August 15, 2007

This Is Not The Market For Unrealistic Sellers

The Chicago Tribune reports from Illinois. “The residential real estate industry is bracing for more complications and the potential for collapsed sales agreements because of global credit crunch fears. Last week, North Side broker Beth Ryan said a seller she represents accepted $25,000 less for his $500,000 house after another offer fell through when the would-be buyer was shut out of a mortgage.”

“‘Their credit score was 580 and, as of last Tuesday, their broker said they could have gotten a loan approved for 3 percent down,’ Ryan said. ‘But then standards tightened and he said no one would touch that deal.’”

“‘If you have [a preapproval] from last week, you can rip that up’ because conditions are changing daily, said mortgage broker Kit Mueller.”

“Chase, Chicago’s biggest bank by deposit market share, said last month it has seen a rise in delinquencies in home-equity loans.”

“‘We tightened up underwriting standards,’ Chief Financial Officer Michael Cavanagh said in a conference call. That includes raising minimum FICO score requirements, taking a closer look at loans that allow for less-documented finances, and lowering loan-to-value maximums.”

“Barton Pitts, president of Professional Mortgage Partners in Downers Grove, said the bankruptcy announcement of American Home Mortgage Investment Corp. this month changed the picture for jumbo loan borrowers.”

“When American Home went under, Wells Fargo said it was raising its rates dramatically on jumbo-fixed loans, by about a point and a half, from say 6 1/2 percent to 8 percent.”

“‘That shook up the jumbo markets. Everybody was saying, ‘What does Wells Fargo know that we don’t know?’ Pitts said. ‘The other traditional lenders said, ‘We’re out of here.’”

The Daily Herald from Illinois. “The number of homes and condominiums sold during the second quarter continued to slide in the Chicago region, according to a report released Tuesday by the Illinois Association of Realtors.”

“In the Chicago metro region, total home sales were down 19 percent to 29,061 compared to 35,889 last year. The toughest hit was Lake and McHenry counties, which had 25 percent drops this year compared to about 7 percent drops in the second quarter last year.”

“The crisis in the subprime mortgage industry has forced many lenders to strengthen requirements on who gets mortgages, said Marve Stockert, executive director of the Illinois Association of Mortgage Brokers in Lombard.”

“‘Those people with questionable credit scores are now having a tougher time getting mortgages,’ Stockert said. ‘Their options are quite limited now. Some lenders are looking for higher scores and other requirements. So the longer it’s a buyer’s market, the longer those houses will sit there.’”

From Quad Cites Online in Illinois. “Across the country, lenders large and small are pulling in the welcome mats for those borrowers with less than perfect credit. ‘What I see happening out there is mortgage lending was loosened a lot,’ said Kristal Schaefer, a mortgage loan officer at Quad City Bank and Trust Company. ‘That made it easier for people with credit issues. The sub prime industry came in and said, ‘We’ll take those loans. Not a problem.’”

“‘It’s bad,’ Ms. Schaefer said. ‘I’ve had people come to my desk, and they break down and cry. They’re frustrated. They were either given bad advice from a previous lender or bit off too much.’”

“The new figures from the National Association of Realtors underscored the severity of the current housing slump, the worst downturn in 16 years.”

“The median price in the Davenport-Moline-Rock Island statistical area was down 11.3% from the second quarter of 2006 to the second quarter of 2007, according to the report. The spring 2007 median price was $103,000, versus 116,500 in spring 2006.”

“The median home price for Davenport-Moline-Rock Island was $107,800 in 2004; $117,900 in 2005; and $119,700 in 2006.”

The Journal Sentinel from Wisconsin. “Wisconsin’s foreclosure miseries deepened in July, new figures show. Creditors brought 1,662 new court actions against defaulting homeowners last month - 38% more than a year earlier, reported Tuesday.”

“That brings this year’s toll of families facing loss of their homes to 10,891 - 25% more than the first seven months of last year. ‘The foreclosure business is booming,’ company President Robert Jansen said.”

“Wisconsin’s problems echo the nation’s, as aggressive lending practices during the 2001-’05 housing boom backfire. People are trapped by increases in adjustable-rate mortgages, tougher standards in the humbled mortgage industry and a dearth of buyers in an inventory-glutted housing market, Jansen said.”

The Capital Times from Wisconsin. “Homeowners with for sale signs in their front yards may be starting to get nervous as weeks go by without a sale, but many local real estate experts maintain the local market isn’t as bad as it’s made out to be.”

“Agape Hammond wishes the balance would tip a bit more in her favor. She and her husband put their home on Madison’s for-sale-by-owner Web site in April. Hammond said she realizes it’s not a good time to sell, but they had no choice. The couple and their baby are preparing to move into a bigger house owned by family members.”

