Paying The Price For A Housing Bubble In California
Reuters reports on California. “‘The golden dream by the sea’ is how Gov. Arnold Schwarzenegger has fancifully described California. Yet for thousands who bought homes during the Golden State’s latest housing boom, foreclosures have turned recent months into a nightmare. Dorothy Hicks, a retired federal employee in Oakland, California, is seeing her American dream of owning a home teetering on the edge of collapse.”
“After refinancing into an adjustable-rate mortgage last year, she faces possible foreclosure on her home of nearly 40 years.”
“Hicks says she was told the mortgage was a fixed-rate loan, but was soon overwhelmed by soaring payments when its interest rates rose. ‘By the time you pay (utility) PG&E, the telephone and the mortgage, you don’t have any money,’ she said.”
“‘We have a lot more of these shady mortgages out here, so that doesn’t bode well,’ said Christopher Thornberg of Beacon Economics in Los Angeles. ‘We’re due for a very traditional consumer-led downturn.’”
“‘Business is picking up and I think it’s going to continue,’ said Patrick McGilvray, president of a Sacramento firm that matches distressed homeowners with investors and home buyers.”
“‘In the early 1990s we were losing a major industry and losing it for good. Now we’re paying the price for a housing bubble, but housing will come back,’ said Howard Roth, chief economist for the state Department of Finance. ‘We really haven’t lost jobs yet. That may happen. But in the early 1990s we lost over 500,000 jobs.’”
From NBC San Diego. “Local homebuyers looking for bargains will have dozens of prospects to choose from at a major foreclosure auction next month.
“More than 125 single-family homes and condominium units are being listed for sale by the Real Estate Disposition Corporation August 18 at the San Diego Convention Center.”
“The property with the highest ‘previous value,’ $670,000 - is a four-bedroom, two-and-a half bathroom house on Vista San Guadalupe in Otay Mesa’s Vista Pacific neighborhood. It was owned by a couple who, according to neighbors, also bought, rented out, and defaulted on two other houses in the area.”
“The starting bid price: $289,000. But real estate observers point out that the sellers have a higher, undisclosed ‘reserve price,’ or minimum - below which bids will not be accepted.”
“The auction-list property with the second highest previous value, $619,000, is a three-bedroom, two-and-a-half bathroom house on Fieldbrook Street near Chula Vista’s Heritage Park. Starting bid price: $309,000.”
“Next-door neighbor Andy MacNeill tells NBC 7/39 that the couple who defaulted on the house ‘got in about two years ago and actually did a lot of upgrades and stuff. But I think they got into the wrong type of mortgage and couldn’t handle it. It kept goin’ up every other month.’”
The San Diego Union Tribune. “For some home sellers, putting up a for-sale sign is getting to be a costly exercise. In its latest price report, DataQuick Information Systems found nearly 17 percent of homes sold in the county last month closed escrow at a price less than the previous sale.”
“That’s way up from 2.7 percent a year ago. The median difference in price was $61,000.”
The LA Times. “Possible household foreclosures in Riverside County are up 281% in the second quarter compared with the same period last year, according the real estate tracking firm RealtyTrac.”
“The firm reported 12,759 filings of mortgage default notices, auction sale notices and bank repossessions during the quarter. Los Angeles County led the state with 24,054 foreclosure-related filings, the firm said.”
The Daily Bulletin. “Foreclosures are continuing to climb locally, and it’s a trend that should continue for at least the rest of the year.”
“The two Inland Empire counties were among the hardest hit in California during the first half of 2007, with Riverside up 207 percent from the same period in 2006 and San Bernardino up 186 percent, according to RealtyTrac.”
“‘We haven’t seen the end of this,’ said Redlands-based regional economist John Husing. ‘The situation will get worse before it gets better. We are moving into a period when more homes will be at risk.’”
“Statewide, the number of homes in foreclosure was up 170 percent from a year ago, as California is being hit much harder than the nation as a whole.”
“Every one of the six Southland counties was up at least 125 percent from a year ago.”
“Husing said to really understand the numbers, it’s important to know where are the at-risk properties. ‘I’m not at all surprised to see more foreclosures out here than in Los Angeles,’ he said. ‘If you look at home sales in 2004, 2005 and 2006, you’ll see that there were more homes sold in the Inland Empire than in L.A.’”
“Bill Velto, manager of Tarbell Realtors in Upland, said many of the people in foreclosure now clearly fell prey to unscrupulous lenders. ‘Some of them put people into loans (when) they knew there was no way that they could make the payments,’ he said.”
From KGET.com in Bakersfield. “As the housing market fizzles, the number of foreclosures is on the rise, and scams and real estate frauds that went unnoticed amid a flurry of mortgage applications are now coming to light.”
“Local attorney Kathryn Fox said her phone has been ringing with local people claiming they were the victims of real estate fraud. ‘I have a lot of people that are not in the financial position for this type of home, something really out of their price range,’ said Fox.”
“But what if the homebuyer is in on the scheme? Here’s a typical property flipping scenario: The flipper buys a property for a specific price, $300,000, for example, and then artificially inflates it’s value by obtaining a false appraisal.”
“Now the overvalue of the home is repurchased at the higher price by associates of the flipper. The flipper pockets a profit, and usually offers kickbacks to the appraiser and associate who helped buy the home. But the associate never pays the mortgage, and the home goes into foreclosure by the lender, who is left holding the bag.”
“‘When you qualify people on facts that are not true, or embellish the facts or leave out bad facts, or you assist them in buying and know they are not going to be able to service the debt, or service the loan, you’ve got a problem,’ said Fox.”
“‘You can do anything with the property as long as it keeps going up in value,’ said Attorney Cal Stead from Borton, Petrini & Conron. ‘It’s when the increase in value tapers off is when you start having these foreclosures.’”
The East Bay Business Times. “Home building permits in the Oakland metropolitan area were down more than 50 percent in June compared to the same period a year earlier, according to the California Building Industry Association.”
“Permits were down nearly 30 percent year-over-year last month in the Vallejo-Fairfield metro area.”
“Overall, California’s total housing starts fell more than 50 percent year-over-year: 9,536 permits in June compared with 19,637 in June 2006. The total last month dipped 14 percent from May, when 11,064 permits were pulled.”
The Fresno Bee. “For the first time in years, sales-tax revenues are dipping in many central San Joaquin Valley communities — raising the possibility that some cities might have to cut services.”
“Valley cities have based their spending plans on the assumption that those revenues would keep going up, as they have for years.”
“Local officials said they suspect the decline here is tied to the Valley’s worsening housing market. Consumers worried about decreasing home values or their ability to make home payments may spend less in stores, they fear.”
“Riverside and San Bernardino counties received less sales-tax revenue in the holiday 2006 season than they did in the same period the year before. Sales-tax revenue dropped in Sacramento County the past two quarters in which figures are available, compared with the year before.”
“Clovis had a 3% decline in sales-tax collections during the first three months of this year, the city’s first quarterly decline in at least four years, city figures show. ‘I’ve never seen two quarters in a row that were flat or down since I’ve been with the city,’ said Rob Woolley, a city employee for 20 years.”
“In a market where prices for new homes have skyrocketed over the past 10 years and forced some buyers out, there’s actually a positive side to high-priced housing.”
“That’s the conclusion the California Homebuilding Foundation recently came to in a study published this month on the fiscal impact new housing has on local governments.”
“With higher-priced new homes, more money is being made off of property taxes, one-time taxes, and home-building fees, said John Frith, VP of public affairs for the California Building Industry Association, which works with CHF.”
“A surge in housing prices over the past five years is fuel for CHF’s argument that new housing pays for itself and then some, Newman said. Besides more revenue from property taxes, one-time taxes and home-building fees, new housing attracts wealthy middle-income residents which in turn attracts commercial development that’s vital to the existence of several cities.”
“However, new housing’s positive economic impact on local governments only came about in the past three years, according to Redlands-based economist John Husing.”
“Husing said Inland Empire cities have consistently argued over the years that new housing doesn’t pay for itself, and they’ve been correct in doing so. New housing has only been paying for itself since 2004, Husing said, a time when prices were peaking or still climbing in some areas.”
“‘It really had a lot to do with assessed valuation,’ Husing said, noting that CHF’s report might not hold up if home prices continue declining. ‘Going forward, it probably will fall into a different dynamic.’”
The Record Searchlight. “Pulte Homes may have dropped its option to buy the Nine Mile Ranch property, some 3,100 acres near Cottonwood it had pegged for the ‘active-adult’ Del Webb community Sun City Tehama. But neither the mega-homebuilder nor the land owner is talking.”
“Former Del Webb spokeswoman Judy Bennett said Monday that she heard Pulte has walked away from the project. Bennett and former project manager Brendan Leonard were among 45 people let go in June.”
“Bennett said it was at a June 29 party with former Del Webb employees at her house that she was told Pulte wasn’t pursuing the land deal in Tehama County.”
“Leonard said he couldn’t speak for Pulte or Nine Mile Ranch. But he did say, ‘If they’re (Pulte) not out of the picture, they’re not spending money on it (Sun City Tehama).’”
“With foreclosure notices up in Shasta County, the opportunity for mortgage fraud has jumped. The FBI reported in May that California is a hot spot for lending predators.” “In Shasta County, the number of homes in some stage of foreclosure in the first half of 2007 is up 118 percent from a year ago.”
“‘I have talked to several different agents who have come across clients who have fallen victim; it is getting prevalent,’ said Nicole Dutell, branch manager of The Prime Financial Group in Redding.”
“The distressed property owner gets a call from someone who wants to help. They offer to lend the homeowner money, but in doing so the homeowner will have to transfer title.”
“Dutell says, use common sense. Who’s going to lend $100,000 to a homeowner who can’t make a mortgage payment on a house with zero equity?”
“There are some areas in the north state where home sales are actually up in 2007, bucking a countywide trend that has seen a 10 percent dip in sales. Take, for example, Lake California…near Cottonwood where prices have dropped about 12 percent from a year.”
“Homes are selling for about $279,000, down from $320,000 a year ago, added Bob Neher, co-owner of Vintage Realty.”
“And the typical-sized home selling in Lake California is about 1,600 square feet, a floor plan dwarfed by some of the 2,000-plus-square-foot monsters being built in Redding. ‘It doesn’t seem that many people are looking for homes that big right now,’ Neher said.”
“Dutell says, use common sense. Who’s going to lend $100,000 to a homeowner who can’t make a mortgage payment on a house with zero equity?”
That is apparently a lender who believes prices are going to rise.
Who cares when you can slice it and dice and resell it to suckers, er…. I am mean sophisticated high net worth investors.
tell that to the geniuses at Bear Stearn.
