The Entire Country Got The Same E-Mail, Don’t Buy Now
The Times Herald Record reports from New York. “The Route 17 billboard in Orange County promised a new era for the region: ‘Drive 20 Minutes, Save $50,000,’ blared the sign for the new development of homes in the Sullivan County hamlet of Hurleyville. This was America’s largest home builder, D.R. Horton, betting on our region with its first project in New York state.”
“It planned to build 111 homes aimed at a new market: families ‘priced out’ of more expensive areas like Orange County. Nearly two years later, only 15 homes have been built including a few models. Two owners say they bought their model homes, furniture included, at reduced prices: $319,000 for a $355,000 home; $400,000 for one listed at $435,000.”
“They also got a couple of extras they didn’t bargain for: a huge common backyard of about 60 acres of cleared land, and a neighborhood so quiet you can hear a sprinkler spritzing new grass.”
“Why has America’s largest builder gone bust in Hurleyville? In this county where the median home price was $165,000 when the development went on sale, the answer is obvious.”
“‘The price was just too high, and the $250,000 to $450,000 range took such a beating last year,’ said Realtor James DiNapoli in Rock Hill, president-elect of the Sullivan County Board of Realtors.”
“Five of the seven largest builders in the country are building in the mid-Hudson. They arrived here at the height of the housing boom and Orange County’s population explosion. Today, the housing market has gone from brisk to just plain cold.”
“‘It’s like the entire country got the same e-mail — don’t buy now, prices will come down in six months,’ said John Caulfield, senior editor of Builder Magazine.”
“Lennar plans to build 143 estate-style homes in developments in Newburgh and Monroe, with prices starting in the $700,000s. That translates to roughly a two-year supply of high-end homes for all of Orange County.”
“Big builders do whatever they have to do to move homes. They have no choice. ‘You’ve got divisions and regions that you have to report to, and at the end of the quarter, they’re going to look at your numbers,’ said Jean Rowe, executive director of the Builders Association of the Hudson Valley.”
“The big builders’ only reason for existence is to construct new homes. ‘The paradox is that they can’t stop building entirely,’ said Caulfield. ‘You have an overabundance of inventory you can’t sell, but you are also building more product.’”
The Patriot News from Pennsylvania. “The entry of national players into the midstate market has ‘absolutely’ driven up the price of land here for all builders, said Mark DeSouza, senior VP of a Bala Cynwyd firm that has developed property in the midstate since 1969.”
“‘The nationals have larger resources and deeper pockets, and that enables them to pay more for a parcel of ground,’ DeSouza said.”
“The onrush of national builders ‘did inflate the price and made local developers pay more than what they thought they could support,’ said Neil Barr, a real estate agent in Hampden Twp. ‘Now, sellers have this perception that their land is worth that amount, even though it didn’t close. It’s hard for them to adjust back to a more reasonable level.’”
“National home builders such as K. Hovnanian and Toll Brothers entered the midstate market in 2005 at the peak of the housing boom.”
“Now that the national housing market has cooled, these builders are trying to reduce the glut of homes everywhere. In the midstate, multiple examples can be found of national builders looking to renegotiate existing land deals or abandoning development proposals.”
“While the cost-cutting moves of the national builders appear to have slowed the pace of midstate development, new houses are still being built. In several cases, long-established local and regional builders are stepping in to handle projects abandoned by the big players.”
“In Silver Spring Twp., K. Hovnanian is renegotiating its agreement with midstate developer Triple Crown Corp. to purchase more of the 55 planned lots in the Bella Vista subdivision. K. Hovnanian hopes to acquire an undetermined number of the remaining 27 lots at a reduced price, said Doug Fenichel, spokesman for the builder.”
“K. Hovnanian had acquired the first 28 lots at Bella Vista, and 15 houses have sold, Fenichel said. In recent weeks, the company has advertised price reductions of up to $60,000 on new houses in the development.”
“‘It’s an extremely competitive market. The market has caused everybody to lower prices,’ Fenichel said.”
“‘We walked away from deals over the last two years with landowners for prices that we thought were exorbitant,’ said John DiSanto, president of Triple Crown. He said midstate landowners who haven’t been able to sell their properties now want to make deals.”
The Washington Post. “Home buyers again need their own money to close a deal. Lenders faced with growing piles of bad loans, even to borrowers once considered good credit risks, have clamped down on the no-money-down mortgage. The abrupt shift threatens to dash the hopes of millions of potential buyers.”
“‘No-down-payment loans are just about near impossible to get right now,’ said Jennifer Bridges, a real estate agent in Woodbridge. ‘We’ll have someone all lined up and then without warning, the lender will say: ‘It’s gone.’ It’s terribly depressing.’”
“National City Home Equity, one of the nation’s big home lenders, stopped funding some types of zero-down loans this month, said Ken Carter, the division’s executive VP. ‘When home prices were appreciating and interest rates were declining, that product made sense,’ Carter said. ‘Today, we’re on the opposite side of that coin, and it’s not prudent to be stretching.’”
“‘It used to be that we would finance a loan up to $1 million with no down payment for a first-time home buyer,’ said Daniel H. Aminoff, a senior loan consultant in Alexandria. ‘But as of March, we will only finance a loan of $417,000 with no down payment.’”
“Many years ago, a 20 percent down payment for a home was the norm. But as prices escalated, fewer people could afford that. After all, 20 percent of $500,000, the cost of a middle-class suburban house in the Washington area, is $100,000.”
“No-down-payment mortgages came into play about a decade ago, at first for wealthy borrowers with stellar credit. The idea was to give those borrowers loans that allowed them to buy houses without having to liquidate other investments, said Sean O’Boyle, a VP at SunTrust Mortgage in Chevy Chase.”
“‘But the model deteriorated, and it became available to just about anybody in recent years,’ he said.”
“In part, that was because lenders assumed that as long as home prices kept climbing, borrowers who could not afford future mortgage payments could sell or refinance. But once home prices dropped in many parts of the country, that option evaporated. Delinquencies and foreclosures surged. With urging from federal regulators, lenders tightened their policies.”
The Daily Press from Virginia. “Mortgage banker Michael Mapes has approved loans for about 17 clients who have a new home they want to get into, but they can’t sell their own homes.”
“Inventory has built up substantially over the past few years and it is taking much longer to sell a house. Sales are still strong at lower sales prices and in select markets, such as the city of Williamsburg, but the high inventory and prices can’t co-exist much longer.”
“‘The inventory’s been built up because sellers are so doggone stubborn,’ said Mapes. ‘A lot of sellers are stuck in 2005.’”
