Bits Bucket And Craigslist Finds For September 13, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Hovnanian advertising 150k NJ junk on Bloomberg Radio with the tag line, “it’s never been a better time to buy”. Ari Hovnanian and Bob Troll have a cell waiting for them along with the rest of the white collar criminals on Wall street and in DC.
“Ari Hovnanian and Bob Troll have a cell waiting for them along with the rest of the white collar criminals on Wall street and in DC.”
Don’t I wish. But something tells me that, as this whole bust unfolds, there will be a couple of real physical casualties at the hands of some stressed out losers. Or not. On the whole, the Enron folks who got cheated were remarkably well behaved over their debacle.
I’m not one for vigilante justice, but I’d be pretty steamed if my savings or whatever just disappeared as a result of criminal bankers, Wall Streeters or fundies.
You’re no fun
Why? They sold homes. People willingly bought those homes of their own free will. I fail to see why either should be in jail for selling a lot of their products for handsome profits.
By that logic the CEO of Ferrari should be in jail too since selling cars for $300K should be a crime.
I don’t think the selling of the homes is what is at issue, but the financial misrepresentation and market manipulation, stock sales, etc. And, you know, any fraudulent activities. Stuff like that.
Can you document and of this alleged fraud?
As for stock sales…any CEO can sell his/her shares as long as he/she follows SEC rules. As far as I know both of them did just that. Toll has been selling shares in the millions going back to 2003.
I think it’s just that he was telling everyone to buy now or be priced out forever, yet his actions (selling his company stock) imply that he didn’t believe his own advice.
What accounts for the simpleton logic?
Nice. Didn’t respond to my post, you insulted me personally. Oh well.
See my response above.
“Ari Hovnanian and Bob Troll have a cell waiting for them along with the rest of the white collar criminals on Wall street and in DC.”
Too big to jail.
IMHO ,when you give investment advice like ,”good time to buy “,when you know the market is tanking ,you have crossed over the line .Saying that a “timing is good” regarding investments is saying that your investment is sound ,you won’t lose money and it’s likely that your investment will perform well .
It would be better if the builders and the NAR/sales agents just touted the features of a home or a location or reduced prices ,but to say the timing is right or that we have reached a bottom is crossing the line in my opinion .
Nice thought but real estate agents, home builders, mortgage brokers, etc. have no fiduciary obligation to their buyers. They can say anything they want about their investment class, advice that would get anyone making a commission on a securities sale thrown in jail.
I’ve said it before - I hope that changes. If you want to pass yourself off as an “investment professional” (’real estate only goes up’, ‘it outperforms the stock market’, ‘buy now before you are priced out’, ‘it’s the best investment of all time’, ‘there is no bubble’ - all of which RE people have said in my presence) AND you make money off a sale based upon your “financial advice”, you should fall under the same laws as any other Registered Investment Advisor.
Yeah, and lying is still illegal. If you lie to me, and I suffer a tort as a result of your lie, then I can sue you, can’t I?
Well said San Diego bear. Jail is the best deterrence for this nonsense.
Correctomundo Big V. When one uses constructs to separate another from his money, then there is a counterparty with a valid claim. Factually, it is a criminal act in any state in this country. It’s a matter of upholding the law.
Actually very little jail time would be needed - lawsuits tend to keep RIA’s on the up and up. And lying is not illegal Big V. They are offering an “opinion.” Currently, they can say anything (and many of them believe their own garbage) without any penalties if they are wrong.
If a realtor told you the real estate only goes up in 2005 and you bought a house based on this, you cannot sue the realtor if you sell for a loss four years later. (And you certainly cannot throw them in jail.)
If a financial advisor sold you a stock they said would only go up and you bought it and four years later you sold at a loss you would have grounds for a lawsuit. If the moron put it in writing, it might be an open and shut case and the E&O insurance would just pay you without you even needing a lawyer.
How many realtors do you think put “real estate only goes up” in their e-mails, newsletters, MSM interviews? Yet you cannot sue them. They are giving financial advice on an asset that they will make money on if you buy and you cannot sue them. Yeah, I’m a little PO’d.
Treating RE brokers like any securities Broker - hell, creating a regulatory aparatus akin to the SEC/NASD for real estate, is the best and only place for govt to step in.
The model is already there and working in other markets.
Some clever politician should realize that this is a serious political opportunity and start talking about it now. By the time the election rolls around the Great Real Estate Collapse will be on everyone’s mind and that person will seem like an oracle.
But instead they will stand in line and see who can throw the biggest bale of cash at the problem.
Looks like Bob Toll’s dream of having housing take up 60,70,80% of income (”Like it does in Europe!”) is slowing somewhat.
But, with people like him, the NAR and lenders funding Chris Dodd, Barney Frank and Chuck Schumer, you get the introduction of a bill by Frank allowing Fannie to buy mortgages larger than 417K - well, they still may be able to keep housing prices inflated. Incredibly, the Bush administration opposes the bill.
I don’t think sucking so much money out of the economy and putting them in the NAR’s and the builders’ and the lenders’ pockets is a good thing.
“Incredibly, the Bush administration opposes the bill.”
Ummm, do you mean supports?
Bush taking about a bailout has pretty much cemented my plans to leave CA as it will slow the correction down by years. (I believe strongly in the importantance of investor emotion in a correction - this just gives false hope.) One of the few times I admired shrub was when he said no bailouts the week before. A week later he changed his tune. Just proves there are NO true fiscal conservatives left in politics.
Couldn’t agree with you more. I don’t feel sorry for any of these people who are being foreclosed on. They signed up for idiotic mortgages because they all thought the bubble was going on forever and they were going to hold the property for two years and sell for an obscene profit. They thought they were going to put one over, and they were such fools they got one put over on to them. Darwinism, pure and simple. Why should the Federal Gov’t reward stupidity?
Nope - opposes. From the article:
“The Bush administration opposes allowing Fannie Mae and Freddie Mac to buy larger home loans…”
And
“The Bush administration has unsuccessfully tried to persuade Congress to create a tougher regulator for the companies since 2003 and the beginning of revelations of $11.3 billion in accounting misstatements.”
On this topic, the Democrats are, to me, in the wrong camp, with Frank, Schumer and Dodd aggressively lobbying for bailouts and FB relief. They will wind up keeping house prices elevated, benefiting builders, lenders and NAR, whereas, ironically, the party that many consider the partisan of big business, is against these things. For now anyway. Virtually all politicians have a price and I guess eventually the lobbyists will be able to turn the Republicans too.
Frank is NOT supporting any bailout. To the contrary, he supports shutting down the criminally liable product call subprime loans.
“…having housing take up 60,70,80% of income (”Like it does in Europe!”)…”
Neuromance — to keep proper balance, and to the extent this is is accurate, it has to be noted that Europe has an extraordinarily higher amount of bartering and of company-paid tax-avoidance perks that in the U.S. almost always come out of disposable income. Further, there are more households in which services that are outsourced here (lawn mowing, gardening, painting and the like) are performed by an unemployed or underemployed member of the household. Which means that it’s not apples to apples, with regard to the % spent on housing.
The trap…
http://www.nytimes.com/2007/09/13/business/13prepay.html?_r=2&ref=business&oref=slogin&oref=slogin
“You want to give pause before banning prepayment penalties,” said Kurt Pfotenhauer, senior vice president for government affairs at the Mortgage Bankers Association. “They save consumers’ money by lowering their interest rates.”
Er, they provide commission for the broker?
I notice the poor mortgage holder is pictured sitting on the bumper of his RV saying “We have no money”.
maybe he could sell the TV - tough choices
$10,000 in credit card debt from a wedding in Thailand? I’ve never had $10,000 in credit card debt, ever, and I shudder at the thought.
What did they do in Thailand? I stayed there for over 2 months and didn’t spend $2,000! Of course I just stayed in a bamboo hut on one of the islands in the gulf…good times.
I have a rich, unattached uncle who goes there for 6-8 months at a time, basically for sex and golf. He loves how cheap it is to be there. He sprained an ankle once and the ambulance trip cost him something like $15 US dollars, and the total cost of the care was miniscule. I think under $100 US.
Blano:
Your uncloe goes to Thailand for cheap sex? From who, prostitutes? Even if the prostitutes are adults, this is still something that one should not brag about.
Also, prostitution is illegal in Thailand, although the local cops are paid off. Many of the prostitutes are Burmese debt slaves (or even kidnapped). Since they do not know the language or the Thai legal system, they are easily controlled and abused.
“Your uncloe goes to Thailand for cheap sex? From who, prostitutes? Even if the prostitutes are adults, this is still something that one should not brag about. ”
Was he bragging or just stating facts? Maybe this guy’s uncle doesn’t talk about it. Besides, an average looking guy with non-shreklike looks and a fat wallet is basically a “Mel Gibson” to thai and filipina gals. Who said he had to pay for prostitutes? Even if he did, so effin’ what?
“By that logic the CEO of Ferrari should be in jail too since selling cars for $300K should be a crime. ”
You’ve got to be kidding. Ferrari is probably one of the FEW finely crafted, aestetically pleasing and extremely man-hour intensive products still made. Comparing Ferraris to Toll’s built-on-greed beheamoth, characterless McCrapBoxes is weak, IMO.
DOC
Dear Dr. Strangelove,
OK. What’s wrong with prostitution? Well, let’s see, there’s the little matter of this thing called the HUMAN FAMILY that prostitution tends to interfere with. Oh yeah, there’s also that human trafficking issue too.
If his uncle didn’t talk about it, then Blano wouldn’t know. If he’s telling us about it (and not saying he thinks his uncle is wrong), then it seems he’s condoning it.
It would also be um, WRONG to string a bunch of impoverished Thai women along, letting them think that they might actually win a husband who can put some food on their table, have sex with them, and then just leave them high and dry.
Remember, y’all, this is a FAMILY BLOG.
Big V,
By posting another comment about a topic you disapprove, you have created several comments. You are offending your own principal of maintaining a “family blog”
I’m not so hung up on morals, when it comes to opining on how other peoples live their lives and make choices. I don’t believe that is the same thing as condoning bad behavior. I do prefer that negative, anti-social or provocative behavior should be discreet and behind closed doors.
I agree with the other poster. The original comment was not a brag, but a mere statement of a fact as to how one particular tourist travels.
I sure did, after 9-11 put corporate travel practically on ice for a year. Try retraining for a new field on your own dime, unemployed, while Congress stalls on extending your unemployment for the 1st time in history and gives the airlines who lobbied to discourage security measures loan guarantees to bail them out.
OK, someone gave a 91 year old woman a $450k mortgage. That’s ridiculous.
Unless you’re the 91-year-old woman. Then it’s just smart.
Oh, I keep forgetting: people are smart.
My aunt is 91, real slow until she hears the right word and then a torrent of information flows out of her…
I mentioned the word “still” and a 5 minute oral history of grandfather’s moonshine abilities came out.
Then she was quiet again for another 5 minutes, until another right word triggered her brain.
“still” as in “distilled”?
I assume “still” as in thing-that-makes-moonshine.
My advice aladinsane: Get it on video (or at least audio). Those stories are absolutely priceless.
(My grandfather in law was once telling a story about happenings back in the 90s. It took me a second to realize that he meant 1890s. Wish I had that on tape.)
I dislike reporting like this, where they don’t tell the whole story. Like the fact that she probably didn’t just refi her old loan, but got $100k more to buy a new car or to take trips, give money away to family members, etc.
People are prone to feel sorry when we hear stories like these. However, as most who read this blog know, there usually is much more to the story than they are telling us.
well, I don’t feel sorry for these people. Not even the 91-year-old woman.