“‘There are so many reports out there that say we are in the biggest slump since the 1950s. No, I don’t think it’s the best time,’ Hammond said.”

“‘It seems like people are really out there looking. There are just as many people interested, maybe, in buying, but they are looking a lot longer, because they are so hesitant to buy because of the market being iffy the way it is,’ she said.”

“They’ve already reduced the price by $5,000 to $214,900. She said they get a lot of people coming by to look, but she gets the sense that they are also looking at 20 other houses and in the end may not buy at all.”

“‘People are being really picky right now,’ she said. ‘There used to be a time when people looked at buying a house as a really good investment and a stepping stone to the next level, and now they are kind of looking at it as this is where I have to stay for the next 10 years.’”

“The number of properties offered for sale now in Dane County are considerably more than they were in 2005. In June of 2005, there were 3,000 active listings that hadn’t sold. In June 2007, there were 5,400.”

“Robert Verhelst’s 2,100-square-foot house has three bedrooms, two bathrooms, and he and his wife, Krista, are asking $239,000. They have done well with open houses and have had two offers, both below what they were looking for.”

“‘I think people are thinking, since there are so many houses on the market right now, that houses will go for lower than the value of the house,’ Robert Verhelst said.”

“Sheridan Glen, who manages First Weber’s Capitol office, is also seeing buyers driving for low prices. It used to be, particularly on new construction, that the price was the price and that was it, Glen said.”

“Now, virtually everybody who has new condos for sale downtown is having to be flexible on price and be willing to negotiate…or just simply reduce the price. ‘Those things are all on the table now and they weren ‘t a year and a half ago,’ he said.”

“In the current marketplace, anyone who has owned a condo downtown for less than three years is unlikely to see it appreciate above what the purchase price was three years ago, Glen said, noting that there is a good chance that they won’t break even after paying real estate commissions. ‘I’m telling my clients that if you don’t have to sell, don ‘t sell.’”

The Star Tribune from Minnesota. “In Minnesota, spillover from Wall Street’s difficulties is likely to be compounded by recent changes in state law aimed at protecting consumers against unscrupulous lenders and expensive, exotic mortgages. While those changes, which went into effect Aug. 1.”

“‘We’re in the eye of the storm,’ said mortgage banker Ronny Loew, who thinks the situation could get worse before it gets better. ‘Underwriting guidelines are changing fast and furious.’”

“Deb Greene, president of the Minneapolis Area Association of Realtors, is optimistic that the mortgage market troubles aren’t deep enough to affect the broader housing market. ‘We’re in our recovery,’ Greene said. ‘It’s a U-shaped recovery and I don’t think we’ve totally hit bottom yet, but we are on our way up.’”

From Minnesota Public Radio. “Joe and Pam Sutton have lived on this hobby ranch in rural Hubbard County for seven years. They built the home themselves. For a while, times were good for the Suttons. Joe had plenty of work as a self-employed construction contractor. But Joe says the housing market took a dive a few years ago.”

“The couple put their house up for sale in 2004, but even at a drastically-reduced price, they couldn’t find a buyer. Joe says things came to a head about a year ago.”

“The bank foreclosed on the house this summer; the Suttons have to be out in six months. Pam says their credit will be ruined for awhile and they’ll probably have to rent until they get back on their feet.”

“Experts say the Sutton’s story is being repeated across the state at an alarming rate. The new study from the Greater Minnesota Housing Fund shows there were more than 11,000 foreclosures statewide last year, nearly double what was previously reported by a national study.”

“‘The part that is of major concern is that we see a trend that is increasing fairly dramatically. And we don’t really know right now what the future holds if you go out a year or two from now,’ says Tim Flathers, with the Headwaters Regional Development Commission in Bemidji. ‘Are we just at the tip of the iceberg? I’m not sure. There could be a lot more people out there that are in a precarious situation right now.’”

The Shakopee Valley News from Minnesota. “For the last two years, home sales and prices have been in relative decline for the Twin Cities housing market. Like 24 of the previous 25 months, newly signed purchase agreements (pending sales) for July were below the number signed in July of the previous year—confirming that the market is still experiencing a decline in buyer activity.”

“‘Make no mistake, our market is still in decline and the correction must hit bottom and rebuild before we see any signs of bouncing back,’ said Deb Greene, president of MAAR.”

“‘Sellers need to understand that they aren’t just competing with the home for sale down the street,’ said Greene. ‘With almost nine houses on the market for every buyer, the competition is fierce. Sellers should carefully plan how to make their property and asking price competitive.’”

The Pioneer Press from Minnesota. “Summer vacations and weekend getaways up north didn’t help sluggish Twin Cities home sales last month. Closed sales fell 7 percent in July from the same period last year.”

