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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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5%… We read this time and time again, the economy is just fine outside of the housing market. I like many can’t buy into it. Saying something is so does not make it a fact. So where is Joe&Jose sixpack coming up with all this dough to keep everything perking along?
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_berry&sid=avsPSp2cXT0U
Wednesday, September 05, 2007
One problem we can’t spend away
Robert Reich
The subprime mortgage crisis is exposing the fact that American consumers have very little money in their pockets. And commentator Robert Reich says that realization could lead the nation right into recession.
http://marketplace.publicradio.org/shows/2007/09/05/PM200709054.html
Here’s a solution from your redistributionist, ivory tower Mazzhole liberal.
Note the deliberate call for taxpayer culpability relative to bail-out refinancing.
It’s hard to imagine the guy’s actually a professor. The article leaves me speechless as to it’s assumptions.
http://www.boston.com/news/globe/editorial_opinion/oped/articles/2007/09/07/sensible_solutions_to_the_lending_mess
idiots who earn 75k or less be warned…..
judge smales…….you get nothing, and like it
The race for the bottom…
Which major homebuilder will go bankrupt first?
An interesting posting at indexcalls.com:
Highlights shown below courtesy of one of my trading buddies,
Hovnanian Reports 4th Loss in a Row
Four consecutive quarterly losses, a 35 percent cancellation rate, fewer sales and contracts.
The company also said it would slash prices on homes across the country beginning late next week to try to sell off excess inventory.
“Right now the game is who can cut the prices the most,” he (Alex Barron, Analyst)said. “They have a lot of debt that they need to service and in order to service that debt they need to have some cash coming in the door.”
http://biz.yahoo.com/ap/070907/earns_hovnanian.html?.v=7
remember…Bankruptcy is often precipitated from loss of cash flow, not profits and losses. If a builder can’t come up with the cash to service its debt, it will face bankruptcy. Hovnanian is striving to raise cash by cutting home prices. We will have to wait and see if it can raise enough cash to pay its creditors.
Race to the bottom…
Beazer puts its hat in the ring:
NEW YORK (Reuters) - Shares of Beazer Homes (NYSE:BZH - News) fell 8.4 percent to $9.99 in pre-market trade on Friday after the homebuilder said it has received “purported” default notices on some of its debt.
Beazer said the notices are invalid and without merit.
One link for above:
http://www.thestreet.com/s/beazer-gets-default-notice/newsanalysis/homebuildersconstruction/10378401.html?puc=_googlen&?cm_ven=GOOGLEN&cm_cat=FREE&cm_ite=NA
The default is due to them not filling their quarterly report due to “investigations.”
A topic on Beazer is worthy (in my book).
Neil
Beazer will be first.
Pulte will follow at some point IMO - much bigger news since they’re a fair amount bigger than Beazer.
Don’t count out our good friends WCI. Unless Carl Icahn continues to throw good money after bad they are toast with all of their FL condo towers. WCI is trading around $8, stupid shareholders refused a $22 per share buyout offer from Icahn not long ago.
is this free money?
short beazer to zero, yes its a real number.
throw in..
HOV and CFC?
I’d like to hear from HBBers on the changes (good or bad) that have taken place in their communities as a result of the housing bubble. Sprawling new developments are obvious, but what about some of the other, more subtle (or not so subtle) changes like demographic shifts, closing or opening schools, traffic patterns, loss of a favorite small business, etc?
Just the other day, I was driving down Rte 41 on the eastern shore of Tampa Bay and saw that Cox Lumber is shut down and boarded up, a casualty of the housing bubble. Before Home Depot came in, this was the place where locals would go for their hardware and home improvement needs. It may not have had the greatest selection, but it was adequate and friendly. Home Depot bought it out and shut it down. Now the folks in this immediate area have to drive an extra five miles or so to Home Depot.
Also on Rte. 41, we have had the Ruskin (Florida) drive in movie theater, a fixture in the area for years and one of the last of its kind in the country. It almost had to shut down because of the bogus “best use” tax assessment. They fought it and won, but it has still been very difficult for them to survive. Driving by, I notice they have a huge campaign sign up for a property appraiser challenging the incumbent in Hillsborough County.
We’ve had boat ramps and bait & tackle businesses get swallowed up, traffic medians put in to re-route familiar patterns (thanks a pantload, Lennar). This past spring, the familiar scent of orange blossoms was gone from the air, due to the fact that a number of groves in the area were sold off to developers.
Palmetto,
One thing I’ve noticed in So Ca, and being a member of The International Council Of Shooping Centers ,is the amount of designer malls that were built during this latest bubble. (Doesn’t the world have enough shopping centers already!)
Now we are looking at leasing in more of a survival mode. Even the yuppies have decided that if its all made in China, why not just buy it at Target.
Sorry to hear about the orange blossoms.
I still miss the Orange groves in Tustin/Irvine California.
Here is the change I’m seeing locally: Multiple families living in one home. Not that common (yet), but some homes have far too many cars. I even see this in Palos Verdes. Kids never leave the nest as its too expensive to buy anywhere in the south bay. I’m talking kids about to hit 40!?!
