No Area Is Immune In California
The Voice of San Diego reports from California. “About a year into his career as a Realtor, Denny Oh was itching to buy a home. With just a year under his belt in a commission-based business like real estate, Oh knew his income made it impossible to buy alone. So, two years ago, he and two college friends went in together on a three-bedroom, two-bath condo in Pacific Beach.”
“‘I mean, most of my clients are older and buying million-dollar homes and I’m renting a $500 room somewhere?’ he said. ‘It’s kind of like a car salesman who doesn’t own a car.’”
“His friends were dating each other, had been for several years. Oh moved into the second bedroom, and they rented out the third. They wrote up a contract and each has one-third ownership of the condo. But then, a few months ago, the couple broke up.”
“‘We don’t really know what we’re going to do,’ he said. ‘Obviously, it wasn’t planned and we’ll have to figure it out.’”
“And market conditions are far from the golden days from several years ago. The market could dip further, and the home-buying partners could lose some of their investment if they decide to sell.”
“Indeed, despite the breakup, Oh’s biggest regret about his situation is that they bought in 2005, at the peak of a sizzling housing boom.”
“‘I probably shouldn’t have bought; I should have waited and rented,’ he said. The condo ‘is probably worth exactly what we bought it for. We would not make any money at this point. Maybe in a couple of years.’”
“Oh said his living costs quadrupled when he bought his share of the condo unit, but it was worth it to live where he wanted to live and work toward some equity.”
“‘You just have to really make sure everyone’s on the same page,’ Oh said. ‘What if you lose your job? What if you get married? It sounds bizarre, but stuff happens.’”
The Orange County Register. “Real Estate Economics from Irvine has published its take on SoCal’s new-home market in the second quarter: Average net base price for new homes has fallen by 8.9% in a year.”
“Advertised concessions increased 121% in a year to $10,442. ‘It should be noted that, in many areas of Southern California, the level of undisclosed concessions may be more than double the disclosed amounts.’”
“The rate of total monthly sales has fallen dramatically by 84.9% since 2nd quarter 2006.”
“The overall level of inventory has increased by 15.6% during the past twelve months. Total months of inventory (which accounts for slower sales rates) is now 12.”
The San Francisco Chronicle. “To many people in the affluent Bay Area, losing a home to foreclosure sounds like a Depression-era relic or a Rust Belt phenomenon. But in recent months, the Bay Area has proven to be home to numerous victims of the subprime loan debacle.”
“Just like elsewhere in the country, people here with tarnished credit or limited funds bought houses that proved to be beyond their means.”
“Jeff Hahn bought the house, a nicely laid-out decade-old four-bedroom Colonial in a neighborhood of classic two-story homes, three years ago for $495,000. Later that year, he met Vanessa, they fell in love and started a family.”
“‘When I first bought the house, everything was too good to be true,’ Jeff recalled. ‘No money down, instantly gaining $10,000 in equity. Written in very small print was that the loan will adjust in two years. Everybody I talked to said it would only be a (minimal) increase.’”
“Instead his two loans, initially totaling $2,200 a month, hit $3,700 last September. Several loans fell through for various technicalities. By the time a new loan finally came through in March, not only had the subprime mess caused banks to tighten their lending standards, but the home’s value had dipped.”
“Jeff had borrowed against the home’s equity to pay off some bills…start his business (and) to cover closing costs for the new $570,000 loan. The 40-year fixed-rate loan, at an interest rate of 10.5 percent, carries monthly payments of $5,000.”
“Why did Hahn accept a loan with higher monthly payments? ‘I was using credit cards to subsidize the payments’ on the existing mortgage, he said. ‘I was about to miss a payment. My lender said, ‘Take the loan, because it will save your credit, that’s the first issue. Then you can sell the house.’”
“The Hahns have not made any payments on the loan since it was funded in March. ‘Honestly, I gave up once (monthly payments) hit $5,000,’ Jeff Hahn said.”
“The Hahns put their house on the market, only to discover that real estate prices were spiraling downward in their area. Their house, which had been appraised for $630,000 in January, was now worth less. They started out listing it at $575,000, and now have dropped the price to $555,000.”
“So far, the Hahns haven’t received any offers. ‘My neighbor is selling his house for $505,000,’ Hahn said. ‘My Realtor wants me to drop my price another 100 grand.’”
“Jeff Hahn said he is bitter about his experience with home ownership.”
“‘I’ve probably wasted $90,000 over the past three years and have nothing to show for it,’ he said. ‘I lost my house, have to relocate my family and ruined my credit. Now my family will probably never own a house again because we will be considered even more of a risk in the future.’”
The Contra Costa Times. “Thinking about refinancing a mortgage or getting a no-money-down loan to buy a home? Something that was relatively easy to do several months ago may be a lot harder in today’s stricter lending environment.”
“‘In many cases, down payment requirements are higher than they were before,’ said John Holmgren, president of the East Bay chapter of the California Association of Mortgage Brokers.”
“Those who are getting hit hardest by the tightening loan standards are those with low credit scores, subprime borrowers and people who are unable or unwilling to document their income, mortgage experts say.”
“‘If you have marginal (credit) and try to do a stated-income (loan), that’s where the loans have become much more constrained,’ Holmgren said.”
“Many lenders are requiring borrowers with less-than-perfect credit scores to put a 3 percent to 5 percent down payment, said Janet Parker, senior VP of national underwriting operations at Walnut Creek-based PMI Mortgage Insurance Co.”
“‘If they buy a new home, they may have to save a little more for a down payment, which is not a bad thing,’ she said. ‘That way, they have some equity in the home right away.’”
The Sacramento Bee. “The onslaught of foreclosures in Sacramento’s housing market has left a grim, telltale mark: hundreds of vacant and boarded homes throughout the city. No area of the city is immune, but city leaders say the hardest-hit areas seem to be Oak Park and North Sacramento.”
“Fueled by riskier adjustable-rate mortgages and falling property values, foreclosures have escalated at an astonishing pace in Sacramento: 73 in 2005, 667 in 2006 and 1,066 through the first five months of 2007, according to DataQuick.”
“‘Go down any street and it seems like you find them,’ said City Councilwoman Sandy Sheedy in a recent tour of the Del Paso Boulevard area.”
The Times Herald. “The real estate picture in Vallejo and the rest of Solano County may be slightly worse than statewide, but by no means is it in free fall, a local real estate expert said. The picture was worse on both counts in Vallejo, Benicia and Solano County generally, said Solano Association of Realtors president Jeff Dennis.”
“In the first five months of 2007, the number of transactions plunged more than 43 percent in Vallejo and about 20 percent in Benicia, Dennis said. The numbers for May 2006 over May 2007 were even worse, he added.”
“‘There were 202 transactions in Vallejo in May, 2006 and only 93 this May,’ Dennis said. ‘That’s down more than 60 percent.’”
“In Benicia there was a drop of about half that, from 41 transactions in 2006 to 27 this year, he added.”
“‘It’s the lower-end homes that aren’t selling because of the subprime borrowers being locked out of the market by the tightening standards,’ he said. ‘But a lot of the more expensive homes are selling, which drives up the average price of homes sold.’”
“People who are holding off buying a home, waiting for a dramatic bubble burst, don’t have to, Dennis said.”
“‘People are afraid to buy because they’re hearing that prices are going to drop, but if you look back over the past 50 years, that’s not going to happen,’ he said. ‘Real estate is still a good long-term investment and always will be.’”
“The Record.net. “Wells Fargo Bank has become the latest of the big name banks to join the ranks of born-again mortgage lenders, folks who’ve seen the light, embraced the truth and vowed to go forth and sin no more.”
“The sin, of course, is the wink and a nod lending that put people in homes who should have stayed in apartments or who put people in too much home for the income of the family.”
“DataQuick reported last week that San Joaquin County default notices more than tripled in the second quarter from the same period in 2006. Home values are falling, off 12 percent countywide in the last year to a median price of $390,000,and the inventory of homes for sale high is considerably higher than the pool of eager buyers.”
“Gotta unload your house quickly? Death in the family? Divorce? Transfer? Good luck. Been getting calls from your mortgage lender? Got fired? Your adjustable mortgage adjusted upward about 30 percent? You’ve got really bad luck.”
“What happens next is that we’ve just got to work through it. The excess inventory has to be absorbed. Mortgage lenders have to take on the sober banker image of an earlier time. And borrowers have got to stop believing that just because they want something, they deserve it. Oh, and they might actually read the fine print.”
“An interest-only loan, more than 40 percent of the new paper being written in this county at one point, really means you’re only renting the money, not buying the house. Take one of those loans today and it means you’re really stupid.”
“It sounds bizarre, but stuff happens.”
yes.. truely bizarre. I can hardly grasp the thought.
That’s the comment that jumped out at me, too.
If he finds all of this a bit odd, he’s about to be floored with whats coming around the corner…..
LOL. Ditto for me.
“If he finds all of this a bit odd, he’s about to be floored with whats coming around the corner….. ”
…rather, WHO is coming ’round the corner, and that would be Mr. McCornholed wearing his strap-on Joshua tree. Brace yourself Denny!
“Oh said his living costs quadrupled ”
does that show up in the core?
Oh Oh…
can’t resist …
OH the pain
OH please stop
OH make it go away
LOL
Ow! Ow! Ow!
The stupidity it burns. Make it stop!
Hes got the 30% loan rise ,30% equity dip blues.
“Release your equity and RELEASE your pain!”
it’s hedonically adjusted because he could substitute a cardboard box
His oh face is much different than others.
Confucius say, OK for sh!t to happen - will decompose
“three years ago for $495,000″
“No money down, instantly $10,000 in equity.”
“borrowed..pay bills..start business..closing costs for $570,000 loan..40-year fixed-rate at 10.5 percent”
“have not made any payments since it funded”
“‘I’ve probably wasted $90,000..Jeff Hahn said he is bitter”
In my proffesional opinion Jeff Hahn is a fradualent dildo! How the hell can they print such drivel from little assholes like this and call it news!!!!
“‘You just have to really make sure everyone’s on the same page,’ Oh said. ‘What if you lose your job? What if you get married? It sounds bizarre, but stuff happens.’”
Losing your job or getting married or getting pregnant or getting divorced or… none of this stuff is “bizarre” and all of it should be considered before signing papers of this magnitude. It would be more bizarre if NOTHING happened.
