Bits Bucket And Craigslist Finds For August 1, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
To donate by mail, or to otherwise contact this blogger, please send emails to: thehousingbubble@gmail.com
PayPal is a secure online payment method which accepts ALL major credit cards.
Links
-
November 2024 M T W T F S S « Sep 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Photo Submission: hbbphotos@gmail.com
View the HBB Photo Gallery *updated 4/13/2008
Pending home sales up 5%. I’m shocked. Yes, traditionally June is up from May, and we’re likely to see a big drop for July. And, they revised down May, so it was a lower base and therefore, the June is likely to be later revised down as well.
Still, I’m shocked thery were able to report an increase in sales.
shouldn’t we see a slight volume increase as prices decline ? like stocks
“Falling Knife Catchers Lock in Lower Comp Prices”
“shouldn’t we see a slight volume increase as prices decline ? like stocks “
No. These are two very different mechanisms for what the propeller heads call “price discovery”. In a weak stock market, prices decline quickly as volume spikes. Price discovery is nearly instantaneous.
In a weak housing market, sales volume declines rapidly as prices stagnate. Prices can’t move without transactions to establish new comps. Homeowners and the media may take the view that “Well, OK, sales volume is down but who cares since prices are firm”. But they are looking at stale prices. The only way for a homeowner to discover the current price for his home is to sell it.
Nice post!
“In a weak housing market, sales volume declines rapidly as prices stagnate. Prices can’t move without transactions to establish new comps. Homeowners and the media may take the view that “Well, OK, sales volume is down but who cares since prices are firm”. But they are looking at stale prices. The only way for a homeowner to discover the current price for his home is to sell it.”
Yes, and if you think a bit more, you’ll see this is very consistent with Flatf’s point. Note his use of the word “slight”. Some bit of seller capitulation will result in *slight* transaction increase with inflection from flat price trend to downward price trend.
Sorry to reply to my own comment. But furthermore, if you look at CA’s bust of early 90’s, you’ll find that sales volume generally *slightly* increased from (roughly) the early- to the mid-90’s; and mid-90’s marked the bottom in prices.
P.R.A.V.D.A.
Prices really aren’t verifiable data anymore
Clever. I’d imagine there are some readers who are too young to remember Pravda, in the frequently-in-the-news sense.
T.A.S.S.
Totally asinine sales statistics
It’s almost like “trading halted.” And in the past few days there is reason to think housing prices could be down ANOTHER 5-10% when the market “re-opens.”
There are always going to be people who have to move, for whatever reason. In all market price falls, you always have people waiting to see where prices go, but eventually they have to move. I know dozens of people who have been in the same home for over a decade, so the bubble didn’t affect them at all (HELOC, etc). Of the people I know who moved, they all “made money” on their homes because of 10 years of apprecation, so they had no problem selling for well under peak price 2 years ago.
Another thing to consider is that even though housing prices have fallen, the money made when the homes were sold at peak is SOMEWHERE. Someone cashed in on the bubble, just like someone cashed in on the dotcom bubble. The money doesn’t disappear, it just gets wealth transfered. Those people who profited big time will eventually spend the money somewhere — giving people money to spend on housing if needed.
Bubbles don’t pop, they just shift the air around to new ones.
I’m sorry but much of the paper value evaporated just as it did during the .com bubble. If you didn’t act quickly and transact, the “value” is nothing more than vapor. I believe a majority of those who DID transact turned right around and bought more housing which too is nothing more than vapor profit.
Or the Dallas Mavericks……
The money that went into China has helped to finance the largest buildup of excess manufacturing capacity in the history of man. Their factory bubble is very similar to our housing bubble. If they’re lucky, they will work through it in 5 years or so. If not, they’ll look like the last 20 years in Japan.
I talk to buyers who source out of China all the time and they say that they have tremendous negotiating leverage. If the suppliers don’t meet the offered price and terms, you can just walk across the street and find someone who will.
The perverse incentives are and have been too strong. You get paid (in the stock market) for building capacity. Nobody seems to be asking if you can make a profit at it. It’s a lot like the telecom frenzy where you got paid for building the network and signing up customers even though you were losing money. The assumption seemed to be that you could make it up in volume.
“the money made when the homes were sold at peak is SOMEWHERE.”
Check retail sales and the trade deficit over the last 5-10 years.
My thought exactly. That money went to china!
Exactly, the bubble in foreign held debt. That bubble will go into precious metals and energy, and I’ll be loving every minute of it.
The Chinese bought over $100 billion in CDOs. We have the houses and they have the worthless paper.
As weird as it is to say it…
$100 Billion ain’t much in the scheme of things~
wow :boohoo: …yeah :crazy:
:p
The SOMEWHERE is likely in a new house, purchased at peak price. Very few walk away at peak with cash. The lion’s share of the gains are usually on paper, in the ledger, and never realized.
During peak years, sellers were walking away from closing with $400 billion a year. Of that equity extraction, only HALF went into down payments on new houses. That is $200 billion a year that went elsewhere.
Add $300 billion a year that came out of houses through ReFi and HELOC.
Except that the downpayment money isn’t somehow stored in the walls somewhere, it was transferred to the sellers/builders. So the builders paid wages, salaries and dividends, and probably reinvested in land and other assets, thus transferring the money elsewhere in the economy.
Even the money sent to China didn’t just sit there, they used it to buy Treasuries, which sent it right back over here. Money doesn’t sit in assets, it keeps moving through the economy.
Many acquaintances I have seen over the past four or so years, sold and then patted themselves on the back for being so smart, and then turned around an went “all in” and bought two or three more homes to cash in again…and they are either already BK or headed there because the homes aren’t selling.
The real winners were executives in banks, hedge funds, builders, mortgage co’s and r.e. brokers. While there were some older people who understood these last few years were a ponzi, most of the 20 to 40 year olds jumped right back into the market…at least IMHO
AB:
The funny money disappears when the greatest fool can’t pay his mortgate, the bank forecloses, and they can’t get enough from the sale to cover their liability. Then they have to increase mortgage rates to try to compensate for all that loss.
Good luck on that one, Mr. Bank.
With the exception of those who sold, the rest of the money did disappear into thin air. Actually, it didn’t disappear because it was never real, but the opportunity to make the money is now history. Homes are not a store of value, they are an expense, and should be thought of as such.
Darrell,
Many people think we’re at the bottom of the dip, but in
Anthem, AZ area we have 700+ homes on the market, and 31 home sales in July which equals a 23+ month inventory.
Prices are coming down, but very slowly. Lots of people with equity are still holding onto those “hoping” prices.
Lip
Many people think we’re at the bottom of the dip,
Yes all 500,000 Realtors
500,000 = only the realtors in California
Or one for every 50 adults in the state.
Talk about a bubble…
Do pending home sells include bank forclosures?
Pending home sales include bank REO’s if they are sold through a realtor on the MLS. If they are sold on the courthouse steps then no.
Don’t pending home sales include contingent sales?
Seems like things are going contingent around me, but not necessarily selling.
My take: Desperate sellers are taking offers that are iffy. MAYBE they eventually close. Not my opinion of market strength.
Another observation: People with pre-quals locked in at lower rates in May and April rushed to buy in June when rates started heading higher so they could take advantage of their lower rates. Not sure if it really works this way as I’ve only locked rates after signing a purchase contract, but I know of two couples who claimed this as their reason for signing a purchase contract in June.
lurker
That definitely calls for more research. Pending sales could go up as more and more contingent sales ‘hang fire.’ Until the contingency occurs, the contract stays pending so that number can go up even if new contract signings are down. Anybody have either first-hand knowledge or suggestions on where to start digging?
I think this information from NAR suggests that contingent contracts are included.
http://www.realtor.org/Research.nsf/Pages/PHSBackground?OpenDocument
That is the other factor, isn’t it. Contracts are up in June, but how many failed to qualify? I’m guessing a lot.
Not in Florida’s MLS systems, according to my friend in the business. There may be states where a signed contract changes the listing from “active” to pending,” but not here, if there are any contingencies (as in, 99% of the time). Even an inspection is a contingency. Once the contingencies have been cleared; or the days allowed for contingencies to be cleared plus, in the case of condos, the kickout period, expire, then the status moves to “pending,” which means all that remains is the closing — no financing approvals stand in the way, nada.
I do not know if MLS “pending” is equal to the national pending-sales “pending, but it would seem odd if it didn’t.
Where I live in Ohio we always had to have a purchase contract to lock in a rate and it had to be closed in say 30 or 60 days. If you were one day late closing the rate could change. Sometimes up, sometimes down.
Typical - someone wants to save $35,000 over a 30-year mortgage, and instead overpays for a house by $100,000.
I am more shocked of the low mortgage applications reported today.
So the pending sales are going up but the mortgage applications direction is down and big time, I think I read 6 month low.
Maybe people are able to buy houses without mortgages (i.e. high end market), maybe pending sales won’t materialize because of buyers can’t get a mortgage…
Weird
Remember refi’s. That is considered a new mortgage, unless they are getting an equity loan.
Related Bloomberg story:
http://tinyurl.com/2ynvuf
“Today’s pending home sales report runs counter to other housing market data, which has indicated the slump is continuing. The Mortgage Bankers Association’s index of applications to purchase homes fell last week for the third consecutive time and the total applications measure declined to the lowest level since mid-February, the group said earlier today.”
