The Housing Hit Is Intensifying
Some housing bubble news from Wall Street and Washington. Bloomberg, “Housing starts in the U.S. plunged more than forecast to a 14-year low in September, the Commerce Department said. Building permits fell 7.3 percent to a 1.226 million pace. The number of housing starts was the lowest since March 1993. The decline was led by a plunge in construction of townhouses, apartments and condominiums.”
“Construction of single-family homes fell 1.7 percent to a 963,000 rate, today’s report showed. Work on multifamily homes slumped 34 percent to an annual rate of 228,000.”
“The decrease in starts was led by a 28 percent drop in the Midwest. Construction fell 12 percent in the South and 10 percent in the West. Starts jumped 45 percent in the Northeast. The number of homes under construction fell 1.4 percent to a 1.114 million pace and the number of properties completed dropped 8.2 percent to an annual rate of 1.391 million.”
The Street.com. “‘Starts have declined at almost a 40% annual rate over the last three months, as the problems in credit markets gave the housing market another leg downward,’ said Wachovia economic analyst Adam York. ‘We think new construction will continue to decline into 2008.’”
“Housing analysts continue to say that a reduction in overall home inventories is a necessary precursor to any recovery in housing prices, which are falling in nearly half of U.S. markets.”
From MarketWatch. “Economists were clearly shaken by the accelerating weakness in housing starts. ‘There is no end in sight to the drop,’ said Ian Shepherdson, chief U.S. economist at High Frequency Economics.”
“He noted that housing starts fell 66% from 1978 to 1981. ‘This episode will likely be worse. The housing hit is intensifying,’ Shepherdson said.”
The Guardian. “‘September’s housing starts figures were so bad I’ve just had to apologise for using a profanity out loud,’ said Paul Ashworth, economist at Capital Economics. ‘Starts peaked at almost twice that level only 21 months ago. The credit crunch may only have had a limited impact on the rest of the economy but it has devastated an already weak housing sector.’”
The Associated Press. “Homebuilders are getting gloomier about the slumping housing market, as a 22-year-old index that tracks their sentiment set a new record low Tuesday.”
“The National Association of Home Builders said its housing market index, which tracks builders’ perceptions of conditions and expectations for home sales over the next six months, fell two points to 18 in October, the lowest level since the index began in Jan. 1985. It was the eighth straight monthly decline.”
“The group’s chief economist, David Seiders, said in a statement that many prospective buyers have ‘unrealistic expectations’ about new home prices and about how much their current homes are worth in this market.”
“Nationwide new home sales are projected to fall to 805,000 this year, down 23 percent from 1.05 million last year, the National Association of Realtors said last week. If that happens, it would be the worst year since 1997, and sales are expected to drop a further 6.6 percent in 2008 from this year’s forecast, according to the Realtors group.”
“In August, new home sales tumbled to the lowest level in seven years, and the median nationwide sales price fell by 7.5 percent from a year earlier to $225,700. That was the biggest drop in percentage terms in nearly 37 years, the Commerce Department reported last month.”
From Forebes. “‘Builders in the field are reporting that, while their sales incentives are attracting interest among consumers, many potential buyers are either holding out for even better deals or hesitating due to concerns about negative and confusing media reports on home values,’ said NAHB President Brian Catalde.”
“The Mortgage Bankers Association predicts the housing recession will last until the end of the third quarter next year. And if confidence isn’t restored in the credit markets, the wait could extend until 2009, the group’s chief economist said.”
“‘Tough times,’ said said Doug Duncan, chief economist of the group, after sharing the group’s loan production estimates during a briefing with reporters.”
“‘We have a ways to go in the housing recession. It is clearly a deep recession; at this point, we figure that will dissipate at the end of the third quarter,’ he said. ‘Anyway you look at it, there are massive supplies of homes that have to be worked off the marketplace before we return to an increase in activity, and certainly in terms of construction.’”
“In fact, the publicly reported inventory numbers are likely underestimated, considering they don’t include contract cancellations for new homes or foreclosed properties that aren’t being marketed by a real estate agent, Duncan said.”
“With the current glut of homes for sale, ‘any significant increase in homebuilding is probably years off,’ Duncan said.”
“‘The day of the 100 percent loan-to-home value loan in the subprime world are gone,’ he said in an interview with The Associated Press.”
“‘If you’ve got a spotty employment record, but good financials on your credit record, you may well still be able to get credit,’ he said. ‘But if you have a spotty employment record, and late payments on three credit cards, and you don’t have cash reserves, most likely you’re not going to get the credit.’”
“‘Layered risks is what that is all about,’ he said.”
The Sun News. “Troubled home builder Levitt and Sons has halted construction at all of its home projects across the Southeast, a spokesman for its parent company said. Fort Lauderdale, Fla.-based Levitt and Sons ordered builders to stop working Thursday - the same day the parent company, the Levitt Corp., announced it would write off huge losses from its home-building subsidiary.”
“The glitch leaves home buyers in Seasons, Levitt’s planned 460-house community for people ages 55 and older in Murrells Inlet, in limbo.”
“One buyer, Eileen Behrens, had been looking forward to moving into the Seasons community next month. She said she put $42,000 down on the house, including luxury upgrades.”
“But when Behrens drove through the neighborhood Thursday, she found that all work had stopped. But as the road progressed through the development, homes were less and less complete. Frames of homes stood deserted on lots, as if a permanent lunch break for construction workers had been called.”
“‘It’s just sort of like a ghost town there,’ Behrens said.”
The New York Times. “J.P. Morgan Chase took $1.6 billion in write-downs and increases to loss reserves, in line with several of its Wall Street peers, after it suffered from a sharp drop in leverage loan values, bad trading bets, and deteriorating home equity loans.”
“CEO James Dimon was cautious about the next quarter or two. ‘Clearly there are still a lot of issues out there that will take time to resolve and there is a lot of risk on the balance sheet.’”
“Mortgage lender Thornburg Mortgage Inc. said Wednesday it lost more than $1 billion in the third quarter due to the fallout in the mortgage markets and elected not to pay a dividend to holders of common shares to conserve cash.”
“During the third quarter, Thornburg Mortgage sold a total of $21.9 billion of loans at a loss of $1.09 billion. Thornburg also posted a loss of $11.5 million to fund forward commitments.”
“The lender was forced to sell loans from its portfolio at a discount because of the declining mortgage market. Thornburg Mortgage originates jumbo loans.”
From Reuters. “Fremont General Corp, which quit offering subprime mortgages in March, on Wednesday reported a $1.06 billion loss for the 18 months ended June 30.”
“CIT Group Inc., the largest independent commercial finance company in the U.S., reported a third-quarter loss, dragged down by costs from closing its subprime home-loan unit. he loss included a $290.5 million charge for lowering the value of its home lending portfolio to reflect market conditions, following a $495.3 million charge in the second quarter.”
“MGIC Investment Corp., the largest U.S. mortgage insurer, posted its first quarterly loss and said it won’t be profitable next year as the U.S. housing market worsens.” “The net loss of $372.5 million, was the worst quarter for the Milwaukee-based company since it went public 16 years ago.”
“MGIC reported third-quarter costs of $602.3 million, more than three times as much as a year earlier, to cover losses by the mortgage lenders it insures. CEO Curt Culver said on a conference call that U.S. real estate prices may drop 10 percent over the next 18 months.”
“MGIC wrote off its $466 million investment in Credit-Based Asset Servicing and Securitization LLC, jointly owned with Radian Group Inc., after demand for subprime loans collapsed.”
“Fitch Ratings said it may downgrade MGIC’s claims-paying ability because mortgages insured in 2007 appear to be performing as badly or worse than 2006 loans.”
The Kansas City Star. “Kansas City-based NovaStar Financial Inc., scrambling to survive the subprime mortgage meltdown, plans to sell much of its remaining business and slash about half of its remaining staff.”
