Weekend Topic Suggestions!
And send in your housing bubble pics to:
hbbphotos @gmail.com
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
To donate by mail, or to otherwise contact this blogger, please send emails to: thehousingbubble@gmail.com
PayPal is a secure online payment method which accepts ALL major credit cards.
Links
-
April 2025 M T W T F S S « Sep 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Photo Submission: hbbphotos@gmail.com
View the HBB Photo Gallery *updated 4/13/2008
Yesterday Neil mentioned we should have a thread on holiday housing bubble discussions w/ family, etc.
Also, this was posted in the predictions thread last night:
“aeyra
Comment: Here’s my prediction: the masses of consumerian Androids will descend upon the shopping malls and stores of Amurika and they will use anything they can to pay for stuff. Credit cards? No problem. Maxed out on the Happy Meals on the CC? You can give the cashier cash (but most Amuricans don’t have any money). No money or CC? Write a check if you know how to write (most people don’t). Nothing in that checking account? Well there’s no law that says you have to use FRNs, you can use gold, silver, platinum, copper, dental floss, liquid cheese, gravel, toilet seats, arcade tokens, bolts, nuts, potato chips, anything you can stick in a cashier drawer. Walmart (currently set to merge with Haliburton) plans on having sales of 90% off…wow that’s why there’s all kinds of tents in the parking lot…kind of looks like a squatter city. The economy does the best on Black Friday, the USA only has 1% inflation and unemployment is -3% because King Kahuna in the DOL said so. We have the housi!ng collapse under control, if the houses get too small or ornery we’ll import them from China or Kazakhstan or Walmartistan (breakaway province of Afghanistan). Yes, Peak Oil is real and because of that oil will go to $200052854389024 per barrel and we’d better get that wind powered car program set up and start running our factories/Walmarts/Mcdonalds on cow methane and French fry oil. George Bush is going to be President for life, he has an approval rating of 100% and he wants to set up a Department of Religious Affairs (escort service for the Religious Duh right). Dick Cheney will marry Larry Craig, the Dow Jones goes to either 39999 or -10384, gold will go to $.50 per oz, Vermont will become a seperate country and make its citizens become Nazi Greens, GM and Ford will merge and create the Ford Corvette (blows up at 50mph), Toyota will make an SUV that gets 2 mpg and is a hybrid (runs on gasoline and cow methane directly), Al Gore becomes an astronaut and dances in space! , Britney Spears is sent to Mars (and comes back with Martians!), demonic toilet paper runs amok on the coastlines, the Confederate states throw out the turducken and replace it with the MeowWooftweet (a parrot stuffed into a cat’s butt stuffed into a dog) and Ben Jones wins the lotto!”
“Hahahaha….”
Much better idea than my rant.
Please delete.
Graciously,
Leigh
Okay, here’s mine.
Tx: Sterling, would you like some more turkey? White meat, you say?
How are things looking in your neighborhood? Are you seeing more prices reduced, short sales, etc.:
Sterling: Woof
I’m still watching the hometown listings. They have not decreased at all. The house of an old classmate just took another $10,000 off. It is now down to $259,900 from $299,900. I figure they only have $70,000 more to go for it to be a fair deal. All of the listings are still priced too high. Spring should be a complete disaster. I can’t wait to watch it unfold.
Go to the boroughs, homemade signs, empty houses, empty apartments… Then talk to the people and find out how working people can’t afford their own apartments like they were able to five years ago….Don’t worry it will trickle up it always does.
MeowWooftweet (a parrot stuffed into a cat’s butt stuffed into a dog)
FowlFelineFido?
OK.
How low can we go?
Seriously, our monitary value is~~
.68c??
Debasing our dollar to the lira is likened to selling fertile land for condos!
Will America wake up from her stupor?
Do YOU want a community or another failed devopment?
What are you willing to do to save America?
What are we willing to do to preserve the Declaration of Independence–The Bill of Rights–The Constitution?
Are you mad as he!!?
What will it take for us to come together?
Are we so fractioned self interest reigns?
OK, not a good weekend topic, as I’m all over the map.
Not as much as aeyra!
Do you ever sleep my friend!
You are a tireless one, listening to the rants of (us).
Smiles,
Leigh
I couldn’t sleep. There is a Canadian magazine bit coming out today on the HBB! Hope to have a PDF up later today.
Congrats!
Ben, you are the making of Main Stream!
Post it!
Leigh
Is it MacLeans?
Pity Badger Boy. Working in a wine store in the mall today. From 6am - 9pm. Part of my duties include testing the sample bottles regularly… to make sure they are still fresh!
And I get paid to be here. tee hee.
Nice work if you can get it.
No it’s in Calgary. Good mornin’ Calgary!
Calgary reminds me of Sacramento, on Oil Steroids.
Oh jeez . . . . I guess the Snooze is mad that someone slipped that story about Dallas prices being down into yesterday’s paper. Here’s the usual pap to keep the advertisers from bolting:
http://www.dallasnews.com/sharedcontent/dws/bus/stories/112307dnbusrealestatepredictions.209aa52.html
OK Tx.
