pc on inflation scares, the fastest rise since 1994. Interestingly, the 94 bond shock did not in itself cause a US recession. But then the US was a very different country. There was no housing bubble, for starters.

Comment by GetStucco
2007-07-07 06:34:23

UPDATE 2-US hearings to eye private equity, hedge funds
Thu Jul 5, 2007 6:49PM EDT
By Kevin Drawbaugh

WASHINGTON, July 5 (Reuters) - Three U.S. congressional panels plan to examine private equity firms and hedge funds at separate hearings next Wednesday, turning a spotlight on an industry that some lawmakers think should pay sharply higher taxes.


Comment by NYCityBoy
2007-07-07 06:36:20

Does the War on Savers expand to include the War on Hedge Funds. I’m guessing that it probably won’t but it sure would be great if they had to explain themselves to the public. All of those dirty little secrets would really be fun to hear on public radio.

Comment by hwy50ina49dodge
2007-07-07 08:34:11

Yes, they’ll go out to the chicken coop, open the door, find all the eggs gone…all the hens dead…look at each other in shock and mutter…”how did that happen, who would do such a thing…better get a derivatives dog “czar” right away…who’s got the number for… Foghorn Leghorn?

Comment by GetStucco
2007-07-07 07:22:27

Sorry if already posted…

Deadly ripples threaten subprime funds
Troubles at two Bear Stearns funds could trigger a selloff that deepens losses, hurts credit markets.
By Grace Wong, CNNMoney.com staff writer
June 21 2007: 4:01 PM EDT

LONDON (CNNMoney.com) — The fallout from problems at two Bear Stearns hedge funds that may be on the verge of collapse could roil the bond market and lead to a tightening of credit, analysts said Thursday.

The problems at the two funds, which bet heavily on securities backed by subprime mortgages, are also affecting stocks, which took a beating Wednesday as jitters about the possible effect on credit markets coursed through Wall Street. The Dow industrials, S&P 500 and Nasdaq all sank at least 1 percent Wednesday and opened lower Thursday, though stocks later recovered and ended with modest gains.

The declines at the two Bear Stearns Cos. funds - its High-Grade Structured Credit Strategies Enhanced Leverage Fund and High Grade Structured Credit Strategies Fund - have revived fears about the subprime mortgage sector and triggered worries that worse is yet to come.

Desperate measures for the mortgage business

“The unraveling of the Leverage Fund is at best an embarrassment for BSC, and at worst, it threatens to have a ripple effect on valuations across the subprime sector,” Kathleen Shanley, an analyst at independent corporate bond research firm Gimme Credit, wrote in a recent report.

Wall Street has weathered hedge fund implosions fairly well in the past. Amaranth, a $9 billion hedge fund that collapsed last year after bets on natural gas futures went sour, didn’t send many tremors through the markets.

“But this has the potential to be more widespread,” said Jeff Schwartz, a fixed income analyst at investment firm Payden & Rygel who focuses primarily in asset-backed securities. Mortgage-backed debt is being held in a lot of different places and “that’s leading to a lot of nervousness,” he said.


Comment by NoVa RE Supernova
2007-07-07 08:04:31

Good post. It seems like the UK and German financial media are providing more accurate and timely assessments of the CDO blow-up than their US counterparts. Any guesses as to why?

Comment by oc-ed
2007-07-07 08:51:04

Their advertisement income is from other sources and their personal investments are not at risk to such a high degree.

Comment by albrt
2007-07-07 12:05:16

More importantly, the UK and German audiences contain significant numbers of actual grownups.

(Comments wont nest below this level)
Comment by ille_vir
2007-07-07 06:02:26

I think most of us here are well-positioned to take advantage of an economic downturn. That having been said, there are a few things we should each do to speed up the coming of the recession.
Stop spending money! Each dollar we spend adds like ten dollars to the economy. (person who gets that one dollar spends 90 cents of it on average, person who gets that 90 cents spends 81, etc.) Thinking of it the other way, every dollar we hoard amounts to a ten dollar hit to the economy.
If you have things that you don’t need, give them to people that need them. A barter economy keeps money from changing hands. Finding free stuff on craigslist has never been easier.
Keeping cash under the mattress obliterates the velocity of money and damages the economy. This was a big thing in deflationary Japan, but probably won’t become that big unless the Fed lowers rates to zero like the BOJ did.
So do your part, people. It doesn’t stop with just not buying a house! :)

Comment by aNYCdj
2007-07-07 06:24:21

One BIG caveat here:

I saw 60″ tv sets for free a whole apartments of Ethan Allen / Broyhill, furniture for FREE….that ain’t the cheap stuff from china…..all free……… but 9 times out of ten its on a 5-6th floor walk-up…

But the wildest one was a Free regulation size Pool table in a 5th floor walk-up. Think about that one!

Finding free stuff on craigslist has never been easier.

Comment by Chip
2007-07-07 19:48:45

What’s sad to me, an old-timer, is that the term “Ethan Allen” and “Broyhill” automatically meant “made-in-American.” No longer. Whether or not such nostalgia is meant to pass away, as I will, is yet to be determined, but I am nationalistic enough to wish it will not be so.

Comment by CA renter
2007-07-08 00:01:14

“Whether or not such nostalgia is meant to pass away, as I will…”
Goodness, Chip…sounding a bit down, here. Hope you’re feeling well & not speaking literally (I know at some point we all have to go…just not anytime soon). ;)

Hope your health is good & I’m just reading too much into that remark.

Take care!

(Comments wont nest below this level)
Comment by NYCityBoy
2007-07-07 06:34:22

I don’t really agree with this. Buying things is not bad. Turning the act of buying things into a religion is bad. Buying things for which you have absolutely no use is bad. Buying things when you don’t have the money to buy things is bad. Placing things above all else is bad. I’ve seen a lot of people do all of those things and it is repugnant.

I will keep spending money that I have rightfully earned whenver I want to spend the money that I have rightfully earned. We live in such a small place that we don’t really buy “things” any way. Our biggest expense is rent, followed by entertainment, such as dining out and going to bars. That is what we love about New York. I’m not shoving some twenty dollar bills down my pants just to make a point. The mere fact that I even have those twenty dollar bills seems to be point enough.