Got popcorn?
Neil
My parents live next door to a “kids living with parents” situation. Both “kids” are in their twenties, and are quite capable of living on their own and supporting themselves. But, since they’ve got a better deal at the parental Best Western, they’re next door.
Mom isn’t happy about the late-night traffic generated by the friends of these “kids.” She also doesn’t care for the parents, but that’s a different rant.
Hi Neil,
I miss the fruit orchards, and fruit stands
that were once a part of San Jose.
I, too, live in Pinellas and I’ve noticed a lot of wildlife in our neighborhood, including coyotes. I used to wonder how people in California could bear to take out their garbage at night and see these wolfish creatures. Now we know.
we have coyotes in Pinellas? i’m in north Pinellas, i would assume that’s where they’d be, since there’s some deer and other smaller critters here…. and i doubt if there’s enough substantial habitat south of Tampa road that would sustain an animal like a coyote without causing people problems.
Surprise! We have them and it is freaking people out. We live in unincorporated Pinellas between Seminole and Pinellas Park. You have them, too: http://www.sptimes.com/News/061201/NorthPinellas/Residents_suspect_coy.shtml
They also just rescued one from under a bridge at Boca Grande!
Why the big fear of a coyote ??
I’ve seen documentaries on coyotes living in NYC. Also, coyotes are not anything to fear, very little of their diet is meat, they are omnivores, eating whatever, including forbes. Coyotes will get your cat if they can, and possibly a small dog, but my dogs routinely chase coyotes, and I’ve even seen one dog play with them. I hike all the time around coyotes - their main diet is mice and squirrels. I have never heard of a coyote attacking a human, and if they did, you could easily kick one away, as they really aren’t that big.
Too much like wolves, though I guess I shouldn’t be so afraid if you’re sure they’re harmless.
RE: Too much like wolves
My mother lives in a quasi-rural town 32 miles north of Beantown.
Last winter 3 coyotes took down a 160 lb.
deer in her backyard on a Friday night when it stumbled in trying to clear in a rear drainage ditch.
By Monday the entire carcass had been cleaned to just the spin, ribcage, and skull by a variety of beasts and fowl.
Crows and turkey vultures were the big pickers after the coyotes had their fill.
Not sure I’d be a jogger in the area after watchin’ it all.
the deer must’ve been diseased or injured. I’m 4th generation ranch family in W. Colo and have never seen a coyote kill anything except mice and lambs. wolves are also maligned. do some research before you make generalizations. there has never been one case of a coyote going after a jogger
historic norms are, lets say,
virtually normal.
Officials with the California Department of Fish and Game estimate that roughly one person gets bitten by a coyote per year in California. The last human to be killed by a coyote was a child in the Los Angeles area around 1980. (SDUT 1/3/95, B1; 5/16/00, B3)
In NYC the good news — the most new housing production since the 1960s, middle class people willing to live in more city neighborhoods, a temporary boost to public finances due to real estate transfer taxes.
Unlike elsewhere, new housing quality may have actually increased here, as developers who formerly only built in established affluent neighborhoods (and made people take crap to get that location) attempted to attract people to less desirable locations with the quality and amenities in their buildings.
The bad news — people who grew up in the city but didn’t attend college priced out by college graduates from elsewhere, loss of economic competitiveness due to higher real estate prices than elsewhere. I believe people and businesses may stop coming here if the prices do not fall. While NYC banked the extra tax revenue, the State of New York blew it, and will be coming after us for tax increases and service cuts.
WT….Do many people raise families in New York…two or three kids ??
I second Palmetto’s topic suggestion.
The housing bubble has made land so valuable around W. LA that they’re tearing down surfshops, malls, old houses, anything they can get their hands on (they=developers) to build CONDOS. I shudder every time I see a new condo dev’t going up, because I know it’s going to mean more traffic, less retail/pedestrian space, and more single/DINK yuppies moving in.
Unless they end up empty.
In Chicago, which is very neighborhood-centric, development happens at different speeds. Some neighborhoods have been completely transformed since I moved here a decade ago, some have remained largely the same.
In some cases, the local alderman’s power has a lot to do with the pace and tone of development — in the now quite-gentrified Wicker Park neighborhood to the south of me, for example, little was done for years to protect older residential buildings. Lots of frame houses, classic Chicago bungalows, and two / three flats were razed to make room for ugly-ass new construction — the kind we all know will not age well.
Lots of arts spaces, small restaurants and the like were driven out of the area by ever-increasing rents and taxes — most notably (for me, anyway) the much-loved legendary Polish greasy spoon The Busy Bee. Many of the small businesses that remain in that neighborhood either have built-in hipster appeal … or have owned the property for years. Lots of old-timers cashed out and more elsewhere, too.
I’m hoping that the bursting bubble will save my neighborhood from the same fate — it’s a neighborhood on the verge, and it would be a crying shame if it lost its character.
Here in the D.C. area, formerly dicey areas in Va. close in to downtown have become much more expensive, since the rise of the far-flung exurbs has made traffic much worse, really just in the last 10 years or so.