Don’t want to hijack thread…
Wiskey Foxtrot Tango? (as Neil would say).
grrrr…
Leigh
Legit weekend topic.
The fallout of housing bubble:
http://www.acorn-online.com/news/publish/ridgefield/25661.shtml
P.S. Did NOT do tinyUrl due to technical difficulties.
It’s too bad they didn’t investigate whether squatter numbers were on the rise due to FB owners’ foreclosures, tenants who lost their place to landlord’s financial indiscretions, or people who experienced layoffs first and then lost their housing (meaning they may be truly penniless).
I’ve often wondered, when people lose one home/apt, can they really qualify for/afford available rentals?
With millions of homes vacant, rental prices have to be feeling pressure, at least in communities with lower inventories. I would imagine the lower income groups are facing the music first. I know bloggers have mentioned they see no such pressure but sometimes I wonder if that’s because the type to frequent the blog are also the type of tenant most landlords don’t want to risk losing. (Stable income with deeper pockets) Perhaps a different segment of our population is experiencing rental difficulties?
Where did I just see a piece on tv about a guy, Carpenter who lived in caves he dug out and re-enforced with bits of leftover wood found? He said it was warm in winter,cool in summer and just a bit dusty. But nice. Couldn’t afford housing.
Global housing bubble fall out (nhz
http://home.nzcity.co.nz/news/article.aspx?id=78923
Why is it that the same people that can’t show up to work on time at 8:30 a.m. can show up at Walmart at 4:00 in the morning for the chance to run to buy a $13 Mickey Mouse vibrator?
lol. I could have a lot of fun with that one.
But you probably wouldn’t part with the $13.
“chance to run to buy a $13 Mickey Mouse vibrator?”
The running part, is the only exercise most of those people will get all year.
What is the most pathetic Black Friday story you bloggers have heard in the past few days? I almost strangled a co-worker the other day. She was pouring over the newspapers and telling me about “all of the great deals”. She was taking today off so she could go shopping. She was making a list of all the things she was going to buy (that she didn’t need). I yelled at her and said, “maybe you could just spend less this year”. I walked away shaking my head and cursing. Why was I so angry? It could have been that little story she told me about a year ago when she explained how her and her husband had declared bankruptcy three years ago. I see another one in their future. Anybody that gives her credit deserves to lose their money.
When did this whole “Black Friday” “holiday” start? I’m sure it’s less than a decade old. What is pathetic is all the morning news reporters doing live coverage from the parking lots of the malls in New Jersey.
BTW, it is only since I switched from the public sector to the private a couple of years ago that I have even had this day off. I sure as hell am not going to spend it at the mall.
The “Black” in “Black Friday” references the day that retailers historically become profitable.
But, most of the little womb-turds get today off (and have for the past 25 years), and need to get out of the house.
Watch ‘Idiocracy’ some time. I think that movie is the new ‘1984′.
It’s a layer cake of sarcasm, that movie.
1 + 1 Thumbs Up = 256 Thumbs Up (Wall Street math)
“What is the most pathetic Black Friday story you bloggers have heard in the past few days?”
http://en.wikipedia.org/wiki/What_Would_Jesus_Buy%3F
Ach, don’t get me started on Black Friday.
I posted yesterday about how the media and the avertising agencies have dreamed up the new, glommed holiday of “Thanksmas” that gives the lucky populace a ’shopping opportunity’ from Thanksgiving to Xmas (with the enticing ads starting on Labor Day weekend), and a strange mingling of the myths from each festival…
The ‘pathetic’ thing is that, apparently, there is no newson any of the cable or local stations. Well, other than the usual breathless reports on the people camping outside of malls all night, for the opportunity to pick up a bargain.
Hands up - how many people knew that a series of bombs went off in northern India in the last 12 hours? Anyone know what its about? Who were the targets? Did it have anything to do with the situation in Pakistan? Or is it just another move in the unending war over Kashmir?
Nada, nothing (other than the 10 second AP headline that first caught my attention) - every single TV station has A) turned into the Weather Channel during the runup to Thanksgiving, by giving blow-by-blow travel details, or B) turned into the cheeleader for consmerism by doing, yet again, those dull ‘human interest’ stories about single mothers camping for days to buy little Jonnie an iPod in the sales.
Sorry, feeling a little bit cross (and slightly hungover from yesterday), as I just watched Naomi Wolf about the tipping points from democracy to fascism on Youtube. The news being a perfect case in point about how little the average American knows about the rest of the world. And how easy it makes it to manipulate the unconcious masses. Sort of like the implosion in the economy, etc,etc..
If you’re interested:
http://uk.youtube.com/watch?v=RjALf12PAWc
Anyway, enough bile for me (urgh, my poor liver), off to go and do the mountain of washing up from yesterday.
PS: despite wishing to be a ‘nay-sayer’ to the Black Friday bunfight, by not leaving my house or buying anything today, sadly I have to relent, as I’ve just relised that I’ve run out of cat food.
Bummer. Stupid cats and their need to eat every day….