Comment by ille_vir
2007-07-07 06:38:19

Hm? Don’t recall saying buying things is bad in and of itself. Not buying things, however, has an assured detrimental effect to the economy. Just saying if one is looking to speed up the coming of the next downturn or whatever, one should follow personal habits in line with those desires.

Comment by NYCityBoy
2007-07-07 06:59:06

“Stop spending money!”

Not a lot of gray area there. And if you didn’t think spending money was wrong, why would you make a blanket statement to stop doing it?

“Don’t recall saying buying things is bad in and of itself.”

So, buying things isn’t bad but spending money is? I’m so confused.

(Comments wont nest below this level)
Comment by ille_vir
2007-07-07 07:37:36

So I listed “stop spending money” as the first and one of the most obvious ways to slow down the economy, and listed a couple other ways to achieve this end. If one is, in fact, looking to bring on a downturn, I do advocate these as things to do, but not because of the morality of the acts. I never mentioned this morality thing, and you pulled it out of thin air. I’m not saying you should these things because they’re right or wrong, but that if you want to bring on a recession, these are things that can be done on a personal level.

“So, buying things isn’t bad but spending money is? I’m so confused.”
I don’t know why, but you managed to thoroughly confuse yourself by putting into my first post things that weren’t there in the first place. Why would the general act of spending money be right or wrong anyway?

Comment by fla - pa
2007-07-07 07:31:15

If you are in Debt, DO NOT SPEND MONEY! Use all the money you can to GET OUT OF DEBT!

If you have no Debt, Spend Wisely. “Stuff” Will aways be around for buying.

Debt is not Wealth, Debt Is not Freedom.

(Comments wont nest below this level)
Comment by Mole Man
2007-07-07 08:08:10

Strictly speaking this could be taken as advising people to avoid going into debt to get a college degree. Balance and foresight are necessary for all major judgements. Academic accolades are not mere “stuff”, but they do cost real money that is likely to involve some level of debt.

Comment by cami
2007-07-07 08:29:21

True MM, but the problem that is I see is that many college kids are not taking out the minimum about of debt possible, but instead are maxing out student loans, credit cards, and auto loans to live a lifestyle that cannot be afforded at their current stage of life. The “balance and foresight” are often times not there.

Comment by WAman
2007-07-07 09:11:41

I am no kid but CAMI hit the nail on the head! I am over halfway through a masters degree in education. When I started I found out that I qualified for a subsidized loan (thanks everyone) and an unsubsidized loan. So I got two loans for $9500 each. $19,000 for a $10,500 degree! I also found that there also were closing costs on these loans.

I needed the loans to get the degree as the principal at the school wanted me to do this. There is also the fact that my salary will increase by $11,500 when I finish the degree.

Comment by not a gator
2007-07-07 10:02:26

Why did you take the unsubsidized loan, then?

When I went to undergrad, I and my father paid in scholarships and money that we’d earned, and I had some grants and subsidized loans. The loan amounts got larger as I advanced through school (a kind of bait and switch–had I realized this, I might have gone with a different school). I always paid as much cash as I had, I only took loans on tuition, room & board (the latter only one year–other three years I lived at home), and I paid off the highest interest rate loans aggressively.

I consolidated remaining loans at a low rate and now make a few hundred bucks on interest rate arbitrage because I chose to float the remaining loan instead of paying off. I will be paying off next year, however, because it’s getting annoying and also so my credit looks better (loan to income). I have positive net worth many times value of the outstanding balance.

When I went to grad school I got a fellowship and I lived on that. Pretty sweet. Plus the undergrad loans were deferred.

Student loans are fool’s gold because they only justify management raising tuition ridiculously. You can see what they spend it on–it certainly isn’t reducing class sizes.

They should have kept academic programs for the state schools and a small Pell Grant program for the poorest students, but no loans. Work study is a joke too. I always took off campus jobs b/c the pay was better.

Loans inflated the price of college, making it nearly impossible to work your way through (unless you’re lucky enough to get a good scholarship at the right school).

Med school and law school are the worse. Students trade hundreds of thousands of dollars for the promise of higher future earnings (often unrealized). You will finish richer if you get a job at 18 and save $4K a year in a Roth every year until you’re 40. No joke.

It’s all about supply and demand.

Comment by Chip
2007-07-07 19:53:14

With all due respect, Mole Man is a “devils’ advocate” on many or most issues here about which he posts. To me, it always is useful to hear a contrarian point of view, but it also is important to recognize it as such.

Comment by tcm_guy
2007-07-08 11:38:30

Many of these recent college graduates are starting out behind the eight ball - tens of thousands of dollars in debt - because the credit was so easy.

I read in a college bi-weekly publication in KY how easy this is done. Citibank pays a third party to market to the college crowd. They advertise all over the campus free pizza and drinks on any given Friday/Sat night at a local pizza joint. To get the free pizza and drinks they have to fill out an application for a Citibank credit card. If they do not fill the ap out, no free pizza. Of course, they never let them know ahead of time that personal information for a CC is required, they find this out once they are there with their friends and eager for the free pizza and drinks.

This was not happening this way when I was in college 1/4 century ago. Would I have walked away under these circumstances? I dunno…

Got 10% down?

Comment by spike66
2007-07-07 07:44:28

I’ve been following this advice for some time, not because I care about the economy, my piddling nickles and dimes don’t matter, but because I enjoy not participating. I expect a period of deflation, and if I wanted anything I wouldn’t buy for another year or two at least. Cars, furniture, tvs, clothing whatever–all of it I believe will be substantially cheaper. About 10 years ago, I heard a saying “I don’t pay interest, I collect interest”. I live by that. I use cc cards, but haven’t paid a nickle in interest in 10 years–I’m what the cc folks call a “deadbeat”. I also bellieve it’s not what you make that counts…its how much you keep. As food costs skyrocket, and safety issues mount, I am (unbelievably to me) turning near-vegetarian. Even in NYC, there are greenmarkets and other locally produced food outlets.
My only financial concern is where to stash my savings safely as the dollar melts down.