“Brian Mullins, president of the Peninsula Housing and Builders Association, said he doesn’t expect a sellers market for about another year. A slower market in 2007 hasn’t kept people from listing their homes or builders from feeding the market on the Peninsula, where new listings of existing homes were still up 14 percent from the year before. The number of newly constructed homes for sale was 29 percent higher.”
“‘That hurts us,’ said Mullins. ‘We just need to hold on and build smart.’”
“The builders need the mid- to higher-priced existing home sales to pick up, so those owners can move into expensive new construction. ‘We need to get that market moving first before we can get momentum at the upper end again,’ said Mullins.”
“During the hot market of recent years, sellers didn’t accept as many contingent offers, but it also didn’t matter much if they did. ‘They didn’t worry about it because they knew they would sell their house,’ said Natalie Miller-Moore, marketing director for Wayne Harbin Builder.”
“With more competition to attract buyers, contingencies are more problematic. A deal killed when someone can’t sell their own home can also trigger a loss of multiple sales. ‘That creates a domino effect,’ said Mapes. ‘If one falls, they all fall.’”
“Sellers are sweetening the sale by offering concessions such as home warranties, closing costs and mortgage payments. Wayne Harbin was offering a furniture allowance, but buyers preferred to take cash to offset closing costs. ‘People are very price driven now,’ said Miller-Moore.”
All right, which one of you guys wrote that email?
Don’t know fer sure but when I opened my copy it smelled like toasted popcorn . . . !!
I’m innocent I tell you! I know NOTHING!
But I do want to buy the writer a nice bottle of wine.
A good 18 month boycott of housing would do wonders for housing affordability.
Got popcorn?
Neil
“‘It used to be that we would finance a loan up to $1 million with no down payment for a first-time home buyer,’ said Daniel H. Aminoff, a senior loan consultant in Alexandria. ‘But as of March, we will only finance a loan of $417,000 with no down payment.’”
Ahahahaha! Wow, you’re really getting tough there, Dan. That’s only, like, 8x median income in many parts of the country.
The market collapse still has a loooong ways to go…
From the WaPo article: “Without the piggyback option, many first-time buyers who want 100 percent financing may find themselves priced out of the market because they would have to pay mortgage insurance, said Eric D. Gates, a mortgage broker at Apex Home Loans in Bethesda. ‘That will make the monthly payments much higher,’ he said.”
Good lord, the article didn’t even comment on the inanity of someone who doesn’t even have enough cash flow to afford PMI getting a half-million-dollar-plus mortgage. Anyway, I’ve been told the piggyback’s generally higher rate basically equates that portion of the mortgage to the cost of PMI. Is that true?
For the most part yes. The bigger reason to go this route is pmi was not tax deductible whereas, mortgage interest is. That changed recently as pmi is not td as well.
typo sorry-
That changed recently as pmi IS td as well.
You might be an FB if you think PMI is a “woman thing”.
LOL…NYCB …. But who cares that PMI insurance wasn’t tax deductible . Lenders use to put PMI insurance on loans under 80% loan to value for the protection of the lender .PMI underwritten loans of course had to qualify .Avoiding PMI insurance was just some way the industry sought to avoid qualifying people on low down loans . How they got loan funders to invest in low down loans without PMI insurance is the real question . Oh …I almost forgot …..Just rate junk loan paper AAA and the investors will come .
PMI is deductible now on a jointly filed return if the AGI is $100K or less, for a single filer, $50K or less. Congress looks at the PMI deduction from year to year. I would not bet on the fact that PMI will be deductible in any given future year. It was originally only a temporary measure directed at new homeowners who were unable to put 20% down.
One can get a lender-paid PMI loan (which is still available) in order to roll the cost into a mortgage and deduct. My CFP said it is not a bad deal for those who don’t plan to be in a house more than 5 to 7 years. To carry it beyond that may not be wise.
“those who don’t plan to be in a house more than 5 to 7 years.”
That was the bait used for lots of folks to take 5/1 ARMs when 30 yr fixed was close to 5%. Why not save a half-percent and go adjustable? Most people move within 5-7 years. Course, now that you can’t sell your house, you may be there for a lot longer than 5-7 years. Unless you are foreclosed first, in which can you will be moving.
So does this mean that Freddie Mac or Fannie Mae are buying these steaming piles of crap? Sounds to me that, despite the protestrations of the CEOs of those two organizations, Freddie and Fannie are bending over for the good of all the important people (NAR, hedge fund managers, mortgage borkers).
Guess the good old taxpayer will have to supplement the earnings of any bad paper issued by these two in the near future.
Earnings? What are those? FNM and FRE don’t have to report financials…
I would never consider borrowing close to that number, based on my current income, but if other lenders fall into line, that alone would be sufficient to slaughter coastal East and West coast bubble markets.
And look at all the flippers/speculators that started buying the million dollar homes with no down to flip ,or gambling buyers were thinking their profit margins would be higher on the pricey homes. From what I have seen so far ,the underwriting wasn’t very good on the higher loan amounts either .
In the track I use to live in the lenders,(or should I call them bagholders ), were making many 700k to 900k low/no down loans . In fact , the house down the street from me sold for about 850k in mid 2005 with a no down buyer .Lending standards never became a issue when I sold my house in 2005 because the buyers payed cash ,but that’s when I first started wondering what the hell was going on in lending ,which lead me to this site .
“‘It used to be that we would finance a loan up to $1 million with no down payment for a first-time home buyer…’
Just 10 years ago, a $1 million home purchase required at least 30% down and a stellar credit score. After the ’90’s bust, banks were really reluctant to write mortgages that big.
Wow. $1M for a first time buyer. Unbelievable.
“$1M for a first time buyer.”
That could go a long way towards explaining all the homes sitting on the San Diego market in the $1M price range without selling for month after month…
Funny thing is, in DC Metro, a $1 million house is nothing particularly special.
“Many years ago, a 20 percent down payment for a home was the norm. But as prices escalated, fewer people could afford that. After all, 20 percent of $500,000, the cost of a middle-class suburban house in the Washington area, is $100,000.”
- If you can’t come to the table with at least 10% and a reserve to match that (for future expenses) you are putting yourself at great risk.
Without easy money prices come back in line with incomes. It’s simple really.
“Many years ago, a 20 percent down payment for a home was the norm. But as prices escalated, fewer people could afford that. After all, 20 percent of $500,000, the cost of a middle-class suburban house in the Washington area, is $100,000.”