“The company late Tuesday announced a deal to sell its mortgage-servicing rights for $175 million to Saxon Mortgage Services of Fort Worth, Texas. NovaStar said it would use the proceeds to pay off debt. At the end of June, NovaStar had about $633 million in short-term liabilities.”
“The once high-flying company has been laid low by the woes of the subprime industry, which makes residential loans to borrowers with blemished credit histories.”
“As of June, more than 1 million mortgages were in default or foreclosure, up 50 percent since June 2005, according to a report released Tuesday by the Government Accountability Office.”
“By selling off its mortgage-servicing rights to Saxon, NovaStar hopes to buy time until housing conditions improve. Whether it can do that while other subprime lenders declare bankruptcy, close their doors or get bought out by larger concerns remains an open question.”
The Journal Sentinel. “The U.S. housing market has become an economic drag on the businesses it once fed, A.O. Smith Corp.’s chief executive said Tuesday. ‘Housing weakness will continue for the foreseeable future and may be accompanied by slowdown in other market segments,’ said CEO Paul W. Jones. ‘As subdivisions don’t get built, some strip malls and the like will be delayed.’”
“‘The first couple weeks in August, when credit dried up and everyone decided we weren’t at the bottom of the housing market after all, we saw a couple weeks with practically no orders,’ Jones said.”
The Palm Beach Post. “Treasury Secretary Henry Paulson said he wants lawmakers, regulators and lenders to focus on ‘putting an aggressive plan together and moving forward.’”
“The roots of the problem reach back to the 2002-05 housing boom, when many lenders aggressively pushed subprime mortgages. Paulson also urged Congress to ‘make some changes in our laws and rules in order to prevent some of the excesses and abuses of the last few years from happening again.’”
“‘Some of the conduct and practices that I have learned about are shameful,’ he said. ‘It is no secret that, while not the norm, some fraudulent activity on behalf of mortgage brokers occurred.’”
“A plan by top U.S. banks to set up a fund preventing the forced sale of billions of dollars of hard-to-value securities faces some serious obstacles.”
“Analysts said the pool might end up hurting existing SIVs even more by stripping them of their best assets. Nor is it clear who would manage the new pool. ‘It’s all a bit of a shell game,’ said Bill Cunningham, head of global fixed income research State Street Global Markets in Boston.”
“The chief of JPMorgan Chase & Co Inc, which is helping create a roughly $100 billion fund to bail out risky, illiquid investments, said there may be some of these investment vehicles that will not be helped.”
“JPMorgan CEO Jamie Dimon said on Wednesday the so-called super fund for structured investment vehicles, or SIVs, won’t help every SIV equally. ‘No one ever said every SIV is going to be helped,’ Dimon said.”
“‘There may be some SIVs that it’s not going to help, and that’s life in the fast lane,’ Dimon said.”
The Washington Post. “Only on Wall Street, and in its political annex, the U.S. Treasury, could someone think that the way to prevent a meltdown in structured investment vehicles is to create a giant structured investment vehicle.”
“While we’re at it, why not locate it, with all the other SIVs, in some offshore financial haven like the island of Guernsey or the Cayman Islands, where we can shield it from lawsuits and regulatory scrutiny and make sure nobody has to pay taxes until the profits are repatriated.”
“Like the SIVs it is hoping to rescue, let’s make sure it is highly leveraged, to get the best return on the relatively modest amount of real cash anyone puts into it.”
“And let’s ensure none of the banks setting up this Super SIV will have majority control or assume too much of the risk, so they won’t have to put any of it on their balance sheets or set aside their own money — ‘regulatory capital’ — in case something goes wrong.”
“Best of all, let’s use it as another chance to earn big fees!”
“International investors sold a record amount of American securities in August. Total holdings of equities, notes and bonds fell a net $69.3 billion, the Treasury Department said Tuesday. None of the dozen economists surveyed by Bloomberg News predicted the decline, the first since Russia defaulted in 1998.”
“Foreigners dumped American assets as mortgage defaults set off a surge in borrowing costs that spurred central banks to flood the banking system with cash and forced the Federal Reserve to reduce interest rates.”
‘Building permits fell 7.3 percent to a 1.226 million pace…Nationwide new home sales are projected to fall to 805,000 this year, down 23 percent from 1.05 million last year, the National Association of Realtors said last week.’
This is what has been happening for years, even as the industry touted its ’shortage.’ They are building hundreds of thousands more houses than they are selling. Why? Because artificially high prices are still rewarding them for doing so, IMO.
Reporting from the land of artificial demand, I just wonder what impact this coming glut will have on Manhattan. Your post, Ben, is exactly what is happening here. They see these rising towers as gold mines.
There is so much stuff finishing around me, just as layoffs are being announced and the dollar is dying. I expect the reports from “the financial capital of the world” to really start turning ugly in the next 6 months. They have been building for a demand that exists only inside the 4 walls of their craniums.
Dont’ forget the 421a program, which exempts new development from property taxes for 15 years.
When an exclusion area was enacted for prime areas for Manhattan in the mid-1980s, builders rushed to get foundations in to grandfather, exacerbating the subsequent crash.
Now that exclusion area is being extended to rest of Manhattan and prime areas of Brooklyn and Queens near Manhattan. The deadline to be grandfathered and get the tax break is June, 2008. Permits are at the highest level since the 1960s, when builders rushed to grandfather before a new zoning resolution limited development rights.
WT, are you in NYC or Minnesota? I always forget.
The Windsor Terrace neighborhood of Brooklyn, NY.
Is that some place in Brooklyn? I don’t leave Manhattan very often. I see big problems for Brooklyn ahead, even if their denial runs as strong as the strain being seen in Manhattan.
What problems? More affordable housing is NOT a problem! I just hope there isn’t a bubble in the future when my teenage daughters are deciding whether or not they can stay here.
Affordable housing is “bad” because it allows people to live their lives without being in a state of extreme debt and constant fear of losing their homes. That results in less control by the Wall Street Crooks, so it is a problem. Similarly, stable jobs are bad, pensions are bad, nice living conditions are bad, etc. The ideal environment is that of workers who are so in debt that they own nothing, who are stressed out of their minds all the time, who have no hope of anything, and who live in miserable squalor. Much like serfs from centuries ago: this is what the Wall Street crooks want for our future.
‘I expect the reports from “the financial capital of the world” to really start turning ugly in the next 6 months.’
Six months should allow plenty of time for da boyz at the top of the financial pyramid scheme to take the money and run.
I suspect that has aleady occurred. Look at Mozilo. He did it right in front of his stockholders faces. As did Toll.
Where is the outrage?
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The so-called stock market exists for a reason — to scam the public. Puritans in England practically shut down the stock market for some 40 years following the bubble burst of 1720s in which many middle-class people were destroyed.
Jas
Be nice. Mozilo has to pay for the education of his 9 grandkids. That makes it okay. Doesn’t it?
How many amps does a tanning bed draw?
Not enough.
The so-called stock market exists for a reason — to scam the public. Puritans in England practically shut down the stock market for some 40 years following the bubble burst of 1720s in which many middle-class people were destroyed.
Let it burn. I learned alot from the 2000 crash and this time I’ll have my pile tarped down when the wind blows
Where he is heading there will be enough heat to keep him sizzling.
I’d very much like him to be a permanent guest @ the Chateau d’if…
Bonjour, coup d’tan
What will his tan look like when he only receives striped sunlight?
Outrage PB?
Why would there be outrage over his selling? He publicly telegraphed his view of the stock price. If you chose to ignore it, you did so at your own peril.
If you’re talking about outrage over the constant spinning as to how good the market is, there is and will be plenty of outrage over that.
I can’t fault a guy for selling an overpriced stock publicly and out in the open. I can fault him for lying.
Agreed. Wall Street bonuses are usually paid out between january and march. So 6 months ought to about do it.
RE: da boyz at the top of the financial pyramid scheme
The future clients of Blackwater, once the politico’s give ‘em the boot for their cowboy inspired shoot ‘em up’s.
