The Decline Is Across The Board In California
The News Press reports from California. “August was a tough month for home sales in Santa Barbara County as problems in the mortgage industry took their toll. From the South Coast to the North County, sales fell almost 20 percent. Lompoc Valley was hit hardest, with home sales plummeting by 22 percent last month compared to August last year. Yet the median price was down only about 6 percent to $417,000, the local Association of Realtors reported.”
“In Santa Maria, sales declined by 13 percent last month, and the median dipped nearly 10 percent to $374,900. Home sales in the Santa Ynez Valley fell 5 percent, with the median also declining by 13 percent to $800,000.”
“Sales across the county have been blindsided by the sharp reduction in the type of mortgage loans available, especially those that targeted borrowers with shaky to poor credit. ‘An industry that has become accustomed to rules that allowed nearly anyone to receive a loan now must turn customers away,’ according to the latest report from the Goleta-based California Economic Forecast.”
“Local economist Mark Schniepp, director of the California Economic Forecast, recently predicted that the South Coast ‘housing recession’ is about at the midway point, or ‘in the top of the fourth inning.’”
“Unlike the real estate crisis of the 1990s, the main factors for a deep recession are absent now, Mr. Schniepp said, even with the problems in the subprime market and its impact on credit.”
“In the 1990s, the county lost thousands of jobs from the mass exodus of aerospace firms, there was a national recession, inflation was much higher than what it is now and there was an oversupply of homes, Mr. Schniepp explained.”
“But the forecast is for South Coast home prices to dip between 10 percent to 15 percent from where they are now until the recovery expected in 2009. The forecast is more gloomy for the North County, the area that accounts for more than 80 percent of all the defaults and foreclosures countywide.”
The Orange County Register. “A surge in office construction combined with sweeping layoffs at mortgage companies lead to both higher office vacancy and higher rents in O.C. in the third quarter.”
“The county’s office vacancy rate hit 10.53 percent at the end of last month, the highest in nearly three years, reports Voit Commercial Brokerage.”
“Developers have finished work on 3.5 million square feet of offices so far this year with another 1 million coming in Q4, says Jerry Holdner, VP of market research with Voit.”
“‘Concessions may begin to increase in the short run in the forms of limited free rent, reduced parking fees, relocation funds and tenant improvement allowances, as new inventory becomes available,’ he said.”
“As for mortgage companies, they occupy about 4 million square feet of office space in the county, or roughly 4 percent of larger buildings. The total is down 30 percent from 6 million in mid 2005, he said.”
The Daily Bulletin. “With home prices generally lower than in Los Angeles, an abundance of available land and a growing population, the Inland Empire has for the past few years been a kind of developer’s paradise. But the faltering housing market is having a powerful effect on some of the area’s most anticipated projects.”
“Local housing starts were down 45 percent for the first eight months of the year compared to the same period in 2006, and several housing developments are either going by the wayside or slowing their pace.”
“‘The decline in the market is across the board,’ said Steve Johnson, Southern California director of the market-research firm Metrostudy.”
“One local builder, Young Homes, spent hundreds of thousands of dollars planning a development of more than 720 homes on Rialto’s south end. Just a few months later, however, Young Homes sold the land to an industrial developer for $92 million.”
“‘There’s not a piece of land I wouldn’t sell,’ Young Homes Chairman and CEO Reggie King said in August.”
“Buildings the company once filled with employees are now sitting empty, or nearly so.”
“Off the 15 Freeway, 2,100 homes were supposed to be built as part of the Rosena Ranch community, along with a school, clubhouse, water treatment facilities, parks and roads. Now, with less than 100 homes built at the site, county planning officials say as soon as homes under construction are finished, work will stop indefinitely.”
“Sales have slowed at Shady Trails, a 1,100-home Lewis community in northern Fontana. ‘It’s about the same place that the Preserve is. We’re happy with our sales against the soft market. Obviously, if it was a better market, we’d be happier,’ said Leon Swails, Lewis’ chief operating officer.”
“Never bet against the house, unless it asks you to. The housing market is in such bad shape that one home builder is even helping investors bet its stock will drop.”
“That’s not a misprint - it’s exactly what Standard Pacific Corp. added as a sweetener to attract buyers for a $100 million convertible bond offering. Like most in the industry, the California-based builder has been hit hard by the real-estate prices collapse; enabling bond buyers to short its stock was the trick it needed to raise cash.”
“‘With market conditions like they are right now, they must think this is their best approach,’ said credit analyst Matthew Wilcox. ‘That will give them liquidity if they need it.’”
“The unfolding reality is that things are far worse than even the most bearish housing industry watchers had anticipated. It’s like peeling an onion that’s rotten to the core.”
“The Irvine-based company has commitments coming due in the next year, including a $150 million unsecured bond issue that must be repaid. But raising cash is not easy for home builders now, said Dennis McGettigan, a partner at the investment bank Gordian Group LLC.”
“That helps explain the home builder’s announcement Monday that it would end its dividend program, which will conserve $10 million a year in cash.”
“The offering ‘can be interpreted as an attempt to manage liquidity at the expense of shareholder value,’ according to McGettigan.”
The Press Telegram. “More real estate agents are turning to a higher power to help them through the market downturn - so if your agent says, ‘Say hello to my little friend,’ don’t freak out, it’s only St. Joseph.”
“Stephanie Leon stands in the front yard of a small home that its owners are trying to move in a short sell to avoid foreclosure. Leon digs a hole in the front yard about half a foot deep, then plants a figurine of St. Joseph, which she buries head down in the hole.”
“‘A week after burying the St. Joseph, the home had its first offer in two years,’ Leon said.”
“The Los Alamitos agent took over the listing for the home in August. She dropped the listing price to $420,000 from $502,000. Leon credits the first offer with pricing the home reasonably - and burying the St. Joseph statue.”
“With the market woes growing and home sales being fewer and further between, more and more people are turning to the practice that last saw popularity during the real estate bubble in the early 1990s.”
“Phil Cates, who sells St. Joseph kits for a living, said sales have picked up ‘dramatically’ in the last year. On one recent day his firm sold 640 kits.”
“‘At around May it really started accelerating, and now every week it’s going up,’ Cates said. ‘In the last 30 days this is by far the largest amount of (one month) sales we’ve ever had.’”
“Real estate veteran Colleen Badagliacco has taken note of the return of the St. Joseph tradition. ‘I’ve noticed that from my travels around the state that a number of (real estate) associations have stocked these St. Joseph statues,’ she said, adding it’s her belief that they are little more than an ‘interesting little myth, and a conversation starter.’”
“‘I think correct pricing, conditions and marketing will carry the day,’ she said.”
“But, she added, the St. Josephs may make for ‘a good opener with the seller - to let them know you’re going to do everything humanly, and heavenly, possible to find the right buyer.’”
‘A Tracy caller last week fretted about being caught in this downdraft despite the fact that he has done everything right and has no trouble paying his house note. He and his wife came here from Oregon two years ago, bought a home they could afford (but at the top of the market). But they are seeing their down payment evaporate - that is, their equity - as prices slide. They worry their neighborhood will crumble if the number of foreclosures grows, further undermining their home’s value.’
‘I tried to sympathize then offered him a bit of Isaacs-speak: hang in there. If you don’t have to sell now, don’t. California generally and this part of the Central Valley specifically, still is growing and masses of people aren’t suddenly going to opt to forever live as renters.’
‘Chicken Little is wrong, long-term anyway. Still sometimes you’d like to clobber that bird … or at least the people who put his rants in the paper.’
Ah, but Chicken Littles are now perched to rule the roost.
Chicken Little laughs last.
Still sometimes you’d like to clobber that bird … or at least the people who put his rants in the paper.’
just ignore the fact that were Chicken Little to apply for a $700K loan it woulda been granted..
How does he know that Chicken Little is wrong long term? As far as we know, Al Quaeda is about to nuke us all to high heaven. Then how much would RE be worth?
Let’s define long term, then wait that long and calculate whether it would have been better to rent or to buy. What is it with these clowns?
What? Al Quada has plans to nuke us to high heaven? I gotta call my broker - that’’s sure to make stocks go higher!
Of course. If society collapses, then the Fed will lower rates for certain. Buy stocks while you still can.
Pause for cause. Curstey.
The Smart Weapons Management Office also has responsibility for the Army’s share of the joint service “Chicken Little” program managed by the Air Force at Eglin Air Force Base. Chicken
Little provides an environment for cooperative flight and warhead testing for many different weapon programs. The initiative has saved many program offices significant testing costs and has provided other programs a testing opportunity they wouldn’t otherwise have had at all.
Got umbrella?
Best,
Leigh
Yes, but they GOT top of the market when they sold in Oregon. That’s how it is.
Curtsey. Mac–the AF has a Chicken Little program.
I was pointing out the irony. Did not mean to offend.
“…masses of people aren’t suddenly going to opt to forever live as renters.”
This is in fact true.
The part before that about California always growing, maybe not so much.
Lately I’ve been watching my mid-30’s Bay Area renter friends buy houses in Austin, North Carolina, Oregon…
“But, she added, the St. Josephs may make for ‘a good opener with the seller - to let them know you’re going to do everything humanly, and heavenly, possible to find the right buyer.’”
Free St. Joseph! The poor guy is being mutilated in ways no saint deserves to be treated. Pretty soon he’s going to get pretty pissed and demand a little help from one of his archangel buddies. Let’s stop the torture before we have to fear the wrath of the heavenly.
Neil
“Say hello to my little friend.”
LOL
That’s Joshua tree talk!
This is right up there with the Baby Jeebus B@tt plug. I’m not making this up - just can’t link from work.
Don’t get Olypiagal started. Eye leaking laughter.
buried head first .. what’s next? Crucify a statue of St. Peter upside down on a tiny cross?
I said it before, and I’ll say it again. I think they have the wrong saint. If I remember correctly, Saint Jude is the patron saint of lost causes
St.Jude is the patron saint of lost causes! St. Joseph is the patron saint of workers, so I don’t get burying a statue, upside down no less, to sell a house…..
