It’s Not Business As Usual In California
The Union Tribune reports from California. “The ugly side of San Diego’s condominium downturn is on display along Fifth Avenue. The bones of what was supposed to be Atmosphere, nearly 80 ‘luxury live/work units for a life well-designed,’ sit open to public view. Atmosphere is one of two downtown San Diego condo projects that started then stalled. The developer of Triangle, at 14th Street and Imperial Avenue, demolished an old warehouse and then stopped. It’s a parking lot now.”
“San Diego real estate economist Gary London said the downtown skyline won’t see many new residential towers for at least four years. ‘There is a pipeline of 9,000 units of projects that are planned after this year – most of which won’t be built,’ London said.”
“For the San Diego housing market, the winds are already blowing hard. For many borrowers, July was the last month of super-low, two-year ‘teaser rates’ on their mortgage payments.”
“Already, the number of defaults, foreclosures and bank takeovers in San Diego County has risen immensely, jumping from 5,401 in the first half of 2006 to 18,409 in the first half of 2007, says RealtyTrac.”
“‘What I’m advising my clients is that the market will keep deteriorating gradually until it bottoms out in the next 12 to 18 months,’ says Gary London.”
“‘Right now, lenders are running for cover and concentrating on vanilla-type loans, lending to people with golden credit scores and a lot of money in the bank,’ says T.J. Knowles, a mortgage broker with CalBrokers. ‘They’re going back to that old cliche of saying, ‘If you don’t need a lot of money, I’d be happy to lend it to you.’”
“Knowles says he does not see the number of foreclosures leveling off soon. ‘I don’t know that I would use the word ‘catastrophic’ to describe how I view the situation, although it’s very possible that things could get that bad,’ he says.”
“With foreclosures mounting, the local rental market is experiencing growing demand. Mortgage defaults are ‘creating a new population of tenants,’ said attorney Steven Kellman, director of the Tenants Legal Center of San Diego.”
“Some displaced homeowners are getting a cool reception as the surge in real estate foreclosures sends them back to the rental market in search of shelter.”
“Nevel DeHart of a national tenant-screening company, warns that homeowners often are deeply in debt by the time a foreclosure occurs. With no financial reserves to fall back on, they sometimes make poor rental risks, he said. ‘There is just no margin for error.’”
“Ron Bowdoin, who oversees 2,500 rental units in Los Angeles and the Inland Empire, said foreclosure victims often fail to meet his company’s credit standards.”
“‘As they reach the brink of foreclosure, their credit reports have suffered tremendously,’ he said. ‘We have to do a co-signer or large deposits to get them into apartments.’”
The Napa Valley Register. “A record 906 Napa County homeowners tried to sell a home in July. Only 61 were successful. The number of homes for sale in the county peaked to an all time high in July, up 18 percent over 12 months. This leaves the market with a 14-month supply of homes, according to Trendgraphix, Inc.”
“Things couldn’t get much worse in American Canyon where a measly four homes sold in July, from 166 listed. ‘It’s pretty slow,’ said David Barker of ReMax. ‘The buyers just aren’t out there. The problem is we just have so many homes for sale. If you want to sell you have to be spectacularly priced and in absolutely cherry condition’.”
“Statistically, American Canyon faces a 41-month supply of inventory of homes for sale. ‘It’s brutal. We can’t seem to get people to look at the houses,’ said Barker. ‘We’re only selling one (home) a week on average. If it continues the way, there could be 175 or 180 (homes for sale) next month.’”
“American Canyon homeowners continue to face foreclosures or ’short sales’ to avoid foreclosure.”
“‘Those are the people who bought in the last few years, but more significantly, it’s people that bought in 2005 and 2006 with 100 percent financing and negative amortization loans. The value of the loan has increased, the value of the property has decreased, and the payments have gone up. It’s the perfect storm,’ said Barker.”
“‘What’s their option?’ said Barker. ‘They can’t refinance. They have no equity in the house. Now they have to sell. The only way to sell is with a short sale.’”
“Heidi Rickerd-Rizzo at Pacific Union GMAC Real Estate said it can be tricky getting buyers and sellers together.”
“‘We are still in a seller’s mind set. They are still looking at numbers of three years ago and they are not prepared to be reducing their price points. We have a lot of offers come to the table and they’re not able to get buyers and sellers together to get a deal done. The buyers are walking away. Sellers are not negotiating. It’s an interesting phenomenon,’ she said.”
“‘There’s still a lot of money out there but investors want tighter controls,’ said Robin Rose of Coldwell Banker Brokers of the Valley. ‘Our perspective right now is that short term this may be difficult but long term, the mortgage correction will be good for the real estate market.’”
The Bakersfield Californian. “Whatever is going on out there, it’s not business as usual. Default notices have been rolling in to county offices at a quickening pace since December when 407 filings warned borrowers they could lose homes if they didn’t catch up on overdue mortgage payments.”
“As the year has ticked along, the numbers have gone up: More than 500 default notices arrived in February, records from the county Recorder’s Office show. In June, 661. Last month, lenders sent 780 such notices to local property owners.”
“Prior to December’s tally, the 400-mark hadn’t been broken since March 2000.”
“Regulars at public auctions have noticed a startling change of late. Two years ago, 95 percent of homes were snagged by eager bidders, one auctioneer estimated Friday. These days, about 90 percent go back to the bank.”
“Lenders have even started discounting deeply, sometimes starting bids at 80 percent of the amount owed on the first loan. The second loans left from so-called 80/20 ‘piggyback’ deals, which required no money down, typically get eaten.”
“On Thursday, for example, the house at 2817 Dartmouth Street came up for auction, with $333,484 owed on the mortgage. The lender started bidding at $200,000. Still, no one nibbled, and the house went back to the bank.”
The Daily Press. “A spacious home sits empty on a side street off Spring Valley Parkway, the plants drying up and needing pruning. The house is one of 50 foreclosures in the 4,200-member country-club community since January, with 39 currently for sale by the trustee.”
“‘We’re getting them in all communities, all areas of the valley, all classes,’ said real estate agent Paula Hurst. ‘Even in the mountain resort communities.’”
“Aside from the devastating psychological affects, walking away from a home is deadly to a credit score, she said. ‘It’s going to be a long time before someone will trust you again with that size of a debt,’ adding that the number of years used to be from seven to 10.”
“Foreclosures could continue for two to three years in Spring Valley Lake, Hurst said. ‘It would take us two to three years to sell off the current inventory if we didn’t list anymore (homes),’ she said.”
“Real estate agent Norm Sanchez is handling two foreclosures in the lakeside community. ‘Many people were getting these things with the expectation that they were going to be able to sell it within a year,’ Sanchez said.”
“The owners of both homes were hoping to turn them around quickly, he said. One of them earned only $30,000 in annual income, and after living in it for a month, she rented it out.”
“‘People said, ‘Hey, well I’m struggling and this could be my opportunity,’ without realizing that the rents weren’t going to pay the mortgage.’”
The Sacramento Bee. “Unemployment rose in Sacramento and across California last month, state officials said Friday. The numbers provided fresh evidence of the impact of a housing slump that has rattled the financial markets in recent days.”
“The number of payroll jobs fell by 8,600, the Employment Development Department said. The construction industry lost 7,800 jobs during the month, the worst showing of any sector of the state’s economy.”
“Economic consultant Chris Thornberg said the housing industry’s problems will likely bleed into other parts of the economy. ‘The turmoil in construction by itself is not enough to cause a recession, but it’s putting a squeeze on things,’ said Thornberg, of Beacon Economics in Los Angeles.”
“Sacramento-area…payroll jobs dropped by 5,200. The construction industry shrank by 400 jobs, an unusually weak showing for a month when job sites are usually busy.”
“Although construction tends to wind down in late summer, a July cutback is rare. ‘We’re seeing construction pull back a little early,’ said EDD labor market consultant David Lyons. ‘That’s not unexpected, given the circumstances.’”
“Lyons also noted that the Sacramento area’s financial industry sector cut another 100 jobs in July, demonstrating further weakness in the mortgage and real estate industries.”
The Record Searchlight. “Two years ago, business was thriving at Carmona’s Appliance Center as the Redding retailer catered to new subdivisions and rode the real estate boom. The boom has fizzled and with it the demand for refrigerators and stoves in new homes.”
“The slowdown in new construction, housing starts in Redding through July are down 21 percent from a year ago and 68 percent from two years ago, has affected north state businesses that rely on home builders in different ways.”
“A year ago, Carmona’s store delivered appliances to as many as 20 houses a month. ‘Now we are lucky to see 10,’ said Sales Manager Joe Heslin. ‘The Northern California market is in a slowdown and Sacramento is at a standstill.’”
“The drop in home construction has prompted the Western Wood Products Association, which represents manufacturers in 12 Western states and Alaska, to revise its economic forecast. In the spring, the trade group predicted the demand for lumber would pick up next year.”