If they haven’t been told by now to read what they sign, then that’s just their problem. And if they can’t interpret what they sign, then surely there’s got to be a low-cost way to find someone who can help them before they commit. Legal Aid maybe?
You should meet my 81-year-old mother. When it comes to funny deals of any sort, she clamps her checkbook down like a beartrap.
I wouldn’t mind seeing them abolish prepayment penalties for future mortgages. That would absolutely kill the teaser rate ARMs that have caused so much damage. To change the rules on existing mortgages would be devastatingly bad.
Maintaining the integrity of private contracts is far more important than a few deadbeats losing houses they have put nothing into. Our entire economy will come to a screeching halt if contracts can’t be enforced or if politicians can come back later and change provisions they don’t like.
You make changes for the future, not the past. That way everybody knows that the rules will be enforced. You learn from problems but you don’t every change the rules in mid-game.
our society would fold. one of the things you can (should) count on is that a contract is enforceable. If you can change the rules like that, then I believe complete chaos would ensue.
It’s clear that the lenders made the pre-pay penalty loans with the idea that the borrowers would need to refinance before the pre-pay time period was up ,or the flipper speculator would need to sell or flip before the pre-pay penalty time period was up .It was such a mania that people didn’t care what type of loans they went on . A 6 month penalty on interest on a loan can be very costly .My neighbor took out a purchase loan adjustable with pre-pay during the boom because they didn’t require a down payment and they had a teaser rate . The neighbor was a investor who owned 4 other properties and had just purchased another property three months before that one on a owner-occupy basis .So I don’t know if the loan agent was hiding alot of details about the borrowers financials or what ,but it should of been clear that they were investors .
By the way ,this property is the only one in our project that is foreclosure bound and the neighbor is applying for a short sale in spite of a high net worth on other properties .
Is it right to put a person on a loan that they can’t qualify for ,than set that borrower up for a pre-pay because they qualified on a low doc teaser rate ?
But ,I agree with you M.B.A. ,you can’t change contract law after they fact ,unless it’s voidable because of fraud .
First ,I don’t see how they can void a contract clause unless the lender waves it . They can make a future law against pre-payment penalty on loans ,but how can they retroactive a contract clause and void it out if it wasn’t illegal ?
I acknowledge writing this bit without verifiable instances at hand, but I follow the issue and there has been an insidious increase in ex-post “gotcha” laws, rules and regulations that seems to have begun in the early ’90s. As long as they are accepted without revolt, there will be more and more. That’s how it goes, in the twilight of a noble experiment in government.
“You make changes for the future, not the past. That way everybody knows that the rules will be enforced. You learn from problems but you don’t every change the rules in mid-game.”
iMHO it has ALWAYS been the case that if provisions of a contract are made illegal, the contract is unenforceable. Do you think if you wrote a contract to deliver (legally) designer drugs prior to their being made illegal, or to sell arms to Saddam while he was still our buddy, that the contract would not be voided as soon as said action was made illegal? That having been said, prepayment penalties are not anywhere close to pernicious enough to be made illegal.
I would restate that as “if the provisions are made criminal, the contract is unenforceable.”
That would cover the distinction between the cases you’re citing and mortgage prepayment penalties.
If you are the IRS or Congress you can change ( ‘86) the rules in mid-stream. Do you remember?
Maybe this sums everything up perfectly for me.
From youtube: “Now this is a mortgage commercial”
http://www.youtube.com/watch?v=oouQbcXdyH0&NR=1
“But, I don’t own a home. Should I still call Kal?”
Indeed, how can it be wrong when it feels so right?
As a computer Tech… Ben, why don’t you add a message to the posting form that: 1) give at least 15 minutes to wait for the cache. 2) try shift-refresh on your web browser software. 3) try adding &z=1 to end of URL.
Guess: the problem is either with the Wordpress install, some intermediate ISP caching server (you guys having problems on time-warner cable modem service?), or even the anti-spam software and waiting on Ben’s manual approval of posting. I noticed the posts with offsite links have a higher level of repeats [spam filter trigger].
The double and tripple posts on this blog seems to be a regular problem… and almost always people claim losts posts that show up. Look at the timestamps on this post (3 times) from ~lorna - she posted at 04:25:17, 04:29:37, 04:30:06. People really need to wait longer before reposting… stop assuming it won’t eventually show up
The problem is some are instantaneous and others aren’t, so people don’t know what to think. It is not universally a 15 minute wait, for instance…
Sometimes the time stamps are off by up to 4 hours. I know because the first posts to be submitted always come in on top (vertically) of subsequent posts. There have been cases where I’ll post something in the morning, then check back in the afternoon, and find a post above mine with a time stamp like way later than my own. I can also often tell by the content that it must have been an earlier post.
Furthermore, sometimes the posts end up coming through and sometimes they don’t, so if you have a really important point to make, then you might not want to wait till the afternoon/evening to see if the posts got through.
I have found a pretty reliable correlation between the length of the post, in words/lines, and the time it takes for the post to appear — all other things being equal. That’s not a complaint, just an observation. If you assume this to be the case, it makes it much easier to manage your posting without frustration.
The other thing I’ve learned over time is that so long as I do not change a single character in my post, clicking it a second time will generate a “duplicate post” reminder from the system and the second post does not appear in the thread.
thanks chip, that is good advice. the form just went totally empty after i submitted the comment. i assumed i broke it because of the ~ in the name.
OMG. The guy is my favorite part.
That commercial was ridiculous. Would you want a loan from someone who has a customer base like that. Not one whole collective brain among the bunch. Now that’s a used car sales advertisement.
I thought it was a clever spoof of those 900-number ads. Then I realized it was serious. OMG!
Slumping builder slashes home prices
Hovnanian offering 6-figure discounts
Just a few years ago, Hovnanian Enterprises held lotteries to sell new homes because demand for housing was white-picket-fence hot.
Now, with the residential real estate slump deepening by the month, the largest New Jersey-based homebuilder is holding a fire sale at developments across the country. Prices this weekend will be slashed by up to six figures — $100,000, $149,000, in some cases $240,000.
http://www.nj.com/news/ledger/index.ssf?/base/news-12/1189658360216280.xml&coll=1
“Hovnanian.. expects hundreds of home buyers to crowd its developments … “Deal of the Century” sale.. begins at 9 a.m. Friday and ends Sunday at 9 p.m.”
.. looks like an advertisment.. Or, as the Vegas paper lables their RE listing pages, the “Promotional Section”.
Yeah, but it’s on the front page, below the fold.
That was my initial reaction until I read this:
Skea, the Hovnanian vice president, said the company recognizes some recent homebuyers might feel uneasy about the sale. However, most of those buyers probably received some type of incentive as well, he said.
~ Buy now or pay less later!
“~ Buy now or pay less later!”
Brilliant! Thanks for the laugh.
Nice way to kill the comps. They will then buy cheaper land, use cheaper labor and build a cheaper house.
Bagholders are screwed.
For all those sellers who don’t want to offend the neighbors by lowering the comps and setting a reasonable selling price–this should be a wake-up call. In this market, it’s every man for himself.
In any market it’s every man for himself. The heck with the neighbors; they’d do the same thing.
I agree - we didn’t buy our home for the neighbors, and they sure didn’t buy theirs for us. At least I don’t recall any of the one’s that took the cash and ran stopping by and cutting us a check for “not undercutting the market”…(hopefully they stayed out of the market afterwords - but I bet they all “upgraded” their debt…)
You’re assuming HOV will survive. I’m not sure they will since they have very little cash on the balance sheet. Fire sale time to raise enough cash to service their debt and avoid immediate default.
‘Crazy Eddie is back in the real estate business’
Prophetic choice of words?
How can it be wrong, when it feels so right?
http://www.youtube.com/watch?v=oouQbcXdyH0&NR=1
Sorry if this is double posted….
Wow…
Now go a step further and check out the guy’s myspace page.
http://myspace.com/kalwayman
This guy is giving out financial advice?
That’s unbelievable. I know mortgage brokers have made a lot of money in the last few years but this guy had the lifestyle of a Hollywood A-lister. I imagine he spent all his money on beautiful women, booze, drugs, vacations and cars. Now that the market is slowing down he’s probably hurting. Unless of course he has family money from somewhere else to supplement his income….
For some reason I can’t picture this guy as a mortgage broker. I know a mortgage broker (he doesn’t do scumbag loans or else he would lose his lucrative account with a credit union) and it’s a pretty stolid lifestyle. He pushes around a lot of papers, explains a lot of mortgage terms, talks to some banks to make sure the loan will fund at closing, etc. Not at all a glamorous career choice.
S.P.Q.A.
Senate and People of America?
Society for the Prevention of Quishing Animals???
“Society for the Prevention of Quishing Animals???”
Funny, clever.
“I imagine he spent all his money on beautiful women, booze, drugs, vacations and cars.”
Yeah, and the rest he just wasted!
How did “beautiful women” end up in the same category as vices-for-sale, such as “booze, drugs, vacations, and cars”?
I guess you’ve never met a gold-digger.
First on the list (in order of expense
OK, enough is enough. I repeat: THIS IS A FAMILY BLOG. Women and girls are not second-class citizens here, got it?
Quite right. The blog is about sticking ones head eye deep in the warm sands of political correctness, lest we see that the discussion was not “vices for sale”, but expense lines of young spendthrift men.
Thanks, Big V!! (And amen, Sister!)
okay is there one picture where they’re NOT drinking?
LOL! Scroll down to the picture of him dressed up like Austin Powers.
OK I am a little embarrassed to say this but I know this guy,friend of a friend thing. His myspace page is only slightly an exaggeration of the real thing.
As for the drinking and women…he’s 25 for crying out loud, what do you expect? I was 25 a few short years ago and had myspace been around it would have looked very similar…with a lot less hair products though.
Goes without saying I would never get a mortgage from him.
This guy’s “straight” and I’m a leprechaun….
Adds entirely new meaning to the term effed borrower.
I doubt this guy is hurting. It’s a quick segue-way to the porn industry.
But who, unless you’re a crack addict, would entrust your financial decisions to this guy?
Having some trouble posting comments…. sorry if this is a 3x post. But it’s way too good not to share.
“How can it be wrong, when it feels so right?”
http://www.youtube.com/watch?v=oouQbcXdyH0&NR=1
I see two posts so far.
When they don’t show up try closing and reopening your browser and reconnect to the blog.. not just a ‘refresh’. It has worked for me.. with IE.
as for the vid, every 14 year old boy who sees it will aspire to someday become an FB.
Hold shift-key on keyboard when you click Refresh on browser… works in both IE and Firefox.
Also wait at least 15 minutes before declaring it “lost”.
shift refresh works here for me on IE.
Ben - in order to cut down on dupes, maybe this should be the first post on every thread for a couple of weeks…
I have had some posts show up an hour or more after posting, and some show immediately. And sometimes I have one that never shows up, unless it shows up the next day after I stop checking. It’s a total mystery.
I’ve had the exact same results–most of the time, it posts immediately, but a few of my comments have just gone off into the bit bucket.
Sept. 13 (Bloomberg) — Goldman Sachs Group Inc.’s Global Alpha hedge fund fell 22.5 percent in August, its biggest monthly decline, on losses from currency and stock trades, according to an update sent to investors.
The fund, managed by Mark Carhart and Raymond Iwanowski, has dropped by a third in 2007 and 44 percent from its peak in March 2006. Investors notified New York-based Goldman last month that they plan to withdraw $1.6 billion from the fund, or almost a fifth of the assets as of July 31.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aNuaC.IG9pWs&refer=home
“…Goldman blamed its losses on too many quantitative funds making the same trades, and said in mid-August it would have to develop new strategies.