(Comments wont nest below this level)
Comment by Bill in Phoenix
2007-07-07 07:57:22

it’s not what you make that counts…its how much you keep.
That is one of the phrases my dad told me. He was correct. But if you have the discipline to save much more when your income goes higher, it’s all the better.

Comment by ille_vir
2007-07-07 08:31:44


The thing with deflation is that it has a beneficial effect for those of us already employed by increasing our real earnings and wealth. Staying away from large assets like houses would keep us from suffering from asset depreciation. Also, deflation feeds on itself just like inflation. If more people think that prices will decrease in the future (like you do), they are more likely to cut down on consumption today in expectation of those lower prices tomorrow.

Wonder if the deflationary spiral could happen here.

BTW, won’t the dollar gain strength in a deflationary environment? Goods getting cheaper= dollar getting stronger, right? Although I guess the economic malaise accompanying the deflation could devalue the dollar further?

Comment by Hoz
2007-07-07 09:41:22

“won’t the dollar gain strength in a deflationary environment?”

If goods get cheaper in the US with 8T dollars overseas looking to buy any reasonable asset, I would be shocked.

As we are (for the most part) US centered, we all fail to notice that the world economy is chugging along at full speed except the US. Others on this blog have talked about the metals in pennies and nickels being worth more than the coins face value. The reason is that manufacturing countries need these metals and are willing to pay almost any price to get raw material in quantity.

China announced the other day that its trade surplus (is) expected to exceed 100 bln USD in first half. Opec, last week in its bank meetings in Switzerland, announced foreign currency reserves of $3T. Russia’s foreign currency reserves announced this week at $600B.

The UK did not raise interest rates to make the pound stronger, they raised because the economy is growing so fast that the risk of inflation is a greater threat than shutting down the economy.

It is impossible to have deflation in the US when the world economy is growing at 5.5% (6.5% if you take out the US). The pass through from commodity increases just has not been felt in the market yet.

If some asset becomes cheap (by world standards) in the US, some country will use its US dollar reserves to buy it. Vulnerable in the US are marginal mining operations and small oil producers.

As Mr. M Friedman pointed out that inflation is always a monetary problem, the money has been expanded and is looking for a home. It does not matter to the rest of the world if the US stops printing paper now, although it would be painful for us. We have financed the largest expansion in the history of the world and we can’t play.

Comment by spike66
2007-07-07 11:35:23

I value your insights and am always happy to see your posts.
From a macro viewpoint, I agree the wheels have come off the US engine. However, as a small fry, I find that my own strategies are limited to preserving assets, staying out of any debt, renting, and continuing to look for ways to reduce my living costs and bolstering savings.
If you have any suggestions for small-time Americans, I would love to hear them.
all best,

Comment by Hoz
2007-07-07 12:46:38

Hi Spike, I am in the same boat as you…my goal is to avoid losing moneys. In 30+ years as a financial investor, I have seen every method of investing work! The key to successful investing is to have an entry plan and an exit plan. It does not matter if you are bearish in a raging bull market or a bull in a 1987 type of collapse. Investment requires discipline.

You are using discipline when you opt not to pay any credit debt interest. I have not used a CC except for car rentals - then paid off immediately. When I buy a piece of property I pay cash - if I cannot pay for it , I do not buy.. (My business is scary enough without worrying about a mortgage payment).

I was as naive as most on this blog when I realized there was a housing bubble. I learned the hard way when one of my sons wished to buy a house in Gurnee, IL and asked me for the down payment. My thoughts were you could buy the whole town at the price of this house.

There are some excellent pieces of advice for small investors and large investors on this site. I am in favor of diversifying out of the dollar - you can do this in many ways from investing in hard currency funds such as MERKX to investing in emerging market funds. I like the Japanese stock market at these prices with the Yen at these levels. I am looking for a 30% appreciation in the Yen over the next 24 months as well as significant earnings improvement- I think the Japanese stock market is poised to soar. There is always a bull market somewhere. And there are some excellent NYSE no load Japanese stock funds. UJPIX Profund is one of many, Vanguard and others have good funds.

Comment by spike66
2007-07-07 14:03:01

Thank you for your reply. I will follow up on your suggestion re Japan and start doing some research. I had mentioned elsewhere on this blog, that I rolled out of the markets entirely in Dec. and went liquid, which has left me feeling like a doofus as everything continues to soar. I know my own weakness as an investor is sticking with an exit strategy–but this time I pulled the trigger waaay too early.
Again, my thanks for your reply.

Comment by CA renter
2007-07-08 00:12:38

Ditto what spike said, Hoz.

I always pay careful attention to what you say.

BTW, do any work as a financial consultant, or thought about it? You might be able to get some good business from people on this blog.

Thank you very much for your insights!

Comment by tcm_guy
2007-07-08 12:53:07

FWIW, when I invest in a security I do so with an idea of an exit price point. Once purchased, I may adjust that exit point up or down, depending on the level of profitability of the company during subsequent quarters, particularly in relation to the previous year comparisons.

I always purchase with the intent to hold for at least a year. Doesn’t always work out that way, but most of the time I do hold for at least one year.

Got 10% down?

Comment by Bill in Phoenix
2007-07-07 08:05:16

Investing in stocks around the world is a way to create jobs for people, no matter where they live, moves people into the professional path and away from idleness, knocks down tensions, and so on. It is also a way to profit. The Asians have done this for decades, have a lot of wealth, and are extreme savers. I am a white man raised in western culture, but I have long admired the Asian cultures and confucianism. Most of the Asian americans I knew since I was a child have some of that culture. Some (an ex-girlfriend from Hong Kong) are too materialistic though.

(Comments wont nest below this level)
Comment by Hoz
2007-07-07 13:03:28

Confucious says:
“Baseball wrong, man with four balls cannot walk.”

Sorry Bill et alia my poor sense of humor.