I guess Oh et al didn’t consider what would happen if the market went south, much less if his trio decided to split up. Also - if his condo is worth today what they paid for it two years ago, he hasn’t factored in how much they have lost due to inflation (8 - 10%) along with other costs, such as lost opportunity costs by tying up his money for so long.
Not to mention the fact that, being a Realtor (TM), he is probably also out of a job right now - or nearly so.
“… Oh et al…”
Good one. Maybe it should read “Owe it all.”
“The Hahns have not made any payments on the loan since it was funded in March. ‘Honestly, I gave up once (monthly payments) hit $5,000,’ Jeff Hahn said.”
Sounds like another person who got suckered into the dream of get rich quick w/ real estate. Welcome to the FB club my friends. I wonder how many FB we have in the club to date.
Got tinfoil?
What does FB mean? First time buyer? F**ked buyer?
f’d borrower
“First time buyer? F**ked buyer?” …actually, for the last 4 or so years the two terms have defined each other, so both apply, along with f’d borrower.
Potential,
I think the concept was drawn out here:
http://www.housingbubblecasualty.com/
The archives are a good read, too.
“I wonder how many FB we have in the club to date.”
I want to answer your question, because I’m starting to find out that some of my friends/coworkers are unexposed “FBs”, and their day of reckoning is inevitable, and then they will get angry and desperate.
I’m guessing that about 15% to 20% of home “owners” are FBs at this point - maybe not the extend of losing the house but have HELOCs over 100% of real current value or resetting ARMs that will eat up every extra dollar (that used to go to cable, eating out, gym memberships, etc).
20% of the 70% of the 140 million US households that “own” homes is what - about 20 million FB households?
20% of the 70% of the 140 million US households that “own” homes is what - about 20 million FB households
There you bears go again with your pessimism. That means there are 120 million US households that aren’t f’d yet!
LOL @ “yet”
I lost my house, have to relocate my family and ruined my credit. Now my family will probably never own a house again because we will be considered even more of a risk in the future.’”
The joke of that is that an industry is always created out of chaos..for all those that have “foreclosure” on their credit..after 1 year they can again own a property..loans today are funded by more than banks but by individuals who put together “Funds” for investment..they may require more of a ve$ted interest in the property(downpayment), will probably charge a higher rate..but you can still own a property..chances are thought it won’ t be as “nice” as the one you owned before..The wheel always keeps turning..
Yeah, it’s interesting, isn’t it?
IMO, that wheel you speak up will keep turning until the Fed turns off the spigot. When there’s too much money easily had, we should expect no less than what you speak of.
This trick is going to be what most of us here adhere to already - keep debt to an absolute minimum. Those of us with clean ledgers will be able to navigate around a lot of the oncoming mess.
There is already “owner” financing but those guys want 20-50% downpayment and around 10% interest. My bets are few people will be able to afford that and just keep renting.
‘No money down, instantly gaining $10,000 in equity…
lol
That quote jumped out at me too –a real smack-forehead comment. The thought of going in on the purchase of a house –sh1t, not even a real house: a stinking condo for God’s sake!– with one other person, much less TWO would be enough to send me running in the other direction.
Plus, there was that other tidbit about his monthly shelter costs QUADRUPLING:
“Oh said his living costs quadrupled when he bought his share of the condo unit, but it was worth it to live where he wanted to live and work toward some equity.”
Gives new meaning to the term “showing your ‘Oh’ face”, I guess.
“Oh” face: http://temp.corvetteforum.net/c5/pigface/Huh/o-face.jpg
what’s in a name?
I got a sneaky suspicion that on the day he was born in the hospital, his mom exclaimed “Oh! A baby! How bizarre!”
Should have chosen abstinence(no mating)
LOL
harm - from the best movie ever to feature cubicle dwellers!!!!
No, “Oh”, it wasn’t worth it. You could have lived “where you wanted to live” by renting, much cheaper. And you just admitted you didn’t get any equity, so quit trying to put lipstick on your PIG of a decision.
Got Oh?
$0h when done, and Oh No, the property will not be worth more in 2 years it will be worth a LOT less!
Got Oh?
Why, yes, I do. Don’t look at me like that—I’m not going to share. She’s got her real estate license, an Ivy League econ degree, and a very refined gag reflex for a ethnic Korean.
Get your mind out of the gutter, this is a real estate blog.
Geez, his living costs quadrupled?? How much was that condo?
This is also stated in the article re business partnerships:
“But Nelson said the buyers realize they’re not embarking on a short-term investment.
“We’re recommending they hold it for three, four” years, he said. “Gives the economy a chance to turn. We’re 100 percent sure you get the tax savings, but obviously we can’t promise there will be appreciation.”
3-4 years doesn’t sound like a long term investment to me!
Here in Canada, one of the national banks is currently promoting a mortgage which allows “friends” to split a mortgage for investing purposes, ostensibly so poor J6P’s can jump on the gravy train with their pals and lose money (and friendships) together. Idiots.
LOL
Haha, great idea, I thought the whole point of ownership was to IMPROVE your standard of living, not shack up with a bunch of roommates like an impecunious college student!
Haha, great idea, I thought the whole point of ownership was to IMPROVE your standard of living, not shack up with a bunch of roommates like an impecunious college student! People say they don’t like renting because they have to share walls - I guess they’d rather share bathrooms??
first time i’ve ever seen someone use ‘impecunious’ on a blog! nice!!!
I had to look it up:
impecunious |ˌimpəˈkyoōnēəs| adjective having little or no money : a titled but impecunious family.
impecunious = no dough ( no d’oh )
Impecunious: Im Pecu: Lacks cattle.
–
As they say: Misery loves company. And misery is the best breeder of humor I know.
Losing money together makes for lifelong friends. Afterall I wasn’t alone!
Jas
Oh : should change his last name to Doh.
I think he should change his first name to ‘UH’…
Because if he thinks everyday life is bizzare, wait ’til you couple that with poor planning…
Geez, his first name’s Denny. How perfect is that:
D. Oh!
Book ‘em, Denny Oh…
His freinds were named La Quinta = (next door to Denny’s)
If he bought in 2005. I bet you he’s house is priced for much less if sold today. So much for the real estate expert! Get into the game dude! haha, loser
Here’s a link from a press release done by a developer here in San Diego who markets their condos exactly this way. They call them “mingles.” Buy with a friend and get more buying power! I got one of their mailers earlier this year and had a good laugh over it.
http://www.barrattamerican.com/about/pressrelease.php?id=276
Your mileage may vary as to how long you remain friends after the selling price on the road to real estate riches erodes away under both of you.
Renting never looked so good.
Buy now and get a financial mangling with your mingling at no extra cost!
We have these all over Sacramento though they aren’t marketed as a mingle. They have 2 master BRs either on opposite side of the house or on separate floors. The sales person will urge you “find a friend to go in with if it’s too expensive”.
I almost tossed my provided bottled water into the face of the first rep who said that to me. Only thing that held me back was being afraid she’d melt and I’d have to clean up the mess.
So… let me get this straight: I can either rent my own place, or pay MORE to live like a poor college student while at the same time wrecking friendships and eventually ruining my credit?! Well, golly gee - slap me silly and sign me up! Right!
Bawahahahaha, the low $400,000s for a 1300 sq ft condo in La Mesa! You got to be kiddin’ me!
It’s actually much closer to being the College Area. Right on El Cajon Blvd in an old worn down section of the boulevard. I don’t think the h00kers venture that far north but still…
El cajon blvd is riddled with pimps and prostitutes.I was just over there a few months ago and saw the prostitutes strutting their stuff. The college area has went downhill.My grandfather had a place near college and elcajon blvd so I know the area.I would not buy their today.
pulled over on el cajon in 93, full search of the vehicle….
infraction: failure to stop for a pedestrian in an uncontrolled intersection……
you can keep el cajon blvd all to yourselves.
OK this is just too funny.
On the HGTV, this woman asks advice about buying a foreclosure for her son to fix up and live in while he is in college. A few of us let her it’s a bad idea and she flies off the handle. Turns out she’d already bought it and was just looking for attaboys. According to her it was an up and coming area near the college….. wait for it….. just off El Cajon >; )
I’m guessing the proud momma never visited the area after dark.
No, but sommy probably has.
sonny. I need sleep.
Operation, trust me I knew exactly where it was. That’s why I was laughing so hard.
Gwynster, that up and coming area is Rolando and arizonadude is dead on, the area is riddled with prostitutes and drugs.
I’m renting a 1100 sq. foot condo in San Jose that’s actually no better than an apartment with a one-car garage. The asking price for these are around $450K. Makes me want to throw up!
As of today the 3 month trend is acceleration again for NODs in 93552. It had turned around a bit at tax time, maybe people using their return to get just above water? There are now 3 times as many NODs in the zip as there are sales. Repeat after me, “VICIOUS CYCLE”!
“…‘It’s kind of like a car salesman who doesn’t own a car.’…”
No, it’s kind of like being an idot. His urge to keep up with the Joneses has earned him a surefire spot at WalMart as a lot of folks are fond of saying here, along with a trashed credit profile.
With all the crazy money slushing around he should have bought a quad or something, like most of us realtors do in the beginning so when months are lean you’re not out on the street because you can’t pay your rent or mortgage. What a moron.
In selling real estate –just as in selling illegal drugs– using one’s own product is not always a *good* idea.
I like that one.
It is hilarious to see some of the rookie realtors out there in fancy cars.I guess the car is supposed to make them feel like somebody.
I was always taught that in business you sacrafice at the startup.I see lots of people go under real quick by takeing on too much debt.
a decent car is sort of a necessity in the beginning .. you have to cart well dressed clients all over town in the back seat. Mom’s station wagon aint gonna cut it.
And where does this carting clients around take place? It sure didn’t happen when I was looking for a house here in Tucson. The agent acted like he was doing me a huge favor to take me on just one property cruise.
It used to be pretty common, nowadays Realtors are told to let there clients take their own cars so that the clients have an opportunity to talk amongst themselves also after about the first 2 houses people tend to annoy one another so if you’re looking at 10 homes it can get pretty gritty.
well, i was a good boy.. took good care of clients.. left the Levis at home and got dressed up with a tie and all that… even carried a briefcase… drove a Lincoln… it paid off.