Bogus numbers from the NAR on the supposed increase?
“It is too early to say if home sales have already passed bottom,” said Lawrence Yun, senior economist at the National Association of Realtors in Washington. “Still major declines in home sales are likely to have occurred already and further declines, if any, are likely to be modest given the accumulating pent-up demand.”
There’s another quote to save. What a tool. Spring was slow and summer was slower, but there’s going to be some miraculous surge in sales in the fall and winter due to “pent-up demand”?
That was before the latest housing mortgage meltdown hit the front pages and the stock market. I suspect, lots of those pendings are calling to cancel!
Why don’t they just report sales, and that’s it? What’s with this counting your chickens before they’re hatched sh!t? You either sold it or you didn’t. Not that hard to figure. Is this some sort of realtor carryover that they use at the local real estate office to make it look like their particular office is doing well, and then it just gets reported up the food chain to the branch office, then to corporate headquarters, then to the NAR where thet regurgitate out a bogus meaningless stat? If that’s the case, then I’m a millionaire, I just have to wait til all my investments go up, in the meantime, sobody peel me a grape, give me a massage, and kiss my ass. I’m a millionaire afterall, I just need to catch you on the flipside with my payments.
Each state sets the way a contract can be entered into the MLS. Realtors have to follow the guidelines contingency, pending, etc. or they can lose their MLS privileges. We used to argue all the time about sales going to pending when there was a house to be sold by the buyer that might never get sold to complete the contract. We said it tied up the seller’s house and other realtors would not show it. It also gives false numbers in the MLS.
These government numbers are totally worthless crap, just check
low inflation numbers at your local food store.
Enron Accounting has Invaded Government Reports. The “tooth fairy” brings the main street media numbers, and even Ben’s Bloggers report them as meaningful.
These aren’t govt numbers. They are NAR numbers.
If Government = Tooth Fairy, then NAR = Great Pumpkin?
Inflation? Why, yes, Mr. Bernake there is a lot of inflation. Just check out the increased prices at local fast food restaurants. The Carl’s Jr. chain raised price 10% to 15% on hamburger combo meal recently. THAT’S A big ouch in my pocketbook… having 2 kids… we make a lot of fast food stops.
Also, look at McDonald’s… I use to pay between 5 and 6 bucks for most large “value” meals… now, it’s more like high 6’s!
Have you bought gasoline recently? It’s around $3.00 per gallon! Sucks to have to drive somewhere these days.
Many of these pending home sales will fail anyway as people will not be able to get a mortgage. In addition how many of these are still pending from May? Does this mean that a house who went pending in May, but did not close is being counted twice?
“In addition how many of these are still pending from May? Does this mean that a house who went pending in May, but did not close is being counted twice?”
My favorite ones are the house listings on the Phoenix MLS that are supposedly “pending” for several months, even a few since 2006. Obviously, some bad data/lazy listing agents.
There has been a “sale pending” sign on a Beacon St house in Newton, MA, since about March. Nice pile of bricks but I’m betting the buyer is having trouble selling their old one.
“Beacon St” (beacon_st) was a poster here once, a young lad or lass, who believed all his egghead PhD bosses knew better - that there wasn’t a bubble and all was well.
An inference was made that houses on such a street would hardly have a problem in a market slowdown.
This was back in 2005.
Lots of “genius” is being revealed these days.
http://www.fool.com/investing/general/2007/08/01/more-housing-bull.aspx
All the homeowners that cheered the boom have no right to complain about the new assessments…
http://tinyurl.com/ywffv8
30% rise in home value?
If you live in Palatine Township, you might have done a double-take last weekend when the property tax assessments arrived in the mail.
If you live elsewhere in Northwest suburban Cook County, you already should have received your new assessment — or be prepared for possible sticker shock in the next few months.
Palatine-area officials say they’re fielding a lot of phone calls from residents wanting to know why the new assessments are so high.
On average, Palatine Township residents are seeing assessment increases of 30 percent to 35 percent, township Assessor Terry Kelly said.
Elk Grove and Maine township property owners received their assessments in May and June, and those numbers also were substantially higher.
Officials from both townships cite an increased number of assessment appeals.
Mike Marks of Palatine was among the 38,000 property owners in the township to get the notice over the weekend.
“I was just totally shocked by it,” he said. “To be honest, I thought it was a mistake.”
His assessment rose more than 20 percent.
“I’ve lived here since 1988,” he said. “This was a heart-stopper.”
Wheeling Township residents are up next. Their notifications are to be mailed Sept. 21.
Ooops my boss lives in Palatine.
On average, Palatine Township residents are seeing assessment increases of 30 percent to 35 percent, township Assessor Terry Kelly said ???
Lets think about that for a moment….ll of a sudden this county assessor is going to receive a unexpected surge in revenue and guess what ?? They will pi$$ it away as fast as it comes in….
Albeit, California’s Prop.#13 has some inequality in it but it put a stop to the greedy hand of municipalities…
it also ruined the public school system. once the best in the country now the public schools are near the bottom. a catastrophe. thanks homeowners for short sightedness and looking out for yourselves only.
Some inequality. Uh it ruined the public school system. once the best in the country now the public schools are near the bottom. Prop 13 was a devastation.
Some inequality? It devastated our schools. it ruined the public school system. once the best in the country now the public schools are ranked near the bottom.
Some inequality? The greed of the municipalities? what about the greed of the homeowners? It devastated our schools. it ruined the public school system. once the best in the country now the public schools are ranked near the bottom.
Wow! my apologies for the quadruple post!
Yes, your last post was as bad as the first.
at least you are consistant Des
oh i see the tactics at work, make a personal attack if it is something out of your comfort zone. typical.
Melvin — if you’re referring to the quad posts, no, they were just poking fun — they were not being critical. Humor is an essential part of the success of Ben’s blog, IMO. Multiple posts often occur when there are server problems or delays. What works best for me is that if it looks like my post does not take, I open a new window to confirm. Then I re-transmit without re-typing a single character. The blog software has a way to confirm exact duplications and will kick it back with a message to such effect.
thanks chip, kind of you.
But it still does not take away from the one-sided view of Prop 13. Yes, prop 13 is a disaster. Are 30% Y-Y increases in RE taxes any less of a disaster? One causes a public disaster. The other causes many private disasters. Why should the pols and bureaucrats get to determine what they will charge for the right of living in a community without some form of check (and no, elections are an insufficient and untimely check on this power)?
If the gov was more reasonable about how they tax people and spend that money, then the draconian measures of the prop 13 revolt would not have been necessary.
Some middle ground needs to be found. Govs and individuals will look out for their own needs first. Neither should be trusted to look out for the public good.
ruined the public school system ??
Must have touched a nerve prompting the multiple pounding on the left click….
Our schools do not lack revenue….They lack discipline and the impossible task of managing multiple ethic groups in the same classroom with grossly different levels of competency….Many public school systems that are concentrated with the same ethnic makeup’s are “Stellar”….Take Cupertino, California, mostly Asian….Prop #13 has not effected them one bit and I can name many others…..….
affect not effect.
Prop 13 has had a huge negative effect on the schools - I was one of the last kids who graduated before Prop 13’s effects were fully felt. I, myself, was not affected.
I think I’m also one of the last few people who use the words effect and affect properly.
The reasons schools have suffered so much in the wake of Prop 13 is that the schools today are filled with non-English speaking students, which California (well, certain Californians like Reagan and Deukmejian and Wilson) needed to pay the increased sales taxes to make up the revenues lost by slashed property taxes.
Well said Dani and Chili. Prop 13 was a disaster.
If I had kids and could afford it, I would send them to private schools. Our public school system is broken and has been for many many years.
Prop 13 was a disaster for the tax-n-spend govt.
Wrong, Dani. Think of affect as “cause”. “Effected” is correct usage in this instance. Sorry. I’m particular about its correct usage as well.
I recently had a conversation with a lady whose kids go to school in Cupertino. She said the school asks the parents on a regular basis to donate cash in order to keep certain services (such as PE and bussing). The parents in that neighborhood can afford it, so they pay.
Alternately, at the school near my house (West San Jose), almost all the kids are Mexican, and most don’t even speak English. I don’t know if donations are being asked of the parents, but I’m sure that the parents couldn’t afford it.
Perhaps the difference in test scores between the schools has nothing to do with racial consensus (e.g., all Asian vs. all Mexican), and is soley a consequence of economic inequity (i.e., illegal “guest workers” vs. imported tech workers).
california schools or at least in my neighborhood california are for the most part an apartheid system. the schools are starving in the poorer neighborhoods. most if not all the kids who come from money go to private schools. it is shocking to actually see this disparity. the public schools are starved for money, the schools are falling apart quite literally thanks to Prop 13. the homeowners ‘revolution’
I don’t understand why California doesn’t think of a new way to get $$ to the schools. It’s not like poor, for crying out loud. I think the main barrier right now is that all the middle-class people are already paying through the nose to support their various private schools, so they selfishly won’t vote to support the public schools. But that, of course is just begging for HUGE social problems.
I should campaign!