Comment by Bill in Phoenix
2007-07-07 07:52:28


It’s kind of strange to promote consumerism when American’s have been hyperconsumers. Also, many Asian countries have high savings rates and “not buying” has not been detrimental to their economies. They just are smarter at producing, have fewer socialists running their countries - less regulations and lower taxes - and admire industry. We have too many economic girlie men in the USA. From your perspective, I’m one of the people who will be responsible for the oncoming market crash. I am an extreme saver. There will be a time for me to spend, and I will do that in the bad times. I like being sort of a contrarian, but diversification in investments is how I do personal finance. I’m buying platinum bullion in two weeks. It’s going to sit and not create jobs. But it’s a good alternative to the dollar.

Comment by yogurt
2007-07-07 09:01:07

You think Asian countries have less regulations? Go live in Japan or SIngapore for a while. They do have lower taxes though.

Comment by Bill In Phoenix
2007-07-07 09:29:22

“You think Asian countries have less regulations? ”

Taken as a group, yup. Taiwan, China, India, Vietnam, Thailand, Singapore, South Korea, Laos, Indonesia, Malaysia, Phillipines: Name me three of those countries with the equivalent of our EPA, Food and Drug Administration, OSHA, Center for Disease Control, HUD, FDIC, a Labor Relations Board (NLRB), Department of Energy. I just named a few. America has more socialism than many nations in the world. You just named me Japan and Singapore. Singapore has strong controls, but that is one out of many Asian nations. Japan has been a mixed economy for decades. I’m talking about the general case. You are talking specific cases.

There are many former iron curtain countries in eastern Europe with lower income taxes than the U.S. Estonia has a 13% flat income tax. Some western European nations have lower capital gains taxes than the U.S.

I’m bullish on the world economy in the long run. I also will go out on the limb and predict that in two generations the savagery in the middle east will be replaced by real peace, burgeoning middle class economies and an end to secular governments. They will be forced to turn their economies from oil to information-based. They will be running out of cheap oil very very soon. Either they go back to the nomadic existence or get with the information economy and become kind and civilized humans too busy to cause evil in the world. There may be many nations that come out economically further ahead than the U.S. China is on that path for now. But we are currently headed on the road to Serfdom, trading our freedom for security.

(Comments wont nest below this level)
Comment by GeorgeSalt
2007-07-07 10:04:39

“America has more socialism than many nations in the world.”

First: market regulation is not “socialism.” Socialism is government ownership of the means of production. Period. You are spouting rightwing propaganda.

Second, as for all those “free” Asian countries, try talking to a South Korean grocer sometime. In particular, find out why they came over 10,000 miles just to open a small grocery or convenience store - in “Socialist” America, to boot! You’ll find out that back home, it is almost impossible to get the necessary business licenses unless you pay some rather exorbitant bribes to the right people. Corruption greases the wheels in “Non-Socialist Asia.”

Comment by Hoz
2007-07-07 10:12:05

Bill for the most part I agree with you. However IMHO this is not correct:

“They will be running out of cheap oil very very soon. Either they go back to the nomadic existence or get with the information economy and become kind and civilized humans too busy to cause evil in the world.”

I doubt very much if any OPEC country cares whether oil is cheap or expensive. I suspect they would be happy if it was more expensive then they could produce less of it. I remember a Standard Oil (?) commercial during the ‘73 fuel crisis that showed a car running out of gas and the announcer said “there goes the last drop of oil”. Scarcity of a resource raises the resources price. There will always be oil, the price may just make it unaffordable.

As regarding the nomadic existence. I suggest you visit Dubai to see what a first world city currently looks like. The moneys in the oil producing countries are going into infrastructure and financial resources. “The Burj Dubai (Arabic: برج دبي for “Dubai Tower”) is a supertall skyscraper currently under construction in the “New Downtown” of Dubai, United Arab Emirates. Projected to be completed and occupied in 2009, the building is part of a huge development located at the “First Interchange” (aka “Defense round-about”) along Sheikh Zayed Road at Doha Street.” Wikipedia

currently 138 stories tall.

Chicago and LA each bid on the Olympics with guarantees of 16B, that is less than Dubai spends each year on its infrastructure.

I suggest you read what is happening in the middle east oil countries. The key is what happens to the US dollar when the rest of OPEC converts to a mixed basket.

Comment by Paul in Jax
2007-07-07 12:07:27

“First: market regulation is not “socialism.” Socialism is government ownership of the means of production. Period. You are spouting rightwing propaganda.”

Bill has it more or less right. (BTW, why would this be “spouting propaganda”?) Government ownership of the means of production is the definition of communism, not socialism. Regulation, governmental controls, and redistribution of wealth is the hallmark of socialism. Why do socialists have a problem being called what they are? It’s a defendable political position. I don’t mind being called right-wing (but please, not conservative) - if people have a problem with that phrase, that’s their baggage, not mine.

Comment by GeorgeSalt
2007-07-07 12:14:48

“Government ownership of the means of production is the definition of communism, not socialism.”

My Gawd, another product of Christian homeschooling. From Wikipedia:

“As an economic system, socialism is often characterized by state or worker ownership of the means of production.”

“Communism is an ideology that seeks to establish a classless, stateless social organization based on common ownership of the means of production.”

Comment by Bill In Phoenix
2007-07-07 12:40:34

There you go assuming that any free market afficionado is a Christian. I’m an atheist and very socially liberal. I am not shy to say that I abhor people who try to control my life. Those include Christian fundies and those who want government to control the economy.

Comment by Paul in Jax
2007-07-07 18:30:04

Hey Saltman - wikipedia doesn’t cut it with me. My definitions are better and more generally acepted than wikipedia’s. Interesting (and very predictable) that you can ‘t respond without using more personal attacks. Get lost.

Comment by Chip
2007-07-07 20:11:54

Hoz — you and I probably are among the very few here who have spent a lot of time in Dubai. I interacted a lot with the oil people. Dubai is a lot of fun if you are ALREADY in the hot, dry Gulf area — as are, to be fair, a lot of expatriates. But it is hotter than Death Valley in the summer. While the sheikhs there have done their best to make it a Las Vegas for Middle Easterners, it is not a place for which I would spend a dime to travel from Florida for a vacation, at least outside the December-February breather (March brings sandstorms that remind you of “Raiders of the Lost Ark” or the airplane in the desert one). Dubai has the finest modern architecture in the Middle East, indeed perhaps anywhere. It is a great place to shop (particularly in nearby Sharja and during the February Shopping Festival). But, folks, during much of the year it is so hot and dry that you might well be much happier viewing all that magnificence on your 1280p+ TV than going there to endure it firsthand. The UAE is a strong and highly-valued ally of the US. Politics is not an issue. But they cannot change their weather. If you love Bakersfield and Death Valley, go there anytime. If you are really rich and want an awesome vacation, then go there and stay at the “Burg” in clement weather.