“The company has numerous effective programs to assist borrowers who have the willingness and wherewithal to remain in their homes,” the statement said. “Countrywide recently announced the $16 billion home preservation program specifically designed to help those facing a rate reset in the coming year – a program that will help 82,000 borrowers.”
http://tinyurl.com/24gqlw
Those who “have the willingness and wherewithal to remain in their homes” shouldn’t need help and mostly don’t have loans from Countrywide based on the recent lending practices of that company. Totally empty offer.
Will financing for conventional mortgages at traditional metrics dry up, due to the contagion effect of the mortgages of the past few years? What were Freddie and Fannie doing holding subprime anyway.
We’ve often said here that the problem was the crazy mortgages and the prices, that interest rates were still low and people with downpayments could buy if a house was priced fairly. Now I wonder if Americans’ unwillingless to save and, once burned, foreigners unwillingness to lend to them, will undo the original benefits of the create of securitized mortgages through Fan and Fred, and reduce housing capital below the level reasonably justified.
For one thing, all the fraud in the mortgages documents will leave a residue of distrust that may take years to undo. Years after the last NINJA loan goes bust and no additional pain arrives.
Well all the fraud is an argmenent that more distrust is NEEDED in the mortgage business.
I think that if the unwinding of the bubble leaves conventional mortgage financing impaired, there is your argument for an overshoot on the downside, even in markets without overbuilding.
Well of course there will be overshoot, especially since overshoot is basicly defined as “below long term average prices.” But at some level, there IS a hard bottom: prices so low that purchasers come out ahead of renters after a year. Keep in mind that is NOT the normal circumstance. Only abnormal levels of appreciation made short term flipping profitable. Normally buying your housing is a loosing proposition for the first few years of ownership. More of your payment is “thrown away” on interest than the rental cost. But after 10 years, you’re paying less interest, and renters are usually paying more in rent. At some point, those lines cross.
Right, in the absence of deflation homeownership is generally the way to go for those seeking a permanent home even if a little more is paid than in rent to start. This assumes, of course, that while paying more than rent one is paying down principal.
I suppose paying less than rent in year one may be a possiblity for those with downpayments. In fact it would have to be, because I think at some point demand will have to come from those buying to rent out at a positive carry.
Weekend Topic Suggestions:
What do you think the big market story will be next week?
What is the story with GMAC and Northern Rock? (Apologies if it was discussed in depth on days I wasn’t online)
Well whatever the big story proves to be, I’m sure that the FFR will be mentioned prominently. Ex:
“Mrs. Smith of Elm St. was distraught over the loss of her pet Mr. Wiggles, but she won’t be sad for long as the Federal Reserve Board is expected to cut the Federal Funds Rate again when it meets next week.”
I would like to see stories from the bloggers about how reading the blog has changed their ideas, financial strategies, or spending habits. Also, success stories of bloggers who have advised others.
“… success stories of bloggers who have advised others.”
My success score is dismal. I can’t get people to listen, especially if I am talking to more that one Koolade drinker at a time.
A common word that interrupts my spiel is the word “yeahbut”. Whatever I say is interrupted by this word and is followed by echos of what the NAR and MSM are spewing.
People hear me but they do not listen to me, except for a few. With these few I have broken through the hearing stage into the listening stage and ultimately into the understanding stage. The moment of breakthrough into understanding is usually accompanied by a flickering of their eyes as if a light switch is turned on somewhere in their psyche. Great progress in comprehension on theri part soon follows.
Interestingly enough, people’s opinion on the HB don’t seem to be heavily correlated to “intelligence.” Some very smart friends are in the “not here,” camp and others, not as bright are saying “prices are crazy, this can’t last.” I think that it has more to do with a willingness to defer gratification rather than “intelligence,” per se.
Here in the Coachella valley, you get much, “parts of the valley will always hold up,ie: Indian Wells,RanchoMirage,PalmDesert,Las Palmas area in PS, and so on..oh its only going to happen in Mecca,Coachella,and Indio. LaQuinta and Indio and PGA West are right next door and there definitely are many foreclosures.Everywhere.
DeNile.. swimmers up
Try explaining leverage to the older generation. I had my mom and her friend as my captive audience for two full hours. They kept asking me what does leverage mean. I alway use the example of 5 mill in HF leverages to 50 million investment. They got the part about losing on the way down.
My whacky aunt is giving her Pasadena bungalow home to her tenant. Upon her death. Its on Margurita Lane. I am jealous. I can’t wait till this tenant can’t pay his property tax.
Very kind of your aunt. I assume it’s been a long-term tenant who has befriended your aunt.
Very nice, indeed!
Having watched incomprehension blossom in the eyes of many compatriots, and further realizing they literally could not hear what I was saying, I’ve come to believe “real estate always goes up” has been internalized by the sheeple to the point they’re impervious to logic or evidence.
This is the difference between “thinking” something, and “believing” it….. Belief seems to me to allow no possibility for an alternative reality…..like the one apparent to those of us here.