The best use of the St. Joe status in selling the house is to hold it close to your ear. If you listen real hard, St. Joe is saying “Lower the freakin’ price, already!”
I don’t get this at all. My copy of the bible clearly warns against idolatry. Burying an idol in your lawn (for the sake of another idol, money) just seems wrong.
I know several people that swear by St. Joe. After the sale you are to display the statue in a prominent place at your new home.
It depends on what your definition of an “Idol” is. I don’t think that anyone is claiming that St. Joe is a god.
Toooooooooooo funny-sort of–use to pray TO the Saints and now I am praying FOR them.
Nothing against vodou…OKay…- sacrilegious! (put a statue of Mohamad, butt up, in the ground, …er…sssshite…dead infidiel!!) See how that works out for US…ya just can’t make this stuff up!!!
OK my cover is blown, I’m not for hemorrhaging of any *good soul*
Just having fun…and laughing…which is a GOOD thing.
Best ever!
No digging holes for any butt up…I crack myself up. weee
Leigh
So far, I’m amazed at how well the house of cards is holding up so far, at least in the Eureka, CA area. It seems like the FED’s plan to bolster the stock market, thereby making people feel wealthier and more compelled to buy overpriced housing is working to some extent. Plus, the idiots who bought property using ARMs are seeing rates trend downward and plenty of sympathy for taxpayer bailout proposals, such as the latest on CNN Money from the “Center for Responsible Lending.”
I never thought there would be such a mass conspiracy to keep housing prices artificially inflated, even to the extent of sacrificing the USD. I still am holding out; I will not buy a house at these ridiculous prices. I saw a show on HGTV this weekend about some 30-something newlywed couple looking for a “starter” home in the DC suburbs for $1 million or less. WTF? Just 5 years ago, you had to be someone REALLY special to afford a $1 million house, now they act like every Tom, Dick, and Harry is entitled to it. When will this madness end? Or is the plan just to let inflation rage such that these home prices don’t look so onerous when gas is $20/gal or a meal out is $100/person?
I saw a show on HGTV this weekend about some 30-something newlywed couple looking for a “starter” home in the DC suburbs for $1 million or less.
Even the “I love Lucy” show still has re-runs
I’ll say it again even if Bernanke gave people ZERO interest for 30 years, most still could not afford to keep living in their $400K starter home!
——————————————————-
I never thought there would be such a mass conspiracy to keep housing prices artificially inflated,
360k at 0% interest would be wonderful - that puppy would be paid off in 12 yrs.
Good to *see* you. : )
Geeze Gwyn, obviously UC’s paying you too much ;).
I have a secret regarding UCR’s purchase of the entire housing development next to its campus…
BM
Oh do tell! gwynster01@yahoo.com >; )
Our Village West development mysteriously dissappeared. I’m not sure what is happening behind the scenes but Davis is now getting rocked by it’s first wave of foreclosures. Couldn’t happen to a nicer place….
How is the bid for the UCRP seat going?
Maybe sure but add in insurance, utilities, Taxes, repairs maybe HOA fees, you are up to $1500+ month…. Remember even at $50K yr stated income…. its not going to be fun when the kids come along.
0% interest rates, and we will see a bubble nobody can imagine.
There are so many people who, even if rates didn’t go up at all, when they moved from their teaser rate or i/o period into the non-teaser rate, they wouldn’t have been able to afford it.
And to talk of “bailing” these people out, or even feeling sorry of them is so offensive my brain wants to explode.
“sacrificing the USD”
In the past couple of days the AUD has broken through its late July highs vs USD.
That AUD thing makes me sad because I am going there at the end of November. Of all times to go. At least I went to London and Paris last year and not this year. Yikes.
Sold my condos in ‘05, bought oil and metals. Still bought some metals last week. If ICE doesn’t do their job, will buy some more metal (Pb) for home defense. Sellers still in denial here. Spouting ‘05 sales prices and appraisals.Two year supply of homes on market.
It was nice to hear some more central coast news. I figured it was that bad.
I think the plan is to devalue the dollar until the Chinese savers can swoop in and snap up California real estate at fire sale prices. Time to learn to converse in Cantonese, so you can understand your landlord when he raises your rent through the roof.
: ) mandarin
Mandarin is going to be taught in Santa Barbara High Schools next year.
“‘There’s not a piece of land I wouldn’t sell,’ Young Homes Chairman and CEO Reggie King said in August.”
If only he could find buyers willing to pay the price he wanted for the land.
And what ever happened to the claim that RE always goes up because they’re not making any more land?
Dirt takes builders under.
I wonder why no one in the MSM asks the obvious question.
If you are selling every piece of land you can, do you have any plans to build homes next year?
New housing starts begin with land purchases and infrastructure developements. None of this is taking place. Only projects drowning in debt are moving along. When this peters out, nothing is following up later.
I wonder why no one in the MSM asks the obvious question.
If you are selling every piece of land you can, do you have any plans to build homes next year?
Because the answer is obvious.
“‘A week after burying the St. Joseph, the home had its first offer in two years,’ Leon said.”
“The Los Alamitos agent took over the listing for the home in August. She dropped the listing price to $420,000 from $502,000. Leon credits the first offer with pricing the home reasonably - and burying the St. Joseph statue.”
I am sure glad that the statue did all the work. I was afraid for a moment that the actual reduction in price had something to do with it.
I’ll bet that if they had dropped another 50K off the price, St. Joseph would have acted within a day or two.
And what happens if the buyer brings their own St. Joseph statue? Stalemate?
Stalemate …. now that’s funny.
(Reminder to myself - don’t drink tea while reading HousingBubbleBlog. Potential for damage to keyboard.)
Not to mention:
-leaking eyes
-inny popping out (or outie popping in)
-spontaneous combustion
-ruptured kidney
-flying toenails
-dead computer due to flying fits of laughter while holding any said drink…don’t drink and computer (DDAC)
Dang…this is too much fun : )
Leigh
Good question. Neither one can blink.
Can you picture that lawn? A front lawbn full of garden knomes and St Josephs statues facing off, battle of the Marrigolds!
Oh dear, [pictures the South Park episode with Jesus and Santa Claus]
You gotta make sure Saint Joe is buried correctly. One seller pointed Joe in the wrong direction and the house across the street sold instead of his.
Mwahahahahahahahha!
the ‘Anti St. Joseph statue” for buyers…..Bingo… we got a new winning business!
What a great strategy, bury a religious statue upside down to profit monetarily. Try this one on for size; I don’t want your bad karma. If I find out that the house that we’re looking at has one of those statues buried in the yard, I’m going to walk away. The same would apply if I walked into a garage and saw an upside down cross on the wall. No thanks. I’m not a perfect catholic, but I know where not to tread.
There was an unbelievably good rant on the HBB from a somewhat devout catholic/christian.
It started with praying for a specific profitable outcome is theologically suspect.
The rant/critique was factual, brutal and gut-splitting.
We definitely need a “best of” thread someday.
Who’s the patron Saint for “Catching falling knives”?
Realtor Stephanie Leon neglects to tell us what the lowball offer was, why let that get in the way of the power of myth?
“Stephanie Leon stands in the front yard of a small home that its owners are trying to move in a short sell to avoid foreclosure. Leon digs a hole in the front yard about half a foot deep, then plants a figurine of St. Joseph, which she buries head down in the hole.”
“The Los Alamitos agent took over the listing for the home in August. She dropped the listing price to $420,000 from $502,000. Leon credits the first offer with pricing the home reasonably - and burying the St. Joseph statue.”
“Myths are public dreams, dreams are private myths.” Joseph Campbell
“In the 1990s, the county lost thousands of jobs from the mass exodus of aerospace firms, there was a national recession, inflation was much higher than what it is now and there was an oversupply of homes, Mr. Schniepp explained.”
Peole who keep clinging to this mindset are going to be in for a very rude awakening. Benial at it’s finest.
amen
Why do you think so, it makes a lot of sense to me?
The vast majority of homeowners in SoCal bought their homes before the run up, are still employed, and are not maxed out with HELOC’s. Now if unemployment rises to 7-8% there could be some major downward pressure on prices (i.e. 40-50%) in the non Inland Empire/central CA areas as large amounts of people “have to sell”. The feds are going to tell the FDIC to lay off and let the banks hold properties for a while so as to avoid a major sell off.
IE/central CA is f-ed up due to new inventory available - there ain’t substantial amounts of new inventory available in northern OC, LA and southern Ventura counties - not like IE or central CA.
Unless and until tens of thousands of homes in northern OC, LA and southern Ventura counties come on the market there probably won’t be any crash. People will just wait it out.
Just look at Ventura forclosure sales for the first half of 2007 - only 548 - and that is a major story since there were only 62 for the same period in 2006. 548 foreclosure sales aren’t going to affect prices substantially in that county, 5,480 wouldn’t “crash” the market. You would need 30,000 or 40,000 forclosures before you would see huge price declines. The only way that is going to happen is if thousands of people lose their jobs and dump their homes.
LMFAO!!!!
You must be new here. LMAO!!!
re-read your post -
Still LMFAO!!!!
CMBUL!! (coughed my balls up laughing)
nnvmtgbrkr,
I might’ve missed it. ex-ex-nnvmtgbrkr = nnvmtgbrkr ?
Yes
come on youze guys.. it aint easy to abandon all hope. It takes time and lots of effort.
I had to re-input my info and forgot the “ex”. My bad bigtime.
Time… yes.
But look at how buyers are laughing at the sales!
Besides, the mortgage quality in the LA market is really poor where the flippers took hold. Or did you not read the stats on the low down payments?
If $550k in Compton makes sense to you… You probably think burying St. Joseph upside down will work too.
Assuming this new guy isn’t a troll…
Think about what income it takes to buy a home in LA. Now look at the incomes! e.g. at homefare.com you can look up lots of information. Notice something? Prices and incomes have *nothing* to do with each other.