I see a deranged future full of empty houses that nobody can buy since we’ll all be poor, and nobody can sell since doing so would result in them booking losses on their balance sheets and going out of business…
“‘There may be some SIVs that it’s not going to help, and that’s life in the fast lane,’ Dimon said.”
Yeah baby, life in the fast lane. Lend money to the poor and expect to get rich.
The problem is not really one of lending money to the poor. The problem is rather one of making loans to people of whatever means in such a large amounts relative to permanent income that repayment of the debt is out of the question.
Hear, hear. But the stupid “subprime” meme is so firmly embedded at this point that is going to take forever for the outside world to catch on.
That sounds like an “80’s Guy” comment coming from Dimon - how retro!
and that’s life in the fast lane,’ Dimon said.”
that one can go on an HBB t-shirt.
I like it!
Dimon say Relax.
Judging from HP’s remarks yesterday and BB’s oft-expressed mortal fear of deflation, it seems the primary objective of the Fed / Treasury is to restart housing price inflation. How can they miss the obvious: That this will worsen the overbuilding problem (which tends to ramp up deflationary pressure in the housing sector)?
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“the primary objective of the Fed / Treasury is to restart housing price inflation.”
They can’t. There is such a thing as supply and demand, long-term. You can only create the artificial demand for so long, a lesson not learned from the New Deal which ran its course and in 1939 we were back to where we were before the New Deal. We have no idea what would have happened to the US economy if there were no WW II.
Jas
History texts leave out that little bothersome fact, don’t they? That the New Deal was not the lasting solution that big gov’t proponents made it out to be.
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And lot more important facts during the 1930s. I will type and post one of these days.
Jas
Yes if only they had slashed regulation and dropped taxes to a flat 5% that would have fixed everything.
1921- biggest CPI price declines w no gov “help” the economy bounced back and zoomed
We are now turning Japanese, i really think so
“1921- biggest CPI price declines w no gov “help” the economy bounced back and zoomed”
Only because Germany went ‘Weimar’ from 1920-24 and inflated the world. That ’slow’ period after the SHTF, Germany imploded, and the debt deflation spread is known as the Great Depression.
“Only because Germany went ‘Weimar’ from 1920-24 and inflated the world.”
Done because the Armistice saddled them with an unrepayable debt.
http://en.wikipedia.org/wiki/The_Economic_Consequences_of_the_Peace
At the same time, HP said he has “no interest in bailing out … property speculators.” As if there were a difference between victimized homeowners and “property speculators.” (They bought knowing they couldn’t repay, but RE always goes up.)
Everyone in and around the REIC is taking hits. Up and down and across the board, members of the REIC are writing down something. The carnage is beginning to scare the bejesus out of naysayers and even some of the bears.
Got CDO-Risk-Transporter?
It’s the financing commitments. Use it or lose it. The financing was obtained long before the credit crunch. They would rather risk troubles with their lenders later on, then to lose out on the
financing that won’t be available later on.
Why? Because artificially high prices are still rewarding them for doing so, IMO.
Unfortunately, the outcome of this housing mess and now the high oil prices is looking more and more like the 1980 -82 era. It was not a fun time back then and this looks like it may be much worse, which I hope it is not!
RE: the 1980 -82 era.
Prime @ 21%…30YR fixed mortgage interest rates @ 14.75%.
We are a long ways from those days.
However, with this unpaid for war (aka ‘Nam), peak oil, and all the various government’s Ponzi pension and entitlement schemes coming due…look for history to repeat itself.
LMAO…
WTF are these vinyl and glue POS McMansions, 2 hours outta major economic bases gonna be worth with 14.75% interest rates and $9.00 gaz?
Wheee doggies…it’s gonna be a wild ride.
We are a long ways from those days.
You are correct that interest rates are not like they were in 1980-82. On sept. 1980, I had an interest rate on a 30yr. at 13.75%. Oil is almost the same and housing inventory now looks like it is larger than it was during this period. However, what I am seeing now is a consumer who refuses to pay the high prices of the houses on the market and the consumer cutting back on spending to compensate for the high oil prices and food. That is what happened during the 1980 -82 period.
Oil spikes to $90 a barrel. According to Bernanke, this has nothing to do with inflation.
Then what is the definition of inflation? Is it all just hot air?
It will be inflation when it hurts wall street, just like the mortgage/housing mess was not a problem until WS was hurting…
LOL
Many many people are starting to come to this conclusion, myself among them.
It’s like the old joke. A slut is a woman that will screw everybody in the bar. A b*tch is a woman that will screw everybody in the bar, except me.
A balanced market is a market that crushes the little guy. A problematic market is one that starts to hurt the Pig Men on Wall Street. Bernanke and Paulson are starting to call the market a “b*tch” because it is hurting their buddies. They loved the market when it was a slut.
Wow, that was genius.
BTW- This oil story, IMO, is nothing but speculation! These overleveraged HF’s have moved from the MBS market to the oil market.
There is still upside to oil. It has made steady progress and we could see an upside breakout of $5 or more any time, IMO.
And Turkey is already lining up against the Kurds. The scariest thing, for me, is the thought that our government jeniuses will see a war with Iran as a good fix for what ails us. When governments don’t know what to do they usually choose war. And the debt peddlers love it.
The Kurds always get their way.
“Kurds” & “way”
This just in from Arab News online:
OPEC Views Recent Hike in Crude Price “With Concern”
10/17/2007
Abdullah Salem al-Badri, the Secretary General of OPEC, said his organization is watching “with concern” the recent hike in crude prices and added that market fundamentals do no justify the record price of crude. He attributed the price hike to speculators.
However, in his analysis of the situation he said the hike is rooted in a number of factors, including the consistent decline in the output of refineries due to maintenance work, the geopolitical situation in the Middle East, and the decline in the foreign exchange value of the dollar.
“I will not be surprised if it goes up to $100 or $125 a barrel sooner than expected”, he added, and hinted that the rising oil price would have its impact on many other fields of economic activity: “Inflation will grow globally. There will be all-around price increases. Air travel, especially, will become costly. And there will be a renewed cry for finding a cheaper substitute or alternative energy source.”
al-Qabas, Kuwait, October 17, 2007; Arab News, October 17, 2007
Got that? SOONER THAN EXPECTED. sheesh.
can anyone tell why the hell they always cite refinery outages and maintenance as cause for a rise in crude? shouldn’t it work the opposite? if refinery capacity is limited, demand for crude should drop off and demand for refined petroleum product should rise.
what we have now is the opposite. gas is stable and oil is rising. WTF?
This oil story, IMO, is nothing but speculation! These overleveraged HF’s have moved from the MBS market to the oil market.
I view it another way: Housing market and goverment debt leading to decline of the USD…. Oil traded in USD … oil goes up. Same with Gold.
what’s your backup for your opinion that it’s speculation? so far production has never surpassed the 2005 peak. Any visibility into the HF purchases? Just a feeling?
just initially it would seem to be an odd choice to intentionally provoke a bubble in the one commodity where it would simultaneously cripple all of your equity holdings.
maybe they’re all gearing up to cash in on the cancellation of the short sale-uptick rule. drive up an oil spike and then short the hell out of everything.
it’s a new fuzzy math. the energy required to produce goods goes up but the price of the goods stays the same. so wages must go down, or profit must go down. something got to give to maintain price stability. i’d say it’s the wages; the blue collar workers always get it in the rear end first.
According to the government CPI was up .3 %. You believe the government don’t you?
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Yes, I do! Long-term, CPI has been very accurate measure of consumer level inflation. If anything it overstates the inflation rate by 0.5-1.0%. Most of the lies come from the private sector and politicians and not from bureaucrats at the BLS and other agencies that release the data.
Jas
“Yes, I do! Long-term, CPI has been very accurate measure of consumer level inflation. If anything it overstates the inflation rate by 0.5-1.0%.”