I had no clue about housing until I found HBB. I only had vague ideas of a 20% down 30-year fixed mortgage. First job fresh out of lots of schooling, I lived in DC for a while. My salary increased some, but housing went much faster. In 2003-2004, I was bombarded with stories about all these pretty young 20-somethings buying houses (condos, actually). The media emphasized how wonderful home ownership was, and that the pretty things were getting ahead in life so young and how on-the-ball they were, painting walls and shopping at Ikea and the like.
I read this stories with interest, but at the same time I wondered where they got the $50K down payment. I felt so guilty. I thought I was a hard worker and frugal spender, and yet I must have been a major slacker if I, 10 years older than them, didn’t have that $$ put away yet. I was also getting red flags about pricing: $250K for a one-bedroom apartment? Something felt wrong, to me. But the paper was so happy about the housing that, and the ads were so full of happy clubbers, I began to think my common-sense radar was broken, or maybe I was just a fuddy-duddy who didn’t enjoy life.
Then I found this blog by way of another blog, and learned about I/O and no-money down mortgages and house price spikes and McMansions. Spent a lot of time on realtor.com and Zillow too. And I learned that all those pretty young somethings must have bought with no money down, and now they were in a world of hurt. The only ones who will break even are those who bought early, and stay in their condo until 2009 or so, which isn’t easy if you’re young and want to be “upwardly mobile.”
Within a year of finding HBB, I was so well versed that I advised a friend of mine who was thinking of moving from Tucson. She bought in 2000 for under $80K, Zestimate now $160K. She thought she could get $150K. Should she wait until spring to relist and hold out for $160K? NO NO NO, I screamed, SELL THAT HOUSE. Even wrote a long paper in MS word to explain why. She didn’t understand all of it, but she was convinced enough to sell. $150K Nov 2006, just in time.
Thanks to this blog, my friend is sitting on cash. And I was mobile enough to find a better new job in a new state and relocate within 2 months.
And I feel much better about being just a crap-a$$ “renter.” Yeah, I’m tired of throwing away rent, and I’m not getting any younger, but if houses drop 10% in a year, I will be financially ahead by renting that year.
Unless you prefer living in a park, you are not throwing your money away on rent. A roof over your head and indoor plumbing have value, irrespective of who pays the property taxes.
Gotta credit the NAR with embedding their memes into the populace.
I actually had a relative I thought would never admit it tell me today that everything I said would happen is happening. It only took total television news saturation of the same facts and falling markets to swing her.
Personally I was already in cut back mode at least a year before finding the blog. Eight years ago I remember telling my husband in our kitchen that exec to worker pay ratios were going to eventually catch up with corporate America.
I experienced the same feelings as combo techie wondering how couples much younger than us were competing for similar homes. I initially thought deep pocketed parents must be helping them but now I know the truth. I had thought the market was whacked in 2002 and wondered at that point how it could keep going. I did not understand all the liquidity being added to the system or how loose lending standards had become until finding the blog.
The beauty of the blog for me was knowing I was not alone in the assessment of what was going on. It was such a rush to be putting mathematical facts, charts, and details of the inner workings behind those feelings.
I understand our economy and money in general so much better now. It has lit a fire for learning again.
Based on reading this blog, I’m planning on paying off auto debt hopefully by the end of this year, before the hurricane begins in earnest. Also trying to increase cash reserves in my checking account.
Ok, this makes no sense to me.
If dollar is falling then dollar is becoming cheaper i.e. you are paying your debt over time with cheaper dollars ( unless of course you have an insanly high interest rate on your vehicle or unless you are planning on paying off your auto loan, selling the car for cash and buying a cheaper car for cash).
I think we are in a stagflation, not a pure inflation.
Commodity prices are obviously rising, and wages generally are stagnating (certainly my wages have not increased at the same rate as oil, gold, and some classes of food). As the recession begins, I would like to reduce mandatory spending so that I have some additional flexibility.
The cheaper dollars argument primarily works when wages are skyrocketing. I’m not sure it will work when countries start playing beggar thy neighbor in a race to the bottom of who has the cheapest currency. I’ll grant there isn’t much evidence of this race to the bottom… yet.
I’ve been a legend among those who have known me for being a cheapskate for 30 years, so no change there.
It’s a simple matter of living efficiently. There is only so much money and so much time in my one and only life. I never wanted to spend it commuting, or on a large house with a lawn to mow. So we have a brick (no painting) small (not too much stuff) rowhouse (no lawn just some gardens for the wife) in Brooklyn (one old car, use subways and bikes). We cook at home from scratch mostly, on a healthy semi-vegetarian diet (meat for flavor, not to much, except special occasions). There is so much free and cheap entertainment in Brooklyn and Manhattan, we could never hope to do half of it.
The money we saved when young, by trying to see how little we could spend and be happy, enabled us to both work part time and be with the kids when they were little. The commute is reasonable. A continued dedication to being semi-independently wealthy (living off one income with two careers) gives us lots of money for charity, and savings for college and retirement. I was also able to take time out of the workforce and launch a minor party protest campaign for (or rather against) our state legislature when I couldn’t stand what they were doing anymore.
