You Swing Way Up, You’re Going To Swing Way Down
The Gazette reports from Colorado. “Colorado Springs’ housing woes continued last month, as November foreclosures pushed the area’s year-to-date total to 3,106 - the highest in 20 years. Another bad month in December could give El Paso County the dubious distinction of breaking its yearly foreclosure record of 3,476, set in 1988. ‘It’s very possible we’ll beat that record,’ said Fred Crowley, a University of Colorado at Colorado Springs economist.”
“Through November, Springsarea single-family permits totaled 2,053 or a nearly 38 percent reduction when compared with the same 11-month period in 2006. With December to go, it’s likely this year’s permit total will be the lowest since 1,154 in 1991.”
“Builders have stepped up incentives, while sellers of existing homes have slashed asking prices and sometimes wait months to find buyers or take their homes off the market.”
“‘We’re doing everything we can,’ said Mark Long, VP of Saddletree Homes and Symphony Homes in the Springs. ‘We’re advertising. We change the incentives that we do frequently. Everybody who’s in the market to buy knows builders are going to do what they need to do to move product.’”
The East Valley Tribune from Arizona. “While the real estate downturn has devastated many households, it has also opened up opportunities for first-time home buyers and others to take advantage of more affordable prices and low interest rates.”
“One advantage for first-time buyers is that they don’t have existing homes to sell, experts say. That’s a problem plaguing many move-up buyers in today’s market with more than 50,000 existing homes for sale and builders offering big incentives that are hard to rival.”
“Others are stuck because they owe more than their current homes are worth. ‘It’s become tough to sell a house even if you have equity in it,’ Gilbert real estate agent Tra Bell said.”
“Mesa real estate agent Steffanie Countryman said she recently listed a bank-owned property in south Chandler for $469,000 — almost $200,000 less than what the former owner paid for it in 2006.”
“‘(Prices) jumped up so quickly,’ Countryman said. ‘It’s like anything else. You swing way up, you’re going to swing way down.’”
The Daily Courier from Arizona. “It is too early to tell, but if the housing market remains steady, property owners may see the full cash value of their property holding steady at the 2008 (2009 tax year) level.”
“County Assessor Victor Hambrick said, ‘We have seen a significant reduction in the volume of sales in Yavapai County. Our office processed 1,400 sales in July 2005 and only 200 in July 2007. What we have not seen is a drastic reduction in prices.’”
“Realtor Lee Amble said housing prices ‘are down 15 percent to 25 percent from the final quarter of 2005; sales are down about 50 percent.’”
“In a Nov. 2 letter to the Arizona Department of Revenue, Hambrick wrote, ‘We are seeing an overall trend of declining sales continuing beyond the June 30, 2007, cutoff date. This is of great concern to us as we begin our market adjustment process. We feel in order to serve in the best interest of our County and its taxpayers, using sales available after the June 30th cutoff date would more accurately reflect the market for the 2009 valuation cycle.’”
“Hambrick said the reason he talked to the ADR is that the county wants to ‘be at the bottom of the market. Our goal is to reflect the market as accurately as possible.’”
The Yuma Sun from Arizona. “If economic trends continue, Yuma County’s budget will face a shortfall at the end of the fiscal year. This did not come as a complete surprise, said county finance director Scott Holt.”
“Back in the spring, when the budget was being finalized, former County Administrator David Garcia itemized three ‘risk factors’ for the board that might cause revenues to dip: a downturn in the housing sales market; a similar dropoff in housing-related industries such as construction; and a fragile overall economy due to increased prices on gas and other essentials.”
“‘All three of those risks are coming to fruition,’ Holt said.”
“Tight budget times are not unique to Yuma. The state is facing a deficit of $800 million or more by some legislative estimates. Counties all over the state are facing the crunch and taking various measures to compensate.”
“Maricopa County has asked all departments to cut administrative spending by 5 percent and froze all non-essential spending. Mohave County has imposed a hiring freeze. Yavapai County is dipping into its contingency fund.”
”It’s going to be an ongoing, developing situation,’ said District 4 Supervisor Tony Reyes. ‘I don’t believe the sky is falling but there is a problem.’”