There’s an enormous advantage in coming fron a educated family where academic excellence is valued and stressed.
How many middle-class kids start kindergarten not knowing how to read? Probably not many. They know their numbers and colors, and probably rudimentary arithmetic as well.
They’re comfortable with books, as their parents read to them.
Children of uneducated parents are already behind when they start school. That they don’t speak English is just a double whammy.
Correction: It’s not like WE’RE poor.
Poor writers, it seems.
i know what Calif should do to “correct” prop 13’s shortcomings.. have a state sponsored lottery and fund schools with that!
now, back to the future:
After it filters through the general fund and the bureaucracy about 3 cents on the lottery-dollar actually gets to the schools and a fraction of that to the students in the form of education..
Sorry, but there is absolutely no lack of funds at least in the LA County of Education, which includes LAUSD as well as a slough of others. I used to help implement financial systems there and if anyone were to actually see the BILLIONS of dollars of tax revenues that were being flushed down the toilet every year through inefficiency, waste, corruption, and incompetency, it would make anyone’s jaw drop. That was the year I started to really hate any mention of increasing taxes to “help education” or “for our kids”.
Big joke. Ohio did that. However they failed to tell the voters that for every dollar given to schools from the lottery, they took it away in the amount they got from the general fund. They used that ruse to pass the lottery and schools get not one penny more, but the state government gets more dollars to spend on themselves. We call it the shell game here and everytime gambling comes up on the ballot to fund education there’s meetings everywhere demonstrating this little shell game.
I think the poster was feeling rather silly for getting caught for re- wording his thoughts four times. I re- word my posts a lot too but am always careful not to hit the Add comment button.
Funny how all people are the same in so many ways.
Hi SKB:
Actually, I was correcting my own post. Sorry if I implied that the Melvin was silly. I didn’t mean to.
When assessed values go up, tax rates should go down to keep the tax burden at equilibrium… That would be much more fair. There is no reason on earth that someone’s taxes should go up just because a bunch of irresponsible idiots overpaid for nearby houses using suicide loans.
This is exactly what happens in Colorado. Back in the 90s the voters took the idea of Prop 13, but took it a step further. It locked govt spending to population and inflation. Govt can collect whatever it wants, but it can’t spend it without specific voter approval. AND, the voters are not disaffected. Since they have the control, they actually pay attention to what is going on in polotics. I’ve lived in half-a-dozen states, and the voters in Colorado paid WAY more attention to politics than any other state I’ve lived in. Not even close.
TABOR is great. Since the state and muni gov’ts knows that there will never be windfalls to piss away they are a lot more careful with their budgeting.
That said, some communities have exempted sales tax from TABOR. In Larimer county they have made an artform out of getting people to come down from Wyomimg and Nebraska to shop. You would think that someone would have built a mall in Cheyenne by now.
There was a mall in Cheyenne for years, are you saying it’s not there any more? Wyoming towns like Casper and Cheyenne are too small to support mall “churn” like we see in Colorado where every couple of years somebody builds a new one a few miles away to steal all the business from the older one(s).
I don’t know if there is one in Cheyenne. I just assumed there wasn’t judging by all the Wyoming and Nebraska license plates at the local malls on weekends.
Triennial assessments are a b****. This is just adding to the pain of the increase in mortgage rates. Try selling that $550,000-$750,000 3/1.5 (in some northern burbs) with a 7% interest rate and taxes that have jumped from $7000 a year to $10,000. Something tells me that those who could afford the payments wouldn’t want to live in 1700 sqft house on a 6200 sqft lot.
Next year (when they have to show the new taxes as their current taxes) is really going to hurt for the northern burbs. Shame because 2007, in the words of one HB, already sucks.
The idea of paying that amount of property tax would be mind boggling in Colorado. A house in Larimer county would have to be assessed at 1.5 million to have a 10K property tax bill.
That’s what happens when you’re held hostage by the thugz in the public sector unions here in the rust belt.
http://www.chicagobusiness.com/cgi-bin/news.pl?id=25854&seenIt=1
The city of Chicago released preliminary budget figures Monday for 2008, saying it projects a $217-million shortfall.
Rising personnel costs and a slowdown in revenue sources, such as the real estate transfer tax, were cited as reasons for the shortfall, according to a statement from the city’s Office of Management and Budget.
“We are not alone in facing a budget shortfall this year due to a slowing real estate market and the current mixed revenue environment,” said Bennett Johnson III, the city’s budget director. “Cities and states nationwide are struggling with similar financial challenges.”
Oh, boo-hoo! Gee, they think their house should double in value/price in 5 years so they can stick some new foolish buyer with the bill and strike it rich, but now when their house gets assessed at the higher prices, they start whiner!
Maybe the county should toss back at them some of the BS “fundamentals” that fueled this Bubble: Why is your assessment so much higher? “Because real estate always goes up!” “Because everyone wants to live here!” “Because real estate prices are no longer based on salaries in this New Era!” and so on. Seems fair to me!
When will the sheeple wake up to the fact that LOW housing prices are in the best interest of almost everyone, save for the people who make money on Bubbles?!
Note that I DO feel sorry for all the folks who did NOT participate in the Bubble and who are being hosed by this increase in property taxes… Didn’t mean to come across as cold-hearted to the innocent.
Yes , I also feel sorry for a owner that was minding their own business and they got whacked with a high increase in taxes ,that will in some cases force the stressed borrower to sell.
Because real estate prices determine property tax and insurance increases ,real estate is not a investment that inflated prices doesn’t have far-reaching effects .
Some fake market that was riddled with unqualified low down buyers and speculators ,with their liar loans ,is going to affect the entire community . The RE industry and the Wall Street greed dogs had no right to do this . The borrowers had no right to submit liar loans .
Buyers that refused to submit a liar loan or backed off when they knew they could not afford the RE prices will be rewarded in the future for being sane .
In VA, property tax is assessed every year at market value. From 2002-2006, I saw my property taxes nearly double*. In 2007, my taxes actually went down, as recent (2006) sales were lower than 2005, thus lowering my assessment.
* to partially make up for increasing assesments, the local politicians did lower the property tax rate from a little over 1% to 0.9%.
AHM is down to a buck. It’s teetering on foreclosure since it is unable to lend (financing has dried up). Also, AHM said it did not make subprime loans, but ALT-A and prime.
oops teetering on BK LOL
And IMH is down another 16% so far today (US time).
And picking another 2 REIC companies at random, CFC and BZH both down 3-4%.
Ain’t over yet.
DO NOT BE TEMPTED.
Do not cover yet. I have made extra $15K today, but I am not covering my shorts yet.
There is much more blood comming out.
That’s the one that spooked the market (DOW) yesterday when it fell from triple digit gains to -150 in a couple hours. Shows folks are very very jittery. Like playing Jenga.
Kerplunk!
http://www.toycatalogs.com/mt506.html
i had that game
Sheesh…trying to follow the DOW chart today is like trying to swat a fly.
Did the PPT crunch the numbers maybe? But jobs fell well short of forecast …
Welcome back Ben,
pending home sales post surprise gain. Dip buyers?
Thanks, we just got the server back up.
I tried to get on this blog earlier and all that came up was yesterday’s articles. I had a Chicken Little moment and thought maybe the subprime had caused the entire world to end. Glad you’re back, Ben.
Question for you Lost….How is the public school system in Utah ???
Gwynster;
Yes, I would say those buyers are definitely Dips.
SubKommander Dred
This “opportunity” smells fishy to me. If they really have the cash to fund this project, why do they need my good credit to do so?
Forgot the link:
http://pensacola.craigslist.org/rfs/386610753.html
“The whole project should not be much more than $250K.”
That’s one way of putting it. Good luck with that.
“My credit is tied up right now …”
Translation: My credit is hosed and I now need to hose yours.
Idiot is tied up in Clearwater. I can tell you NOTHING is selling here, especially waterfront. Today in the paper people were moaning about insurance again.
Cool - the fella is throwing in a physician and a changing room.
I thought it was a document and an escape. Probably closer to that, anyway.
I work in an industry–publishing–that isn’t known for great salaries, but the pay is perfectly fine. Median incomes easily put an individual within the top 15% of wage earners in the nation. The other day, I was talking with a coworker, who was complaining about how she and her husband have difficulty making ends meet. She mentioned that there are very few areas where she and her husband could cut costs. I asked her when she bought her house. The answer: 2004. I thought, “Well, that explains it.”
This person is generally quite intelligent. So It is beyond me why she would be so stupid as to put herself in a precarious financial position.
Greed. There’s absolutely no other way to look at it.
If they had to move, they should have put 20% down, gotten a fixed loan for 30 years, and accepted what the market would provide in their affordability range (maximum 28% gross towards mortgage+overhead).
If they didn’t accept what the market would provide within those parameters, they were greedy — either wanting more than they could afford, or hoping prices would appreciate.
Are you the Dan from VA tech that was asking about SBIR grants? If so, I had a some thoughts on where NIH is likely to head back under your original post.
Nope. Different Dan.
We need to get your to wear different shirts or nametags or something >; )
Different name tags.
VT Dan here… your comment on the SBIR grants drying up is what I fear. NIST ran out of money last year and I have a feeling that my speciality (Virtual Reality) is likely to be one of the first to get cut!