So no, the HBB hasn’t changed my views, just confirmed them — although the financial bubble aspect of this is new to me. However, the fact that I’m such a legendary oddball hasn’t helped me convince anyone not to buy.
“…how reading the blog has changed their ideas, financial strategies, or spending habits.”
I came here knowing something was wrong, but not quite sure how to put my finger on it. I knew RE markets went up and down, and I had read several books on how to buy a house. I thought SD housing and some of SoCal was just going wild (2003-04). Buying a home is supposed to be a no brainer and financially prudent thing to do. So I tried to buy one, fearing that I would be priced out soon. Now I feel incredibly LUCKY when I think about all the offers I made which were turned down.
When I began visiting here in the first half of 2005, it became clearer to me that the situation was far from local or remotely sustainable. The HB was a tiny fortress of financial sanity. I was still really sick of renting, and I came by often to keep myself from reconsidering my decision to not buy. Therapy perhaps? Real Estate Anonymous?
It’s been quite an education. As many have said before, the community here has called nearly every step of the downturn. I frequently find myself reading books and articles on topics that would have put me to sleep quickly a few years ago! Continuing to rent looks good to me. I’ve put my finances in better order after discovering my 401K options were all rooted in mortgage backed junk. I’m in no hurry to own RE anymore.
As for advice that I’ve offered that anyone has taken seriously, one person paid off an adjustable rate HELOC and two refinanced into fixed rates. Talking someone out of buying once they have it in their head is nearly impossible. A friend who bought recently has finally realized that what I was telling him was correct. He’s now trying to sell, but doesn’t realize just how stuck he is.
I was reading Graham’s Security Analysis tome last night and was struck by how ultra-conservative financial standards became in the wake of the Great Crash. My weekend topic proposal: what if mortgages could only be underwritten to net rental cash flow equivalent, as the only nonspeculative value the underlying collateral should have to the mortgage holder? Not only would that mean that all the presumed benefits of ownership - taxes, pride, and possibility of capital appreciation - would actually be paid up front by the beneficiary, but it might even mean that the “owner’s equivalent rent” in the CPI might bear some real relation to actual housing costs.
What do you wish someone would give you for Xmas? Here’s mine. I want this for my desk to remind me that anything can happen.
http://www.royalartglass.com/shop/viewitem.asp?ID=2633
I want one of these.
that is pretty cool. I’m waiting to hear what people say about it.
Oh man! I took a photo of a black swan this summer in a drive-thru safari. Doesn’t compare to your find…..
First, I’d like to thank everyone here for their contributions to my learning curve. Ben, I’d especially like to thank you for your perserverance in the face of adversity.
My home, of 20 years, has been a refuge to 24 dogs and 7cats and various other creatures. Some were dumped, others were animal shelter refugees and some we took from the vet or friends who couldn’t care for them. As I look over the years I wonder if an uptick in our #’s may have related to housing booms and busts of the past. We presently have 10 dogs.
I just wanted to remind people that there are innocent spectators in this frenzy of spending and some of these animals will be put to death because the former owner had to have that puppy. So in your holliday spending, if you can, drop a few bucks at a local shelter.
That is my pet cause, pardon the pun. I give 95% of my charitable dollars to that particular issue. I’ve said here many times that in my own rescue operations, I have seen vastly increased numbers of owner surrenders (of a very expensive pure breed) as well as in the mixed breeds. I have one Frenchie here who I took from a guy who was being foreclosed. He paid $3,000 for this dog and gave it to me for free so I would take care of it. At least he cared enough to find a rescue organization.
We were lucky to find a place to rent where we could bring our pets. Luckily my recently sold home’s photos were still on line when we were searching. With 3 pets it was spotless, much cleaner than many homes with no pets.
But this spot is temporary and I greatly fear what will happen when we have to find the next place. “No pets” is an almost universal rent situation in this area probably due to irresponsible owners. I’ve spoken with boarding places to get some “foster family ” leads until we own again. I offer to pay all food and vet bills while the animals are fostered. I’ve been told the foster families are already exhausted and overworked.
As a previous pet “owner”, I have tried in the past to adopt,foster etc, to be told ‘no you have a swimming pool and pet could fall into pool’. So, unfortunately some pet can’t live with me. Restrictions are too high for pets and not high enough to have children.
CarrieAnn,
one suggestion, get your current landlord to write a letter testifying to your good tennacy, and ask if they will give you a good verbal rec as well. Also, for a new landlord, offer a month or two deposit in escrow against any possible damages.
Post 9/11, in NYC, new rental condos actively advertised pet friendly, a sign which disappeared subsequently, when the market recovered. So, when good tenants with cash reserves are hard to find, you may find yourself a decent rental with pets. Do try not to foster them, if you can.
If you think you may have to move, I would start by advertising on craigslist months early, just to see what response you get. You might be able to develop a relationship with a potential landlord, who could visit you in your current rental, and check out the cleanliness etc.
In any event, best of luck to you.
A country on TILT, but local government must go on…
Will it raise property taxes to the sky, as in the early 1930’s?