“It ‘may be until 2009 before we see any type of significant recovery,’ Western Wood Products Association spokesman Butch Bernhardt said. ‘A lot of things are happening in the mortgage markets, foreclosures are adding to the supply of houses, which will reduce demand for new housing. A lot of that needs to be worked through.’”
“Ron Bowdoin, who oversees 2,500 rental units in Los Angeles and the Inland Empire, said foreclosure victims often fail to meet his company’s credit standards.”
What’s wrong with this? They were considered good enough to loan money to, at low teaser rates and 0-down, but they’re not good enough to occupy a rental?
A classic example of how mortgage standards fell below rental standards.
“‘As they reach the brink of foreclosure, their credit reports have suffered tremendously,’ he said. ‘We have to do a co-signer or large deposits to get them into apartments.’”
Large deposits?
Correct me if i’m wrong, but are deposits in Calif not limited by law to a max of 2x monthy rent (unless theres a water bed)?
I dunno if i’d be satisfied with only 2x deposit..
And is it some great hurdle for FBs to come up with maybe 4K cash to rent a place to sleep? Yes.. yes it is.
It should be a piece of cake for these FB’s to come up with 4k. It takes about 9 months of not paying the mortgage before the bank takes it back.
Whoever wins the white house in 2008 is going to have a disaster on their hands.The false economy of the bush administration is simply a joke.All they did was create money out of thin air via housing speculation and still say there is no inflation.The government numbers are totally bogus.All the people who bought the subprime loans are going to be left holding a bag of sh@t. What a phony mess this has been and still there are people out there saying all is well, we will just print more money to throw at a broken system. Housing prices are on their way for at least 50% declines.There is going to be blood on the streets here soon.
you don’t need to go all the way to DC and knock on GW’s door.. take a ride downtown to your local city council or mayor..
Ask them why they approved the flood of new destruction and construction.. why they encouraged and passed all the condo conversion permits.. and the zoning variances that bulldozed classic old buildings and paved over agricultural land.. and let loose the Dogs of Speculation..
“The false economy of the bush administration is simply a joke”.
Sorry but what planet are you from? I am not defending this administration or any other, I have no use for either party but you need to crack open a history book or two, your knowledge is sorely lacking. This didn’t just start with Bush.
As long as everyone believes the Fed can fix things by running the money press at full tilt, the U.S. economy will be just hunky-dory.
Main Entry: hun·ky-do·ry
Pronunciation: “h&[ng]-kE-’dor-E
Function: adjective
Etymology: obsolete English dialect hunk home base + -dory (of unknown origin)
: quite satisfactory : FINE
It’s been a false economy since the 1990’s when NAFTA was passed along with GATT, WTO and the rest of the unfair trade deals. Manufacturing was exported to slave-labor countries while we become a nation of paper shufflers.
Hey, if you’re looking for “original sin” you can go back to the creation of the Fed and the ratification of the 16th amendment allowing Federal income taxes (1913), the New Deal (1933), and the total abandonment of the gold standard (1972).
Is it really limited to 2x the rent? When we first moved to New York we looked at an apartment in the Village, about 2 blocks from Washington Square Park. Because we were moving we didn’t have the income the rentor was looking for. So, he was asking us to come in with 4 months of rent plus fees for applications. We needed a cashiers check of $10,000 to rent a 400 square foot apartment and we had 800+ credit scores. We took a different apartment that only required $4,500. It wasn’t the amount of money that scared us off. It was the fact that we didn’t trust this man. That’s my story. I don’t feel sorry for any of these Foreclosure Refugees.
here’s a link to the various States’ deposit limits
http://tinyurl.com/7d7ae
Yes, that is correct. In CA it’s 2x rent. Nobody asks for that much here in San Diego though. My rent is 1750 for a 1400 sq ft house right up the hill from Mission Valley. We paid 1500 deposit and an additional 500 pet deposit. 1500 is low but most places I looked at didn’t ask over 2000 for the deposit.
I don’t feel sorry for any of those FBs. The people I feel bad for are the renters who have to move because their LL is getting foreclosed on. I am SO very happy I didn’t rent from a flopper.
but they’re not good enough to occupy a rental? ,
The natural superiority of renters becomes obvious!
Bwaaa haaa haaa ha!
Seriously. This will drive quite a few people out of state. As to meeting rental requirements, its amazing how high ideals go away when its a choice to rent to the foreclosed or have one’s apartments foreclosed upon.
I don’t like it… but we must look at this through cold hard logical eyes.
Or the third choice, they move in with mom and dad.
How many residences will have over a dozen people living in them? Homes that housed two to four but a few months ago?
But wait a second… this drives the surplus housing market even further…
Do understand, this will be a market where for every two steps forward we will see one back. Think of it as some overly elaborate ceremony where no one likes the rules, but we must live by them. But its going are way and will for years.
Got popcorn?
Neil
Neil,
One of my most intelligent clients calls this effect the Hidden Housing Elasticity Vacancy Factor. He taught me about it in 1990-1995. When housing craters, the young adult kids move back in with mom and dad and the other the FB’s all give up the 5 & 3 houses to double up in two bedroom apartments or rent from other stuck flippers. A friend of mine owns a senior housing project and vacancy there is rising. Why, 6 grandparents have been pressed into service as roomate renters for their FB’d baby boomer children. It is funny how suddenly it is O.K. for mom to live with you when you need her $1200 a month to make your newly adjusted $6,000/mon mortgage payment.
One of my most intelligent clients calls this effect the Hidden Housing Elasticity Vacancy Factor.
Catchy… and true. I hadn’t thought about moving grandma out of the old folks home so that she could help subsidize the rent… Ouch. Great for the grandkids.
Who first predicted this would be the “back to basics” Christmas among the posters here? It looks like its happening.
Got popcorn?
Neil
What I’m seeing on CL are how rents are bifurcating. You have those people are have become serial CL listers as they stubbornly try to rent out the failed flip for the full monthly nut. And then you have those people who have caved in and reduced their rental price because they’d rather get something covered instead of nothing.
Man that guy is tough. Not cutting a “…foreclosure victim…” any slack.
Neil, I know we’re way past “tragedy” status, are we at “statistic” status yet?
Got FICO?
For good or bad, its still in the “tragedy” class.
By late 2008, it will be statics.
Got popcorn?
Neil
statics=statistics
I just heard on the radio that new congressional legislation is proposed to raise the conforming loan limit to ~$709K. Another figure that was mentioned was ~$625k.
Up to now I thought this was all rumors, but this came from a local (San Diego) high profile broker. Anyone have any more details, such as the bill number so I can read more? Couldn’t find anything on the congressional pending legislation website.
So raise these limits, lower rates, and the party is on again.
There’s no bill #. They’re on vacation until after Labor Day. But Chuck Schumer has said that he wants to do this. Search the NY Times or Bloomberg or the Calculated Risk blog to come up with his statements.
Schumer is in the pocket of the bankers and brokers. What he wants is good for Wall St and bad for Main St. So we try one more lame approach to inflating the bubble. Well, to have a bubble, someone has to borrow the money and I’m hoping that j6p has learned a little this year.
Schumer and Clinton are from NY and are screaming the loudest for a Wall Street bailout. Dodd is from Connecticut where many of the blue blood bankers live. Barney Frank is from Boston, the Northeast’s other major financial center. All of this intervention from HUD and the GSE’s will only make things worse. The intervention should have come from the SEC and FDIC before things got out of hand, but Bush’s buddies were making too much money to spoil the party.
Nope, the party is over. The psychology has changed amongst lenders and borrowers. The only thing preventing a crash are the sellers. By not lowering the price they are keeping the market up. That can’t last too long.
I think any attempt to bail out this market by legislative action will fail in an election season. In the political arena inaction is better than action when the outcome is uncertain.
What will really bring on the price drops is when the banks start getting out of the property management business and dump their forclosures at fire sale prices which I hope will begin this fall or early winter. BRING IT ON!! Peter Schiff believes prices in markets like CA could go down as much as 90% from the peak which means all the “false” gains of the past 6 years will be GONE plus some. It always overshoots the downside. I think I may go out to some open houses today for fun!
“Peter Schiff believes prices in markets like CA could go down as much as 90% from the peak”
From his lips to God’s ears. Faster, please. I did a little local craigslist, realtor.com and other housing website cruising this afternoon and many prices are still OUT. RAJUS.
Have the same problem on Long Island. I keep wondering when the stuff will hit the fan.
We went for a bike ride in Sacramento today. We saw 35 dead lawns in 1 hour and 10 minutes. One street in Elk Grove had 9 dead lawns (out of 46 homes on the street.)
Here is where it gets interesting today: Only one of the 9 houses on that street has actually been foreclosed by the lender. All nine houses have dead lawns and all nine have not seen a live body for many months…..yet only Countrywide has taken back a foreclosure (originated by Fremont Investment and Loan July 2005).