“Longer term, successful quant managers will have to rely more on unique factors,”
What they’re really saying is “they” have to make the “maze” with more maze…
You mean crowded trades unwinding cause losses? Who’da thunk it?
Long Term Capital Management had the same problem right before it died.
LA Times reports August sales at 15-year low:
http://www.latimes.com/business/la-fi-homes13sep13,0,2859388.story
“Sales for the month plunged 36% from a year earlier. What’s more, 71% of the Southland’s ZIP Codes showed price declines, according to figures released Wednesday by DataQuick Information Systems. The survey excluded areas with 14 or fewer sales.”
Saw that too, Michael, and it was above the fold for a change. I”m sure Ben will get to it later in the Cali thread. This train wreck is beginning to move much faster. I mean, Christopher Thornberg quoted in the cover of the LA Times? I actually had to look twice.
More local anecdotal information–I was speaking with a tax collector who told me that when homes go into foreclosure, most banks stop paying the property taxes until it goes into tax sale. (This is also commonly done by builders because they don’t have to pay interest.)
It probably depends on the state and locality but I would not doubt it. There are all sorts of special tax breaks for special interests in the “free market” economy, especially if they write multiple campaign contributions to either/both D / R
Cynical — In Florida, what you are describing can make good sense for the bank, though shareholders might not agree. Once taxes are overdue, a tax certificate is auctioned off with fees plus an annual interest rate (until paid) ranging up to 18%. It is a good way to make above average returns with low risk, if you know your stuff, but the hassle is the no-free-lunch part.
The most important part to know is that the tax certificate is just a first-priority lien — so the bank is not at risk of the property being sold behind their back unless they let the 7-year limit expire.
Here’s a primer on it. I suspect that there is a similar procedure in many states:
http://www.hillstax.org/tax/tax_certificate_primer.pdf
They bid for the interest rate here. My friend says that there are usually the same 3 guys in her town who conspire to fix it before the auction. They decide which properties each wants before hand and then bid accordingly.
BTW, this is in NJ.
“BTW, this is in NJ.”
I’m shocked.
Sept. 13 (Bloomberg) — U.K. house prices fell for the first time since 2005 in August after five interest-rate increases in the past year discouraged buyers, the Royal Institution of Chartered Surveyors said.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a_P0EKaWygFw
Looks like the UK has now joined Ireland and Spain in rolling over. But it’s all contained right?
sit Uber-Stupid, sit…..good dog.
This is old news, but I didn’t see any mention of his passing here:
A Tribute: Dr. Kurt Richebacher
In recent years, Dr. Richebächer became ever more despondent about the runaway financial inflation he was seeing in America … and nascently, also around the globe. He was sometimes apoplectic, disbelieving that such recklessness were possible. He’d often mention how few financial economists were left on Wall Street and its sister centers around the globe who knew anything about theory and causality. Without such understanding, he regarded the quantitatively-driven research of Wall Street as so much voodoo.
Jim Willie of the Golden Jackass Newsletter is something of a disciple of Richebacher. Willie has a piece posted almost every Wednesday or Thursday on financialsense.com
Favorable Gold Disconnect
For the last two years, I have spent very little time in the US (abroad for work reasons). I am just back after a 9 month stint. To keep informed, I have read this blog daily, as well as other bubble sites and mainstream outlets.
I am amazed at how much the mentality has changed since I was last in the US (January). I am no longer a chicken little. People get it. I have overheard many a panicky conversation - and I have been back only 3 days.
Yesterday, I had CNBC on in the background (purely for entertainment purposes). I must have seen the latest “People Are Smart” Di Tech at run 15-20 times in an 8 hour period.
Blood is in the water, and the panic has begun…
On a side note, my mother is a Realtor and has been for 25 years (I know, boo hiss). She is actually very down to earth, no silly glam shots, plastic surgery, and she happens to do well in what the Economist rated as probably the WORST real estate market in good times and bad (Danville, IL).
We had a conversation yesterday about how her company is now asking more for desk space and overhead. A bit of a squeeze going on to keep only the highest earners. I told her it is only a matter of time before her industry goes the way of the travel agent. She agreed.
“On a side note, my mother is a Realtor and has been for 25 years (I know, boo hiss). She is actually very down to earth, no silly glam shots, plastic surgery, and she happens to do well in what the Economist rated as probably the WORST real estate market in good times and bad (Danville, IL).”
I think sometimes we give realtors as a whole too hard of a time, without acknowledging there are good ones. They get a bad name from those among them who are lazy, greedy and criminal. They also get a bad name because of the likes of Liareah, Yun and Appleton-Young.
Over my years of buying and selling property, I’ve met some bad apples myself, but I’ve also worked with a couple of great realtors who went the extra mile and were worth every penny of their commission.
Our Realtor that sold our house was an old hand and when I last talked to her a few years ago, I told her, someday this war is gonna end…
Don’t hang around too long after it bursts, I uttered…
She flashed a Joe Friday knowing look my way, and asked if i’d read her mind?
I think sometimes we give realtors as a whole too hard of a time, without acknowledging there are good ones. They get a bad name from those among them who are lazy, greedy and criminal.My issue with realtors is a remarkable lack of knowledge of the properties that I have asked to see (no research), and poor knowledge of the value variations from neighborhood-to-neighborhood and the reasons. It took me awhile to figure out that these people are not experts in any sense. They are not agents, they are salespeople, and often not very bright ones.
I’ve found the same stunning lack of knowledge present in many car salesmen.
In general, if I meet someone in sales, my mental screen flashes “Not Very Bright.” Of course, there are exceptions, but I’ve found them to be few and far between.
Just for your info. There’s a whole lot of things realtors are not allowed to say about neighborhoods or which is better than another. They are not allowed to talk about schools except for location and number of students. They absolutely cannot talk about testing report cards or where a school ranks among other schools. They are not allowed to talk about crime. They have to refer people to local police departments. They definitely are not allowed to talk about the makeup of the residents of a neighborhood. I used to tell them to walk the street and talk to people they see living there. They can’t even point out a drug house. They have to refer them to the sexual predator site online. Aids can never be disclosed, but death, suicide or other strange things about the house can be. Many things you want to know about neighborhoods the realtors know, but by law are not allowed to discuss. I know, I used to be one, and it really ties your hands when you’re working with a client. If I knew there was a problem with crime I really urged them to check police records for any neighborhood they were considering. I also kept the phone numbers of all the school superintendents in the area so they could call and ask any info they needed. There’s definitely a lot more laws for realtors than mortgage brokers who handle all the money. There’s still going to be realtors out there breaking them, so turn them in. Each state has a review board. If it’s illegal enough they will lose their license. I turned in a few myself.
Really? That’s weird. Wouldn’t all that info be protected under freedom of speech? What state are you in? Can you give us a link to some of these laws? It’s interesting.
Funny thing is, Realtors in general haven’t shown any fear of lying, yet they’re afraid of disclosing the truth? I met a Realtor last year who claimed that he had bought a house 2 years earlier, and it was now worth 5x what he bought it for (now being last year, 2006), even though he hasn’t done any upgrades. An obvious lie. Who enforces these laws?
Yes, really. It’s because of discrimation and fair housing laws. They don’t want them to make any discriminatory remark on a neighborhood or school or anything like that. That is why they cannot say things like that. Yes, the laws are that strident.
Here, here. I can recommend David Flory to anyone in Houston trying to sell. The first thing he did when he met with my wife and I was to try to set low sales price expectations (which was unneeded as we were already in touch with reality, but it was refreshing to deal with an honest realtor).
He then put together the most professional sales brochure on our house that I’ve ever seen, and warned us not to have open houses as they just lead to break-ins and theft. He did his work by keeping a steady stream of prospective buyers viewing our home and when we closed he split the 4.25% commision with the seller’s agent. I’ve never seen a realtor work harder for less pay (or more pay for that matter).
There are good ones out there. But you can’t go wrong assuming they’re crooks until they prove to you otherwise.
Thanks David! (just kidding :))
Devildog, this might be a good weekend topic, pros and cons of realtors. I just had a wonderful experience with a realtor who worked out a heckuva rental deal for me and went way above and beyond the call of duty and I don’t think they’re making a dime on it. This is one hard-working lady who has been at it for years and really knows the area, the people and RE law, among other things. But she’s had over 20 years of training and experience.
Years ago, a realtor got me out of a really bad HOA jam. Before that, I dealt with a realtor who impressed me with her area knowledge and also the psychology of dealing with buyers. She found the ex and I a place that fit our needs exactly, but she took us around during the course of one day and first showed us properties that were OK, but just not quite right. The last one she showed us was the one. I realized later she played us like a violin, but in a good way, because if she had showed us that last one first, we would have wanted to see what else she had. Smart cookie.
one thing about my realtor (OC, CA) that I noticed when the times were good she did not live it up. she seems to know what goes up, must come down though she states that now is a good time to buy
. but never pushes us to do any thing. we’ve been working with her for 2 years before renting a place recently.
my point is the good realtors know about cycles and act accordingly, thus in bad times wont go hungry and desperate. Realtors have a tough few years ahead of them.
Betty Gauze?
If that’s her, she went to bat for me one time when I was trying to sell my house in Champaign. She tracked down the original builders and had them fix drywall cracks (the place was 4 years old) for free. I think it was something like “I see you’ve got a bunch of spec homes in the pipeline. I bet prospective buyers would like to see what their house will look like in 4 years time…
A Gated Community
http://www.stockmania.com/2007_09_13_archive.html
Awesome, kahuna. The buildings look like outhouses (nice touch) and I love the lurking cat or coyote on the roof.
Hell is also a gated community. Come to think of it, so is heaven.
Thanks. Isn’t it nuts how putting a gate in front of a subdivision makes it exclusive and somehow special. Ha.
True story from just outside the Tucson city limits. An elderly friend used to have a pet-sitting business. One of her clients lived in a gated community, and the husband spared no effort to tell my friend how safe it was.
One evening, while his parents were out, a teenaged neighbor borrowed the family car and went on a rampage throughout the gated community. Caused thousands of dollars in property damage.
And, here’s another thing about gated communities that bothers me. What about the people that the HOAs pay to tend to the plant life? Are they those much-vaunted people who are here to “do the jobs that Americans just won’t do?” Or are they criminals casing out gated communities for, umm, opportunities? We have no idea.
I like the tan on the RE agent. The red dress is a good touch too.
I was thinking that the couple must have driven in — the wife’s skirt doesn’t look long enough to suit Southwest.
That stewardess was just jealous. I’ll bet she’s a hag.
Ease Money-Market Crisis by Letting Banks Go Bust: Mark Gilbert
The correct number of banks to fail when a credit bubble bursts is not zero. If the best way to avoid the mispricing of risk in future is to sacrifice some of the less-prudent lenders on the altar of liquidity, then let the culling commence. That is especially the case if it erases the perception that central banks will always act as lenders of last resort, even to institutions that don’t deserve to survive.
http://www.bloomberg.com/apps/news?pid=20601039&sid=avb.l86I2ITo&refer=home
Was talkin’ bubble with my wife, and loans went from being able to fog a mirror, to now when it’s virtually impossible to get a loan, no matter your down or fico score… ($300k down and a 825 score, was turned down on a $800k bay area house as per a story here)
One way to temporarily stop the prices of houses from falling, is to essentially not let anybody buy one…
Nudge Nudge, Wink Wink
Nice. Makes me picture the “Suzanne Researched This” classic:
THEN: The husband was on the fence on whether to buy the house the wife and Suzanne loved, back when he didn’t even have to put any money down.
NOW: You think he’s “on the fence” when he needs to come up with $300,000???