NIST, NFS and NIH are some of primary sources of grants in this area.
I think we will see a vicious cycle of cuts leading to job loss leading to housing foreclosures leading to lower taxes and more cuts.
The only way out will be a LONG deflationary depression or hyper-inflation followed by a LONG depression (stagflation).
Damnit, flipping timeout eat my long post.
In a nutshell, can you use your current grants to leverage yourself into a faculty or staff researcher position?
eat=ate grumble grumble
I have looked at cutting recurring monthly expenses and have managed to cut back $600/month, but most people are not in a position to do this! I think I know the main reason we are seeing wage stagnation… health insurance.
Because I run my own company I get to see the TRUE costs of employment and have to bear the full burden of my health insurance and the full 15.3% social security/medicare.
Health care costs are eating up all of the pay raises that everyone would otherwise be seeing. Shopping around I found a plan to cover my entire family for $150/month vs $670/month under the companies group plan. Granted it has higher deductibles and co-insurance, but because my family is healthy I realized I only needed protection from the 10’s of thousands of dollar expenses and not the couple hundred dollars here and there type expenses.
Once I realized that hyper-inflation is the only way out of our FIAT money system and national debt I promptly canceled my whole-life insurance (saving $128/month).
Most people don’t have the savings or flexibility to make those kinds of adjustments. House + Car + Insurance + Cell + Utilities + Cable + Internet + HOA eats up the vast majority of peoples income. Not to mention any credit card debt/interest payments.
I have a feeling that we will see a major decline in the cellphone and cable/satellite TV markets as these bills can eat up a combined $100 to $200 per month alone!
So… when do you think that the health care bubble will pop? Prices are obviously over inflated and artificially propped up, but the government seems more likely to continue this!
Not until tort reform. Malpractice insurance is the major cost that keeps rising and forcing up health care costs. Well, that and if we were to actually get rid of the illegals that show up at emergency rooms but don’t have insurance.
There is a major hospital across the street from my house. However, if I get into a car accident at the corner where that hospital is, they won’t take me to that hospital. It isn’t a trauma center. I’d have to be driven about 10 miles away.
The city keeps pushing the hospital to open to trauma, but it flat out refuses. Trauma is a HUGE money loser because of the huge number of people that come in without coverage or ability to pay that they have to pay out the arse for.
Shockingly, the people without coverage are also the most likely to file malpractice suits.
It’s not just tort reform (although that would help), it’s they way we pay doctors (per procedure rather than a fixed salary), and the lack of price sensitivity of consumers (take an example of Tylenol vs a Cox-2 inhibitor, like Celebrex). Tylenol works pretty well for some pain at $0.06 per dose, Celebrex works better, but costs $0.40 per dose. If someone doesn’t face the price difference (because their premiums are paid as a withholding and they have a low co-payment), they will almost always choose the better performer even if the difference is pretty minor. Sure the price difference between those two is pretty small but it does widen on other drugs/procedures.
Insurance is supposed to be for things that actually have risk of impacting someone in a substantial way, not to spread the costs of basic treatments over a group.
I got a bill for some lab work $581. Since I went to a lab in the network, the lab agreed to accept my insurance companies payoff with no cost to me at $40. If my insurance hadn’t covered it I would have had to pay $581. Now tell me there’s no inequity in billing. If they can do the job for $40, why should someone else without insurance have to pay $581.
because, insurance does not pay most of the time, so to compensate, you have to raise prices else where.
I agree with Bluto, insurance should be for expensive procedures and everything else should be controlled by the market. competition would drive down the prices of basic treatments.
Maybe that’s the way to get healthy, financially capable, people to self-insure…make those who don’t buy insurance (when they can) ineligible to sue for damages for pain and suffering (but able to recover economic damages).
I’d love to be a fly on the wall when bill-paying time happens in my neighborhood. I can’t figure out why people are having a hard time making ends meet.
For example, a young couple down the street has an income of about $110k (I know this because she dropped it in conversation, and it is realistic for his profession; he’s an experienced helicopter mechanic). They recently bought a $240k house, which I verified by public tax records (not because I’m a stalker, but because I just can’t figure this one out). She says they have no credit card debt, but they did just buy a brand-new Explorer at $500/month.
They have two healthy kids, both of whom are young and do not participate in any after-school activities. She doesn’t work, so there are no childcare expenses. And, their house is sparsely furnished.
Nonetheless, she tells me in casual conversation the other day that foreclosure is looming. They bought the house with a sub-prime, interest-only loan and a two-year, prepayment penalty. (Huh? With that kind of income, they should have been able to get much better loan terms than that.) She says they just can’t make it anymore. When I asked about savings and retirement, she intimated that they have none!!
Now, my spouse makes about $120k a year, and we manage to put away about 35% of his income without any hardship, and we are hardly frugal people. So, what am I missing?
Redhead,
I agree that somethin is rotten in Denmark. The numbers don’t add up. They should be fine financially on a monthly basis.
Absolutely rotten, particularly since he apparently isn’t contributing to any kind of retirement fund. She says that their house payment is about $2000/month, and they don’t have any discernible hobbies that would eat away the rest, unless he has a girl on the side. Or she’s snorting powder up her nose, which I don’t think is the case. It’s just weird. I have got to be missing something!
drugs.. gambling.. who knows.
gambling..
Prostitution? This is fun! I love gossip. Keep your ears perked and let us know the moment you glean anything juicy about her husband’s activities.
They have credit card debt. Everyone says they are paid off but I find that not to be true. Student loans maybe?
“..tells me in casual conversation the other day that foreclosure is looming..”
i find that admission a bit more than odd and out of place.. Did you console her and share that you’re in good shape? Did they ask for a loan yet?
somethin stinks but you’d be the best to judge what it is.. i’d keep my guard up and take nothing for granted.
I didn’t say anything about our financial situation, because I’m not looking to give a hand-out. They won’t learn anything unless they dig out themselves. Hardship is a tough and effective teacher. I know this from personal experience.
Also, I’m a bit cautious about people knowing anything about us, and we try very hard to live under the radar so to speak. The story out of Connecticut scared the crap out of me. Desperate people do crazy things, and I don’t relish the idea of making my family a target.
Anyway, I’m still very confused about the loan. Why in the world would they have settled for those terms with their income? Their credit must have been a disaster.
Bovine brains see opportunity to buy the dip in wake of international stock selloff…
International stocks hit by credit-market jitters
Fed not seen in a hurry to offer help; banks, miners drop
By Steve Goldstein, MarketWatch
Last Update: 9:48 AM ET Aug 1, 2007
LONDON (MarketWatch) — International stocks dropped on Wednesday as investors were again rattled by credit-market concerns, with a warning from the tenth-largest U.S. mortgage lender that it can’t pay its creditors and another from Australia’s Macquarie Bank of heavy losses in one of its funds providing the latest reasons for investor nervousness.
Markets last week saw heavy losses as several bond deals couldn’t get sold to investors, igniting concerns that a wave of private-equity interest that has helped stocks to rise for much of 2007 will come to a halt.
“It’s a sentiment-driven market,” said Peter Dixon, strategist at Commerzbank in London, noting the big gains in Europe on Tuesday followed by the sharp drop on Wednesday. “There’s no information that could justify this kind of volatility.”
In Asia, the Hang Seng in Hong Kong dropped 3.2% and the Nikkei 225 in Tokyo ended 2.2% lower.
http://www.marketwatch.com/tools/marketsummary/
I’m proud to be a bovine brain. I buy $200 per month international stocks outside my 401k. Inside my 401k 20% goes to international stocks. And then there is the matching, which is free money.
Moo!
Trust me, Bill, I feel equally foolish for being very long $US. No investment strategy seems worth bragging about these days…
“Deutsche Bank AG, Germany’s biggest bank, said profit rose 31 percent, beating analysts’ estimates, as second-quarter trading revenue surged to a record….Deutsche Bank’s sales and trading unit, run by Anshu Jain, accounted for almost half of the company’s 8.8 billion euros of revenue. The bank said it benefited from “favorable market positioning” in credit trading as U.S. housing suffered the worst slump in 16 years. “…
“The company trades rather than invests in collateralized debt obligations, which repackage loans, bonds and other assets into new securities, he said.”
Bloomberg
There were a lot of profitable opportunities over the last few months and even more over the last few weeks. It is still early in the cycle, there are plenty of opportunities.
I have to reread my post where it suggest I feel foolish. Dollar Cost Averaging is not a foolish strategy in any investment where you can buy a small amount at a time. Precious metals, Treasury notes, equities all do better w.r.t. inflation over time. To invest in all three areas is to reduce volatility and the balance depends on how many years you are from retirement along with your risk tolerance. I have my own risk tolerance. Most of my assets outside my retirement plans are in government securities, certificates of deposits and money market funds.
–
Except the one that I mentioned — Buy long-term puts on Fraudentials and Hopebuilders. Most of mine are Jan’09 but I also had some Jan’08 that I sold partly over the past three trading days. Over all, my target for these puts is 10x.
Jas
I mentioned AHM’s troubles to the Mr. Gwynster and his erudite reply was “huh? no way”. He worked under a broker in Chicago long before this current mess, and even though he believes the last 7 yrs have been madness, it’s hard to accept a biggy going down. I suspect many out there are thinking AHM can still be bailed out some how, some way.