“Inventory of existing homes for sale continues to be at a record high in the metro area, with nearly 11 percent more houses for sale, or 34,722 overall. In this buyers’ market, there are 8.57 houses on the market per buyer currently versus 6.65 last year and 3.68 in 2005, according to the Minneapolis Area Association of Realtors.”

“Meanwhile, the new construction market remains in a bust. This week, the Builders Association of the Twin Cities reported 440 building permits issued in July, a five-year low.”

“As for sellers, agent Brad Palecek divides his 25 listings into two camps. In one are sellers so motivated that they’ll check out competition, do repairs and drop their prices as needed. In the other are sellers willing to keep their houses on the market for months rather than changing strategy. Now he’s getting choosier about houses he lists.”

“‘The burden is really falling into the sellers’ laps to make sure their houses are priced competitively, that they can show their home competitively, because this is not the market for unrealistic sellers,’ Palecek said.”

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Comment by Front Range Bob
2007-08-15 12:52:25

“‘It seems like people are really out there looking. There are just as many people interested, maybe, in buying, but they are looking a lot longer, because they are so hesitant to buy because of the market being iffy the way it is,’ she said.”

WTF? My FB-speak is a little rusty… Could anyone translate what she just said? I’m assuming it was something like “I’m gonna need a job pole-dancing pretty soon, because I have the mental capacity of a turnip.”

Comment by Arizona Slim
2007-08-15 13:15:23

Bob, you just insulted turnips.

Comment by joeyinCalif
2007-08-15 13:40:15

well, i get it. She’s saying potential buyers are looking.. looking… looking… looking.
Her extreme distress may be causing an acid flashback from her hippy days… #9, #9, #9, #9

Comment by Chad
2007-08-15 13:46:40

“I have the mental capacity of a turnip”

The feeling I’m getting from everyone quoted on this Minnesota thread. All complete morons. Maybe their brains are shutting down for winter hibernation.

Comment by Drowning Pool
2007-08-15 14:04:28

Yes, translate that to “I used to make $24K on a single commission, now I have to do over two thousand lapdances to make that money and my butt is killing me”.

If you’ll excuse me, I am going to establish a long position in kneepad manufacturers…

Comment by Bill in Carolina
2007-08-15 15:06:24

“… I don’t think we’ve totally hit bottom yet, but we are on our way up.’”

Does Deb Greene realize how stupid she sounds? Probably not. I imagine the next words out of her mouth were, “Now is a great time to buy.”

Comment by skooch
2007-08-15 17:28:18

Old Deb wasn’t a math major, I guess … if we’re on our way up, then we have hit bottom already.

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Comment by andrew
2007-08-15 12:52:56

Newspapers should start quoting people who are “underwater” after having bought houses recenlty. That may cause sales to decrease and prices to drop even more.

Comment by joeyinCalif
2007-08-15 13:47:29

i dunno if that will happen..
yesterday we learned the mayor of Stockton was an FB.. two properties.. and it’s likely that more than a few newspaper editors and other various big wigs in the media business are in the same boat. I’ll assume last thing they would want to encourage is price drops.

Comment by pos_dude
2007-08-15 12:53:31

A little bit of information to what will come.,GREAT.html

Comment by Mole Man
2007-08-15 14:01:38

The Depression is a really bad comparison. At that time homes were small, many had no plumbing, at least not inside, and global industry had been essentially wiped out by the Great War. The long period of stagnation during the 1970s is a much better comparison. It is really important not to underestimate the extremely high cost of stagnation coupled with inflation. Just five to ten years of that kind of treatment can cut market values overall in half, which oddly enough turns out to be roughly the scale of the correction we should expect. This is going to be very unpleasant, but deindustrialization isn’t a likely outcome.

Comment by e-man
2007-08-15 14:40:12


I thought “made in China” was all about deindustrialization. And with China refusing to peg its currency correctly, it’s only going to get worse.

Comment by newb1
2007-08-15 14:48:24

I’d love to read an article or two (what?! they didn’t have blogs like this in the ’70s?) comparing the 1970s stagnation and what we’re likely to see here.

Comment by Margaret Jones
2007-08-15 16:48:02

The 70’s weren’t a lot of fun. We had a $150 a month house payment that was hard to make. We paid $15,000 for the house. I don’t remmeber the interest rate. Selling it two years later was a good move. We own now-my grandmother-in-law’s house. We owe about $20,00 on the equity line we took out to do repairs, and are paying it off as fast as possible.

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Comment by watcher
2007-08-15 12:56:10

Stock market selling off at the close; now under 13000 even with the Fed botox/cash injection. The patient is non-responsive…

Comment by joesixpack
2007-08-15 12:58:13

The Fed needs to borrow enough money to get out of debt.

Comment by sfbubblebuyer
2007-08-15 13:04:23

And it closes WELL under 13k. Ouchies!