You know 20 years ago we built a new house (100k - $15k of that was land that we bought and paid for over 9 years time) We did this with 33% down on $25k salary. This is crazy that everyone is saying no one can come with a downpayment today. Look where salaries are at in some parts of the country compared to years ago. Granted prices are too high now, but a mere 4 years ago they weren’t and banks were still making 100% down loans. If you can’t sacrifice to save for a house, then you don’t deserve to have one, and chances are you’ll default on the loan. 10% is not unreasonable when prices are stable. If you’re too into instant gratification today, you’ll never be a good credit risk.
I think you would be surprised to find out how few folks could come up with $50,000 in cash today. For one thing the cost of living is a much bigger chunk of todays salaries than it was in 1987, and of course, would it surprise if folks today lacked dicipline to save?
I posted yesterday that personal debt is now more a product of human stupidity than inflation. That idea was shot down. I don’t agree with the dissenters.
Here is an example. My sister has a friend in her late 20s with a husband in his early 30s. I think they probably make $60,000 - $70,000 per year. They are looking to buy a new house in the $200,000 range and are planning to pay cash. They have money saved, even after they buy the house. They have no credit card debt. They had their first child about a year ago.
What is their secret? They live like we used to live in the 60s and 70s. The thought that we couldn’t still have one income families is one of the biggest myths around. We can’t have one income families because people want too much house, cell phones, cable TV, Starbucks, designer jeans, twenty pair of shoes, brand new SUVs every 3 years, etc.
The reason people don’t have $50,000 in savings is because they choose not to save, not because they don’t have the ability to save. This market is toast and attitudes are going to be changing drastically in the years ahead.
While agreeing that personal debt is more a result of stupidity than of inflation, I further assert that the debt culture is part of the CAUSE of inflation, particularly as regards house prices and college tuition. When it became “normal” to borrow heavily (or should I say outlandishly) for these expenses, that gave the sellers of houses and the sellers of college a license to raise their prices by double digit percentages annually. Oops, party over.
part of the problem I think is the television. It is proven that people who watch television are more apt to ‘desire’ more stuff.duhhhh that is sort of a no brainer with the message that constant drone drilling into the brain ‘consume more! this will make you prettier or slimmer or more manly! or happier!’ 24/7.
Have DirecTV? Go to channel 115. Have a barf bag at the ready because they have a free preview channel called “Accessing the equity in your home” You can use the interactive button on your remote to begin the process.
Totally agree - NYC.
I could take a 30% pay hit tomorrow and still have money to spare. My biggest problem is figuring out where to park my cash (none of which was given to me or made in real estate), given the, now-in-progress, real estate crash. Did I mention that we’re a one-income family in a big house (which I didn’t buy until I was over 40), and make under 100k.
We all make decisions in life. A lot of people are in absolute fear when there’s a problem with their car - that hasn’t happened to me EVER. The difference was that I spent some time in high school actually learning how the thing works and I can fix almost anything (and understand the rest well enough to not get shafted). Same for plumbing, electrical, and just about everything else. In short, I don’t mind getting my hands dirty.
Rather than acting like martyrs and complaining about electricians charging $100 per hour to change a switch, perhaps some of these people could shut off the plasma for a few hours and either read a book on something useful (like wiring or plumbing or car repair), or go to a trade school (I know, you have to mingle with the little people there - but they’re not so bad, once you get to know them - and, needless to say - I respect them more than many of my peers).
The idea that things are tough now is a joke. They may seem tough, but for most people, it is their own doing and their own decisions. If you want to see tough times, just wait a couple of years as this mortgage mess (finally) blows up.
You’re right get rocks! Times will be tough because people are not prepared. Kind of like when you go into a test w/o opening the book or attending class.
Did you buy your house in 2005? Things are indeed tough today as a result of this Housing Bubble, for anyone who didn’t get in before the runup.
I can give you our own experience. We are middle class in Massachusetts. My wife and I rent (still waiting for a major price decline before we buy). We have one daughter who goes to college with merit scholarships and our out of pocket cost is ~10K per year. Our income is 120K. We manage to save anywhere between 50 to 60K per year, incl the money socked ways in 401K and HSAs. We live a very enjoyable, yet simple, life. Really, most of our money goes to social sec and local/state/fed taxes. Our savings (=investments) generate their own stream of earnings. In the last calendar year our savings 55K and investment income $71K together was more than what we made in our jobs!
It is possible to save, no matter what one’s income level is. Things I can suggest:
(1) Never ever patronize donut shops or Starbucks
(2) Use coupons, look for sales, clearances, etc.
(3) Don’t go shopping today if you can wait till tomorrow. If you must shop, shop for groceries
(4) Go for evening walks together with family members instead of driving to mall
(5) Visit the public library often, borrow books or movies - whatever appeals to you - and use the book/movies keep busy at home. The longer you are inside your home, the less money you will spend.
(6) Use no-fee credit card that returns 1% cash back for all your purchases, pay off each month.
There are many ohter tricks we employ, can’t think of everything now.
You are my kind of folks.
My wife quit working when our first child was born to be a full-time mom (the only kind that’s sufficient, in our view). We’ve made it on my income ever since. While enjoying a modest but rich lifestyle, we’ve invested wisely and saved enough to buy a $300K house outright when the right time rolls around. And no, I don’t set snares for the neighbors’ cats or only eat rice and beans (not that there’s anything wrong with that). We spend a lot of quality time with our kids (to whom we’ve passed along on our love of the outdoors and nature, and our disdain for the mall and various electronic distractions). As zero-debt, high-savings renters, we experience none of the quiet desperation we are starting to see among many friends and acquaitances. The coming economic and social crisis will have the beneficial consequence of forcing millions of our fellow citizens to get their priorities in order.
The thought that we couldn’t still have one income families is one of the biggest myths around.
Thanks to the divorce rate, it not a myth, it’s reality.
My parents tried to raise 3 kids on 1.5 incomes. Mom worked part-time, but she considered her real job to be wife and mother. Unfortunately, if you aren’t on welfare, “wife and mother” doesn’t pay the bills. When Dad left, we lost our home. If it hadn’t been for Mom’s friends, we would have been homeless. I’m not putting my kids through that.
Ghostwriter
Well Said
Depending on what region of the country you live in..having a down payment can be next to impossible…here in Ga you can still get that $200K house..in SFL that would get u a bad condo conversion…you need to spend at least $400 to get something decent..and not stuck in a 70’s time warp
“But as prices escalated, fewer people could afford that.”
But as down payment requirements deteriorated, prices escalated.
I get so pissed when the loan industry keeps justifying their drunken party with lending by statements like you quoted GS.
I feel like saying ,”So if you can’t afford a house ,or the down payment requirements ,than your priced out of the game .”