Comment by ille_vir
2007-07-07 09:03:40

Bill in Phoenix,

Appreciate the response. I think the reasoning would be that those Asian countries are geared towards funneling their savings into export-based industries, whereas our economy is all about consumption. When domestic consumption starts to fall, it will lead to an economic correction, probably in a shorter amount of time than it will take for our economy to shift to a different model.

I wonder if an “extreme saver” by American standards is more like the average consumer by the standards of some other countries. You’re right on about the bad times being the time to spend. Cash will be worth more and “stuff” will be worth less.

Comment by CA renter
2007-07-08 00:45:13

Everyone is correct. Fact is, people define communism & socialism in different ways.

Here is a link to a number of resources with definitions for “communism” (not using tiny url becuase that sometimes causes posts to drop, IMO):


A link to definitions of socialism:


(Comments wont nest below this level)
Comment by GetStucco
2007-07-07 06:31:38

Hedge Funds Crisis Spurs Congressional Hearings: ‘Plunge Protection Committee’ in Rare Testimony

July 3, 2007 (EIRNS)–In light of a growing credit markets crisis centered on hedge fund failures and the mortgage-based securities and derivatives they trade, two Congressional committees reportedly have scheduled new hearings on hedge funds in July.

In a rare event, the chiefs or deputies of the Treasury, Federal Reserve, Securities and Exchange Commission, and Commodity Futures Trading Commission will testify to the House Financial Services Committee on July 11. Collectively, these are the famous and usually secretive President’s Working Group on Financial Markets, colloquially known as the “Plunge Protection Committee” which monitors for market crises and plans liquidity interventions or bailouts to head them off.


Comment by CA renter
2007-07-08 00:47:35

Thanks, GS! :)

Comment by Tango in Uniform
2007-07-07 06:40:20

Billings’ (MT) most-quoted Realtor claims that, to balance the buy-rent ratio, rents will rise 50% in the next 1-2 years:

Housing prices ready to soar

Comment by GetStucco
2007-07-07 06:48:57

Unfortunately, since wage inflation is stuck in the mud (relatively speaking), everyone will live homeless as nobody will be able to either buy or rent.

Comment by Ghostwriter
2007-07-07 07:39:39

Billings with a waiting list of 1500 for section 8 housing sounds like the rest of the country. People can’t afford the prices that homes have risen to. Sorry but you’re only delayed and your bubble will burst.

Comment by Hoz
2007-07-07 08:18:12

That graph is hysterical. Billings housing bubble is enormous. Since the Federal Reserve changed its policies in 1987 Billings has had 1 quarter where prices did not appreciate (source OFHEO). I wish the graph showed the appreciation from 1988 on, then (not caring about price) the bubble is as large or larger than Florida’s.
OFHEO Billings, MT vs Orlando, FL

I guess there is no more land in Montana.

Comment by bayparkwatcher
2007-07-07 09:56:31

Montana is getting a lot of retirement couples from right here in Southern California. I personally know two. Sorry about that, Montana!

Comment by Groundhogday
2007-07-07 11:25:42

Thanks Tango,

That is certainly a way to twist the truth around backwards. Yes, there is a rent vs. purchase price relationship. THis clever fellow just has causality reversed!

Comment by Tango in Uniform
2007-07-07 06:42:06

And here’s my letter to the editor response which was printed this week:

Dear Editor,

You had a good housing article going on June 28 with an interesting survey of affordable housing in Billings. But it’s too bad that you decided to lead the story with the headline “Housing prices ready to soar.” Not only was it sensational, but it lacked real factual support from the article itself.

You quoted real estate agent Howard Sumner extensively, and he noted that mortgage payments are roughly twice as much as rental payments. He correctly stated that this is out of line with historic averages. To remedy this, either rents need to rise or housing prices need to fall. Since apparently Real Estate prices could never go down in the world of Realtors, Sumner makes the unfounded assertion that rental rates will be up an absurd 50% over the next year or two.

Sumner’s claim of rapidly rising rents is not new for him. In the March 13, 2007 edition of the Big Sky Business journal, Sumner said “People will be shocked at the increases in rent over the next 90 days.” As a renter who actively watches the market, I can tell you that it’s 90 days later and I’m not shocked. The unbalance is unchanged.

I noted in March that his quote seemed to be a scare tactic with no grounding in reality. If rents are set to rise rapidly, then renters had better buy instead. And what reason might a Realtor have to encourage people to buy houses? Conflict of interest, perhaps?

Of course Sumner is not going to suggest that home prices may decline. I have quotes from the Real Estate industry dating back 25 years, and you know what? Optimism was always on their lips, even in the face of the 1986 crash that financially ruined many.

Here are the real facts: Rental rates tend to closely track wage inflation. Rents cannot be raised beyond what the market can bear. House prices, on the other hand, are much more susceptible to booms and busts. Thanks to lax lending standards, speculation, and a bit of “can’t-lose” psychology, we’ve temporarily entered a level of unsustainable home price levels.

Booms (no matter what type) usually bust, especially if they’re not supported by fundamentals. As the article noted, less than 5% of houses today cost less than $100,000, while in 2000 over 50% homes could be had for that. If that’s not a sign of a mania-driven boom, I’m not sure what is. I too believe there’s a perfect storm on the way, but I believe it will come in the form of a housing price correction.

Since the article was about affordable housing, I am concerned about the implications of Sumner’s quotes. If rents are set to take off and house prices (as he has claimed elsewhere) will rise 6-10% a year, then everyone would be foolish not to buy today. Of course this is not true. While buying is a prudent move at some point for most people, it can be disastrous for those not prepared financially. There’s no shame in renting until that day comes. And contrary to Sumner’s gloomy prediction, there’s not going to be a huge move that suddenly puts renters at a disadvantage

In order to counter what I see as industry-driven agendas clouding the facts, I have produced a series of amateur videos taking an honest, unflinching, unbiased look at the Billings housing market. These can be found on the web at http://www.topoimagery.com/billings. I welcome suggestions and ideas for future video topics.