Yes, and it’s a razor wire fence.
“One way to temporarily stop the prices of houses from falling, is to essentially not let anybody buy one…”
On the otherhand, prices could continue to fall until nobody needs a loan to buy a house; they would just pay cash. Would you like fries with that house?
The bankers (both central and public) would never let that happen on a scale large enough to help the general masses. It would put them out of business. But it shouldn’t be too hard for a select few prudent people who saw this coming, got out of debt and saved to make some good deals.
Think of every move they make as being more of a stalling measure, more than anything else…
One way to temporarily stop the prices of houses from falling, is to essentially not let anybody buy one…
You’ve got it ass-backwards pal. Somebody always has to sell, and somebody always has cash. Always, always, always.
Take it or leave it.
This is where Congress really deserves more credit than they get for mucking up the farket. Schumer’s bill to increase the GSE conforming limits in Bubbleville (which would effectively increase the definition of “affordable housing” to include homes priced north of $500,000) is slithering its way to a Congressional vote next week. This is a potential source of policy uncertainty, as FBs trying to unload California McMansions priced above $600,000 may get confused and somehow hold out hope that a higher GSE limit will save them, too, from crushingly-high Jumbo lending rates.
I also see some evidence that Jumbo lending rates are undergoing a dead dog dip off their recent upward spike; the realization that greatly-increased prospects for a recession are the driver behind this dead dog dip may fail to offer much comfort to sellers having trouble sleeping through many a dreadful night.
————————————————————————-
Mortgage rates tumble
By Holden Lewis • Bankrate.com
Mortgage rates tumbled to their lowest level in four months as a shockingly downbeat employment report convinced investors that a Fed rate cut is at hand.
http://bankrate.com/brm/news/mtga/Sept1307_mortgage_analysisa1.asp
Which is why somebody is likely to get even richer paying alot of cash near the bottom when it is almost imposible for others to get loans. Now alot of other somebodys will lose their shirts buying long before we hit bottom but… It’s almost as difficult to call bottoms as it is to call tops. I don’t mind people gambling, but I don’t want to spend my time listening to either “I was up by 100k,” or “I though it was a sure thing.” Some win, some lose, but don’t bet money that you can’t afford to lose.
Don’t count on it. I am guessing that folks who are hoping to finally bring their savings to bear on a home purchase (after having sat out the mania) may be disappointed to learn that they have been priced out by the interaction of stock ownership heavily concentrated in the upper 3% of the income distribution with the Fed’s program to make sure the stock market keeps going up at the expense of the dollar. I guess I pretty much agree with B.i.P.’s frequent suggestions to keep buying stocks no matter how dire the credit crunch situation appears. Don’t fight the Fed.
September 13, 2007 6:09 P.M.ET
BULLETIN
Fed lends banks $7.2 billion
Highest total of borrowing from discount window since Sept. 11, 2001
In first significant borrowing since the discount window went down last month, some U.S. banks apparently couldn’t get funds elsewhere.
http://www.marketwatch.com/
Would love to see that story.
whoops RV , the 05 plasma stays
Oh, they will keep both the RV and the plasma. Its the home that goes!
I’ve been reviewing this article (hat tip Sacramento landing) over and over. I’m just stunned at the portion of people spending 50% or more of their income on homes. Yes, we all knew it was bad; but these statistics leave me speachless:
http://www.usatoday.com/money/economy/housing/2007-09-12-affordability_N.htm
at least they can live in the RV, unless it is repo’d….
“people spending 50% or more of their income on homes”
That’s one reason that the economy will actually recover very fast, those who don’t buy or get out of their houses/loans will have more disposable income to spend elsewhere. Also people will stop spending on fixing up their houses…granite countertops anyone?
I just walked by Grand Central Station. Out front they have some losers handing out “Save the Homeowner” pamphlets. I didn’t take one. I probably should have but I was too irked. The drone handing them out was saying, “save the homeowners, not the speculators”. I wanted to knock him to the ground and say, “what are you doing for us renters?” But he didn’t look very bright any way.
NYCityBoy, I’ve seen those “Please help the homeless” shills in NY, repeating the same line over and over in monotone. Seems like they’ve got a different line now.
As to saving the renters, renters in NY had the a$$ cut out of them when MetLife handed Peter Stuyvesant town over to Tishman Speyer’s consortium. One of the saddest days of my life when I read about that deal. My parents’ first apartment was in Peter Cooper Village and that was where I spent the first four years of my life. I remember the apartment and the playground and the walkways and even some of the neighbors. It was a great place for the working middle class in NY and if I recall correctly, Robert Moses talked MetLife into building Stuyvesant. A great public/private partnership, to assist the middle class. No more visionaries like that now. The public/private partnerships now work to screw the middle class on behalf of the bums, both the bums in the gutter and the bums on Wall Street.
Hey i was born in Stuyvesant town. as for the bums, blaming the victims is kind of off base imo. When 1 percent of us own over 50 percent of our wealth one might want to look at the poobahs that have too much power and wealth and the schmeggeggies caught in the trap can’t get decent health care or a roof. Also one might look at our government system that says corporations are people with with the same voting rights as a citizen. duh
“as for the bums, blaming the victims is kind of off base imo.”
Melvin, please read my entire post and you’ll discover that I agree with you in essence. But bums are bums, whether they are passed out in a gutter or wearing Brooks Brothers duds on Wall Street or pontificating in CONgress. I don’t think corporations should have the same voting rights as citizens and I deplore this state of affairs. But as someone who is part of the income class that is vultured by both the parasitic wealthy and parasitic poor (as opposed to non-parasitic of both classes), I’m a little out of sorts right now and looking for a good anti-parasitic remedy.
Not to be a stickler, but I think it’s 5% that own 50% of the wealth.
… if I recall correctly, Robert Moses talked MetLife into building Stuyvesant. A great public/private partnership, to assist the middle class. No more visionaries like that now.
Moses was extremely involved in the Stuyvesant Town development. He paved the way through the usual government red tape and helped push the project through the City Planning Commission.
To build the complex, they cleared 18 blocks of Manhattan and displaced approximately 11,000 people — so, while Stuyvesant is now looked on fondly, there were some harsh planning calculations involved. It was controversial project.
Moses was definitely a visionary, but I’d say his legacy is somewhat mixed.
ET, thanks for the information. I didn’t know about the earlier history of Stuyvesent Town and will look that up, very interesting. Robert Moses was always a controversial figure while I was growing up, but definitely a part of the recent history of NY. He put on a helluva World’s Fair.
London Banker at Roubini summed it up nicely yesterday:
I attended a meeting hosted by the British Bankers Association in the City yesterday on the credit crunch. There was very little optimism that it could play out soon or smoothly. The US and UK have grossly misallocated excess credit towards residential real estate and consumption, making it virtually impossible that the mountain of debt owed by consumers and financial institutions can be repaid with a reasonable risk-adjusted return.
The consensus was that the Fed had indulged the markets too generously after the dot com bust and 9/11, fueling the asset bubbles that will painfully unwind in months to come. LIBOR is still spiking - and sustaining its spike over Fed funds. Hedge funds are coming under redemption pressure and as more close redemptions will dissuade further inflows. Banks are retrenching to build capital for reserves and to fund committed lines of credit that will now inevitably be drawn down due to the seizure of the commercial paper market.
In short, the conditions for a massive repricing of credit are in place and soon folks are going to notice that the Fed’s “happy talk” no longer delivers properity. Whatever the base rate, the rates charged by banks to consumers and corporates are heading higher.
Governor Mervyn King’s letter today makes clear that imprudent bankers will get bitter medicine and no sympathy from the Old Lady. I read the letter as being addressed more to the Fed and ECB than to the Parliament Treasury Subcommittee, laying down the law that the Bank of England would not be complicit in further rigging of the credit markets against good sense and rational pricing of risk.
Written by London Banker on 2007-09-12 17:42:06
“LIBOR is still spiking - and sustaining its spike over Fed funds.”
As I posted to the bits bucket yesterday, this is a very telling development, as the LIBOR is out of the direct control of BB or any other individual player in the global CB cartel, and hence is more of a true indication of the state of global banking than an interest rate such as the FFR (which is set by committee decision rather than the collective wisdom of markets).
“London Inter-Bank Offer Rate. The interest rate that the banks charge each other for loans (usually in Eurodollars). This rate is applicable to the short-term international interbank market, and applies to very large loans borrowed for anywhere from one day to five years. This market allows banks with liquidity requirements to borrow quickly from other banks with surpluses, enabling banks to avoid holding excessively large amounts of their asset base as liquid assets. The LIBOR is officially fixed once a day by a small group of large London banks, but the rate changes throughout the day.”
I’m not the sharpest tool in the shed when it comes to these byzantine financial workings, but could someone please explain to me why a US homeowner would have a mortgage rate tied to a bunch of Brit banks? Is there a good reason for this, or is it just that it makes a nice index to justify screwing over the bagholder?
“Is there a good reason for this, or is it just that it makes a nice index to justify screwing over the bagholder?”
It protects the lender from artificial (non-market-based) manipulation of internally-controlled interest rates.
“I’m not the sharpest tool in the shed when it comes to these byzantine financial workings, but could someone please explain to me why a US homeowner would have a mortgage rate tied to a bunch of Brit banks?”
The LIBOR market is also known as the Eurodollar market. With London as one of the key world banking centers, the price of dollars (interest rate) there is just as legit as any set in NYC. This dates back to the 1960s and the Kennedy Administration. Our foolish tax policies pushed the short-term money markets offshore so THE key free-market interest rates for the dollar are set in London, not New York.
“…Hedge funds are coming under redemption pressure and as more close redemptions will dissuade further inflows.”
“Now about those August 15th hedge fund redemption requests…when exactly do “they” get “their money”…sometime in September?
Prosperity for the few…suffering for the many (includes taxpayers …{at least the honest ones})
pros·per·i·ty :
–noun, plural -ties.
a successful, flourishing, or thriving condition.
FED: This is your Captain Benny Boy speaking: “Goldilocks is having a very prosperous cruise on board the “Good-Ship-Lollipop” …we just need to avoid the large icebergs and rouge tsunami waves…the liquidity virus that has spread about the ship will be “contained, stabilized & normalized” by the time we make port in the “Islands”…please place your withdraw requests at the “discount window” with the “Purser”…If you hear a loud blowing horn and “gates” slamming closed…DO NOT Panic…there is a “helicopter” on the upper deck…additionally, I believe there are more than enough lifeboats for everyone. Relax… enjoy the rest of your beautiful Autumn voyage. Oh, also, Pink Floyd will be performing in the “Officers Club” at “midnight”…sorry, invitation only. All the Best!”
Here are the lyrics if you’d like to sing along:
Money, get away
Get a good job with more pay and you’re O.K.
Money it’s a gas
Grab that cash with both hands and make a stash
New car, caviar, four star daydream,
Think I’ll buy me a football team
Money get back
I’m alright Jack keep your hands off my stack.
Money it’s a hit
Don’t give me that do goody good bullshit
I’m in the hi-fidelity first class travelling section
And I think i need a Lear Jet
Money it’s a crime
Share it fairly, but don’t take a slice of my pie
Money so they say
Is the root of all evil today
But if you ask for a raise it’s no surprise that they’re
giving none away
http://www.youtube.com/watch?v=4hkjkTe5kZE
Smiling…
Thanks for the link mrktMaven FL, …to quote Jay Leno: Exactly, Exactly!
Volume W.F.O.
A Problem of Confidence:
Prior to the August hedge fund blow ups, the PTB were marching in lockstep chanting the mantra of Goldilocks: economic growth not too hot and not too cold, moderate inflation (including a hawkish bias by the FED) low unemployment, and low interst rates.