Comment by edgewaterjohn
2007-08-15 13:54:15

Volume over 4B - and most of that late, the a.m. rally was slow.

Comment by skooch
2007-08-15 17:31:20

Alas, Dow 13K, we hardly knew ‘ye.

Comment by Front Range Bob
2007-08-15 13:35:11

I bet Paulson’s call da boyz right now to get a short-squeeze rally going tomorrow, which will let the MSM declare a bottom on the market.

It’s all good! :-D

Comment by Matt
2007-08-15 13:46:24

Short squeeze? This is longs starting to panic.

Comment by Front Range Bob
2007-08-15 14:34:33

It will be the shorts panicking if da boyz can force the market significantly higher tomorrow. The shorts will have to cover their bets, thereby forcing the market even higher, etc. Look for a big rush to the upside if this comes to pass. (Hint: It won’t be the dreaded PPT.)

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Comment by 85249 is Toast
2007-08-15 13:38:15

S&P is now negative for the year.

Comment by sartre
2007-08-15 13:57:48

I don’t watch much TV, but does someone know if cnbc brought out the baloons, cake etc today just like they did at 14,000? no love for bears in this town…

Comment by housegeek
2007-08-15 12:58:56

Dow falling fast!

Comment by cheezbubbler
2007-08-15 13:01:30

People are being really picky right now,’ she said. ‘There used to be a time when people looked at buying a house as a really good investment and a stepping stone to the next level, and now they are kind of looking at it as this is where I have to stay for the next 10 years.’

ah yes, changes in sentiment abound. This isnt Cal, Flor, or AZ, this is Madison, Wisconsin. hilarious….

Comment by barbara_7
2007-08-15 13:03:50

“‘I think people are thinking, since there are so many houses on the market right now, that houses will go for lower than the value of the house,’ Robert Verhelst said.”

No, the “value” of the house will go lower than the “value” of the house and then even still lower than that “value”….

Comment by sfbubblebuyer
2007-08-15 13:15:28

If any of these FBs applied a rational valuation model to their house based on incomes or rents or historical trends, their heads would explode.

Comment by Chad
2007-08-15 13:49:50

My head almost exploded from reading a single sentence with the word “think” twice and “house” three times.

Comment by de
2007-08-15 13:05:56

“Deb Greene, president of the Minneapolis Area Association of Realtors, is optimistic that the mortgage market troubles aren’t deep enough to affect the broader housing market. ‘We’re in our recovery,’ Greene said. ‘It’s a U-shaped recovery and I don’t think we’ve totally hit bottom yet, but we are on our way up.’”


How in the hell do we begin a recovery before we reach bottom?

How do increased rates, tightened lending criterion with the bottom shot out of the buying pool, lenders not wanting to touch anything the can’t sell to Fannie/Freddie, a constant ramp-up in foreclosures and an ever-widening pool of homes on the market not affect the ‘broader housing market?’ They are the broader housing market.

Argh. Typical realtor.

Comment by Arizona Slim
2007-08-15 13:14:26

Deb just described a mathematical impossibility. Either you’re moving down the curve toward the bottom, or you’re going up. Can’t do both at the same time.

Comment by ronin
2007-08-15 14:39:48

In the sense that your snowboard has to slide down the left side of the pipe before it can slide up the right side.

It is a very zen approach. We are not just down, we are heading down faster, and since space is curved, the downer we go the closer we get to up.

Comment by edgewaterjohn
2007-08-15 13:35:31

Such nonsense should never have made past the interviewer. These nimrod journalists should read their stories out loud to themselves before going to copy.

Comment by Chad
2007-08-15 13:52:34

Who says she was interviewed? Maybe she was “elected”.

Comment by Chad
2007-08-15 13:53:14

Nevermind, I thought you meant interview for the job, not the story. I need to go to sleep or something.

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Comment by Malibucreek
2007-08-15 16:16:45

As a former newspaper reporter, I should fess us that *often* reporters know that quotes are BS, but we include them to allow those sources to light their credibility on fire with their own words. And to give smart readers a chuckle, too.

Comment by dimitris
2007-08-15 13:37:55

Spatial disorientation is one deadly bitch.

Comment by Chad
2007-08-15 13:51:41

“How in the hell do we begin a recovery before we reach bottom?”

Not to worry, she totally shoots herself in the foot in the next article. Thanks Ben for putting them together!

Comment by qt
2007-08-15 14:01:40

U-shape curve? How the hell did we recover if we didnt hit bottom? Can you please retake calculus!?!!

Comment by Arizona Slim
2007-08-15 14:28:28

I think calculus would have been too hard for Realtor Deb.