Jas, I had to read your post three times to make sure you were actually serious. Dude, you need to spend some time at ShadowStats.com. You need to educate yourself about hedonics and substitution. The CPI is a joke since the early 90’s. If you don’t get the joke, you will pay for it soon. We’re about to go Weimar, buddy. Stuff is going to become much more important than paper. Already is. Gold and silver - canaries in the coal mine. Same with commodities in general. But even gold and silver will pale in comparison to what happens to the price of food when the buck goes Weimar.
He’s locked in for deflation for the duration…
Hard to change horses mid-race.
“CPI has been very accurate measure of consumer level inflation. If anything it overstates the inflation rate by 0.5-1.0%. Most of the lies come from the private sector and politicians and not from bureaucrats at the BLS and other agencies that release the data.”
You seem like an intelligent and well-informed person, so I’ll assume you’re joking/being sarcastic here.
Definition of inflation:
A small percentage that is added to Social Security payments and other entitlements each year. It must be greater than zero so that the recipients won’t squawk, but it cannot exceed typical wage increases. Thus, if it is formulated by some reference to prices, certain fast-rising prices (houses, oil, food) must be excluded to keep the official number within the requirements of the first two sentences of this definition.
Then what is the definition of inflation?
The definition of inflation is when it impacts him and the other political heads. A downturn or recession is when it impacts you and a severe recession is when it impacts you and I.
Our cats are potty-trained and I take my dumps in a litter box. I am an economist. It makes sense to me.
“Our cats are potty-trained and I take my dumps in a litter box. I am an economist. It makes sense to me.”
I almost hacked up a hair-ball on that one.
Wow, now there’s a visual.
I think you’re going to need some more kitty litter. This thing is stinkin’ the place up.
Holy moly. We need a digest of Ben’s digest.
I think we are officially out of the first inning.
We were listening to NPR in the car on Sunday. Yes, we were on vacation and I drove for the first time since 2005. That was weird. The woman at the beginning of the NPR program said, “with housing in a handbasket” and I quote. We are out of the first inning when NPR knows that housing is toast. I think this is less like a baseball game and more like the fight in Rocky I. Rocky just knocked down Apollo Creed. I can’t wait for the part when Rocky calls Apollo over and collapses his rib cage. That should be fun.
Neil, pass the popcorn and a couple Jaeger bombs. My wife and I are thirsty.
“drove for the first time since 2005″ — ha ha, I wondered who that novice driver with NY plates was, right in front of me through NC/VA.
Agree with your diagnosis of innings and/or boxing match.
Wrong! We had Jersey plates. I was the one that gave you the finger when you cut me off outside of Richmond.
City, I call foul.
You can use that kind of language with nitwits like me, but be more civilized when communicating with genteel posters such as az_lender.
Besides, she’s got a whole lot of money.
“Agree with your diagnosis of innings and/or boxing match.”
I’ve rethought my metaphor. I think it’s more like the Andrew Golotta/Riddick Bowe fight where Golotta kept hitting Bowe in the johnson. Eventually the fight got called due to the excessive amounts of low blows. The housing market is beginning to learn just how Riddick Bowe felt when Golotta’s fifth punch to his willy was landed. Only this fight won’t be stopped and there are plenty more where those shots came from.
A better Rocky analogy would be Ivan Dragov vs Apollo Creed in Rocky IV. Apollo Creed playing the part of the “NAR Cheerleader”. The next scene was at the cemetery!
Yup, in this world Glotta drops to his knees and begins to speed-bag the smegma right off Bowe’s sack, as the ref looks on in amusement.
ROTFLMAO !!!
Actually, in SF, the NPR station was ahead of the SF Comical in reporting the state of the RE market. Way late and not by much, but still ahead of the MSM.
About that 28% decline in Midwest construction - a local observation made just last night…
2005 - the northeast corner of Peterson & Jersey on Chicago’s North Side. A rather substantial and modern three story bank building is torn down to make room for 2 & 3 bedroom condos in a mid-rise.
2006 - A sales trailer is erected - lot is empty.
Spring 2007 - lot sits still empty until new banner proclaims that smaller units will be offered - studios and 1 bedrooms. Very, very unusual for a location so far from the lakefront.
October 2007 - Big New Banner - “Land for Sale - Build to Suit”
We were driving through Newark, NJ yesterday. It was not a good part of Newark, if there is one. In the midst of a neighborhood that looks like a war zone there was a building with a large sign that read “Luxury Condos”. Incentives include an AK47, kevlar vest and free Last Will and Testament services. People still don’t understand the level of insanity involved in this Mania.
There is a good part of Newark, along Branch Brook Park and the city subway. Whenever NY area housing bubbles are at their peak, that area is “the next hot neighborhood.”
Ironbound isn’t bad either.
When I was in college in Newark (NCE=>NJIT) two of my lab partners were Portugese from Ironbound. Their grandad made wine in the basement, lots of it. He was generous and liked me because I helped his grandkids with lab reports. Lots of bathtub wine. That’s all I remember about Ironbound.
Ya just can’t make this stuff up (can you?)
Smiles,
Leigh
Here in Portland, Oregon, Arbor Custom Homes has a new development planned in NW PDX. They had a sign saying “Available, Spring 2006″. Then they changed it to “Fall 2007″. Now leaves are falling, but all they have is a brick wall around the area of development and some construction roads. The foundations are being laid so slooowly, at this rate, the development may finish, if at all, by 2010. My guess though, is that they may run out of cash soon and leave this “Archeological” monument. These were all $500K+ homes targeted towards migrating Californians.
We are seeing similar things here in Pullman, WA. Realtors don’t bother to update MLS listings for lots, so many/most now say “buy now and build in the summer of 2006″.
You had a bubble in Pullman? Wow! I thought it was a sleepy town with endless supply of land (Lived there ‘84-86). But I felt the same way about Missoula, MT too; it felt like Southern Cal seeing it after 21 years .
Huh?
“The group’s chief economist, David Seiders, said in a statement that many prospective buyers have ‘unrealistic expectations’ about new home prices and about how much their current homes are worth in this market.”
So, they think that their homes are worth peak prices, but they should pay rock bottom for the home they want? Hmmmm… Well, that sounds about right for the clueless American consumer.
Perhaps if the RE establishment stopped lying to them on the sale side they would be a bit more realistic. In FL, the RE people should say to sellers “Listen, this market is crashing and will be falling for years. We are going to list at XXX, and every 2 weeks we are going to drop 5% off the price until it sells”..
At least set the expectations correctly.
Please refer to my post above regarding economists. Excuse me for a few minutes while I hit the litter box.
“Starts jumped 45 percent in the Northeast.”
WTF?
This can be only good news for us bubbleheads in the northeast. The only thing I can think of this is that they opened things up to cast footings and foundations before the subgrade freezes.
Anyone else?
They flipped a quarter in the air and said, “heads we lie and tails we lie even more”. It came up tails and housing starts in the Northeast are now up 45%.
lmao….. How could I forget. It’s because the economy is roaring here. Why? Because it’s different here.
Having developed land in the northeast for the last 20 years, I can attest that the approval process in most “hamlets” takes forever. It’s not a three month slam dunk like most of the Colorado front range corridor. We have a piece of ground in Massachusetts that has been in the approval process for seven years. I think you’ll find the pipeline much tighter in the northeast that in the rest of the country, imho.
boulderbo…. I don’t buy that. If that were the case then every quarter or even every month would look like a roller coaster if viewed over say a 5 year period. Not to say that permitting isn’t difficult in the northeast. A 45% jump in either direction isn’t typical at all.
I’m guessing a lot of people in the northeast are going to find their pipelines substantially loosened by the time this mess is over.
LMAO……
I think that there is an error in the 45% up in the northeast. My cousins own a well established surveying business, and they have not seen a request for a subdivision in their area (SE mass) all year. In fact they are surviving doing plot plans and line demarcs. No Form A subdivisions, mean no new starts, at least around here. They of all people would be the first in the pipeline to see subdivision plans, as you need those to get approved by the planning board, and then get a building permit.