Now we have seemingly overnight spiraled out of control. A philosophy change at the dicsount window, liquidity injections, a sprialling dollar, historically high commodity prices, and commercial paper failing to roll over.
Lots of calmmoring form Wall Street for a rate cut. Everywhere from a full point to a quarter point is priced in. What does it solve? Nothing.
How can confidence return?
The funtion of confidence is wrapped up in time coupled with market correction. The bankers/lenders/buyers who drank too much of the kool-aid must be allowed to fail. Without failure, there is no pain. Without pain, there is no learning. Risk still exists, adn risk must be allowed to reward AND punish.
The FED needs time. The market needs correction to correctly price in risk. So the FED needs to start JAWBONING again, the same way it did before, and do NOTHING.
Fun facts:
Much of the pain this decade has come from evangelical fundies, and hedge funds.
Both promised Redemption
Hmmmm….
“Much of the pain this decade has come from evangelical fundies, and hedge funds.
Both promised Redemption”
I’m not an “evangelical fundie” but this is bs. And I’m no fan of the snake oil preachers either. But there a lot of good people who have “fundie” faith and they contribute quite a bit to society because of their beliefs.
To claim “Much of the pain” is a result of “fundies” is to totally ignore the murders committed, continously, by another belief system….a belief system that treats women as chattel, that celebrates acts of “martyrdom” that murder people at random….often murdering people of THEIR OWN FAITH in the process.
Yours is a bigoted, ignorant, statement aladinsane.
“It is a truism that almost any sect, cult, or religion will legislate its creed into law if it acquires the political power to do so.”
Robert A. Heinlein
“It is a truism that almost any sect, cult, or religion will legislate its creed into law if it acquires the political power to do so.”
“It is a truism that any belief system….like, say, “progressive”, “liberal”, “socialist” or “conservative” believers, will legislate their “creed” into law if they acquire the political power to do so.”
Feel free to quote me on it aladinsane.
That’s another fundamentalist religion…they just worship a different Sky Friend. He didn’t say anything about Christains, did he?
Sorry, but “yes, we’re bad - but look at what those guys do!” is not an argument I find comforting, or even relevant.
And as for Aladinsane being ‘bigoted and ignorant’, I’d hazard a guess, from his many other posts, that this is far from the case. Heck, he’s a Burner….
Tell you what, let’s just drop any references to religion altogether. Seems to turn normally rational people into dunderheads anyway.
And, its not as if there’s not enough going in the world without re-eanacing the XXVth Crusade right here, right now.
Nuff sed.
“Sorry, but “yes, we’re bad - but look at what those guys do!” is not an argument I find comforting, or even relevant.”
Hey!, thats the whole premise of Jerry springer and all those court tv shows and I love them!
Actually, he did. “Evangelical” isn’t a term that is used much other than to describe Christians.
Evangelicals are by definition, Christian.
“When facism comes to America it will be wrapped in the flag and carrying a cross.”
Sinclair Lewis
Ah, my bad. I though evangelical meant you were into recruiting others to share your faith. Didn’t realize there was an actual sect.
I’ll bet there are a ton of FB’s with soon to be resetting Arms who all believe they will be saved if the FED cuts. Imagine the shock when they read the fine print and discover that the index in play is the LIBOR not the FFR. OUCH!
Note to self: If we ever buy a home with an ARM, make sure the fine print does not index it to the LIBOR…
Why would you ever buy a home with an ARM, unless interest rates were at ridiculous 1979 levels?
Obviously because homes are unaffordable using 30-year fixed rate financing.
It is a little bit more complicated than that Professor. I don’t expect someone with your lack of business acumen to actually grasp this, but I’ll try to explain it nonetheless.
You see, Real estate only goes up.
So, you take out a I/O arm for an amount as large as you can possibly qualify for. Realizing of course that you can ALWAYS Refi into another fixed (low) rate mortgage after a year or two. The beauty of this, and something I don’t think you are able to fully grasp, is that you can use the EQUITY BUILDUP that happens in the intervening time as a downpayment or just blow it on cool stuff! See how that works? Can you see how you build riches off of this model? Didn’t think so. You are destined to be a loser while the rest of us get RICH, RICH, RICH! It’s good to be King!
I’m with the Professor. I don’t get it either.
I guess I was born to lose on this one, because my brain seems to be impractically logical.
But Auger-Inn, you haven’t fully explained the glory of this system. I’ll try:
Prof. Bear:
You are not patriotic unless you follow this scheme, because this is the only way for you to afford a Humvee, and you have to have a Humvee like Arnold in order to be patriotic. So you kill two birds with one stone. It’s the brilliance of the American way.
It worked in my case — bought my house in 1979, and was “lucky” enough (thanks to a good realtor who steered me to a good local bank) to get a 30yr-fixed at “only” 8% (remember, this is 1979, right when interest rates were taking off to Volcker heights).
Then I paid on my fixed rate through the interest-rate spike and subsequent rate downturn to about 6.5-7% until about 1986 (IIRC), when I refinanced into a 12yr ARM at my local credit union (basically, betting that rates would continue to stay steady or decline some more, which they did). By upping my payment every year when I got a raise, I got to have my mortgage-burning party in 1996.
Using an ARM works fine if interest rates are falling, and keep falling
I had some US SAVINGS BONDS from that era that paid 7% for some years. That was pretty funny. They were still paying about 20 times what my BofA savings account was making last year (20 times nothing is still about nothing
My credit union (the Boeing Employee’s Credit Union in the Seattle area), didn’t make mortgage loans until a few years ago during the bubble. Before that decision, presumably they used to have institutional understanding of what happened in the early 70’s when the employer of their affinity group laid off 60,000 people over a couple of years.
Luckily, this kind of thing isn’t a problem when the economy is good and housing always goes up.
on the local nyc news today there is a report about nyc area residents paying as much as 50% of their income on their homes
and how salaries have not matched the skyrocketing homeprices
wow i am glad they let me know
how is this news? anyone with basic math skills could figure it out
anyone who depends on the msm for their information is a dope
how could someone of avg means pay 50% of income on a home. I mean really. All us homeowners know houses are a big money suck above the mortgage. I would not even have Ramen in my cupboard if I cared about such things as insurance, getting to work, heating oil and that type of thing.
One thing I do see, is that neighborhoods will deteriorate fast if people no longer plow cash into maintenance.
Our daughter is a new college grad working in Investment Banking in Manhattan. Salary =$60,000–sharing a 2 bedroom apt $2000 a room per month. She and her roomie are thrilled to rent out their small, windowless livingroom for $1100 a month to college students doing internships. Even renting over %50 of her after tax income as a 22yo!!
Our daughter is a new college grad working in Investment Banking in Manhattan. Salary =$60,000–sharing a 2 bedroom apt $2000 a room per month. She and her roomie are thrilled to rent out their small, windowless livingroom for $1100 a month to college students doing internships. Even renting over %50 of her after tax income as a 22yo!!
She’d probably do better than that in Brooklyn, some parts of which are closer to downtown on the subway than residential areas of Manhattan. Still, most of the fun to be had is in Manhattan.
Don’t foget to mention her total comp will be closer to 150K with bonus
CK - that is not likely. The 60k/yr people do not warrant those bonuses until at least a few years out….. 110k bonuses for 60k newbies? Possibly in certain positions, but I would not bet my paycheck on that for most!
Anecdotally….maybe no big bonuses this year. She is busy in her division, but the new grads working real estate, financials, etc. are able to go home by 6pm(unheard of!) and the older analysts worry of layoffs. Investment Banking is a crazy career choice in my opinion…The Ivy League colleges do seem to churn out the young analysts!!
Bonus range at my bank (major NY IB) was 80-100K for 1st years and 60K salary. Same as all other bulge brackets on the street.
True that workload for junior bankers has declined dramatically in the most affected areas. Probably down to 70-80 hours a week for 1st year analysts
50% of income on housing. Not a good plan if you’re in a high cost area like NYC. I have a relative who lives over in the eastern part of Manhattan and she pays around $1200 - 1500 per month on a small apartment (I assume she’s under rent control). God knows what would happen if she decided to buy a condo or coop there. I don’t think the job market in NYC is as strong as the Chamber of commerce types try to put it. For the record, I think the job market in most major cities isn’t very good despite the media rah rah. I’m not too optomistic about the big cities being able to get through a real estate meltdown without a lot of pain. Even in Manhattan I foresee 40 - 70% drops even on prime property.
I concur 100%, aeyra.
Not a good plan
if you’re in a high cost area like NYC.50% isn’t smart anywhere. My wife and I have a lot of student loan debt between us, and we pay about 10% of our take-home on rent (yeah, we’re pretty lucky). But even wiping out our debt, I can’t conceive of how we’d make it if we quadrupled our housing costs.
“10% of our take-home on rent (yeah, we’re pretty lucky)”
Since it is just a matter of luck, maybe you should have bought that $700,000 McMansion you and your wife saw in the new tract home development across town. You might have gotten lucky with a mortgage at less than 10% of your take-home.
Yeah, for a few months. And then we could just refinance, I’m sure….
50% of a $3 million income leaves $1.5 million to spend on food and entertainment and saving, etc. For those with high incomes, 50% is completely doable (as long as those incomes stay high).
Why is your point relevant? A vanishingly-small share of the U.S. population makes over $3m/year.
Sometimes it seems like folks commenting on this blog want to believe that everyone is living beyond their means. Some people are just plain wealthy and that isn’t likely to change.
The more I hear Robert Reisch the more I like him. (Clinton labor secretary? and pundit.) He said recently that cutting taxes on “the rich” won’t stimulate the economy. The rich already spend as much as they want to: that’s what being rich means!
The other part of the comments were that rather than pushing on the FFR string to keep the economy moving, he suggested cutting payroll taxes for the poor and lower middle tax: since they are maxed out on credit cards, rate cut won’t help. Besides, banks are (or will be) too scared to lend anyway.
Since this group spends everything they make, cutting taxes here goes straight into the economy. And since they don’t pay a large part of the taxes anyway, it wouldn’t cost that much
Great! I’ll just go out today and apply for all of those $3 million-a-year jobs out there.
Unless they’re buying the Hearst Castle or such, I suspect most people in that income bracket pay cash for housing…
Salsbst:
She said her daughter only makes $60,000.
Also, I saw a chart on iTulip yesterday showing that only the top 95% of people in America don’t have a dangerously high percentage of their net worth tied up in real estate. That means that the rich people ARE NOT the ones with 50% of their incomes going to the mortgage.
Just read the headline and subtitle on a CNN article: “Why You Can’t Afford a House.” The subtitle said that the reason was that wages haven’t kept up with inflation. But I’m pretty sure by “inflation,” they weren’t referring to the inflated price of houses.
I rent in Queens. It’s a good thing I’m married because with our combined income we can afford the rents. Renting a one-bedroom apartment in the outer boroughs would easily cost more than 50% of my income if I were single. I was born and raised in this city and remember when there were many affordable neighborhoods for middle and working class people.
And now for some San Diego schadenfreude: $42,500 is over 80% of the SD region’s 2006 median HH income of $50,710 (Data Source: SANDAG Data Warehouse http://sandag.org/index.asp?classid=26&fuseaction=home.classhome ). No household financial decision could be much worse than throwing your money down the rathole of an overpriced mortgage that was used to purchase a money pit.
Housing decline continues
Home sales and prices fall, mortgages tighter; but other counties have it worse
By Roger Showley
STAFF WRITER
September 13, 2007
* Foreclosures reach record high in S.D.