These are private people just trying to do what the big lenders have been doing for the last couple of years. And thats ripping off stupid people. I guess if you’re an individual doing it they call the FBI. This scam only works when there is still equity left in the property, but these days, most of the home debtors in touble are able to extract whatever equity is left with the help of a conventional refi.
Lend $100,000?? You think so small. Try $1,000,000 –that’s a lot closer to average in my neck of the woods (L.A. “we’re so special” County).
Dorothy Hicks, a retired federal employee in Oakland, California, is seeing her American dream of owning a home teetering on the edge of collapse.”
“After refinancing into an adjustable-rate mortgage last year, she faces possible foreclosure on her home of nearly 40 years.”
*********
Ms. Hicks had “the dream” for 40 years and now it’s time to rent!
******
“‘In the early 1990s we were losing a major industry and losing it for good. Now we’re paying the price for a housing bubble, but housing will come back,’ said Howard Roth, chief economist for the state Department of Finance. ‘We really haven’t lost jobs yet. That may happen. But in the early 1990s we lost over 500,000 jobs.’”
*******
How many jobs “will go away” in the REIC before this is done?
Does 1/2 million in California seem like too many?
Given that there’s 500,000 realtors, perhaps not.
I know of one furniture store in So Cal that has closed two stores and laid off workers already this year.
Could that be the ‘Stacks’ (formerly “Lumberjacks”) stores? Or is this another one?
No I had in mind a different one, but we do some work for them, so I will let them remain nameless … My guess is that major appliances, furniture, home improvement have all been huge winners from the last bubble, and will be seriously contracting right now.
glabman’s
I believe it was that one in Costa Mesa that catered to high end clients. I am going to miss my favorite restaurants, time to get the recipe book out and make some good food me thinks!
Speaking of food, Did you catch this?
No More Krispy Kreme In The Sacramento Area
http://cbs13.com/local/local_story_212072551.html
It looks like they are pulling out of the central valley completely.
Darn it. Who is going to feed those fat as*? Not to mention the cops on the beat, always hungry, on the prowl for criminals…er…or just laying back, parked under the shade, having a cup of coffee and a nice doughnut, giving the taxpayer a finger or two.
No, actually the coppers are lying in wait to give a motorist a ticket in a faux “construction zone” @ double the prevailing rates…
A variation on the crooked southern town speedtrap~
amy repo girl ……
Good timing, on a day that a California Highway Patrolman was mowed down by a “taxpayer” in Placerville. One less finger to sneer at as you pass by the shady spots…..
I can’t wait to see all these snooty, high end fixture stores go out of business. Two thousand dollars for water faucets, what a joke.
How can you have a home for 40 years and not pay it off? She must’ve been living the good life the last few years.
Good life, you mean the excellent life, should have been payed off decades ago.
Seems to me a paid off house and no debt or rent is the good life.
Many months ago someone made a great observation — these days you need three incomes to make ends meet: the husband’s, the wife’s, and the house. Dorothy has just been like too many people — counting on her house to keep its job and keep producing income. Bad news, Dorothy, your house just got RIFd. And that’s a layoff that’s not going to show up on any Labor Dept. statistics.
“Ms. Hicks had ‘the dream’ for 40 years and now it’s time to rent!”
And I’m a renter - not such a bad place to be at present.
URGH: I am going to have to stop having to come here. This is where renters hang out. They smell of realism
Yeah… realism left the Bay Area during much of the dotcom run (’97-’01) and returned for maybe a couple years before the housing mania took over.
Today, however, even the formerly bullish/clueless in SF proper are starting to get the message, though there’s a whole generation of residents who are now going to expect bubbles the rest of their adult working lives.
So, of course, they’re “busy” looking for the next one.
If her home is foreclosed and not equity, then the dream was indeed a dream… now she woke up 40 years later to find hear payments plus interest + property tax + insurance + maintence was all for the rental which went back to the bank…
It was just a dream for 40 winks ago… after all…
There’s a whole lot more to Dorothy Hicks story for sure.
Me thinks Dorothy is no longer living in Kansas, Toto.
You bet. If she bought it 40 years ago, she probably paid about 1/20 or 1/10 of today’s typical asking price. If she can’t get today’s typical asking price, maybe she should sell for 1/2 of today’s typical asking price. But no, she cashed out all the so-called equity as she went along, living in the house for free for years and years and years. I have no sympathy.
She can always move to some Medical retirement home, at gov’t expense, of course.
“There’s a whole lot more to Dorothy Hicks story for sure.”
‘dis mortgage is a bunch of junk!
What I fail to understand is why someone who has lived in a house for forty years has a mortgage at all. Shouldn’t her mortgage be long paid off?
That’s what happens when financial charlatans blabber on about mortgage interest deductions, making your equity work for you, not leaving money on the table, leveraging your investment, etc.
They seem to forget that the reason we are investing is for some sort of financial security and independence. Not having a morgage or rent payment is the first thing I think of when I think of financial freedom.
Financial charlatans just want your equity “working” for you so that they may leech more fees from your wealth. After all, anything that is not “on the table” is out of their slimey grasp.
Howards happy talk about how high unemployment was back then compared to now is total BS because they’ve gamed the unemployment metric so much their is no value in it for comparison purposes.
I worked aerospace duing that time and nobody I knew got canned, just crappy to zero raises.
Also, the RE industry has been a huge employer in this latest credit surge, and will be hit harder than aerospace ever was.
“Hicks says she was told the mortgage was a fixed-rate loan”
I am not surprised about this. They tell you that you get a (insert # here) ‘fixed’ loan. There are friends that I know that have this, and they insist that their loan is fixed.
Of course, it is only ‘fixed’ for 10 years, with a probable balloon payment due then.
Damn companies are playing word games.
Fixed means the same payment thru the life of the loan.
They have changed it to mean that it won’t adjust for x number of years.
Or it could have been “fixed payments”…with a variable interest rate (and maybe not fixed once the loan hits the neg-am cap). Yes, LO’s in general seem to be pretty slimey, but then again, a lot of people expected the impossible (I had to explain to my wife a couple times that real (30 year fixed) 1% loans do not exist).
Youy had to explain it more than once. You’re kiddin’ us, right? Every single one of these 1% offers I’ve seen are fixed for one month only, just ONE MONTH.
but the dancing bull, alien, woman, santa clause, and walking person said that I could get a low monthly payment to buy a $700k house at a great rate!!
I think what they mean by “fixed rate” is they are “fixin” to get refi after the reset.
That is bad. LOL
“fixed” the way Tony Soprano “fixes” things
In Zip realty’s interface, if you check the Calculations area at the bottom of the home detail screen you find a field labelled
“5 Year Fixed” Rate: 5.500% APR:7.273%. These are numbers provided by E Loan.
Why, why WHY someone borrowing a HALF MILLION DOLLARS won’t spend $200 on a lawyer to review the contract, is utterly beyond me.
What’s wrong with these morons?
Verbal doesn’t fly in these situations - regardless of what the loan officer said or promised, it’s the print on the page that counts.
Did she not read her loan docs before signing? And - as another poster has asked - how can you live in your home for over 40 years and not have the darn thing paid off already? What was the original cost - $15K?
As posters above said, she def. was living more than the American Dream of the Miller High Life. Even if she bought for 100K, how in the world could she not pay off 2500/year or a little more then 200/month for 40 years? Again, another reporter not asking the deeper questions. Let’s see the usual suspects (forgive my smugness here): the around the world vacation every year on the QM I and then the QM II, paid off CC’s, maybe 1, 2, or 3X, put kids through college, upgraded bath and kitchen 2X, paid for and went through 3-4 cars. Oh well, you guys get the point. Blah, blah, blah.
At any rate, she had a great ride and as a fed employee she can always take that monstrous pension and move somewhere cheap and start over, say in Kansas. Dorothy fits in well there!
40 years ago a nice, brand new house in San Diego was $30K. A house in Oakland !!! maybe $15K.
Forget folks, it’s over. J6Pack cant hide anymore. Cramer is now a full on Housing Bear and has declared so two days in a row on national tv. Ordinarily I don’t pay much attention to him but this is a big deal. Whether you like him or not, he has a huge following and has just pored gasoline on the fire.
“plow under the IE…”
“…walkaway and rent..”
Remember what I said 6 months ago about the MSM eventually looking foolish if they continue to ignore the warning signs and only cite biased resources…well…that moment is here.
I agree. he knows what’s coming is inevitable. And the mind-blowing thing is, he’s saying this now, when we’re still in the early stages. He stated the people calling a bottom are just wrong. The main crunch of ARM resets is still ahead of us.
Just imagine how a wannabe home seller would feel after watching those videos. The absolute sinking feeling in the gut.
When TLC stops airing “Flip that House!” and other fluff, it’ll be time to buy. Right now they’re starting to show failed flips to go with the successful flips. When they can’t show anyting but failure, people will still watch out of gruesome interest. When they can’t get anybody ON the show, and nobody wants to watch anyway… that’ll be close to the bottom.
Bravo has a new angle. A new show called “Flipping Out” premieres tonight, 10pm PST.
http://www.bravotv.com/Flipping_Out/about/index.php
BayQT~
I’m watching this show right now, and I’ve got to tell you…it sucks big time so don’t bother. The flipper guy is an LA business man with OCD (obsessive compulsive disorder), and he flips million dollar homes and (supposedly) makes six figure profits on all of them. But one of the things that he does is illegal, he knows it and says so on the show. What he does is while a property is in escrow he has his “people” come in to clean up (painting, pulling up carpet, etc) the property so that it appraises out to what he wants to help guarantee the loan from the bank. Note that he doesn’t “own” the property yet …it is still in escrow…and that he is really trespassing.
Wow! And he just had a hissy fit when one of the guys working with him pulled his car over to make a call rather than make the call while driving. He actually ripped him a new one and fired him over something stupid like that. This guy is a nut case.
I’m done. Not worth another look-see.
BayQT~
I think that’s a fictionalized mockery of the other shows, not a reality show.
If you ever start to soften up and feel sympathy for the FBs, just watch HGTV for a while. The flipper shows are surreal. The kind of people involved in that industry are just greasy and disgusting. They all seem to have one thing in common: a grossly overinflated sense of ego. They are all show and flash and bragging when things go right. They have no qualms about using illegal aliens to do renovations if it will save a buck, while at the same time moaning about the state of the union. The way they treat contractors is appalling, always expecting unrealistic amounts of work in way too little time for a ridiculously low sum. Then they turn around and think they deserve a $75k profit for 3 weeks of “supervising” a rehab. I want to watch them squirm, badly.
Actually, because of the video on Calculated Risk I watched his Mad Money show last night.
HE WAS BEING IRONIC!
HE WAS MOCKING HOUSING BEARS!
Cramer introduced the show with a doom and gloom scenario, “there’s no difference AT ALL between subprime and prime,” and “I’d burn my own house if I owned in the Inland Empire,” then concluded by saying that the whole problem could be avoided if the Fed cuts rates by 1%.