And those exurbs that suddenly sprouted up in the last five years. Lawdy! They’ve managed to pave over pretty much everything in Va. within 50 miles of D.C.
Yeah, I grew up there in the ’70s and ’80s, and the pace and scale of exurban development in VA has been insane in the past few years. I continue to be shocked by how far people will commute in NoVa.
I’ve had my fill of Home Depot and Lowe’s.
Ignorant floor help, no one at the check-out counter, and marginal quality merchandise never in stock.
I’ve taken my hardware & tool purchase biz back to Sears and the local True Value store.
In the Atlanta area the main impact I have seen due to the bubble has been the deterioration of once stable lower middle class to middle class neighborhoods. The underclasses have moved into these areas, either buying with subprime loans or renting from speculators. People trying to raise children in a true middle class environment have had to gamble on exotic loans in order to live in safe family areas. Those who didn’t want to take the risk with a mortgage have had no choice but to live with low life crack heads & drunks as neighbors and hope that their children survive. Neither option is a good way to raise a family.
Another adverse impact is the continued deterioration of traffic congestion caused by a combination of sprawl and an exploding immigrant population. The immigrants fling their cars all over the roads with no consideration of their safety or the safety of others, resulting in daily road kill. Two of them died today on I-75 because the driver of the car trying to change lanes stopped in the middle of the road in front of an 18 wheeler . Traffic in the NW metro area was nightmarish because of this for 6 hours. So it has become prudent to avoid the interstates if you want to get anywhere alive & on time.
Kid, you make a very important point, the deterioration of once stable middle to lower middle class neighborhoods. I call them “modest” neighborhoods. You are talking about the sort of place I like to live and this is a HUGE hot button with me. I am not a particularly high earner. I believe in living within my means. But during the bubble, those places where I could live within my means either deteriorated to the point that I wouldn’t want to live there (I tried, but living with scum is difficult for me) or “upgraded” in price to where it was unaffordable. It is not so easy to find a safe but modest neighborhood now. Fortunately, due to an incredible stroke of luck, I happened to find a rental deal in an “upgraded” neighborhood that is relatively safe. But just right now, until things get real again, I couldn’t afford to buy here.
And the spread of illegals in the area is not to be believed. I don’t care what anyone says, they cause deterioration and danger to peaceful communities.
most people see money,
but the real aspect is debt, the growth has been still is and gonna be debt/. rate cuts dont solve debt, only increases in the rates consume the debt.
Had to go into (shudder,) Bakersplat today and saw three dedicated billboards along Hwy 58 touting reduced prices in new housing developments. These were not ads with “price reduced” slapped across them, but boards specifically advertising $50,000 off, etc.
BFD. It’s still Bakersplat. Maybe when they’re down to 50K total price.
Nah….
Still a lot of new industrial starts and commercial building going on. Saw a new (empty,) office complex on Truxton Extension with its windows shattered.
In-town traffic seems to be easing, though, so maybe folks are leaving town for (dare I say it,) Oklahoma?
The latest graph of the Phoenix, AZ, area notices of trustee’s sales is here.
The graph as printed is slightly misleading because of the non-zero baseline. Makes the current number look more than twice as big as the few-years-ago high, when in reality it’s a bit less than twice. Still amusing, and impressive. I keep wondering if the exceptional promptness of my borrowers’ payments in 2007 is connected with their misunderstanding the foreclosure spike as a symptom of a new mood of meanness among lenders. Like, they don’t dare be a week late because I might take it into my head to foreclose…? Used to be a lot of them were a week late.
Looks like the things we’ve been telling our family and friends is upon us. Up here in Anthem (N PHX) there are going to be many guys like this. The RE market up here is ready to fall off the cliff.
http://phoenix.craigslist.org/rfs/412936757.html
I’m supposed to crave this home because it has a big bathtub?
“Looks like the things we’ve been telling our family and friends is upon us. Up here in Anthem (N PHX) there are going to be many
guys like this. The RE market up here is ready to fall off the cliff.
http://phoenix.craigslist.org/rfs/412936757.html”
Anthem is a black hole. It doesn’t matter what you buy there, you’d live in a soulless, dead zone. I’d rather dodge bullets in Jersey City, at least I’d feel alive. Depends and home health aids anyone?
I am in the middle of reading Roger Lowenstein’s book about the rise and fall of Long Term Capital Management. Thus I thought it interesting that there is a link on Drudge Report this morning to a report that Alan Greenspan says the current turmoil is the same or similar to what was seen in 1998, 1987 and even back to 1907 and before.
Would love to hear HBBers thoughts about this.
I saw that article and thought it was interesting Greenspan neglected to mention 1929.
Good point…I missed that.
Odd mental lapse there. It is hard to avoid noticing the similarity to 1929, which was preceded by a Florida Land Boom that went bust and myriad homeowners getting stucco thanks to interest-only loans.
I doubt it was a mental lapse. It seems more probable to be a deliberate ommission. Even if we are on the verge of something like the great depression, a good central banker (or ex in this case) would never breathe a word of it to the unwashed masses. Who knows what he’s thinking but it seems obvious to those paying attention we are much closer to the conditions in ‘29 than any other time period.