It’s different here …. NOT
I almost believe the 45% statistic. Chittenden county VT has yet to catch onto the fact that the party is over. Homes over 450k+ aren’t moving at all, condo sales are stagnant and slow and sellers are dropping prices at all. Inventory is also rising slowly and steadily.
Add to the fact that there are a bunch of developments in start up mode leads me to believe that the pain is just beginning here. I personally hope some of the local developers lose their shirts. Is that evil of me? Mwahh haa haa……
>
should read: condo sales are stagnant and sellers aren’t dropping prices at all
Wish one could edit ones posts. I’m so damn sloppy…..
vthousingbear,
I know a number of private builders who lay up shacks in Rutland, Bennington and Addison counties. Everyone one of them is a clown from NJ, NY or CT who actively encourage more clowns from elsewhere to move in.
RE: “Starts jumped 45 percent in the Northeast.”
Source?
My guess it’s some propogandists tryin’ to keep the RE ad money comin’ into the Globe.
“Analysts said the pool might end up hurting existing SIVs even more by stripping them of their best assets.”
Nice cherry picking scheme. It reminds me of my sister’s former career as a health insurance salesperson at Colorado ski resorts. The best health insurance customers are the ones with lots of money and few health problems (like people who frequent ski resorts).
“Only on Wall Street, and in its political annex, the U.S. Treasury, could someone think that the way to prevent a meltdown in structured investment vehicles is to create a giant structured investment vehicle.”
Heavy drinkers have understood this hangover treatment approach for centuries.
http://en.wikipedia.org/wiki/Hair_of_the_dog
It is starting to become painfully clear that the amount of overbuilding is staggering. The reverberations of the housing implosion will be felt far and wide. The dollar is in the crapper and $90 oil is just around the corner. Yesterday I paid $3.18 per gallon (east bay area). Fortunately my commute is less than 10 miles. I cannot imagine what commuters out towards the central valley are going to feel like. Anyone else thinking that it may be a good time to stock up on ammo and canned goods?
Gas was $2.53 per gallon in New Jersey. It was my first time buying gas in 30 months. You Californians get screwed more ways than Jenna Jamison.
My employer is paying 3.29/gal to fuel up my diesel pick up.
That may be so, but I wouldn’t exclude New Jersey from places where people are getting screwed (property taxes, insurance premiums, etc).
Don’t get me wrong. That little drive on the NJ Turnpike sure wasn’t free of charge.
The Emp has figured out the go to work/don’t go to work line, that must not be crossed. It’s a gas.
Once it costs more to drive your chariot to work & back, versus than actual take home pay, a lengthy sit home strike will occur.
Call it the “Norton” line.
I have a crystal ball and it says “record highs for heating oil, winter ‘07.”
So glad I locked in a nice low rate
keep in mind also that new jersey gas includes full service (or at least someone pumping it for you). in calif. you have too pump your own gas unless you want to pay 30cents or 40cents more per gallon
This is exactly why I rent 2 miles from work.
2 miles?!?!? Damn, that’s a long way
My walk can’t be more than 1.5 miles…
My walk’s about a quarter mile…
I paid a bit over 3 bucks yesterday, here in Washington state.
Oh, and I’m already stocked up on ammo and snacks.
Kansas City MO. $2.45 gal
‘Yesterday I paid $3.18 per gallon’ Yesterday I paid $2.96 per gallon here in Salinas.
In 1967 1 Troy Ounce of Silver bought you 4.5 Gallons of Gas.
In 2007 1 Troy Ounce of Silver bought you 4.5 Gallons of Gas.
in 1967 1 Troy Ounce of Gold bought you 125 Gallons of Gas
in 2007 1 Troy Ounce of Gold bought you 250 Gallons of Gas
Ahem…yes and yes.
Yes Sir. I’ve been talking ammo and canned goods for some time. Regrettably it won’t be long now…
I paid $105 for 400 rounds of .223 with a real ammo box.
–
“Hits just keep on coming.”
And we are only in the second inning.
Jas
“‘Some of the conduct and practices that I have learned about are shameful,’ he said. ‘It is no secret that, while not the norm, some fraudulent activity on behalf of mortgage brokers occurred.’”
Der paulson was shocked, shocked, shocked…
That fraud was going on in his casino
“…while not the norm…”
There were normal lending practices being followed 2003-2007? News to me.
“He noted that housing starts fell 66% from 1978 to 1981. ‘This episode will likely be worse. The housing hit is intensifying,’ Shepherdson said.”
Yes, it’s intensifying - which is what happens when the general population has ready access to information that was difficult, if not impossible, to obtain 30 years ago. The collaboration taking place in the emerging Web2.0 World is sure to accelerate the downturn in housing beyond anything we’ve seen before.
For anyone who might otherwise believe the Uniontrib’s spin that the jumbo loan issue was merely a temporary summer blip here in San Diego, I assure you that is not the case. The rate has dropped back about 0.5%, but the sticking point is actually having to document the income and coming up with 5 or 10% down. I visited a good friend in SD over the weekend who is a mortgage broker (wife is a loan officer), both out of work. I was frankly shocked to hear that both have given up and are getting out of the mortgage business (well effectively the decision was made for them). These are 2 of the biggest housing optimists you can imagine up until the past few months. They said they have plenty of people contacting them for loans around SD, but few can document enough income and come up with a down payment. The few that can typically overestimate their equity by at least a 100K and once the appraisal comes back they drop away in shock and horror, their dreams of cashing out or moving up greatly diminished or gone.
“They said they have plenty of people contacting them for loans around SD, but few can document enough income and come up with a down payment.”
This is why it will take years for this market to recover. Saving 5% or 10% for a downpayment isn’t something that just “happens”. Not with groceries and gas and health care all going through the roof.
It can take a few years for someone to get their financial house in order to purchase a home. So, if that’s what we’re back to, we can all comfortably sit back in our rentals and have at least 2-3 years of popcorn in our cabinets.
Oct. 17 (Bloomberg) — Cheyne Finance Plc, the structured investment vehicle managed by hedge fund Cheyne Capital Management Ltd., may not be able to pay its debts, receiver Deloitte & Touche LLP said today.
The receiver declared an “insolvency event,” it said today in an e-mailed statement. An insolvency event means the SIV “is, or is about to become, unable to pay its debts as they fall due,” according to its prospectus.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a2O7DQ4MZz8E&refer=home
“Moody’s cut the SIV’s top credit ratings on Oct. 4 by as many as 12 levels to Ba3, three steps below investment grade”
A whole two weeks warning, wow those Moody’s guys are really on the ball these days.
That’s life in the fast lane.
The Dude: Jesus, man, could you change the channel?
Cab Driver: **** you man. If you don’t like my ****in’ music get your own ****in’ cab!
The Dude: I had a rough…
Cab Driver: I pull over and kick your ass out!
The Dude: Come on, man. I had a rough night and I hate the ****in’ Eagles, man.
Surely make you lose your mind…
From MarketWatch. “Economists were clearly shaken by the accelerating weakness in housing starts. ‘There is no end in sight to the drop,’ said Ian Shepherdson, chief U.S. economist at High Frequency Economics.”
You know, even if you don’t think it will ever get there, zero is definitely as far down as new housing starts can go. It is visible in the sense that you can comprehend the possibility. Not knowing when the bottom will hit isn’t the same as not knowing the bottom that can be hit.
I suppose if there comes a time when bulldozing permits exceed construction permits, that could possibly be defined as negative housing starts.
Does anyone besides me wonder how 963K SFH and 228K condo starts adds up to 1226K starts? I get 1191K, don’t you?
Someone posted yesterday that a Federal Court issued a decision in a case that indicated that the coin value of gold is its taxable value, not its actual market value. Can someone post a link to this story, perhaps elaborate a bit?