Prices would of contracted early on in the RE mania because of affordability and down payment requirements and the prices would not of inflated like they did .This easy money caused the speculators to go wild ,and the industry didn’t really come up with affordability products or affordable housing . It’s so silly ,the industry proceeded to give people loans they didn’t qualify for based on a model that real estate always goes up ,so borrowers can refinance or sell if the borrower runs into trouble . IMHO ….Just plain crazy lending ,not acceptable under any circumstances .
Right, just what I was saying in response to NYCityBoy — the deterioration of lending standards fuels inflation.
“…the deterioration of lending standards fuels inflation…”
and sows the seeds for subsequent deflation with a foreclosure crisis for good measure.
Hey,
I’ve got a question for the board.
I live in MD and I’ve been lurking this for a while. I’m currently convinced that I should wait until at least 2009 before looking to buy anything.
Right now I have about 60K in a “buy a house” account that I add $1100 to each month. My credit scores from the 3 bureaus averages out to about 720 and I have no debt.
I always hear people say that a bank savings account is the worst place for your money. What should I do with the money I’m saving to buy a home with? I don’t want to take *any* more risk whatever I’m facing with a my savings account at the credit union.
Thanks.
Depending what your savings interest rate is, at least look into a cd–most banks seem to be giving at least 5% now and it’s FDIC guaranteed up to 100K
Waiting, even your Credit Union should have a CD or MM account with higher interest than your regular saving account.
Further to Steve’s comment, you can probably get an FDIC-insured CD in foreign currency from Everbank — like maybe 10%+ if in something like Icelandic krona — if this sounds risky to you, I can only say, risk is in the eye of the beholder. Staying 100% in US dollars is not so much of a “risk” as a guarantee of becoming poorer.
Isn’t Everbank way under-funded? I thought there was something funny about their balance sheet.
Consider opening a Treasury Direct account. The web address is http://www.treasurydirect.gov For as little as a $1000 you can buy T-Bills that mature in as little as 28 days and earn approximately 5%. By the way, the interest is both local and state tax-free. That’s something that CD’s don’t offer as they are fully taxable. T-Bills are as safe as our government and by rolling them ever 28 days, you can benefit if there is a rise in interest rates. I used to buy CD’s but T-Bills beat them hands down for me. The treasury department just made these available to individuals on their web site last year. It’s a great place to park your cash savings while not having to worry about bank insurance. I would also recommend putting 10% of your savings in gold coins minted by the US. They are highly recognized and very liquid. Treat it as the ultimate insurance against the collapse of our currency. Take physical possesion and don’t worry whether the price goes up or down. Actually, you hope that you will never need it and pass it on to your heirs. If market conditions get really scary, you will still be able to sleep at night knowing that you have taken steps to protect your financial survival. I hope this helps someone out there who needs a sensible plan.
ForeClosure Central,
Excellant Points! I agree with everything you said here. I too, am into T-bills at Treasury direct and I buy one ounce gold and platinum coins every now and then. I don’t look at prices anymore. I just keep buying these, as well as electronic Series I bonds. With Series I bonds, although they are at a lower rate than 3 month T-bills, you are not only free of state and local taxes, but you do not pay federal taxes until you cash out. With T-bills, you keep rolling them over into new T-bills over the years. But you are taxed on the gains every year. It’s a tax on a tax on a … That is why I also am into Series I bonds. You are taxed on the gains once only when you redeem them.
I don’t claim to be an expert here, but your credit score seems low, given your situation. I would try to raise it, as you save money.
It could be that low if you’re renting (I just don’t know). But generally the best way to raise the score is to have big lines of credit (in credit cards) and very low balances (I never run a balance at all - and you don’t need to either). I’d also pay off any car note that you might have.
Otherwise, you look in great shape - so go buy some popcorn and watch the fireworks.
Credit scores seem to be a product of the total amount of debt repaid amongst other things. Outside of lates etc, little use of credit or inactive credit accounts seems to score against you. I also believe your zipcode is used in a form of geographic profiling… The best scores appear to go to those who buy on credit cards, then pay in full when the bill arrives.
While I would hardly dispute the above advice in normal times (regarding the purchase of CD’s, T-bills and gold coins), I would have to say that we are not living in normal times. I think the run up in both real estate prices and the stock market over the past few years has been built on a lot of assumptions about wealth and our economy that are not true (”Real Estate always goes up,” “The stock market is a great place to park your money,”). Perhaps I am wandering off into tin-foil hat territory here, but if things are as bad I think they may get, I don’t think putting money into any institution is going to be safe. If so many supposedly smart folks have gotten things so wrong (stock and bond traders, hedge fund managers, investment bankers and other such ‘Masters of the Universe types’) what’s to say the heads of commercial banks and credit unions have not made the same mistakes. My fear is that if (or when) the economy finally tanks due to corporate and individual credit drying up like a toad in the desert, what will prevent these institutions from going broke, closing down and taking your savings with them. If enough banks go belly up, no CD or Money Market in the world is going to be safe at all. Same goes for T Bills. Something that is backed by the guarentee of the “Full faith and credit of the United States” really doesn’t sound very reassuring. Perhaps I am completely wrong about this, but at present, I can think few other places to park my cash than in a big, heavy safe in the closet of my bedroom.
SubKommander Dred
I lived overseas for five years and didn’t have a US credit record. If you have no record, they assume you’re a drug dealer or something. When I came back to the US, I couldn’t get a credit card for a year! In the US! I eventually had to write them a special letter in which I explained that I had three brokerage accounts in two countries, foreign and domestic bank accounts, and that I thought their latest income statement looked a little weak due to their overlending to poor credits.
They finally gave me a card with a $350 limit. In four months I had $30,000 of total credit with the card companies (credit limit not balance).
Dunno if you’ll see this but the main thing against my credit is the length of time I’ve been building it. I didn’t have a single credit card until 2004 and I’d never financed anything previously. Currently I have 2 cards with limits of about $500. I don’t have a car note.
I 2nd Treasury Direct (IIRC, you also don’t have to pay state taxes on Treasury Bills).
ING Direct is also tempting. Remember, that it’s FDIC insured, so don’t keep more than 100k in an ING account. Also, I don’t know what degree they are tied-up into the mortgage industry, so caveat emptor.
https://flagship.vanguard.com/VGApp/hnw/funds/bonds/bonddesk
I think you have to have a brokerage account to buy these CD’s but you can see what they are offering. Changes weekly.
Again, this blog called it. The home builders will grind away and never stop building.
It reminds me of that one music video where there is a cartoon car racer circling a track; the windshield cracks, the body starts to break apart, the tires smoke. Each eroding piece only propels the driver to go faster. Eventually a ball of dust blows across the finish line.
This is the home builder.