His points were that 1) the bears are overstating the case, and 2) if the money supply loosens up the finance crunch will be mitigated.
Cramer just made suckers out of thousands of people with no sense of humor. He’s not much of a bear at all…
Was he being ironic or sarcastic?
The terms have basically the same meaning for speech.
From Google Dictionary: Sarcasm is “A form of verbal irony, expressing sneering, personal disapproval in the guise of praise.”
perhaps sardonic and sarcastic?
He probably thought he was being ironic, but didn’t even manage sarcasm. Which is ironic.
Nah, I think he was tying to be sarconic with a bit of ironasm.
He was tring to be entertaining which is all he’s good for anyway although I would say he’s no good at that either.
Gives me a headache jumping around and yelling all the time.
Then why is there a second video on housingdoom in which he restates exactly what he said the previous day?
Still, sarcasism only works if the real situation is true behind the facade.
Actually I hope you are being funny now…because if you think he was being ironic or goofing around…well put down the crack pipe and back away from the computer. Financial analysts and people who project on stocks and what not, do not joke about things like this. Last time something like this happened if that was the case was when Reagan joked that the bombers were on the way and WWIII was starting in a press conference.
Get a clue…
DID YOU WATCH MAD MONEY LAST NIGHT? IT was 100% clear that he was joking, and he repeatedly said “I don’t really believe that stuff I started the show with.” The short little video was just a teaser…
Nope I didn’t watch it last night, I watched the second one today and it was more of the same “joking”. Then I watched AHM basically fold losing 90% of their stock value also today.
I don’t make a habit out of watching Cramer, or TV in general.
Well, on “MAD Money” he dresses up in silly costumes, pushes buttons that make honking noises/crying babies/whips cracking, etc., he has a box of “Uncle Ben Bernake’s Rice,” and thows little rubber bears and bulls all the time.
Seriously.
Now please go back and rethink your comments.
Does he also tell people to stop paying on their investments….in a joking way? Does he say to fraud people in…a joking way? Does he say to destroy your credit to stop the hemorrhaging with a red bulb nose on?
I’m taking this at face value until he comes out with a retraction of his statements. Which is what he will do if he was joking…otherwise it stands as is. Where are all the videos of his show saying I was just kidding folks, stay married to an albatross around your neck! When I see the retraction I will believe it other than that….what the man says, which happens to be all true….what a coincidence.
No point in continuing this conversation, as you’ve already made up your mind.
There’s no doubt Cramer believes housing has problems, he just grossly overstated the case to make a point about the relatively controllable nature of the problems.
But, FYI he’d certainly wear a red nose while repeating his running joke about “drinking cheap scotch sitting on the linoleum floor in my kitchen.” He’d probably have on a coyboy hat and diving suit at the same time. He show is *all* about entertainment and *partly* about investing.
I watched mad money tonight, and he seemed 100% genuine! Sell into any strength. The whole show was about getting out of just about everything and into defense stocks…. Seruiously, defense stocks. Bombs, bullets, guns, planes, tanks, armor, etc.
John, I thought the same thing you did and he did put together a doom and gloom show, arguing from that point of view, so it was hyperbolic. But I saw him today on CNBC and in all seriousness he has turned very bearish on this sector. He said that the CFC conference call was the most important call this year, that mozillo was not exaggerating the state of housing, that Greenspan was more responsible for these mortgage products than the lenders. He indicated there is no difference between ALT-A and subprime, etc. AHM had just dropped 90% so his statements were serious.
Didn’t see the show, but Cramer conveniently suffers from a curious strain of schizophrenia which makes it very easy to feel no need to apologize about changing his opinion 180 deg. in the matter of 24 hours of less. (Person A doesn’t care what Person B said or promised - I used to have a GF like that.) Not to mention being a strong proponent of both communism and take-no-prisoners capitalism at exactly the same time. An odd duck.
I saw him as well and he said retail except for walmart was trash and no place to invest. So I think he has seen the light. And as I have been saying to my wife for days now when will Wall Street see the light?
Take today’s action. We knew late last Friday that AHM was in big trouble. Then when the stock did not even open yesterday we knew it was probably worse then we originally thought. I told my wife on Saturday morning that they are probably toast, another NEW. So why did the stock market go up 140 points and then drop like a rock when AHM started trading again? These guys are paid to know these things!
from cramer:
http://secure2.thestreet.com/cap/login/rm_mbp_summarylong.jsp?flowid=5feb9ad6b&url=http%3A%2F%2Fwww.thestreet.com%2Fp%2F_dm%2Frmoney%2Fjimcramerblog%2F10371407.html
“We can’t work through all of these mortgage problems overnight. You must, I repeat, you must listen to Angelo Mozilo’s conference call for Countrywide. It is a wakeup call to people like me, who wanted to believe that things could be contained to lower-end mortgage products. What people are missing but can be gleaned from the Countrywide call is that there are real problems involving those who piggybacked, who took put a home equity loan on top of a mortgage. That’s where the Alt-A, which was supposed to be safe because of higher FICO scores and more documentation, is unraveling. If you took out a home-equity loan on top of a mortgage loan in 2006, you are faced with an economic decision to walk away, and it often pays to do so. The simple fact is that there are still a half-dozen companies that are directly analogous to..”
it seems quite absurd that boy cramer was left in the dark and had not a clue that he could pick up here. I suppose he is just a political appointee in the new US soviet empire and is merely reading his que cards. The masses listen to him and booyah him, I do not.
A snippet from the second video:
Cramer: “No, No, there is no place where [mumble] you wouldn’t be down on your home if you bought it in 2006, that’s what the issue is. So, I’m saying that buying homes in 2006 was like buying the Nasdaq in February of 2000. They’re very very similar - it was better to be margined out than to continue to put capital against those Nasdaq stocks.”
Cramer: “There was a report this morning by David, I believe it was David, uh, Blitzer, on, when I was on with the wonderful and fabulous Erin Burnett and it was that the, some housing prices have, uh, been, have actually stopped going down and some are going up and I just think that’s not true. I think, like, bad CDOs, and, like, bad leveraged loans, the actual mark to market is down everywhere. I get that from the 5 homebuilders whose conference calls I listen to. There are no up markets, and there are markets that are falling 20-30%, and those are the ones where it’s much smarter to walk away from your house.”
Today on CNBC he kept telling people to listen to the CEO of countrywide in his conference call. It isn’t just sub-prime. It is across all mortgages. He isn’t joking!!! He is serious. Get out of anything financial or real estate.
i watched that Sh#t…. if he was attempting to project Sarcasm all I suggest to him is get drama coach….
there are markets that are falling 20-30%, and those are the ones where it’s much smarter to walk away from your house.
He’s right, this is the economically rational thing to do. Whether it’s morally acceptable is up for every man to decide for himself.
Whatever. Ironic or sarcastic. He said that he thought 100% of 2/28s would default and told everyone to walk away if their homes dropped 20% in value. He seemed like he was on coke or speed in the video. I know that’s his normal pace, but it seemed a bit creepier this time.
Don’t people who walk away from their mortgaged home remain liable for the debt, or any balance of the debt remaining after the bank sells it?
maybe yesterday he was joking or being sarcastic, but watch tonight’s video - he is serious about telling FB’s to walk away and do it now. crazy.
http://tinyurl.com/33b2wj
In this one outside on the street today Cramer said he sold all his real estate and that the guy who bought his beach house was an idiot. I must be the idiot, because he seems sincere.
Or, maybe this is his way of saying the truth and then sticking a “just kidding” on the end. I don’t have any respect for the guy, but still… you have to wonder…
“HE WAS BEING IRONIC!
HE WAS MOCKING HOUSING BEARS! ”
Yes and no. What he was doing was COVERING HIS ASS!!!
Now in 6 months, when they say, “Why didn’t you tell me about housing being a deathtrap?!?!” He can say he did, and has the tapes to prove it. Just because you”interpreted” it as being sarcastic mocking, is YOUR fault.
The important thing to look at is he did say in one of these that he had just got out of all his properties. Notice he didn’t address the bear until AFTER he had sold all his real estate? Actions speak louder than sarcasm.
Uhh, yeah so he did it again today at the risk of his own personal reputation??? AHAHAHHA What’s the matter John? You got some houses to sell sucker??
Let me tell something, Mr. Kramer got crucified for not getting in front of the tech bubble burst…he doesn’t want to make the same mistake again or he will lose whatever credibility he does have.
I watched my CFC puts go from a loss of 50% to doubling my money in two days and watched AHM open at 25% of its value on Friday??? You tell me if he is serious or not moron.
If the FED cuts rate we will be on the wrong end of the carry trade a la Japan.
Inflation will be massive.
Since the Treasury has to sell bonds to pay for everything rates will still be high to JoeSix and Barbie…
Its the endgame for bubblemania
No irony at all.
Cramer: That’s Right - If Your House is Down 20%, Walk Away
07/31/2007 01:06 PM EST
A follow-up to yesterday’s video:
Your House Is Down 20%? Walk Away
07/30/2007 01:37 PM EST
Forgot link to video:
Cramer: That’s Right - If Your House is Down 20%, Walk Away
07/31/2007 01:06 PM EST
http://videoplayer.thestreet.com/?clipId=1373_10371063&channel=Cramer+On+Demand&cm_ven=&cm_cat=&cm_ite=&puc=&ts=1185943328687&bt=NS&bp=WIN&bst=FF&biec=true&format=flash&bitrate=300
“plow under the IE…”
LOL! Good stuff. The Inland Empire provided a new home to ANYONE THAT WANTED IT. It has a huge underemployed Mexican population that is infested with gangs.
I didn’t realize being a housing bear went along with racism.
what did he say that was racist ?
“Racism” no longer refers to the discredited theory that some ethnic groups are innately superior to others, based on innate, hereditary biological differences. The word now refers to “any observation that any social characteristics are disproportionately represented among different ethnic or cultural groups.” It also refers to “any political opinion that the self-appointed representatives of an ethnic minority group oppose.”
Truth is no defense to a charge of racism.
No, it only pertains to certain observations. To wit:
Racism: Koreans score higher on standardized tests than blacks.
Not racism: Blacks are more muscular than Koreans.
There are 40,000 Latino 18th Street gang members, mostly in SoCal. That’s more than all the black, Asian, white/other gang members in the entire state of California, Texas, Illinois and New York combined. That is a fact, not racism.
Oh, give it a rest. What about Sobay’s ovbservation was racist?
1. Does the IE have a “huge underemployed Mexican population” or not?
2. Is the IE “infested with gangs” or not.
Both are valid points of view. If you disagree, add something substantive, if not, go away.