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Comment by Lostcontrol
2007-08-15 16:04:37

sorry about that last posting…what was I thinking…

Comment by Lostcontrol
2007-08-15 16:03:02

You see, there’s this blackhole, and like a rabbit, I just jump in and end up on the other side going up.

It sounded logical, at least from Alice’s viewpoint. And besides, the the Cat with the smile said it’s fine by him.

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Comment by joeyinCalif
2007-08-15 14:04:27

“..‘We’re in our recovery,’ Greene said..”

When the ambulance’s doors jared open, the comatose patient strapped to his gurney rolled out and careened head-first down the road, ricocheted off the guard and into the air, flying over the edge of the cliff, finally coming to rest a thousand feet down the mountain side.
A helicopter is now recovering the body.

Comment by climber
2007-08-15 14:28:43

Dead cat bounce is one term for it.

Comment by Az_Smarts
2007-08-15 13:07:53

I am moving from AZ to Utah in the winter and my fiancee has found a house that she wants. I have read this blog since last year and am opposed to buying right now- especially in a state that I am unfamiliar with. Does anyone have any insight into the Utah market, mainly the layton area and weber county? Plus…. zillow does list sale price in utah.

Comment by kThomas
2007-08-15 13:12:30

save your money. if she’s for real, she’ll respect your decision.

Comment by sfbubblebuyer
2007-08-15 13:35:16

It’s true. My wife finally realized just how unhappy I was at the prospect of buying right now and said she’s willing to wait a few years. This was after several months of house shopping in Feb-May.

Comment by shel
2007-08-15 15:37:04

phew! congratulations on that!
I’m still trying to convince hubby to wait, but at least I got him to avoid buying in these last couple years so far, mostly by developing nervous conditions so that he feared for my health lol.

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Comment by newb1
2007-08-15 15:10:23

Agreed. I strongly suggest letting her read just this last week’s worth of entries here and I bet, if she’s “for real” she’ll not only respect your decision, she’ll hop on board.

Take the time to save (more) for your down payment. You’re going to need it, apparently.

Comment by shel
2007-08-15 15:40:02

and don’t you think that as people have to actually put money down, they will be reluctant to buy if prices are still ridiculous or even in that neighborhood, and if depreciation is still happening? After all, they could lose that hard-earned money!

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Comment by mrquoi
2007-08-15 14:09:56

I believe the WSJ reported that Utah had the highest % of people using interest only loans- the kind with negative amortization. Now add that to the fact that Utah has the number one bankruptcy rate in the country. Last of all, Layton and Weber Co. are exurbs, ie a long drive to work and the traffic on the 15 & 89 can be horrible-just as bad as here in San Diego!

You can look at San Diego for a glimpse of what you will see next year. Right now you still have prices rising and inventory rising. Next year you will have prices dropping and inventory rising. Only prices are gonna drop a lot faster on those Ivory homes - Layton is not exactly a hot spot for retirees but it was big for local specuvestors.

But, for your fiancee, buy her some nice gifts, rent a really nice house with a view, and tell her, “Well, sweetie, let’s rent a year since we might find out we’d rather be in Ogden/Bountiful (cities) or somewhere out in the boonies. We need to be very careful about where our babies grow up.” Uh, I think the last bit might be over the top. Oh and the whole stretch from SLC to Tremonton is Utah’s Meth Alley.

If you are going to let her whip you into buying a place get it tested for meth and ask the local PD what’s gone of there before because Utah is a non-disclosure state and the seller is not responsible for telling you your new home was a meth lab/crime scene/mold pit so long as they can get a clean bill from their neighbor/cousin at the local dept. of health.

Comment by jag
2007-08-15 14:34:10

Don’t worry, unless you have 20% to put down, perfect credit and a documented, perfect, job history you won’t get a loan.

Guess what this will mean for house prices in Utah (everywhere)?

Comment by SD_suntaxed
2007-08-15 15:16:43

Look at the charts toward the bottom and check out the inventory numbers. Looks like May had the flippers and investors starting to bolt for the exits.

Some friends recently left and really didn’t like living there. I’d seriously consider renting to see if the area is a good fit for you. Utah has its share of mortgage backed problems that just aren’t as apparent, yet.

Comment by DR
2007-08-15 16:45:40

I currently live in NOrthern Utah. The market has turned a bit pricey here and I believe it is currently a buyers market as inventory for sale has almost doubled from last year. I would rent for a while and find what areas you really want to live in. The Weber county area in not pricey like the metro SLC area.

Comment by Sobay
2007-08-15 13:11:34

“‘It’s bad,’ Ms. Schaefer said. ‘I’ve had people come to my desk, and they break down and cry. They’re frustrated. They were either given bad advice from a previous lender or bit off too much.’”

- I hope that they are ‘frustrated’ at themselves….the mopes did not bother to figure that their 25k income would not cover the payments.