All this stuff is just business necessities, imo. It’s no excuse to blow off big dollars on a fancy car.. but among other stuff, one should lease a car or steal one or something if a young newbie expects to make a good first impression on older wealthier people..
“…one should lease a car or steal one or something if a young newbie expects to make a good first impression on older wealthier people…”
Believe me when I say you’re not making an impression… you’re more liable to piss them off especially if they have worked their knuckles to the bone for years to acquire their wealth. I learned that early, made a habit of driving a nice clean 5 year old mid-luxury auto for a year or two at a time. Only recently has the new Mercerdes and BMW been required to appease clients. Probably because there are more 20 yr olds out buying from 20 yr olds or something.
“Probably because there are more 20 yr olds out buying from 20 yr olds or something.”
heh! you probably hit it right there. Dress and act like those whom you wish to attract.
You mean to tell me that driving a car like ‘Columbo’ just doesn’t cut it!!!
I’ll have to agree that a decent looking vehicle is a must for a Realtor. A Benz or BMW is not necessary, but something middle of the road is. I remember a neighbor interviewing Realtors prior to listing his property, and one showed up in a beat up late 70’s Camaro. It was funny as hell. It just screamed “I’ve never sold a house”.
Whenever I see a salesman in a fancy car, I wonder how hard he’ll be selling me to make his commission to pay for his expensive tastes.
A nice, used car that is well washed and kept up is just fine. Doesn’t need to be mom’s station wagon, but a brand new BMW would send the wrong message to me.
I hear you. I heard growing up that no matter what you hope to ben one day, doctor, lawyer, scientist, teacher, millionaire, Olympian, etc. I thought the advice was to set goals, work your a$$ off, get knocked down, get up, save, scrimp, and finally succeed. But these hot shots are way too cool for that old advice.
Sounds like they are getting their own reward…
Fancy car and 500 dollar a month room.
Just don’t let the customer get into your personal buisness. Remember the customer buying at the peak is weak and you are a wolf in sheperds clothing.
Potential Client: “Wow you must be very successful to drive that new Mercedes.”
Agent: “No, I rent and save a ton of cash”.
Of course, every dealer has to admit he loves his goods.
Let’s hope that he never ends up with a career in AIDS research…..
“‘If they buy a new home, they may have to save a little more for a down payment, which is not a bad thing,’ she said. ‘That way, they have some equity in the home right away.’”
With many zips falling 5-10% monthly that 3% equity is nothing. These terms are just setting up for further foreclosures down the road.
They have some equity in the home right away only because they are supplying the equity…
I was floored by that comment. So even now, even after the subprime implosion, Bear Stearns, Alt-A detioration….
Even now, it is possible to get a no doc subprime loan with just 3-5% down?! I’m waiting until PRIME loans require 20% down and everything else requires 25% interest, anal cavity check, and a firstborn.
I haven’t heard of any zips falling at that rate. Could you provide some details, please?
Mortgage lenders have to take on the sober banker image of an earlier time. And borrowers have got to stop believing that just because they want something, they deserve it. Oh, and they might actually read the fine print.
Well said.
And the following paragraph was just as good:
“An interest-only loan, more than 40 percent of the new paper being written in this county at one point, really means you’re only renting the money, not buying the house. Take one of those loans today and it means you’re really stupid.”
“Indeed, despite the breakup, Oh’s biggest regret about his situation is that they bought in 2005, at the peak of a sizzling housing boom.”
OoooH……..Noooooooo!!
The hardcore FB’s bought in 2005.The mania was out of control. You were seen as a loser if you didn’t own a home.Now the real losers are losing their homes.
My Dad called me a “loser” for not owning a huse in San Francisco in 2005. I’m 37 and rent a 2 bedroom with a view of the Golden Gate Bridge, garden and parking for $1100. The apartment turned condo next to me that is not as nice sold for 1.2 million in 2005 and does not even have a yard or parking. I tried to explain to my Dad that my rent is less than the propety tax would be and he did not get it. In 2005 my sister bought a house for 2 million in SF. I wonder what it will be worth in a few years?
“house” - I can spell!
“My Dad called me a “loser” for not owning a huse in San Francisco in 2005.”
Sorry to hear that. It’s all about bragging, which we all do to some extent. No one wants to be the only one whose kids don’t have a new home. Herd mentality again.
How embarrasing for Dad assuming he young enough to be around in five years.
A friend’s parent that I’d known a long time came over and asked why am I still renting, and why don’t I just buy one of the townhomes in the complex where I live.
Egads. Uh, cuz I’m not stupid enough, maybe? Nice to see I’m also getting some of the “why do you insist on being such a loser and not buying” crap that others on this blog get.
What’s the monthly cost on that $2M house?
OMG I want to rent one like that for $1100 a month! That is about 1:1000 rent vs. buy! If the rent
Yeah, my father was like that. Rent is throwing money out the window. So is buying crap. National sobriety is coming. Hope I have the strength to deal with the disdain of FBs towards the happy-go lucky renters.
No area is immune? Try telling that to any of my neighbors. They all argue that since they have ocean views their 3000 sq ft $1.5M stucco castles in the South Bay of LA will get through the downturn unscathed. I suppose time will tell.
Sounds like a nice place.
But should they really need to sell, they’re going to have to compete with all these other homes on the market. Nobody wants to believe they’re a sucker.
stucco castle, that’s funny.
That is the same story I’ve been hearing from everyone I know in the South Bay.
“Its different here.”
“Unless there is massive job loss, where else are high income LA individuals going to buy?”
“Coastal property is different… the IE is going to tank… but not here”
Makes me sick.
I’m seeing a detachment from psuedo-reality. Some townhomes are 3 lots away from SFR that are much cheaper per sf. and similar design/finishes. Example is 1.8 mm 2400 sq ft townhome 3 on a 7500 sq ft lot vs. 3 houses down the same steat a 4600 sf sfr with yard on a 6000 sf lot for 2.4mm. The psuedo is the mcmansion sfr for 2.4… but it looks cheap compared to the townhouse for 1.8 mm. I talked to the builder (he’s also the realtor on the deal)… he seems detached from reality to me.
i have met people, an architect even, that preferred to buy a condo over a house because the HOA takes care of everything. Of course we got into an argument because i said most of the horrible HOA’s don’t spend the money wisely and there are still assessments to pay that are huge. She didn’t care. Its easier for people to write a check. I personally would get a tiny house over a larger condo. BTW I used to work for a little Engineering firm who did a lot of the plans for the condo conversions in the South Bay. They are still very very busy.
I live in a townhome and must admit for dense areas it just makes sense.
“Unless there is massive job loss, where else are high income LA individuals going to buy?”
They’re going to keep buying right there, but at lower prices. Just like in the first half of the 1990s.
We are having job loses in high paying high tech. When ever prices increase as they had, jobs are exported elsewhere in order to compete globaly. This was true back in the 80-early 90s. That is why we lost all of our manufacturing to overseas plants. Today nothing has changed except high costing R&D is the target of budget cuts. Add to that we have been seeing massive M&A from HP and Oracle. The M&A like Oracle acquring Hyperion Peoplesoft and dozen others is tech centered and not labor acquition. The same is true with Cisco which buys the technology and laysoff its new workers.
All together only 250K out of 850K of jobs are High Tech leaving the majority as average paying jobs. The HT jobs over the past 10 years has been flat and migrating out while retail and goverment has been growing.
Government is no longer growing, and retail = low wages.
Agreed. These are rarely new jobs. Especially now that revenues are falling, they aren’t going to add much to the payrolls because they know what the backlash will look like.
I work with all types of government, Fed, states, counties other universities, and small munis. You’ll hear that government added 600 jobs but what is happening is that 900 are retiring and 600 of those openings are being filled.
Case in point, I had a EPA program (flow through to a small muni) get put on hold for 9 months because the GMO retired. They couldn’t assign another GMO because the staff was already stretched too thin. So we waited.
It’s really not hitting some of them out here in S Redondo. 1.8 mm for a new townhome (2400 sq ft. lousy peak view) … thats $725 / sq ft! You can get a 3000 sq ft SFR with a better (albeit further away) view in Hermosa for that. I wonder if retirees won’t know to look at all 3 towns and fall for the ploy.
LOL yea right, they obviously didn’t live in the South Bay during the last downturn, Man oh man the deals…
During the last downturn could you get anything 1-4 in 90277 to cashflow at 10-12 x rents?
I don’t remember what the rents were in that area at that time… However, I do remember Palos Verdes had condo’s going for 99k, Torrance was pretty reasonable 100k to 400k, Manhhattan Beach and area’s like that you had to have a little square footage and be able to spit in the ocean to get over a million… 2 blocks away from the sea all bets were off 500 to 700k
wow that is a drop. Manhattan walk street sfr for around a million… man they want 5-6 mm for those now. I tried to council my buddy not to buy east of prospect in HB but he just got his counter accepted. 2000 sf sfr on postage stamp lot for 740k. He plans on holding it for as long as it takes to build his 3600 sf sfr on his existing lot east of pch in HB…. I hope he does not get too upside down. Hes trying to avoid paying rent and I did what I could… I’d rather stay friends then push my points on him any harder.
Poor kool aid drinker and knife catcher. You did all you could. If he comes to you begging for money, say you don’t have any extra money either.
1996… Palos Verdes slipped the furthest, almost made an offer on a 3/2 with a 1/1 house in the huge backyard 3 blocks from Lunada Bay on Chelsea. Asking was $460K and the owners seemed pretty motivated. Were looking all over the SoBay and remember seeing 10-12 original/smaller houses in Manhattan Beach tree section for right around $475K. Knock-down value on the Manhattan strand was $1M. My Redondo house was worth $330K at the time. This market is holding up so far, and many think will be immune to the downturn that will only affect everyone else. How can anyone even consider that a remote possibility? I see at the very least a return to ‘02 prices, a 30-40% trim.
I have to agree with Income. By the way, as I have stated here before, L.A. and OC will soon become akin to Mexico City. A few highly paid professionals and business owners and the rest lower working class and thieves. Whne the next downturn truly hits, say the next 24 to 36 months, the implicit agreement between poor people and rich people will quickly dissolve. An example would be the horrendous home invasion which took place last week in CT. Those were just scumbags, but what happens if we have a 10% unemployment rate coupled with most jobs being at or below poverty rate. Then poor people will be less likely to give respect to “rich” people they see driving by in Mercedes and BMW’s. Then you will see lots of home invasions, car jackings, etc. Additionally with all of the illegals out of work it could be a liability to be a gringo in L.A…
Chrisusc
I tend to agree with you. Economic and political stability go hand in hand. But you burn down too many people–and we’re taking an army of FBs in California–and you have a real recipe for violence. When the foreclosures really snowball, and we’re just getting started, you gotta figure some of these folks are going to go postal.