Racism doesn’t describe the IE situation…it does have a large underemployed Mexican popoulation and gangs…plus the banks stretched in every way possible to give loans to illegals. Sad facts, but facts nonetheless. For example, Bank of America stopped required social security numbers for new accounts.
And that is why I have as little to do with them as possible. Sadly, my company uses them, but I don’t. One of the local branches has denied knowledge of this practice.
So does the fact that they don’t require SSN mean that they’ll pay me interest on CDs and not report it to the IRS?
may be I missed the point, but that was a fact, where is the racism?
Well gab if it makes you feel better, parts of the IE are also infested with mouthbreathing redneck monster truck-driving white guys.
Oh wait .. was that racist?
no… that was kool…
long live Kyuss, Fu Manchu, and Queens of the Stone Age….
Its somehow normally not racist if its about white people. But oh well. One thing to go along with the gang thing in the IE. Anyone notice how no one is cleaning up the tagging on the freeways in the LA area anymore??? Its getting really really ugly around the 5/10/110 areas between Dodger Stadium and East Los Angeles direction. Does the IE look like this?
I’ve also noticed more graffiti in LA and also in parts of San Diego. IMHO, the cities are overwhelmed. Crime is picking up, also.
Recession????
http://www.thestreet.com/funds/smarter/891820.html
02/29/2000 - His article before the biggest tech stock crash in history…
You want winners? You want me to put my Cramer Berkowitz hedge fund hat on and just discuss what my fund is buying today to try to make money tomorrow and the next day and the next? You want my top 10 stocks for who is going to make it in the New World? You know what? I am going to give them to you. Right here. Right now.
OK. Here goes. Write them down — no handouts here!: 724 Solutions, Ariba, Digital Island, Exodus, InfoSpace.com, Inktomi, Mercury Interactive, Sonera, VeriSign and Veritas Software.
If you listened to that idiot you would have lost everything.
When Crammer starts on the housing bubble bandwagon, it’s serious time to START BUYING. This clown calls everything wrong.
You first pal…
I was challenged the other day by someone who asked me to show them month over month declines of 5-10% that would instantly wipe out any small downpayment.
I stand corrected, Palmdale 93552 was down 15.4% MOM from 367K median in May to 318K in June, so I obviously understated the decline. I only track this in this one zip. Has anyone else seen these drastic reductions in median in the greater LA area?
BTW, that same zip just broke the record for NODs, with 85 thus far in July surpassing 81 total for Feb. It’s going to get grimmer before it gets better.
How do I get this data for my zip (91354/91355)?
dqnews.com has a link for la times chart list each zip code. It doesn’t show previous months, only current and YOY. I’ve been mining the data for a few years now.
I’m sure there is someone who has a better answer for this.
DQ’s archives have the data going back years, so it’s all there on the website.
Where I live in Glendale, most of the condos in my price range $300-400k have actually dropped from the over $400k range and are now closer to the low $300’s since last summer. Its a mix of people selling after buying last summer or selling after buying REOs and short sales about 6 months ago. I have almost seen everything in the city in this range personally that is somewhat decent and have been paying close attention to a couple of cities for the last 1.5 years in this range. The higher up stuff generally just sits for a long time and sits and sits and sits. =)
My comment was based upon “Why?” My sales staff has not had one of our Buyers go into default. I try to make sure that the buyers we represent either have been advised of the types of loans and the fact that the loan payment is going up if they choose a ARM. I have been accused of convincing buyers that they should not buy. Many lenders are excellent and buyers that want to buy will no matter what you tell them or advise them of.
“In its latest price report, DataQuick Information Systems found nearly 17 percent of homes sold in the county last month closed escrow at a price less than the previous sale …The median difference in price was $61,000.”
This type of statistic should be mandatory alongside every statement that “medium sales prices rose/fell by x%” …
heyheyhey…
And another one bites the dust….
http://www.bloomberg.com/apps/news?pid=20670001&refer=home&sid=a2yB9pe.3k3A
Important note… that’s an “Alt-A” lender. Not subprime. This was a company that would have no problem weathering the storm as it dodn’t have ANY subprime exposure.
How long before one of the smaller prime only lenders goes down?
Hey HD,
Any thoughts on the North Shore market?
When will it be down 25%?
When might it hit bottom?
Any thoughts you have would be much appreciated.
Thanks.
Pen
Yes. 3/4/08 @ 15:14 approx for 25% but that is on a logarithmic scale. If you want 90% confidence level, then that is something else.
On the otherhand, I may be wrong.
I have a few funds spread over online savings account - E:Loan and Emigrant-Direct, ING. Is it safe to hold them there with the mortgage crisis? Are T-Bills better.
(Never had T-Bills, so if someone has a pointer, it would be greatly appreciated).
my feeling is you’re OK as long as you keep to under the FDIC insured amount and do exactly what you are doing by splitting up your funds.
also, some banks have DIF, which is private insurance.
my bank has it, does yours?
http://www.salemfive.com
“The DIF was established by the Massachusetts legislature in 1932..”
DIF.. that’s just for Mass?
Anyone know if there something similar for Calif?
Vanguard Prime MM 5.23%
“Bill Velto, manager of Tarbell Realtors in Upland, said many of the people in foreclosure now clearly fell prey to unscrupulous lenders. ‘Some of them put people into loans (when) they knew there was no way that they could make the payments,’ he said.”
Sorry Bill, those folks were ‘Hell Bent’ on getting a piece of the American Dream. If the first loan officer didn’t give them the loan - the second would of.
Mr. Velto when they were looking at houses did you suggest that the prices might be a little too high?
I see, real estate only goes up.
Did you ever ask your clients how they were going to pay for their house?
Oh, I see you would help them get a loan.
Didn’t you think it was odd for a strawberry field worker to be looking at a 600K house?
Everybody knows that farm workers make a lot.
What CYA bs.
Now batting .281 for the Inland Empire Inepts…
“Possible household foreclosures in Riverside County are up 281% in the second quarter compared with the same period last year, according the real estate tracking firm RealtyTrac.”
Was it Leslie Appleton-Young who said as they were measuring her neck, ” Let them blow bubbles.”
Good people lost their good sense when they bought into the California Housing Pyramid thinking there was always someone right behind them to buy their house at a higher price. Most people believed they could refinance or sell before the timebomb mortgage they signed blew up in their faces. To the detriment of many of them it is turning out their credit and way of life is what has blown apart. I don’t feel much pity for them because nobody twisted their arms or forced them to do it….it is the pressure of living in such a superficial place like California where you are judged on your material not spiritual wealth.
well i have to take a little disagreement here. that is too much of a generalization! there are 36 million people who live here! are we all superficial and materialistic? Heck no, in fact California is at the vanguard of so many progressive ideas in living within our means, using alternatives for energy, recycling etc. better to have said at the very least Some or Many californians are materialistic and superficial , but so are New Yorkers or Minnesotans or Floridians or the california governor is superficial and materialistic. there are many who are quite the opposite!
And we don’t smoke here.
It is a generational issue. The older generation, my parents, believed in saving. “Risk only what you can afford to lose.” I know a lot of people in Gen Y/X that buy the nicest cars max out their cards and are surprised when the bills come in.
I know a lot of genx geny people that live small. Small cars or motorcylcles… Not much debt and quitely saving while boomers buy a bigger house approaching retirement to build a nest egg.
I think genY is less materialistic than us genXers and we are removed from the boomers level of self absorbed materialistic narcisim
Great. We’ve gone from racism to genism…
“I think genY is less materialistic than us genXers and we are removed from the boomers level of self absorbed materialistic narcisim ”
in LA everyone’s a Beemer or ‘McCedes drivin’ A$$hole regardless of Generation…. quit sterotyping ding-dong
Racism and ageism and sexism and so forth are just manifestations of the universal human trait of “jerkism,” of which we all have our share. It’s just that lately, it’s been discovered that by being angry enough about one fashionably-detested variety of jerkism, one can feel good about oneself despite being a jerk in virtually every other aspect of his personality.
hahaha that is classic. how true!
If people start walking away form houses in the IE I’ll bet people will rent their soon to be lost house to some other poor soul in the same hole and it will be a merry-go-round of moving in and getting kicked out. This would be a geat time to haul all those FEMA trailers to the IE and use them as courthouses with all the lawsuits to be filed. This is getting good, BEER ME !!
For what it’s worth I saw my 1st REO (Big sign in window saying bank owned) in San Jose this weekend. This was in a “Good” area no less and a very nice house.
I just saw a REO in Davis, CA. It’s in the Wildhorse development, right off the golfcourse. Those homes used to be considered forclosure-proof.
Looks like California is going to get the brunt of the market colapse, followed by FL, AZ and NV, just as many predicted.
This has been so utterly and undeniably predicted it’s almost sick.
A popular theme last year on this blog was the coming “tidal wave of foreclosures”. Well, it’s obvious now that the tidal wave has arrived, but it has a ways to go to play itself out. CA has now beat its record for the most foreclosures (as in repossessions), beating even the ugly days of the early 90’s. And the slope of foreclosures vs. time is darn near vertical.
Another common prediction was the investors that buy the loans shying away from making them or demanding much higher rates. Witness the implosion of leveraged funds where the collateral tanked as a result of such higher rates and reduced liquidity in the market for the mortgage bonds.
Another prediction was that at some point the mass media would start swearing off RE as an investment. Well, if Cramer’s comments don’t establish the arrival of that, then I don’t know what does.
There’s always something to being right, and the posters on this blog have been right about a lot of things (though so far, the bearishness toward the stock market as a whole has not really been vindicated, but we’ll see).
Not to mention CFC’s difficulties, that Q2 2007 would be the “opening act”, etc. Almost all the truly bearish thought any economic downturn would occur from the bottom up, that Joe6Pack’s spending would radically decrease. No one predicted that the pain would come from the top down (to my knowledge) when Consumer Confidence had just registered an all-time high.
I hope Hawaii gets hit hard too. Although there are some price drops, it’s still waaay overpriced here.
I’m seeing MANY more open houses (Sundays) lately in Waikiki. 20 signs along a 10-block stretch of Kuhio Ave. Big Island, another “investor” favorite, is a train wreck. Plenty of inventory in my local ‘hood, and prices are getting better.
I’m waiting for the 50% haircut.
Patience will be rewarded. Just make sure you have a good FICO and have a down payment. Or pay cash.
We’re lagging, not immune. I would guess we’re 1 year behind Cali.
This is the 2nd inning of a 9 inning game. It has barely started. Sorry
Yes and the home team just batted around - and it looks like it could go extra innings too!
Is it just me, or does the Realtor.com home search site not work? Hit the search button and all you get is, “please wait.” That’s not good!
I love their tag at the top of the site:
“Let’s Talk Real Estate! Read the daily roundup from the best blogs in real estate”
Something tells me Ben’s blog is not at the top of their list-o-blogs!