Wasn’t me, but try this.
Thanks. It’s still unclear. What happened appears to be that the employers was acquitted on criminal charges brought by the IRS for willful tax evasion. I don’t know if it necessarily presents a legal decision that a silver coin stamped as 1 dollar will be taxed as 1 dollar.
“The essence of the argument is that under the Constitution
Congress is obligated by law to mint and circulate such
coins as demand requires, and must establish the value of
coins as they are used as legal tender, but the coins’
market value, arising as valuable personal “property,” is a
distinct, separate attribute of such coins, and is of no
legal consequence if the coins are used as legal tender.
In other words, if a worker is paid with such coins, his
taxable “income” (if any) can only be the face value
indicated upon the coin money paid — i.e., $1.00 for a
circulating silver dollar or $50 for a circulating gold U.S.
coin. Not surprisingly, the IRS has never issued any public
guidance regarding this significant issue.”
Its a known fact that the metal content in a penny and a nickel (pre-?) is higher than the face value and no one is prosecuting people for tax evasion for transactions that involve these coins. In addition there are a number of old high silver content dimes, quarters, etc. that one comes across every now and then. No one is charged with willfull tax evasion when using these coins in transactions either.
Its a very interesting loophole.
Could this be the reason that the US Mint stop selling gold coins?
Maybe they are going to put $800 on the coin value, instead of $50?
Sure its the “Bob Kahre” case.
He paid his employees in silver and gold currency and was accused by the Government of defrauding on taxes. Out of the 24 defendants one plead guilty in 2005, the others went to court and won, the government appealed and the ruling was upheld. It is a very important ruling.
The only news (MSM) article was from the Las Vegas Review Journal
link
http://tinyurl.com/ynsnvk
OK, I’ve read both articles now. I’m willing to bet that the IRS won in a prior case, that the employer was required to pay FICA based on the market value of the coins (and the employees should have reported income based on the market value.) These articles merely refer to the CRIMINAL trial, to decide whether they KNEW what they were doing was illegal, and not just a mistake (the article remarks that the sister of the biggest offender “conceded” she might have made a mistake.)
I would be very careful about imitating this scheme.
Mr. Kahre does not go to trial until January.
The IRS lost the first case appealed and lost the second case.
The problem that may occur for Mr. Kahre is not paying minimum wage.
I read that story but cannot convince my business partners to try it. It would seem like the company would have to intentionally take a loss by buying coins at $800 each and “selling” them by spending them at $50. The IRS would get its money when you sell your $50 of “income” for $800 and get a $750 capital gain. That is still much better than paying 15% in FICA on top of your 15-35% income tax. If you have a years worth of “savings” in the bank then you can convert your savings to Gold and spend your savings thus deferring taxes. If you sell the gold of slowly enough and receive cash for it then you can probably avoid paying the capital gain as well.
For a business, I agree.
For an individual trying to eliminate potential tax problems for heirs. e.g. I can give my children and g’kids 21K each per yr. with no tax problems, now I can unload 1050 $20 circulated gold eagles to each child and g’kid. No taxes to be paid.
The REAL story ?…
The Journal Sentinel. “The U.S. housing market has become an economic drag on the businesses it once fed, A.O. Smith Corp.’s chief executive said Tuesday. ‘Housing weakness will continue for the foreseeable future and may be accompanied by slowdown in other market segments,’ said CEO Paul W. Jones. ‘As subdivisions don’t get built, some strip malls and the like will be delayed.’”
His SOLUTION
A.O. Smith is hunkering down for tougher times - trimming inventory, moving faster to pass on its rising materials costs and closing three older manufacturing plants - sooner than anticipated, he said. The company plans to close two plants in the South and one in Hungary and move their production to Mexico and China
RESULTS
Another example of “concerned” US CEO soapbox news speak and Corporate “bottom-lining” the US Worker and the American Economy with offshoring to cheap labor:)
I’d better act now to get my decent quality American made hot water heater.
“‘No one ever said every SIV is going to be helped,’ Dimon said.”
Priceless! Maybe they should name it Super-Conduit-Noah’s-ARM. Only the paper that protects our cabal gets onboard. The rest of the market ruts in hell. That’s how you build confidence.
1985: HIV is a raging epidemic spreading wildly throughout the known human world.
2007: SIV is a raging epidemic spreading wildly throughout the opaque financial world.
Oct. 17 (Bloomberg) — Standard & Poor’s lowered ratings on $23.4 billion of subprime and Alternative-A mortgage securities that were created as recently as June.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aSlzZnAfN3u8&refer=home
Is that bad?
It’s a stinker.
“I think we are going to need a bigger boat.
“He noted that housing starts fell 66% from 1978 to 1981. ‘This episode will likely be worse. The housing hit is intensifying,’ Shepherdson said.”
This appears to have been a historical instance of the housing sector leading the rest of the U.S. macro economy into a recession. According to NBER, the economy was in recession from 7/81 through 11/82.
http://www.nber.org/cycles.html/
P.S. Don’t worry — lightning never strikes twice.
It won’t hit bottom until they are naming housing starts and not numbering them.
Home depot closed two truss plants in Florida and may close the last one in the next few weeks.
A healthy bad move.
Truss, but verify.
It occurs to me that if accountants allow large, multi-line financial companies to gradually write off their mortgage losses, earnings in other business lines could spare them a catastrophic hit. Mortgage companies? Not so much.
Ditech parent company will cut 3,000 jobs
http://tinyurl.com/22v734
“As of June, more than 1 million mortgages were in default or foreclosure”
More than 1 million houses going on the chopping block !!! No where to hide anymore.
Scary thing is, June is ancient history.
I got 2 posts eaten yesterday and the day before concerning the San Fernando Valley area of Los Angeles. Simple version: Drove through a mexican ghetto which used to be white blue collar. Abandoned cars. Sofas and easy chairs dumped on the sidewalk. Street people collecting cans out of the trash. I then passed a nearly finished construction site. On either side of the site, the apartment buildings were seedy and run down, offering 1 Month Free rent. Lots of mexican women dragging 3, 4, 5 kids around behind them. A sign outside the nearly completed construction site said, “PRICES RANGE FROM $725,000 to the low $1 million. I almost crashed! At the MOST these new residences are worth $195,000 to $225,000. What a sick joke property has become.
yawn. check your calendar. SFV been that way for 20 years. what you describe in 2007 is Costa Mesa, Anaheim, San Pedro… Bienvenidos a Alta California.
north hollywood?
North Hollywood use to be my hood growing up. Just to bother the realtor, I went to a open house ($1M) by N H High School 2 months ago. You’ve got to be on hallucingenics to think a 1949 home 2,100 sq ft in area is worth that, granite and viking stove included. Wow, $1M in North Hollywood. I guess renaming that area “Valley Village’ justifies it. Good luck getting it sold for that much. Inflated appraisals are toast. That house is worth $289K, not $1M.
We’re paying cash. When the Amero kicks in, who knows how screwed up us Baby Boomers conversion from investments to cash will be. I want no debt, investments, and low living expenses. Scary times.
Bloodbath continues nationwide and the end is no where near, no matter what Wall Street and the fed tell you.
Just drive around, why watch CNBC, builders hire college students to do flips in the air while holding up for sale signs, for rent and banh owned notices taped on the windows and doors are all you need to know that a recovery is far away. When you start seeing sold signs and no more cheerleading students on the corner yelling at you to give us a look you will know that a recovery is here till then sit tight, the road is going to get stagecoach bumpy?
My 100% foolproof system for failure:
#1. Property market bubble. Joe America jumps in as the smart money is getting out. Stock market bubble. Joe America gets in as the smart money is getting out. The merry-go-round goes on. Property market bubble. Stock market bubble, ad infinitum.
#2. Average Joe America gets in when the property market bubble is about to burst - and gets reamed.
#3. Average Joe America gets in when the stock market bubble is about to burst - and gets reamed.