He also believes in CA is economic roadkill waiting to happen and our politicans are all wimps so at least he falls into the mostly sane category.
We watched the Nikki start to go down and headed out for a late sushi dinner. Seemed appropriate.
So is Mr Gwynster going to back his judgement with some of the folding stuff? AHM’s 52 week high is over $30, so at just over a buck there’s some serious upside opportunity if it stays alive . . .
(Not investment advice; I don’t even live in the US :D)
“AHM reports increase in share price…”
Out in the distance, however, a big fish was ready to attack. Its name was American Home Mortgage Investment Corp. (AHM 1.08, +0.04, +3.8%) and, while it was ominously halted throughout the Monday run, it was patiently awaiting those who had wandered back into the water.
http://www.marketwatch.com/news/story/voracious-predator-swimming-streets-waters/story.aspx?guid=%7BC83EBD36%2D33A9%2D46C8%2D9131%2DE12228B1044A%7D
As I posted yesterday, but probably missed by most. AHM (at prices under $2.00) is a good stock|stock hedge, one buys AHM and sells a similar company that has not yet experienced the downdraft. The Sharpe’s Ratio is greater than 1.27
The risk to the trade is AHM going BK. Not something I would do, but there are large firms already in crappy positions that will do this.
The problem the confused market faces: Higher home sales are ancient history; credit crunch is right now and tomorrow.
August 1, 2007 11:04 A.M.ET
BULLETIN
Stocks zigzag to down side
Stock prices gyrate from green to red with investors encouraged by home sales, but discouraged by more credit-market fallout.
http://www.marketwatch.com/
Did this writer misspell “Loan shark?”
TODD HARRISON
Land shark
Commentary: Voracious predator swimming in Street’s waters
By Todd Harrison
Last Update: 11:54 PM ET Jul 31, 2007
“I’m pleased and happy to repeat the news that we have, in fact, caught and killed a large predator that supposedly injured some bathers. But, as you see, it’s a beautiful day, the beaches are open and people are having a wonderful time.”
Mayor Vaughn, “Jaws”
http://www.marketwatch.com/news/story/voracious-predator-swimming-streets-waters/story.aspx?guid=%7BC83EBD36%2D33A9%2D46C8%2D9131%2DE12228B1044A%7D
The Real Morons of Orange County
Why 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/
I know a young engineer who, with her sister, bought a condo in Irvine. Her whole family are engineers. Those women aren’t likely to want to move out of the area in the next ten to fifteen years. They bought high, but they will probably break even in 2020. They have no reason to be sorry about buying.
Those women aren’t likely to want to move out of the area in the next ten to fifteen years.
8.0 Earthquake? Immigrants take over the county? Crime worse than New Orleans? Massive Terrorist attack(s)? L.A. Lakers sign Alan Iverson? Transportation worsens making it impossible to get anywhere? Gary Coleman becomes mayor? Richard Ramirez and Charlie Manson open meat locker? Lots of things could happen, never say never.
“Those women aren’t likely to want to move out of the area in the next ten to fifteen years. They bought high, but they will probably break even in 2020. They have no reason to be sorry about buying.”
Most of my life has been either working as an engineer, or managing engineers (software). The average length at any one company has been about 4 years…either because I wanted to move (better jobs), or because the companies I worked for downsized or closed up completely. Ten to fifteen years is actually quite a long time in today’s engineering economy.
But did you leave the city too often in after your 4 year stints? Most engineering takes place in a few big hubs (depending on what kind you specialize in).
LA / Orange County is a big hub. Still all sorts of defense / aerospace, both large companies and small.
One “hub” was SF bay area, had jobs in Tiberon (Marin), SF, and SillyCon valley. If you don’t mind 1 1/2 hour commutes each way (it may actually be worse right now), I guess you could stay in the same place while switching jobs…but with “hubs” like SF, LA, ???, even jobs in the same “area” may mean a move. It just depends if you are OK with giving up 15 hours a week to life on the road…
You are talking about a “young, female” engineer and “her sister.”
What if one or both of the women decide to get married? People often do that in their 20’s and 30’s, you know. It could certainly happen in the next 10 to 15 years.
Bill — presumably there are no good rental deals available in her condo complex, or they bought one of the tip-top primo units that almost never goes up for resale? Since condos within a given complex are about as fungible as real estate shelter can be, did they consider renting until they can buy for less? Seems to me the opportunity cost of not keeping their cash layout invested otherwise, added to the higher monthly outlay of being an owner, in almost all cases, makes me think that their sanguine outlook is not well-founded. It looks like they’re letting a lot of good money just run away through a wide-open door. Maybe condos are different there than here (Florida).
I suspect their parents pushed them to get into RE. Yes, the young women are in their early 20s and dating. As the previous poster wrote, there could be problems if at least one of them gets married. Then there will have to be a quick sale at a bad time.
Buying a lumpy asset at a high price point using oodles of leverage is always an expensive move, no matter how long you hang on to it.
they will be sorry when they see people buy a twice bigger house for the same amount they paid for their house. believe me that will hurt.
Hi GetStucco:
I like you, but I’m about to correct your grammar. Sorry. I think you meant to say urban, not urbane.
-Big V
Big V — given that “urbane” = “polished in manner,” that’s a pretty picky point — said point presumably being that urbane typically applies to individuals and not areas. Since we’re into picky and the closing bell has not yet gotten my attention, why not move from pure grammar to style. Are you “about to correct your grammar,” or should it instead have been “['here is' or 'I offer'] a correction to your grammar?”
OK, I’ll offer input instead and retract my correction.
Besides, I shouldn’t have piped up to begin with since it appears that the article was written by somebody else, and you are only associated by copy-and-paste. I guess we ARE kind of “in to picky” on this blog, aren’t we?
I rather thought of it as “anti-picky.” A poster long ago made the point better or more succinctly than can I — that as long as the poster’s message can be understood clearly enough, typos and small errors of grammar or style do not matter and we won’t attack them. There is greater value in the rapid exchange of ideas than in the perfection of their delivery. I was just watching Stucco’s back, as he is a prolific contributor and perfect copy is far less important than the message itself.
Got an e-mail from Findelity this morning warning me about how bad it is to have so much of my portfolio in cash. Arg! Wonder if I can opt out of Fidelity e-mails.
Strange timing, isn’t it? I got the same email last night. Maybe this is how the PPT operates? Or maybe Fidelity is seeing major outflows in its funds and wants to stem the tide a bit.
pick up the sunglasses and put the dam things on…
see it for what it really is!
they live!
I got one too- smacks of some kind of desperation.
Reminds me of NAR’s “It’s a great time to buy” campaign.
Please write back and mention that you’ve missed a terrible drop in the market, and do they think this sort of advice is valuable?
Housing is still crazy hot where I live (Victoria, BC) but is starting to show signs of cooling. Inventory is up slightly, and houses priced at wishing levels are sitting. Anything remotely decent and affordable is snapped up. I use the word affordable loosely, how affordable is $325k(Cheapest CFH on the market) when the median income is only $60k per family.
Victoria BC…What a paradise….Biked around for a couple of days with my new bride in 1975…How much is a nice rental now ??
moneybox: Commentary about business and finance.
The Twin DebaclesHow the housing collapse is like the Iraq war.
By Daniel Gross
Posted Friday, June 15, 2007, at 5:48 PM ET
Illustration by Mark Alan Stamaty. Click image to expand.
What do Iraq and the U.S. housing market have in common? At first blush, not much. Iraq, which has taken the lives of thousands and ruined America’s reputation abroad, is far more disastrous than the housing collapse, which has been merely financially devastating.
Nonetheless, the twin debacles, which are defining the foreign policy and domestic economy of the second Bush term, have significant similarities, especially in the way that their public- and private-sector architects and promoters have behaved. Iraq and the housing market offer a case study in how two phenomena can go from being extremely popular to deeply unpopular in a matter of months. And with Iraq having turned into a disaster about two years before housing did, the way Iraq is playing out in the culture may predict what will happen in housing.
http://www.slate.com/id/2168417/
Two thoughts:
1.US Embassy fence climbers
&
2.Relief soup kitchens
Bugs: “eh got any Bakersfried carrot soup?”
Banana = 15 Houses
One correspondent recently told the BBC News website that one candle can cost twice the official government wage for a farm worker, while the price tag for a single banana is 15 times what she paid seven years ago for a four-bedroom house.
http://news.bbc.co.uk/2/hi/business/6922441.stm
Hyperinflation Hell…
I just got back from a trip on Monday that included Zimbabwe - the country is getting pretty scary - food is getting hard to come by and inflation is running at 100% a month.
Lovely people though - a really nice gentle sense of humour - it’s a pity the country is so missmanaged - it could be paradise.
Zimbabwe issues $200,000 note
“Harare: Zimbabwe’s central bank will issue a higher denomination bank note, a $200,000 note, on Wednesday to cope with the hyperinflation ravaging the southern African country….”
Interesting aside:
These notes are probably not produced in Zimbabwe, either, and they are not that cheap. During hyperinflation, manufacture, importation and management of banknotes becomes a major expense. The government ratchets up inflation simply by having to change banknotes, whose cost is another expense unmet by tax collections or bond isuance.