Give me a good builder that builds 2-4 houses a year with a small crew any day. Our house was built by 2 brothers that fed their families from their homebuilding. They are still in business today. Never had one problem with the construction in the 21 years we’ve been here.
Here’s the problem with large builders:
1) The quality of labor they hire is questionable
2) When the profit line is down, they cut corners, where you can’t see
3) The overhead for a national company is astronomical and it’s passed down
thru the prices of the houses - why pay for huge offices etc.
4) This article said they way overpay for the land, so again the cost is passed
down
5) You can’t monitor your construction loan as easily as if you’re dealing with a
local bank and a small builder - Are subcontractors being pd? - Are the draws equal to the work completed?
6)Honesty is not their strong suit
We’ll probably sell down the road here, because 6 acres is a lot to maintain, but I will research any house I look at and if it’s built by a large national builder I’ll pass. I’ve seen what they do to cut corners, and frankly some of them will be lucky if they’re standing 30 years from now.
I agree with #2. Friends of mine bought a house 2 years ago. They used sheetrock in the bathrooms instead of greenboard. You couldn’t see it, but you do now. They also were supposed to get 2 layers of stucco but ended up with one very thin layer.
Excellent post, Ghostwriter. The house that the ex and I sold at the top of the bubble was built by a fellow during the early 70s and he also built a few other houses in the same subdivision. Nothing fancy, but solidly built. And he lived in the same subdivision back when he built, so you can bet he didn’t want to piss off his buyers.
The “business model” of the big homebuilders is unworkable in the long run, for exactly the reasons you’ve laid out.
bonfire of the builders:
By rushing into the mortgage business big-time, homebuilders helped fuel the housing crisis
http://tinyurl.com/2c8d3w
“In November, 2005, the couple, who have four children, agreed to pay $540,000 for a newly built three-bedroom house in suburban Clarksburg, Md., near Washington, D.C. . . .
Oops, hit the Add Comment button too soon: “In November, 2005, the couple, who have four children, agreed to pay $540,000 for a newly built three-bedroom house in suburban Clarksburg, Md., near Washington, D.C. . . . The Mottos moved to Clarksburg, but they haven’t succeeded in unloading their previous home in Rockville, Md. They have nearly $1 million in mortgage debt on the two dwellings. With $145,000 in family income, Elizabeth says, they are ‘on the brink of foreclosure’ on both houses. ‘We are so broke.’”
All I wanted to ask here was what made a couple with four children reasonably believe that they could afford all this on a $145k income? Sometimes, I really do feel like I’m living in the Twilight Zone.
Most of the world went mental over real estate between 2000 - 2006. They just chose to be part of the flock. Now they are getting fleeced and it is “boo-hoo”.
It makes me wonder if the rest of us, who did not take the bait of infinite riches in real estate, will get stupid on some other bubble?
That is why I like to balance my investing in opposite asset classes to reduce the volatility.
I wonder how a family of 18 (and growing) pays their bills? Probably by living in Arkansas.
The secret is that once they reach 13, they are sold off for medical experiments.
The $400,000 house wasn’t enough, they had to “move up” just as soon as they qualified for the ARM on the $540,000 place. Its the American way. People can’t stay in a house that costs less than half a million now can they?
“Lennar plans to build 143 estate-style homes in developments in Newburgh and Monroe, with prices starting in the $700,000s. That translates to roughly a two-year supply of high-end homes for all of Orange County.”
They better hope the Orange County Chopper boys can triple production and by up all of these palaces. That must be Plan A. I wonder if they have a Plan B.
Plan B is to put up walls in the McMansions and turn them into 3 townhouses.
1 McMansion = 3 townhomes. Then you have 60 illegals all under one roof trashing the place from some investor who thought he was getting a deal.
Honestly, things are happening so fast 99.99% of the public or the media doesn’t have a clue of the ramifications or the significance of the recent events. If the media would tell people the truth of what is really going on:
the secondary market for mortgage loans/mortgage backed securites is essentially gone. It started with subprime loans and had grown to almost all mortgage loans within the past week. This means that banks cannot sell the mortgage loans after they fund and so are forced to carry them on their own books. This makes their costs skyrocket, a source of income disappear, and their reserve requirements go up. Most banks rely on selling their loans on the secondary market and so lack the reserves neccessary to keep the loans that they fund. So most banks have been slowing the funding of loans especially the high risk loans by tightening underwriting standards like requiring income documentation for all transactions (no more stated income loans). As the funding cutbacks grow less people can obtain financing on refinancing their house or buying a new one. As the peak of the ARM resets come in October very few of these borrowers will be able to make their mtg huge payments nor will they be able to refinance. The defaults occuring right now will look tiny in comparison to what will occur over the coming months.
More foreclosures and less people able to obtain financing = more decline in home prices = less assets for bank = more reserve requirements = more insolvant banks.
THIS IS WHY Jim Cramer was so frantic on Friday calling for the fed to act NOW.
THE FACTS ARE APPARENT!
UNLESS THE SECONDARY MARKET IS REVIVED…
MANY PEOPLE ARE GOING TO LOSE THEIR HOMES. MANY PEOPLE ARE GOING TO LOSE THEIR JOBS (those in the housing sector already are). MANY COMPANIES CANNOT SURVIVE THIS HUGE LOSS OF FUNDING THAT HAS BEEN KEEPING THEM IN BUSINESS (some lenders have already shut their doors).
WE WILL HAVE A SEVERE ECONOMIC DEPRESSION.
above from Yahoo BSC message board.
http://finance.yahoo.com/q?s=bsc
OK Cramer , than you tell me what stupid secondary market investors are going to fund these low down/low interest rate loans you want to revive the RE and stock market market ?
The reality is that house prices especially in CA greatly overshot their value. Housing is unaffordable to the majority, even those who make good money. Prices must come down because they only stay at that insane level with the artificial prop of “creative financing”. Even now, a lot of “Financial” advisors are still recommending people to avoid a fixed 30 yr rate because they maintain most people will only stay in their house for on average 7 years. I have a friend who is finalizing a divorce receiving this very advice. I told her she would be crazy to not get a fixed 30 yr mortgage.
The sad fact is most people make poor financial decisions. Greed overwhelms people, even the best of people. However, this current government knew exactly what they were doing. I have little faith in the so called experts. Most of the newspapers don’t even report the facts because of course they are beholden to their advertisers…
This blog has been the only place where the facts have been put out for anyone with interest to read.
The secondary market is gone until people stop blowing up on their debts.
People will stop blowing up on their debts when they can afford their mortgages.
People can afford their mortgages when their mortgage balances are not too high (3x income for example).
For that to happen, house prices have to fall on the order of 50% for coastal markets (unless incomes double…NOT).