History always repeats itself, if you know where to look…
“A tax revolt is a political struggle to repeal, limit, or roll back a government-imposed tax.”
“In the United States, it is often used to refer to a series of anti-tax state initiative campaigns. The first significant wave of these campaigns was during the 1930s. The Great Depression introduced unprecedented tax burdens to Americans. While real estate values plummeted and unemployment skyrocketed, the cost of government remained high. As a result, taxes as a percentage of the national income nearly doubled from 11.6 percent in 1921 to 21.1 in 1932. Most of the increase took place at the local level and especially squeezed the resources of real estate taxpayers. Local tax delinquency rose steadily to a still standing record of 26.3% in 1933.”
“Many Americans reacted to these conditions by forming taxpayers’ leagues to call for lower taxes and cuts in government spending. By some estimates, there were three thousand of them by 1933. Taxpayers’ leagues endorsed such measures as laws to limit and rollback taxes, lowered penalties on tax delinquents, and cuts in government spending. Partly as a result of their efforts, sixteen states and numerous localities adopted property tax limitations while three states instituted homestead exemptions.”
http://en.wikipedia.org/wiki/Tax_revolt
If a person owns a house that is foreclosed upon, do they have to declare bankruptcy? This was a question posed to me over T-day.
No. Of course if they’re insolvent, it might be to their advantage, especially if their lender can get a deficiency judgement and seize other assets.
How large will be the eventual total cost of the U.S. mortgage crisis?
Here are some rough figures:
- Major bank subprime writedowns thus far = $50 bn
- OECD estimate of eventual total subprime writedowns = $300 bn
- Alt-A and prime mortgage loan writedowns = ???
$300 Billion in Write-Offs Is Predicted
By CARTER DOUGHERTY
Published: November 23, 2007
FRANKFURT, Nov. 22 — Losses in the distressed mortgage sector of the United States could reach $300 billion, only a portion of which has so far been accounted for by write-offs at major banks, according to a study released on Thursday by the Organization for Economic Cooperation and Development.
http://www.nytimes.com/2007/11/23/business/23oecd.html?ref=worldbusiness
I’d say housing values have to fall by $5 trillion to restore affordability.
Only a portion of that will contribute the mortgage problem, however. For example the fact that the theoretical market value of my house soared and will subsequently return to earth affects no one.
So how many people bought or HELOCed at peak prices? That is the question.
“For example the fact that the theoretical market value of my house soared and will subsequently return to earth affects no one.”
Not so. Many folks who become aware of the drop in theoretical market value of their houses will feel compelled to contribute to the reverse wealth effect through increased personal savings. Higher savings translates into lower consumption spending. Happy Black Friday!
P.S. How large does a decline in domestic price level have to be to qualify it as “implausible”? Or is it the likely policy response from the Fed which renders it implausible?
Why is the Dollar So High?
Martin Feldstein
NBER Working Paper No. 13114
Issued in May 2007
NBER Program(s): IFM ITI
—- Abstract —–
The level of the dollar is part of a complex general equilibrium system. Nevertheless, it is helpful to recognize that the high level of the dollar is necessary to generate the current account deficit equal to the difference between national saving and investment. Understanding the high level of the dollar therefore requires understanding the reasons for the low level of national saving in the United States. Reducing the large current account deficit will require both a higher rate of national saving and a more competitive dollar. Although the necessary decline in the real value of the dollar can in theory occur without a decline in the dollar’s nominal value, the implied magnitude of the fall in the domestic price level is implausible. A decline of the real value of the dollar that is large enough to reduce the current account deficit significantly requires a significant decline in the nominal value of the dollar.
http://www.nber.org/papers/w13114
“Inflation does not lubricate trade but by rescuing traders from their errors of optimism or stupidity.”
John Kenneth Galbraith
1. How can “We the People” get our “elected” “representatives” to create a “National” standard that says there can only be a maximum of 3 pages to sign in order to buy a “Family Home”…and at a minimum font size of 12 pts.
2.
Really, really love that idea hwy!!!
I posted this earlier in the week, but I think it’s a good topic.
What metric should we use to judge whether houses are affordable?
I’ve know the traditional levels of median prices at 4x median income and 10X annual rent are good indicators of affordability. But I’ve come up with another.
Almost everyone I know who has owned their home for at least 5 years tell me they could not afford the home they live in at todays prices. Pretty amazing when you think of it. Most people with homes could not afford one if they were buying today.
So I think it will be time to buy again when people could afford to buy the house they live in with a standard 20% down, 30 yr mortgage.
Discuss.
“…with a standard 20% down”
Requires savings…who does that and why would they?…when you can “borrow” money from your stucco ATM (that you “bought” with 0 $ down )and replace it later with $$$$$$$$’s that is created every 9 months by equity appreciation…or has “something” changed recently?
“…has “something” changed recently?”
Tuesday, November 20, 2007 - 12:50 PM HAST
Study: Homeowners in negative equity
Pacific Business News (Honolulu)
In some parts of the country hit hard by falling housing values, more than 70 percent of homeowners who bought a home in the last year now owe more money than their house is worth.