Comment by tg
2007-07-07 07:15:09

Very well written

Comment by Bye FL
2007-07-07 07:30:06

If the landlords try to raise rents way up, just watch all the tenents walk away, even moving to some other state if neccessary. Those landlords don’t want to be losing even more money sitting on empty property so they rent, even if it is at a loss because they can’t sell because they are still in denial about the bubble.

Comment by Hoz
2007-07-07 08:57:32

Agree, a very pleasant read and the video is well crafted. A well done presentation with readily verifiable statistics. Thanks!

Comment by JungleJim
2007-07-07 07:33:13

WOW!!! Great video. A must watch. I would love to be able to produce a product like yours to counter the BS I here in the Sarasota/Bradenton market. The more of this educational material out there the faster this bubble will unwind.

Comment by GeorgeSalt
2007-07-07 09:45:08

Great video! Are you a college student, majoring in communications?

Wow, those were some butt-ugly condos for sale in the downtown area.

Comment by not a gator
2007-07-07 10:21:23

I actually thought they looked cool, but rent-only.

Also didn’t mention the sqft, so depends… if it’s too small it doesn’t have bachelor pad potential.

Comment by peninsula renter
2007-07-07 07:04:37

King of ALL fixer-uppers in San Jose…

This price is not an error! LOL :-)

Comment by mrincomestream
2007-07-07 09:42:38

I’m at a loss for words…

Comment by sf jack
2007-07-07 10:34:51

Just another “prize” here in the Alt-A Bay Area.

Comment by Mo Money
2007-07-07 10:55:36

notice that the tree out front is in spring bloom and here it is July. Guess that gem isn’t being “snapped up” by a flipper so fast after all.

Comment by Paul in Jax
2007-07-07 12:12:59

Obviously a spoof, hinted at and then given away in the final line:

“Pictures don’t do it justice. In this case, it’s actually worse than the pictures show. “

Comment by Wickedheart
2007-07-07 13:24:50

OMG, that is the worst. I need to go take a shower just after looking at that. It looks worse than my parents rental did after it had been used as a drop house for illegals.

Comment by Bye FL
2007-07-07 17:08:48

Probably a teardown. But that land arent worth $420k, even the flippers know this. There doesnt even seem to be .1(tenth) acres of “land” id say $200k at most is a fair price. What do you say? Comment :)

Comment by mrincomestream
2007-07-07 18:39:42

200k my ass…

(Comments wont nest below this level)
Comment by diemos
2007-07-07 07:11:19

Are banks sitting on their REOs because they expect RTCII to come by at any minute and take them off their hands at full price?

Comment by Ghostwriter
2007-07-07 07:45:54

Banks can’t afford to sit on REO’s for long. The more houses they have in inventory and more loans that are defaulted on the more money that is tied up and can’t be used for loans to someone who would pay.

Comment by oc-ed
2007-07-07 07:51:59

I have heard a few opinions on this topic. First, the banks are ramping up staff to handle the sales. Second, they will hold em until they have to sell as a result of laws regarding non-performing assets. Third, they are trying to sell them at the current high wishing prices, but are reluctant to drop prices because that would depress the value of subsequent REOs.

Personally I think they are holding out in the hopes of a bailout as you suggest or a recovery as the NAR seems to predict on a weekly basis. What amazes me is that these are THE folks who should have the greatest insight into where the market is headed and from what I can see it is headed down so why not get what you can now before the bottom falls out?

Comment by arroyogrande
2007-07-07 09:06:50

“Second, they will hold em until they have to sell as a result of laws regarding non-performing assets. Third, they are trying to sell them at the current high wishing prices, but are reluctant to drop prices because that would depress the value of subsequent REOs.”

I think #2 and #3 are the most likely reason right now. I think that part of the psychology is that things will get better “soon”.

Comment by Warm Climes 4 Us
2007-07-07 09:09:57

I don’t think banks can hold REO very long without severe capital requirement problems. Do we have any bank examiners surfing here that can enlighten us?

Comment by tuxedo_junction
2007-07-07 11:10:56

I was a bank examiner for 10 years. There are no laws or regulations that require a bank to dispose of REO, nor limit the amount of REO it can hold. REO is simply another non-earning asset; have too much of it and the bank starts losing money.

There is a reason though that bankers prefer a non-performing or problem loan to REO. REO is a highly visible distressed asset that can’t be restructured, it’s a “costing asset” instead of an “earning asset” (property taxes, insurance, maintenance), and its market value can be approximated reasonably well with an appraisal. Examiners, and to a lesser extent independent auditors, can readily identify a defensible loss amount for an REO. This loss amount, once it exceeds any unused allowance for loss, is an offset to the bank’s net worth. Bankers have a good deal of lattitude with respect to loss reserves for questionable loans (look at the ridiculously low loan loss allowances on bank books), but with REO they have none other than a fraudulent appraisal (Book Value - Appraised Value = Loss.)

Note also, that once a bank obtains title to security property, either through foreclosure or voluntary deed-in-lieu of foreclosure (jingle mail), the bank must back-out all accrued, but uncollected interest income. This can be substantial for option-pay loans.

(Comments wont nest below this level)
Comment by CA renter
2007-07-08 01:08:29

the bank must back-out all accrued, but uncollected interest income. This can be substantial for option-pay loans.
Thanks for the info. Should be interesting to see the numbers when/if this happens.

Comment by Hold out in LA
2007-07-09 18:06:03

First off, “Banks” makes it sound like the local downtown branch manager has a drawer full of keys. Most of these REO were dumped back onto the loan originators made up of traditional banks but most of the industry is made of brokers. All the loans that went belly up were returned by the owners of the CDO’s. Lets call them MOFO’s (Mortgage Originators of Financial Obliteration) instead of banks.

Fistly these MOFO’s are trapped by the losses if they mark to market the true value of housing all of those FB’ers who are still holding onto homes will bail and they will get swamped with a never ending torrent of REO’s.