Greenscam ought to know, he created this freak’n mess. What a poor excuse for a Central Banker.
What’s this guy making a speech, somewhere north of $100K per speech in the private sector. Only in Mexica.
don’t you mean Amexica?
a good review of Greenscam and the original housing bubble:
http://www.safehaven.com/article-8354.htm
I have something strange happening on my street in Sunnyside Queens. House is up for sale a crummy 2 family for $749K. Somebody installed very dark wood paneling in the hallways looks spooky Zillow says he paid $360K 7 years ago. The for sale sign is still up, yet he is telling everyone its sold. He told the tenant to find a new place to live, and he has been packing stuff and USPS has been picking them up to be sent to the Philippines .
And he did have an open house last weekend. What do you think? Jingle mail Next month? Quick exit to Manila?
slip sliding away…
and 300k was gone.
DOUBLE THE BUBBLE ILL GOTTEN GAINS.
where are we?
weekend question:
What is the most ridiculous thing you’ve heard a realtor say or do?
(ridiculous can cover a lot of territory…from uninformed pronouncements to obvious bullshiattery to outright illegal activity.)
ridiculous thing you’ve heard a realtor say or do?
Ask if the asking price of the house is firm without knowing the asking price or seeing the house…..Kind of moronic…
A friend of mine was looking for a house during the last boom. The realtor kept showing her homes she couldn’t afford. When my friend complained that the realtor was trying to get friend to overextend herself, realtor replied: “It’ll be good for you to have to stretch - that’ll motivate you to better yourself and work harder!”
My friend told realtor: That is the stupidest thing I ever heard.
I posted last month about a real estate lady in Temecula who actually tried to sneak signing papers into a mental ward to save her commission.
Let’s talk about the turn in the job numbers. FYI this data is something I know a great deal about.
The Current Employment Survey job numbers are based, in the long run, on unemployment insurance tax returns, and only include wage and salary employees and not the (fast growing) number of self-employed and independent contractors.
The unemployment insurance program provides the “sampling frame” for the survey, which takes place every month. Much later, when the quarterly unemployment insurance taxes come in, the data is “rebenchmarked” to what it actually is. The big rebenchmark is each March.
What about businesses that open and close? They aren’t surveyed, they are “guesstimated.” What this means is that there is always a delay before the CES can capture a turn in the economy. What you see here — aha, fewer businesses opened/more closed than the model says — is what happens EVERY TIME.
Perhaps more rebenchmarking to come when more data becomes available.
healthcare and ed is 50% gov ,so just the parasite class is happy
RE: parasite class
Apt description.
You guys are talking about Wall Street investment banks, right? Or did I miss something?
For a weekend topic, I’m wonding how much the news is affecting people’s willingness to pay their mortgages. Specifically, people who can’t pay their mortgages every month are not some loser deadbeats, but whe were tricked by evil lenders and part of a large (and growing) set of people who just are not up to the task of paying a mortgage every month.
In Northern VA, the housing bubble has mostly affected the sane among us who bought within our means. So our neighborhood is mostly young couples and working class families who have bought 300k townhouses in the last 3 years, and then a few part-time cable installers who bought the houses more than 5 years ago when they were 85k.
It is an interesting mix, as the new owners have extra cash to fix up the houses, generally respect each other, and don’t pile trash everywhere. Guess how the others treat the neighborhood.
Schools are another issue, in that schools in the area now have a wide variety of parental involvement, from parents who have to be reminded that they should occasionally feed and clothe their child, to parents that won’t shuttup about the latest educational findings.
schools are welfare/free lunch distributing centers
and taxpayer-subsidized daycare centers. Can you tell I don’t have kids?
Random comment: Free and reduced lunches were not orginally welfare programs, as in “we worry about the poor” type. The military pushed for the school lunch program as a way to make sure recruits were resonably healthy. The laws mandating enrichment of grain based foods such as white bread, etc, is also a product of the same thinking and people.
Public schools - good ones - are an expenditure I’d be delighted to support, given these folk vote….
And may someday pay (what’s left of,) our Social Security benefits.
In the Minneapolis-St. Paul area, the recent housing bubble has created an unsustainable retail (strip malls, big-box stores, designer malls) construction blitz (IMHO). When the music stops in this musical chairs game, there will not only be some very po’d J6P, but also a lot of commercial developers/landlords/out of business tennents.
Another example of complete rubbish… who in their right mind would design and develop an “open air” designer strip mall that mimics similar ones in San Diego for the Minneapolis-St. Paul suburbs? I am sure customers don’t mind hustling from store to store in the -30 degree windchill and blowing snow during the upredictable winter season (November-March). I find this recent local trend very ironic since the first “all enclosed” mall in the U.S. debuted here in Minneapolis in the 1960s (Southdale Mall).
We’ve also seen many local small businesses dissapear completely. Many local hardware stores and coffee shops… gone in 60 seconds after the big box stores and chains moved in (Home Depot, Lowes, Caribou Coffee, Starbucks).