Its hilarious EVERY TOPIC on thier blog is about buying a house.
And no comments at all, zero! They should at least stuff it with fake questions and answers! (watch for that tomorrow)
Q:”How can I make sure to get a good deal on a house?”
A:”Make sure to use a REALTOR™ who is a member of the NAR™ since they are trained to negotiate hard for you!”
(puke!)
VIX rises, suggesting bumpy road for U.S. stocks……………
CHICAGO, July 31 (Reuters) - The Chicago Board Options Exchange Volatility Index (.VIX: Quote, Profile, Research), often called Wall Street’s fear gauge, popped higher on Tuesday, suggesting another round of volatility is in store this summer as U.S. stocks sank amid renewed credit concerns.
The widely watched VIX surged 12.7 percent to 23.52, within striking distance of a four-year high of 24.17 hit on Friday, as stocks suffered their biggest rout in nearly five years last week.
We are on the brink of a climactic selloff. The more days that pass between now and then, the more violent the impact will be. Volatility is very good when the market is trending upwards, very bad when it’s trying to go the other way. The intraday swings to the upside are being met head-on by the bears and getting sacked in the backfield. When the bulls have decided to go back to the locker room and regroup, the indices are going to get crushed. This could be a one or two-day climax, but one way or the other, it’s coming. With yet another Bear Stearns hedge fund reportedly circling the drain, and with hedge funds sheepishly releasing worse news with every day, the banks are going to turn their guns on the other big houses and start calling in their loans before everything gets marked-to-market and destroys their balance sheets. At this moment, we’re in the midst of a standoff. Anyone providing loans to outfits like Bear Stearns backed by junk collateralized debt realizes that if they demand an auction, the market’s going to find out all the other hedge funds and CDO’s with subprime mortgage products on the hook might be close to worthless at this point. But Merrill Lynch wants its money. So Bear Stearns quietly allowed the first two hedge funds to explode (it didn’t help that initial feelers for an auction produced hypothetical bids of ten-cents on the dollar), then paid back their loans with funds earmarked for other divisions. At some point, enough is going to be enough. The banks are trying to hold this thing together, but when it starts causing major damage to their own bottom line to let the malfeasant CDO managers avoid walking the auction plank, the crap is going to hit the fan.
Meanwhile, Toll Bros. still builds homes. This is going to end badly, and it’s going to hurt all of us.
Couldn’t let such a well thought out post go unanswered. You are indeed correct. These up and down swings are becoming more radical every day. Eventually the buy at the dip and sell into strength strategy will no longer work.
“Local attorney Kathryn Fox said her phone has been ringing with local people claiming they were the victims of real estate fraud. ‘I have a lot of people that are not in the financial position for this type of home, something really out of their price range,’ said Fox.”
If Fox choses to pursue that all these people where ‘victims’ then I think that the mortgage industry needs to employ someone to interview friends, neighbors and co-workers of the alleged ‘victims’ to see how many were bragging about their RE acumen before things went south. I know BK well and that would be a fun job! Yes, I believe a rare few were duped but most were greedy, stupid, and bought the lines of family and friends that were ‘making money hand over fist’!
Have y’all seen the story about Paris Hilton’s home in the Hollywood Hills, currently on the market for “a cool $4.25 million?” It has me wondering why there isn’t a Yahoo headline every time a starter-cottage hits the market “attractively priced” at $1.3 million here in Silicon Valley. The last time these cottages were photographed from the sky was during a high-speed police chase.
Yes but the news coverage said that it was overpriced for the area. MSM also said that someone out here in love with celeb’s will probably pay the price.
Still, it strikes me as a bargain. Don’t the rich have a range of “affordability products” to choose from? Or do they know something I don’t?
Input this in Google Maps:
otay mesa, san diego, ca
“The property with the highest ‘previous value,’ $670,000 - is a four-bedroom, two-and-a half bathroom house on Vista San Guadalupe in Otay Mesa’s Vista Pacific neighborhood.”
Why they call it “Vista Pacific,” I’ll never know. It’s actually closer to Mexico than the ocean.
If you head south on the 5 or 805, be sure to get off at the FIRST or SECOND exit. Otherwise, you in T.J., mi amigo.
Any info on the prices around Mira Mesa? ZipRealty has some short sales and bank owned but I don’t know how much off the peak they are.
I’d keep sittin’ on that fence for awhile. Mira Mesa has a hellava lot houses for sale.
Look up a particular address, intersection, or zip code in Mira Mesa using the arjis crime maps (mapping.arjis.org), then come back and tell me you want to park your car there.
Been there (Mira Mesa) and done that. Made it all the way to work the next morning before I realized something was different, or missing on my car. They stole the stock ground effects kit off my M3, doh! I guess my intuition was correct to get wheel locks when I moved their from NB.
“Otay” is a really offputting name. Imagine having to tell people that’s where you live.
It worked for Buckwheat!
Ah…the joys of unregulated capitalism.
And yes, I do have popcorn!
The popcorn is a must for the next ~12 weeks.
You see, the “invisible hand” of the market is braking free. They thought they had buried it… under stone. That only delayed when it showed up, not if…
Its going to punt some people trans-continental.
Got popcorn?
Neil
The invisible hand just put on a latex glove…
Cough, please.
Got it backwards Joe, the wonders of “regulated” markets. The wonders of manipulated interest rates. Convince the sheeple they have nothing to fear, its all legal, and insured. Lead them to the edge of the cliff.. then over they go like leamings to their ends.
Oh! Oh! Oh!
July 31 (Bloomberg) — Bear Stearns Cos., manager of two hedge funds that collapsed last month, halted redemptions from a third fund after investors demanded their money back….
“This shows you don’t necessarily have to be a subprime fund now to be having problems,” said Bryan Whalen, a portfolio manager in Los Angeles at Metropolitan West Asset Management, which oversees more than $21 billion in fixed-income assets.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aBuz_1cIZ_EQ&refer=home
Coup D’O
And the hits just keep on coming. Should keep the market frothy in the a.m.
Bear Stearns Cos., already forced to shut two hedge funds that bet heavily on the risky subprime-mortgage market, is now facing big losses in a third fund that has roughly $900 million in mortgage investments, according to people familiar with the matter.
The fund, known as the Bear Stearns Asset-Backed Securities Fund, ran into trouble in July and has refused to return investors’ money for the moment, according …
http://online.wsj.com/article/SB118591963252683893.html
So how long will it be until the credit market collapse will ripple through to main street mortgage vendors? How long before 20% down and demonstrated ability to repay are standard requirements for home loans?
It would be really simple, really. The lenders and banks would have to make mortgage loans as if it was their own money at stake.
It’s contained! Really! Oops… ignore that exploding hedge fund. No - that is not the third one to explode! All of our hedge funds are stable and will make you very wealthy. And they are all contained as well!
Exactly what I thought.
Excellent proof that this is all contained.
What would be funny is if the markets ignore this.
Now don’t look behind the curtain… HEY I SAID!
Got popcorn?
Neil
This fund claims only 0.5% invested in subprime, yet
they have to halt redemption. The loss must be coming from
non-subprime. Must be the prime NINJA loans.
“This fund claims only 0.5% invested in subprime, yet
they have to halt redemption.”
I caught that too! You know the underlying story isn’t fit to print.
Oh! Doh!
July 31 (Bloomberg) — Oddo & Cie, a French stockbroker and money manager, plans to close three funds totaling 1 billion euros ($1.37 billion), citing the “unprecedented” crisis in the U.S. asset-backed securities market.
Oddo said it will wind down the funds within the “shortest possible time frame” because of a plunge in prices for collateralized debt obligations, notes backed by other bonds, loans and their derivatives.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=an06StEp.bjo
WOW IS ALL I CAN SAY!
These two hedgie stories should really rock WS tomorrow. This housing, er, I mean credit bubble is unwinding really fast now. All I can say is that any fund that won’t give me any of my money back is not ever getting my business. I don’t care if I have Buffet’s money, if I can’t get back my 10, 20, or 30 mil when I want it plus or minus dep. on how the investment went, I would be pissed big time!
This thing is really strating to unravel at a pace that even I didn’t think possible. I know Neil keeps us eating the popcorn, but these 2 stories just make me realize how serious this is.
Maybe, I just better take the money and hide it in the mattress. The next 18 months are going to be very interesting indeed!
OCDan,
It is very serious. I too am scared. The only parallel I find are the ponzi scheme investment clubs circa the late 1920’s.
When this finally happens, it will happen very quickly. I believe we are within 12 weeks of a *major* economic crash. A bad recession. At this point I still see indicators it will only be a recession; but the politicians could screw it up.
I’ve posted many a time, when will we see a “run on the hedge funds” to finance their business jets, vacations, and high end real estate habits?
I’m also waiting for wine futures to take a huge hit.
Got popcorn?
Neil
Ok,
I just become much more scared. The 3rd Bear Stearns fund is supposed to be *unleveraged*. Holy %^&!
That actually disturbs me as much as finding out about the speculative bubble in Arkansas. Maybe more!
At this point I still see indicators it will only be a recession.
Sure, ignore $500T+ in derivatives… ignore record margin in the markets… ignore record personal, private & public debt… ignore all those things that were not a component of prior recessions. Ignorance is bliss!
You have all the info, Neil… you just gotta come to terms with it! Don’t hog the popcorn while your mulling it over, too.
Here is a good example why they sub prime is in a mess.
850 E. Ocean Blvd. #410 Long Beach, CA 90802
Sold 04/08/04 $365,000
Sold 09/29/06 $650,000 100% finance
Listed 07/31/07 $439,900 Bank owned
nice haircut!
California, the land of silicone, drugs and gangs…
Once again, thanks to Ben and his blog for opening my eyes back in 2005. I sold at the peak and never looked back. Took my equity and what was left of my sanity out of CA and have never looked back.
The price per sqf in my zip code is now DOWN at least 20% from what I’ve sold at. And we’re talking prime Encino. I didn’t use a realtwhore when I sold so I only paid a minimum fee to an MLS posting outfit. I had two offers a week BEFORE the first open house, so I got 15% over my asking price and no inspection… yep, that was crazy CA back in 2005!!
My friends there tell me prices are back to 2004 levels already. Everything else you hear from the NAR, the media, Suzanne! and their ilk is just lies…
I’m waiting, patiently and happily, until 2009 or 2010 before I look again in CA. Santa Barbara and San Luis Obispo should have plenty of desperate homedebtors by then willing to take any offer.
Booyah!!!!
California land of bicycles, recyclers, green energy producers, solar fields, progressive politics, wind farms, artists and models, sierra nevada mountains and the 7th largest gnp in the world…we must be doing a few things ok.