Comment by barbara_7
2007-08-15 13:12:24

Countrywide (CFC - Cramer’s Take - Stockpickr - Rating) took another hit Wednesday as the struggling mortgage lender got downgraded by Merrill Lynch on concerns about its liquidity. Merrill downgraded the stock to sell from buy a day after a smaller lender in the business of making jumbo loans,

yo Merill, you so brilliant….Thank you for the advanced warning…..!

Comment by Michael
2007-08-15 13:16:21

Nice look at some of the scenic areas in the US. I haven’t been to some of those areas in a while but I think of them as quiet and peaceful places. Places where you don’t think that people would get caught up in a bubble.

But I guess most of the country got the fever to varying degrees.

Comment by climber
2007-08-15 14:17:04

Nearly everywhere people are carrying more debt than they can comfortably handle. The prices of the houses are not really all that important, it’s the debt load of the occupants that matters.

The “non bubble” areas are badly indebted as well, and when it comes to a head they often lose even their modestly priced houses. House prices everywhere in the US are vulnerable to the credit crunch. I don’t know of anywhere where people are routinely using 15 year mortgages on one income. If there were such a place then I’d say its prices are not vulnerable.

Comment by Magic Kat
2007-08-15 14:49:03

“Nearly everywhere people are carrying more debt than they can comfortably handle.”

Climber, you are so right. I’m in N. Cal for a wedding and went with the bride to Wally World to get a few items. We were about 10th in line and I noticed that everyone, and I mean everyone, ahead of us pulled out a credit card to pay for their purchases (which were mostly groceries). Funny, I don’t remember my folks EVER having to use a credit card for food. Matter of fact, I don’t think grocery stores even accepted credit cards when I was a kid. If credit cards were suddenly taken away, how many people would go hungry? Millions?

Comment by sfbubblebuyer
2007-08-15 14:55:49

Could be debit cards. I hardly ever carry a ton of cash. I love my debit card!

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Comment by shel
2007-08-15 15:35:10

and there are many people, I assume, who use the cards for convenience. I think I read recently some alleged ‘de-bunking’ story about that…don’t know if it’s really true…that the vast majority (like, at least 60%) of people pay off their balance each month. I know I do, but I pay for everything with credit cards. Easier to see what you spent on, easier on the wallet-size, feels safer than carrying a load of cash, safer than a debit card too.

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Comment by DavidD
2007-08-15 16:13:03

I agree shel.

I use a no-fee Amex card for most purchases, no matter how little the amount. Last year my rebate check was over $600

Comment by garrett
2007-08-15 13:22:10

OT here — any opinions out there about Vanguard Prime Money Market Funds? Safe storage of money or get out while one still can?

Comment by safe_as_apartments
2007-08-15 13:37:17

It’s probably safe, but no money market is guaranteed.

Comment by TJ_98370
2007-08-15 13:52:05

Related topic-
Be wary of Legg Mason / Smith Barney Western Asset Money Market Fund. According to it’s prospectus, this fund does invest in mortgage backed securities.

Comment by VT_Dan
2007-08-15 14:03:29

It is a real shame that vanguard doesn’t have any cash equiv accounts.

Comment by colorado_renter
2007-08-15 14:03:40

Take a look at : Vanguard Treasury Money Market Fund (VMPXX)
It invests in US Treasuries
Yield is slightly lower than Prime Money Mkt (4.80+ v/s 5.20+ %)

Comment by DrChaos
2007-08-15 16:49:34

And interest on US treasuries is not taxable by States.

if you’re in a high state tax bracket, it might be worth it.
Then again, you can just buy auction t-bills directly for no cost at TreasuryDirect or Fidelity. Almost a money market fund with 0.0% expense ratio.

Comment by Muggy
2007-08-15 13:27:11

“The bank foreclosed on the house this summer; the Suttons have to be out in six months. Pam says their credit will be ruined for awhile and they’ll probably have to rent until they get back on their feet.”

That’s awful. They shouldn’t have to rent and throw their money away. Somebody get on the horn and get this lovely couple an I/O ARM so they can own the dream.

Comment by Inland Empire
2007-08-15 13:32:02


I have a 401K w/ prudential and would like to reallocate my funds into a safer fund. I am not to knowledgeable concerning stocks and not sure what to do. Does anyone have any suggestions on where I can read up on this type of stuff that wouldn’t be to far over my head? Any suggestions on what funds I should be looking at would be nice as well.


Comment by Tom
2007-08-15 14:09:54

People were saying look at Mutual Funds that focus on tech and Big Cap , International plays.

Comment by climber
2007-08-15 14:24:54

Zimbabwe here we come. In a currency collapse stocks outperform most other things, even though they usually don’t outperform against a stable currency.