Customer traffic at most of these big box stores appears to be down significantly compared with 6-12 months ago (not a scientific statistical analysis, just a personal anecdotal observation).
Also spoke with family from the St. Cloud MN area… one told me about an ATV/Snowmobile/Farm Implement dealer (one of the largest in the Midwest, if not the entire U.S. in terms of gross sales) manager who told him that if it weren’t for the John Deere farm implement division, that they would be in the red due to virtually non-existent sales of ATVs and Snowmobiles. Seems sales are down significantly from 05-06.
Again, seems to follow a very similar pattern whereby home-mortgage slaves used their HATM (house ATM) to withdraw funds through HELOC, 2nd-3rd-4th mortgages, or annual toxic refinancings to fund their buying sprees of automobiles, HDTV, vacations, timeshares, vacation homes, recreational vehicles, etc.
No HATM funds = no spending = declining corporate profits = layoffs/reorganizations = recession.
Pass the chips and salsa (microwave popcorn not so good right now) to go with my cold Sam Adams (or Sierra Nevada or Fat Tire or Summit).
Popping corn on the stove in a medium sized pot, with corn oil
Still tastes the best…
I’m noticing that the South Bay part of LA has in incredible number of “for lease” signs up at commercial sites. Mostly 2nd rate sites, but we’re starting to see 1st tier office/commercial offering leases. (Usually prior to the previous client vacating, for the 1st tier.) But if you drive around the commercial sections between Hawthorne Blvd and Crensaw Blvd, there are quite a few buildings hidden back there sans tenants. On PCH near Hawthorne one building was torn down (dilapidated) and is awaiting “build to suit.”
Yes, I know some “mini-malls” always struggled for tenants, but now it includes locations that usually are 100% leased.
Got popcorn?
Neil
ps cook it in olive oil, so yummy!
On the stove with bacon grease, then thrown in a big bowl with lots of butter on top….mmmm good!!!
Mmmmmmm, bacon grease.
I’ve never thought to pop corn in bacon grease. Sounds devilishly good.
Ok, I yield. Everything tastes better with bacon fat.
Neil
I heard that Minn. was doing very well in general due to strong agg. acrros the state…Not so ??
I’m wondering if one outcome of all this might be the ridiculous salaries professional athletes are paid will finally come back to reality. Or do you think J6P will continue to fork over ludicrous amounts for tickets to these events even though he’s going down the financial tubes at the same time?
My humble opinion is that many J6P won’t, and neither will a lot of the companies J6P works for. During this last hockey season and playoffs this spring the papers kept noting the empty seats at Joe Louis Arena in Detroit. Even during the playoff run the house wasn’t full. That supposedly hasn’t happened since the Dead Wings of the early 80’s.
Competition for seats at the 1st USC game wasn’t as intense as normal . (Its still impossible to get season tickets.) However, parking was as bad as ever… So inconclusive.
But it won’t surprise me to see J6P cut out the games. Tickets, food, and drinks for two easily top $200.
Any more evidence of this trend?
Neil
There might not be as much of an impact at the college level, I’m thinking. Over 109,000 people watched Michigan get humbled by Appalachian State at the Big House, and they’ll all be there tomorrow for the Oregon game I’m sure. Maybe there will be less impact on college sports.
J6P hasn’t been able to afford NFL season tickets for years. At least here in DC, except maybe some of the higher-level construction types. The NFL has a distinctively corporate bigwig feel to it.
If there is a recession, I wouldn’t be surprised to see NFL TV ratings skyrocket. Most games are on broadcast TV, and it’s something for Former Homeowners to do on Sunday for free after they cancel their cable subscriptions.
vick aint the only millionare in da joint
Friday, September 07, 2007
Getting the wrong kind of closure
A foreclosure sign hangs in front of a home for sale. (Joe Raedle/Getty Images)
The news keeps getting worse for many American homeowners. New data shows that the rate of home loans in foreclosure has hit a record high for the third quarter in a row. And there’s no end in sight, Bob Moon reports.
http://marketplace.publicradio.org/shows/2007/09/07/AM200709073.html
Thursday, September 06, 2007
How far down will housing drag us?
A foreclosure sign hangs in front of a home for sale. (Joe Raedle/Getty Images)
Three key indicators popped onto economic radar screens yesterday and none of them brought good news. The credit and housing crises are starting to impact the larger economy, but are we on the steep road to recession? Steve Tripoli reads the signs.
http://marketplace.publicradio.org/shows/2007/09/06/AM200709062.html
Here is my research in tampa,florida….
Annual sales records in hillsborough (SF homes)
2001=>19100
2002=>20000
2003=>22000
2004=>24000
2005=>28000
2006=>19800
2007=>7000 (upto july-31)
2007 records
————
jan 906
feb 967
mar 1061
apr 982
may 1081
jun 1081
jul 885
upto aug-6th 54
It makes you wonder, who are the fools still buying? Every time I see a “sold” sign, I think “must be bad karma.”
Harley-Davidson forecast 2007 earnings of $3.69 to $3.77 per share, compared with $3.93 in 2006, and said revenue would decline modestly. As recently as July, the company had said it expected earnings per share to rise by 4 percent to 6 percent this year.