11.4X price to income and the sellers will just wait it out. I don’t think so… I toured a bunch of open houses this weekend. Every seller was dropping the price. Not much is moving; darn pesky Jumbo loans!
I admit some areas will lag in the downturn (a la the 1990’s). So what? The fell hard in 1994/1995. History is on our side.
Got popcorn?
Neil
Thanks for the reply. My experience has been that housing prices in CA now are at least closer to the “norm” and the mid-90’s was the exception. People have always stretched to afford in the areas I mentioned….always. You could argue that the CA multiple of housing cost to median income has always been well above the national median - that’s just CA, I know it doesn’t make any rational sense, but home prices in CA have NEVER made sense relative to income, except in the mid 90’s - and that time was considered as bad as the Depression, with much higher unemployment - 9% in CA at that time.
I am certainly not saying that there are not price declines - I am saying that you are only seeing severe declines in areas that can add inventory on vacant land. What you are seeing now are the people that have to sell, and I concede that ther are a fair number of them. But to take my Ventura Co. example, 548 forclosures won’t make a dent, nor would 10 times that many. I am talking about the magnitude of the declines. In the IE, yes 40-50%, higher end stuff 15-20% max.
Unless we have 9% unemployment again, then all bets are off.
Ventura prices are already down 8% from their peak according to DQ (Car #’s).
Yeah, Ventura county is “different”. Just added that to the list of “different” cities. I would agrue with you, however, you are obviously a REIC member. Why dont go buy everything up…
I will wait until things are down 25%, if I wait for 50% down I may be waiting a very long time…….unless I want to move to the IE, which I don’t….
You could argue that the CA multiple of housing cost to median income has always been well above the national median - that’s just CA,
True. They normally vary between 6X and 8X income. Never before did they break higher than 8X. However, they peaked at 11.4X incomes. If you think it won’t break, explain the huge fraction of loans resetting in LA. Loans if they cannot be refinanced we’ll see foreclosures.
We’ll see 9% unemployment just off the layoffs in the real estate related industries. You did see the reports on California and how many people work as realtors ™ and mortgage brokers? LA, OC, and Ventura counties are where they are concentrated. They are still laying off.
Let’s say you’re right… that prices won’t drop. Keep that saying that. If prices don’t start dropping soon, Aerospace will leave southern California like they did Silicon Valley and Long Island. Why? Not enough profit to raise salaries enough to recruit in LA/OC. Think about that a minute. I’m talking huge job moves and quickly. All of the aerospace companies are bleeding employees (plenty of work in Denver, Houston, and Huntsville).
LA is dependent on Jumbo mortgages with low down payments. Since that is becoming rare (still out there, but more rare), its going to weaken the market.
Right now, in the south bay (my area of interest), only Torrance is really ready to break. But man are people getting jumpy to sell in Redondo. The mortgage stats in Redondo scream massive foreclosures are coming.
And if its not going to change, explain why Redondo and PV are down 4% YOY!
In the 1990’s the areas “that would never drop”… dropped 40%. Its going to happen again.
Got popcorn?
Neil
John, you may be right about the mid-90’s being an aberration, but my view of the mid-90’s was, it was almost “normal” because the ratio of a price to a monthly rent was only about 120. Low interest rates, a high state income tax, and perhaps other factors combine to keep CA’s price/rent ratio higher than in other states. Right now, though, I would think the greatest of these factors has been the absurdly lax lending practice in CA. And THAT, my friend, is not sustainable. I see lotsa CA places with asking prices that are 180, 250, or 400 times the monthly rent. Buy if you dare…!
Re: “9% unemployment,” we also need to account for the fact that a big batch of the real-estate-related people who are taking Joshua trees in this downcycle may not show up in the official unemployment stats. Self-employed Realtors, mortgage brokers, illegal-immigrant construction workers and landscapers — that’s a lot of people who aren’t getting paid, but won’t necessarily show up as “unemployed.”
This is going to get messy.
Only arguing magnitude here, I am sure I am oversimplifying but I think you only have huge price declines (because of huge inventory) with very high unemployment and/or more inventory being built. Neither of those is true in certain SoCal areas. The idiots that overborrowed or got teaser rates will get squashed, I just think that is the minority in the areas I mentioned.
oversimplifying .. perhaps.
I see us passing a critical point where housing market problems severely affect other market sectors. And, in a couple years we’ll look back and gaze in wonder at how everything around us is so sublimely interrelated, and ask ourselves how we could have missed the obvious relationships.. as though time/space before the crash was like that on some foreign world…
F must stand for “Fresh Meat”.
You have huge price declines because of affordability. Inventory is a factor of affordability. If home were affordable there would be no inventory or foreclosure problems. The only reason prices shot up was because banks were lending money to people that could not afford it. Now that they have come to their senses and will only lend if there is a chance of getting paid back the number of qualified buyers has shrunk. The remaining qualified buyers are not willing to stretch to buy an overpriced home because most of them are now aware of how overpriced everything is. It’s not inventory…IT’S THE PRICE, it’s always the price.
“The idiots that overborrowed or got teaser rates will get squashed, I just think that is the minority in the areas I mentioned.”
OMG!! Dude, you really need to get out more often. Let me tell you about your “minority”. I may be up here in NNV, but I’m a born and raised OCer for 30 years and my contacts allowed me to do a lot of biz down there from Santa Clarita to San Diego, as well as talk to the folks that really mattered in what was happening in real estate (and if you don’t believe me, than I’m sure “Income” will back me on this.)
Dear John, if you’re the type of homeowner that can actually afford his house payment (maybe you own it outright. If so, good for you), if you have a nice cozy fixed rate that you’ll manage without a hitch, if you haven’t repeatedly refinanced to support your style of living or even just to make ends meet, if you didn’t count on home appreciation to pay for the kids tuition or the dream vacation or the remote vacation home, if one missed paycheck doesn’t spell absolute disaster because of your current financial situation, then count yourself lucky, because YOU ARE THE MINORITY, my friend.
As Ive said so many times before, even a flat-lining market spells major doom for all bubble areas, and especially So Cal. Look up Ponzi scheme, see if you can figure out what we’re saying here.
Question for the Blog: If the lay offs are 1099ers and semicash employees, do they count in the layoff statistics? I thought that the ‘hidden’ economy workers didn’t get counted, that’s why some people want a ‘Flat Tax’.
In reference to “California prices currently being closer to the norm now” you are seriously delusional! The ONLY reason why prices here in California hyperinflated was due to the so-called creative financing. We now know how deeply fraudulent most of this was. I personally know of a LOT of people who bought properties with no money down interest only Option Arm loans. They didn’t care about any reset because they’d just refinance into a lower rate loan. People bought numerous properties with no proof of income. They bought them together so that it wouldn’t show up on their credit report. Numerous people went to the housing ATM and have already blown their “Equity” on new cars, and other toys…
Mortgage Brokers made out like bandits. Realtors did equally as well! You seriously must be one of the above. You make no sense otherwise.
ex-nnvmtgbrkr-
I couldn’t have said it better myself, but that’s the prevailing attitude out here. The vast majority feel like they are immune. They always start with that Aerospace argument… They have no clue and are not interested in getting one.
I gotta go do my 5 miles, so no time to help this poor bastard unplug his ass lodged head. But this gives all you a chance to excersise your wealth of knowledge and pick this worthless argument apart piece by piece. The newbies need to know why this is faulty thinking. When i get back from my run I’ll check and see how you did.
That’s ex-nnvmtgbrkr.
bahhahahhaha
BTW, Mr. XNNVMB, one the things I appreciate about you is your making the fine distinction between a “mortgage broker” (you) and a “lender” (me).
If this is the norm it implies predatory lending was the norm before 1990’s.
Currently the prblem isn’t employment it’s making ends meet. Where people simply can’t afford to make payment they signed up for. Most people on this board decided not to sign up for what they couldn’t afford.
“…If this is the norm it implies predatory lending was the norm before 1990’s…”
Predatory lending did exist prior to the 90’s it was just a lot harder to get away with it.
No, it wasn’t. The broker just paid a tax person to produce fake tax returns.
“…and are not maxed out with HELOC’s…”
I’m not going to pick you apart piece by piece but I will address this. If you think the vast majority of people in SoCal. don’t have Heloc’s I suggest you spend some time at county records. Pick any of your peers who have a home and a new BMW or the like in the front yard or who has completed any rehab to their homes in the past few years. The odds are long that they have either refinanced or heloc’d.
And re-fi’s… Look at all those fancy cars financed off the home.
The key here is “maxed out”. How many people that bought in 1995 for $275,000 borrowed another $100-$150k against a home “worth” $750,000. Those people can afford the additional debt since interest rates are 200bp lower than 10 years ago. And they will wait it out unless they lose their jobs.
I agree the ones that borrowed $400,000 could be in a bit of trouble.
JohnF,
Its the serial refi’s that are the big issue. There are internet services to look into such information. LA is in big trouble…
The issue is the huge turnover in LA housing. Yes, someone who bought in 1995 and held would be doing great if they didn’t borrow much against it. I know of three people at work who are about to lose their homes due to serial refinancing.
You might want to talk to your banker friends… we’re not making this up. Its something various bloggers have been looking into for years.
Got popcorn?
Neil
Dear JohnF,
Are you a rentor or a homeowner? If the latter, have you owned for a while, say more than 7 years, and did you buy using traditional lending..20% down and 15 or 30 year fixed?
Did you never refi or Heloc your home? Do you have 6 months to a year of liquid savings sufficient to cover your mortgage, utilities, taxes, and maintenance? Is your job secure, or do you have sufficient liquid assets to support yourself and your family for a protracted recession?
Not maxed out on credit cards or with onerous medical debts or car payments?
Then count yourself among the smallest percentage of folks in California. Do check the stats on liar loans–subprime, stated income in California in the last 2 years. Do look at the price tumbles and back-up inventory in Orange County and San Diego. Auto sales have fallen off a cliff. Foreclosures in many CA counties are rising by new percentage highs each month. 1099 workers are not counted in unemployment stats–mortgage brokers, construction workers, re agents, landscapers, contractors, et. al. HD and Lowes are down, Target and Walmart have warned for the quarter.