San Diego County housing prices continued their slide in August as home sales dropped to a 15-year low, DataQuick Information Systems reported yesterday.
The market’s decline, a 4 percent drop in price from August 2006 to a median of $475,000, was propelled by relatively strong sales of lower-priced condominiums pushing down the overall median, DataQuick said.
Grim as the news was, it was worse for other counties in Southern California, DataQuick said, where sales volume was off by nearly half from a year ago.
(PEGGY PEATTIE / Union-Tribune
At Standard Pacific’s Canopy Park in Santee, incentives include a 42-inch plasma TV, refrigerator, washer, dryer and $20,000 in discounts.)
San Diego County’s August median of $475,000 was off $14,000 from July and $20,000 from August 2006. The median represents the midpoint of all sales prices with half above and half below the figure.
The August median showed the biggest monthly decline since prices fell $23,000 to $472,000 from December to January, when high-priced new housing sales were comparatively scarce.
Judged by the median, housing prices here were down $42,500, or 8.2 percent, from the record level of $517,500 posted in November 2005.
http://www.signonsandiego.com/uniontrib/20070913/news_1b13housing.html
I have a question: Where are all these foreclosures hiding? I sure don’t see them showing up on the greater SD MLS…
Foreclosures reach record high in S.D.
By Roger Showley
STAFF WRITER
September 13, 2007
San Diego’s distressed-property market grew substantially larger last month as mortgage defaults topped the 2,000 mark for the first time and foreclosures hit a record that was more than six times what they were a year ago.
http://www.signonsandiego.com/uniontrib/20070913/news_1b13foreclos.html
What I do see is that the greater SD MLS appears to have hit a permanently-high plateau of around 20,700 since a couple of months ago. I don’t see how that reconciles with the news that foreclosures are ever-increasing…
i was in San Diego in spet. 06 and just from the 3 days or so i spent there could tell anyone that town was toast
so many condo’s so little loans boo fricken hoo
My sister and many friends live there, and one thing to remember about Diego de Los Angeles is…
Property values historically there, were 2/3rds as much as in el lay.
Add in a ton of new houses and condos and you have the makins’ for a disaster, albeit a disaster with nice weather.
Serf’s Up
Diego de Los Angeles? Are you talking about San Diego?
If the bank isn’t contracting out the sale of the foreclosed home to a Realtor, it’s not going to show up in the MLS.
This blog has lots of info pointing to banks just sitting on REO right now, so the MLS numbers make sense.
I’ve mentioned something similar here before. When I go out door knocking on houses headed to foreclosure, I see LOTS of vacant houses that are just sitting there with no realtor sign in front. They’ve been sitting there for months at a time in many cases before any sign of life shows up there.
Thanks for the insights, Blano and Brian.
PB - I know the banks are holding onto a lot of them. If you know your local banker (and I am starting to get to know mine better) they should be willing to show you a list of properties they own.
I also am not seeing them in the listings (i.e. reator dot com) as I do in a couple other states I am considering moving to. I do not know if they are allowed to list them in California without saying “Banl Owned” or if they are just holding onto them and keeping them off the MLS and RealtyTrac.
If you find out any information about this can you please post it?
It can take a year, up to two years before the bank goes thru all the channels to actually list a house with a realtor. Sometime the first 6 months to a year the owners still live in them. I predict next summer you’re going to see tons of REO’s hit the market.
I had heard a while back that the banks are holding the properties off the market to keep values up. How many repos is CW holding - I thought I had seen 10K nationwide.
2994 in california alone as of today, at 478K median each, that’s 1.43 billion in CA REO.
um, what?
A recent article on foreclosed auction properties in California said 95% of the August properties went back to the banks, with a total value of over $3 billion for just the one month. The overall numbers have to be huge.
The Countrywide inventory of REOs can be found at: http://countrywide-foreclosures.blogspot.com/
Current inventory as of 9/12/07: 12,154 (nationwide)
Total asking price: $2.6B
If these are all overvalued by 30%, CFC is looking at about an $800M liability that hasn’t hit its books yet. Also, if you factor in the rate of increase, they should have an inventory of 20,000 come spring. CFC is going to piss away its $12B in recent debt pretty quickly.
I had heard a while back that the banks are holding the properties off the market to keep values up
Doesn’t work, of course, any more than it works for the FB’s. It just allows the builders to sell more houses to the diminishing pool of eligible buyers while the market value keeps dropping. Keeping supply off the market only works if everyone does it - i.e. you have a functional cartel. Which is really hard to do even when it’s legal (i.e. OPEC).
But maybe if they hold them past year end the execs will keep their bonuses.
What qualifies a FB as sufficiently credit-worthy to get on board one of these FHA-provided Titanic life rafts? (I can’t help but think back to Elaine’s criteria for “sponge worthy” on Seinfeld…)
Let’s do the math: 2.2m FBs - 60,000 Titanic life rafts = 2.1m drowning FBs.
FHA saddles up to help delinquent borrowers
By Holden Lewis • Bankrate.com
As millions of homeowners lie bleeding in the Subprime Corral, the feds ride in on an old mare to rescue a few borrowers suffering from scratches.
- advertisement -
The bailout plan, called FHASecure, is designed to prevent foreclosures among homeowners who fell behind because the rates went up on their adjustable-rate mortgages. About 60,000 “delinquent-yet-creditworthy” mortgage borrowers will be able to refinance into FHA-insured home loans in the next year or so, an official with the Federal Housing Administration says.
It’s a triage operation, with the FHA aiding the delinquent borrowers who are easiest to patch up. The rescued borrowers will be dwarfed by the number of struggling homeowners who won’t qualify for FHA refinances. “Unfortunately, we think there will be some families that we won’t be able to help,” the FHA official says.
http://bankrate.com/brm/news/mortgages/FHA_bailout_a1.asp
2.14
Rounds down to 2.1
Countryslide…
Countrywide Financial mortgage loan fundings fall 17% in Aug
By Steve Gelsi
Last Update: 8:32 AM ET Sep 13, 2007
http://www.marketwatch.com/news/story/countrywide-financial-mortgage-loan-fundings/story.aspx?guid=%7B6274CD0A%2D038D%2D4833%2DAB9B%2DE40040821B8C%7D
I get the good news for McD’s, but did I miss the encouraging news for GM that explains why their share price is driving the DJIA up ever-higher? I guess people buy more cars on the news that the prospects for a recession have increased?
Try to avoid noticing the Russell 2000 trend line when you view the linked stock chart…
September 13, 2007 10:23 A.M.ET
BULLETIN
GM, McDonald’s drive gains
GM rally helps spark blue chips. McDonald’s dividend hike, possible Target card divestment and Alcatel-Lucent warning also in focus.
http://www.marketwatch.com/tools/marketsummary/
GM went up because Citigroup upgraded them to a buy. I’d like to see Citi’s logic behind that.
Well, people still drive in recessions. Cars wear out, so people still have to buy cars in a recession. A recession probably changes the ratio of affordable-to-luxury sales - in favor of GM and Ford. Perhaps Toyota and Honda will have buyers switch from Lexus and Acura to Toyota and Honda, thus having no market share gain, just a drop in margins.
GM is probably well positioned in the entry-level luxury market as well. Their new 2008 CTS is shaping up to be a worthy competitor to the BMW 3 and MB C, etc. With the inflation sure to follow the upcoming rate cuts, the CTS will be a bargain compared to the imports.
There’s some logic for you.
What I wonder about is the finance arms of GM and Ford. Are they having a credit crunch right now? I haven’t heard anything about GM, but I do know that Ford gets a fairly significant portion of their funding from unsecured demand notes sold to the general public in the way of money market-style accounts. Commercial paper drying up probably isn’t affecting them so much.
The companies that can finance people may end up gaining a lot of market share in the next few years. Maybe Citi thinks GM is very well positioned.
Cars are most likely the item of most value, for people scraping the barrel, trying to scrounge up next month’s mortgage…
I expect to buy a 2 or 3 year old Tacoma 4×4 truck, for around $3k, this time next year.
The 1 car family for most?
My experience is that when times are tough, the demand for used cars increases (while demand for new cars decreases).
Oh come on. Good luck finding a 2 or 3 year old Tacoma for $3k. Even in the worst of all depressions, that isn’t going to happen.
Late 20’s cars sold for Cents on the Dollar, as they were the item of most value, for most…
During the Great Depression
History usually repeats itself quietly.
Tacoma for 3k????? Your dreaming in technicolor. That is the type of foolish statement that makes people think we are hysterical and not realists
“By 1932 a bushel of wheat would fetch only 30 cents, down 90 percent from the almost $3 it had brought 12 years earlier”
“I think wheat was probably in more demand at that point than autos and yet….”
Tacoma for 3k????? Your dreaming in technicolor. That is the type of foolish statement that makes people think we are hysterical and not realists
I agree. There will be helicopter drops one every block before that that kind of deflation kicks in.
“Well, people still drive in recessions.”
Indeed. But it is not whether they drive, but what they drive, that matters. I vividly recall how impressed I was with the myriad brand-new automobiles that hit the roads in the late 1980s, soon to be followed by an aging fleet accompanied by very full new-car dealership lots in the wake of the early-1990s recession. Put simply, most people are not all that interested in forking out the dough for a new car when their job is at risk, and lenders are also not all that interested in loaning them the money at that point, either.
“GM is probably well positioned in the entry-level luxury market as well.”
My comments apply doubly to the luxury market. And by the way, entry-level luxury market is no less oxymoronic than $500,000 starter home.
One further remark (I seem to have a lot of things to say here!): The behemoths that GM produces are not exactly where financially astute households should want to “position” themselves when oil is climbing northwards of $80 a barrel.
Just to be clear, I’m giving my insight into what Citi’s logic behind upgrading GM might be. I am not bullish on car companies.
If I had to pick a car company to do the best relative to all other car companies, I would pick Ford. Over the last few years, they borrowed cheap money and used it to turn themselves into a company that could be profitable selling fewer cars. Toyota, Honda, Kia, Hyundai, Nissan, BMW, etc all built expensive new factories that will be a major drag on their balance sheets if car sales go down the drain. Everyone questioned what Ford was doing voluntarily giving up market share. As we all know, the laws of nature clearly state that house prices and car sales always go up.
Ford would be the last company I would pick for survival. It has zero new car product in the pipeline. It is not positioned to sell economical cars into a recession.
The foreign makers may have expensive new factories, but they are far less of a drain than the legacy benefit costs Ford has to hump. Plus, they are all well positioned to roll out economical cars just in time for a recession - and in fact, are already doing so.
Ford will ride trucks and SUVs into bankruptcy.
Craven, I’m not sure I agree with you. The foreign makes have been investing heavily in trucks and SUVs - I’m sure you’ve noticed all the commercials for the Toyota Tundra. Hyundai just started advertising for their brand-new full-size SUV. They all may be late to the party, but they are definitely making sure they will have non-economical vehicles on their lots.
As for Ford’s pipeline -
This car is going to be sold in the US as well
Ford Focus is selling very well, if the new cars being driven in G’ville are any indication, in every model from three door to the station wagon.
Ford is getting slammed on the bigger trucks (crew cab, etc) but so is their competition.
Toyota is still doing okay with the Prius, though Yaris seems less popular (they should be selling a 5-door, but they didn’t want to “compete” with Scion … whatever).
Honda is in trouble unless they bring out the CRX again. Remember the “commuter car” in 1990? It’s coming back. Unfortunately Honda got burned by the Insight, in part because their cheapskate buyers were (rightfully) concerned about having to buy new batteries in a few years. There is a market for the CRX/Insight/whatever if it’s gasoline-only and low maintenance. (Btw, my dad, who rejected the hybrid, was actually willing to consider an all-electric; he just objected to maintaining TWO power supplies.)