Don’t worry, folks. Mortgage mess is contained entirely.
Boat sales down too:
http://www.news-journalonline.com/NewsJournalOnline/Business/Headlines/bizBIZ01090707.htm
Good thing no one HELOC’d for toys.
Neil
My brother is the parts manager of a huge HD dealer in California. He recently said that they had a guy in there trying to buy a new $22k bike, but his credit was terrible. However, they have a first rate financial guy with connections (Soprano Financing?), and about 30-minutes after close of business this guy finally rode out of there on his new bike…just like magic!
Unloaded the last of my HDI shares held for 20 years 2 weeks ago.
One of the best performing stocks in the US over the last two decade.
“It’s Over”…Roy Orbison
Some folks are thinking outside the box about ways to offer foreclosure relief that does not impose negative pecuniary externalities on taxpayers. Chris Farrell mentioned one recently on American Public Media’s Marketwatch radio program (own-to-rent). Can anyone point to other creative solutions to the foreclosure crisis which don’t involve holding a gun to my head and forcing me to involuntarily fork over money to bail out fools?
Scott Jagow: This week, Congress is debating ways to help out homeowners stuck with awful mortgages. There are many ideas floating around. One in particular from economists Dean Baker and Andrew Samwick strikes our economics correspondent Chris Farrell. It’s own-to-rent. OK, Chris, explain this.
Chris Farrell: The simple way is, Congress passes legislation and says the current homeowner has the right to stay in the home as long as they like. All they have to do is pay fair market rent. And of course under this plan, the homeowners turn over the property to the mortgage holder. So the mortgage holder does get the property, and it’s a bailout that really protects the low-income homeowner who was sold a bill of goods.
Jagow: Do you really think that Congress would do something like this?
Farrell: You know, the idea is out there. See there’s a real problem with bailouts and let’s just use the word bailout loosely all right? You don’t want to reward speculators and you don’t want to reward lenders. You really want them to suffer, you want that pain. They deserve to go to the seventh circle of hell anyway right? Now, but you do want to protect the homeowner that was misled. The benefit of this idea is that it’s the most targeted idea I’ve seen that helps out that person, doesn’t throw them out on the street, doesn’t force them to go through foreclosure, and at the same time forces the lenders and the speculators to take a financial hit.
Jagow: How exactly would this be a punishment in any way for the mortgage lenders?
Farrell: They are now landlords and it puts them in the landlord business and that’s always a risk when you speculate and that’s what the lenders were doing, were speculating, don’t use any other word. But it does essentially say ‘you know what, you’re not going to foreclose on this property, you’re not going to put this person out on the street, you’re not going to be able to rewrite the terms of the mortgage loan by the way as long as that tenant meets the fair market value bill, you’re a landlord.
Jagow: So do you do anything to help the mortgage lenders get through this?
Farrell: No. I don’t see any reason why you should. Actually you know the Federal reserve is doing what it should do and I’m a big fan of what Ben Bernanke has been doing and I think all this whining from the hedge funds and Wall Street about the Fed needs to cut rates, look, the Fed’s not in the business of bailing out these big banks. I mean look at the money that’s been made. What was it last year, bonuses on Wall Street were what $60 billion? I think what we’re going to see over the coming year or two is a Darwinian process of the market and as far as I’m concerned I hope a lot of people go out of business.
http://marketplace.publicradio.org/shows/2007/09/06/AM200709061.html
That has to be one of the stupidest proposals I’ve ever read. The banks would be throwing enough lobbying muscle against this that every lobbying firm on K Street would be fat and happy for months.
Call it all the names you wish, but I like it, since it does not involve putting any guns to the heads of American taxpayers.
And what do you think happens to the lending institutions if this goes into effect? Sure, they should pay for their stupidity, but I’d like them to *still be around* in a few years when it makes sense to buy a house (or a car).
It’s a little too easy to call for the government’s gun to be put to someone else’s head. The gubbimint should just stay the hell out of the mess and let nature take its course.
What happens when they want to move? What happens to the neighbors that want to sell? Another way to screw the responsable really…
This does nothing to deal with the adjustment housing prices need to make before any of it gets any better…
What is the most DUMB thing people did with the HECLO money I vote.
http://realestate.msn.com/lawns/Articlebusweek.aspx?cp-documentid=589060>1=8278
Hope the link works. Think it will make a house sell faster or be worth the investment?
LOL - basically that’s for when a married couple doesn’t get along - it’s a way for the husband to get away from his wife, and relive his childhood at the same time in the playhouse.
We had stuff like that when I was a kid. We called it the basement or garage.
I would like to know how HBBers intend to weather the coming financial tsunami (it’s very close now). Where is your money? I have been in physical precious metals and energy stocks for several years and don’t plan to make any changes.
Cash for the down payment in CD’s at multiple banks. I’ve pulled money out of ‘money markets’ due to the turmoil. (I believe we will see a “break the buck” scenario, which is scary.) Some ‘low cost’ provider of alcohol stocks. Some high tech stocks (yes risky, but I’m short term bearish, long term bullish). I haven’t made the money of the short sellers here… but I appreciate their advice.