I suspect a lot of the tensions between racial and economic groups have been eased by an ocean of easy money–and that tide is going out.
Good points.
It’s already starting to happen Chrisusc… The NBA palyer this weekend is a prime example. Another issue that’s going to compound the problem is that states and local communities are starting to take the immigration issue into their own hands. Example: A guy somewhere here locally picked up some day laborers and drove them to the border and dropped them off, Arizona just passed a bill penalizing business for hiring illegals or getting caught with any on staff, New Jersey is requesting permission for their police force to work with ICE. They had a good sized demonstration up there in Jersey this weekend didn’t look too friendly. There was a not so complimentary article in the Post today or yesterday if I’m not mistaken about Hillary Clinton and I believe India. Once the unemployment numbers start to escalate there’s going to be a big pressure buildup and it’s really going to get crazy. Being in a illegal haven like here in Los Angeles could get real tricky no matter what side of the economic fence you are on.
“A guy somewhere here locally picked up some day laborers and drove them to the border and dropped them off”
now that’s funny
Wait a minute…an ocean view for $1.5?? Trust me, there is no way. Mayber a 1300 sq ft, with NO view, mountains or otherwise.
actually he’s not off if you consider the ocean view is a roof deck and the house is in the golden triangle or the tree section etc. My buddy just looked at a 3000 sf sfr in HB with an awesome roofdeck view of blue water for 1.8 mm…. totally done up zen style lots of glass etc. This is why I think the 1.8 mm townhome in redondo is such a joke. I mean they are both overpriced but the townhouse cant compare to the other place.
There have been so many idiots who claimed SF Bay Area is too afluent and too wealthy and will support the insane prices for many years down the road.
Stupid CAR statements many were brainwashed into believeing.
while all areas will be hit hard, i think the city of SF will be least affected because prices didn’t bubble up all that far. In 2000 a $750K property in the Avenues might have risen to $1.1 mill or so by 2006 .. but didnt have the huge appreciation of other bay areas where 2X or 3X or more was common in the same time frame.
As I recall back from the RE street rags in 1997, a high tower condo measuring 2000 sq ft overlooking SF moma was around 200K. This was pretty typical price per sq ft. The same condo today would go over $1M. So to me over 10 years prices have gone 5-6x in SF city. Did we have that much general or wage inflation to cover the appreciation. Since 1997 SF has put out more condos, TH and SFR than I can recall since the 80s. Just look at all the high tower condos near the Ball Park not to mention all over the city form one end to the other.
There a few jobs that support that kind of prices. And there seems they are adding more TH/Condos even today.
fair enough .. i was speaking of existing properties and established neighborhoods while new construction is another matter.
However, i gotta estimate that at least 95% of the City is not at all new. Condos? afaik, mostly conversions/rezoning of older properties. And there is a lottery for the limited number of conversion permits.
Here is the proof, SF will suffer an equal downturn.
http://www.karevoll.com/AA1997BAY06.shtm
Resale houses No Sold No Sold Pct. Med($K) Med($K) Pct.
May-96 May-97 Chng. May-96 May-97 Chng.
Alameda 1,037 1,250 20.5 $200 $219 9.5
Contra Costa 959 1,094 14.1 $220 $225 2.3
Marin 286 356 24.5 $352 $357 1.4
Napa 95 110 15.8 $167 $170 1.8
San Francisco 370 388 4.9 $270 $289 7
San Mateo 654 708 8.3 $294 $324 10.2
Santa Clara 1,625 1,525 -6.2 $270 $302 11.9
Solano 399 369 -7.5 $139 $149 7.2
Sonoma 455 533 17.1 $196 $210 7.1
Bay Area 5,880 6,333 7.7 $240 $258 7.5
This is correct - comparing to 2000 prices is misleading because that was at the height of the dot com mania, which is now history. 1996-1997 is a better baseline for extrapolation if we want to see where prices may be headed.
BTW, rents have fallen dramatically in SF since 2000, so if you look at the increase in price to rent ratio since then, it’s much worse than simply looking at the change in sale prices. Absent the real estate bubble, prices should have actually fallen a lot in the last few years.
I agree 100% with your baseline for extrapolation.
I used the same reasoning when entering the stock market in late 2002. Needless to say my mark for the S&P was a mear 20 points off, but I did call the bottom using the same reasoning. We can use the same for RE as re-entry point.
hard to believe landlords who have suffered through over 25 years of mandated, unnaturally low rents are gonna cut rents now..
Another illuminating factor for SF is the population drop since 2000 (historic figures from sfgov.org, 2006 estimate from census.gov):
1996 population: 755,315
1997 population: 777,906
2000 population: 800,606
2006 population: 744,041
hard to believe landlords who have suffered through over 25 years of mandated, unnaturally low rents are gonna cut rents now..
Market rents have absolutely dropped. I moved here in 2005, easily found a 2-bedroom in the Inner Sunset for $1450/month (fairly good deal, but still only 2 days worth of hunting via Craigslist required). My co-workers told me that it was almost impossible to get a 2-br at any price in 2000, and people were paying $3k or more. That’s what a sub-1% vacancy rate will do to you.
Sure, this doesn’t change anything for someone who got into a rent-controlled place 20 years ago and is paying $600/month, but the decision to buy TODAY should certainly take into account whether you could recoup your costs by renting it out, and that is even less possible now than it was for a buyer in 2000, despite the cheaper prices then.
i dunno what those population figures illuminate except that the city is, as it has been since the 50’s, still 49 square miles in area and remains filled to maximum capacity.
jbunniii
i kinda think we are both correct .. we are just looking at two different entities in the city.
One is the old SF i know well.. the other is the New Bubblicious SF born of the very recent past. And i think these are actually two different sets of properties (with some overlap).
I dunno if i explained it clearly.. but there is certainly a huge area of old properties with longterm established owners and tenants.. and then there’s the other entity of relatively fewer properties affected by the bubble.
i dont wanna argue the point.. As far as SF goes, i can take it or leave it. Time will tell how hard the city gets hit.
I dunno if i explained it clearly.. but there is certainly a huge area of old properties with longterm established owners and tenants.. and then there’s the other entity of relatively fewer properties affected by the bubble.
I hear you, and I agree. I’m sure 80% of the property in this city never changed hands at all between 1996 and now. But market prices are set by the properties that DO sell, and my guess is that those market prices are headed back down for the reasons I cited.
If I’m wrong, then I guess the city really has fundamentally changed into a city for the rich, in only 10 years. I think that may be true for some neighborhoods like the Mission, but a lot of ‘hoods like the Sunset and Richmond haven’t changed much at all, other than the house prices, so I just don’t see them sticking where they are.
I guess the good thing either way is that we’ll know the answer in a year or two, unlike most of the other mysteries of life!
“I just don’t see them sticking where they are.”
agreed.. all SF properties will be headed downward.. if not due to the bubble itself then due to it’s economic fallout, from which nothing/nowhere will prove to be immune.
“If I’m wrong, then I guess the city really has fundamentally changed into a city for the rich, in only 10 years.”
I would say it hasnt fundementally changed, but we do have more inventory. Its the same old rich which has been around. And like rents which fell so will price of homes.
I had a friend who bought a block off the water in Sunset for 250K in 97′. He sold just recently for around 750k. That’s a hell of a windfall for sitting on a house for 10 yrs. I think SF will fall like any other area.
Forbes magazine doesn’t agree with you. SF is slated amongst its top 10 to fall.
BTW - what I’m seeing in the South Bay is sale pending signs that get removed eventually, because obviously the new buyers couldn’t qualify for their loan. House back on the market.
..or the appraisal came in too low or they couldn’t sell their house
The townhouse complex I rent in has 8 for sales and 1 for rent out of 80 units(94539 zip).
Both rental and sales price are out of whack.
SouthBay and all counties has been very hot with ARM loans…
http://www.businessweek.com/common_ssi/map_of_misery.htm
All will suffer the most… the predictions on this board are coming true each passing month.
It has become less interesting, for we’re just seeing what was already predicted.
However, take a look at the map of misery. Notice something? Its not the highest fraction areas that are falling the hardest; its the ones where construction was a high fraction of the economy. (Ok, San Diego is both…)
Texas, Florida, and other areas are very hard hit. But not yet the grand daddy of them all: California.
I’m getting scared. When my home state takes front center, none of the rest of the economy will be able to ignore it. There is no way things will hold together for another year. But when will it fall apart?
Got popcorn?
Neil
Six months ago I would have guessed that California would start to fall pretty hard by summer 2008, but at the speed things have been going (witness the complete meltdown of subprime over the past 4 months, and it’s now spreading to prime) I’m starting to think it will happen faster. Things might be pretty dismal in much of California by the end of this year.
I think the wild card in this game is the ability of the homeowner to resist panic. There’s a sentiment in the SoBay that many of the Manhattan, Hermosa, Redondo are so rich, they’ll be able to ignore the fray by digging in their heels and not selling, keeping inventory low. I don’t think this strategy is remotely possible. Can any area stay even while surrounding areas fall? When this crash gets into full swing, whatever collusion these people think they may have will be tempered with reality… little or no savings outside of the equity in their houses… then, it’s Econ 101.
There’s a sentiment in the SoBay that many of the Manhattan, Hermosa, Redondo are so rich, they’ll be able to ignore the fray by digging in their heels and not selling, keeping inventory low.
They may not panic-sell, but obviously sometimes people have to move for whatever reason, and tenacity or not, when they do decide to sell, the market will set the price whether they like it or not. Then once the comps have clearly rendered some of these “rich” people as badly underwater, the rational thing for them to do is walk away from the mortgage, whether or not they are financially forced to do so. You don’t get rich by taking a loss that you can avoid.
Actually, SF and San Jose bubbled FIRST so the later 2003-2006 national gains didn’t seem as dramatic. The dot com bubble drove real estate prices from Marin to Monterey through the roof, and even rents went super wacky in 1999-2000. Rents fell to earth, hard, by 2002, and then the interest only fad hit buyers in 2003.