The Boston Globe reports on Nevada. “In America’s ultimate boomtown, the signs of economic trouble literally show up in the streets, with ‘for sale’ sign after ‘for sale’ sign stuck in the front yards of homeowners who lost their houses because they couldn’t afford to pay their mortgages.”
“Las Vegas now suffers the highest foreclosure rate in the country. Nearby Henderson now has more than 300 properties in foreclosure or preforeclosure and some streets have as many as six houses in the process of being sold because the owners couldn’t keep up the payments.”
“‘I think it has huge political ramifications,’ said Jeremy Aguero, a financial analyst with a Las Vegas-based economic consulting firm. ‘We have a crisis situation in southern Nevada.’”
“It is also having a ripple effect on the entire economy, according to housing and financial specialists. ‘It’s like being on the Titanic. It doesn’t matter if you are in first class, the sides of the boat or the bowels of the boat, we’re all going down,’ said Gail Burks of the Nevada Fair Housing Center, which helps residents avoid foreclosure.”
“In addition, some wealthier buyers bought homes well beyond their means, taking ‘interest only’ loans. These buyers assumed the value of their homes would increase dramatically before they would have to start paying on the principle. But as the housing market has softened, these higher-income buyers are finding that they cannot sell their homes at the price they want - or at all, Burks said.”
The Review Journal from Nevada. “State officials on Monday rejected a proposed plan to help homeowners who may owe more than their homes are now worth.”
“Mendy Elliott, director of the Nevada Department of Business and Industry, outlined a proposal for the Legislative Commission Subcommittee on Lending and Housing to help homeowners who may now owe more than their homes are worth, but she dismissed the idea almost immediately as being imprudent.”
“Nevada officials briefly flirted with the idea of floating bonds to finance the portion of the debt that exceeds the property’s value. ‘I don’t think that we would be in a position, as the state of Nevada, to take that kind of risk,’ Elliott said.”
“Assemblyman Marcus Conklin,chairman of the Legislative Commission Subcommittee on mortgage lending and housing, said the state could be left holding the bag if borrowers failed to repay their loans.”
“Other states are talking about adopting a similar plan, but Conklin said the subcommittee doesn’t favor that approach. ‘There’s no solution’ for people who are faced with homes less worth than their home loan, he said.”
“Former state Sen. Joe Neal also opposed using state bonds for unsecured home loans. ‘I see this as a bailout for the bankers association in this particular area,’ Neal said.”
“State Sen. Michael Schneider criticized national home builders and mortgage lenders who helped drive speculative frenzy that helped fuel today’s mortgage problems. ‘They were just slamming people into these loans, because it was profitable for them,’ he said.”
“Nevada and the other states encountered a housing bubble and mortgage debacle because homes were built faster than the population increased. ‘It probably indicates overbuilding,’ said Douglas Duncan, chief economist for the Mortgage Bankers Association. ‘You had speculative overbuilding related to a rapid run-up in housing prices, and now you’re seeing the reverse of that.’”
“The inventory of foreclosed inventory in Nevada increased to 1.57 percent in June 2007, up from 0.45 percent a year ago.”
“The value of homes in Nevada declined 9 percent to 10 percent over the last year, ‘and we expect it to fall further,’ Duncan said. Nevada residential foreclosures tripled between June 2006 and a year later, Duncan said.”
“Jeremy Aguero, a principal in a Las Vegas financial consulting firm, said the news media is creating a bad image of Nevada as a boomtown state that went bust. ‘It seems we have emerged as the Paris Hilton of states,’ he said.”
From Las Vegas Now in Nevada. “State lawmakers met on Monday to continue the dialog about helping homeowners affected by the foreclosure crisis. The problem is, most don’t want to appear that they’re bailing out speculators.”
“Committee members do not want to appear soft on home buyers who came into the market to make some quick cash.”
“‘Because you’re not only bailing out the homeowner, you’re bailing out the lender that made a questionable loan in the first place. And those people need to suffer,’ said Senator Warren Hardy.”