It appears to me the latest strategy by the lenders is to NOT FORECLOSE, but keep the FB on the string for whatever they can contribute and make them bring in a short sale. Think about it: The lender has a loan in default, but all the carring costs, taxes, insurance, HOA and bond losses go against the FB homeowner for now. The bank incurs no carrying costs until they actually take title. Thus they add the $4,500/month onto the foregiven debt, but don’t book the loss until the house short sells. (The other factor could be that lenders are too swamped to perfect a foreclosure, and either way it still spells disaster).
And nothing is selling. Countrywide is listed at $50,000 below everyone else on the street and they foreclosed about 6 months ago. They keep walking the price down about 3-5% every couple of weeks.
The lenders are the usual suspects brokered to by KB Homes: Fremont, New Century, First Franklin.
There is a lot more h3ll to pay stacking up in the pipelines. As ugly as it is today, I don’t even think the real pain has started yet. Watch out. The games the lenders played and now appear to be playing are going to back fire on them.
Not a winning strategy if they can’t get the easy money flowing again. Who will the buyers be for those short sales? With whose capital? And if they keep ratcheting the price down every few weeks, why should the few potential buyers not just stand back and watch?
Thank you for that report from the front lines. Keep em coming.
I remember this happening in the 1980s but it sure did take a long time for them to get the process going. I think that the economy has to stink for them to take drastic action. It probably does in many areas but I think that overall, the economy is in okay shape. The other thing that can happen is that banks could just plain go belly-up. That’s not supposed to happen with the Fed around but I wonder if a bank could get into as much trouble as a mortgage lender. At the moment, I think that Countrywide is the best example.
Have you cruised the Countrywide REO website at all? I just cruised the Florida listings. Wow. Just. Wow.
Palmetto,
You make a good point. However, “wow” starts when they start to sell them at market prices. Right now its just delaying the dam break. But it will happen.
And the foreclosures are still accelerating.
Got popcorn?
Neil
“However, “wow” starts when they start to sell them at market prices. Right now its just delaying the dam break. But it will happen.”
Testify, brothah! I’m just in shock and awe at the number of foreclosures and the concentration in certain areas: Miami, Jax, Orlando. Kissimmee, of all places, although the Kissimmee listings look like a block of properties that some flipper flopped on, or even maybe a fraud deal. But the list has gotten longer even since yesterday. But they’re at wishing prices, not market prices, like you said.
Let’s say there are 30,000,000 households in California, of which 50% are owner-occupied. That’s 15 million SFHs or condos, and let’s say that half of them have mortgages and the other half are owned free and clear. So Countrywide, who makes about 20% of the mortgage loans, would account for (7.5m x 0.20) = 1.5 million mortgages, and their web site shows 2468 REO properties. That’s about 0.2% of the loans they made in the last, say 15 years, or maybe 0.5% of the loans they made in thew last 7 years. Want to bet that number of REOs grows?
Now those are very approximate numbers and I probably missed a couple of things, but I am not “wowed” by 2468 California REOs on their books as of today. Ten times that many would get a wow! from me, but they will be BK long before they hit that number, and the REOs will be on someone else’s books.
Maybe the Universal Nonpayment Collection Loss Establishment (U.N.C.L.E.) will be bagholder of last resort.
Countrywide claims that of the sub-prime loans that they originated 2/3 have already refinanced before the big S hit the fan 3 weeks ago. With, nationwide, $250 billion to reset by Jan ‘08, and $500 billion to reset by July ‘08 seems like the problema is partially contained.
Let’s say there are 30,000,000 households in California
How is that even close to possible if the entire population (men, women and children) is about 36 million? I’d guess there are MAYBE 15 million households.
90%??? I don’t think so. 50%-60% in CA is possible, but don’t forget: real inflation has been, and is, running at about 10%
Yes, in terms of basic needs costs, but not in terms of wages and salaries, which are mostly static and have been since 2000. This means most potential buyers have less money avaialable to purchase homes with, and will need to pay even less.
I think he meant 90% of the gains from the ponzi scheme will be wiped out. There is no way the actualy prices will drop 90% anywhere unless there is a nuclear disaster.
Exactly! That’s what I believe he meant. A definate haircut off of these wishing and dreaming prices that are out there right now.
I listened to the interview and Schiff was, I believe, talking about house prices in terms of ounces of gold or silver. That is, gold silver will increase against dollar to the extent that you will be able to buy a nice house for 100 or so ounces of gold, whereas now it takes 1000 ounces or more in California
Watch this video…towards the end, Peter Schiff predicts that in a lot of markets the value(s) of homes will be reduced by 50%….not 90%.
July 2nd, 2007
I think Peter is calling it right….the clowns that debate him on TV (including the one in this video) were wrong!
I hear differing opinions on Gold and Silver. Some believe it will fall others it will rise. Gold was very cheap through the 80’s and 90’s because the Russians were dumping their stock to keep the lights on. Since we are devaluing our currency, does it not stand to reason gold will go up?
“Peter Schiff believes prices in markets like CA could go down as much as 90% from the peak”
Not likely . There’s such a thing as being too bearish and ‘ol Pete just crossed the line .
Dream on ….
Yea I’d have to agree with that 60% will probably be the bottom 90% we’ll need a natural disaster or a riot or two…
Or a really big earthquake followed by riots. Not completely out of the question, but not very likely.
“Peter Schiff believes prices in markets like CA could go down as much as 90% from the peak”
I believe this would fall into the “Thunderdome” scenario. At which point, you’ll be more worried about getting gas, water, and bullets.
Peter Schiff’s articles usually are grouped with the other extreme bears on kitco.com. You have to take them all with a grain of salt. They’ve been saying for the last 15 months that gold prices are going to break away. They might be right, but they have to keep changing the calendar date!
I say 50% from peak.
Y’all sure are smart bunch. All, I mean ALL, previous Kalifonrican crashes have reached 1:1 ratio with the median American house price. I’m glad its different this time. With all those budgets and infrastructure problems in Calif we need the property taxes. And better stop the outflow of high-paid professionals.
sm_lndlord: wouldn’t a ‘quake serve to tighten the market (owner and renter) b/c of an extreme decrease in supply?? The stucco, rotting POSs are going down!
Home_A_Loan: I quoted “Thunderdome” in BnB just now. Rats. You probably beat me to it.
“I say 50% from peak.”
B.i.P and I don’t always see eye-to-eye, but on this is also my best guess, with the proviso that the 50% off is adjusted for inflation, which looks like it might get pretty high given the Fed’s recent suggestion that it will supply liquidity as needed to prop up sagging asset prices.
cfc will need to sell reos to stay in business
We had a REO listed in my complex at 130/sq ft., priced at 274K for 2100 sq ft. There are 1400 sq ft houses priced at 295-320K. Yep those owners just got a wake up call and their prices are roughly 100K too high. The snowball sometimes starts small as it begins it’s descent.
Every realtor I’ve spoken with recently has said the market is going to crash, but, only after I say I think it’s going to drop a bit. Funny to listen to them go from it isn’t going to be bad to absolute horrible in 5 minutes.
I’m renting for at least another year.
Got my popcorn and watching the show.
Can someone advise on the others factors that make a loan conforming, other than being below the limit?
wiki to the rescue.. that thing often amazes me with pages upon pages devoted to minutiae..
http://en.wikipedia.org/wiki/Conforming_loan
This is exactly how the speculators are going to get bailed out. Pawn the bad loans off on the public and keep the casino going.
If they do this lending standards will take a dive again.
Unbelievable.
The Powers that Be in Bizness and Gubmint will only try to reinflate the bubble if the outcome is positive for Gubmint and Bizness.
Until the end of 2006 the results were good. But now that lots of people are hurting, attempting to blow the bubble again will not be attempted, and would fail anyway. A bailout is are more likely.
Loose lending standards must be coupled with liquidity and the ability to pass the risk along to others for the Ponzi scheme to work. Without this trio there is no bubble.
Besides, who’ll buy? The psychology has changed, and most greater fools are already FBs. They would have had to lower lending standards lower than they were to qualify those who are without a home.
If they raise the limit does this mean FNM can buy existing loans from banks? If so this is how the public gets left holding the bag.
I need to find another country.
“If they raise the limit does this mean FNM can buy existing loans from banks?”
Yes, but not for long. Fannie Mae is famously teetering toward disaster already. I think that it will either get a fed bailout or be BK in a year. Two years ago they got beat up on corruption charges- six years of ‘extensive fraud’. They had to pay hundreds of millions in fines, and some of FNM executives are being hung out to dry.
http://www.washingtonpost.com/wp-dyn/content/article/2006/05/23/AR2006052300184.html
As part of the penalty for their bad behavior, they are not allowed to expand their investment portfolio. I also heard a quote to the effect that FNM cash flow will keep up under the ‘direst’ scenario of two years of 10% declines and two years of 2% increases in interest rate. Oh, oh- so no cash flow if we get a 30% price decline?