There was a year in late 1970s hyperinflationary Bolivia in which banknotes (real beauties, made in W. Germany) were the second largest import.
Let’s see.
It’s August, four years since I decided housing prices were getting out of hand, and two years since the generally accepted (on this blog) housing price peak. Man, this adjustment is taking a long time.
On the other hand, it’s only two months to October, when whatever happens as a result of rising mortgage defaults this quarter (the first big one for subprime adjustments) shows up in earnings and mutual fund statements.
Took about 6 years last time - 1990-1996. Run up beforehand wasn’t as big and there wasn’t widespread use of lunatic loans then, either. This could take 5 five more years, or not. Who knows?
Oil reaching an all time high. Oil inventories are down 6.5 million barrells so prices are up.
gasoline prices at the corner are now at $2.65 near my apartment. I expect oil prices to fall in November, to seasonal lows. PGH started to fall some. I’ll snap up another 300 shares of PGH around that time. That will probably be the last time we’ll see cheap oil stocks.
I just filled up for $1.20 Australian
.
.
.
(per litre :()
OIl inventories are 10% higher this year than last and, if you look at the normal range of oil inventory, the 344 million barrel level is ABOVE the norm for this time of year.
http://tonto.eia.doe.gov/oog/info/twip/twip.asp
http://www.businessweek.com/the_thread/hotproperty/archives/2007/07/i_confess_i_cau.html#comments
I confess: I caused the housing downturn
Financial guarantor getting killed again today. ABK and MTG are in my Financial Enablers short portfolio. ABK guarantees (mostly corporate) bonds against default and you all know about MTG. Both down about 10% today after 15% and 8% yesterday.
Serious nervousness about bond defaults finally starting to hit Wall St. Stupid that they’re just now getting around to this conclusion. If whole companies (New Century, etc) and funds (Bear Stearns) can default, why not a few bonds?
Just a random bit - 2 conversations with people that I consider neutral to ’seems like prices are out of whack’ attitudes on housing - both homeowners already and very smart. Each mentioned (w/o provocation by me) how ‘obviously with the housing market tanking’ in various phrases - and I was content. I must say it is nice to hear the sentiment changing in the previously unopinionated area of ‘neutral smart current homeowners’. Now maybe the opportunity for the well discussed ’standoff’ where sellers maintain 2005 expectations can start to erode here in LA.
Yes, SoCalRugger. I too am extremely soothed to hear this change in sentiment. That’s why I think the crash will actually be accelerated this time, not extended like I had feared. Let’s hear it for the ex-unopinionated new bubble theorists.
Hip, hip… (now you guys say hooray)
I got the opposite this weekend. Out with three friends for dinner. One tells me I’m not allowed to say anything because I get too emotional on the topic of housing but I’m wrong and here’s why:
-Two economists at her corporate job earn over $200,000/year each. (I guess people who make more than I do are smarter than I am. Little scary when you think about what Paris makes for “The Simple Life.)
-They predict the market will come back in two years (July of 2009 I guess)
-Yes, they predicted the current downturn two years ago (She said when prompted - why don’t I believe that?)
-They have to be right because the entire company depends on housing coming back (they sell hottubs. Glad I’m so wrong - would hate for my friend to be unemployed yet again.)
So I just shrugged and said ok. I’ll call her later this week to clarify exactly what the “economists” are predicting. Then I will make notes and bring it up in two years. Either in person at our August b-day dinners (assumes I am right) or by phone if I have left (assumes she is right.)
However, the news in the last two weeks indicates I might get to be as big a bitch to her as she was to me! (Although I don’t embarass people in front of others so I won’t.)
(BTW is anyone else starting to keep notes with dates and quotes? I am finding a lot of the people I debated with (including screaming fights) two years ago have conveniently rewritten their beliefs to say they saw it coming. I am amazed at how many people are doing this. And I want to scream because I was a bear before it was trendy!)
Dear SD RE B:
What kind of a friend tells you that you’re not allowed to say anything? If she thinks you get too emotional over the topic, then shouldn’t she just not bring it up? Whatever.
A come-back in 2 years just means the market continues tanking for yet another 2 years, then starts being “normal” again. That will make for 4 years of price declines overall.
How does that come out to you being wrong?
Unfortunately, she is not much in the nice personality department (but does have other good traits.) And she is NEVER wrong. Of course, if she is she neither wants to hear it or she rewrites what she said. I remember seeing “The Lion King” with her and when we came out I said I liked it but it was a complete rip-off of “Kimba the White Lion.” (My favorite tv show as a tot.) Her response? There’s no such show. Yep, an entire tv show no longer existed because she had never heard of it. Of course years later when I sent her a link to the show she said she never said that.
Did I read that right…a hot tub company has two economists earning $200k each on the payroll?
Yep. They do more than hot tubs but that is their main business. However, my guess is that in two years they will have no “economists” on the payroll. (And she didn’t define the term since there’s no standard - BA’s in econ? MBA with econ focus? PhD’s? Overpaid frat boys with their heads up each other’s asses? Oh sorry, shouldn’t put my opinion here. :D)
Classic regarding American Home (AHM).
Three months ago they issued another MBS deal. Moodys were all over it, questioning the servicer rating of the proposed Master Servicer for the transaction, threatening greater subodination levels if AHM didn’t choose an Master Servicer with one of Moodys vaunted (only by them) SQ1 ratings.
So, AHM complied and choose Wells Fargo as the MS.
Way to go you pathetic morons at Moodys….while you are worrying about getting your bribes from servicers so you would rate them SQ1, your client was going bankrupt!!
I actually visited AHM in April, they are (were?) a client of mine. The sense of fear was palpable, key people were leaving, senior management were in BS overdrive. Naturally, I shorted the stock - I could see what was happening and I’m not even a “FINANCIAL ANALYST”….(whhooooooooo……what an exalted role - notice how three senior FA’s downgraded AHM ON MONDAY MORNING!!!!!)
I sense Obviousman is in the vicinity.
This is the great untold story so far. The story of Moodys, S&P and Fitch. Were they just lazy and greedy (always a fatal combination) or something much worse? At least they need to be investigated for gross conflicts of interest.
Yeah, you doofuses….keep on worrying about that servicing system for the MS. Best spin for these players: They are grossly incompetent. Worst spin: They are criminally corrupt.
Since virtually no one at AHM sold much stock recently (a director actually BOUGHT more) I think you have to go with a: grossly incompetent.
A third Bear Stearns hedge fund may be in trouble.
http://www.thestreet.com/s/yet-another-bear-stearns-hedge-fund-is-on-the-ropes/newsanalysis/wallstreet/10371464.html?puc=_tscfoc
Chicken Little continues to maul Bear Stearns…
Somebody throw in the towel and stop this carnage!
–
Bare Stunts and Goldchain Silverknife (the white shoes have black sole!) epitomize the culture of fraud among NYC bankers and financiers.
The worm has turned.
Jas
Does anyone have links to reports on what percentage of recent purchase loans and refinances are prime vs. sub prime vs. alt-a for different areas of the united states? I remember a while back (sheesh, sometime in the past two years) reports that showed the breakdown of different loan types for different areas of the US, specifically by city and/or ‘MSA’.
What I’m looking for is something to show what percentage of loans in my area are prime/alt-a/subprime, as well as the mix of 30 year/15 year/ARM/IO ARM/Option ARM.
I remember seeing those reports during the past two years on THBB, but I can’t for the life of me locate them now.
Thanks for any help.
Yates told The Associated Press. “The knockdown effect on the global economy can never be discounted.”
“No one knows what kind of effect it’s going to have,” he said. “We could be talking massive amounts of money….
” …and then it went dark.”
http://biz.yahoo.com/ap/070801/world_markets.html?.v=8
Bear Hedge Funds File for Bankruptcy
The news comes amid media reports that Bear Stearns froze the assets in a third fund with exposure to the credit markets. A Bear spokesman was not immediately available to comment.
” …and then it went dark.”
http://biz.yahoo.com/ap/070801/bear_funds.html?.v=3
Given the role of the US consumer as the spender of last resort and the prop our enormous trade deficit provides to exporters, I’d have to say the effect could be substantial. The knockdown power of falling US consumer spending is pretty high - I’d say somewhere between a .460 Weatherby and a .577 Nitro Express.
“It is too early to say if home sales have already passed bottom,” Yun said in a statement.
Done Yun has his head… so far up his arse… that he can see what he ate for lunch 10 minutes ago.
“…because it measures home purchases in which a sales contract has been signed, but the DEAL has NOT YET been CLOSED.”
I make $17,000 a year as a stawberry picker, what do you mean escrow… WON”T CLOSE?”
http://biz.yahoo.com/ap/070801/pending_home_sales.html?.v=9
How can you pass a bottom? You may be on to something about his head up his arse. He would certainly be passing from his bottom at that point.
Passing the bottom?!? Methinks that Yun may end up “working” like Robert Downey Jr. at the end of Less than Zero…
Next round: lenders will be shocked - shocked I say! - to discover that REOs have been categorically underreported. When they are finally forced to admit reality, it will be due to mistakes and a changing market, not because they lied.