What you’re forgetting is the the dotcom bubble pushed up Bay Area RE prices long before the rest of the US. The dotcom bubble was replaced with a credit bubble, serving to continue the propping up of prices.
Will they fall as hard as most places? Probably not. Supply constraints will help. However, every move-up buyer is going to have a hard time moving up, since selling their “starter” home is going to be harder and harder. Prices will be flat (nominally) at best in the Bay Area for the next several of years, IMHO.
Now is a good time to be renting for ~1/3 the cost of buying.
“Will they fall as hard as most places?”
Yes, the second leg (2nd bubble) is falling off due to all the current reasons we read about (subprime) and more (arm reset).
Then the over due first leg (dot-com bubble) buyers will fall because we dont have any new dot-com millionairs who will by pay for their overpriced home and continue with the “spending free money” mentality.
By late 2000 homes have climbed to $500K from 200-300K 1997 prices, but interest rates declined and blind belief “the tech equity” bubble will return in a V shape recovery. Many still overpaid… That didnt happen. We arent seeing this new ‘reinvented” tech boom which many believed will happen once again and create new IPO millionairs. Far from it we are seeing a deep decline in tech offerings.
The bubble in San Fran is as big or bigger than anywhere! In my humble neighborhood, (Bernal Heights, in the southeast of the city) a 2/2 or3/2 SFH went for no more than 300,000 in the mid 90’s. Now, you can’t even buy a tear down for less than 700,000.
I’ve heard it all: foreigners will always buy, there’s lots of rich people in SF, they’re not making any more land (but there a sh*tload of building going on)…
We are two school teachers with 2 kids, in our early 40’s, and still rent. Most school teachers and firefighters and cops and nurses, etc. cannot live in SF - they commute to the East Bay, which is getting whomped right now.
So we are saving our money, and hope to buy in SF in 4 or 5 years.
“‘I’ve probably wasted $90,000 over the past three years and have nothing to show for it,’ he said. ‘I lost my house, have to relocate my family and ruined my credit.”
He will have something to show for it….in 2008 the IRS will be sending him a 1099 for $150,000 in phantom income, due to debt relief.
No one looks at the downside risks when they buy a house. PITI shows no pitY, when you bite off more than you can chew.
I was thinking today of how little known that provision of the tax code is at the moment - and how that is going to drastically change over the next year or two.
Also - if he gave up paying when it reached $5k a month - how the hell is he going to come up with circa $30k come tax time…..
Rinse, repeat x 1 million FBs.
Sooo.. Once a 1099 is issued, and the debt relief is considered income, the original creditors cease pursuit of the money, since they wrote off the debt? How does this work? Do you have to pay the tax and the debt?
If you are insolvent (liabilities higher than assets), you can argue that you don’t have to claim the income (but you must document). The foreclosure itself will still be on your credit unless you file BK (due to other debts as well), then the bk will be on your credit.
Do you have to pay the tax and the debt?
No, it is treated as income only when the lender writes off the bad loan. In that case you’re off the hook for the loan but on the hook for the tax bill. (IRS debt, incidentally, is generally NOT wiped out even by bankruptcy.) The debt write-off will also appear as a big negative in your credit report.
Wow I wonder how all those FB’s who defaulted are going to afford the tax. Does the IRS allow you to pay monthly(with interest of course) or could they take a loan to pay the taxes? What if they refuse to pay? Jail time?
a friend of mine ran a decent size carpet cleaning shop in the Orange County area about 10 years back. He said he tried to weed out those with IRS problems and not hire them, but what would happen, is they would start working, and all seemed good for a while, then one day a garnish demand would show up, and the employee would never be seen again, I guess it took a couple of months back then to catch up, so they had to get good at finding new work, or work under the table…
I fully expect that part of the tax code to be repealed in short order.
Either as part of the “Saving the American Dream” Act of 2008
or perhaps the “Homeowner Relief” Act of 2009
or maybe the “Oh S**t!, Fire up the printing presses. We need to get some cash into the economy before they burn down the cities” Act of 2010.
I have an interesting thought? people who bought in the last 2 years without down payment, will sell in the next few years and ultimately have to pay the equivalent of the downpayment thru IRS if they shortsale or what ever the situation, Downpayment in reverse.
Ultimately everyone will have to pay for the house upfront or later.
Interesting point.
My favorite tax story is about the retiree from California who goes to Nevada to avoid income tax, then gets banged on the property taxes.
…just can’t seem to escape that ole tax collector…unless you’re a fund manager.
or maybe flee to a country with no extradition? good riddance. if the stupid sheeple leave, their slac-jawed spawn do too and we wipe out many problems at once.
slackjawed
I’ve been thinking that there are going to be a lot of FBs willing to fork over the 10% penalty on early disbursement of 401 (K) funds to try to stay liquid. But it also occurs to me that if the IRS or banks are finding it difficult to collect money owed them, one can envision an initiative to get legislation to waive the 10% penalty “in certain instances.”
Yup. That’ll definitely be an event that people will want to be the first to panic and get out of the domestic market for. I doubt many of those people will have a while lot of their money in overseas funds.
I bet a lot of people will foolishly tap into the 401(k) to try to keep the house, and will lose it to foreclosure only after exhausting those funds. That falls under the category of throwing really good money after bad - never a wise thing.
OT: Posted in Bits and Buckets, but this is a popular one on this board and much anticipated.
$510M Briny Breezes deal cancelled
http://www.bizjournals.com/southflorida/stories/2007/07/30/daily6.html
Thanks, edward, I hadn’t heard about it yet. I had a feeling that would happen. I remember txchick and I discussing how, if she’d been one of the residents, she would have sold off her portion of the deal for a discount to some cash flow vulture.
Another day, another set of outstanding news from California! It feels like every day is Christmas nowadays.
“‘If they buy a new home, they may have to save a little more for a down payment, which is not a bad thing,’ she said. ‘That way, they have some equity in the home right away.’”
Or I could just leave it in the bank at 5% with no risk of losing my equity while I rent.
They also get to lose that money in one month in a volatile market like now…so dumb to buy now.
Why do Realwhores buy RE? It is so stupid, invest in something that has NOTHING to do with what you do, so if you are out a job your investments are not killed also. Kinda like a dealer doing his own product, bad business!
agreed - same thing for couples who work at the same company…talk about not diversifying risk…
Almost all dealers also use their own products. Drug dealers usually also get high.
Don’t miss the big picture in this boom and bust situation. It isn’t poor old sucker Joe America who is at risk. He might lose his crappy, over valued sh*tbox in foreclosure but the newly rich (they think) will get hit harder. A lot of them gambled on the future being as hot as it was in the past 10 years and invested in risky paper - like hedge funds, junk bonds, etc. The elephant or gorilla (take your pick) in the room is the hedge funds.
I took notice of what Easy Al said some time ago about hedge funds. Easy Al always throws in a line which is hardly noticed so that if something bad happens and people point fingers at his incredibly reckless actions, he can protect his wrinkled, flabby a*s and say, “Look back to xxx date. I warned then this could happen.” Well he warned about a serious situation if the hedge funds start going belly up. A few have already.
At the moment, I’d lay odds the Wall Street Financial Gangsters (of which Paulson is one of the Godfathers) are struggling to contain any possible hedge funds melting down.
Here’s a scary piece of information I picked up off Brokers Outpost. Many hedge funds are leveraged 10 to 1!! Jeeze…10 to 1.That’s what you call margin with a capital M. If they hit trouble this could be a really serious financial meltdown ther likes of which we haven’t see because these risky investments were not around. We could see $1 million houses dropping to $350,000 in no time flat as everyone bails out trying to save as much of (what’s left) of their hedge fund investments, the returns of which have allowed them to indulge their consumer fantasies for the last 10 years +.
“…to save as much of (what’s left) of their hedge fund investments, the returns of which have allowed them to indulge their consumer fantasies for the last 10 years +.”
I have been reading more and more that many hedge funds are “freezing” redemptions (and the fine print states that they can do so). So… I guess the sophisticated hedge fund investors are getting a big surprise these days, as they find out that they can’t withdraw their money. Just more of people not reading the fine print. The class actions are also heating up.
Yeah, and when you put them in front of a jury, more bankruptcies and unpaid judgments are guaranteed even though “return” is earned by placing money “at risk.” Nobody wants to have the risk part hit them. Everybody wants a free ride, guaranteed returns and no downside. Then they discover:
‘What if you lose your job? What if you get married? It sounds bizarre, but stuff happens.’
At least if the hedgies start losing money we won’t have to listen to CNBC talking about how high their taxes should be every 20 minutes.
“We could see $1 million houses dropping to $350,000 in no time flat”
From your lips to God’s ears, Mike. Speaking of leverage, could someone please explain to me why banks are allowed to indulge in this fantasy called “fractional reserve lending” and I can’t? I think I should be able to. After all, I am a citizen and I should have more rights than a corporation. In fact, I had $5,000 in an account and one of my relatives needed a loan for $35,000. I said no problem and contacted my bank and told them I wanted to create a loan for $35,000 based on 7 times the $5,000 I had in the bank. I told them I would be depositing the additional $30,000 out of thin air in the form of a nice note I had made up. They frowned on this. (This was a joke, but this is how ridiculous it seems to me)
The concept of “fractional reserve lending” is insane, IMHO. How the hell can anyone lend money they don’t have? But banks do it all the time. Really, so what if they have a ton of foreclosures on the books? Provided the foreclosures are equal to or less than the fractional reserve (which is made up out of thin air) and don’t eat into the actual long green on hand, what’s the dif? They don’t have to get all huffy about it. After all, they still get something for their thin air, a foreclosed place they can sell for pennies, which is still better than nothing, which is what they lent out in the first place.
Anyway, forget about fractional reserve lending. Looks like most FBs did themselves in with fractional reserve spending.
Tesify, brotha Palmetto. You have to remember that the entire economy, but esp. the consumer side, is driven by debt. Banks wanted in on this action. Who wouldn’t, unless you just don’t like debt. The only way the banks could loan the money they DIDN’T HAVE TO BEGIN WITH is to come up with some scheme like this. Now, if banks actually had to have the money on hand, even if they didn’t have to physically move it, just have it, that would be a much different story. Also, rmember that in our country, money is really created out of thin air and is already debt, even when printed.