If house prices fall 50%, bank recoveries will be horrific and anyone in levered paper (CDOs, MBS lower tranches, insurers, etc.) will be vaporized.
I think the secondary market is gone for a while here. Otherwise, what is the big money making strategy? Make 75bps over on conforming loans and cross your fingers through the hurricane?
People have been talking about “what if foreigners sell their Treasury bonds”? The real question is: what if foreigners sell their Fannie and Freddie debt?
“Countrywide said that even people with good credit were defaulting on home-equity lines, largely because of unforeseen events such as illness, divorce or job loss.”
Shocking, I thought all those hedge fund computer models and the packaging of loans up into CDO’s elimated the risks of illness, divorce, or job loss to investors?
Throw the computer models out the window along with the computer.
See, this is why I would never get employment as a reporter, because the minute some clown made a statement like this I would respond with something such as “there has always been these risks ever since we started making loans as an industrialized society. In fact, there’s probably very accurate statistics about how many people regularly default due to job loss, divorce, illness. We’ve obviously exceeded those normal percentages, which means there is another problem that you’re not talking about. I wanna hear what that problem is, not this B.S you’re trying to get me to print. Let’s hear it. I’m all ears!”
The reason these people are defaulting is because the lender expected the first payment .
Whoa, wait, you mean the lender expected to be paid back? Why, the nerve! (LOL) Of course, in the sense that the lenders were lending huge amounts of money they didn’t really have anyway, I can almost understand how it could have been so unreal as to almost seem like a joke to some borrowers.
Maybe, just maybe, a complete purge of the funny-money system could be a good thing. The end-game is in sight and the emperor has no clothes. Provided the FED falls along with hedge funds and all the other craziness in the monetary system, perhaps starting all over with something sound and sensible would be the best thing, IMHO. (Gee, what a concept)
Don’t forget the #1 reason for divorce is financial trouble! We have a self perpetuating spiral.
Now I realize how naive I was to think this could unwind in 18 months… (Hey, the point of these blogs is to learn.) My current timeline only grows to the right… sort of like a work schedule.
Got popcorn?
Neil
“Don’t forget the #1 reason for divorce is financial trouble!”
I can see it now. Before the bubble, divorce rate: 50% homeownership rate: 69%. After the bubble, divorce rate: 69%, homeownership rate: 50%
//unmarried renter
palmetto …..My take on the situation has always been that the only answer is a “clean house ” purge of the corrupt credit market system that was allowed to flourish between 2000-2007. The fraud in lending was just to widespead to be considered anything other than a crime wave . If you look at all the factors that caused the inflated prices ,the single biggest factor was no underwriting standards or appraisal standards . They need to put all these current underwriters into a class on how to make good loans, or get rid of them all together .These rubber-stampers are a joke . But ,that isn’t going to change the fact that the appraisal data banks are riddled with fraud and cash-back deals ,so the industry is going to have to address that problem . Maybe they should enact a rule that the mortgage brokers and realtors can’t pick the appraisers ,and maybe they should be barred from contact with the commissioned salespeople .I don’t know all the answers ,but the system is so out of whack ,its scary .Good God , I have never heard of anything so crazy as salespeople running around with bats in loan offices ,if a underwriter turned down a bad loan .
“Good God , I have never heard of anything so crazy as salespeople running around with bats in loan offices ,if a underwriter turned down a bad loan .”
They should have been arrested and prosecuted for assault with a deadly weapon. Criminality became something of an operating basis after the 2000 election, perpetrated at the highest levels, filtering down to all levels of society, IMHO. Those of us who can, should be speaking up. It is hard to do, given the intimidation and the perception, whether real or imaginined, that to speak up would bring on censure at the very least, possibly assault or imprisonment.
That said, the whole system is toast, nationally and probably globally as well. It can’t survive because of its unworkability. This IS the endgame. I like the idea of the NESARA (National Economic Stabilization and Recovery Act). In itself, it is an excellent idea and is the solution. However, vested interests have managed to heavily discredit it by “moonbatting” it, by associating it with fringe groups and far-out conspiracy theories, etc. Doesn’t surprise me, it would destroy the games of the funny-money crowd.
Thats it , “hanging chads” started all this mess.
I thought that he was referring to all of the Clinton pardons…now that was criminal.
“No-down-payment mortgages came into play about a decade ago, at first for wealthy borrowers with stellar credit.
‘But the model deteriorated, and it became available to just about anybody in recent years,’ he said.”
How could this deterioration have possibly come about? Tis a puzzlement! I wonder whether the Washington Post writers considered the following as a possible factor?
American Dream Downpayment Initiative
HUD Secretary Jackson Announces $161.5 Million in Downpayment Assistance for First-Time Homebuyers
(Picture of President Bush speaking at the celebration for signing of the American Dream Downpayment Initiative into law.)
Watching President Bush sign into law the American Dream Downpayment Act are, from left to right, Delegate Madeleine Bordallo, Guam; former HUD Secretary Mel Martinez; Rep. Michael Oxley, Ohio; Sen. Wayne Allard, Colorado; Rep. Katherine Harris, Florida; Acting HUD Secretary Jackson; and Rep. Jim Leach, Iowa.
Summary
The American Dream Downpayment Initiative (ADDI) was signed into law on December 16, 2003. The American Dream Downpayment Assistance Act authorizes up to $200 million annually for fiscal years 2004 - 2007. ADDI will provide funds to all fifty states and to local participating jurisdictions that have a population of at least 150,000 or will receive an allocation of at least $50,000 under the ADDI formula. ADDI will be administered as a part of the HOME Investment Partnerships Program, a formula grant program.
Purpose
ADDI aims to increase the homeownership rate, especially among lower income and minority households, and to revitalize and stabilize communities. ADDI will help first-time homebuyers with the biggest hurdle to homeownership: downpayment and closing costs. The program was created to assist low-income first-time homebuyers in purchasing single-family homes by providing funds for downpayment, closing costs, and rehabilitation carried out in conjunction with the assisted home purchase.
http://www.hud.gov/offices/cpd/affordablehousing/programs/home/addi/
GS - your post seems to imply that FHA got started with zero down with ADDI in 2003. Actually, FHA got into this business by allowing the “non-profit” down payment assistance loans in 1997 (ie, about a decade ago). I was surprised to see the Post claim that it started with wealthy folks, when FHA was getting into the very seem business at the very same time.
very seem business ? I meant, of course, very same business.
OK - the software is weird. I posted a comment with an error, then corrected the error, and it’s showing the correction, but not the post.
oh well, what I said was
GS - your post makes it look like FHA got into the nothing down business in 2003 with ADDI. But FHA has been in the nothing down business since 1997, when they allowed “non-profit” down payment assistance programs. I was surprised that the Post said it started with wealthy borrowers, when FHA was getting into the same business at the same time.