The system never fails.
This is known as a perpetual money pump. The pump’s address is on Wall Street, NYC.
Yeah but it’s different this time!
Financial markets
Banker, heal thyself
Oct 16th 2007 | NEW YORK
From Economist.com
Banks seek life in the debt markets
CAN a group of banks succeed where the monetary authorities have failed? Despite the best efforts of central banks to deal with the credit crunch that took hold over the summer, some debt markets remain dysfunctional. Buyers are still on strike in an important part of the market for commercial paper (short-term corporate debt): the bit in which so-called structured investment vehicles (SIVs), which have mushroomed in recent years, borrow in order to invest in higher yielding assets. Now many of those vehicles are finding it difficult to roll over their debts and the banks that stand to lose most from their demise are scurrying for solutions.
http://www.economist.com/finance/displaystory.cfm?story_id=9974211
Ahem…it won’t happen.
Whether the scheme works remains to be seen. It looks rather like the Resolution Trust Corporation that was set up to liquidate America’s failing savings and loan institutions in the 1980s, points out Brad Hintz of Sanford Bernstein, a research firm. But while the design is proven, the banks may struggle to reach agreement on a host of issues, not least the price at which to mark assets bought. Though the banks say they want to get the fund off the ground within 90 days, some analysts think it will never fly.
Even those who support the fund admit that it is, at best, a temporary solution. As one banker puts it, it is about buying time so that the real problems facing the debt markets can be sorted out. In the case of asset-backed commercial paper, the two biggest are the inherently unstable structure of SIVs and their lack of transparency. Not only do they sit off their creators’ balance sheets but they do not even have to publish their holdings. Only when these underlying issues are addressed is confidence likely to return.
Hoz, as per our bet, I will extend 1 Dec to 30 Jan, if it pleases you.
Curtsey,
Leigh
Sure…. You are overly generous said the fly to the spider. LOL
The only condition is that when I win you donate the funds that would have gone into the purchase of the fine libation to the Salvation Army. There have been many layoffs and insufficient moneys for the good works they do. :>)
A glance at the accompanying graph tells it all.
House prices
A hole in the roof
Oct 17th 2007
From Economist.com
HOUSE prices in America are sliding. The S&P/Case-Shiller national index, the broadest gauge of prices, dropped in the second quarter of 2007 by 3.2% compared with a year earlier. Prices peaked in 2006 after rising by 134% in the previous decade. Buying property for investment accounted for a rising share of the market during the boom. Housebuilders responded to the surge in demand. The number of housing starts jumped from 1.5m, at an annual rate, in August 2000 to a peak of 2.3m in January 2006.
http://www.economist.com/daily/chartgallery/displaystory.cfm?story_id=9976467
Paul McCulley was just on CNBC begging for 100 basis point rate cut. Why not 200? or 300? The whole thing is sliding out of their control now.
I’ve asked that question before, and others here have remarked how Bernacke has “telegraphed” his punches, he WILL lower rates. So why not just address the calamity and go all the way?
#4. Average Joe America finally realizes what’s up and says “F@ck it!”, then quickly leaves country and becomes Average Joe Canada.
At which point the NAU merger occurs and J6P realizes he can run but he can’t hide…
At which point the NAU merger occurs and J6P realizes he can run but he can’t hide…
Some of us will be much further than that. If you want to find me, bring a machete, the jungle is thick…
“Foreigners dumped American assets as mortgage defaults set off a surge in borrowing costs that spurred central banks to flood the banking system with cash and forced the Federal Reserve to reduce interest rates.”
Sounds like foreigners had the sense to run for higher ground before the Fed’s liquidity tsunami hit the shore. Who is buying American assets these days?
Foreigners will still buy our real assets, just not paper ones.
The Japanese tried that at the onset of the last U.S. housing bust. It did not work out very well for them.
What real assets?
Assets generate income. Houses are not assets.
I don’t know if anyone has posted this yet, but I think it’s a great read.
http://www.newsweek.com/id/52626
Good Post Inland Empire and it shows you where Paulsons head is at. Why it wouldn’t be justice to go after the Wall Street Boys that peddled crazy money into the real estate market with fraudulent risk ratings is the big question .
There is a house for sale around the corner from my childrens elementary school, with a ” Bank Owned ” placard on the bottom of the sign.
Decent Fair Oaks, CA neighborhood, middle class, no gang bangers, etc.
This house caught my attn a few months ago. Listed at $249k. Been watching it sit on the market since then as I travel daily to the school nearby, and whats really telling is seeing many cars pull in the drive to check it out, but it still sits there unsold. Maybe people have FINALLY wised-up about the market … no more stupid stampedes to buy Buy BUY !!
That same house in that price range would gave been gone in 3 minutes last year. I’m tempted to call the listing agent & offer $150k but you just KNOW he’s gonna hem n haw. I block my caller ID , which agents HATE and wont even answer an incoming call, because they cant call the prospect back later for more ” opportunities”, so when I unblock it, he’ll never leave me alone on his prospect list . Not worth the hassle.
sidenote: since the spouse wants to take a small HELOC loan on the present residence, and I cant talk her out of it, I can at least control the process & minimize the damage as much as possible. Like no personal home or cell phone numbers, mail contact only . .. fine tooth combing the closing docs for junk fees …. RE lawyer reviewing docs … etc . It’s nice not to NEED a loan, just want one for convience, and no rush either. I’m sure I’m causing hundred of RE people to swear at their screens in anger!! heh heh.
(Now all you mortgage parasites .. er ‘ professionals’ that are drooling for a client dont even bother spamming this name; its a dead drop box name.)
Not just drug dealers will get burners (Disposable Cell Phones). Those of us wanting to avoid RE agents will
roundsparrow
so a disposable cell phone = ” burner ” ?
interesting slang.
especially telling since an interview with a telecom exec over the NSA flap/data release stated that NSA mines phone numbers back 2 generations form the original. As in, the person you called/called you, then a list of all numbers THEY called/called them, then another list of numbers generated off anyone from that list called/received.
Of course it’s breen ongoing for awhile - just not public info …. until now.
Yup, learned that from The Wire. But even with a burner, the government can track you.
No news - we have lost ALL fvcking rights to privacy. Gov’t could be monitoring us right now- you know - revolutionary types…..
call from another phone….
For the first time in a while, I see the hand of the PPT in the market today. This comeback was unnatural, and they smacked gold just for fun.
They are leaning in to the recession worries sparked by BB and HP confessionals yesterday that the housing market poses dire risk to the U.S. economy, plus a dismal beige book reading, plus rampaging oil and other commodity prices…
Home prices fall, but many still can’t buy
I like this quote: “Last month’s sales were roughly equivalent to one transaction for every real estate office in the county, based on a 2005 Census count of brokerages.”
http://tinyurl.com/36vtyb
I can see all the realwhores in each office like pit bulls on a piece of meat. Now THAT would make GOOD TV!!!
“The group’s chief economist, David Seiders, said in a statement that many prospective buyers have ‘unrealistic expectations’ about new home prices and about how much their current homes are worth in this market.”
From the consumer standpoint it is called “affordability” The new home market went through the ceiling in terms of pricing. That fed the secondary market which in turn increased in pricing. It’s a market out of control. The builders could have not increased their prices, but greed was more in place than common sense. Now it is payback time for the greedy!
“The builders could have not increased their prices, but greed was more in place than common sense.”
The builders are not responsible for the price increase. This was a consequence of the loose lending. If anything, the builders have done the most of any REIC constituent group to deflate prices, through massive overbuilding.
The builders are not responsible for the price increase.
I agree it was a consequence of loose lending, but the ultimate reponsibility of price increases lie directly on the builders. All they were doing was building more and more while increasing prices almost weekly.
“…but the ultimate reponsibility of price increases lie directly on the builders.”