The Nevada Appeal. “The head of an independent Southern Nevada research firm told lawmakers Monday nearly 60 percent of homes in foreclosure there are not occupied by their owners.”
“That means they are either rentals or homes purchased by speculators during the housing boom of the past couple of years.”
“Jeremy Aguero, of Applied Analysis in Las Vegas, said of the nearly 30,000 unsold homes on the market, 42 percent are vacant and another 11 percent occupied by renters.”
“Doug Duncan, economist for the MBA said Nevada, California, Arizona and Florida are in the same situation and the cause is a mix of over-development and speculative investment.”
“‘Housing construction should be in proportion to population growth but there’s been a dramatic increase in housing construction compared to population growth,’ he said. ‘There’s a massive supply of houses on the market.’”
“The housing market took off, especially in Southern Nevada, in 2004-2005. Homes sold within hours after they went on the market, driving prices up relentlessly. Aguero said the average sale prices of a new home in 2001 was $170,000. Now, he said, it’s $305,000 and that’s down a bit from last year.”
“But the market has effectively collapsed, not just in Nevada but nationwide. Homes are now on the market for months, selling sporadically when owners agree to drop prices.”
“Duncan said the percentage of loans delinquent in Nevada was 2.8 percent in June 2006. This past June, he said, it was 4.8 percent. He said it’s still lower than the national delinquency rate.”
“He said large numbers of those speculators who see their investment dropping in value and the market stalled ‘will simply turn in the keys and walk away.’ When they do that, he said, the house doesn’t show as delinquent.”
“Aguero said there are more than 6,000 foreclosures in Nevada ‘in the pipe’ today. And Duncan said the situation won’t turn around soon. ‘We expect sales will continue to fall for some time,’ he said.”
“He said up to 45 percent of loans made during the boom are ’subprime,’ which effectively means they were made to people who probably didn’t have good enough credit for that large a loan, and 42 percent have adjustable-rate mortgages.”
‘Jeremy Aguero, of Applied Analysis in Las Vegas, said of the nearly 30,000 unsold homes on the market, 42 percent are vacant and another 11 percent occupied by renters.’
But from the RJ article:
‘Keith Schwer, chief of the Center of Business and Economic Development at the University of Nevada, Las Vegas, pointed to several factors affecting Nevada’s housing market: A decrease in taxable sales, slowing in-migration and higher unemployment. Schwer counted 27,000 vacant homes. ‘That represents the overhang that we are going to have to burn off,’ he said.’
The Prescott report: ‘ERA National Realty Realtor Lee Amble said housing prices ‘are down 15 percent to 25 percent from the final quarter of 2005; sales are down about 50 percent.’
But check out this USA Today piece: ‘The real estate market in Prescott, with a population of about 42,000, also never got as overheated as some other parts of Arizona. But given the average home price of $384,400 and an economy built on service and retail companies, some working families are moving to nearby Prescott Valley, where the average home costs $238,000.’
Also, it’s funny that the Globe tried to paint the Nevada defaults as helping the bailout crowd! …’Because you’re not only bailing out the homeowner, you’re bailing out the lender that made a questionable loan in the first place. And those people need to suffer,’ said Senator Warren Hardy.’
Not sure if this has been commented on yet today, but there’s a decent article in the WSJ today about the factions that are against a bailout of FBs. Similar arguments we’re been making — it’s unfair to responsible borrowers, people who take bad risks deserve to suffer the consequences, et ceters.
passthebubbly,
Hey how you doin’! I hadn’t read that article specifically but you don’t have to be on a bubble blog to realize a great many Americans want no part of anything resembling a bail-out. Period.
Hey D, what’s up.
A lot of “ordinary Americans” who worked hard and saved, and bought a house at prices that made sense, or maybe stretched a little but never too much relative to the old guidelines of downpayments and debt-to-income ratios are against this thing.
In most of the country RE was priced OK before 2002 or so. Most of America wasn’t flipping condos every six months.
Yeah, I (like most here) have read ultra-sleazy posts from sellers on C/L that openly admit they just need to find a renter on a lease for ___ months until they go to sell it tax-free.