The “edit” feature on the old HBB is still missed.
I did not mean to imply that 2003 was the starting date of zero-down-payment loans at the FHA; merely that a law was passed to provide taxpayer support for the policy.
Is 1997 the actual starting date for the zero-down FHA loans? That actually makes more sense to me than the 2003 date, as this seems like the kind of policy a numb-skulled D-rat would introduce…
1997 is the date the first deals were done. 1998 is the year that FHA said the deals were OK. So the Ds first allowed it, but in 1999 proposed a policy to eliminate it, then dropped the proposed policy in 2000. The Rs have had almost 7 years to get rid of it, and still haven’t done so.
The Washington Post. “Home buyers again need their own money to close a deal. Lenders faced with growing piles of bad loans, even to borrowers once considered good credit risks, have clamped down on the no-money-down mortgage. The abrupt shift threatens to dash the hopes of millions of potential buyers.”
Even though I’m in the target market the Post describes, I would rather eliminate no money down mortgages and have prices come back to normal than to not.
I really don’t want to bid against some “impulse buyer” with zero down. If it takes you 3 to 5+ years to save the down payment, its amazing how much more thought goes into the purchase.
We’ll all be better off.
I stand by my prediction that 25% down payments will be required in the darkest days of this downturn (excl. FHA).
Got popcorn?
Neil
“I really don’t want to bid against some “impulse buyer” with zero down.”
I’m with you. I sold my house in 2004 and I absolutely refuse to buy again until this zero down/no doc mortgage crap is gone. I will not compete for a house with some whacked out FB to whom the money means nothing because none of it is their own.
and FHA may go back to being 25% of the market.
And that would be bad because?…
Got popcorn?
Neil
Amusing seeing the latest buzzwords applied to real estate. Everywhere you look it’s ” Team This ” or ” Team That ” on a For Sale signpost.
Ohhhh brother !!
I remember during the dot.com boom everyone had to have a ” system ”
You couldn’t just have Joes Saw Repair Shop” oh no no, to stay current it had to morph to “Joes Blade Systems” or some such other BS trendy name.
aqius, coming from a family that was heavily involved in Madison Ave back in the day, I can tell you that this “Team” business is indeed BS. From a marketing perspective, it doesn’t work. I’m sure the term is chosen to give prospective clients the idea that they have a “team” working for them. But there is also the concept of having a “team” working against you, especially if you are a buyer.
Buzzwords and buzzterms set my nerves on edge. The chief operating officer of Ebay uses the word “tranche” to describe the graduated fee categories for merchandise sold on ebay. What’s wrong with “fee levels”? His use of the word “tranche” demonstrates ignorance and misapplication of the term, not something you want in the chief operating officer of a company you are investing in or doing business with. It also demonstrates he’s spending too much time with Wall Street analysts than he is with his customers.
Palmetto, then you can probably validate my contention that “home” versus house is a Madison Ave creation. I even see people on this blog use the term “home”.
exeter, check out that book I mentioned below, “Class” by Paul Fussell. See what he has to say about the use of the word “home” in real estate marketing ploys. As in “Townhome”, as opposed to “Townhouse”.
Just ordered it. Cost me $4 shipped to my door.
I always make a point of calling a house “a house” here and in my everyday conversations.
Something that annoys me a little, personally, the use of the expression “Offered by…” or “Offered at…”. It’s much more common on high-end items, like expensive houses and expensive boats.
It’s like the seller is doing you a favor by offering you something. No one is doing anyone else a favor, just say it’s “For Sale”.
Like the $20k Dodge with 225k miles on it yesterday. (Was it Tom?) Anyway, his sign should have said: “Offered at $20k” LOL
The book “Class” by Fussell written during the 1980s “offers” a wonderfully amusing and extremely literate explanation of how all this came about.
There is a real estate Crime Syndicate going by the name of “Houlihan & Lawrence” who “offers” grossly overpriced junk here in Dutchess county.
What a joke.
Personally, I think “Entertaining offers above 20K” maximizes the snark.
I haven’t lived in the South Bay part of LA for the last 16 months, but I recall the self-congratulatory and pretentious ads in glossy RE magazines marketing the high end homes on the PV peninsula. One couple, both with fat faces, also look as if they had a few dozen botoxes. One single broker wears dark shaded glasses and a very toothy smile, abeit crooked, overlooking water some place in PVE. Give me a bag so I can vomit! Funny thing, the high end home brochures were in grocery stores that customers with $60,000 incomes usually shop, and in neighborhoods of $60,000 incomes. So who were these phoney brokers trying to sell to?
“So who were these phoney brokers trying to sell to? ”
You know damn well who they were trying to sell to: the people who shop there.
It didn’t ( as of last week probably) what their income was.
I knew we were heading for trouble (Los Angeles area) when I used to hear 20 somethings throwing around numbers like 800,000 in coffee machine conversations, like “Yeah, we’re going to sell the one for 800 and get another one for a million in a better place”.
When we bought our first home in the early 1990s our household income was 140k, the house cost 220k and the lender still wanted 10% down and we walked from the loan. They later called and accepted our 5% down offer. We had enough for a 10% but we were so fearful of getting in over our heads we didn’t want to invest ALL of our cash.
This new generation of spendthrifts has no idea what they are dealing with. They were given access to wealth beyond my generation’s dreams (before 1980 the average TOTAL lifetime income was like 600,000) which they promptly pissed away. While dealing with numbers like 800,000 they couldn’t even scrape together 10,000 cash if they had to. They had no concept of the amount of work associated with 10,000 dollars.
These guys would show me their houses worth over 600,000 and I’d be thinking “sell this sucker now before it’s too late” and if I mentioned that they’d go “pffft right”. That was over two years ago. I’m shocked it took so long (The Wall Street bonanzas always go right off a cliff I guess before they end). Now they’re stuck with a fishhook in their cheeks, unable to sell with a dwindling asset. I can’t say I have any sympathy.
“People are very price-driven right now.”
I would argue that people were very price-driven during the run-up as well. Only, the effect of the prices then was like the effect of stock-market prices or any other gambling vehicle: the higher the price, the more people want to buy. The effect of prices now is, reductions in price do not attract buyers until or unless buying becomes actually cheaper than renting the same thing. We have a long way to go.
(“The Route 17 billboard in Orange County promised a new era for the region: ‘Drive 20 Minutes, Save $50,000,’ blared the sign for the new development of homes in the Sullivan County hamlet of Hurleyville. “)
My in-laws live one county farther away than that, a three hour plus drive. They were thinking about moving a year ago, and I told them to sell immediately for that they could get. But they lah-de-dahed it.