Artists and models, progressive politics, recyclers? Grotesquely ugly poles of bird-whacking whirling rust euphemistically known as “wind farms”? That’s the best you can do? They sure don’t get their GDP from that. I thought I liked California - silly me, I thought it was the land of food and munitions and high-tech wizardry. No wonder CA is about to get its a$# handed to it.
no its not just california. its the whole country its getting shafted. we’re headed for some very rocky times. thats right, recycling, wise use, living within our means, progressiveness that would have been a whole lot better than what we have now. war, insecurity, deregulation and rampant mindless consumerism and corporate control. Thats not so silly. America is the no 1 polluter in the world! the no 1 arms merchant on the planet. that is nothing to be proud of. I’ll take windfarms over laser weapons any day. and don’t go putting down wind farms, while the planet heats up and the ice caps melt.if we were to have followed our generational responsibility, the wind farms and the solar fields should have been dotting our country long ago instead of global warming caused by fossil fuel polluting, war making oil. as for the investment in munitions which you seem so proud of that has only gotten us one thing. war and death and insecurity. Rusted wind farms whacking birds, thats a lie!- its clean energy! wake up and get modern.
Sorry, Melvin,
I call BS on America being the #1 polluter. It just is not true.
Go back to school. Solar takes more energy to make a panel than it can produce in its lifetime. Without tax subsidies, it would be economically unviable.
Ditto the rest of your watermelon whining.
Paul
We are, but on the other hand:
-Massive illegal immigration
-High tax burden
-Education system rotting away from colleges down to kindergarten
-Massive outsourcing
-Massive SMOG!
-Pension system that will eventually break at all levels
-50 BILLION, YES, BILLION DOLLAR DEBT. As the Crock Hunter would say, “Crikey!”
-Housing Bubble that only MA and FL can compete with.
Did I miss anything. Feel free to add.
BTW, I have just applied for a job in Spartanburg, SC. I know some of you will pray hard I don’t get it, but don’t worry my family will assimilate very nicely. We won’t cause any problems and would never tell you how we did it in the South OC. In fact, I might never admit that I lived here.
Look, I would like to own again/someday. the thought that I only have to pay a small amout of property tax 2X a year and have no mortgage or monthly rental is enticing. Even if markets drop 50%, I don’t feel like waiting, nor do I want to live where HOAs dominate. Besides the growth in So CA in the 21 years I have lived here is NUTS! In 1986 you could drive down the 110 heading toward Torrance on a Friday at 5 in the afternoon and do 60. 20 years later…good luck avg. 16 mph! I have had enough. I want out.
To those who say good riddance, that’s okay. No hard feelings. I will miss my SC Trojans, being an alum, but you can’t have everything. However, my sanity and health and those of my family are worth more than the obscene sunshine tax we pay to live here. Besides, I would like a home with SOME freakin’ land. My neighbor doesn’ need to see what I am doing in MY HOME!
…and forgetting a little thing called agriculture…..
yes agriculture. if it weren’t for California you wouldn’t have your veggies on your table or the fruits you eat. Tired of people blaming California. its the whole blasted nation that has become hypnotized by corporate media and control.
You realize we import most of our food now right?
Yeah, it sure is. Every time I drive through Cali now on vacation I just want to cry every time I see a new housing development or strip mall that now covers prime agricultural land, old vineyard, or fragrant cow pasture. It makes me wonder now…exactly where do Californians get thier food now????
yes it is awful the amount of development covering over our land. not only that but the burden on our infractucture to dig new sewage and electrical and water systems. everyone wants a single family home and a big one. a real unwise use of resources. let me tell ya what california has to fear…drought.
‘little boxes on the hillside,
little boxes made of ticky tacky,
little boxes and they all look just the same’
where do i get my food? i’m a californian-FARMERS MARKETS!!! buy direct from the farmers on Tuesday and Saturday mornings. lucky to live in the Bay Area where one can find ‘em every day of the week. good small family farms, all organic produce at a very reasonable price. the best of the best.
much of the food is grown in the central valley. huge agricultural conglamerates that provide safeways and walmarts all over the country.
Ummm 8th largest GDP. We got demoted again. China, Japan, and Germany are kicking our butts. We were fifth in 2002.
next….
Ummm….. California is the 8th largest GDP. We’re getting our butt kicked by Japan and China. Soon Canada will be kicking dirt in our face. We were 5th as recently as 2002.
ps Ca sucks. I’m a native. I’ve lived all over the state for 40 yrs. I feel pretty damn qualified to say that.
Good job, smarty-pants.
Where exactly does Cramer get the idea that a 1% interest rate cut would solve the whole problem?? That just will lengthen the hangman’s rope…
Bill Gross at PIMCO said a 60 basis point cut was needed to prevent a complete housing collapse (either in Mar of this yr or last Dec), I suppose Mr. Cramer was time dating Mr. Gross’ position.
I really have a difficult time believing any rate cut of any magnitude will help the RE market. The damage was done years ago, the infection has spread and the patient is past life support.
Hoz…
Not unlike a patient with a terminal disease, we’ll attempt to keep it alive for longer than necessary, to better separate it from any funds it might still have~
Hey buddy, how was your weekend?
“I really have a difficult time believing any rate cut of any magnitude will help the RE market.”
Me, too, Hoz. And given that this is probably a fact, interest rate cuts could only further deteriorate matters, IMHO. As in contributing to inflation, which is something we DO NOT need right now. Heck, I think I heard on the news tonight that oil just hit an all time high, having increased $1.40 a barrel or something like that.
Hey, so long as I can get my plasma TV for $500, what inflations?
“Now, television may fill leisure time, but to increase the time spent watching TV is not going to give us more productive and creative citizens.”
Eleanor Roosevelt
yeah tv owned and operated by the same corporations that provide you with oil and weaponry. tv is a machine to get us to consume more and more. it creates needs when all we really need is community.
So true, Melvin!
A rate cut is like throwing gasoline on a fire. With inflation at 7%, we need a rate hike. Let’s get this thing over with. It’s going along like a bunch of paper cuts.
To Chairman Bernanke and his minions such as Fed governor Poole:
“‘Do the Volcker’ and drain the liquidity cesspool before we all drown!”
Just keep saying this. Mortgage rates are tied to treasuries… if we lower interest rates then dollar will go down and investros will demand a higher rate of return. That higher rate of return will cause mortgage rates to skyrocket.
Not to mention the markets are losing the appetite for risky CDO/MBS products so banks will need to be more cautious. This is just the begining of the credit crunch as banks/investors try to figure out if anything they are holding has value.
Companies are already exiting subprime and pulling credit lines. As defaults increase and risk gets repriced the credit will get tighter.
This is what happened in the Great Depression. A protracted time of loose money and reduced risk premiums resulted in a credit event. The comparisons are downright spooky.
The numbers Cramer talked about were an exageration but they may in fact happen.
A brief injection of liquidity may forstall things a bit but ultimatly the fall will be worse.
A rate cut might lure a few knife catchers. But real estate usually falls during rate decreases. Rate decreases are in response to a weak or recessionary economy. People are usually more afraid of losing their jobs at than buying houses. If you look at the biggest gains in house prices, a few years ago, it was after the Fed started raising rates. People were scared into buying “Before rate rise and price them out forever”.
If the Fed lowered rates now, it would cause unwinding in the Yen carry trade and further collapse in the dollar. Plus it would spark inflation. There’s a lot of money waiting for the Fed to lower so they can jump on commodities, sending inflation higher. A collapsing dollar would exacerbate the problem.
Plus it’s a different environment now. The fools have already bought in and people are seeing what happens when you pay more for a house than you can afford. The Fed is pretty much stuck, right now. They won’t be able to do anything until the economy tanks. Then it will only serve to stretch out the pain, with false hope.
“Yen-buying will continue, land mines of troubled subprime issues are ubiquitous.” Hideki Amikura, deputy general manager of foreign exchange at Nomura Trust & Banking Co. Ltd
Aug 1, 2007
The “carry trade” is stalled. At least until option expiration - the 118s are real expensive.
Yeah, I don’t get that either. If it is to be believed that loans are harder to get, a 1% drop in rates might make housing cheaper but not easier to obtain.
Not a chance. In order to save the market, lenders need to be willing to lend (give) several times more money to potential buyers without questions asked than they could possibly ever afford. This is what happend over the past few years, and low rates are mostly incidental IMO
Subprime is contained.
http://tinyurl.com/2eecsx
The fund, known as the Bear Stearns Asset-Backed Securities Fund, ran into trouble in July and has refused to return investors’ money for the moment, according to these people. One of these people said the redemption requests were postponed in hopes that the fund’s assets would rebound in value. The fund contains a range of mortgages, but only a small slice of them that are considered subprime, the area that has given so many firms heartburn in recent weeks. Unlike the two other Bear funds that are being closed, this fund is not leveraged.
The asset-backed fund was up about 5% between the beginning of the year and the end of June according to these people. But faced with a slew of mortgage markdowns in July, its performance appears to have plummeted. It is not known how much, if anything, Bear owns of the fund. Its shares were down about 5% Tuesday, to $121.22.
The decline of the asset-backed fund is yet another setback for Bear’s embattled money-management unit, Bear Stearns Asset Management. The weakening and eventual failure of two structured credit funds in June and July, known as the High-Grade Structured Credit Strategies Fund and the High-Grade Structured Credit Strategies Enhanced Leverage Fund, lost investors as much as $1.6 billion in equity and forced the ouster of the unit’s chairman.
“There are no plans to shut down the fund,” said Russell Sherman, a Bear spokesman. “We believe the fund portfolio is well positioned to wait out the market uncertainty. And we believe by suspending redemptions, we can ensure the best long term results for our investors. We don’t believe it’s prudent or in the interest of our investors to sell assets in this current market environment.”
Pardon responding to my own post. Note the last line:
We don’t believe it’s prudent or in the interest of our investors to sell assets in this current market environment.”
Right, because if we do, we’re insolvent tomorrow, whereas if we don’t we’re not insolvent until Thursday or Friday.
Right. Their effectively insolvent now. They just refuse to admit it. I guess investors will have to sue to force redemptions. I can’t believe that their are very many investors in these types of funds that will be very eager to invest in these types of funds in the future, or with Bear Stearns.
S & P futures down 11, Asia down 1-2%.
Hey, no fair - I heard corrections only go 5% and then snap back. This doesn’t feel like the other corrections!
China is up, but they refused to buy any more MBSs.
So that’s why Paulson went there on Monday, begging them
to buy more MBS.
Repeat after Paulson:
-Subprime is contained
-The worst is behind us
C’mon now. They’re just waiting a few months until the market comes back….
It would def. suck to be an investor in that fund right now. Getting your money back from them is like asking a hooker for a refund. Good luck!
If the fund isn’t leveraged, then why couldn’t they just liquidate collateral and return investors money–at current market values. If that is what investors want.
I call BS, there has to be more to this story.