I’d say get at least some % in Japan and Europe. The oil exporters may or may not hold up. I depends on whether Americans can afford to drive.

Comment by mossypete
2007-08-15 16:46:00

I also have a prudential managed 401K - Just dumped all of my holdings (in euro and developing mkt investments ((12%+gain in the last 6 months)) for the money mkt fund - taking a breather for the next few months. According to the prospectus the MM fund invests in short term govt paper - no mtg’s as far I can tell.
I’ve been following what would have happened to my investments had I not made the changes - down 6% or so in the last 2 weeks

Comment by Wheatie
2007-08-15 18:33:44

CASH!!! Get as close to cash as you can such as short-term Treasuries. Avoid ALL commercial paper like the plague. The spread between guv and com paper will rocket. Even overnight paper could collapse with the commercials. DO NOT GO INTERNATIONAL in my opinion - foreigners are the last to jump on board before major market moves. This bear market is not going to be the USA, but global. Do you want your money stuck in Russia or China because some mutual fund is as screwed as Bear Stearns, Goldman Sachs, etc. have been lately?

Comment by jjinla
2007-08-15 13:55:05

“When American Home went under, Wells Fargo said it was raising its rates dramatically on jumbo-fixed loans, by about a point and a half, from say 6 1/2 percent to 8 percent.”

THUMP!!! Is that the sound of the bottom of So Cal’s market falling off? By December there will be blood in the streets. Since Monday alone, I’ve noticed three “pending” signs come down from high-end properties in my neighborhood.

Comment by Chad
2007-08-15 13:59:02

Wow. Next pending sales figures ought to be nasty.

Comment by climber
2007-08-15 14:21:06

I’d bet pending sales will hold up better than completed ones. Pending sales may actually balloon as it becomes harder to line up financing and sellers are less willing to ditch a willing (even if unable) buyer.

Comment by Tom
2007-08-15 13:58:02

Hedge Fund redemption was today and tomorrow. LOOK OUT BELOW!

Comment by aladinsane
2007-08-15 14:07:07

It’s perhaps time to liquidate your 401k’s and take the tax beating…

55% of something beats 100% of nothing~

Comment by technovelist
2007-08-15 21:24:07

I’ve borrowed out almost half of my 401k money so I could put it in something relatively safe. No tax consequence, as long as I pay it back if I get laid off.

Comment by Tom
2007-08-15 14:08:03

This guy on CNBC wants them to cut interest rates 50 basis points. He then wants them to do it in another month at 50 basis points. He is afraid of housing deflation claiming, “we are entering the worst housing cycle since the 1930’s”.

He said to avoid exchange rate risks (sacrificing the dollar and carry trade) the Bank of Japan and ECB should cut rates in unisom with us.

Comment by climber
2007-08-15 14:19:06

I have a better idea. The FED could buy every single mortgage in the country, and then print money and pay them off. Poof, no non performing loans. We’d all be rich - we’d all have 100% equity in our homes!!!!! Wow what a deal, let’s start today. Inflation, what’s inflation?

Comment by VT_Dan
2007-08-15 14:57:45

This is actually close the best solution. If they simultaneously implemented 100% reserve banking.

We need to print debt free money to pay of all of the interest due, it is the only way out.

The biggest problem is distributing the wealth in a “fair” way.

I think if they simply paid off the national debt with debt free money we would probably be MUCH better off.

Comment by memmel
2007-08-15 14:20:05

Japan is going to have a tough time cutting rates.
Turnip bloods is being spilled all over the street today only the idiots are left cheer leading.

Comment by 85249 is Toast
2007-08-15 14:09:13


You can smell it in the air.

Comment by joe momma
2007-08-15 14:33:11

You really can.

Comment by shel
2007-08-15 15:11:43

you know what I flashed on today?
how the whole feel of panic is just sorta heightened by the rest of the media coverage lately…
bridges are collapsing (can’t trust the infrastructure)
toys, millions of them, are being recalled (maybe I should let the kids play with sticks and baseballs, they’re safer…and cheaper! can’t trust the toystores)
toothpaste and cough syrup and even frozen shrimp are coming from China, but we really can’t tell because the labels don’t always report country of origin, and they’re poison! (can’t buy frozen food, or cold meds, or even toothpaste! maybe we should just not use toothpaste…)
all consumer goods are made in china, wow! (maybe we should just assume they’re sending over toxic waste in the cd players and coffee makers, and not buy those either. and why would we want to reward a communist country who will sell us poison if it makes them a couple extra yuan!)

add to that a little extra fear about illegal immigrants, who shoot innocent kids for instance, and the whole world seems to be going to hell in a lou-dobbs style handbasket, while jim cramer screams that the Fed is not doing what it needs to do, as if there’s anything good it could do, to stop it.
start saving money and putting it in a mattress because the banks are all collapsing too, it seems.