Oh, and did you notice, UBS wrote off 4 billion in bad US mortgage loans for the quarter, and Citibank’s profit will be down 60% for the quarter based on soured mortgages.
But, hey, it’s a free country–you can believe in the tooth fairy, the great pumpkin and the solid values in California RE. If you do, please get out there and buy. Somebody has got to catch those falling knives.
I don’t think you truly have a pulse on what’s going on here. I’m thinking that you might be part of a circle of friends that have lived responsibly through this mess, and that somehow you think that you’re little slice of the world applies to the rest of So Cal. Your talking to people that are in the real estate business here, John (mortgage broker for 13 years). We have been a part of it and have sen it go down. Your talking to witnesses here. Like “Income” said above, the majority are maxed out, period! The situation is FUBAR to say the least. (and if you didn’t know, mrincomestream is in the biz in your neck of the woods)
One other thing, John. If you are indeed a troll and not some poor misinformed sap who needs some enlightenment, then you’re gonna be the recipient of the Joshua tree I was saving for Gary Watts. It’s a real beauty!
JohnF-
What you are not including in your analysis here is that many people jumped on the ARM bandwagon specifically because their payments would be so much lower discounting the fact that rates were the lowest in 40 yrs and were bound to come back up, or they thought the option arms were a good idea because they had been laid off before and thought the features would come in handy. Most focused on the payments and not the structure of the loan if one alluded to it they were dismissed. Also let’s not forget about stated loans, most of these people who pulled 100 to 150k out of their houses would not have qualified under conventional standards. In short there’s a lot of this you are missing. Might want to take some time and do so some research. Like ex-nnvmtgbkr said, I’m in the business have been for awhile and didn’t really recognize the levity of the situation until I was dragged to a party one afternoon. It forced me to take a closer look. I came to the realization that this is going to affect far more people than you or I combined think.
Renter due to divorce, plenty of savings, and no CC or other debt. Perhaps I am surrounded by similar responsible people.
I do NOT know what % of people HELOCed (and by how much) and what % of homes transacted in the last 3-4 years. I haven’t seen anyone here tell me. If over 50% have maxed out HELOCs and 30-40% of the homes transacted in the last 3 years then prices are in serious trouble. If it’s only 10-15% then we are not.
“If over 50% have maxed out HELOCs and 30-40% of the homes transacted in the last 3 years then prices are in serious trouble.”
30-40%? Your numbers are conservative, I’m afraid. Speaking of fear, are ya scared yet? Actually, if you’re who you say you are, you might weather this thing. My rants have been to get debt free, simplify, and learn to live lean.
It’s very simple, John. The average buyer in California cannot afford to drop half a million dollars on a “starter home” under traditional lending standards. Household savings are negative. Where is the $100k down? How does someone making $55k carry a mortgage for the remaining $400k?
Everything “worked” when nobody had to cough up a down payment and could take on ridiculous teaser rates. Even when it didn’t “work” buyers could HELOC the difference and keep the party going another year. But numbers don’t lie and until the median wage buys the median house the market can only move in one direction.
Down.
Replies have been truthful…
…but again no one is able to say ___% of loans made in the last 5 years are HELOC’s (or re-fi’s) and are 90% LTV….also no one has said how many homes have transacted since 2002 run-up….again if these numbers are as high as I said then I will agree, otherwise, where is the downward pressure on prices going to come from in areas with no new building and low unemployment? You need tens-of-thousand’s of foreclosures, not hundreds (or even thousands)….
JohnF -
The numbers are available, and surely you jest when you mention 90% LTV. Most homes up to about I would say 1.5 million in price were done on 100% financing in the past 5 years. If I remember correctly the number was like 60 to 65%. Professor Bear or one of the others have the exact numbers I’m sure, because of a head cold I just don’t have the motivation to look them up and post them.
In regards to foreclosures, yes there are not 10’s of thousands yet but they are coming back at a steady clip and as someone who was heavily involved in cleaning up the mess of the last downturn from what I can see you’re going to get your 10’s of thousands sooner than later.
Grab some of Neil’s popcorn, kickback, and prepare to be blown away.
Exactly.
55% of loans for the first six months of 2007 were 5% down, or less.
Eh… he’s convinced it won’t drop. That’s what makes a market. Enjoy John. Buy when you see it near the bottom.
I’ll buy before the bottom too. Like late 2009 when real bidding occurs on homes.
Ever hear of the Dusenberg effect? That’s what is happening to LA in a nutshell.
Muncha buncha.
Neil
JohnF
Let’s just deal with the last 3+ years, the worst of the bubble. Since the end of 2003, existing home sales are approx 25 million per the NAR, new homes approx 5 million per the Census Bureau. That’s 27% of the current housing stock. Nationally, 40% of the mortgages written were either subprime or Alt-A. The Alt-A catagory is dominated by low or no-doc liar loans. 2005 is the last full year I have data for the state breakdowns. In that year, 30% of mortgages written in California were Alt-A and 25% Subprime.
Alt-A combined LTV was amazingly consistent during 2004-2006: 86-88%. Subprime CLTV was 92-94%. Much valuable information can be found in the Credit Suisse report:
http://www.billcara.com/CS%20Mar%2012%202007%20Mortgage%20and%20Housing.pdf
As for home equity lending it grew explosively during the bubble. From 1998 to 2005, the outstanding balances tripled and they doubled from 2001 to 2005. The numbers are staggering - $913 billion at the end of 2005 and certainly much higher now. That of course is on top of cash out refinance, which doesn’t count as a home equity loan.
I am not trying to be an a$%hole here, just arguing magnitude. Of course there will be drops in values.
For example: when there are only 500 new foreclosures in VN county and there are several hundred thousand homes and 4% unemployment, you will see only modest declines.
When we have 9-10% unemployment and 20,000 new foreclosures per month in LA/OC/VN counties then you’ll have 50% price declines.
John, you’re missing the big picture here. Going back to you’re original post, you can’t look at the late 80’s or 90’s situation at all in reference to this latest mess. I’ve argued that many times here with others when they’ve tried to predict the outcome. Why? Because, unlike last time, this was/is an unprecedented asset bubble, probably like none we’ve ever seen. This has nothing to do with employment, although employment will eventually be affected, bigtime (actually already is, the numbers don’t reflect it yet, and probably never will fully). Just now what we’ve been saying for some time here is hitting the MSM, and that is the mess that Greenspan made (actually, it goes further back than Greenspan, but I don’t want to go on all night). Never in the 90’s did we see the fed purposely drop the rates to nothing, flood the market with liquidity, with the intent of it going into housing to stimulate the economy (Yeah, they did it on purpose) What they failed to realize is how out of hand it would get in areas that were somewhat out of their control. Bring in the lending mess and on and on. Look, the info out there, go research it. The point is that this plays out so different in so many ways than other historical norms. We have a massive bubble here with no where to go. It can’t be reinflated, and because of the nature of bubbles, it won’t remain static either. And because this bubble is such a monster, it’ll blow away any other dowturn we can look back upon. Prepare for the worst, my friend.
We may already be there JohnF as far as unemployment goes, because of the sheer fact that most of the REIC are independent contractors and they won’t show up in government numbers, which also doesn’t include the illegal alien workforce that is being laid off as we speak.
Also in regards to your 20k a month in foreclosures, during the last downturn there weren’t that many coming back a month and if I remember correctly I think the average decline for SoCal was 25%. Another thing you haven’t included in your assesment are instances where folks purchased 5-10 homes for flips. Who are currently trying to hold on so they don’t suffer tax losses. Unfortunately some will be happy if the tax loss is all they incur going forward. You’re also not incorporating the coming interest rate increases, but oh wait maybe you think the fed is going to keep cutting so folks will stay in there homes, fine…nevermind.
In short there are a lot of things you are not taking into account. But it’s ok you’re mindset is common in SoCal so buy, buy, buy it can only go up…right?
I was living here in Irvine in the heart of OC and the value of the home I bought at the top of the market in 1989 went down 35%. I can varify that if you like so don’t say prices did not or cannot come down!!!
Hey JohnF
You are to be forgiven for your inability to grasp the gravity of the ongoing and potential situation. I concur with everyone here who has suggested that you read further both on this Blog. I have a very strong background in finance and I can tell you unequivocally that this Blog distills a lot of intelligent people’s thoughts, ideas and opinions in such a concise manner that it will save you 90% of your time if you really want to know what is happening in RE across the nation. Besides, in a week or two of following it will become addictive.
Ben Jones has and continues to (how does he find the time?) provide and guide the absolute best source of RE information in real time that I have ever seen. Consider your visits here mandatory if you have any notion of buying any RE whatsoever.
how can you check this online? la county specifically.
I’m not sure L.A. county has it online for free. That’s why I suggested he visit the court house
John I’m selling a cheese slice on ebay shaped just like Wyoming. Let me know I’ll give you the item number.
Cheese makes me gassy…
“Flattery is all right so long as you don’t inhale.”
Adlai E. Stevenson, Jr.
JohnF,
No point in making vast generalizations about the depth and breathed of home values. Focus your efforts on understanding the mechanics of the coming disaster.
You are going to tire yourself out trying to inflict optimism on others more informed about how this tragedy will play out.
Does anyone have links to the Shiller graph or the Credit Suisse reset bar chart? Perhaps if JohnF were to get the picture, he would see the picture.
I was born and raised in the city of angles…
Never was there a more “see me-dig me” place ever on the face of this earth~
Not much construction happened the past 10 years, as there isn’t much land to build new houses on…
but i’d guess that the percentage of people there living la vida heloc, is much higher than any other big city~
“The City of Angles”… how apt.
This guy’s got an angle, that guy’s got an angle…
John, I remember when prices in Santa Barbara dropped 27-35% in the 1990’s. We know that Amgen is going to lay off approx 645 people. We still don’t know what Countrywide plans to do yet…..