BTW, since I don’t live in CA, how many posters here thing AHHHnold is doing a better job than Gray Davis? Wasn’t it Enron that brought down Davis? And did Ahhnold sell out CA when he settled with Enron for pennies on the dollar, his excuse being that he felt it was best for the state to move on? (I am asking because this was my perception, I could be wrong. Anyway, all these politicians say stuff like that when they want to avoid something unpleasant, that’s why we’re not seeing impeachments when we so desperately need them). But what do you Californians think? Is Ahhnold doing a better job than Davis? Because from where I sit, CA is looking worse off right now than it did under Davis. Same kind of stuff happening, only in more volume and because of different circumstances. Not to mention that the illegal immigrant problem seems to have vastly increased, too.
It is worse off but I don’t think Davis could have saved it either. All arnold has done is spent a lot of money on special elections. I don’t know anyone in Sacramento in politics that likes him and I know quite a few staffers. Most people just smile and try to wish him into the cornfield.
IMO California is worse off now than it was under Davis, but if he had remained Governor, it would be even worse. Davis was destroying the state wholesale. Arnold is destroying it piecemeal. The State legislature is controlled by some of the biggest socialist in the country, so it is only a matter of time before the state is bankrupt and destitute. The health care, global warming crap and the state unions continue to drive employers from the state and for the last 2 years more people have left the state than have moved here. The gleam is off the golden state and now the tarnish is setting in…
I’m not defending Arnold but I think the state of the state is bigger than him and been in the works for some time and at a federal level.
I often think of Davis as that gimpy guy from that movie The Usual Suspects. You see him and you just think he’s a goof and the boys at Enron got the better of him. But secretly I think he was in on it. He was much more clever than he’s made everyone think. He made deal to transfer the big tax receipts from the tech boom to the energy robber barons turning our lights on and off in the summer of ‘01.
IIRC, Davis wanted to have FERC investigate the energy companies and Bush blocked his requests.
Personally, I didn’t mind Davis, and think he did a fine job. California is one heck of a state to try to govern. He deserves more credit, IMO.
————–
And it was Davis who was the target of all the vitriol from the Republican side of the aisle, a direct response to Davis’ aggressive attacks against President Bush, FERC and the power industry.
http://archive.salon.com/politics/feature/2001/06/21/energy/index.html
new housing attracts wealthy middle-income residents which in turn attracts commercial development that’s vital to the existence of several cities.”
“Wealthy” middle-income? What kind of double-speak is that?
They must realize now that the median house price is out of whack with the median household income. So, presto-change-o, turn us middle-income folks “wealthy” and sure, then we can afford those overpriced homes!
Incredible, isn’t it. The spin is unbelievable. Isn’t wealthy something middle income people aspire to become. Thus no longer middle income.
But I guess wealthy is a matter of perspective anyway. My self and my family are all healthy, have roofs over our heads and food in the pantry. From my perspective we are wealthy.
It’s the new REIC/Trump-speak - the more you’ve borrowed, the wealthier you are!
“The starting bid price: $289,000. But real estate observers point out that the sellers have a higher, undisclosed ‘reserve price,’ or minimum - below which bids will not be accepted.”
I hope those who attend this auction go well armed with rotten eggs and tomatoes. Any auctioneer who starts the bidding at a certain price knowing full well it’s just a fake come-on bid needs all the abuse he gets. Will auctioneers join realtors, appraisers and lenders as the 21st Century’s top scumbags?
First time poster here, so please be gentle. I was wondering why there seems to be such hostility towards flippers among housing bubble discussions. My initial reaction to them was also hostile, but then I came to realize that many areas are better because of their existence. I am not excited about their misuse of credit, but then many others are also to blame. Their motivation to make money seems very capitalistic, which I applaud. I do think that the media has made too much of their POTENTIAL financial exploits, but I am not sure that many of them are rich. Besides, if they are, they certainly took significant risk in obtaining those resources (and many of them are paying for those risks now). I am very against any misleading information that was provided on mortgages to get financing, but that again is not limited to them. Don’t get me wrong - I am not a flipper nor do I have pity on their current situation. I just don’t see the point in disparaging their role in society unless they attained that role fraudulently. I am very like-minded with the group here and am concerned about my own tendency toward schadenfreund-like behavior. I don’t want to be bitter about someone else’s gain. Thoughts (but not flames) anyone? (I hope I am not rekindling a past discussion.)
“I just don’t see the point in disparaging their role in society unless they attained that role fraudulently”
They cheated you of the ability to buy a home at a reasonably affordable price in a measured timespan. The problem is fraudulent which may be as much as 60% of the loans generated from 2002 to present.
“(and many of them are paying for those risks now)”
You can’t detect any innocents who paying for the flipper’s recklessness?
who paying”
who arepaying..
Early-stage flippers were mostly aggressive fixer-upper/value added RE types who were taking advantage of the capitalist system. They generally took risks and didn’t commit fraud. Late-stage flippers mostly did not take risks and did commit fraud. Some early-stagers morphed into late stagers, but for the most part the ones getting their butts handed to them are the late-stagers who are either idiots or criminals, or both.
“My initial reaction to them was also hostile, but then I came to realize that many areas are better because of their existence.”
In what way? That’s a statement that is begging for some elaboration.
Sometimes flippers help communities by revitalizing marginal homes, and sometimes they throw the bottom line out of whack by adding way to much frosting to their housing cakes and then wriggling out of the mess by setting up fraudulent cash back deals leaving the community with empty, foreclosed homes that are poorly suited to local markets.
but then I came to realize that many areas are better because of their existence.
What, you thought there was a shortage of ugly, poorly constructed tract houses before they came along?
In L.A. the typical flipper has destroyed so many quaint Ranch houses by adding marble, classical columns, stucco and cheap Milgard windows. The city of L.A. should not give a building permit to anything “ugly”.
Just my thoughts, but I feel that the flipped fixer-type properties that I have seen in the past couple of years have been redecorated, more often than remodeled. The materials in many cases were lower quality and bigger issues in the home were ignored in favor of profit. I’ve seen walls torn out of smaller older houses to make areas look bigger, at the expense of the structure itself. Toss in some sod, interior paint, stainless steel appliances and mark the price up on a typical house by $120K, or at least that’s how I’ve seen it work in San Diego. This isn’t truly adding value to the home or the neighborhood in my opinion.
As for flippers who go into an area and hold pre-construction contracts or empty homes for a short period of time to take advantage of rapid appreciation, they’re only helping to further distort prices.
I also agree with what the others here have stated about the fraud factor being high.
could you tell me what the role in society a flipper might be?
I like to think of flippers more as maggots feasting on the carcasses of a big fish kill from a polution spill. They didn’t cause the big die off, they are just capitalizing on the waste created by a larger bad actor (Fed). We’ll all worse off for the waste (except the maggots temporarily). You can think of them as disgusting creatures, but simple in nature. I put the other middle men in the same boat, agents, brokers, pig men of various varieties. Opportunists making the best of an unnatural disturbance to the balance of markets.
that’s pretty much it .. flies on shit.
I’ve heard a story that on the eve of a major battle during the Civil War, some speculators got wind of what was happening and bought up all the black mourning crepe in Philadelphia, from which a number of the regiments engaged had been recruited. When the casualty lists came in, the speculators tripled the price and cleaned up.
That’s pretty low, wouldn’t you say?
Now consider the fact that every speculative flipper that enters the housing market displaces a potential purchaser-for-consumption. A house can’t serve two masters — it can either be shelter to a family, or it can sit vacant as a flipper slaps on another coat of paint and jacks the price up to sell to another flipper. Flippers helped turn a traditional consumption essential into a get-rich-quick instrument. It has emphatically *not* been good for our society.
I don’t equate flipping with fixing up a troubled property to raise it’s value back up to that of the surrounding properties, and therein make a profit. Fixer-upers is a service to the community.
Flipping has no purpose other than to sell for more than was paid. It raises the cost of living and nothing more.
At one time the word flipper did not have negative connotations. Knowing a market, buying carefully (mostly with cash), fixing something up, and getting it back on the market quickly was often called flipping.
The cost of living is only raised by inflation, a general increase in the price level, related to the supply of and velocity of money balances. Selling something for more than you paid does not increase the cost of living. It only indicates that relative demand has shifted in favor of the product.
i see..
So, if you must pay more for housing due to the action of flippers, your cost of living has not increased because no monitary inflation was involved..
If not “cost of living”, what shall we call that which increased?
the whole thing stinks. flipping to me is like ’screw your neighbor’ we have better things to do. like producing products for the future.
solar fields, mass transit systems, alternative energies, family farms. flipping is strictly stone age.
Did anyone else watch the full string of Cramer videos?
I’m nauseous after that. Not only the news but the fact that the cameraman was at least 120 degrees out of phase with all of Jimbo’s fidgeting.
What is really interesting is the rate of this unwinding. I hope Bernanke understands what is happening. He is the most important person for our collective future. I wish him well.
Actually I am hoping the complete opposite. Our system is so totally corrupt we need a massive washout to wake people the f**k up. The gangsters on Wall Street are getting a total azz blastin, and that has to warm your heart.
This is WELL deserved and LONG overdue.
Well said, Joe!
Today was a milestone. The end of liquidity for a major lender and publicized by the mainstream media. The MSM is where the blogosphere was about two years ago now and the crash is just beginning. A lot of people are going to get hurt, but most deserve what’s coming.
Most do not deserve what is coming! Most Americans are hard working, bill paying and generous. Most did not get caught up in this fiasco through any fault of theirs. They are caught up in this fiasco through 401Ks that have purchased over priced stocks and bonds that have purchased CLOs and CDO’s, and through flippers that created a steadily increasing real estate tax, and through trusting their employers to grant them modest wage increases to keep up with inflation only to see their jobs exported to Vietnam. These innocents did nothing wrong, they bought within their means.
Most do not deserve what is happening and certainly what might happen.
You do not wish to know what I think will happen.
Well said Hoz
‘Most do not deserve what is happening and certainly what might happen. ‘
Unlike some on this blog, I do not think this is the apocolypse. The major result will be a return of housing values to 2000 levels, which will hurt many people but not those who didn’t do anything rash or silly during the past seven years. Those who lived on their “equity” will be hurt; those who have not probably won’t be hurt that badly.
I don’t agree. You have to take the “enthusiasm” of the last 4 years and reverse it. That’s what’s going to drive the market down like a rocket fired from above, downward into the earth.
We’re going to overshoot badly on the downside. Without intervention, I see a depression on the way. This isn’t just about housing, don’t you get it? It’s about the non-productive nature of the American economy. Not only have people been living off credit, they’ve let the means of production fall into disrepair, be shipped abroad and the incentive to be a producer be raped by government meddling.