We will have to agree to disagree on this point. Any builder who did not raise their prices during the mania would have (1) left money on the table; (2) quickly run out of inventory. The same thing would happy at your local supermarket if the grocer summarily slashed the price of bread by 50 percent.
It is not the builders’ fault that overly stimulative monetary policy crippled the invisible hand.
P.S. The same thing would happen at the gas station if pump prices were capped to mitigate the effects of rising oil price on gasoline prices (remember the Nixon gas lines in the 1970s?).
I got more information about my old house Sonoma County, CA (after selling it for $560K at the peak). So it became an REO two months ago with the bank buying it back for $470K two months ago. They have it on the MLS for $419K now. Redfin is offering $8K cash back. That’s a total $149K (26.6%) loss not to mention carrying and transaction costs.
I should make an offer for $300K — the same price I paid in 2000. Although if I rented it out, I probably would be cash flow negative. So in a way, it’s still not a good deal with a 46.4% discount!
And if confidence isn’t restored in the credit markets, the wait could extend until 2009, the group’s chief economist said.”
This jerk just does not get it. The problem is affordability, nothing else!!!
As long as buyers and lenders remain confident, the buyers will be willing and able to get any home they want at any price. Budget constraints only exist in economics text books, not in the real world.
Just in case this wasn’t posted…from a couple of days ago…this guy is such a tool
Broker Watts says housing slump may end soon
http://tinyurl.com/2kymme
Foreclosures mount in some Orange County neighborhoods
http://tinyurl.com/2k5bya
Test
The test worked!
http://www.fool.com/investing/general/2007/10/16/more-housing-hanky-panky.aspx
The Corporate clowns have lost around $70 Billion in the past couple weeks, and here’s another $70 Billion they lost.
“International investors sold a record amount of American securities in August. Total holdings of equities, notes and bonds fell a net $69.3 billion, the Treasury Department said Tuesday. None of the dozen economists surveyed by Bloomberg News predicted the decline, the first since Russia defaulted in 1998.”
“Foreigners dumped American assets as mortgage defaults set off a surge in borrowing costs that spurred central banks to flood the banking system with cash and forced the Federal Reserve to reduce interest rates.”
Housing Even Hairier
By Seth Jayson October 17, 2007
Did you expect anything different? Today’s latest housing numbers show a situation that’s going from worse to … um … let’s just call it worser.
http://www.fool.com/investing/general/2007/10/17/housing-even-hairier.aspx
Top News
Bush says soft housing market needs help
Published: 17, 2007 at 3:40 PM
WASHINGTON, Oct. 17 (UPI) — U.S. President George Bush said he supports measures to keep a housing recession from spilling over into the larger economy.
http://www.upi.com/NewsTrack/Top_News/2007/10/17/bush_says_soft_housing_market_needs_help/8156/
What “meaures” does Bush think will be effective in stopping this tsunami from hitting the economy broadside? Aside from starting another war, this one with Iran, which will be the final nail in the country’s coffin, there ain’t jack the W or his diminuitive pal Cheney can do. So much for the Decider.
Bailing out Wall Street - again
The US Treasury’s troubling plan to overcome the home mortgage meltdown leaves many questions unanswered.
Dean Baker
October 17, 2007 8:00 PM | Printable version
Twenty years ago the stock market experienced its largest single-day dive in history, with the Dow falling by 22.6%. The next day, Alan Greenspan, newly appointed as Federal Reserve chairman, ensured his everlasting status as a Wall Street icon by engineering a rescue of the market. Greenspan coordinated arrangements with the major banks who stood behind the specialty brokers that make the market. This restored liquidity to the market and brought Wall Street back to life.
This history is noteworthy now, not just because of the 20th anniversary, but also because we seem to have a new bailout in the works. According to press accounts, Treasury secretary Henry Paulson has made arrangements for several major banks to form a bailout fund.
http://commentisfree.guardian.co.uk/dean_baker/2007/10/wall_street_bailout.html
The problem with the housing market runs far deeper than just real estate prices dropping with no end in sight. This is a problem which has become a vortex or a black hole, sucking in the real estate market, the stock market, the economy as a whole.
We haven’t even begun to see the ramifications yet. There is a massive storm on the horizon, and the first raindrops have fallen.
This is why you’ll see more and more appearances by White House officials, the president, the Sec. of Treasury, the Fed and so on. They are trying to figure out what to do about it before the whole thing collapses.
And of course, there is nothing they can do. There is no amount of money which can solve this problem because it’s not a money issue. It’s an issue of a system which has progressively shown signs of distress. The real estate prices over the last few years have been like a patient with a fever, which goes higher & higher before the patient finally succumbs.
All they can do is sit and watch. Bankers around the world are in the same position. The Bank of England’s bail out last month was a tiny band-aid on a huge problem. Bottom line: the Bank of England is now a proud owner of a largely worthless portfolio becuase no one wants to buy Northern Rock’s paper.
This is also an implosion which will pull in the entire world before it’s through.
I would suggest to anyone watching the implosion to wait about 2 years before buying anything. There will be lots of Soap Opera, melodrama, big price cuts. The temptation to buy will be enormous.
But…..the best prices will come around 2 years from now. You’ll be able to buy for about 20 cents on the dollar.
If you’ll be able to buy for 20 cents on the dollar, I would imagine that a lot of us here might not be in a position to buy even at those prices. No economist here, but it seems to make sense that prices will ultimately go back to pre-1998 levels plus, say, 5% per year - in essence, a return to what would be expected prices today had there been no bubble.
ok so this post is real estate related … somewhat …
been renovating 2-story house & I gotta say its getting to be pretty interesting and, ok I admit it, fun !
fun as in learning new terms & playing with power tools:
like- compound laser miter saw.(chop saw). radial arm saw. drywall patch kit. GFC. sand filter vs. DME filter vs. cartridge filter. wireless doorbell vs. wired. OSB board. belt sander/orbital random sander. 18V drills. HOA CC&R’s. recycle day/green waste day. lot lines. setback. planning commission.
Ok G’head all you veterans laugh away - no prob! I laugh at myself too. been an apt dwelling free spirit so long this home thing is quite an experience, and if there is another HBB party in the area I owe all you regs a round of drinks, with my appreciation for all the info/tips !!
I never knew home ownership was such a complex faberge’ egg !!
We are in a war economy, Haliburton stock is up 500%, Black water is doing
well too (they have to be making something on 100,000 mercenaries in Iraq)
Relax, the returning soldiers will need to be housed, Sacramento will be the new Levitown
4 out of 5 charlatans recommend Gulfstream V, for a border run.
6,500 one way miles is your max range…
http://en.wikipedia.org/wiki/Gulfstream_V
“Only on Wall Street, and in its political annex, the U.S. Treasury, could someone think that the way to prevent a meltdown in structured investment vehicles is to create a giant structured investment vehicle.”
“While we’re at it, why not locate it, with all the other SIVs, in some offshore financial haven like the island of Guernsey or the Cayman Islands, where we can shield it from lawsuits and regulatory scrutiny and make sure nobody has to pay taxes until the profits are repatriated.”
“…as the road progressed through the development, homes were less and less complete.”
I remember flying into Houston Intercontinental in the late 80’s and from my window seat I saw just that kind of development. Amazing how history repeats.
MGIC Trick
“MGIC Investment Corp., the largest U.S. mortgage insurer, posted its first quarterly loss and said it won’t be profitable next year as the U.S. housing market worsens.” “The net loss of $372.5 million, was the worst quarter for the Milwaukee-based company since it went public 16 years ago.”
Holy Foreclosure Batman!!!
More than one million homes in foreclosure? To give that some perspective, assume the average home is 40′ wide. If we squished up 1,000,000 40′ homes side-by-side like a continuous line of townhouses, we would have a townhouse community that stretched from NY, NY to LA…back to NY…back to LA…and then back almost to Vegas.
40,000,000 ft = 7575.757 mi.
OR 7575 mi. and 1333.333 yrd
And it’s only going to get worse!