Secondly, BearSterns public debacle sent a clear message to everyone else in the business. No one is going to fall on a sword to help you out. Anyone attempting to get out of Dodge before the SHTF is a marked man. As the LT. said… “this is one giant shite sandwich and everyone is going to have to take a bite.(Full Metal Jacket)”

Lastly, people are sheeple not lemmings. The ones at the edge of the cliff are trying to keep from getting pushed off the cliff.

Comment by stealth4
2007-07-07 13:10:23

What exactly would the bailout consist of? What entities of government are advocating a bailout? I’d like to know so if they are we can do some letter writing of our own.

Comment by uptown
2007-07-07 14:18:47

More likely the mortgage was cut & diced into the bond market and it’s the loan servicer handling the sale, so not in any hurry to sell low.

Comment by Bye FL
2007-07-07 17:12:03

You are right, if foreclosures are skyrocketing, the banks should know prices are dropping. If those dumb banks hold on those REO, they will get a lower price. Many banks end up auctioning them for a low or even NO reserve and their loss is forgiven by the IRS, but the foreclosee ends up paying taxes.

Comment by homoaner
2007-07-07 07:13:41

From today’s St. Paul (Minn.) Pioneer Press:

Ramsey County / Sheriff asks to add two deputies
Recent growth in home foreclosures creates need
By Jennifer Bjorhus

“The current wave of home foreclosures is creating so much work for the Ramsey County sheriff’s office that it’s requesting two additional deputies in its civil unit.

The staffing request is yet another sign of the toll rising foreclosures are taking across the Twin Cities. Already this year about 5,000 families have lost their homes in the seven-county metro area, more than in all of 2005, according to a Pioneer Press analysis.

While somewhat invisible to the general population, foreclosures are expensive for industry players and communities, and each can take a year from start to finish. Sheriff’s offices shoulder some of the administrative burden. For instance, deputies serve the actual foreclosure notices to homeowners in default, and they handle the auctions where foreclosed homes are sold back to the lender or to real estate investors who make a bid. They also get involved in evictions.”

Comment by Hoz
2007-07-07 09:02:19

A double whammy - taxes have to increase to pay for additional staff and/or needed services (schooling, fire and police protection are lopped).

Comment by WAman
2007-07-07 09:21:22

Just what I was thinking Hoz.

Comment by WAman
2007-07-07 09:27:01

I think that a huge number of people (98%) have no idea of the pain that is coming. Who is paying property taxes on all of these properties in foreclosure. If taxes are not paid how can a town or city pay its workers? I see layoffs of municipal employees picking up in the next few years. There will be a drop in services and more work for those that remain. There is also the drop in sales tax revenues that many have already mentioned.

But hey folks don’t worry subprime is contained!

Comment by Bill in Carolina
2007-07-07 10:07:28

Once the lender forecloses, the county starts sending the property tax bills to the lender.

(Comments wont nest below this level)
Comment by not a gator
2007-07-07 10:25:37

Already saw one commercial property in G’ville taken due to nonpayment of taxes.

County and city are planning for 10% cuts. It’s finally good that RTS is the red-headed stepchild. We receive so little city funding that we’re barely going to notice the difference. Just some concern about fuel usage. No layoffs.

However, if the county cuts funding, say bye-bye to bus service outside the city limits.

So, county dwellers, was that 10% property tax discount worth it? Speak up.

(Comments wont nest below this level)
Comment by GetStucco
2007-07-07 07:32:42

America’s mortgage giants
Fannie and Freddie ride again
Jul 5th 2007 | NEW YORK
From The Economist print edition

The subprime mess provides an opportunity for Fannie Mae and Freddie Mac to salvage their reputations
Satoshi Kambayashi

WHERE there is crisis, there is also opportunity. The turmoil afflicting parts of America’s giant residential mortgage market has already claimed dozens of casualties, including two Bear Stearns hedge funds that bet the wrong way on structured products backed by loans to subprime borrowers. But Fannie Mae and Freddie Mac, the government-chartered siblings that tower over the market, spy gold in the rubble—or at least a chance to polish their tarnished reputations.


Comment by Hoz
2007-07-07 09:09:55

“They paint themselves as saviours, but they are essentially opportunists”

If Fannie and Freddie know how to cherry pick, the stocks might be a safe buy. It is a big “if” based on their past experience.

Comment by ockurt
2007-07-07 07:46:49

At least they mentioned that prices did go down once upon a time

Platinum Triangle market stays strong


Comment by mrincomestream
2007-07-07 09:40:43

125 Million for a house. Wow…

Comment by Ghostwriter
2007-07-07 11:35:22

125 million for a house. Must be a safe full of gold bars somewhere on the property.

Comment by uptown
2007-07-07 14:23:22

A fool and his money…

(Comments wont nest below this level)
Comment by Bye FL
2007-07-08 05:58:26

Well its 45,000 living square feet. Still if I had $125m to spend, I would buy in a cheaper location where I could get a mansion of this caliber for say $200/foot so id be looking at $9m. But honestly who needs so much space? 5000 living feet is enough

(Comments wont nest below this level)
Comment by ockurt
2007-07-07 07:55:08

Sale of French unit of KB is approved

KB Home can sell its French home-building division, Kaufman & Broad, to private equity fund PAI Partners, European Union regulators ruled.

Los Angeles-based KB Home, one of the largest U.S. home builders, said the sale of 50.01% of the unit would net it $783.2 million.

Comment by asuwest2
2007-07-07 07:59:48

this fits more in the market observations, but it’s a bit early today & I’ll be offline—
Had the day off yesterday. Went to check out the Trustee (foreclosure) auctions in Orange County (CA). Grand total of maybe 8 possible bidders. Obviously 2 pro’s in that #. Of the 1st eight properties, only one had anyone present to auctioneer that they had $ to bid. & he bought it at $.01 over note amt. Next 7 went back to the bank, 0 bids.