Hello JohnF : )
Here is my Ben’s blog story in short. I lurked for almost a year. Folks on the blog scared me to death. I (still) feel intimidated.
Point? The most informative folks, willing to share, and most importantly, they really do care.
Relax. Come as often as you can or care. The conversation may initially offend. Care=education. Many have walked the path, and simply seek to save others. Lessons learned.
Welcome,
Leigh
John,
One thing I think you are not understanding is that we have a CREDIT bubble, not a housing bubble. The high housing prices are simply a symptom of the credit bubble.
AFAIK, we have never experienced the sort of credit explosion we’ve seen in the past 6-7 years.
You do NOT need layoffs or a recession to see lower housing prices. All you need to see is a contraction in credit.
Picture this: if everyone was handed a $100 bill (need not be paid back for 5 years or more) to be used to buy pencils (and you HAD to buy pencils with this money), and the price of pencils started at $1.00 each.
It’s very likely the price of pencils would rise. As the price rises, most people would rightly assume that it might be a good idea to invest in $1.00 or $2.00 pencils. As prices rose to $20, more people would begin considering a career in “pencil investing.” Prices would possibly rise to a peak of around $100 (theoretically). At that point, there would be no more liquidity, and pencil prices would no longer rise. People would stop investing in pencils if there was no profit, which reduces demand and lowers prices…which keeps more buyers out of the market…lower prices, etc. all the way down.
Now, imagine the lenders who originally made the $100 loans wanted their money back. All the pencil investors would have to liquidate their holdings to pay the loans back, increasing supply in a market with fewer buyers. Pencil prices go down and the lenders are not able to recover all their money. Think they want to make those $100 pencil loans at that point?
Just keep following the logic, and you’ll understand what’s happening.
Off Topic - but considering buying in SLC, Utah. Haven’t been there in 5 years but from the looks of it prices have more than doubled. Anyone care to speculate about future home values there?
Thanks, Eric
research average incomes in the area.. multiply by 3 or so.. that’s gonna be close to the average home price at the bottom.
Median income for a family is $45,140
http://en.wikipedia.org/wiki/Salt_Lake_City,_Utah
Down.
Bah, I really need an editor…Benial=Denial
Actually, Benial kinda works. In fact, I think we have a new HHB term.
I thought you created a new word:
benial = being in denial
And here I thought it was the sort of denial that Ben Bernancke has been in.
Rich Hall would be so proud.
That’s what I thought. Denial on a US economic scale.
Heh. I thought Benial just meant a denial that was so big that Ben might start a blog about it.
I think it means the server’s down — benial = being denied my ben fix.
LOL, you guys…sheesh
Count me among those who thought that “benial” was intentional, and quite clever. I was thinking “bile” + “denial” = benial.
so.. I saw the first foreclosure on my block this weekend. Unusual because I rent a house in one of the more uppity, somewhat affluent areas of the East Bay that tends to attract older yuppie 40-something year olds with young children.
The house went up for sale suddenly and very quickly had a reduced price. It was originally 600k, and is now 500k. I usually despise open houses, but I went out of curiosity. The realtor was actually extremely honest and up front. The house was bought in 2004 for 600k and refinanced in 2005 for 750k, which is ridiculous given the fact that the house I rent, which is twice the size of this one was valued at around 650 in 2005. Anyhow, the owners couldn’t keep up with the payments, hence the house is one step away from being foreclosed upon. Nobody was there so I’m certain that will be the case.
I guess it was sort of a shock ( albeit a pleasant one) for me since most of the bad news seems to be coming from areas that I really don’t care about- like Stockton, Manteca, and Sacramento. But this foreclosure is in the heart of super-wealthy, super overpriced Bay Area- an area that everyone who lives here still SWEARS that it’ll never happen here.
Guess that might be changing.
I use to frequent other housing blogs, but only come here now. I couldn’t stand the Bay folks going on and on and on about how special they were. (no offense towards my Bay area friends here)
I totally get your drift. Many people in the Bay Area seem to willfully believe that the rest of the country can go to hell in a handbasket, but somehow, they will be spared because in their opinion, the Bay Area is not part of the country and too special and insulated to be affected.
A friend from high school purchased a house in Piedmont for 1.8 million in May. I know she had another house that she sold first, but even so, how much equity could she have to put down? Even if she had $800K, that’s still a huge payment. I’ve been particularly keeping an eye on that area and more listings are popping up with more reductions. I do not believe there will be an area left unscathed.
The Bay Aryans, especially those in the City, truly believe that if you don’t live in San Francisco, you don’t deserve to. It is that simple. Totally arrogant and self-absorbed.
“The Bay Aryans, especially those in the City, truly believe that if you don’t live in San Francisco, you don’t deserve to. It is that simple. Totally arrogant and self-absorbed.”
Try Marin, it’s even more arrogant and self-absorbed.
this was covered on South Park- the smug
I know watcha mean, Jetson Boy. I live in the Bay Area, and I have to tell you that it’s not that great. San Francisco is overcrowded and cold. The Berkeley hills are nice, but there are no jobs there. Silicon valley is butt ugly, attractive only to job-seekers with degrees in engineering, physics, and the like.
The Bay Area is not any more special than all the other special places in the country. I think it’s dumb, and will continue to drop in price at an accelarating rate over the next 3 years or so.
“It’s special here” has moved to Seattle and Portland. Or so they think.
This contagion from outer reaches of BA to SV is from an airborne virus.
The deniers will have to buy Asian Face mask for the house.
Well what exactly IS happening in the Bay Area? I know rents are skyrocketing yet I don’t see any reduction in home values anywhere around here. South Bay, Peninsula, Easy Bay and City still demand close to or over a million bucks to live in a regular family sized home that isn’t in a war zone. Sick.
Don’t know if I’d say that values aren’t coming down. There have been a few homes that sold in my neighborhood in the mid 500’s, which albeit is still into insane pricing is cheaper than they were a year ago when there was hardly anything under 600k. That said- I work in SV and it seems that the bursting hasn’t hit here… yet.
Oh ya- I still pay insanely cheap rent. As long as the landlord doesn’t start jacking the rent, which I doubt he will since he likes us- I’m staying and saving for those nice discounted homes that are on the near horizon.
I hope so. My GF and I really want to stay in the bay area, but there’s still nothing out there with a reasonable price.
Dear Joey:
Check out http://www.dqnews.com. Although their data is biased on the positive side, you will see that most neighborhoods in the Bay Area are declining in price. There are a few zip codes that are still holding up the overall median, but there are also a lot of obvious typos in the DataQuick numbers, and all of the typos serve to make the numbers look better than they really are.
We absolutely MUST put an end to the myth that prices are not dropping in the Bay Area.
Too many accronyms, I see you have your very own “greater fool”. If only everyone else was so lucky.
I haven’t seen rents skyrocketing at all.
I’ve noticed two things about articles that say rent is soaring:
1) They come out in August, when all the college kids are trying to land an apartment in the city. Worst time of year to look for a place. Demand for the cheapest places in the “cool” places is (and has always been) pretty intense.
2) The articles only reference asking prices from Craigslist or wherever, and there are a lot of recent “buyers” who don’t understand you can’t just ask for the mortgage payment as the rent amount.
Rents have gone up a little over the past couple years, but not much.
Deluded optimism and misplaced belief in inherent specialness continue to skyrocket to all-time highs however.
Rents in San Francisco proper seem to have skyrocketed in the past two years. I rent a small 2-bedroom for $1450 that, from the looks of things on Craigslist, I would have a tough time touching for much less than $2000 in today’s market. Some jerkoff landlord actually sent me a response to my inquiry, and told me that I needed to write an essay explaining why I wanted to live in his apartment, and bring it along with me to his open house. Yep, writing an essay isn’t bad enough - I was supposed to write one before I even saw the place. I sent him a reply politely suggesting that he might enjoy licking my bunghole.
PS. That essay requirement wasn’t for a chic apartment in an elite or posh neighborhood either - it was for a typical dump in the far Outer Sunset.
Re: rents going up, I heard an interesting explanation for this at an open house yesterday in Ladera Ranch, from a realtor whose other opinions weren’t so interesting. (Standard wishful-thinking “we’re near the bottom” stuff.)
She suggested that rents (that is, rents of single-family houses, as opposed to apartment rents, which are flatter) are going up precisely because many people are successfully selling at the top and choosing to rent for a year or two. Since they’ve got so much equity money, they can afford to pay the desperate-wishing prices asked by the flippers-in-trouble for their almost-new houses — which drives up the average SFH rent.
I had noticed that SFH rents did seem to shoot up dramatically about a year ago, as the bubble consensus started to leak into the mainstream media. So maybe there’s something to this.
Thomas,
Yes, I agree with this (as “sell-to-rent” renters, we fit this description). Homes in our area are significantly more expensive to rent than we moved here in 2004, but after rising sharply in 2005-2006, the rents are fairly flat now.
I sold my house in July and the equity is now called cash and the interest on it pays the rent on a newer house near the beach in OC. The real estate agent we used told us the house 2 down from us fell out of escrow as the buyer had cold feet and walked from his deposit. We could have the house for $2.9mm as the seller would give us credit for walked buyers deposit. No thanks we said. Two weeks later we got an email that the home could be had for $2.5mm (proably worth $2mm). We were told that it finally did sell for that amount. The seller did OK as they paid $1.8mm in 2002. I know it sold as I see people moving in that say they bought it. I thought great, the comps will now reflect that sale! The problem is I can not find a record of the sale anywhere on the usual websites? How can the sale not be listed on Zillow or other sites? Can agents keep that stuff secret? My July sale showed up in 2 weeks. An inferior home (location and layout) a few doors down is currently for sale at $2.8! Some GF might start bidding from $2.8 vs $2.5 (or lower).
2003 pricing in East Bay ? WTF
I am curious how much rent you pay….
sorry- this was for Jetson above - I am curious how much rent you pay….
Sorry, but $650k is not affluent in California. If stuff in compton is that price range, I don’t think so. I would say above $1.2million in California starts to hit the less wealthy pockets of this stupid state.