OCDan, I think this leverage and fractional reserve is at the heart of the problem. I mean, really, how can you take it seriously? No wonder there’s been reckless lending, reckless borrowing, etc. When you really look at it, who care? It isn’t real.
The people I do have some sympathy for, believe it or not, are those who put real dollars into hedge funds. You know, the wealthy but productive types, like David Geffen, etc., those who really earned their money and wanted to invest it. If it was just a matter of risk that turned against them, it would be one thing. But I think frauds were committed on them. Many wealthy people don’t mind taking a risk, as long as it is calculated and they know the facts. These people were given bogus ratings, etc. The real risks were not revealed. There’s a big difference between investments that are risks are known and investments where the risks are misrepresented. There are many wealthy people who worked hard and actually produced something and that’s how they came by their money. It sucks that their hard earned money has gone into the pockets of fraud hedge fund managers.
Correction. Make that Hedge FRAUD Managers.
I’ve a thought. Do you think that the rise of easy credit has been a factor why inflation is low ?
If you didn’t have credit, you’d be looking for a pay rise.
That works in the short term. But later you have no more credit available, things are EVEN more expensive and you have high interest payments to make. Now you are really looking for a raise. Of course employers today are pointing to cheap offshore labor saying forget it.
If you didn’t have credit, you’d be looking for a pay rise.
Absolutely - many people have been “tapping into their equity” (euphemism for increasing the size of their mortgage) in order to supplement their incomes. Now their debts are far huger than before, and there’s no more steam in that engine. That must feel a lot like taking a huge pay CUT.
If you didn’t have credit, you’d be looking for a pay rise.
——————-
OR…if people didn’t have such EZ access to credit, prices would be lower and we wouldn’t need a raise (at least not as much as with all the debt haunting the globe).
How can the banks do this? Easy.
Because the Feds have no interest in stopping them. Stopping them would result in a smaller federal government and less bureaucratic waste as the years pass. And what self-respecting leech working within the D.C. beltway wants that?
Furthermore, why should the banks change? They have no incentive to clean up their acts. In fact, they have a DISincentive to clean up their acts: doing so costs enormous sums and requires admittance of fraud. Why bother with any of that? They know that if things get bad enough, they can ask the gun-toting government to rape the taxpayers.
Those in the biz learned this lesson 20 years ago during the S&L bailout. Rather than let market forces (and the justice system) drive the corrupt out of business, the government threw money at them.
So, in summary - same shit, different era. And so it goes.
In fact, I had $5,000 in an account and one of my relatives needed a loan for $35,000. I said no problem and contacted my bank and told them I wanted to create a loan for $35,000 based on 7 times the $5,000 I had in the bank.
Palmetto, it doesn’t work that way. When a bank does “fractional reserve lending” they still account for all the money. At any one time, the money in deposits is no more than the money owed to him.
If you want, you can take the $5k and loan it to your relative. If he wanted to he could deposit it in your “bank” and you could loan it back to him again. You guys could do that for as long as you like. That’s essentially what banks do except the fed enforces that they keep 10% every iteration. You probably wouldn’t even have to do that.
Those Bear Stearns hedge funds were similarly leveraged and that’s why they lost virtually all of their client’s equity. Imagine your losses if you were allowed 10 x margin on your Ameritrade account and got carried away on some trades.
I agree, Mike.
I have no sorrow for idiots who “invest” in hedge funds, commodities and junk bonds. All are extremely dangerous gambling vehicles.
Fortunately, few people will be affected by any continued collapse of hedge funds. Oftentimes, the entry fee is $100,000 on up and very few people have that kind of money laying around. And among those that do have a $100K to play with, few are so dumb as to “invest” their money in something that will most certainly erase any money “invested”.
The demise of hedge funds is an interesting topic, but the supposed effects (real or imaginary) are way overblown. They are indicative of not much on a broad scale.
Eudemon,
Some points to consider:
- The primary clients of hedge funds are pensions & endowments
- Outstanding derivatives total somewhere between $500T & $750T
- The GDP of the world only totals around $65T
- LTCM posed a “systemic risk” at a fraction of current exposure
Don’t kid yourself — this *is* a big deal.
While your points are well reasoned the effects will still be neglible in my opinion. A very small percentage of the population will be affected directly by the rampant hedge fund gambling on Wall Street.
Your point #1 above would seem to speak otherwise. It is my contention, though, that the taxpayers will bail out the pension funds if necessary. A weapons-toting federal government will enforce it. Fortunately for all of us, few people nowadays have pensions awaiting them. Good riddance.
Taxes will go up - I agree - but if you’re a smart cookie, you’ve expected that and have already positioned yourself ahead of that ongoing battle.
And if you’re a dumb cookie who believes that his or her employer (private sector, government) knows how to look after your best interests…and actually is interested in doing so…then it’s caveat emptor. Who says they should anyway?
I certainly don’t.
Again, MediCare is the horror that awaits us. This hedge fund stuff is a drop in the proverbial bucket.
Similiar story here in Polk County, Florida…
Buddy of mine bought a 3/2 sh!tbox for 80K back in 2000. The house was in a good location for our band to practice in and he was still a bachelor at the time…he was going to fix and flip it but never got around to it..
Anyhow, in 2004/05 he decided to sell the place to his fiancee’s Realtor ™ trophy blonde bombshell friend. We weren’t playing together as a band any longer and he didn’t have the time to fix-n-flip said band party house. So, Blondie The Realtor fixed the place up with a new roof and some cheap paint…
Two months later, she sold the place to some twentysomething unmarried couple for 145K. On a No Money Down ARM. The Man Of The House ( age: 25 ) was first signer on the mortgage; the Girly Girl ( age: 23 ) was second signer.
I couldn’t believe that the banks would even consider putting a puppy love, unmarried couple into a home on a no money down ARM….but somehow this got financed.
However, Love doesn’t last forever.
Last week I rode by the place and it was abandoned. Checked the County Records, and sure enough, the bank had taken the place back through foreclosure ( Ameriquest ).
The place, as it sits now, is probably worth no more than the 80K that my bandmate paid for it.
These stories are everywhere down here in Central Florida.
I can remember when I was 25 ( in the late 80’s )…if you tried to buy a home they looked up your rearend with a microscope and when you went to the bank for the loan you made sure you washed behind your ears and wore clean underwear…( imagine that…borrowing from a bank that actually secured an interest )…and if you were an unmarried couple you wouldn’t even get a chance to sit across the table from a loan officer.
Just wow. What in the hell were the moneymen thinking when they shoehorned unmarried twentysomethings into homes on adjustable no money down mortgages ?????
“if you tried to buy a home they looked up your rearend with a microscope”
Testify, brothah! I’ve had a few such proctology exams in the course of buying property over the years. Right now, I’m LMAO, because it just hit me the gall of these banks. They’re lending money they make up out of thin air. And then they have the nerve to charge interest on the thin air. And the borrowers pay back with actual dollars they’ve earned. What a frakkin’ racket.
You guys have to remember this whole scam was created to keep the economy mocing upwards like trees growing to the sky. (Tinfoil Hat Alert) here: Keep in mind that if you have people in debt up to their eyeballs, it keeps the sheeple occupied with payments and how much a month, rather than really questioning why and what they are doing in life, with the kids, where they life, WHAT THE FRIGGIN GUBMIN IS DOING, etc. It also allows the banksters (thanks, Jas) to keep getting their fix (interest payments). For the savers and the rest of us non uber-rich, there is GS’ WAR ON SAVERS. Keep in mind these WS crackheads are not going to give in easy.
I would also like to comment on a few items from other thread this weekend. I think it was Bill in Phoenix, but maybe Carolina, can’t remember, who got on Chris Rose for his negativity. Well, keep in mind that only 2 things do keep this economy going. Debt and cheap energy, i.e. oil. Why do you think I am so doom and gloom? Sure, when the oil runs down or out, we’ll have something else. Not so sure I believe that, esp. if it requires the goobermint and a large enough scale to accomodate 200-300 million people. When the SHTF, look out. I am also a doomer because the writing is on the wall. Besides too much debt and oil eventually peaking, if not already, you can’t keep up the ponzi scheme know as ouor economy. Infinite growth is impossible, esp. when the uber rich continue to soak all of us. Maybe, just maybe if everyone in the world worked together and sang Kumbaya, if might happen, maybe, possibly, okay doubtful.
Okay, my rant is off. I had to get that out. Now it is time to head over to the Implode-o-meter. I heard it is up to 105. Ouch, this is gonna hurt.
Got cash?
Sure, when the oil runs down or out, we’ll have something else. Not so sure I believe that, esp. if it requires the goobermint and a large enough scale to accomodate 200-300 million people.
I used to think about this sometimes when I lived in OC. What the heck happens to that county (and Southern California in general) if gas prices go to $10/gallon? The way the place was laid out to accommodate the automobile, it seems almost impossible to retrofit it with an efficient public transit system. Seems like SF and parts of the Bay Area would be hurting, but at least functional, because of the transit infrastructure - but SoCal would be another story altogether.
Now it is time to head over to the Implode-o-meter
PS. I encourage anyone who hasn’t been to the implode-o-meter site lately to head over in a hurry - they’re trying to raise funds for a legal defense against a frivolous lawsuit by one of the f’d lenders. I just sent them $10 by PayPal. Also while I’m thinking about it, I’m going to send Ben another $10 - I certainly don’t want to take this blog for granted!
OC Dan, I respectively disagree. Here’s why:
(1) Oil is becoming less and less a part of our economy, and will continue to do so as we become increasingly efficent. Of course, it’d be best if we got off oil as quick as possible to the extent possible. Unfortunately, our own environmentalist whack jobs (hippies) are stuck in the 1970s when it comes to energy generation and use. France has achieved 85% self sufficiency, yet the country has no oil reserves to speak of.
Our leftist groups are at best malfeasant, imo. Their efforts have ensured that there’s no significant effort under way anywhere in this country to produce energy of any sort in the future. Ethanol is a proven joke, solar energy won’t be cost effective for consumers for another 20 years at minimum, and the oft-praised nickel-based car batteries are inefficient AND horrible for the environment (funny how the deleterious effects of such batteries are conveniently ignored, no?). Hydrogen batteries are 30 years away - I personally know several engineers in that industry…few expect hydrogen batteries to appear in our lifetimes. We don’t build new oil refineries or nuclear power plants.