I mean that’s just how nutty things had gotten. When you have people so dense they don’t understand if you’re going to cheat on your taxes (you sure as hell don’t TALK about it) things are headed for a tail-spin.
Zero barriers, anyone can play.
Interesting thing is that I talked to my Grandmother in TN today. TN got the tail-end of the boom and even today, the prices are fairly affordable. But even she was mentioning that it seemed like every street had a few homes for sale, and in her 86 years of living there, she’d never seen so many homes for sale.
It is interesting to see that regardless of location or price- even prices that we Californians might find irresistibly tempting, the bubble has affected sales and prices both up and down nation-wide.
J-B, There seems to have been a lot of overbulding here in Nashville as certain national builders cranked up production here to offset losses elsewhere. The number of homes for sale in established neighborhoods (40+ years) has come down noticeably in the past two years even though overall numbers on the market have skyrocketed. I think that increase has come mainly from new home construction. However, I’m hoping that mortgage reform has come along in time to keep our real estate from overheating.
I bought into an old suburban neighborhood two years ago, one that I grew up in. I felt great about the purchase then and still do today. It was never hip or trendy, nor did it ever have enough turn-over to create a clear sales trend upward. When I moved in there were a half dozen homes within a few blocks for sale, either by estates, downsizing or profit taking. Later on several more were added, and one languished for a year, but now none are on the market. Zero.
My co-worker moved into a neighborhood in Franklin that had high turn over for a while. He was concerned that the “for sale” signs would only increase due to the market situation, and almost panicked about the prospects of having to sell in the near furture (his wife has been diagnosed with arthritis and they’re looking at buying one story). However, his neighborhood, like several others in the area, have traditionally been a temporary layover for folks new to the area, who planned to moved on to bigger and better digs once they got to know the area. So now with the shakey market, and the homes being clearly “good enough” for most people, almost all of those for sale signs are gone in his ‘hood too. Folks are neither inclined to sell in this market nor to buy, so they’re staying put. It looks like he may have bought into a real neighborhood after all.
Real estate is local.
Credit is nation-wide.
From the WSJ -
Mr. Miller says that the rate-freeze proposal reminds him of a television commercial: The announcer asks, “Do you owe back taxes?” A client responds, “I settled for half of what I owe.” Says Mr. Miller: “How’s that fair? Everything seems to be backward.”
Oh… THAT commercial!
Yeah, uh notice how their target client is a freakin’ builder too!
(Do ANY of those guys pay their taxes?) I mean after that 3rd divorce and all.
Heh. Back in the day, when a contractor or someone who was “self employed” started trying to convince me that income tax was unconstitutional etc I knew he hadn’t filed in X years. I mean the argument may be right but no one seems that interested until they know they’re behind the 8 ball.
That commercial drives me crazy! Is it a real, IRS-sanctioned, program through which some a-holes don’t have to pay their taxes like the rest of us?
And 238K is still too expensive for a family where dad works at a tire shop and mom works at WalMart.
Yeah, but in Loveland’s case, now that we have two Super Wal-Marts, we could see upward pressure on wages for jobs there. We’re talking maybe $8/hour for skilled positions, and the sky is the limit (perhaps $12!) for managers. That would obviously support the $400-600k prices for those new houses near Taft and 57th.
Yeah, but the median in Loveland is still below 200K. As to who is expected to buy those 600K monstrosities, you got me. They have to be in the top 5th percentile of price for Loveland. Not even Agilent pays that good. Maybe “rich” people from Ft. Collins (lol).
“some working families are moving to nearby Prescott Valley, where the average home costs $238,000.”
Sounds good in print but what about water in their future, job potential, hospitals when needed, resale, etc.
Schwer counted 27,000 vacant homes. ‘That represents the overhang that we are going to have to burn off,’ he said.’
More like going to have to burn down!
Heh! That one made me chuckle.
RE: “42% of the houses are vacant ,and another 11% occupied by renters .”
So, 53% of the 30k houses on the market were bought by speculator/investors that need to sell .
Suffice to say that that much demand by speculators ,who where only in it for a short term gain of appreciation ,raised the prices ,but the appreciation was unstable .