Also, they apparently have a whopping 0.03 percent loss reserves. Look out below… Finally, FNM usually buys mortgages, pools them and sells them. If they aren’t Ginnie Mae/FHA/VA, etc., they will not be gov’t insured. So they will still have the problem of finding idiots to ‘invest’ in the REMICs. And this won’t happen except for the prime jumbo loans, if even for those. Finally, note that FNM stock is ALREADY trading under special dispensation- they have not filed reports in a timely manner. In other words, FNM is not going to save the housing market by being able to securitize jumbo loans. They will need all the help they can get to save themselves.
Don’t worry, Congress will find a way to bail them out with taxpayer money so they can bail out Wall Street.
Funny thing is Bush gets it right this time, he said no bail out.
I suggest Norway or New Zealand.
“Up to now I thought this was all rumors, but this came from a local (San Diego) high profile broker.”
Are you certain this high profile broker did not start the rumor?
Ha! Not certain. I say “high profile” because he’s on the radio giving daily mortgage status reports and his outlook opinion.
He mentioned he got this from a congressman who proposed this “new” legislation on Friday (two days ago) and his estimation was that it had a high likelihood of passing due to the current attitude in congress to act in relief of some sort. Not a lot of details.
So…
Are you talking about Mehran Aram:
http://www.aramcoaudio.com/
$625,500 is the conforming loan limit for Alaska, Hawaii, Guam, U.S. Virgin Islands which are designated “high cost areas”. (Alaska!?). So I could see some politico arguing that California should be given the same excemption.
It doesn’t matter, its too little too late. We still haven’t even hit the 2008 ARM reset tsunami in California. Did you know that the credit reporting agencies are changing the FICO formula in September? Many things are chaning, like Authorized Users no longer help credit scores, so credit scores are going to drop for many except those that have no credit history (or little) who will actually see a slight bump.
Meet San Diego’s newest place to not hang out…
Ghostloan Quarter
“Things couldn’t get much worse in American Canyon where a measly four homes sold in July, from 166 listed. ‘It’s pretty slow,’ said David Barker of ReMax. ‘The buyers just aren’t out there. The problem is we just have so many homes for sale. If you want to sell you have to be spectacularly priced and in absolutely cherry condition’.”
First he says ‘The buyers just aren’t out there’, then he says ‘The problem is we just have so many homes for sale’. Which is it? If he only had four homes for sale and four homes sold, then he’d be happy and everything would be great?
And now with the new much tougher creidt standards, I believe we will see sales drop another 80 - 90% from last months levels in bubble areas. Literally a city like San Diego which has seen several thousand sales a month could dwindle into the hundreds.
“Regulars at public auctions have noticed a startling change of late. Two years ago, 95 percent of homes were snagged by eager bidders, one auctioneer estimated Friday. These days, about 90 percent go back to the bank.”
Even the bottomfeeder buyers are wised up to what’s what…
I know you’ve deceived us, but here’s a surprise
I know that you have cause there’s deceit in your lies
I can see for miles and miles and miles and miles and miles, oh yeah
If you think that I don’t know about the not so little tricks you play
And never see you when you deliberately put things in my way
Well, here’s a poke at you
You’re gonna choke on it too
You’re gonna lose that pile
Because all the while
I can see for miles and miles
I can see for miles and miles
I can see for miles and miles and miles and miles and miles
Oh yeah
You’re brilliant and have good taste in music. My life changed on Oct. 9, 1976 when I stood on a patch of grass at a Day on the Green in Oakland, CA and saw four hours of the Grateful Dead, followed by almost three hours of the Who. To be a rock-loving teenager in the Bay Area in the mid-70s was pretty good, because Bill Graham was able to put together amazing lineups like that.
Heard this for the first time in a long while and it reminded me of Sacramento:
I’ve been gambling here abouts
For ten good solid years
If I told you all that went down
It would burn off both your ears
Ahh the ol’ Day on The Green Series !
I tried forever to get over & see my favorite group “Journey ” but kept missing em. Did happen to catch the New Wave Day On The Green in the 80’s when the Police headlined, with Thompson Twins, The Fixx, Oingo Boingo, and others. I was talked into driving some friends who payed the expenses, and liked The FIxx myself but by the end of the night I was also a Police fan.
That is one incredible sight to see thousands of mesmorized young girls just HYPNPOTIZED at a concert, all singing along to every word of every song by the Police … almost cult-like !!!
Anway, the heat was brutal during the day. Had to retreat to the upper decks of the stadium after awhile to cool off. I cant imagine 4hrs of music from one band. Musta been something else.
ahh good times !!
(oh right, off topic/sidebar over)
What a lot of people don’t realize is that the housing “Summertime Blues” is going to extend well past winter.
OT but just goes to show the mania is everywhere.
Costello warns states on high-risk loans.
http://www.abc.com.au/news/stories/2007/08/19/2008908.htm
All real estate is local, but apparently not every financial crisis is local.
High-risk loans have helped trigger the financial crisis in the United States, which has spread to some Australian companies.
Mr Costello wants tighter controls on mortgage providers who give low-documentation loans.
He has told Channel Ten the states should create uniform laws across the country or refer their power to the Commonwealth.
“In 2006 a ministerial council of the states met to talk about getting a uniform law,” he said.
“It’s time that that’s brought forward, it’s time that the states enact a uniform law and I am very concerned that some of these low-doc lenders are pushing money onto people they know are bad risks, and I want to see that ended.”
and they thought our cars were the only junk coming out of the US, we make some good toilet paper too.
“The developer of Triangle, at 14th Street and Imperial Avenue, demolished an old warehouse and then stopped. It’s a parking lot now.”
Hey, at least this developer provided some parking. The one in Miami doesn’t think “workforce” condo buyers should have parking. LMAO!
“The number of payroll jobs fell by 8,600…”
8600 people who will cut back on lattes, Thai dinners out, new pair o’ shoes, TV, car…..
“Although construction tends to wind down in late summer, a July cutback is rare. ‘We’re seeing construction pull back a little early,’ said EDD labor market consultant David Lyons. ‘That’s not unexpected, given the circumstances.’”
- It is impossible for California to truthfully report its unemployment rates …. because of the hugh illegal work force, particularly in the construction industry.
8600 people who will cut back on lattes,
NOOOOOO! Everything else I agree with… must have coffee… must have coffee!!!
Don’t worry, its contained.
Any bets on when the layoffs get significant?
My prediction, Again:
Christmas 2007 will suck.
Got popcorn?
Neil
Christmas will certainly suck for retailers..
a few local pastors might even skip the “In all our celebration and gift giving, lets not forget the true meaning of Christmas” sermon.
“Christmas will certainly suck for retailers…”
How do you know? Many predicted the same for X-mas 2006, but they were wrong.
ok.. guess i’m busted.. i don’t know.
The only change of any consequence since last year is this little credit thing.. a rude awakening that the days of phantom-equity-as-ATM are over.
Any chance this credit crunch will filter down to small loans by December? Will everyone realize they’ll have to come up with more cash for necessities, and so limit much gift purchases to whatever is left over from their (non existant) savings reserves?
admittedly i’m not certain.. maybe Santa will be most generous this year.. iPods and X-boxes for all the little tykes.
I love my coffee too but no way am I paying over 4 bucks for a latte. With my little $200 Starbuck Barista machine (2 year warranty too), a bottle of Torani Syrup from smart n final @ $3.99 for 750 ml, 2lbs beans @costco @ $10, 2 gallons of 2% milk @ costco $6.20 and a little bit of water I can make a whole lot of lattes.
They even helped me fix it out of warranty with (I am not making this up) a handfull of pennies, a hammer and a paperclip.
Probably could make your own flavored simple syrup for even less. 1:1 ratio of sugar to water with a scraped vanilla bean or two, heat until dissolved for fiddy cent?
I’ve thought about that mrBubble. I bet I could make some pretty yummy syrup if I tried.
Is THAT what latte ingredients are? Good LORD thats a list!
As a Starbucks virgin the baristas were laughing hysterically at me as I slackjawed the menu while waiting for a batch of gift cards to process for my childrens end of school year gifts.
They thought I was quite amusing asking me if I knew what a vente ? or some other stuff meant. I dunno, you coulda held a gun to my head … vente ? shmente ?? beats me - just gimme 7 $10 gift cards please. Would I like a mocha something majhigger while waiting ?!? Err i dont know what the hell that is but thanks anyway.
The young hipsters behing me were rolling on the ground at pops struggling to retain dignity.
Now know how those civil war veterans felt when seeing their first horseless carriage.
ok let me clarify; end of year school gift cards for the kids teachers. Kids have enough energy w/out me caffeining em up.