GM did try to dump the crapbox Aveo on the US market. It was the cheapest new car out there, but it was also an unreliable junker. If I were to buy a car, I’d definitely jump for a Hyundia/KIA (same company) over a Daewoo/GM (same company). The Cobalt seemed to be selling okay 8-9 mo.s ago, but I don’t see new ones now. It may be that Ford financing is a sweeter deal? Or the Focus is sweeter than the Cobalt? (this is “sweet” in the casey serin sense, as any young person who buys a new car is a moron, imo).
What surprises me is that we still don’t have Euro s***mobiles for sale here two years after Katrina spike gas prices. Is it a tariff issue? Cheapest cars in EU sell for $7KUS (more now with dollar drop); it’s $10.9 over here. WTF? Don’t tell me a catalytic costs $3k alone … as if.
People still drive. Broke friend deciding between the $3000 engine rebuild on the truck, or the 4x$200 tire replacement on the exotic sportscar.
Not sure what I can add to what PB has said, but here goes. That entry level luxury market will be the first part to take a dive in the coming recession, IMHO. GM is still too overweighted in trucks and SUV’s too. Not to mention their market share continues to drop, August sales increases notwithstanding. To me this offsets even their ability to offload their health care on to the UAW, which is becoming an increasing possibility.
I certainly don’t claim to know it all, especially on this site, still I don’t see too much good about auto stocks right now.
“I don’t see too much good about auto stocks right now.”
Too big to fail, yet small enough to bail.
People will just drive their vehicles for 10 years (leases excluded). It’s cheaper to put $1000 in your car a year than to make a new car payment of $300-$600.
We’ve always kept our cars about 10 years even though we could have gotten new ones. We usually buy one that’s 1-2 years old and drive it for 10 yrs. We gave our son our ‘94 car. My husband drives a ‘98 and I have an ‘04 which we bought two years ago after we gave our ‘89 van to a friend. Cars are the worst depreciating asset you can own, why spend all your money on them. I’m afraid houses are going to be a close second.
Sept. 12 (Bloomberg) — GMAC LLC’s bonds rallied after Citigroup Inc. agreed to lend $21.4 billion to the auto and home lender owned by General Motors Corp. and Cerberus Capital Management LP.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aH9EieO4ijIY&refer=home
Citigroup lends the money, then upgrades the stock. What a surprise. Nice way to protect your investment.
GM got a huge amount of funding from Citigroup. $21 billion actually, so they are no longer in immediate danger.
test
Not all central bankers agree with the philosophy of fighting fire with flamethrowers.
Stephen Beard: In a letter to the British parliament, Mervyn King has defended his own austere response to the (credit) crisis.
It’s been very different from that of the Fed and the European Central Bank. King has not poured billions into the money market at attractive rates of interest. Cash-strapped commercial banks have had to borrow at penalty rates.
In his letter, Mervyn King says to let the commercial banks off the hook would encourage excessive risk-taking and create the conditions for the next crisis.
Analyst David Buik:
David Buik: “He is not going to add his name to any bail-out operation, due to what he would regard as reckless lending. If banks have got themselves into a financial hole by being irresponsible, best they dig themselves out of it.”
http://marketplace.publicradio.org/display/web/2007/09/13/britain_central_bank_wont_do_bailout/
Credit card debt? Mortgage can wait
The subprime loan crisis is making some homeowners shift priorities. One big credit counseling service found that many clients are paying their credit cards before they cover the mortgage. Steve Tripoli reports.
http://marketplace.publicradio.org/display/web/2007/09/13/credit_card_debt_mortgage_can_wait/
Scott Jagow: The subprime mess is spawning some wacky tales, and here’s one of them: A big credit counseling service says many clients who aren’t paying their mortgages — which could cost them their homes — are still paying their credit card bills. More now from Steve Tripoli.
What’s so wacky about it? They can rent a house for 1/3 the cost and maintain their consumer lifestyle. It’s all good.
Herd instinct rather than independent thought apparently drives economists’ consensus.
Thursday, September 13, 2007
Did we say no recession?
A lot of economists have been notably optimistic about the subprime crisis, saying it wouldn’t lead to a recession anytime soon. But a poll out today from Reuters may indicate a change of heart. Alisa Roth reports.
http://marketplace.publicradio.org/display/web/2007/09/13/did_we_say_no_recession/
Here’s a weekend topic question.
Why is anyone buying a house now?
Okay, some people are moving because of jobs, and some people have sold their homes and are buying a new one. But why isn’t it obvious to everyone that whatever you buy now will be worth less next year. When I see sales are down by 25%, I think, shouldn’t they be down 75%?
Most people don’t even ask themselves whether or not their house will depreciate after they buy it. Kinda like most people don’t even ask themselves whether or not God is listening when they say grace. They just do it.
I’m from the Midwest but have been living in San Diego for 4 years. I refused to buy a home in that time because of the insane prices. This listing on Redfin proves my point:
http://www.redfin.com/stingray/do/printable-listing?listing-id=476380
That’s not even in a good neighborhood here, btw. It’s also almost what we paid for our 2300sq ft home (built in 1900) back in Ohio (before we came out here…sigh).
I just said this in another post. The prices posters here from the coasts keep throwing around are mind boggling to me, even if these areas take a 30-50 percent haircut. $1500, $2000 for rent?? $3000 house payments?? You gotta be kidding!!!!
$1500, $2000 for rent??
similar and higher here in Syracuse, NY for a 3 BR or a house anyway
$800.00 rent for new 3/2 house in kingman az. new homes for 165,000 to 235,000
Blano: You’re right, but remember that people get paid more in those areas, and they are also paying a premium for being near the beach, having good weather, living in a fun city, etc.
Not to say that houses aren’t overpriced there, but those are just some factors that will always make houses there more expensive than they are in Ohio.
“Severe fire damage” - To me that means you need to do extensive interior repairs. That sucker looks like its almost burned to the ground!
It appears the market has the best of both worlds. Turns out unemployment isn’t as bad as everyone thought and the Fed is still going to cut rates. Good news all around, the Dow is up 140 points so far today.
http://tinyurl.com/2qg8gq
Private placement market gets big boost as three more banks join new platform.
Could someone help me with this one?
Kind of like a shadow stock market for non-public companies. Sarbanes-Oxley made it much more expensive to be public. This helps to reduce illiquidity, which is one of the key disadvantages to private equity.
“Foistner says he got a $2.2 million loan from Citizens Bank last summer. But he and the bank eventually disagreed over the value of the property. When the appraisal jumped to $4.9 million, Foistner says the deal began to unravel”
The slime ball is an attorney. Wonder what loop hole he found.
http://www.concordmonitor.com/apps/pbcs.dll/article?AID=/20070913/FRONTPAGE/709130396
http://wbztv.com/slideshows/local_slideshow_255114937/view?slide=0
off topic, fwiw — Housing and population growth in Hawaii
http://www.hawaiitribune-herald.com/articles/2007/09/12/local_news/local02.tx
On the Big Island, housing is growing much faster than population, an indication that more people are finding it an ideal setting for second and vacation homes. Population on the Big Island grew 14.7 percent between 2000 and 2006. “You do have a fair number of homes of people who aren’t counted as a resident,” Yuen said. Kailua-Kona and the Puna District continue to be construction hot spots, he said. Big Island residents tend to be somewhat older, of more mixed race and more likely to own their homes as the state as a whole. Median home value in Hawaii County was the lowest in the state, with a value of $392,200. Maui was $625,000 and Oahu was $535,300.
Is Consumer Debt Out of Control?
Sep 13, 2007
Audio will be posted this afternoon.
Americans continue to rack up consumer debt. And slow job growth and declining home prices aren’t helping. On the next These Days, we’ll talk about the economic outlook for San Diego and why consumers are having a hard time getting a handle on their debt.
http://www.kpbs.org/radio/these_days;id=9540
SD economist Marney Cox (Chief Economist for the San Diego Association of Governments) is arguing on KPBS’ These Days radio show that the seriousness of the nationwide foreclosure crisis is exaggerated because “foreclosures are overwhelmingly concentrated in just four states (FL, NV, CA and AZ).” Perhaps he ought to think in terms of population share or, better yet, overall value share of the national housing stock, instead of merely bean-counting the number of states.
Obviously four states constitute a mere 8% of the total of 50. But population sizes tell a rather different story (Note: accuracy of population figures is not guaranteed, but good enuf for govt work):
AZ 6.2m
CA 37.7m
FL 18.1m
NV 2.5m
———
64.5m = 21.5% of US population total (300m).
Next consider measuring the aggregate value of the housing stock in AZ, CA, FL and NV, where the bubble drove prices far higher relative to incomes than in other parts of the U.S.
Finally, consider how many folks in these four states either HELOCked
or subprime-ARMed themselves into a negative equity position. At this point in the analysis, you have the profile of a serious foreclosure crisis.
Professor, another measurement to add to your multifactor model - percentage of homes sold in the peak bubble years (proxy for upside down borrowers).
Then how is it that OH, IN, MI,& KT keep alternating around for the top spots for foreclosures. This is wide spread and he’d have to be stupid not to know it.
That economist actually mistated what is happening. The increase in foreclosures was driven by the 4 states - that much is true. Other states have very high foreclosure rates which didn’t rise nearly as much. The 4 you cite are classic examples since their economies have been recessionary for some time so the foreclosures are stable at a very high level. Other areas are showing big % increases but the levels aren’t high enough yet to impact the national numbers - mid Atlantic and inter-mountain west for example.
Not to mention that NY will start getting hurt next year, right after all those financial wiz-bangs don’t get their hugo bonuses.
Marney Cox on the abysmal U.S. savings rate: “At points we (recently) got to negative savings.” (Note the date on the article I link below is 3/8/2006.)
Negative personal savings rate: What does it mean?
By Laura Bruce • Bankrate.com
It’s a bit soon to tell if American consumers made — and are keeping — New Year’s resolutions to save more money this year. But they should.
The number-crunching folks at the U.S. Commerce Department’s Bureau of Economic Analysis dished out some discouraging news recently, saying that Americans spent more than they earned in 2005 — a negative savings rate of 0.5 percent for the year. That’s the first time that’s happened since the Great Depression.
http://www.bankrate.com/brm/news/sav/20060308a1.asp
Supplementing Social Security
By RAHM EMANUEL
September 13, 2007; Page A17
Today, American families are working harder than they used to and making less. And, at the same time, even as they grow older, many Americans are socking less away in savings than they once did.
Both trends might keep us up at night. But with the baby boomers set to begin retiring next year, we cannot afford to ignore the second challenge. The problem is clear: This isn’t a nation of savers.
In the past two years, America’s personal savings rate reached its lowest level since the Great Depression. And in comparison to other industrialized countries, the United States ranked second to last in personal savings.
http://online.wsj.com/article/SB118964627975525938.html?mod=googlenews_wsj
The BSE said in December 2006 that the US savings rate was -1.2%.
“The U.S. dollar is standing at the edge of a cliff, and most people don’t even know it.
Data released by the New York Federal Reserve shows that foreign central banks have been net sellers of U.S. treasuries over the past five weeks, with $48 billion having been sold since late July, and $32 billion in just the last two weeks.”
http://english.pravda.ru/business/finance/10-09-2007/96909-us_economy-0
Who is buying U.S. treasurys now?
The federal reserve is the buyer of last resort. It is called monitizing the debt and is highly inflationary. Think German currency crisis.
The buyers are people worried about default risk. Many of them are fleeing the higher risk bond areas like corporate junk, submerging market debt and structurd products like CDOs, MBS, CMBS and ABS. There’s enough money coming out of those to feed the Treasury market for years.