Just got back from a visit. They said they could still get big money from rich folks from NYC, who want a place to flee to in case of another 9/11.
They think they can get $250K for a house on 13 acres. Closer in, a 100-acre dairy farm with extensive equipment and a four bedroom 2-story house is being advertized at $260K, with no takers.
Watching Cramer rant is classic. ‘My friends are losing their jobs, and 7 million people are going to forclose on their homes, they have to cut the rates NOW!’. Watching him cry like a little baby makes me smile. He and his friends helped cause this run up, and they ‘made’ a fortune on it. Now, they are caught with their pants down, no one wants their paper and they stand to lose. They want the Fed to cut rates so that things get smoothed over for a while giving them more time to correct their posistions and make someone else the bag holder.
EXACTLY!
People are responsible for their own actions. Did all those “friends” of his donate any of their huge profits these past several years to charities? Did they “SHARE” even a portion of their windfall? Of course not.
My thoughts are “Deal with it!”.
Right . The Wall Street Boys/the RE industry just need one more rally of cheap easy money so they can change bagholders.
Does anyone think the fed will cut rates on Tuesday? Just wondering, if they can considering the effect on the dollar.
I do. But it’s effect will be VERY short-lived. There may be a spike in stocks, but by the end of the week, more news will trickle in - and things will return to normal (i.e., crash-in-progress).
These loans are WAY too big to be helped by a small push in interest rates, and a larger push will send long-term rates through the roof.
Not to mention that the people standing at the top of the cliff now are starting to see what’s below their feet…does anyone really think that undocumented income, 100 LTV, and all of the other garbage from this bubble will EVER come back, regardless of interest rates, for a really long time?
I think at best ,you might get special programs where low down is allowed ,(under 10%),but I think investors will require some sort of insurance ,as well as strict income qualifying requirements .
I remember after the Northridge Earthquake in California ,some secondary market loan investors offering money ,would not fund a loan unless the borrower agreed to carry earthquake insurance .
The people with the gold call the shots in the final analysis, in spite of the WALL Street Boys and the RE Industry pulling a fast one on them in recent years because of their yield greed .
The 2-year has traded down to 4.50 so the funds rate is actually higher than it needs to be, but whether the Fed cuts or not is not going to matter much ($ down, gold up, stocks up, HBs up long enough to squeeze out the shorts and then back down to lower lows).
Cramer’s tantrum has now made it harder for the Fed to cut. I see a strong statement (bias toward ease) but no cut. Good chance of an inter-meeting cut in a couple of weeks, though.
“Closer in, a 100-acre dairy farm with extensive equipment and a four bedroom 2-story house is being advertized at $260K, with no takers.”
Where is this?
Sounds like Binghamton but you can find that anywhere in rural areas east of the Mississippi. Be prepared to lose alot of money paying taxes on this junk though.
Dairy cattle are as dangerous as Minnesota bridges. Remember the rural Va. story about the Mennonite family that died of methane poisoning a couple months ago. Give me an orchard or a vineyard any day.
“Just got back from a visit. They said they could still get big money from rich folks from NYC, who want a place to flee to in case of another 9/11.”
BINGO! That is the mentality of many upstaters. Many of them are now so nervous about declining values that they are hoping for another 9/11…. some of them good “Christian” folk are a part of this group. Nevertheless, they’ve convinced themselves that the millionares from NYC are coming to provide for their retirements. My response to some of these people is that “you’re going to have to work for your retirement like everyone else”.
$250K for 100 acres .. . wow !! That sounds so nice .. hell I’d be tempted to pay that just for the luxory of walking around the property in my bathroom shorts w/bedhead in the mornings without my nosy, no-life, freakin retired HOA assoc., 2 ft from my lot line neighbors watching my every move !
But then I guess those cows would need milkin sooner or later .. but ohhh for that much space/elbow room it might be worth it.
If you’re paying more than $1000/acre in any rural area, you’re paying far too much.
Testify, exeter. Not that rural land doesn’t have its value, but it wasn’t long ago you could get land in the more rural parts of FLA for $1000/acre, even less depending on how much you bought.
Soon come around again.
I can still buy at $500 an acre in quite a few places. I’m not sure why I would unless I was going back to jerking cows but I grew up with that and there’s no money it…. even 35 years later.
Ever bailed hay to earn your keep? I have and it sucks beyond description.
Hey WT
Does that 100 acre dairy farm come with any Amish neighbors nearby? Maybe ones that look like Kelly McGillis ??
Oh DAMN YOU for planting visions in my head
It has already been referred to as the Perfect Storm and barring some kind of miracle, it is.
Trillions of dollars worth of derivatives for sale and no buyers. Credit ratings are no longer trusted. Risk is afterall a four letter word. Everyone to the lifeboats! Sell first and ask questions later. Nobody knows where they stand financially. Money market funds are risky as most have no insurance and already some are posting significant losses. Margin calls go unaswered. Mortgages and corporate buyouts are failing to fund and those that did earlier this year are sitting in bank warehouses rapidly declining in value. We are only days away from total gridlock. Like it or not, the FED is going to act. The dollar is toast and so are corporate profits. Wall Street is going to lay an egg. Remember Bernanke said just a week ago, the dollars value is the Treasurys problem. For historical purposes, you might want to TIVO CNBC for awhile. This is going to be a once in a lifetime event that nobody has ever seen before and it will touch everyone is some way. The debt pyramid is about to collapse just like the twin Trade Towers did. Thank You, Mr. Greenspan!
FC,
What is your source on risks and losses faced by Money Market funds? If this is true, it is a serious problem.
Thanks,
Bostonian
Bostonian, Here is the news source out of Germany. Who knows how many more surprises are yet to come. http://www.abcmoney.co.uk/news/032007113866.htm
“Big builders do whatever they have to do to move homes. They have no choice.”
They have no choice this year and years after that… They will be building more. The only difference now is cost of material and labor is down. All this in a already glutted market. Newly built+ busted flip homes + forclosures… not to mention rentals which are 1/2 cost of owning…
“‘The inventory’s been built up because sellers are so doggone stubborn,’ said Mapes.”
Wally: Doggonit, Mr. Cleaver, where are all the buyers?
Ward: Gee willikers, Wally, I don’t know. I thought the market was still peachy keen — perhaps downright boffo.
The Beaver: Ah shucks, Dad. Does this mean I have to keep sharing a room with my creepy brother?
June: Ward, you know how I hate these old kitchen countertops. For crying out loud, can’t you do something?
LOL.