MacGyver?
There’s something pretty satisfying about beating on a broken machine with a hammer.
And it’s even better when you fix it. Starbucks employee “Hey dont hit it too hard!” Me “So what it’s broken now and if I can’t get this off I can’t fix it. I got nothing to lose” So I whacked it about 10 more times. 
Can the retail industry even stand one bad holiday season? I don’t think so, not based on the way they’ve made such a drama of the past few holiday seasons. They cream over “Black Friday” as of that day alone determines the fate of the entire human race.
edgewater John,
I don’t believe the retail industry can survive one bad holiday season either. I’m already anticipating the “Black Friday” coverage.
I must confess, I like to hit the mall, in pure schadenfreude, to watch people buying on black Friday.
Note: I’m pretty generous at Christmas. This year, the wife will make me cut back (so we save a bit more).
Got popcorn?
Neil
I hear ya, Neil. There’s no better sport than people watchin’ during the holdiay shopping season. Heck, I’d bet that anyone at the mall in the last few decades who was apalled at what they saw - could’ve predicted this mess long ago.
Target reports this week, I beleive, watch the miss, and downward revision going forward.
“The problem is we just have so many homes for sale. If you want to sell you have to be spectacularly priced and in absolutely cherry condition’.”
Really? Lemme break it to ya, buddy, if the house was built after 2000, there’s nothing cherry about it, except maybe briefly the illegal construction worker’s girlfriend who stopped by for a nooner while the house was being built.
LOLOLOL!!!!! Thank you!!!
Someone told me there were Democratic debates aired on ABC this AM and that John Edwards was moaning about all the people losing their homes and that a bailout is needed. Anyone hear about that?
No sorry, I didn’t watch the debates either because the MSM hasn’t yet settled on which ones I should vote for yet.
Did not hear it, but not surprising, especially coming from an empty suit like Edwards…I have never seen a bigger phony than that guy!
Yeah, I watched. Everyone was talking very fast, but said we need a “Home Rescue Fund” or something. Then it was off to the next topic.
I think all the Dems’ll be running pretty hard on that one. Whether they’re serious or not, who knows? Hillary’s $1B bailout is probably typical of what we’ll see - a symbolic gesture that doesn’t cost too much and has all the practical effect of a wine cork in the Amazon RIver.
“‘Right now, lenders are running for cover and concentrating on vanilla-type loans, lending to people with golden credit scores and a lot of money in the bank,’ says T.J. Knowles, a mortgage broker with CalBrokers. ‘They’re going back to that old cliche of saying, ‘If you don’t need a lot of money, I’d be happy to lend it to you.’”
A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.
–Mark Twain–
OT, but just wondering what sort of havoc this hurricane is going to wreak. Jamaica is in for it, I understand. The Caymens will get a walloping (does this mean the hedge fund money parked there is in trouble?). Energy prices will most likely spike (all you have to do is fart in the Gulf of Mexico and the traders go nuts). The Yucatan looks like it’s gonna take a whuppin’. Wonder if this, combined with the Peru quake, means another flood of refugees into the States?
yesterday Ben posted about an empty development that got bulldozed years ago. I’m wondering when we’ll see this phenomenon begin to happen. My guess is, when the first major builder goes belly up and the banks start repossessing entire developments. Wonder how far away we are from that?
I don’t think we will see completed developments bulldozed, at least not in CA. That is, as long as the water supply holds out. At the right price, people will continue to move here, from Mexico if nowhere else.
It’s better to get $0.10 on the dollar than lose $1.10 on the dollar buy hiring bulldozers. Besides, I don’t think you could get environmental approval to bulldoze a development in California unless you paid mitigation
“It’s better to get $0.10 on the dollar than lose $1.10 on the dollar buy hiring bulldozers.”
Well, they’re a helluva lot smarter in CA than they are in FLA, because they just bulldozed an empty home here at a cost of $35,000.00, rather than put a responsible squatter who would have paid the taxes and kept up the property.
“responsible squatter”
What the heck is that, Palmetto? Next we will be discussing military intelligence and political honesty.
No Bulldozers!
Action movies! I want to see flames, explosions, and mahem. Maybe another ‘Mad Max’ movie? Rampage and destruction through a suburban scene.
Bwaa haa ha! Seriously, for the sake of the economy, large areas of housing will have to be destroyed.
Got popcorn?
Neil
“Lemme break it to ya, buddy, if the house was built after 2000, there’s nothing cherry about it, except maybe briefly the illegal construction worker’s girlfriend who stopped by for a nooner while the house was being built.”
If she’s doing “nooners” it ain’t no cherry.
The negative tone of this forum is..justified.
I’m just really down on the type of construction that accompanied the bubble. So much of it looks like junk around here in FLA. Everything depressingly the same and depressingly poor quality. Plus the crime and gang problem has literally exploded around here in the past month. I’m looking to buy a little concrete block house for cash and there are actually a couple that I’ve come across, but now I’ve got puckerbutt about the crime infestation in formerly peaceful areas.
imo, if an area was depressed for no reasons other than the bubble-effect, and if it has underlying qualities that made it a nice area to live in previously, it’ll eventually rebound.
Some of the best investments will be where a property/neighborhood’s future value is well disguised.
“if an area was depressed for no reasons other than the bubble-effect, and if it has underlying qualities that made it a nice area to live in previously, it’ll eventually rebound.”
I’m hoping so, joey, but in order for that to happen around here, the devil spawn gangs would have to move on and they’ve become pretty entrenched. Jobs are not an issue with them, they don’t work, as long as there are crimes to commit, they’re here to stay.
Yeah, by “eventually”, the year 2040 comes to mind.
I can name several neighborhoods in PDX that have only recently rebounded that were depressed since the 70s.
“I’m looking to buy a little concrete block house for cash and there are actually a couple that I’ve come across, but now I’ve got puckerbutt about the crime infestation in formerly peaceful areas. ”
Good point Palmetto. I’ve got the same unfortunate sensation here in the Central Valley of California. Like you, I just want to eventually a nice well-built bungalow here and am keeping my powder dry. The old mantra of “Location, Location, Location” will return to RE buying and I’m no exception. Here in my little Central Calif town (which is obscenely overpriced but dropping like a rock) you can bet dollars to doughuts I’ll be knocking on MANY doors of folks in neighborhoods and talking to the local police regarding crime trends. No areas are completely immune, but prudent cautious investigation will pay off big-time.
DOC
I agree, DOC, and the local constabulary here are always willing to talk about which areas are in trouble. They should know.
Those of us who’ve been reading this blog for a while know that’s what you meant, palm. No worries.
~Misstrial
The negative tone of this forum is…pretty darn funny.
The was a positive tone a few years back. They are all in foreclosure now.
The optimists in wine country are going to be FUBAR. My brother is one of them, which sucks. I tried so hard to warn him…
Hey Wine Country Dude,
I agree. I’ve last seen this “head for the hills” desparity in the 70s. Yet at that time it was in MSM.
Times will be tough for a few years ahead of us, but no tougher than the 1970s.
I apologize to the cabal of people here who want to see more negativity than that. Now I’m starting to be ridiculed here because I point out that the gloomiest predictions almost never ever come true.
Also I’m thinking this is like a fishbowl of negativity. You see some of the negative stuff out in MSM, but now many posts now say you have to buy bullets, that only gold will do, or the opposite - cash under the mattress and a five year supply of bullets! What is the psychological effect of this for someone who spends 2 hours a day reading this tone of posts that everything is futile? The posts that finally got to me and pushed me over the edge were the ones that said “all of us will be negatively affected by the housing bubble crash.” That’s when I changed my tone from negativity. Things started getting ridiculous. Where are the survivalists on this board? LOL. Got camouflage? I think RE prices will drop 50% over the next few years so I’m still on that bandwagon and remain an interested spectator.
“Now I’m starting to be ridiculed here because I point out that the gloomiest predictions almost never ever come true.”
This is correct — along with the fact that “the good times will last forever” predictions almost never come true (e.g., real estate always goes up, the stock market always goes up, real estate always goes up in the long run, the stock market always goes up in the long run, etc.).
In the long run we are all dead.
–John Maynard Keynes–
I’ve only been joking with the Mad Max quotes. There’s a graph that I’ve been trying to find that deals with human psychology, but I can’t locate it. Essentially, it is a sine curve. While the slope is positive, people think, “Ah, real estate (or whatever) only goes up”. As slope becomes zero — soft landing. As the slope goes negative — a house is a terrible liability. And as the slope goes to zero again, when RE is no longer a story, when my office manager doesn’t look at me funny when I tell her that I sold, took a profit and didn’t re-buy (seriously, this happened Friday), then I’ll know that it may be safe to get back in the water.