Even if interest rates are really low?
When greed switches to fear, market participants become more concerned with holding on to what they have rather than trying to reach for more.
AG says BB is doing an excellent job and he had no idea the subprime would become a problem until very late (whatever that means?). Is he also throwing a bit of cold water on the rate cut crowd?
http://biz.yahoo.com/rb/070913/usa_economy_greenspan.html?.v=4
“While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late,” Greenspan said. “I really didn’t get it until very late in 2005 and 2006.”
More spin-o-vation from the Maestro.
Good. He’s saying that he wouldn’t cut rates right now if he were Bernanke. I don’t know if Bernanke really tries to emulate Greenspan, but this helps.
Interesting post on Calculated Risk —
Just for your information and to better understand how close countrywide is to the brink of a melt-down.
Countrywide is the servicer of my mortgage and I have automatic mortgage payments being made automaticially from my checking account on the 10th of every month.
Well times are so bad for countrywide that they, without my concent, took payment from my account on the friday the 7th — instead of monday the 10th.
This obviously indicates that they look to “steal” 3-days of float away from customers to allow them to survive their liquidity crunch for another day.
As a result their Banking friends in the community are now enabled to reap higher profits by charging an “overdraft” fee to potential customers who do not keep high cash balances in their checking accounts.
Loks like this could become grounds for a class action - but i guess they they don’t expect to be around for tomorrow!
“While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late,” Greenspan said.
“I really didn’t get it until very late in 2005 and 2006,” he added.
- But it was predicted here by late 2004 / early 2005. So do bloggers here make better reasonings than this lame duck?
Sorry, this should have been in response to post of “In Central Bank We Trust”.
SEPTEMBER 3, 2007
Main Street Is Fed Up
COVER STORY
A wide swath of small investors feels duped
When I called my 87-year-old father in Wichita a few days back to commiserate about the recent financial turmoil, I had no clue what I was in for. “How about that crazy market?” was my opening gambit. “It’s terrible,” he said bitterly. “I think we need a revolution in this country.”
A revolution? This was my father, a lifelong Republican until he quit a couple of years ago over Iraq and global warming. He had never staked out a position to my left. “All these excesses, the hedge funds, private equity, and these CEOs who pay themselves incredible salaries—the greed is outrageous,” he said. “And we all pay the price.”
The problems on Wall Street are making folks on Main Street plenty angry—even those who haven’t bought a new home or refinanced a mortgage in recent years. Regular investors feel as if they, too, are victims of the predatory lenders and gluttonous financiers whose actions are wreaking havoc on the markets. It doesn’t help matters that the recent moves by the Federal Reserve will largely benefit big institutions such as Countrywide Financial Corp. (CFC ), the nation’s largest mortgage lender. “I’ve been watching my 401(k) and wondering if I’ll have anything left,” laments Lisa Moon, a 49-year-old paralegal in Middletown, Conn. Says Craig Dalrymple, a 37-year-old salesman from Northbrook, Ill.: “People are losing their homes, savings, retirements, and we’re seeing worldwide financial chaos because mortgage brokers can make empty promises, lie, cheat, and steal without penalty.”
http://www.businessweek.com/magazine/content/07_36/b4048008.htm?chan=rss_topStories_ssi_5
P.S. Other than helping Godzilla rack up a few more old maid cards, the Fed’s lifeline to CFC does not seem to be working very well…
http://www.marketwatch.com/tools/quotes/intchart.asp?symb=CFC&sid=1426&dist=TQP_chart_date&freq=1&time=9
More from AG. His defense for the ultra low rates of 2003: “It was our job to unfreeze the American banking system if we wanted the economy to function. This required that we keep rates modestly low.”
http://biz.yahoo.com/ap/070913/greenspan_mortgages.html?.v=8
Sounds like the same rationale that might support the liquidity tsunami that has flooded the U.S. credit markets since the onset of the August 2007 credit crunch… I guess we can look forward to higher home prices and more construction of unneeded McMansions down the road?
But he also said that it’s different now because inflation is such a concern.
What inflation? Like $80/barrel for oil? Or $700/ounce for gold?
I thought the term “unfreeze” chosen by AG is interesting. He did put the banking system in the microwave oven at high power level. Regular folks have an easier to understand term for that: it’s called watering down the banking system!
This is too rich: GREENSPAN SAYS HE KNEW ABOUT ABUSES IN SUBPRIME LENDING BUT FAILED TO FORSEE THEIR PARALYZING MARKET EFFECTS UNTIL LATE 2005
Thu Sept 13 2007 12:30:11 ET
Former Federal Reserve Chairman Alan Greenspan admits he “didn’t really get it” that the subprime lending trend was significant enough to hurt the economy until very late 2005, but still defends his lowering of interest rates from 2001 until 2004 that critics say caused the crisis in the first place. Greenspan, who led the U.S. Federal Reserve Bank through 18 years and four presidents, speaks to Lesley Stahl in his first major interview, to be broadcast on 60 MINUTES Sunday, Sept. 16 (7:00-8:00 PM, ET/PT) on the CBS Television Network.
Greenspan says he knew about the questionable subprime lending tactics that gave loans to homebuyers and investors with low adjustable interest rates that could rise precipitously, but not the severe economic consequences they posed. “While I was aware a lot of these practices were going on, I had no notion of how significant they had become until very late,” he tells Stahl. “I really didn’t get it until very late in 2005 and 2006.”
Even though one of the Federal Reserve governors raised a red flag on those lending practices, Greenspan says there was little he could do. “Well, it was nothing to look into particularly because we knew there was a number of such practices going on, but it’s very difficult for banking regulators to deal with that,” says Greenspan.
Several of Greenspan’s former Federal Reserve governors have since said that Greenspan’s policy of lowering interest rates for three consecutive years early in the decade was wrong because it opened the door for the subprime lenders. They think he kept rates too low for too long. “They are mistaken,” Greenspan tells Stahl. “It was our job to unfreeze the American banking system if we wanted the economy to function. This required that we keep rates modestly low,” he says.
Some believe today’s market slide — U.S. stocks have lost significant ground over the past few months — could have been slowed had the current Federal Reserve Chairman Ben Bernanke lowered interest rates like Greenspan did early in the decade. Would he act as dramatically and quickly now as he did then if he were the current chairman as some believe? “I’m not sure that’s true,” says Greenspan. “We were dealing in an environment back there where inflation was easing. We could have acted without the fear of stoking inflationary pressures. You can’t do that anymore… I’m not certain I would have done anything different [if he was the chairman today],” he tells Stahl. “I think [Bernanke] is doing an excellent job.”
“Some believe today’s market slide — U.S. stocks have lost significant ground over the past few months”
Have “some” looked at the market? not really down much at all from the ALL TIME HIGHS as things sit the DOW is now at 13,437 (2:35pm est) I know that this was not written today, but.. non the less….
I guess the guy is either psycho or pathological. They kept Fed Funds at 1%, well below the prevailing rate of inflation for a long time and he calls that “modestly low?” Lowest freaking rates in decades? 3% or somewhere close might be “modestly low.”
Oops! I guess I should have read before I posted - sorry, but saw this and couldn’t believe what I was reading.
Regarding the current trend in servicing credit card debt over housing debt, in my opinion, is that you can’t even rent an apt. without decent credit. So while you are planning for your foreclosure, you need to get into the rental with a decent credit report during that window of opportunity.
Probably don’t need to worry anymore about credit to rent. There’s so many houses out there that people can’t get rid of that will do absolutely no credit checks to rent. Some you could probably rent by the day.
Or by the hour.
3 bedroom CONDO sold last year $230K
Friends just got it at $137K!!!!!!!!!
Mundelein, IL (northwest of Chicago)
The owner bolted and left a few units. Man did the bank take a hit!
My DH talked these friends out of buying a few months ago… they are KISSING HIS STINKIN’ FEET!
What’s a DH?
A DH is “Dear Husband”… it is a internet message board abbreviation. DS (dear son) DD (dear daughter) DW (dear wife), etc.
Phew — thought for a moment that it meant “dependent husband.”
“man-wife”
http://chicago.craigslist.org/nwc/rfs/421460196.html
“Hey, the housing market is awful. If you have an Esprit Model Townhouse in Cherbourg or a townhouse in Manchester Green or something similar and are looking for (or know someone who is looking for) a large single family house in North Arlington Heights, maybe we can work something out. We have a beautiful home that outgrew us–5 bedrooms up, huge backyard, cul de sac, finished basement, lots more–all new carpet and paint.”
Most US hedge funds report August loss
http://www.reuters.com/article/fundsFundsNews/idUSN1339735420070913
Sept. 13 (Bloomberg) — The decline in the U.S. commercial paper market slowed last week, prompting speculation that the worst of the short-term credit rout may be over….
The freeze had shut out borrowers including Countrywide Financial, Thornburg Mortgage Inc. and GMAC LLC and the decline in issuance was the longest since at least July and August 2003, when the amount of debt decreased by 1.5 percent over four weeks. Asset-backed paper, which dropped 2.2 percent in the past week to $945.1 billion, declined $237.8 billion, or 21 percent, in the past five weeks.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a6avpeVYXysY
Tony Crescenzi describes the situation in the following video:
http://tinyurl.com/38oxk7
Sorry. Unable to get link to work.
Watching ’ssshrubery…
blah blah blah stay the course blah blah blah
If things go wacky bad financially, will we need to get out of Iraq, more than ever before?
Sept. 14 (Bloomberg) — Northern Rock Plc, the U.K.’s worst performing bank stock, will receive emergency funds from the Bank of England to ease a credit shortage sparked by U.S. subprime mortgage defaults, media reports said.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aM9Qto2vA2cY&refer=home
I just want to point out how weird it is that these two articles both appear on the front page of CNN Money:
Wall Street’s blue-chip rally (http://money.cnn.com/2007/09/13/markets/markets_0445/index.htm?postversion=2007091318)
Fed can’t stop recession (http://money.cnn.com/2007/09/13/news/economy/recession_risks/index.htm?postversion=2007091316)
Second try:
Does anyone else think it’s weird that CNN Money has these 2 articles on their front page?
“Blue Chip Stocks Rally”
and
“Fed Can’t Stop Recession”
Seem mutually exclusive to me.
If Greenspam’s statement has been posted previously, my apologies.
Relative to Bernanke’s actions to date, quote Greenspan: “I am not certain I would have done anything different,” he said.
Alan, there is a trove of similes for your bleating. A fitting one, among many, would be that of Pontius Pilate. You now wring your hands, oh departed and well-compensated shepherd and you feel so, so bad about the flock who are soon to be eaten because you, oh shucks, forgot and left the gate open. Don’t worry, Alan — all is forgiven because, what the hey, you fessed up and because you did, it doesn’t matter that all those sheep got slaughtered. If a fearless leader fesses up, it is OK, folks — back to work. Yep, we’re all cool with that, dear leader.
No, it was not me who said, “I hope your ass fries in Hell.” Not me. No way — I’m into broiling and no trans-fats. Must be someone else.
The hour is late, so I hope to remember to post this tomorrow or the next day, unless Ben or someone else has. From a Bloomberg piece today about easy money and the UK response in the early 1980s:
“The correct number of banks to fail when a credit bubble bursts is not zero.”
That says a lot, IMO. I think it might help us determine Bernanke’s character.
This was also posted in the bits bucket, just to let you know. I e-mailed that article to myself so I’ll have it in my g-mail account forever.
Oh, we are in the bits bucket. My bad. This is just like the time when I went to Peets and orderd a green tea latte.