Now with people’s real incomes I believe there are only a handful of cities with wealthy/rich people.
Hopefully this will all change and some of the savers can laugh at the end at the mess this country is going to take on.
“That’s not a misprint - it’s exactly what Standard Pacific Corp. added as a sweetener to attract buyers for a $100 million convertible bond offering. Like most in the industry, the California-based builder has been hit hard by the real-estate prices collapse; enabling bond buyers to short its stock was the trick it needed to raise cash.”
—————
The story goes on to relate that the company loaned out millions of shares of its own stock so that buyers of the convertibles could short them. This transaction is known as Equity-Convertible Arbitrage; I worked for a hedge fund in Texas that specialized in this sort of thing. Normally, companies want you to buy their converts but hate it when you short their stock. For a firm to actually facilitate this is really unusual.
To me this looks like a backdoor issuance of new equity via the converts with guaranteed returns. If you do this right, you lock in around 8% for the life of the bonds with little risk. It’s exactly these kinds of transactions that get levered up 10:1 to increase returns to near 20%.
guaranteed .. strong word.
Suppose someone acquires SPCorp, morphs it into a chain of strip joints and the stock zooms up?
joey
You have a short position in the stock and a long position in the convert. If the stock goes above the strike price, you convert your bonds into stock, use it to cover the short position and walk away with whatever income you generated in the interim - all using OPM.
Since you sold the stock short in the first place and used the proceeds to buy the converts, you would have almost none of your own money committed. Usually, the hard part is setting up the arb; after that it gets a lot easier. Here, the company is helping you set it up.
ok.. i sorta get it. The arbitrage thing is usually difficult to set up without cooperation, like SP’s lending 8 million in shares to Credit Suisse for the express purpose of shorting them to bond holders… no broker required .. no problem with finding shares.
I admit i’m beyond my depth and the 2 beers don’t help matters.. but who in their right mind would want to hold stocks in a company that does this? It seems to be a lose-lose for the company, except for the booster shot of liquidity.
i need to ponder this.. tomorrow.
Two beer. Ya made me giggle. I smell a beer and I can’t think straight…BTW, I’m in Wisconsin!!
Thanks for the smile!
“It seems to be a lose-lose for the company, except for the booster shot of liquidity.”
———–
Exactly. But they were desperate enough to eliminate their dividend - which saves them all of $2.5 million per quarter. The fact that they would undermine confidence in the company to save so little cash tells you just how tight things are right now. They’ve already admitted they are in a death spiral. That opens up all kinds of financing options.
Looks like a pretty nice deal - haven’t seen more than a handful of these in the last 20 years.
There are a few fat tail ways in which it could blow up, though, as I’m sure you know. As with most fat tail events, they would have lawsuits for the next five years. E.g.
a. a squeeze on the short interest, and the hedge unwinds nastily.
b. a raid, followed by a big special dividend, or threat.
Probably a bunch more risks, convertible arb isn’t my field, but I smell a first-order hedge here.
There are plenty of low-probability ways for the deal to go bust but you’ve named the biggest ones. The way you protect against them:
a. If the company is lending you treasury stock, they can’t be forced to recall the lent shares short of bankruptcy. Then you don’t worry about it.
b. Change of control provision - preferably a put at a premium to par. Then a raid would benefit the bondholders. If the company is desperate enough to use this kind of financing, you can force them to include similar terms.
Deron,
Thanks for the explain. All in all, looks like a nice trade.
Also known as death-spiral bonds…from Calculated Risk.
uh oh.
go away
“Like most in the industry, the California-based builder [Standard Pac.] has been hit hard by the real-estate prices collapse; enabling bond buyers to short its stock was the trick it needed to raise cash.”
The dreaded death spiral. It’s only a matter of time.
Talk about desperation. These guys will be the first of the big boys to go under.
When the first big builder does go under it will be interesting. Not because of the fact a builder declares BK, but rather what the banks do to recover. Standard Pacific is big regionally, so they would count.
I know Wells Fargo is going to lose billions just in Phoenix. No big deal, they sold off the risk.
(I’m serious!)
If you think the banks have pucker butt now, wait 60 days to see the damage the commercial paper market is going to do. Think that’s something? Wait until the builders default. Then you will have the mother of all credit crunches.
Today we’re in the “eye of the storm” of this credit crunch. Because the heat is being turned up slowly, people are fooling themselves into thinking its getting better. Just wait for that commercial paper… sometime in the next 60 days its coming home (inability to refinance).
Got popcorn?
Neil
Neil,
I joke around sometimes, but I’d bet my…er…
Let us just say the early October of 07 will be history in the making (as I look into my crystal ball).
You just can’t make this stuff up!
PPT is ptttttttttttth.
Sad part is they do not see it coming…uh oh.
I am thinking that builders are having severe cash flow problems now. If builders work anything like miners and manufacturers, much of the credit they need comes from supplier credit. For instance, they could take orders of lumber, wire, etc. and not pay for, say, 60 days as a way of floating some cash. Now I’ll bet the suppliers are getting really nervous about getting paid, and might be tightening up on their credit terms, perhaps even demanding payment on delivery. Goodbye cash flow…
Do you think some of this stock run up was due to folks covering the margin calls on their house builder puts today,once Citigroup raised their status from hold to buy?
Neil: Right on track for Capitulation Day Nov 15, 2007.
Normally season sales are slow, but with mortgage resets and tightening credit…the party will be OVER!
Another day, another eCONomist…
Does he really get paid for his abilities?
“Local economist Mark Schniepp, director of the California Economic Forecast, recently predicted that the South Coast ‘housing recession’ is about at the midway point, or ‘in the top of the fourth inning.’”
“Unlike the real estate crisis of the 1990s, the main factors for a deep recession are absent now, Mr. Schniepp said, even with the problems in the subprime market and its impact on credit.”
“In the 1990s, the county lost thousands of jobs from the mass exodus of aerospace firms, there was a national recession, inflation was much higher than what it is now and there was an oversupply of homes, Mr. Schniepp explained.”
4th inning? Oh… not even close. We still have REIC layoffs ahead. Now everyone open their textbooks to the “Great Recession.” Mikey, can you read about the fraction of jobs created in California from 2001 through 2007 that were real estate related.
Munch munch munch.
Got popcorn?
Neil
Since there have been no major layoffs still, that means there were no new jobs created. I am starting to think that housing is not as big of an industry as I am thinking. I just keep noticing the stock market going up on really bad news as part of that. They keep saying everything is contained. Maybe this is really true.
I don’t notice people shopping less. I even went to look at cars this weekend, and the BMW, Lexus, and Infiniti dealers were packed.
Unless they really are going to shoot the stock market really high and let it crash like the last depression, something just doesn’t seem right.
Things aren’t right. Funny thing happens when you study this (on and off) for a long time… you realize how much the pattern is broken.
Oh… I’m a huge fan of “paradigm shifts” and game changers. Those show huge changes in efficiency.
This time? Debt. At a time the boomers should have been saving for retirement… they borrowed.
Sometimes I scare myself…
Neil
JohnF
Pay attention…..it’s gems like this one above from Neil ” At a time the boomers should have been saving for retirement… they borrowed “, To which I respectfully add …..’too much for too little of enduring value and a whole lot of upkeep’ that make this Blog so worthwhile.
Heard Mark at a seminar sponsored by the BIA in the last cycle, he was a cheer leader just like the boys at Lusk or Anderson. He has no credibility with me because he has no skin in the game.
“The Irvine-based company [SPC] has commitments coming due in the next year, including a $150 million unsecured bond issue that must be repaid.”
If current credit conditions continue, what are the chances?
Can Std Pac Corp’s chart get any worse? It’s ugly, no ppt love:
http://tinyurl.com/yveo8j
Went to some open houses in Woodland Hills and West LA yesterday. In the valley, one was a short sale (south of ventura), and another was a foreclosure. Definitely had the impression that price weakness is showing, maybe 10-15% off peak asking prices. Realtors pretty pushy — ’sellers are motivated,’ ‘price reduced,’ ‘make an offer.’
In West LA, less evidence of price weakness, but maybe 5-10% off some homes so far. Still plenty of delusional sellers, though. Inventory is up.
Went to an OH! in San Pedro. I call them OH’s! instead of Open Houses because when me and the wife walk in we suprise the Realtors, who are often startled to see people standing in front of them after spending all day daydreaming.
This place was perfect, great view, everthing nice and neat.
Owner flip after two years. Was over a million, recently dropped to 950k (wow thanks). Since this isn’t Palos Verdes, I think I’ll wait for reallity to set in.
Is it me, or have rental prices skyrocketed in the LA area in the past 6 months or so? I’ve seen at least 10%-15% increases in asking prices for 3 BR’s in my area, and they are all gone within a day or so.
It is insane to me that so many people would pay $3500+ to rent a 1100 sq. ft house that has an updated kitchen, at best. Sure, cheaper than a mortgage, but still.
I’m paying 3K for 1500 sf 3 plus 2 in a nicer area of West LA, 2 car garage, large fenced-in back yard, recent complete house renovation and landscaping. No rent change in 2.5 yrs. Gardener included. Just have to look around. Home would go on the market for 900 or so now, I would guess. I wouldn’t pay more than 700
(Further to my reply to JohnF above, why would you want to pay 233x your monthly rent?)
Because it’s California….because it’s California….normal economic rules don’t appy here, they never have…..
Calling ex-nnvmtgbrkr, somebody’s looking for the joshua tree treatment.
Not that I ‘want’ to, but I’m not confident that nominal declines over 20% will happen without some other event (earthquake anyone? That helped in ‘94). Suspect inflation will do the rest. I hope I’m wrong. Going to have to wait and see.
I think the high rents you see are FBs hoping for a miracle. Or FB/Realtors hoping to snag someone who can pay that rent and convince them to buy. Also for high rent, asking ain’t getting.