Unless it’s like Blood Beach: just when you thought it was safe to get back in the water…you can’t get to it!!
Just kidding! People have been waiting for a return to normalcy for so long that the pendulum is probably swinging to far.
“The construction industry shrank by 400 jobs,”
yeh not to mention all the illigals who won’t be going to the unemployment lines.
The illegals who are unemployed now, are not spending money in the local communities either.
““‘We are still in a seller’s mind set. They are still looking at numbers of three years ago and they are not prepared to be reducing their price points.”
“about 90 percent [homes] go back to the bank.”
Hmm! if banks are so smart, why are they acting like the sellers and not lowering prices. Any idiot nows the $500,000 house they are holding on to is only worth $250,000. The longer they hold on, the deeper they’ll have to discount.
If they sell that housefor $250K, then everything else in their portfolio gets marked to market. The bigwigs are hiding the truth so they can squeeze out a few more big bonuses.
Maybe they’re afraid of killing comps and inspiring a wave of jingle mail. Of course they’re going to have to sell it at some point but they don’t have to mark to market if they don’t sell, sorta like the hedge funds.
If CountryWide sold all of the housing they’re sitting on tomorrow at current prices they’d be bankrupt by Friday.
tough to be Bk on friday, when your insolvent today.
The quarter just closed. The banks will write down things all at once, all together. Doing it alone would cause a run and a stock crash. When they’re all doing bad together, they’ll get a bail-out.
” if banks are so smart,”
They weren’t smart. In fact, they were really, really stoopit and it looks like they’re continuing that operating basis, even despite the change in lending standards. We’ve got one bank in receivership (Coast) here in this neck of the woods, that lent to a construction company that took bogus draws.
Yeah, I don’t get it. You’d think bankers would understand the history of booms and busts, would understand the evils of easy credit, would be able to realize when builders are over-extended. Most of my money’s in Wachovia. I haven’t heard anything negative about them as yet, but I am getting nervous about the banking system overall.
In your opinion, can “good” banks such as Wachovia and purely investment bank such as JP Morgan can go through this credit meltdown without much losses? Will their stock even improve in this very challenging environment. I know there is talk of Bear Stearns buy out.
Cinch
Wachovia bought Golden West last summer at the height of the housing ponzi scheme. Golden was the biggest option ARM lender in California. Wachovia will be severely impaired by this move, but they’ll be safe due to their diverse business.
Hi, jerry, thanks. That’s what I hear. The personal banker there told me that Wachovia keeps its mortgage business separate from the banking, I guess maybe a different corp.
I’m with Wachovia palmetto and all my research tell me they will be ok ,but you never know . I’m more concerned about inflation eating up the dollar .
Seeing that run on Countrywide bank last week was cause to make people take notice . About two years ago I noticed that Countrywide Bank had a higher rate on CD’s and Money Markets than the rest ,(about 1/2 % more ). I looked at that higher rate at the time and I passed on it . My mind went back to the Keating era with the S&L scandals and I flashed that Countrywide Bank might be having a cash flow problem .
Most people working in banks are completely clueless when it comes to finance and economics. Don’t ask me how I know.
You said a mouthfull there. Everytime my 78 y.o. mother goes to the bank I have to spend 2 hours de-breifing her because the 20-30something punks tried to sell her on some “investment” strategy.
Want to hear something real sicko? What if the banking system’s (individual banks)computers went down/loss there data? I am not aware that this is possible, however it would get the banks off the hook for deposits. In this way, there could be no run on the banks. Well, maybe those individuals who kept recent bank statements could demand there money back.
This may be a tin hat person thinking, however, it would solve a lot of problems for the Fed and the banking system.
I know, that when more than one person is in on a conspiracy, it is no longer a conspiracy, however could a computer virus perform such an act and thereby reduce the number of individuals knowledgeable of the event?
What do the computer bloggers think about this possibility?
It would require criminal negligence….backups are pretty easy to maintain.
I don’t think they’d try it.
Pretty bloody unlikely. Banks, et al, make hard backups of all data, whether it be tape, CD, whatever, and have the data in several places. To destroy all that would be pretty difficult and pretty obvious.
Fight Club! Remember the last scene in the movie, where the banks were bomb and brought down.
Legalized Loan Sharking:
The Sleeper Issue of 2008
also read the comments below the article.
http://tinyurl.com/287p84
Yeah, I made a remark about this the other day, with respect to “universal default” which allows the CC company to jump you to the max rate if you are late on payments to *another* creditor. Yikes.
Anyone with kids over 14 years old should have them read that link.
Then write “Debt is Poison” 100 times in their notebook. It might put some perspective on their choice of higher education, and the credit offers that they will be receiving when they go to college.
Everybody should watch this one. Fantastic stuff!
http://www.pbs.org/wgbh/pages/frontline/shows/credit/
30%? That’s nothing. An ex of mine had car trouble a few months before I met her. Total suck credit because she burned down an apartment and had a giant award outstanding against her. She went to an auto title place to get a $2000 loan. Interest rate was 60%. Borrow $2000, pay back $220 a month for 18 months. It was going to cost her $4000 to pay back the $2000.
I paid the balance off, and let her pay me back $200 per month for 11 months. Still better than 10% interest rate for me.
“the house at 2817 Dartmouth Street came up for auction, with $333,484 owed on the mortgage. The lender started bidding at $200,000. Still, no one nibbled, and the house went back to the bank.”
That just puts a smile on my face.
The more lender owned property there is, the better it is for prices down the road. Eventually, lenders will give in and dump these money pits for anything.
We are screwed. They are going to radically raise the conforming loan limits, which will then restart the casino, as lenders can once again pawn bad loans off on investors. This will be a major prop for housing, as it will help reduce the lending standards again.
I want to puke.
Don’t despair. Even if they somehow managed to do it, the GSE’s standards are so high — great credit, full doc, substantial downpayment, sane DTI — as to totally negate the effects.
Well just to toss in what smart renter did I left California. It could take a decade to clean up the mess there. I relocated to Austin TX and it was no longer smart to rent like it was in California. I purchased a big house on a quarter acre for 161K located just 20min from down town in a nice community. It worked out that renting here is not the thing to do if you have 20% down and good credit. I am a design engineer and I got a 5% raise and there is no payroll taxes here so that is an affective 15% pay raise. I could have purchased a 3000sf monster here easily but why.
Would the last engineer leaving California please tell the gardener to turn out the lights.
I guess smart renter no longer applies so I will donate my name if possible
Asta Cali
I had to do a Costco run today around Noon.
Parking was easy to find and there was only one person in line ahead of me as I checked out.
And he was buying a single box of trash bags.
This was in Venice, CA.
Certainly not EVER empty in Orange County. Packed all day, every hour. Impossible to get in. Same with IKEA.
No way that place is usuakky a zoo…
usually *sigh*
Maybe everyone was at open houses?
sarcasm off/
Everyone uses the 99 cent store on Lincoln and Rose, that one’s always got long lines
http://www.iii.co.uk/news/?type=afxnews&articleid=6248253&subject=economic&action=article
“There are certainly some question marks now surrounding the development of the American economy,” Roth said.”
Hey, Cueball Hank, are ya lissenin? How ’bout you, Heli Ben? Shrub, uh, oh, never mind, go back to your chainsaw.
From the article……………….
“Roth said he regretted that the problem had not unwound a year earlier, which would have left an opportunity for a softer landing.”
So much for the fabled “soft landing”.
It would have had to start unwinding in 2004 in order to have a soft landing. That is when the option ARMs, liar’s loans and fraud really took off like a bottlerocket.
I sure do agree with you on your take on that one jerry from richardson .The REIC did everything they could to keep the party going .Crooks were openly putting signs up on telephone poles and other places looking for straw buyers.
Remember how the RE seminars were in full gear and for sure they were shills for builders selling the great investment scheme of getting rich in real estate .Remember how they would bus the old ladies down to Florida for the next big investment condo project .Remember how DL at the NAR was preaching the talking points of a bull-run real estate market and all the cheerleaders in real estate were chanting the same song without any challenge from the media ,)who didn’t want to piss off advertisers ).
Remember how some properties would be bid up 100k over asking price and buyers would have to write letters to the sellers to be the lucky one picked .
Remember how flippers and speculators made up 40 to 60% of the purchase demands in some areas who planned to sell to the rich baby boomers or greater fools after they held the property for 6 months or less after obtaining their no down liar loans .
And we can’t forget how cherry pickers making 15K a year were getting 700K loans with no money down .
Sure signs of a mania in process with the faulty lending making dumb things possible . I was also shocked at how people would put big deposits down without any contract protections at all ,and buyers would even wave house inspections .
But I guess the one that really got to me was the salespeople taking out the bats and pounding them on the table if a underwriting didn’t approve a loan . Of course “hit the mark appraisals “,and cash back and incentives kept the party going for a couple years longer than it should of . Don’t forget how they were giving away cars if you bought a house and people were dumb enough to want to finance a car for 30 years and have their property taxes be higher on the inflated prices ,
I could go on and on about the strange things that were going on that insured a hard landing .