I don’t consider “money shufflers” like banks, brokers and the like to be productive. They are just the prime beneficiaries of monetary inflation which doesn’t create wealth, it just shrinks the ruler used to measure wealth.
Awaiting,
I think you’re looking at this from a narrow “housing” perspective. There is so much more to it as it is a CREDIT bubble (increased housing prices just being a symptom of the bubble).
EVERYTHING is affected by the credit bubble, and the snap-back effects from the tightening will reverberate throughout the entire global finacial system, IMHO.
Hope I’m wrong, though…
‘I think you’re looking at this from a narrow “housing” perspective. There is so much more to it as it is a CREDIT bubble (increased housing prices just being a symptom of the bubble).’
Sorry, but I think you’re overreacting. The US economy is astoundingly resilient. 9/11 was barely a blip and record high energy prices have not produced the hyperinflation predicted by those on this blog. There will not be a depression, but a moderate recession for a few years.
yes well said. but there is a part of me that says how could you fall for this?
Your 401k gives you the choice of what to invest in. If you invested in a Real Estate Fund, you are ignorant of what’s going on. What you don’t know, CAN hurt you.
I took all my 401k out of the stuff I could invest in yesterday. I know lots of people just say leave it sitting in there and don’t pay attention. Then I say you probably can ride out some of the huge spikes if you just watch the market each week and move it out if the market starts to go down more than 2 days in a row by a lot. They think that is a horrible idea. Well I did that and don’t mind watching my 401k money sit there. I also moved my IRA and Roth IRA money as well. So yeah investing in stocks is risky. But why can’t people who are investing be responsible for what they are investing in. I would be sad to lose a lot of my money but who am I to blame? This is why I think that forcing the 401k on people is a horrible idea.
There are people out there who try to not take huge risks and live within their means and saving.
Its really hard for me to imagine an actual great depression happening again. A horrible recession where people stop consuming so much of the stupid outrageous things that americans are known for, yes, but everything to completely stop seems a bit much.
Do you think they felt that way in 1929?
They did.
All is not well in i-bank world.
“Bear, Lehman, Merrill Trade as Junk, Derivatives Show
On Wall Street, Bear Stearns Cos., Lehman Brothers Holdings Inc., Merrill Lynch & Co. and Goldman Sachs Group Inc., are as good as junk.
Bonds of U.S. investment banks lost about $1.5 billion of their face value this month as the risk of owning the securities increased the most since at least October 2004, according to Merrill indexes. Prices of credit-default swaps based on the debt imply that their credit ratings are below investment grade, data compiled by Moody’s Investors Service show.
The highest level of defaults in 10 years on subprime mortgages and a $33 billion pileup of unsold bonds and loans for funding acquisitions are driving investors away from debt of the New York-based securities firms. Concerns about credit quality may get worse because banks promised to provide $300 billion in debt for leveraged buyouts announced this year.
http://www.bloomberg.com/apps/news?pid=20601109&sid=aKsqEJVi3TZc&refer=news
Moody’s Says Some `Alt A’ Mortgages Are Like Subprime…….
Oh tell me it isn’t so
http://www.bloomberg.com/apps/news?pid=email_en&refer=bond&sid=aMoeHFRFze1o
Gray Davis was an idiot who overspent based on dot.com money going on forever. Arnold is just another has been politician that has upset everybody in one way or another (keeping my language family friendly for you HBBers). I don’t think CA would be any better or worse whether Davis or Arnold. It was going down hill regardless of what clown is in the Gov’s mansion. In fact, you could have stuck any number of the other clowns that ran in that circus election (Gary Coleman, Larry Flynt, Gallagher, Mary Carey, Angelique, Cruz Bustamante {former LGov}, etc) and the state would still be in the same sorry state. I voted for the only qualified person (Tom McClintock). But Hollywood won over the most qualified and experienced. At least McClintock is now LT Gov. But state is still in sorry state and going down hill fast. Glad my family and I are out.
The LG is John Garamendi
http://www.ltg.ca.gov/
The news about declining sales tax revenues is pretty big. It’s not adjusted for inflation, which means overall sales activity is down even more in real terms. They can fudge the GDP numbers and employment numbers all they want, but there’s no way for them to deny the fact that there’s less money coming in. I bet we’ll be seeing similar news about counties in Florida, if we haven’t already.
Yes. State governments can’t print money. They’ll be the first to raise tax rates. Hmmm. Which states don’t have state income tax?
three unintended consequences from the subprime hedge fund mess.
1. those that can’t get their money out of some funds will probably redeem from others just to get any money out.
2. the money they pull out won’t go back into other hedge funds.
3. who is going to buy all those bonds that banks now have for those LBOs? if the banks have to fund those LBOs, how will they do it? do they have enough money?
if I were to label early a potential black swan, it’s the banks and those LBO bonds.
flipping = I buy it, do nothing to it, and hope for some greater fool to pay me a higher price. I detest flippers - now those holding the bag equalling floppers.
not to be confused with rehad, or fixers. Those that find properties, actually fix them and sell them for a higher price. Those folks have added value to some blighted area. Still, some of them are now holding the bag. But I don’t detest someone doing some work to earn some money by fixing up a property.
Cramer must have some inside information on a crop producer in Columbia he is milking for all its worth.
OK let’s see if we can’t round up the pertinent facts, in broad strokes:
1) Housing inventories (new and used) are very high, records in many markets, and sales rates are low, again, multi-year record lows in many markets.
2) Housing prices are very high, when measured against incomes or equivalent rents.
3) Housing prices are falling, according to the NAR, for the first time since the Great Depression.
4) Foreclosures are at record levels in many markets, and must be at least near record levels nationally. Trustee sales, REOs, and REO auctions are beginning to proliferate.
5) A very large “lump” of subprime ARMs are due to reset significantly higher over the next 9 months (and trailing off from there). A couple years later, a significant “lump” of Alt-A ARMs are due to reset.
6) Subprime lenders are going kaput at breakneck speed because investors have lost their willingness to buy the notes or their derivatives. Now, even the Alt-A and prime lenders are starting to suffer, too.
Not to even mention the cultural trappings seen recently which are indicative of asset bubbles (I speak of shows like “Property Ladder”, “Flip This/That House”, “My House Is Worth What?”, articles in Time Magazine about how we love our residential RE, etc.)
So, in a caustic hyper-competitive (for sellers) RE market environment, in which the pool of potential buyers has been decimated by fleeing MBS investors, amidst a looming subprime orgy of resets whose borrowers are likely to be underwater yet unlikely to find new loans, and where even Jim Cramer is pronouncing how much cheaper it is to rent than buy, uh, why again is it “A great time to buy a home”?
Yes, I think I will continue to rent and hold on to my SRS holdings (hedged, of course).
Good Summary . I also want to mention that I think that it’s wrong for a talking head of a business show like “Crammer” to suggest to people to walk on their contract obligations . Is he telling the people the whole story and that they might have a huge tax bite if they walk ? I think when it comes to contract promises ,I don’t think public figures should be advising people on legal issues or liability issues and tell people to just walk . Every case is different regarding the best course a person should take .
This man Crammer crossed the line in telling people to walk without any regard for what the penalty might be for such actions on a legal level .
It’s one thing to tell the truth about a market down trend in real estate and to disclose the facts regarding the economy ,but to tell people to walk on their contracts obligations was not very intelligent on his part IMHO.
Hang Seng down 767 (3%)
Nikkei down 290 (1.7%)
Dow futures down $132
Oof!
Nikkei now showing down just over 400…
Let the real fun begin (ok, maybe that’s just me) - the suits start flying: http://tinyurl.com/3bd4mh
I haven’t been checking on this great blog lately, but had to after seeing the markets today, apparently not bouncing back as it looked like they were going to, apparently having to maybe maybe maybe finally really take seriously the idea that housebubble sh*t might be hitting the fan?!
And as usual, a cursory look here makes their bullish delusions about it not being that bad seem that much more delusional. I knew it must be getting bad too if even that Cramer guy was telling people that this stuff must be taken seriously and they must sell their ‘non-performers’ at the end of last week gasp and that category seemed to include anything most consumers would find the least bit discretionary. “oof” indeed!
I’m wishing I’d sold some of that stupid index fund crap my husband is so into buying with the 401K recently, but mostly I’m just glad he didn’t force us to buy an overpriced house as he sooo wanted to in the last couple years.
And thanks for this blog that made me feel okay about my position before the rest of the world stopped treating someone who wouldn’t drink the koolaid like she was krazy!
Oh my god, I just looked at Home_a_loan’s post above…Cramer wasn’t really telling people they should *rent* right now?! It’s seriously gotta be all over now…
cheers all, though things might start getting decidely uncheery for a lot of people sad to say…
Oh my god, I just caught some of the ’street’ video links of Cramer chatting about homebuilders and real estate (haven’t watched him, or anyone really, in a long time) and he’s just trashing the whole scene….
*but* of course saying all that needs to happen is for the fed to cut 100 basis points and all is well?! I don’t get it?! Is he really convinced all that needs to happen is for rates to go down again and all will be well or is he just talking about short-term what you’d need to do vis a vis homebuilder puts or whatever?
anyway…
cheers!
Asian markets continuing sell-off, now European markets are selling off.
Korean market is down more than 5%.
asis is getting pounded, does it spread to europe and then the US?
Got Oh?
Hey……..the US is where it started……..back to you guys.
Don’t drop the ball now will you
moneybox: Commentary about business and finance.
The Real Morons of Orange CountyWhy America’s most reckless real estate investors come from Irvine, Calif.
By Daniel Gross
Posted Thursday, July 26, 2007, at 5:05 PM ET
Until recently, Orange County was the New Jersey to Los Angeles’ New York City. Upscale, but generally ignored, and nowhere near as chic or happening as its urbane neighbor. Television helped change the image, with glitzy offerings like The O.C., Laguna Beach, and The Real Housewives of Orange County.
http://www.slate.com/id/2171235/
Thank you everyone for the comments. My apparent misunderstanding is the difference between a flipper and a person who fixes and resells a property. I am all for the latter. However, revisiting the former, I am still a capitalist. If someone wishes to buy a property, hold it for a short period of time, and then sell it, so be it. They take the chance that the underlying value of the asset goes down. Again, sans fraud, there is nothing inherently wrong with what they are doing. People do not have to purchase their “flips”. Those that do take their chances. I would be much more worried if government stepped in and forced individuals to either live in their homes before selling them or place some other regulations on buying/selling homes. I am sure that most of us would regret additional government intervention. You can label me as laissez faire, but I think the market works. Unfortunately, there are a number of people too uneducated or intelligent to make good decisions. This group is not among them.
Tired of the seller-who-can’t-cash-out sob stories. The plight of prospective first time buyers is totally ignored by the media. What about the families forced to move and give up career opportunities because of insane housing costs? Not as tragic apparently.