Comment by Patricio
2007-08-15 14:15:38

“The new figures from the National Association of Realtors underscored the severity of the current housing slump, the worst downturn in 16 years.”

Did I read that correctly? Wasn’t it going to flatten out and then shoot back up in Jan 08′? I can’t wait for the next press conference where Yun comes out all disheveled with messed up hair and a bottle in his hand plastered, then screams at the reporters “Awwwww…..shadduppp!!! I’m dwinking here!”

Comment by Leighsong
2007-08-15 14:21:06

Thanks for the Wisconsin coverage Ben…they still didn’t get the darn memo! Guessing most of you are right…this will take some time. Sigh.

Comment by txchick57
2007-08-15 14:24:25

Dallas property taxes (already ludicrously high) going up, just in time for values to crash:

Comment by wawawa
2007-08-15 14:25:37

Off Topic:

Are you guys enjoying your HBs shorts ? :)

Comment by joe momma
2007-08-15 14:35:40

It clearly is different this time! Really different!

Comment by kThomas
2007-08-15 14:50:44

And let’s never forget: real-estate never goes down in value.

Comment by ET-chicago
2007-08-15 15:03:02

‘People are being really picky right now,’ she said. ‘There used to be a time when people looked at buying a house as a really good investment and a stepping stone to the next level, and now they are kind of looking at it as this is where I have to stay for the next 10 years.’

Well, uh … good. That’s the way it’s supposed to be.

Comment by shel
2007-08-15 15:16:12

indeed…that’s why I couldn’t buy anything in the last couple years, because the only houses I could *really* afford were so cruddy that I wouldn’t want to live in them for more than a year or so! But the realtors would tell ya oh, not to worry, just sell in a couple, all my clients do it (seriously, as recently as a year ago I got told this, in a market that has been in trouble for a while now, the detroit msa –albeit in ann arbor, somewhat immune or so they thought til pfizer cut its entire 2400 person workforce here). they live in it, sell after a couple, and use the profit as income.
now that such ‘advice’ is clearly (i’d hope so, by now) bunk, the prospective buyers are even less willing to pay too much, not just buy something they don’t really like.

Comment by shel
2007-08-15 15:03:07

that scenario from the top of the thread, a potential buyer with a credit score of 580, who wanted to use only 3% down on a half-million dollar house?! Why do I find it really scary that even as recently as last week such a deal would have gone through?! Don’t you have to have screwed up pretty badly to have a score that low?! Why would it be okay to lend someone 500K, especially given how quickly home prices have gone up in the recent past, with such a low credit score and with only 15K to put down? Why wouldn’t you demand a greater commitment to paying the loan?
For godsake, when Jim Cramer is getting on the tv and telling everyone to just walk away from a house they’re underwater on, someone would have made that loan?!

Comment by Misstrial
2007-08-15 15:44:29

Great post.


Comment by lurker
2007-08-15 15:49:09

If you think the lending situation is screwed up, you should see the house. It is definitely a tiny trainwreck if it’s on the North Side at that price. I would see the owner of such a place as definitely of modest means.

Comment by BJ
2007-08-15 15:07:53

St Paul mayor proposes a 15% property tax increase. Good thing we have already hit bottom here.

Comment by JayInMD
2007-08-15 15:17:20

cities are going to raise tax rates to keep the money coming in. As property values fall, the rate has to go up to bring in the same amount of money. Yes, it will fail, always has, always will but politicians love how history rhymes.

Comment by palmetto
2007-08-15 15:32:36

Very true, Jay, but very bad practice. Government entities need to tighten their belts, just like the people they are supposed to serve. I don’t think they’ll have a choice, this time around. Can’t squeeze blood from a turnip. But I predict they’ll try and will end up with a buttload of tax lien property that banks and various investors won’t have the money to pay taxes on. There might actually be some real opportunity to buy a nice crib for taxes. Sweet!

Comment by JayInMD
2007-08-15 15:45:07

Gov’t engaging in “bad practices”? Say it ain’t so!!!

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Comment by flatffplan
2007-08-15 17:56:41

my county is spending 15 million on bus tracking as they announce budget shortfalls = schizo
they could chop heads by 50% and no one would know

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Comment by rocketrob
2007-08-15 15:33:43

Countywide is the primary (and almost only) source of loans for mobile home sales on lots. Their failure will virtually eliminate this low end financing. Holy Cow, the high end and low end getting creamed.

Comment by Left LA Behind
2007-08-15 15:56:09

“$500,000 house …” / “…they could have gotten a loan approved for 3 percent down…”

I have a 100% down stashed away for a property of that price, but I am not going to be suckered in to a measly 5% discount.


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