Want to bet that the national averages of foreclosures will be at least 53% speculators purchases .Look at all the new home tracts that were sold to speculators that are still sitting vacant in these areas that didn’t really have long term demand for that much housing .
“‘(Prices) jumped up so quickly,’ Countryman said. ‘It’s like anything else. You swing way up, you’re going to swing way down.’”
A real estate agent saying prices sometimes go down? A lot? Was she saying this back in 2005?
Finally some truth from the real estate industry!
Call the papers — that’s news!
The only thing that should swing way up and than swing way down is George of the Jungle .
I was in Vegas ten times this year. Met a realtor who thought LV was unstoppable. I looked at some vacation homes and empty nest communities and was shocked at the lack of nearby necessities like grocers, restaurants and entertainment.
I’ll keep going for fun on comped suites, dinners and show tickets. My average loss for a five day “free” trip is about $700. Cheapest vacation in the world.
A.B Dada,
With 42% vacant and the other 11% rented out to gang members along with some oblivious realtor that had to be ONE long hot, boring ride!
There was an article a little while back about a gal renting in a “gated community” (well actually the gate had been rammed by the legions of party-goers) but she literally was captive in her own house b/c of the “neighbors” pit-bull. I wonder if that’s what the realtors and developers had in mind?
A.B Dada,
With 42% vacant and the other 11% rented out to gang members along with some oblivious realtor that had to be ONE long hot, boring ride!
There was an article a little while back about a gal renting in a “gated community” (well actually the gate had been rammed by the legions of party-goers) but she literally was captive in her own house b/c of the “neighbors” pit-bull. Is this what the developers and realtors had in mind?
My bad!
“Met a realtor who thought LV was unstoppable”
That wouldn’t be LVlandlord. who used to post here, by chance?
swing low sweet chariott”
if you swing low enough you get bail
‘It’s like being on the Titanic. It doesn’t matter if you are in first class, the sides of the boat or the bowels of the boat, we’re all going down,’
Um, the First Class passengers already took their winnings (stock options, golden parachutes, sales proceeds from overpriced houses) and got off the boat.
The third class passengers thought they had made a score by raiding the liquor supply for free, but now hear the gurgling and realize they are locked in the lower decks.
And the shills at CNBC are tap dancing on the poop deck.
“Through November, Springsarea single-family permits totaled 2,053 or a nearly 38 percent reduction when compared with the same 11-month period in 2006. With December to go, it’s likely this year’s permit total will be the lowest since 1,154 in 1991.”
Why, oh why, do they keep building more houses? At least in Loveland news starts are only 100 for the year. Springs isn’t 20 times bigger. Who is supposed to buy those 2000 new houses? Is the Air Force Academy expanding?
Loveland is a massive sprawl of look alike boxes. Weather is hard on exteriors and the views are all covered up by houses on hills.
Too bad.
Nice train cnxn to Denver though..but that is about it.
Loveland is a massive sprawl of look alike boxes.
I have seen worse (Highlands Ranch comes to mind). As far as “massive”, its only a town of 60,000.
That ride down I25 has been getting pretty busy.
Weather is hard on exteriors
We just had our house painted after 8 years.
Weather is hard on exteriors and the views are all covered up by houses on hills.
??? Other than Namaqua, the hills seem to be pretty house free.
and the views are all covered up by houses on hills.
Nice train cnxn to Denver though..but that is about it.
Hmmm… there isn’t a train station in Loveland. Perhaps you are thinking of someplace else?
It’s all Fort Carson!! All sorts of of privates who get paid very little, can’t manage their money, and will be moving on soon will be snapping them up like hot cakes.
No wait, it has to be the expansion of Colorado College!! Or all the tech industries moving there (heh, heh). I know, they are building because Focus on the Family is going to be the next big national political movement.
Yeah, right.
My MIL law owns 7 rental houses in the Springs area. Most of them were bought at peak prices. They were cash flow positive (mostly) but just barely. Colorado Springs is the definition of strip development. It would not surprise me that in a few years it would be possible to buy a house with a credit card.