Neil
Pawn shops (e.g., First Cash Financial).
good topic
We’ve recently gotten out of the stock market for our retirement accounts. My next move (very soon) is to get us out of “money markets” in our retirement accounts. Other than that we’ve also got physical PMs and CDs, a very small position in some “Buffet” type stocks.
Screw “buy and hold” - I’d rather make a steady low return with a 10% speculative postions than watch the vast majority of my money go on a roller coaster ride. Thank you for the rant time, I feel better now.
BEN, CAN WE HAVE A THREAD TO BE SARCASTIC? JUST FOR FUN!!! TALK AS IF WE WERE PART OF THE REIC!!! MAYBE POINT OUT SOME INTERESTING LISTINGS FROM THE PAST!!!!!! HAVE FUN WITH NAR SLOGANS!!! SHARE THE PROPAGANDA WE FIND THE MOST AMUSING!!!
‘/realtor_type
Real estate always goes up! The bottom is in mid 2008, so why not buy now before the rush while you still qualify for these great mortgages? Buy now and get $150,000 of instant equity!
‘/sarcasm
Neil
sarcasm?
google reads: save time by hitting the return key instead of clicking on “search”
I’d like to suggest a topic discussing how localized ‘hot’ markets like where I live in the Bay Area has been affected more recently by the shutoff of subprime loans. Bay Area ‘buyers’ relied extremely heavily on these loans. I think I remember reading here that something like 77% of all loans used this year were either ARM or IO loans.
I can say that at least for my area, the change in the market is stark in contrast to just a few months ago. Things were slow as early as a year ago. Homes were still selling, but taking longer to do so. As I write this, I can honestly say that I have not seen ONE home sell of the many for sale on my drive home. The activity seems to have totally dried up, which in my opinion indicates prices stretched way above even Bay Area wages.
Perhaps others from across the country can send in their local observations too.
I live in the Bay Area and am amazed how quiet the media is about the housing market here. I never read about the slow market in San Francisco or environs. I still hear how the Bay Area is so different; there are so many brilliant, well-paid people living here that the prices will never go down. Why do I see so many houses on the market for months and months, then?
Just for fun, I looked did a search for houses for sale in Burlingame, which is an expensive suburb of San Francisco. The cheapest ones are in the $1.1 range. I looked up a bunch of them on zillow.com, and found that most of them were purchased within the last 11 months to 4 years. I wonder if these are people who went in over their heads and now need to sell. I think most people would say that this was impossible in a rich place like Burlingame.
I would like to see a thread on how bad this is going to get, we’re already seeing triple digit drops in the Dow, panicking Wall Street people screaming for a rate cut, dollar sliding to a 23 year low, gold rallying and almost certainly a recession. Where are we headed 5-10 years out, folks.
Where are we headed 5-10 years out, folks.
With a $53 trillion debt and a wussified next generation of soccer mommy spoiled, obese, MySpace video game players: 50% of whom can’t even find the United State on a global map where do you think we’re going?
The Chinese are eating their lunch and they ain’t got a clue about anything other than what time the Domino pizzas are gonna get delivered.
Not all of them…….my 17 year old daughter and her friends spent July and August “bucking bales” in 95-110 degree weather.
A good way to learn how hard it can be to make a buck, and to appreciate some of the jobs she might get later.
I’d like to recommend a weekend topic of what price and area people are going to buy in. What are they going to consider a buy signal and what will make them hold off.. I think I’m going to get a condo in maimi, downtown san diego, and vegas for vacation rental biz.. maybe even a home in costa rica once they dry up like a dead dog.. the condo’s would have to be buy one get one free for me to jump.. I think if they want to move property they will get better action that way.. one to live in and one to rent. Can it get that bad.. yea still have copper mountain stock at 1.30 vs. 120 a share.
We are in the second inning of a perfect game.. the only thing that can keep it from a perfect game is the kool aid buyers diving in front of the fast ball!
What are they going to consider a buy signal
If sellers in my area would accept an offer 10-12 percent below asking, that would be my signal. I’m not waiting for rock bottom. I just don’t want to pay for anything hideously overpriced.
Currently sellers are obstinately holding out for their wishing prices, as the comps slowly but surely reset downward.
I’d like to recommend a weekend topic of what price and area people are going to buy in. What are they going to consider a buy signal and what will make them hold off.. I think I’m going to get a condo in maimi, downtown san diego, and vegas for vacation rental biz.. maybe even a home in costa rica once they dry up like a dead dog.. the condo’s would have to be buy one get one free for me to jump.. I think if they want to move property they will get better action that way.. one to live in and one to rent. Can it get that bad.. yea still have copper mountain stock at 1.30 vs. 120 a share.
We are in the second inning of a perfect game.. the only thing that can keep it from a perfect game is the kool aid buyers diving in front of the fast ball!
here’s the answer:
PACHAGED FORCLOSRES.
For a limited time you can get a condo in Miami, a beachfront house in Texas, and a Boat in Washington State…..all for the price of…[insert bullshit finance package here]
I would like to see discusssion of effect (of affect?) on economy when refis aren’t available and credit cards are maxed. What will economy look like when folks have to live within their means?