I area of Westwood (90024) there are many SFH for rent at btw. $4600 and $5,000. They have not rented out that I know of. Houses like those would sell for over 1.2 million in this crazy place. The rent says they have to drop 50%, but the funny thing is they are not renting out. I find it odd, and I don’t have an explanation. I don’t think rents are up in this area, though. 2 years ago, when one of those houses was vacant, I called about it. At the time they were asking something over 5K, I can’t remember exactly. Now they are asking 4,900. They’ve gone down slightly.
I’ll submit myself as an item in the “It’s Better To Rent” exhibit. My life went all country western song like … got laid off, dog got bit by rattlesnake, car died. If I was not a renter I would have had to make the awful choice between paying this year’s property tax or antivenin (aka paying for my vet’s Hawaiian vacation). I would not be able to pick up and move from San Diego to Santa Fe for a new job in less than two weeks. As for the car I guess I have to find a new junker with a functional heater.
OTOH I visited Santa Fe and didn’t like it much but I can survive for a few years while San Diego craters so long as I avoid all the annoying middle aged, new age people there to do/be/sell art/spa services/find themselves. Particularly the realtors. Lots of gorgeous homes for rent for cheap.
Anyone looking for a reasonable (for SD) dog friendly home to rent let me know. mrquoi at gmail
“…so long as I avoid all the annoying middle aged, new age people there to do/be/sell art/spa services/find themselves.”
Good grief, Quoi, you’re describing a good chunk of Tucson’s newcomers! (And, yes, I try to avoid them too.)
mrquoi,
congrats on the new job, and i hope your dog is ok. Geez, rattlesnakes? I’m freaked out by the huge raccoons in Riverside Park.
Just got back from Sante Fe and Taos, loved it. Bought my primary residence in San Diego in 1996.. I will buy my vacation residence in Taos in 2009-10 and retire five to six years later. I believe I will have timed my real estate purchases perfectly in just a little over a decade.
“Local economist Mark Schniepp, director of the California Economic Forecast, recently predicted that the South Coast ‘housing recession’ is about at the midway point, or ‘in the top of the fourth inning.’”
Nope, it’s more like going the full 12 rounds against a determined Joshua Tree, that really knows how to box.
Early in the 1st round, now~
Folks, Joshua Tree is warming up.
CAR economist punches right into the right branch. Ouch, that looks painful folks.
Oh… Joshua tree gets him with a hook to the kidneys. Lots of needles sticking out. A little blog.
What’s this? Joshua tree has flipped the economist.
Now “the tree” is lifting him over his head. Oh… we know what’s about to happen. I can’t watch…
You see… Joshua Tree is more of a WWF wrestler than a boxer.
“More real estate agents are turning to a higher power to help them through the market downturn - so if your agent says, ‘Say hello to my little friend,’ don’t freak out, it’s only St. Joseph.”
What happens if he pulls out peter instead? Do you freak out then?
I’m going to guess, ‘no’. Realtor’s peters are certain to be unfascinating, and not worthy of a decent freak out. Not unless its got a halo, or wings. THEN I’ll freak out.
Well, if I originally thought he was a “she” I do.
LMAO
Lola
L-O-L-A
Lola
Lololololola
LMAO
OMg rofl!
mrktMaven FL…………
You’ve done it again……..LMAO
“Unlike the real estate crisis of the 1990s, the main factors for a deep recession are absent now, Mr. Schniepp said, even with the problems in the subprime market and its impact on credit.”
Liar, liar, pants on fire.
My, my, my. Pulling out peters and flaming pants. This blog seems to be trending below the belt, doesn’t it?
Eh, Slim, I’ve just about had it today with these a$$clown shills and their verbal diarrhea. Really, I even find it hard to read what they say and laugh anymore. These are people in positions of authority, they are considered “experts” by many and unfortunately, what they say has weight with those who don’t know any better. As a result, the harm they cause is tantamount to that caused by a doctor who gives the wrong diagonosis. I’d like to set a pack of personal injury attorneys on their worthless butts like the hounds of hell. I want to see these shills buried for the rest of their lives under mounds of legal paperwork, never to emerge.
I read an interesting analysis, I think it was by William Rivers Pitt, on the lawsuit that Dan Rather is bringing against CBS. A little late, but rightly so. The article demonstrates how media outlets basically have become butt boys for the administration and for corporations. I suppose it had to happen sooner or later. But the same with these a$$clown eCONomist shills. If it would ever dawn on them the untold harm they do, if they’re any kind of human being at all, I don’t think they could live with it. They must be taking the meds (therapy mints) that block them from caring about the difference between right and wrong and what they do to their fellow man. Good on ‘em. What goes around comes around. May they fall into the hands of a doctor who diagnoses them wrongly in their hour of need.
I can’t even read some of this stuff anymore. It was amusing at first, now it is painful and horrifying and just raises my blood pressure.
These are people in positions of authority, they are considered “experts” by many and unfortunately, what they say has weight with those who don’t know any better.
Palmetto, where to begin? Questions, questions. Why do people in authority feel obligated to subject others to their scorn? It’s not a question I can answer, but I’ve observed many promoted ones, and many, upon promotion, act superior. Why? (rhetorical).
It makes me want to puke (not a lady-like word) knowing people do act this way! Ebb and flow.
For instance, in the USAF (corporate America for that matter), when an individual achieves the next rank/promotion, a number of things happen.
-they feel/act superior
-are not prepared for the responsibilities
-few allow it to define them and remain true*
- were not prepared/poor leaders
-friendships broken/new ones emerge
-Make new rules for the sake of said status
Does any of this feel familiar?
I know the only way I survive is a clean heart. No matter the outcome, you too, are of this conviction.
Best Always,
Leigh
“The offering ‘can be interpreted as an attempt to manage liquidity at the expense of shareholder value,’ according to McGettigan.”
Don’t feel bad, shareholders. Ben Bernanke sort of did the same thing, except his move was at the expense of the American people and their currency.
Speaking of liquidity, I’ve got some liquidity for BB and all the shills, right here.
Well the lower currency is only bad if we import and export stuff. Otherwise we are in our own little bubble. Oh wait we only produce third rate cars in this country?
Meet Alan Greenspan’s curious alter ego…
http://en.wikipedia.org/wiki/Hjalmar_Schacht
Isn’t it fascinating to observe world-class stupidity?:
http://realtytimes.com/rtmcrcond/California~San_Diego~lisablanchard
“The following are the August 2007 statistics for San Diego County.
NOTE: The number of Days on Market in ALL areas of the county is trending downward in a sign that properties are selling faster.”
Days on the market is not what it sounds like, most agents re-list a property if it doesn’t sell within a month or two. And if it only covers properties that actually sold, then it’s a totally meaningless number.
Anyway, here are the actual numbers in her write-up:
Coastal San Diego
63 - Average Days on Market DOWN from Jul - 63 DOM
Central and Eastern San Diego
63 - Average Days on Market NO CHANGE from Jul – 63
Inland Northern San Diego
67 - Average Days on Market UP from Jul - 66 DOM
Southbay and Inland South San Diego
78 - Average Days on Market DOWN from Jul – 71
Let’s repeat:
“The number of Days on Market in ALL areas of the county is trending downward”
Too bad Lisa Blanchard stopped posting her “10 reasons why the housing bubble is bogus”. It was very entertaining.
DOM is completely worthless.
Serial Relisters!
Comment by Arizona Slim
2007-10-01 16:47:04
My, my, my. Pulling out peters and flaming pants. This blog seems to be trending below the belt, doesn’t it?’
Sounds like a party to me!
Except no realtors invited. I’m firm on that. I have standards regarding my guests, you know.
‘Guest Rules at My House’
1. No realtors allowed. Not even any bits of them.
2. No bringing your own chainsaw. (I learned that the hard way.)
3. Bringing some snacks is good, like pot luck, such as a bag of chips, or even a casserole. As long as it’s not composed of realtors in any way. But that’s more of a guideline, I suppose, really.
4.
4…
Hmmm. I guess that’s it.
Seen any good Power Point presentations lately, OG? Dang, I’m STILL getting a chuckle out of that post.
No, I have not, palmy, but I will be sure to demand one the next chance I get, just so I can tell you about it. And after I demand one, with pretty pictures in it of course, I will laugh like a hyena.
A snarky, vindictive, very merry hyena.
“A snarky, vindictive, very merry hyena.”
Oh, to be a fly on the wall of that conference room….
I don’t know about you guys but I want to hear more about the chainsaw…
Do you have a powerwasher? Sometimes it’s really hard to get those last bits of realtor stuck in my shoe tread.
“In the 1990s, the county lost thousands of jobs from the mass exodus of aerospace firms, there was a national recession, inflation was much higher than what it is now and there was an oversupply of homes, Mr. Schniepp explained.”
Over supply of homes not priced to reality - Check
Real Inflation, high and going higher due to weak dollar - Check
Nation slipping into recession as housing boom explodes - Check
Thousands of job losses as housing market takes retail out with it - Check
Hmm, I don’t see a difference……
I’ll give you the next address and agenda and you can come on over and submit public input. I notice you have lots of very well-expressed and considered theories. They would all be dooooomed. Doomed, I say! By that, I mean, more doomed than now. All the baddies are looking rather more doomed by the minute, even out here in the PNW, where ‘things are different’.
Haw! Ahawhawhawhaw!
Hey, look–that was a very decent snarly, vindictive hyena laugh right there.
Good practice.
I meant ’snarky’, not ’snarly’, although I guess that works too.
Shoulda been named “Shady Deals”
“Sales have slowed at Shady Trails, a 1,100-home Lewis community in northern Fontana. ‘It’s about the same place that the Preserve is. We’re happy with our sales against the soft market. Obviously, if it was a better market, we’d be happier,’ said Leon Swails, Lewis’ chief operating officer.”
Man behind the curtain to sheeple: “Ignore those misleading stories about falling housing prices, and focus your undivided attention on the ever-rising chimeric stock market.”
Could the stock market be rising because China and India can afford to buy Dow Stocks? Dollar is off an edge and the blue chips will always be the crown jewels.