Talked w/one older guy there with his college age daughter. They were checking it out, but not serious bidder. Interesting, cause when I brought up how it’s still early, he went on about how the banks were loaning to anyone. Even mentioned that a woman in his office pulling down $4k/month had gotten a loan for 1.2 MILLION FRIGGIN DOLLARS. As Gomer said–SURPRISE, SURPRISE,SURPRISE. The Laguna property was in foreclosure. Wonder why.

Stopped by a second auction @ the OC Courthouse, was a bit late, but no crowd there (one person did buy something, however).

Overall–Looks like the banks are gonna be drowning in REOs REALLY fast.

Comment by WAman
2007-07-07 09:30:46

Thanks for the humor - LOL - I could see the sergeant and Gomer from many many years ago.

Comment by zion renter
2007-07-07 10:04:17

Why do many of you want the bubble to pop so fast. If the air goes out to fast then its just a snap. Let the pressure build. As banks keep lending to FBs, sellers hold on to price, buyers wait for deals. The hedge funds tank, and the world credit tanks with it. This is the real Bubble. Real estate is just one card in a house of cards thats falling. Do you think that the Depression started on black monday. No, Its roots were the same as we see now. Lowering of credit standards to prop up a system in downfall. The big diffrence is then it was the banks that lent the money to people and business that were not underwriten with equity. Now its the goverments that underwrites money that has no equity. And lenders know this and use the goverment to underwrite loans. When the big credit wheel stops turning cash will not be king. Real value based on needs not returns or futures. I dont horde bullets and bread, but know that the light at the end of the tunnel is a train.

Comment by GeorgeSalt
2007-07-07 10:39:21

Oh, great. The Y2K kooks are coming back for an encore.

Comment by bill in Phoenix
2007-07-07 20:13:38

I’m one who likes to see the bubble deflate slowwwly. My 2001 Series I savings bonds are up 37% since the Fall of 2001. That’s more than 5.3% compounded annually. Taxed only at redeem time at the federal level. Heh Heh! They don’t go negative.

I think (not hope) that prices will deflate slowly the next few years. I am thinking now that either interest rates will stay flat (5.25) for the next 4 years or rise. If I’m right that Ghawar will be capped within 5 years, we’ll see a faster deflation of real estate. If I’m wrong about oil peaking so soon, rates will be flat. However ARM resets continue the next few years and baby boomers will start to downsize to small cottages. One easy bet is this: RE prices will continue to fall in the future.

If peak oil won’t be recognized within the next five years, I think my allocation of 60% of my portfolio into equities will prove very wise. If I’m wrong, I’m wrong.

Comment by Jim
2007-07-07 10:21:08

Hey zion renter,

I agree with you. If cash won’t be king, what will be? Gold? Wheat? Oil? I also think the light at the end of the tunnel will be a train, a Chinese-made train.

Comment by not a gator
2007-07-07 10:30:59

I’m planning to buy some staples–the staff of life–for personal use in September or August when I move (changing apartments–goodbye Paradigm Properties and good riddance!).

I’m looking at that iPath ETN. If Schwab wants to charge me a fee to purchase that I’m going to be really steamed.

I don’t know what’s up with the nuisance fees. I’m lending them 10K cash at 5% (heck, they determine the rate). I guess they would be nicer if I borrowed from them at 7% or something.

They’re very eager to get me to trade on margin. No thanks, I remember my history lessons…

Comment by Paul in Jax
2007-07-07 12:18:10

“I’m lending them 10K cash at 5% (heck, they determine the rate).”

Hardly. You’re investing in a mutual fund of short-term (money-market) securities, such as CDs, bankers’ acceptances, commercial paper, and repurchase agreements, whose rates are set in a competitive market and which Schwab is managing and charging you a tiny fee (~1%) for. It’s a hell of a deal, really.

Comment by hwy50ina49dodge
2007-07-07 12:22:49

Stretch your talents as a condom tester..

“…would-be testers will be asked to explain why they should be considered. Humor would help in the application, Durex said.”

One submission from a mate in the states: “…Well, see I used to sell real estate in Florida and then…” ;-)


Comment by NoVa RE Supernova
2007-07-07 12:27:29


Bear Stearn’s funds failure opens door to credit crash.

Comment by SD_suntaxed
2007-07-07 12:53:57

Today’s Craigslist find in San Diego.

Gotta hate it when that “can’t lose opportunity” you bought last year in Poway turns out to be a -$150K sinkhole. Original cabinetry, avocado green appliances, formica countertops, dead lawn… this place has it all. Don’t miss the “2 patio doors” or the “beautiful front view!”

This slice of paradise was purchased in June of last year for the absurd price of $650K and now for sale at $499K.

Comment by Ghostwriter
2007-07-07 14:13:29

House that size in NE Ohio would sell for 125-135k.

Comment by WatchingTheSagaUnfold
2007-07-07 14:16:34

A modest looking house, but $500,000? Funny how as the tide goes out, places like this are being recognized as nothing more than a depreciating stone hung around someone’s neck.

Comment by SD_suntaxed
2007-07-07 19:32:41

I agree. Even at the current asking price, it’s still far from modest for this place. Forgot to mention earlier that it also sold in 2004 for $530K.

Comment by Bye FL
2007-07-08 06:08:58

Looks like a flip that flopped! If he paid $530k 3 years ago, he loses money. No one is gonna buy it for $499k today. Thats probably a $300k house. I can get one like that in NW PA for around $50k

(Comments wont nest below this level)
Comment by NoVa RE Supernova
2007-07-07 13:08:28


First cracks in the UK commercial property market.

Comment by WatchingTheSagaUnfold
2007-07-07 16:45:33

Anyone near this one who can find out final auction price?


Comment by Moman
2007-07-07 18:11:21

Kind of off-topic, but I sold some stuff on Craiglist today. I guess the buyer had a change of heart and showed up on my doorstep requesting her money back because she wasn’t happy. (It was some old camping equipment).

What would you do? I just gave her back the $50 and told her to get lost.

Comment by Chip
2007-07-07 20:17:18

What would I do? Give her back her money, as you appeared to do. Unless she was a total jerk about it, I would not have told her to get lost.

Name (required)
E-mail (required - never shown publicly)
Your Comment (smaller size | larger size)
You may use <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong> in your comment.

Trackback responses to this post