According to a study by Seattle’s Zillow.com, home values across the United States decreased by 5.7 percent in the last year compared with a year earlier, the biggest decline in more than 10 years.
http://www.bizjournals.com/pacific/stories/2007/11/19/daily23.html
Mr. Bear…are you implying that “some” people now have:
1. negative home equity
&
2. negative savings
Daffy Duck: “That’s dessssssssssssssspicable!”
From China to the housing bust: Connecting the dollar dots
…
Feldstein argues that the personal savings rate had fallen so low because low interest rates, in combination with the rapid appreciation of home prices, encouraged Americans to borrow without restraint against their home equity. There was simply no need to save money when the net-worth of America’s homeowners was rising so quickly.
But it couldn’t last. Baldwin summarizes Feldstein’s argument:
Feldstein not only calls the dollar’s drop, he links it to developments in the U.S. housing market. True, his logic did not lead him to predict the subprime crisis, but that is more a matter of how, not what.
He notes that bringing down the trade deficit will require a closing of the saving/investment gap. He wrote that this would come mostly from higher savings: “The household saving rate will rise because the two primary forces that have driven savings down will come to an end. First, the sharp rise in wealth caused by abnormal gains in share prices and house prices will not continue. Home prices are already beginning to decline and the prices of stocks are not likely to outperform earnings in the future in the way that they did in the past. Second, the mortgage refinancing will not continue to generate spendable cash for households as it has in the past. The decline in mortgage refinancing has not yet begun. But at a certain point there will be very few households with mortgage rates that exceed the rates available on new mortgages. There will also no longer be a stock of net equity that can be accessed by borrowing.”
The value of the dollar, say Feldstein and Baldwin, is largely a function of how much Americans are saving and consuming, which also determines the trade gap between the U.S. and other countries. In this game of connect-the-dots, nothing is left out. The flip side of the housing boom was the rock bottom personal savings rate. The housing bust, then, will see homeowners pull in their wings and start to save again. That retrenchment will encourage the dollar’s continued decline, as will global nervousness about the state of the American economy, which itself will be largely influenced by how bad the housing bust ultimately gets. Finally, a declining dollar and a rising personal savings rate will make the massive trade deficits of the last two years a fading memory (and indeed, that is already beginning to happen.)
– Andrew Leonard
http://www.salon.com/tech/htww/2007/11/20/china_and_the_dollar/index.html
I suggest a weekend thread on housing bust litigation.
Some examples of which I am aware include:
1) NY state Attorney General subpoenas of Fannie and Freddie, plus related investigation of WaMu and outfit that does its appraisals;
2) Class action suit against CFC;
3) Other?
I am also curious about what other litigation might ensue going forward; for instance, what about IBs that paid out record bonuses last year, but are now reporting “larger than expected” subprime writedowns in the $3bn+ range? And what are the broader implications of a possible wave of litigation for the future of Wall Street’s vaunted asset securitisation business model?
Jig could be up for asset-to-security converting: our man in New York
WALL STREET: David Nason | November 22, 2007
AN Australian at the forefront of the Wall Street securitisation industry has warned that the business of converting assets such as home loans into marketable securities will be “seriously challenged” as regulators and financial markets seek remedies for the severe downturn in US housing and credit markets.
Greg Medcraft, managing director and global head of securitisation at Societe Generale in New York, said the positive aspects of his industry in places such as Australia could be overlooked in the search for scapegoats.
The record of securitisation in Australia was lower cost to borrowers and increased availability of loan funds, he said.
“There is no doubt that securitisation is going to be seriously challenged,” Mr Medcraft said.
“We could be in for a period of painful adjustment.”
http://www.theaustralian.news.com.au/story/0,25197,22799244-25131,00.html
“His (Greg Medcraft’s) comments to an Australian-American Association finance forum in New York yesterday came as a securitisation trust linked to the struggling Countrywide Financial Corp, the US’s biggest home lender, was accused of securities fraud in an action filed by a California law firm. It’s believed to be the first time a securitisation trust has faced a possible class action suit.
The complaint accuses the Countrywide Capital V trust of failing to disclose in its registration statement and prospectus a true picture of the exposure to massive losses in its sub-prime lending division.
It says the sub-prime woes were having a material adverse effect on Countrywide’s business at the time of CCV’s offering in November last year but were not revealed until July 24 when the company forecast a weak second half of 2007.
Countrywide shares fell as low as $US8.21 yesterday before closing at $US10.28. It was the first day since 1991 the stock traded below $US10. Less than 18 months ago it was in the $US40 range.”
“It says the sub-prime woes were having a material adverse effect on Countrywide’s business at the time of CCV’s offering in November last year but were not revealed until July 24 when the company forecast a weak second half of 2007.”
How many stock shares did Mozilla unload between last November and July 24?
“How many stock shares did Mozilla unload between last November and July 24?”