Europeans won’t be able to make so many fat American jokes…
Here in Riverside, Ca. there are deserted homes every other street or so. Today (for the first time) I noticed that a LOT of the for sale signs said “Lender Owned”. I called about one house and the realtor said it was a “steal”! I asked if he had an other bank-owned homes and he said not for this zip code, for bank owned homes usually only occur in lower income neighborhoods. Idiot! There were 2 other bank owned homes just on that street and one around the corner. I told him they were all over Riverside and he said, “Really?”.
How much cushioning can the greenback withstand?
Gold surges past $700 level
By Javier Blas, Commodities Correspondent
Published: September 7 2007 19:56 | Last updated: September 7 2007 19:56
Gold yesterday surged through the $700-a-troy-ounce level for the first time in 16 months as investors sought refuge from the falling dollar in the wake of weak US jobs data.
Spot gold in London hit $707.10 an ounce, its highest level since May 2006, as expectations of a cut in US interest rates pushed the dollar to $1.3798 against the euro.
The sharp rally in gold, which later traded at $703.7 an ounce, up $8.50 on the day, takes the metal close to its 26-year high of $730 reached in May 2006.
Silver rose to $12.60 an ounce, still well below last year’s high of almost $15.
The price surge was driven by robust physical demand for the metal from India, China and other emerging markets as well as gold’s appeal as a safe-haven asset, traders said.
James Gutman of Goldman Sachs said: “Gold will continue to face upside pressure, driven largely by the weakness in the US dollar.”
He said gold prices could rise to $725 an ounce in the next 12 months.
Investors are betting the US Federal Reserve will cut its main interest rate by up to 50 basis points at its September 18 meeting, to cushion the US economy against the credit squeeze.
http://www.ft.com/cms/s/0/e1dbada0-5d72-11dc-8d22-0000779fd2ac.html
Gold went over 500 Euros for the 1st time…
Europeans are Gold Savvy, on a scale of perhaps 10-1, compared to their American counterparts.
Can you walk into your bank here in the states and walk out with physical bullion, as you can in Europe?
This is when it begins to get interesting…
In the USA, the lion’s share of bullion business is done by perhaps a dozen decent sized concerns, and it gets parceled out to smaller dealers, those 12 spokes of the wheel.
Everybody in the Gold business has been waiting for just the right volatile mix of financials, to enable it to leap ahead, and I can see the finish line, in the distance…
And guess what?
So can they. Very soon, in very Atlas Shrugged sort of moment, all those that hold the only true wealth will disappear. No need to do business exchanging wealth for rapidly devaluing paper money, is there?
Your chance to be able to buy physical Gold will pass before you know it.
I go bottom top on the weekend topic. Why?
Flavor.
Gold is a thing, like things in my life they come and go.
The idea of buying physical gold has never entered my thinking until recently…..may be worth a feel to get some.
Just to count at night, at home, alone in the closet with the safe. Nothin in there but paper I dont want burned.
Here’s another weekend topic for you. Unlike most of you, I saw the bubble coming but bought a house anyway, in 2005. I used the fictional equity I had to put 20% down, and have a 30-year fixed at 5.75% on a townhouse. The house can fall about 25% from peak before I owe more than the home is worth, it’s in the DC metro area, and at some point there will be a metro/subway station nearby. Eh, I’m staying here, I might as well own a house so I have weekend projects.
That being said, Countrywide ended up with my mortgage. For three consecutive months, they’ve called me after I made my payment and said “because you’ve proven over the last two years that you can make your payment on time, we’ve selected you for a free consultation.” Curious, I always say yes.
So I get on the phone from someone in “texas” who sounds about 22. He tells me how much I owe on the house, and asks me what I think the house is worth. Of course, I said about 50k less than what it was when I paid for it. They suggest that it is worth *more* than what I paid for it, and that they can get me a lower rate, a refinance, or a HELOC.
Smiling, I tell him that I my house might be *worth* 400k, but that doesn’t mean someone’s going to buy it. I doubt he can get me a lower *fixed* rate, and he agrees. He says he “feels me,” and says that he can’t do anything for me, and that’s it.
So Countrywide is definitely done. I was tempted to ask him when the next round of layoffs were due, but I am not that mean yet. I still have skin in this game.
thats the kind of anecdote I really enjoy.
Why?
You are thinking. You are acting. and You are engaging.
rare in these times.
here’s one that’ll never be understood.
WHICH CAME FIRST,
The recession or the rate cut?
lookin back on this will puzzle the most seasoned economist.
Posted into wrong thread,
but a thought for the economics knowledgable here…
From CEPR:
The one bright spot in today’s report is that average hourly wages grew at an annual nominal rate of 4.5 percent over the past quarter, putting wage growth slightly above inflation”
Ummm, didn’t they raise the minimum wage this past year? So why would such a paltry increase come as a surprise? We going to get blessed with the same “miracle” for each of the next two phases? playing with stats can be done in many ways…
Average hourly wages raise slightly, as jobs get cut…