Witness: HousingTrackerNet says there are only 496 units in REO in the greater Washington area and only 34 in Virginia Beach. (Here:
http://www.housingtracker.net/reo/
I compared real-world numbers with some friends this morning at court. Each of us have conducted dozens of foreclosures in Virginia Beach and we know our lenders are holding those properties and have not resold them. We also know that there are hundreds, yes, hundreds, of foreclosures being called in Virginia every week now, and we could, collectively, personally vouch for more than 1000 in Northern Virginia in the past three months. One friend has 100 sales just this week. A shockingly high number of these foreclosures are from 2005 and 2006 paper, and I’ve even had one or two on early 2007 paper. Another shockingly high number of those foreclosures are going back to the bank without any bids at all.
If you’re still in the markets, don’t trust what you’re being told by the banks and lenders. It’s far worse than it looks. You don’t need to trust what I say here anonymously, either, but for the love of all that’s holy, do your due diligence with uncommon attention to detail before making any moves.
Corroboration of a sort here: http://www.wtop.com/?nid=600&sid=1206426
Mind you, those foreclosure numbers (up 5x over first half of last year) are only from one newspaper, The Examiner. Legal ads in Northern Virginia are also placed in The Times and The Washington Post. If you want to have a better picture of the situation, you can call them and add them in. In fact, the author of the article really should have done that.
You have to be careful with those numbers. For example, let’s say you have 2 weeks (2 samples), and each has 10 foreclosures. How many unique foreclosures do you have? It could be 20. But, it could also be 10, if the 10 listed in week 1 are also on the books at week 2 and nothing new was added.
Actually, the newspapers keep track of the advertisements by sets; that is, when a foreclosure attorney sends them a pub request, they do so with one request for however many times that particular DOT requires publication. One set according to the newspaper could be the same ad once a week for two consecutive weeks, or it could be one time per week for four weeks, or it could be five ads appearing in consecutive or non-consecutive sequence. So, although I understand your point, I think the newspapers are well able to track the number of unique ad sets they run for foreclosures. Now, having said that, there is a possibility that the first foreclosure process could have terminated for a bankruptcy, reinstatement or forbearance agreement, and that failed, therefore a second set of publications might have been requested. There is a possibility of some duplication in such numbers, but it is not extreme.
Also, interestingly, I went back to the original Examiner article (linked by WTOP). The Examiner was using figures from the County. It also seems that the text of the WTOP article has changed. WTF?
Drove by a cemetery yesterday. A sign placed near the road was advertising lots for sale. I guess it is a buyers market for grave lots.
Location, location, location. People are just dieing to go there!
Was there a “Quiet Neighbors” sign rider?
We joke in our town because one street has a medical center, an assisted living complex, a nursing home and a cemetary all on one street. We say you can be treated, deteriorate and be buried without leaving the street.
As of today, stated-income loans are illegal in Minnesota:
Mortgage industry’s wild ride ends with new laws
By Jennifer Bjorhus
St. Paul Pioneer Press
A trio of new laws aimed at protecting Minnesotans from reckless mortgage lending go into effect today, demarcating the end of an easy-money era when anyone who could fog up a mirror could get a mortgage.
The new laws make mortgage fraud its own felony punishable by up to two years in prison, restrict adjustable rate mortgages and outlaw stated-income loans - so-called “liars’ loans” that came to symbolize the era’s lending excesses.
“It’s going to slow the industry down,” said Louis Olsen, president of River City Mortgage and Financial, a mid-sized lender in Eagan that has stopped making stated-income loans. “I think everybody has pretty much succumbed to the fact that everybody has to do business the way we did 10 years ago.”
Mortgage brokers clearly are going out of business, but it’s hard to say how much of that is specifically the result of the new regulatory changes as opposed to general housing-market problems or lenders tightening their underwriting standards, said Abed.
About 40 mortgage originators a month are now voluntarily surrendering licenses, up from the typical five or less, said Commerce spokesman Bill Walsh. That’s an undercount since brokers exiting the business aren’t required to formally surrender their licenses; they can just let them lapse.
Full article can be read (but registration is required) at
http://www.twincities.com/
barn door….horse
Wish they outlawed those loans here in Calif.
GS, just how many PPT helicoters are there, exactly…
Bugs: “eh where is all that swirling wind coming from Daffy? Does TAZ have the “runs” again?
Daffy Duck’s…. DDD index:
Dow
Down
Done!
NYSE Volume: 4,000,000,000 + again today
Bugs: “eh, could be Daffy”
Well I guess there are enough to make sure the stock market always goes up — in the long run.
Heard in the gym this morning: A guy told me that a person he worked with is in trouble and is on his way to losing two houses. The home owner was getting mad at management at work because they were not giving him any overtime and he was about to lose both properties. He further stated that even with overtime he’d lose both properties because he was going underwater fast. Earlier this year the same company had an employee theft of around $100K by an employee trying to save his houses. This is early in the game.
“Buyer must agree to feed the paparazzi, and must be HOT.”
http://tinyurl.com/ytkgqa
Does Paris come with the house?
No. She only comes on video. :O
(So sorry. Apologies in advance. Devil made me do it. Hope I didn’t offend anyone.)
The Zestimate is only $1.7million but they are asking for $4.25 million?!
Yeah, that’s a lot to pay for celebrity value (it’s Paris Hilton’s house).
That’s sexy.
How do you know it’s Paris’ house? Isn’t she on house arrest there?
No I heard the financial analysts joking yesterday that she violated her (Paris) house arrest and is back in jail with added on time. But her house is up for sale.
Sheesh — talk about head-up-their-arse wording. In this listing, there is no “Price” or “Asking Price.” The title is “Financial Considerations.” Gawd, Elizabeth, it is so bloody awkward to discuss such crass subjects as money, so the agent suggested this…”
Railroads, chemical producers and insurance companies are blaming the worst U.S. housing slump in 16 years for their earnings woes.
Burlington Northern Santa Fe Corp., the second-biggest U.S. railroad, said lower shipments of housing products and lumber reduced second-quarter earnings. DuPont Co., the third-largest chemical maker, said slumping demand for kitchen and bathroom countertops was partly responsible for its profit drop. Genworth Financial Inc., the former insurance unit of General Electric Co., said earnings will be at the “lower end” of its forecast this year as mortgage-insurance claims increase.
“The subprime slime is oozing,” said Gary Shilling, president of A. Gary Shilling & Co. in Springfield, New Jersey, who correctly predicted the recession in 2001. “As home equity evaporates, that takes out the foundation of strong consumer spending growth, which has been the mainstay of the economy.”
http://www.bloomberg.com/apps/news?pid=20601109&sid=avZr736O8xUw&refer=home
I also saw that black and decker’s sales of house locks is way down, because they’re mostly bought to be used on new construction.
“Nonfarm private employment grew 48,000 from June to July of 2007 on a seasonally adjusted basis, according to the ADP National Employment ReportTM.
This month’s ADP National Employment Report suggests a deceleration of employment. The three-month average change in nonfarm private employment from May to July is 96,000, which is very close to the ADP Report’s year-to-date average monthly employment change of 91,000.”
“Employment in the service-providing sector of the economy grew a moderate 89,000, while employment in the goods-producing sector declined 41,000. This marks the eighth consecutive monthly decline in the goods-producing sector. Employment in the manufacturing sector declined by 23,000.”
“Small- and medium-size businesses more than accounted for the increase in total employment this month, with employment among these businesses advancing by 61,000. In contrast, employment among large businesses fell by 13,000 in July, the second consecutive monthly decline. The gains in employment at small- and medium-size businesses were concentrated in the service-providing sector of the economy, which showed a gain of 85,000. However, employment among these same-size businesses in the good-producing sector fell 24,000,” said Prakken.
So the US lost 41,000 jobs in the “goods producing sector” and gained 89,000 jobs in the “service -producing sector”. A nice healthy gain, since everyone wishes to work at WalMart.
ADP Employment report.
http://tinyurl.com/nz4j9
I just read that Aaron Krowne of the Implode-O-Meter website just purchased Casey Serin’s old website for the princely sum of $50,000! Um, WTF? Now Aaron’s asking for donations to stave off a lawsuit against his site. Aaron doesn’t seem to be a very wise steward of his money.
Holy crap, I thought you were joking till I checked for myself.
personally i do not think highly of casey or anyone that has any dealings with him whatsoever.
screw aaron krowne.
Where did you get the price info from? Seriously stupid move. I was planning on donating to help him fight the lawsuit, but not now. Anybody who gave casey a dime is kicking themselves. Giving him 50k? Insane!
I saw that sum on Robert Cote’s website in the comments section. Aaron admitted on another blog that he paid more than $20,000, but would not reveal the exact amount. Regardless, $0.02 is too much.
I would have offered the price of one Jamba Juice, no more, no less.
Boy did Aaron get hosed.
boned, to be precise
O, Canada! More Americans Heading North
The Number of Americans Moving to Canada in 2006 Hit a 30-Year High
http://www.abcnews.go.com/US/story?id=3433005&page=1
We just made the move last month, following jobs. With the exchange rate, it was a nice raise.