Meanwhile, Russia is drilling oil like mad 5 miles off our shore in the Arctic Circle while we wring our hands and blather on about how the U.S.A. is guilty of every environmental faux pas in the world.
(2) I’m one of those people who think government debt is not a big deal. I know, I know. I’m sacrireligous. (I’m known for that IRL). Have you seen our debt levels lately? Probably not, as the media NEVER covers it unless it is skyrocketing. We’ve cut it by more than half in just three years, despite our military operations.
Aside from the above, by far the biggest problem on our fiscal horizon is MediCare. A certain disaster which no one in government seems to give a shit about.
Maybe there’ll be a plague originating from outer space that effectively wipes out 80 percent of the population over age Only then would the MediCare problem be solved.
Well, now I gotta disagree with you:
(1) Oil is becoming less and less a part of our economy, and will continue to do so as we become increasingly efficent.
Think again. The petroleum industry itself is more efficient, but we’re as dependent as ever upon it. There’s not a room in your house or office that isn’t overrun with products developed from petroleum.
(2) Have you seen our debt levels lately? … We’ve cut it by more than half in just three years, despite our military operations.
Yeah, right! Read and weep…
WASHINGTON (Thomson Financial) - The US Treasury Department asked Congress today to raise the US debt ceiling, anticipating that the current cap on federal debt will be reached this fall.
In a letter to Senate Majority Leader Harry Reid of Nevada, Treasury Secretary Henry Paulson said the current ceiling of 8.965 trln usd would be reached in early October, and that Congress should raise the ceiling ‘as soon as possible.’
Sorry, I’m not buying. Our consumption of oil is drastically less than it was 30 years ago as a percentage of GNP. And oil has less and less influence on our overall economy with every passing year. Again, I’m all in favor of getting off oil ASAP.
And, our deficit is indeed dropping - and fast. Look it up.
“And, our deficit is indeed dropping - and fast. Look it up.”
OK, I looked it up:
http://www.brillig.com/debt_clock/
You’re wrong. Dead wrong. Next observation?
No, I’m not wrong, Jim D. Our federal deficit is down 45% year-over-year from May 2006 to May 2007. The tax haul was $70 BILLION higher in April 2007 than it was in April 2006.
Money servicing debt is now less than 1% of GNP. That’s lower than it was throughout ALL of the Clinton era.
Heck, I remember going to the credit union in ‘99 to get a loan for my second car (my first car was my old man’s car - he sold it to me on my 18th birthday - I think he ripped me off on the interest rate). I got all dressed up in a suit and tie, shaved, brought paystubs and W2 froms, filled out the paperwork with the car and the price I expected to pay, and then sat there nervously for 30 minutes while the paperwork was reviewed. Finally the CU president came out, talked with me for 15 minutes, and shook my hand.
Little did I realize how insignificant that loan was to the CU, and they were probably laughing at the guy who had records of his first car stretching back 8 years. I imagine it is easier to get a mortgage for 20 times what I paid for that car than it was to get that car loan.
I’ve been there too, back in the 80’s, where loan money was not cheap - my first mortgage was 12.5%, 1 yr ARM, alot cheaper than the 15% fixed 30 yr mortgages. I just barely qualified, and was terrified of the interest rate increasing. Of course, interest rates declined from there, and I got lucky.
Quite an interesting discussion this weekend on the old 20% down rule on residential houses. Hope it comes back, and all loan applicants get the rear end inspection. It would shut down all the spec-u-vesting instantly.
hahaha man that is one of the funniest posts i’ve read in a while. ‘a 3/2 sh!tbox’ ‘looking up your rear end with a microscope’.’ so blondie fixed up the place with cheap paint’ are classic lines. maybe you should write a screenplay.
Yeah, kind of like that 80’s movie ‘the money pit’…. but only funny, and with, y’know, actors.
“The rate of total monthly sales has fallen dramatically by 84.9% since 2nd quarter 2006.”
“The overall level of inventory has increased by 15.6% during the past twelve months. Total months of inventory (which accounts for slower sales rates) is now 12.”
These facts don’t line up very well, unless the market is still adjusting to make them align. For instance, suppose that 1000 new homes a month were previously coming out of the construction pipeline and selling at the same rate they hit the market. But then bad stuff happened and all of a sudden only 150 homes (85% fewer) per month were selling. Assume that the rate of new construction *instantly* adjusted with a 40% recession to a monthly rate of 600 completed new homes (not possible, but a conservative estimate for illustration).
At this point, you would have new homes coming on to the market four times as fast as they were getting built. If you began the year with six months of inventory (6 X 1000 = 6000 homes), then you would end the year with 6000 + 12 X (600 - 150) = 11,400 homes, which is
11,400 / 150 = 76 months of inventory.
Either I am missing it, or something doesn’t align here…
Is the problem that I forgot to factor in the REO with green pools?
Yes. Many of the lenders do not have the properties listed through the MRIS. Even Freddie and Fannie keep theirs listed off their own website. There is a massive - MASSIVE - inventory of foreclosed and REO houses sitting off the books so to speak. This must change by December 31, so there should be a strong push in the back-to-school time frame to get these sold and closed.
“This must change by December 31,…”
If Fannie Mae does not have to follow financial reporting requirements, then why do they (and lenders) have to get rid of this little bitty Enronesque problem with off-the-books inventory by any particular point in time? More generally, can’t elephants survive indefinitely under the rug, provided you feed them occasionally and make sure they can breath?
REO???
Real Estate Owned (I believe)
yeah.. real estate owned .. foreclosed and now owned by the lender, most of which have a REO department to handle their disposal.
“REO”
AKA “housing inventory dark matter”
after yesterday’s conversation about it, i’m inspired to visit WaMu to ask about me moving into one of their nice big vacant luxury REOs.. just need to collect and solidify any pertinent details.. formulate a sales pitch in my brain.
“yeah, i know how to mow a lawn.. has a grimey pool? no problem. I can fix that.. No, i don’t care.. I have my own major appliances. 6 months rent-free but i pay utilities? ok.. it’s a deal.”
“Ryland Group CEO Exercises Options
Ryland Group Chairman, CEO and President R. Chad Dreier Exercises Options for 80,000 Shares
NEW YORK (AP) — The chairman, chief executive and president of homebuilder Ryland Group Inc. exercised options for 80,000 shares under a prearranged trading plan, according to a Securities and Exchange Commission filing.
In a Form 4 filed with the SEC Friday, R. Chad Dreier reported exercising the options Friday for $6.38 apiece and then selling the shares the same day for $33.47 apiece.
The stock sale was conducted under a prearranged 10b5-1 trading plan, which allows a company insider to set up a program in advance for such transactions and proceed with them even if he or she comes into possession of material non-public information.
Insiders file Form 4s with the SEC to report transactions in their companies’ shares. Open market purchases and sales must be reported within two business days of the transaction.
Ryland Group is based in Calabasas, Calif.”
A few picayunes to line the summer vacation house.
MIS just shakes his head, chuckles and gets up from the computer…time to find dinner… unbelievable… next week he’ll be filing for BK wonder if thats pre-arranged also.
my big, fat bucketa$$ that was ‘pre-arranged’
“‘I’ve probably wasted $90,000 over the past three years and have nothing to show for it,’ he said. ‘I lost my house, have to relocate my family and ruined my credit. Now my family will probably never own a house again because we will be considered even more of a risk in the future.’”
Sounds to me like a great deal to show for it…
at least he wasn’t throwing money away on rent…
heh heh.
ROTFLMAO.
“I’ve probably wasted $90,000 over the past three years and have nothing to show for it…”
Wait, is that a quote from the borrower or the lender??? Oh, must be the borrower. I’m sure the lender lost more.
“‘If they buy a new home, they may have to save a little more for a down payment, which is not a bad thing,’ she said. ‘That way, they have some equity in the home right away.’”
…yeah, so they run to some other institution and liberate the equity…..
putting down 15, 20, 25 percent,,,,now that’s equity…IMO 3, 4 maybe even 10 percent down is still close to having zero equity…the margin of error on house pricing, at any given time, must be what?…+/- 5%..factor in transaction costs on the sell side, even on a FSBO, and much of that 5 - 10 percent down, could get gobbled up pretty easily..
“Many lenders are requiring borrowers with less-than-perfect credit scores to put a 3 percent to 5 percent down payment, said Janet Parker, senior VP of national underwriting operations at Walnut Creek-based PMI Mortgage Insurance Co.”
even if they put down 3% to 5%, they don’t have any equity. if they had to sell their home the day after they bought it, they’d incur selling charges (including commissions, escrow, title, et) of at least 6% to 8%.
with 3% to 5% down, they’re upside down the day they buy.
ws is exactly correct. You need to put down 10% to have even minimal equity after the 6-8% selling costs which include the commission, city and county transfer taxes, escrow, title, home warranty policy, fix-up costs.
The march of the bitter former “homeowner’s” has begun.
It warms the cockles of my heart.
what the heck is an ocean view really worth anyway? especially if you have to climb up on a roof deck to see it. i bet it’s like most ‘must have’ amenities, enjoyed a few times in the first year, then completely ignored after that. just go to the beach, sit in the sand and look at the ocean, after 15 minutes you’re done, repeat next week, save a million dollars!
Agreed.
Absolutely! I used to live within a short bike ride from the beach in OC, what more do you need? You still get all the weather benefits and actually it’s preferable to have a bit of distance between you and the rowdy fratboy crowd that lives right by the sand.
Don’t foget the fog. Better to live inland a few miles to avoid the cold, depressing fog. Can linger around the coast 4-8 months here in No. SD County.
The bodies are everywhere. This is unbelievable!
July 30 (Bloomberg) — MGIC Investment Corp., the largest U.S. mortgage insurer, said turmoil in the subprime mortgage market may require the company to write off its entire $516 million stake in a joint venture with Radian Group Inc. Shares of MGIC fell as much as 9.8 percent in after-hours trading….
MGIC said it hadn’t determined the range of the writedown, though the upper boundary may be the entire investment….
http://www.bloomberg.com/apps/news?pid=20601087&sid=aHp62m4BZhmU&refer=home
And MGIC got a 50million injection of cash this week. Where’d that go?
Still no word from AHM, though they do favor late night messages. Are they dining with the FEDs or still hoping for a rescuer or just typing up the BK announcement. Shucks, it’s a publicly listed firm, you’d think they’d say something.