Maricopa County (Phoenix Metro) Notice of Trustee’s Sales
Jan 06 726
Feb 06 687
Mar 06 790
Apr 06 638
May 06 764
Jun 06 797
Jul 06 851
Aug 06 1019
Sep 06 1114
Oct 06 1238
Nov 06 1493
Dec 06 1407
Jan 07 1624
Feb 07 1577
Mar 07 1720
Apr 07 1709
May 07 2007
Jun 07 2325
Jul 07 2501
Aug 07 3248
Sep 07 2834
Gotta love the geometric growth in those numbers. Are the Sep 07 numbers complete, or was there really a down tick last month?
Funny, we’re moving fast and slow all at the same time. MSM, REIC, economists, and other bubble deniers are stuck in first gear - but we’re seeing more and more numbers in fast forward.
Like most of you,
I’ve had to endure this dumbed down country for most of my life, so far…
It is a pleasure to share our minds & thoughts, on here.
Agree! The HBB is the best gathering spot for those who can think for themselves!
Ben feeds his sheep as God pounds his nails, driving them deep and true.
NPR (National Public Radio) seems pretty objective compared to the rest of the media. Hell, they even had Ben on a while back didn’t they?
But, today some joker was on talking about how wonderful today was on Wall Street and how the rest of the economy was doing well, except for housing.
Dead cat bounce if you ask me.
Actually, anyone who talks about bubbled house prices dropping as a “bad thing” is biased and not objective. To many people (homebuyers, people interested in fairness and stability, people who don’t want their property taxes to go up) it’s a GOOD thing.
Deflation of any asset used for collateral is simply death for banks. It makes the loans much riskier and more likely to default on the one hand. On the other, the higher rate of foreclosures will result in higher losses as well when they attempt to sell the devalued collateral. We’ve seen this play out with housing and it is currently starting in nearly all asset-backed debt markets.
Deflation is death for many banks, even when it is very beneficial for the rest of the economy, as during the 19th century. Since the Fed represents the interests of the banks, they will always have an inflationary bias.
OT: What does GWB say about the dollar? Damn, we need to finance war with foreign money. Or should I say funny money, colored green.
“It has been shown that, in contrast to everything which classical national economy has hitherto taught, not the producer but the consumer is the ruling factor in economic life.”
Hjalmar Schacht
“Phil Cates, who sells St. Joseph kits for a living, said sales have picked up ‘dramatically’ in the last year. On one recent day his firm sold 640 kits.”
“Nobody ever went broke underestimating the taste of the American public”
H.L. Mencken
Not sure if the following site has ever been referenced here before or not (and I can’t vouch for the data source either) however the data for around my area (Livermore, CA) makes for very interesting reading. While the median home price has increased slightly YoY from 2005 -> 2007, it appears largely irrelevant due to the huge decrease in sales volume. The 3rd Qtr sales for 2007 are 9% of what they were in 2005 3rd quarter! It seems to be a very typical pattern having surfed a few other zips. Granted, all the Q3 2007 data may not all be in but the data is significant none the less.
http://www.onboardnavigator.com/webContent/OBWC_Search.aspx?&AID=108&CD_SID=CO001
Wow. In my zip code, 8% of the housing stock is vacant, and the median “years in residency” is only 2.56.
Many of the SoCal zip’s I have tried showed prices bottoming out in the first quarter and rising in the 2nd???
John:
What are you talking about? DataQuick tracks median and per-square-foot prices in California. Go to http://www.dqnews.com. As I said earlier, they try their best to make the numbers look good, but even their data continue to show price declines in most zip codes in the Bay Area.
Use the one on the LaTimes Site JohnF
Big V, what zip code?
95126
wow-brutal
**bangs head on the desk**
All I have to say is never trust economic or demographic data put out by the REIC or your local muni. Hell I don’t trust the CADoF as far as I can throw them and for good reason.
All right, my lovelies, does anybody have a Nerf bat I can borrow? There’s an economics professor who needs a boot to the head…
This weekend I was SUPPOSED to go to an OCTFCU (Orange County Teachers CU) retirement seminar at Fullerton College. My husband asked me to go clothes shopping with him instead. I figured he wouldn’t have asked if he didn’t want me there, so I ditched the forum and went with my boy. My best friend was going, so she promised she’d let me look at her notes and grab a bag of free goodies for me.
Good thing I didn’t. She told me that the economist (apparantly a white-haired 50+ academician with “loads of charts, tables and complicated figures,” per my friend) told everyone in attendance (largely 50+ soon-to-retire teachers who haven’t saved enough and are just now starting to pay attention) the following:
“Don’t worry about housing. This is a little dip. it will even out in the next few months and then houses will continue to go up in price. Just don’t put your homes on the market right now.”
That statement alone would have been enough for me to throw rotten vegetables at him, but he then went on to mock the lending criteria (or lack thereof) that got us to the insane levels he was cheerleading and trying to coerce these pre-retirees to try to maintain by keeping their homes off an already glutted market.
My friend and I work in the highest-paying district in the county. This jacka$$ just told her that she will NEVER own a home, because there’s no way she could get financing for anything aver $200K right now, and at best, that’s a one-bedroom condo (with $200+ HOAs) in south OC.
She said she was depressed all weekend because of it. When I started talking about resets and affordability, and fundamentals, she stopped listening, but in the end I just said, “Wait a year. We’ll know whether or not he was right by then.”
By god, it better be me. Or I’m gonna …
Oh, I don’t know. Teach kids about credit cards and debt management in my English classes instead of grammar? Seems like it’d be more useful anyway.
This is just nauseating.
BTW, Neil, I hope it went very well. Maybe before the next one I’ll feel like I have some intelligent witty repartee to contribute to the next HBB party.
Dear Hllnwiz:
This man is just silly. You should ask your friend to find out whether or not he previously taught his students that house prices would never come down. Did he insist that today’s situation was impossible? If so, he loses credibility and does not understand fundamentals.
See if your friend will listen to this:
If there’s no way that well-paid people can afford to buy even the cheapest condos, then that means there’s no way that owners of even the cheapest condos can sell them. With no buyers and no sales at lofty prices, sellers have no choice but to reduce their price (especially when they’re being forced to move out by resetting neg-am, i-o teaser loans). That’s just logic, and there’s no way around it. The Fed is still pushing on a string.
The party was so much fun! I cannot wait until another one happens. By popular vote, we’ll do it quarterly. However, I did trade contact information and hopefully a few friendships started.
Got popcorn?
Neil
So glad you guys had a good time! We were going to try and get up there, but DH had to work.
Looking forward to the next party!
then houses will continue to go up in price. Just don’t put your homes on the market right now.”
well.. an economics professor is a person first and a professor second.. maybe he’s stuck under a couple of flopped flips.. can’t sleep at night.. foresees impending doom.
And so to hell with principles and truth and professionalism in the vain battle for survival.
Test.
Why is it that the only content that’s ever guaranteed to show up is the word “test”?
I’m having a frustration attack and I swear my head is going to explode. What is with the media - I have yet to see them in one of their slob story interviews ask any obvious questions. The minute someone says they are losing their house I would ask did you every refi. If yes, next question is what did you do with the money? I’d do this before I ever asked any of the other ignorant irrelevant questions. The type of loan, who with, they didn’t know, blah blah blah, is secondary to finding out their responsibility in the sitituation. Why won’t the media do their jobs.
Its kind of like all the news I didn’t read about netbank.com going under. A lot of people at my job read the newspaper everyday and I don’t know anyone who knows about that. I hate the media more than anything. I was watching Spy Game last night and there was a scene where the CIA was manipulating the news and I just kept thinking its sad how true that is.
NYT, Saturday. Hard to get any more prominent.
They are afraid of getting too close to the fact that HELOC money propelled so much of the consumer spending and economic growth of recent years.
In other words: They are afraid of looking at the gas gauge now that the amber light is flashing.
Getting Ready for the Roof to Fall.
http://online.barrons.com/article/SB119102714463743349.html?mod=googlenews_barrons
Just got cold called by some local police benevolent society, and the lady talking told me “this call may be recorded”…
We’ve fallen to the level of a dumb beast
The media will not, because the roof is on fire and we don’t care… burn …
and we dont wanna know if it is anyway. Standing out on my deck overlooking many other houses I am still the only person standing out here, … nothing has changed see, it’s different here.
“But the forecast is for South Coast home prices to dip between 10 percent to 15 percent from where they are now until the recovery expected in 2009. The forecast is more gloomy for the North County, the area that accounts for more than 80 percent of all the defaults and foreclosures countywide.”
I’m confused by this. 10 - 15 % still doesn’t get me NEAR a house. He makes the current situation much lighter than most. Any comments or help?
At this point in time, I suppose it’s who you talk or listen to. If you listen to Peter Schiff being interviewed by Bruce Norris (under the “Radio” tab over at thenorrisgroup.com - dated 2007-08-25), you’ll hear someone who is expecting up to a 50% drop in property values pretty much across the board (along with a whole host of frightening suggestions for our financial futures).
Keep listening and reading and you’ll hear the gamut: “We’ve hit bottom and should be seeing a turn back up” all the way to “There’s a foreseeable market for short sales for *at least* another five years.”
I listen to all with a grain of salt and continue to save, pay off debt, and remind myself of what I consider affordable is not necessarily what the lenders may consider affordable.
Good luck! And hang in there!
Thanks for the info. Good luck to you as well.
“He” being Mark Schniepp
Well, there’s one agent’s name to add to my blackball list. We’d love to own someday in Los Al - but Ms. Leon will be playing no part in it - when and if that sale ever does happen.
I agree with the comments regarding the media. We have stopped taking the local paper, and if I want to read it I just go online. I do read the Financial Times as the articles do not have the US corporate influence that our media has rolled over to.
Yeah, right, like California is going to recover. I’m sorry but most of the state doesn’t make high salaries. Even in the areas that do have high salaries, does anyone think that 100K can afford a $2 million house? I suppose it’s not much better than the $8/hour Walmart junkies trying to buy the $500K condos and crap…I’m thinking minimum 80% declines in most of CA…