I’m trying to find housing market info for Toronto. Looks bubbly - dumpy old townhouses going for $500k while massive Miami-style luxury condos are just starting to go on the market for $400k - $3M. Rumors that interest-only loans are about to be legalized here, just in time for those condos to be finished up! And they’re about to legalize non-family members co-signing loans so more incomes can cover the mortgage.
We’re happily renting for now.
Wow - is it just me, or is the stock market just *looking* for an excuse to dive?
Market tanks this morning - in large part due to homebuilders woes, which for today are specifically driven down by a rumor that Beazer - a relatively small homebuilder - is going bankrupt. When the rumor is denied (11:00 am), the whole market shoots up.
A Reuters blurb:
http://tinyurl.com/yv8dsl
If you go to E*Trade, their “Markets Overview” section on the homepage shows all 3 indexes being up, but if you click on “Market Summary”, you’ll see that the Nasdaq is down. Hmmm …
Meanwhile the real economy, especially durables continues to rot. June consumer spending is now down YoY and today’s sunshine report is that July sales for Ford are down 19.1%, Daimler Chrysler down 9.1%. Oddly, the Chrysler division suffered less at 8.4% than Mercedes which fell 13.9%. GM will give us sales tonight.
http://biz.yahoo.com/ap/070801/auto_sales.html?.v=3
GM’s July sales down 22.3% from a year ago. Even Toyota’s US sales were down 7.4% from last year. You know things are bad.
http://biz.yahoo.com/ap/070801/auto_sales.html?.v=8
Just saw that.
Anecdotally - we were at a Toyota dealer the other day, and the salesman mentioned they have really big incentives on the Tundra’s now, since Toyota built way more than were sold this year. I didn’t ask but I know this is large part since homebuilders/contractors are one of the biggest customers/users of these. I wish I was in the market for one.
LA Times
Indymac hit by sub-prime turbulence
Although it has avoided the riskiest borrowers, the Pasadena lender sees profit plunge 57% in the second quarter.
http://tinyurl.com/22kyyc
“Moody’s said it saw signs that the alt-A loans were made using standards similar to those used in granting sub-prime loans. ”
Yeah, saw signs HERE explaining how high LTV, Option ARMs, 2 year ARM resets, stated income, etc. were not just confined to sub-prime. The Zelman/Credit Suisse report confirmed it earlier this year. Thanks for coming late to the table, dinner’s already been served.
I flipped through Ben’s Photo Gallery last night and I have to say that even after reading this blog for two years, I was not prepared for the impact those Miami high-rise condo pictures would have on me. I’ve read a gazillion stories and comments about Florida here, but seeing all those photos… WOW. I’ve been a believer for a long time, but how could anyone look at those photos and the statistics all over the news and not be a total bubble convert?
Many thanks to whoever sent those photos in!
You are welcome.
we are documenting thedemise of america as we knew it. we are pocked for decades.
keep up posting photos!!!
This one is good for a laugh — cleverly written — about HUD Secretary Jackson NOW trying to get China to buy our MBS:
http://www.prudentbear.com/articles/show/2077
Another sad sign of the loss of discretionary spending.
Bally fitness files BK and the stock is still trading even though “Existing stockholders would receive nothing for their shares, Bally has said.”
Guess they weren’t fiscally fit.
Are you suggesting that the shareholders were not exercising “due diligence” when they buy this stock after the news? Discretionary exercise by consumers is only to lift carbs to the mouth while watching TVs. We have to keep our weight up, “No pain, No pain”.
Good one… ha
For the vast mjority of my fellow citizens, it’s more like:
“No Brain, No Pain”
Wit’s up!
—Who would offer up their house to some random drifter for 2 weeks? Even if you were in need of cash, there are a lot better ways to earn $200.
http://phoenix.craigslist.org/roo/385655384.html
I have a room to rent until Aug 15th. $200 Includes unitites, cable and internet for two weeks. It’s furnished with a full size bed and has a large closet. Room is 15 x 10 feet. Pets welcome as long as they get along with my 9 year old dog.
House is located 14 miles west of PHX Sky Harbor Airport. It’s 2 miles from the public bus system and the bus route takes 43 minutes to get to the airport with no bus changes. Driving takes 20 - 40 minutes depending on the time of the day.
Dow down 29 pts. I wonder if we’ll see it go below 13k this week?
I have to get something out there. Occasionally people on here complain about fractional reserve banking and it seems they really do not understand how it works.
The alternative to fractional reserve banking would be full reserve banking. That means the bank must hold (in hard cash) every bit of money you put in the bank. That would mean you could not get interest on that money and would have to pay the bank for holding/securing it.
If you allow them to loan that money out, that is essentially fractional reserve banking.
Do you guys really want full reserve banking? How would you invest your money? Any other investment has similar features to fractional reserve banking.
Too many people say the bank gets X dollars and immediately loans out 10*X dollars. That is absolutely not the way it works. They loan out .9*X and if this situation continues, in a one-bank closed system they would end up with 10*X in loans, 9*X in deposits, and X in hard cash.
You can do it too. In fact, if someone loaned you money and if they agreed you could loan 100% of it out. Big deal! At least the govt limits what banks can do.
Hi JJ:
I can’t speak for others on this blog, but my thing is not so much that fractional reserve banking is wrong, but that it CAN go wrong if not properly managed. The reserve ratio has to be right, and interest rates have to be right too. It’s the Federal Reserve’s job to set those numbers. I guess my main complaint is that Alan Greenspan got a little too old and just flubbed it up and now we’re suffering the consequences.
This video explains the current system
http://bullnotbull.blogspot.com/2007/07/money-as-debt.html
Banks are allowed to create money as long as there is a promissory note to count against it as an asset.
What I would like (since you asked) is a system where a bank is only allowed to make loans up to the amount of deposits. Furthermore, I would want a system where the bank owners put up an equity share that takes any losses first before depositors are hit.
“Full Reserve Light?”
Dow 171 + last… 10 minutes of trading
Daffy: “Page 92…Daffy gets blasted again! Bugs, we need a new script…those PPT Apache helicopters are loaded with missiles!
Bugs: “eh Daffy, I think Wiley E Coyote has just what you need…an ACME blast proof duck suit…I’ll have Road Runner send over to you ASAP!
Foghorn: Hold on a minute Son… I think someone let Taz strike the gavel at the NYSE today!
GS, just how many PPT helicoters are there, exactly…
Bugs: “eh where is all that swirling wind coming from Daffy? Does TAZ have the “runs” again?
Daffy Duck’s…. DDD index:
Dow
Deceitfully
Done!
NYSE Volume: 4,000,000,000 + again today
Bugs: “eh, could be Daffy”
Looks like the money to support the indexes today came from debt. After all where else would it come from? It’s not like mutual funds have any cash and institutions are pretty much fully invested as well.
It looks like there was a big pickup in Yen carry trades today. Overnight it was trading in Asia as strong as Y117.5 to the dollar. By the open in NY, it had weakened to Y118.5 and by the close was approaching Y119.
The carry trade involves borrowing in Japan (in Yen) then converting to other currencies to invest overseas. In the process, US dollars (in this case) would get bought and Yen sold - pushing the Yen’s value down against the dollar. The size of the Yen’s decline today strongly suggests that there was a lot of it being borrowed and converted.
http://finance.yahoo.com/q/bc?s=USDJPY=X&t=1d
This especially makes sense in light of the fact that many big US banks are overcommitted to LBOs. They wouldn’t want more exposure to the equity market just now. Whereas the Japanese banks have no such concerns.
Feeling safe posting this late at night, to never be read or thought of again. As a child, I read all the Asimov, Campbell, Heinlein et al that I could get my hands on. The incredible thoughts of nuclear energy, the way to the future - probably, but if this gets blocked like so many others have been blocked. I suspect it will be the fitting death knoll for our economy; tied to oil, died for lack of energy.
I wonder if the members of the Sierra Club et alia bicycle to protests? Do they use air conditioning? Or heating in the winter? Microwave ovens?
If there is concern about the use of nuclear energy, let the citizens involved vote on the subject. I know more people have been killed by oil than have ever died from nuclear energy - in any form.
TVA OKs second Watts Bar nuclear reactor
“…There are a lot of people that will be in this fight,” said Ann Harris, a former TVA whistleblower at Watts Bar and now an activist with the Sierra Club. “The anti-nuclears. The safety advocates. The people who work on conservation.”
Opposition to Watts Bar Unit 1 was fierce. Whistleblower complaints forced large amounts of cabling and piping to be replaced, delaying the reactor and driving the cost to $7 billion. Protesters blocked plant entrances and demonstrators were removed from TVA board meetings.
“This time people will have a lot more knowledge,” Harris said. “There are lots of opportunities to ask for public hearings, (to seek) injunctions and media that didn’t exist before.”
Watts Bar Unit 2 has a construction permit from the Nuclear Regulatory Commission that will have to be renewed in 2010. Then TVA will have to secure an operating license.”
As a child, I read all the Asimov, Campbell, Heinlein et al that I could get my hands on.
Me too!!! In middle school I stumbled across a book that was a collection of short stories from Hugo award winners and I was totally hooked. “The Gun Shop”, “Nightfall”, “The Roads Must Roll”… awesome stuff, very insightful too.