Ohhhh… that’s going to sting!
Just a mere $1bill combined. Chump change in the world economy. But when the banks find out the mortgage insurance is worthless…
Round 2 starts.
But not for a long time. This will unwind slowly… but surely.
Got popcorn?
Neil
Don’t worry. Subprime is contained. The US economy is fundamentally sound. Goldilocks &c.
Hahn said: “My Realtor wants me to drop my price another 100 grand.”
Ouch…HAHAHAHA!
Sounds like that Realtor ™ has an idea of what the market is really like.
I’d hate to be selling for the next 48 months. Ouch!
Got popcorn?
Neil
“Losing your job or getting married or getting pregnant or getting divorced or… none of this stuff is “bizarre””
Yes they are…the models all have them classified as “Black Swan Events”.
according to the models, all swans are white.
When you are forever wearing peril sensitive sunglasses, there are no swans of any type to worry about.
the invisible swan might be beyond our ability to sense.
http://finance.yahoo.com/q?s=NFI
Saw this it looked like NFI was up 8 bucks took a closer look it was down to 52 week low.
1 for 4 reverse split. Ouch I can imagine lot of people covered went long and kinds of things based on the split.
It is so strange to watch the markets panic when we all knew with certainty this was coming. All this shock and awe from complete idiots makes me want to puke.
I put $5,500 MORE into the market this past Friday. I was waiting for a day like that - it’s a good day when weak, fickle investors get chased out. So far, so good. (I’m still up 12.7% for the year as of today’s close).
I love all the stock market pessism out there - it’s a significant indicator that the market’s in good shape. I hope it continues.
P/Es continue to improve, too. Another good sign.
“An interest-only loan … really means you’re only renting the money, not buying the house….”
Where have I seen this expression before?
“Oh said his living costs quadrupled when he bought his share of the condo unit, but it was worth it to live where he wanted to live and work toward some equity.”
“‘You just have to really make sure everyone’s on the same page,’ Oh said. ‘What if you lose your job? What if you get married? It sounds bizarre, but stuff happens.’”
The get it now mentality strikes again! Yeah, “what if.” Imbeciles!
“‘There were 202 transactions in Vallejo in May, 2006 and only 93 this May,’ Dennis said. ‘That’s down more than 60 percent.’”
Looks like Solano Association of Realtors president Jeff Dennis cannot do basic math. and he is a “president”! what does it say for an average RE “citizen”?
ahh.. well, you aren’t viewing this in the proper light.
not a 60% drop.. only 43%.. and this is good news in NAR-speak. It’s a 17% increase in sales!
oops.. i screwed up.
But, they just might buy the 43% .. lets let it fly and see what happens.
What do you think about all these investment types going on CNBC today arguing that financial services, namely banks, are a buy. Are they trying to fabricate a suckers rally while they get out, or are they really a value at this point?
I noticed the same thing. I watched CNBC all day just to see how much b.s. was going to be thrown out. I did lose respect for Ben Stein when he tried to argue down another guest on Kudlow’s show. Lots of people on the take trying to keep the sheeple believing all is contained and to spend, spend, spend.
I would not touch anything related to the mortgage industry for some time.Remember when bill gates bought the homebuilders awhile backed and suckered a bunch of clowns to buy.Classic pump and dump. They get some real clowns on cnbc sometimes, you cannot trust most of them.Look at jp morgan, it is down for some reason related to bad loans.The banks are going to eat a sh@tload of bad loans. I am totally out waiting to buy into some serious fear and panic after more margin calls.
Got Tinfoil?
It’s so hard to tell.
While I like what arizonadude said below, you’d also have to consider the extent to which the financial companies in question do overseas. Revenues, profits and losses stem from locations all over the globe nowadays…something that lots of people in this country seem to forget.
So, while banks and lenders might be taking a beating on their U.S.-based operations, that doesn’t necessarily mean they’re suffering overall. Consider the growth in China, for example. Some U.S. financial entities are making boatloads of money there.
Good point, which is why the stock market (particulary the DOW and blue chips) has little to do with the U.S. economy. Those are all global companies. So they make money in India or China (through cheap goods and outsourcing), meanwhile the rest of us here in the U.S. suffer from global competition. Everytime I see someone on CNBC smiling about higher priced oil or the market going up, I know I just got a little more screwed somehow.
Thanks. I like your first sentence a lot - though I wouldn’t go as far as you did. The U.S. stock market has considerably less with the U.S. economy than it used to. Lots of Americans have trouble grabbling with that concept.
I disagree strongly, though, that we’re suffering as a result of global competition. I think most Americans are suffering on a very personal level from a lack of fiscal discipline. ‘Suffering Americans’ purchase so much crap it’s unreal. When millions are blowing wads of cash on Botox and other such shit, I have no sympathy for their tales of financial woe. Let ‘em starve!
You’re not getting screwed by oil companies. You’re getting screwed by power-seeking politicians and PACs who refuse to budge from their 1970 energy mindset. This includes ’save the world’ environmentalist groups that insist on pursuing dead ends. It’s amazing how said groups have no qualms about destroying our future.
“Jeff Hahn said he is bitter about his experience with home ownership.”
“‘I’ve probably wasted $90,000 over the past three years and have nothing to show for it,’ he said. ‘I lost my house, have to relocate my family and ruined my credit. Now my family will probably never own a house again because we will be considered even more of a risk in the future.’”
Buh-bye and good riddance, Jeff. Denizens of idiocracy like yourself, with your prolifigate spending and reckless use of credit to “buy” overpriced homes you couldn’t afford, ran up the prices for everyone and forced more prudent buyers to sit on the sidelines. Now it’s time to pay the piper. You and yours are a cautionary tale. Now kindly vacate your house and yield to the evolutionary process of financial survival of the fittest.
Hot off the presses–The Dear GF letter from Sowood Capital Management (warning pdf)…
http://online.wsj.com/public/resources/documents/Sowoodletter-20070730.pdf
Thanks for posting that, P’cola!
He has a very nice signature.
Large loop and upper-zone emphasis on capital J: sees self as extraordinary; enjoys talking about self.
Macalester College, ‘79, former Harvard fund manager, left in 2004 to form own fund (Sowood) with big seed money from Harvard.
http://www.thecrimson.com/article.aspx?ref=358363
Cramer on mad money is bullshitting to cover his ass for all hes worth.
is it
subprime subslime or submerged and drowning
True conversation heard this morning at work:
Two women talking about their weekend.
Woman 1: “So Steve and me went looking at a place to buy this weekend”
Woman 2: “Find anything?”
Woman 1: “We found an older place in Carlsbad, they were asking $480,000″.
Woman 2: “A house?”
Woman 1: “No an older condo, Steve didn’t really like it, I don’t know what his problem is, we NEED to buy SOMETHING, SOON.”
Woman 2: “So are we going to that Indian restaurant after work on Friday?”
Woman 1: “Oh no, I can’t go, I’m broke”.
I hope they didn’t hear me gasp in my cubicle.
W
We NEED to buy SOMETHING, SOON.”
This is one major reason why I’m not getting married. I’ve seen too many friends get sucked into the ‘must buy a house, regardless of finances’ trap by their wives.
No, you just need to keep your b**ls out of your wife’s purse. I got the onslaught for 18 plus months until one she realized that I wasn’t going to budge.
Correction… you just need to marry a woman with enough brains to balance her hormones. There’s numerous examples inhabiting this blog…
Thank you, TJ!!!!!
We NEED to buy SOMETHING, SOON.”
This is one major reason why I’m not getting married. I’ve seen too many friends get sucked into the ‘must buy a house, regardless of finances’ trap by their wives.
Hear! Hear!
Not all women are like that. Just the spoiled ones. There are plenty of good women out there who have brains, just keep looking.
OT- Some Canadian MSM Kool-Aid………
But up here in Canada we’re immune to a housing correction due to rising interest rates because…….. get this……… 30-40 year amortizations. WOW!!!
Canada homeowners less sensitive to rates: study
A growing number of Canadians are taking advantage of new 30-year, 35-year and 40-year amortization mortgages, making them less sensitive to interest rate shocks, RBC said in a mid-year review of the Canadian and U.S. financial industry.
“Recent financial innovation is playing a prominent role in redefining the consumer and housing cycle in Canada and thereby making the Bank of Canada’s job more difficult,” Derek Holt, assistant chief economist at RBC, wrote in the report.
Ottawa began deregulating the mortgage insurance market last year — a latecomer to the process compared to other countries. In June 2006, the national housing agency began offering mortgage insurance for interest-only loans and for amortizations of up to 35 years. Bank of Canada Governor David Dodge initially opposed the changes, saying they could drive up prices further in the already overheated housing market.
RBC argues that Canada’s housing market is immune to the subprime mortgage woes hitting the United States, thanks to the wider array of debt payment options made available at this time.
Ya see, we are truly different up here………
Frickin idiots. I can’t wait for the burn up
here as well.
http://tinyurl.com/3c2a29
RBC argues that Canada’s housing market is immune to the subprime mortgage woes hitting the United States, thanks to the wider array of debt payment options made available at this time.
————————
This is the part that pi$$es me off. They’re always advocating for another “affordability gimmick” (toxic loan) instead of LOWER PRICES.
What the heck is wrong with everybody? Seems like they’ve all lost their minds.
Cramer Capitulates and finally acknowledges some problems with housing!
I actually love Jim Cramer but been annoyed at his blindness to this problem. I chalked it up to where he lives perhaps, New Jersey, New York with all the rich people. He hasn’t been seeing the insanity all around him with housing.
But on his show today he acknowledged a “worst case scenario” and he gets it. He had the best, short description of what might happen I’ve seen yet and better still, he mentions some things that might rescue the U.S. that no one else has mentioned. This is important because during the last “subprime crash” early this year I lost money trying to short the mortgage lenders. It’s important to be aware what might save these guys this time.
Wow. REDC (Real Estate Disposition Corporation, aka ushomeauction.com) has been advertising a major set of auctions in Southern California during August. The radio ads have said there would be 480 foreclosed homes sold; I just checked the website and it’s actually 580 homes now.
I certainly don’t plan on bidding on waaaay overpriced homes that I’m sure will be represented there. I just thought it was interesting. No doubt when these auctions occur they will make major news stories about them in the local rags.