But we need the bonus from selling these toxic MBS to the foreigners:
2006 Bonuses
Ranking Goldman Morgan Stanley Merrill Lynch Lehman Brothers Bear Stearns
Total Comp $16.9 $14.0 $16.1 $8.7 $4.4
Bonus Pool $10.2 $8.4 $9.7 $5.2 $2.6
Employees 25,647 54,349 55,300 24,775 13,000
Average Comp $658,946 $257,594 $291,139 $351,160 $338,462
Average Bonus
$397,707 $154,556 $174,683 $210,696 $203,077
Jerry I am with you 100%. If only this thing came apart like it should have when FFR started going back up… the fallout would have been way more benign. And 2004 is NOT THAT LONG AGO. What a difference 3 years makes.
Now it’s like there’s a big Undo on all the meantime prosperity and a lot of folks will weather it much harder than others. It’s so sad, the writing was on the wall in 2004… that’s when I first read about “The Bubble”. If Greenspan had said “Hey! I’m raising rates, house prices should go DOWN.” maybe they would have, if “The Investors” hadn’t kicked in and ratings agencies went to $hit. Ahhh, so sad.
Either late ‘03 or early ‘04 Stephen Roach (of Morgan Stanley) called for an immediate 200 basis point increase in the FFR in order to head off potential speculative excesses. He was sooo right.
IMHO it reads as if this is not a liquidity crisis, but as an insolvency crisis. “And now we’re seeing that there isn’t a market for such papers. Now reality is striking back. That leads to massive losses and there will be victims”
All the liquidity in the world will not bring the dead back to life.
Don’t think we will really know what insolvency is till the Day of Reckoning on the $ 300 to $ 400 trillion in derivatives starts and they find that so very many of the Counterparties are empty bags with no ability to honour their commitments. That will be a sight to behold and that day may even be in process with all the current volatility everywhere right now.
One can only hope.
Why there are so many problems in the banking system and why we have so many FBs:
Fifty Years of Math 1957 - 2007
Last week I purchased a burger at Burger King for $1.58. The countergirl took my $2 and I was digging for my change when I pulled 8 cents from my pocket and gave it to her. She stood there, holding the nickel and 3 pennies, while looking at the screen on her register. I sensed her discomfort and tried to tell her to just give me two quarters, but she hailed the manager for help. While he tried to explain the transaction to her, she stood there and cried. Why do I tell you this?
Because of the evolution in teaching math since the 1950s:
1. Teaching Math In 1950s
A logger sells a truckload of lumber for $100. His cost of production is 4/5 of the price. What is his profit ?
2. Teaching Math In 1960s
A logger sells a truckload of lumber for $100 His cost of production is 4/5 of the price, or $80. What is his profit?
3. Teaching Math In 1970s
A logger sells a truckload of lumber for $100. His cost of production is $80. Did he make a profit?
4. Teaching Math In 1980s
A logger sells a truckload of lumber for $100. His cost of production is $80 and his profit is $20. Your assignment: Underline the number 20.
5. Teaching Math In 1990s
A logger cuts down a beautiful forest because he is selfish and inconsiderate and cares nothing for the habitat of animals or the preservation of our woodlands. He does this so he can make a profit of $20. What do you think of this way of making a living? Topic for class participation after answering the question: How did the birds and squirrels feel as the logger cut down their homes? (There are no wrong answers, and if you feel like crying, it’s ok. )
6. Teaching Math In 2007
Un hachero vende una carretada de maderapara $100. El costo de la producciones es $80. Cuanto dinero ha hecho?
These days they allow students to use calculators in remedial/elementary math. You don’t need to think anymore, just push some buttons. When those buttons aren’t available, you get the Burger King cashier. That is why the Asian students who come here are in the honors math and science classes while American students are playing their PS2’s and hope to sell houses or play ball when they graduate.
HA! Well as for this American, programming the PS2 was definitely my “balls-earning” experience when it comes to math and thinking, forget honors classes.
And I would defend Americans’ hopes to “play ball”. It’s better than the pathetic pudge that roams around elementary schools now. It probably started when the loser kids’ parents demanded that everyone got a trophy… now we have a nation of fat, across all generations. Alright mom, go set an example for little junior and drink a diet coke before logging in.
Saw a job offer the other day $90K-$150K for PS2, X-BOX, PC etc… game programmers. Must be familiar with hardware as well. I’m trying to steer my younger son towards something like this and interest him in getting a Computer Science or Electrical Engineering Degree.
Not a bad career to be in as a gamer!
True story that happened to me. Went to a local ice cream shop. Total was $2.06. I gave the young guy $5.06. He just stood there with the dumbest look on his face. I too told him all I needed was $3.00 back. He could not get it. I ended taking back the .06 and walked out with my handful of change.
OMG, when I was in high school in the 70’s, I took a business class. In that class the teacher had us balance a checkbook, calculate interest, calculate sales tax and also how to count back change (my mom also taught me that).
Tee hee, sometimes I make the cashier count back the change to me. Talk about confusion. Most of the time they just hand back the change.
My mom made me get a part time job during high school where I learned how to count change pretty fast.
My first job during high school was working in retail. Because of the business class I took during my freshman year and my mom, I was able to count back cash fast and correctly.
My sister and brother has taught their kids how to count back cash, and also taught them money does not grow on trees. Both siblings and in-laws made the kids put their money into saving accounts and into their own piggy banks. If they wanted something, the parents would tell them they would have to get their own money and pay for it. It was real interesting to see how bad they wanted something, when told they would have to pay for it on their own.
“True story that happened to me. Went to a local ice cream shop. Total was $2.06. I gave the young guy $5.06. He just stood there with the dumbest look on his face. I too told him all I needed was $3.00 back. He could not get it. I ended taking back the .06 and walked out with my handful of change.”
I had two similar experiences in the last month. I was dumbfounded.
That’s another reason we need vouchers and charter schools.Where are the teachers? Ans. They are at CTA and NEA meetings on how to strike,cry and whine to get more pay and benefits.
pismoclam - i notice you got a beef with teachers. what’s up with you? i’m one. i don’t “strike, cry, and whine”. i work my a&& off like every other teacher i know (and get paid s#$t for it). back off.
Don’t take it personally erik but the average teacher here is exactly. Scores are going down. We need vouchers and charter schools. Also I am a member of the Milton Freidman Foundation.
So this really old guy comes in and his ice cream is like $2.06. He hands me $5.06!
I’m thinkin.. is the boss watching? $3 bucks too much hahaha! what a fool!
But then i guess he thought about it and knew he screwed up and he asks for change..
But now he want’s $3 back?? huh?
I thought about it all day.. I’m pretty sure he was trying to scam me out of 6 cents.
If you like these stories, get the movie Idiocracy on DVD. The hospital scenes alone are worth the price. (Probly. My calculater is someplace not here.)
In that movie, America had reached the point where anyone who speaks articulately is labeled as “faggy”
Yes, Idiocracy is an excellent view of what I hope isn’t going to be the future.
LOL - very cute. They were starting to teach math the 90’s way as early as the 80’s. (VT is always ahead of the education curve.) One of the many reasons we home school is that we would like to actually educate our kids instead of them being subject to some weird political agenda. They will probably be scarred for life, but they won’t be using a calculator on a regular basis until they can drive a car. I’ll let them work out the trauma their therapist.
priceless!
lol
Palmetto, this is Monday morning email-worthy, very funny, thanks.
Palmetto — that was great! I am a former math teacher and it’s so bad out there. Try to explain the difference between 7/0 and 0/7 using a pie and you can actually smell axons cooking. But according to Barney, the purple nightmare, everyone is special and will get an award at the end of the school year!
mrBubble, I just picked up a book called “Innumeracy” published in 1988, written by John Allen Paulos. It is about mathematical illiteracy and its causes. It is on my list to read, I am very interested in the phenomenon, since I have a mild form of the disease myself.
Agree with you about Barney, though. Remember, everybody is a star!
Well done, Palmetto.
Now we’ll wait for the commenter who will obligatorily argue that what you have written is racist, or insensitive, or perhaps lactose-intolerant. Zzzzzz…..
LOL,,,,Great post
“Fifty Years of Math 1957 - 2007″
Actually, that would make it 51 years..
i admit i found this little tidbit of criticism, among others, on the net..
Palmetto
50 year math comment - BEATIFUL WORK / LAUGHD LONG !!!
see, I laughd so hard I beatiful it was
Classic!
Billionaire to Hire 3,000 Servants
New York Times, October 19, 2012
Ed Lampert, a former hedge fund manager who made 25 billion dollars over the past decade, announced today that he was hiring 3,000 servants to help manage his 900,000 acre estate.