Mr Bear…Mozilla did deposit his stock sale Dollars $$$$$$$$$$$$$$$$ directly into his “personal” money market account with Countrywide “Bank” right? I mean, that would really be the thing to do to show all the “other” depositors that everything is goin’ be alright…down the road.
Success has a hundred authors; failure, a thousand lawyers.
My money’s on the ratings agencies. Been shorting them for a while now (mostly out of HBs at this point), and have seen very nice returns.
IMHO, none of this could have happened if the ratings agencies were doing (what investors assumed was) their job — appropriately identifying risk characteristics of various securities.
I would like to see a weekend topic (again) on where do you put your hard saved money?
Which banks to avoid and which ones are the safest?
Which currencies to avoid and which ones are safe?
What stock to avoid?
Which stock brokers to avoid?
What credit card is best?
How can you preserve you capital?
This is a very important topic, given the need for so many Americans whose houses and stock portfolios are falling in value to find places to save money where it will not be systematically devalued.
Agree this is a good topic.
Our tactic:
-short vulnerable companies (HBs, lenders, ratings agencies & certain retailers)
-foreign currency CDs from EverBank (various currencies)
-long foreign currency ETFs (various currencies)
-long GLD and a little physical gold.
-short-term (1-6 mos) Treasuries & a smattering of LT Treasuries (older, higher-yield)
-CDs spread out among various banks
-a few long positions in bond & stock funds & ETFs (also, some specific stocks that might benefit in a recession/depression) just in case I’m wrong
All in all, a very difficult and frightening time, even for those of us who were anticipating & planning for exactly what’s been happening. Amazing how the “tin-foil-hat-wearing” bears are seeming more and more right with every passing day. Scary.
-
Weekend topic, what do you think the future holds for Realtors? Will they be despised so much in the future that online buying of homes becomes mainsteam like the buying of new cars. Title companies, lawyers and inspections can’t they all be done with a slick online company. The RE business has been like a boiler room selling penny stocks the last 5 years can’t end well IMO.
Some members of Congress (not to mention certain high-profile financial section columnists) seem to accept as a matter of faith that preventing foreclosures will somehow “fix” the mortgage crisis.
Exactly how does encouraging a homeowner to remain stucco in a house he cannot afford until he gradually bleeds himself to death, financially speaking, qualify as helping?
Senators’ Attitude on Housing Relief: What’s the Rush?
By Kenneth R. Harney
Saturday, November 24, 2007; Page F01
Thousands of Americans may be losing their homes to foreclosure or facing hefty mortgage-payment resets, but the Senate appears to be in no rush to help.
The House has passed several major housing-relief measures in recent weeks, but the Senate hasn’t passed even one. On the eve of its two-week Thanksgiving recess, the House approved by a bipartisan vote the most sweeping reforms of the national mortgage system in more than two decades. Meanwhile, the Senate stalled legislation that would strengthen the Federal Housing Administration’s mortgage programs, a key resource for homeowners who need to refinance out of adjustable-rate loans into more affordable fixed-rate ones.
http://www.washingtonpost.com/wp-dyn/content/article/2007/11/23/AR2007112300682.html
Rising Rates to Worsen Subprime Mess
Interest Payments Set To Grow on $362 Billion
In Mortgages in 2008
By RUTH SIMON
November 24, 2007; Page A1
The subprime mortgage crisis is poised to get much worse.
Next year, interest rates are set to rise — or “reset” — on $362 billion worth of adjustable-rate subprime mortgages, according to data calculated by Bank of America Corp.
While many accounts portray resetting rates as the big factor behind the surge in home-loan defaults and foreclosures this year, that isn’t quite the case. Many of the subprime mortgages that have driven up the default rate went bad in their first year or so, well before their interest rate had a chance to go higher. Some of these mortgages went to speculators who planned to flip their houses, others to borrowers who had stretched too far to make their payments, and still others had some element of fraud.
http://online.wsj.com/article/SB119586137992302497.html?mod=googlenews_wsj
ARMs Control: How to
Avoid Mortgage-Reset Grief
By ARDEN DALE
November 24, 2007
Pay attention to the details if you have an adjustable-rate mortgage. Many three-year ARMs are due to reset to higher rates over the next 18 months, and many homeowners aren’t prepared.
ARMs are mortgage loans with payments based on indexes that adjust periodically. The amount due each month may go up several times over the life of the loan.
http://online.wsj.com/article/SB119585631801902404.html?mod=hps_us_whats_news
Lower rates will be a boon to first-time buyers, right? MAYBE…
Refinancing May Be Harder to Enjoy
While Rates are Down,
Lenders Tighten Rules;
Savings Prove Slender
By KEMBA J. DUNHAM and RUTH SIMON
November 24, 2007
For people hoping to refinance a home, it should be good news: Yields on U.S. Treasury securities are falling — which translates into lower mortgage interest rates.
However, the upside of refinancing might not be as great as some expect, due to continuing turmoil in the housing market. Some borrowers could find the savings aren’t as great as they expected — or that they are being shut out of refinancing entirely, as lenders tighten their standards.
http://online.wsj.com/article/SB119586468016502637.html?mod=hps_us_whats_news