Public officials expressed gratitude for the magnanimous gesture, which comes as the housing depression enters its fourth year with no end in sight.
“We are blessed to have 750 hedge fund billionaires in our state,” said Senator Charles Schumer, adding that he would urge the billionaires to hire more servants at his next foie-gras and truffles luncheon with the Billionaires Advisory Council.
Meanwhile, hundreds of people were already lined up outside Mr. Lampert’s mansion, hoping for a chance to land one of the coveted jobs.
“Master Lampert, he’s a good man,” said Gary Watts, who is from California and has the IQ of a bonobo. He said he had been eating chinese pet food since losing his home to foreclosure and moving east in search of work.
Wasn’t Lampert the one who got kidnapped and then released?
seems his net worth is somewhere near $4.5 billion.
“As a child, he would sit on his grandmother’s lap while she read stock quotes to him; he watched Louis Rukeyser religously. The death of his father left him with an obsession with financial security (his mother had to get a retail job in Saks Fifth Avenue to pay the bills.”
“..In 2003, he was kidnapped from the parking lot of his office..”
http://en.wikipedia.org/wiki/Edward_Lampert
Kudos!
I love a droll bit of japery!
Also seen fighting for a spot in the line were Lereah, Yun, Husing, LAY …
Real estate related unemployment numbers are starting to look interesting and the fallout for fly-by-night brokers and spare time housewife realtors have yet to kick. Added to that are the thousands and thousands of illegals who jumped onto the building boom. Added to that the clerks in the brokers offices, workers in building supply companies, people who delivered the materials, etc, etc, the number of unemployed is going to rise big time. However, folks, not to worry. The illegals numbers will not show up so government economists will let us know that unemployment is “contained” just like inflation is “contained” (lol) and I’m sure we will see Bernanke at yet another useless photo op meeting in Washington telling those public money trough feeding politicians that the problem is not spreading (lol).
The first country music song about financial collapse by Merle Hazard!
and he has it right.
H-E-D-G-E
http://www.youtube.com/watch?v=LtcnXLDnXvs
LOL
The Albertson’s store (now Save On) in this bubble city used to have sales that would crack me up. Such as 6 for $8.99 or 12 for $9.99 or 11 for $5.95. This has got to be a marketing strategty aimed at the math challenged. Can you imagine the cashiers above trying to calculate the cost/unit in thier head?
This tactic is very common, not just at Albertson. I see them in Target and various grocery stores. My local grocer put the price of oliver per once next to the total price for each item size. Either the manager doesn’t know he is charging more per once on the bigger bottle, or he/she is trying to fool us. In any case, many people think they are paying less for the bigger bottle when in fact the opposite is true.
Cinch
sorry..typo “their head”
Another typo “strategy”…..shesh. Do you guys think the supermarket made up sales like that because they knew consumers were so dumb they would buy “x” amount of said item rather than look stupid?
Many, many moons ago, not being a shopper (that was woman’s work dontchaknow) I can remember asking a clerk if a 2-for-1 price applied if i bought only one item.
The answer was “no”. If i bought one, i hadda pay more.
I discovered this was not always the case.. Nowadays, it seems that it’s almost never the case.. 10 for $10 means $1 each no matter the quantity.
So, yes.. i agree it’s a marketing ploy. Capitalize on any question or hint of uncertainty or ignorance or lack of self-esteem lurking in a shopper’s subconsciousness..
Looks like the foreign markets are quite happy with the bailout this evening. Probably a 1/2% cut by the Fed for the prime rate is in the cards.
Nikkei 225 15,831.77 9:17PM ET 558.09 (3.65%)
NZSE 50 3,988.48 9:15PM ET 94.14 (2.42%)
Straits Times 3,255.01 9:37PM ET 124.30 (3.97%)
Seoul Composite 1,715.30 9:37PM ET 77.23 (4.71%)
Taiwan Weighted 8,401.49 9:37PM ET 311.20 (3.85%)
The Fed has small investors the world over convinced that it can fix any market problem with helicopter drops of liquidity.
http://news.yahoo.com/s/nm/20070819/bs_nm/cramer_barrons_dc;_ylt=Av_dIc3gMkW62bvdwTGzLwsE1vAI
Proof Cramer is FOS and if he is, so is everyone else at CNBC except Erin!
An item that is ignored is if the economy is doing so well, why did this gentleman go in to foreclosure for 106K?
I can understand gambling on a 750K property in California or Florida, but this is your working class.
The high bidder at the foreclosure auction bid $1.00 - the high bidder is the bank.
After the Pain of Foreclosure, a Big Tax Bill
NY Times
http://tinyurl.com/2cxwau
http://tinyurl.com/2querj
Wall Street Awaits Fed’s Next Move
NEW YORK (AP) - The Federal Reserve may have thrown Wall Street a bone Friday by lowering the rate it charges banks, but if this week’s housing market data and corporate headlines portend more gloom, it may have to toss another.
So far, Wall Street, beset by fears that credit problems in mortgage and corporate lending will cripple the economy, has been stubbornly signaling to the central bank that it wants a bailout - ideally, by way of a cut in the benchmark fed funds rate.
Nikkei up over 500 points.
I still ask with all this excess inventory everywhere, who is going to buy all these overbuilt empty investor homes? There are only so many “qualified” buyers now..You have places that have more than 20% of the community empty…I think this bubble is going to last even longer than predicted by anyone…
I think if I was a lender stuck with holding the bag on a bunch of mortgages I would do the following :
(1) Don’t try to mix the good with bad and just take the cream of the crop packages and put those notes in one pile .
(2) Take the worst loan packages and appraisals and put those in another pile .
(3) Take the middle of the road loan risk packages and put them in another pile .
Than just mark to market the loan packages accordingly to the piles . Enough of this mixing the good with the bad and than developing trenches of risk .Agree to service all the notes with a good collection department who will call up and try to prevent a foreclosure and forget the prepayment penalty if you can prevent a foreclosure by a rewrite of the original note .Don’t give below market rates ,but don’t give the borrower a FB rate either .Re-write the note at a minor re-write fee ,(hey it’s better than a foreclosure ).
That being said ,there will still be thousands of foreclosures that will drive the market down and provide a opportunity for people to purchase at a extreme discount ,but at least they will qualify if prudent lending standards come back . Also give a new buyer a deal on the financing of a foreclosure that is bought instead of giving a discount to the FB who wants to walk .
I will be damned if California blog is not all filled up with 190 comments before i even get a change to post.
“Statistically, American Canyon faces a 41-month supply of inventory of homes for sale. ‘It’s brutal. We can’t seem to get people to look at the houses,’
As I recall American Canyon is the place where the folks who built the nuke subs at Mare Island all live.
Last post, suckas!
As I post this, every friggin’ index worldwide is green. Wall Street always wins?
http://money.cnn.com/data/world_markets/index.html
‘As I post this, every friggin’ index worldwide is green. Wall Street always wins?’
Think of it as a LAST CHANCE SALE on housing puts.
I was at Trader Joe’s in Torrance, CA the other night and the lady in front of me had $2.88 worth of groceries. She tried one credit card and then another in the scanner. Both were declined. She told the clerk to please cancel the purchase. The clerk said, “OK, it’s alright.” The lady said, “No, it’s not alright” and left without her little attempted purchase. Let’s not forget when this all comes crashing down that there are real people left with nothing but despair. I’ll never forget the look in that lady’s face as she left the store without her attempted small purchase of groceries.
‘homeowners often are deeply in debt by the time a foreclosure occurs. With no financial reserves to fall back on, they sometimes make poor rental risks, he said. ‘There is just no margin for error.’”’
Nobody would believe me when I told them, after selling my CA home in Nov, 2004 and renting, that renting an apartment was literally more difficult than getting a $500K mortgage because the rental agencies–UNLIKE LENDERS–required a credit check, proof of income, etc. Two years earlier I had refinanced my mortgage with no docs and no credit check but in 2005 I was turned down on a rental app although I own real estate overseas and had over $400K in various savings instruments! When I moved from a rental condo to a rental house earlier this year, I asked several agents if there were a way for me, the renter, to check the status of the homeowner’s mortgage to see whether it was current. The response was universally something like shock that I would dare to ask such a thing. How could a “loser” renter ask a successful “homeowner” to prove his credit worthiness?!?! As an analyst at Countrywide for several years, I knew that most of the recent homeowners didn’t have a financial leg to stand on but kept getting that reaction when I simply asked. Now perhaps perceptions will start to shift about who the real losers are–renters or those fools who rented some pot of money to live in a house they could not afford in their wildest dreams.
My g/f and I have been doing this to our landlords for the last 2 years. She has connections at title companies that can pull property reports. In San Diego you’d be wise to do a backround check on any condos or homes you may want to rent, apartments, not as necessary.