I’m all for the “phoney” bailout. Hopefully banks will get burned bad by all of this and then in the future make crazy lending almost impossible. It might give a little bit of relief to a few of the FBs, but so what? They were lied to and propagandized by the realtwhores , the MSM and just about everyone who wasn’t reading this blog. On the other hand, lenders will become very conservative which will have widespread effects, not just a few of the FBs. Bring on the bailout !…hehe….
Noticed that notable banker/lender is not seen in gym anymore with Private coaching..maybe he is in office praying.
Nice guy. but too bad.
stan,
In ways… I hear what you’re saying, and you know, I just might be tempted to get on board w/ that! So far the REIC has operated like “Yield unto the REIC that which is the REIC’s” anyway?
Want near ZERO taxes on YOUR… transactions? Bam! You got it!
Want 1% rates? Bam! You got it!
Want teaser rate loans! Bam!
Want to brow-beat appraisers? It’s yours.
I mean, why wouldn’t we? We gave them everything but the shirt off our backs on the way up. Why not on the way down? That way we can for once and all time say; “We have no hoops left to jump through for you to manipulate the RE market/financial system and things are STILL screwed up. Guess there’s nothing more we can do for you. Please go away now”.
Florida Accepts BlackRock Plan to Split Government (Update1)
Dec. 4 (Bloomberg) — Florida officials led by Governor Charlie Crist approved a plan by BlackRock Inc. to salvage the state’s $14 billion investment pool for local governments, isolating more than $1.5 billion of troubled holdings, and accepted the resignation of the fund’s executive director.
Officials also voted at a cabinet meeting today to make BlackRock the interim manager of the fund as they sought to reopen the pool for limited withdrawals. BlackRock will take over from the State Board of Administration while an outside firm is sought to run the fund. Coleman Stipanovich, executive director of the state board, resigned.
School districts and towns in the fund have been cut off from their money since the State Board of Administration froze withdrawals Nov. 29 to stem a run that almost halved its $27 billion in assets last month. The board last week hired BlackRock to analyze the pool’s holdings and provide advice on how to reopen access and restore local governments’ confidence.
”The plan BlackRock submitted is very responsible,” said Crist, a Republican, in an interview after the cabinet meeting in Tallahassee. ”For those who need money, we can accommodate them.”
Under the BlackRock plan, local governments would be able to take out the greater of 15 percent of their holdings or $2 million without penalty.
The Florida things kills me…they have this Stipanovich as the bag holder while Jeb Bush, who chaired the 3man trustee committee, is still apparently in hiding, til it blows over. Jeb Bush oversaw the sales of these “investments to the SBA and the pension fund by Lehman, and then officially joined Lehman in August. Still ducking reporters.
wonder how bob kamikazi’s apartment house is doin in LOST WAGES ?
, pointed to several factors affecting Nevada’s housing market: A decrease in taxable sales, slowing in-migration and higher unemployment.
flat,
On top of that I spoke with a MB lic. in NV and he said they approved a house bill that basically drove a stake through the heart of “stated income” loans. He hastily added; “You… weren’t a-c-t-u-a-l-l-y thinking about buying Vegas… where you!?”
Ahem, who in Vegas isn’t “stated”. No strippers I know! Ooops. (Not that I’d no any)
I was living in Yuma when I really started getting worried about all the obvious fraud and scamming with the housing bubble. Thank God we got out of there. There is no situation so bad that it can’t be made much worse by being stuck in Yuma (i.e. to cheer up your FB buddies who bemoan that they’re going to be stuck in their home for life due to dropping prices, say: “It could be worse, you could be stuck for life IN YUMA!”).
“In addition, some wealthier buyers bought homes well beyond their means, taking ‘interest only’ loans. These buyers assumed the value of their homes would increase dramatically before they would have to start paying on the principle. But as the housing market has softened, these higher-income buyers are finding that they cannot sell their homes at the price they want - or at all, Burks said.”
This is the kind of thinking I just don’t get . . . sooner or later they have to either 1) make the re-set payments, 2) re-fi into a 30 year fixed and make those higher payments or 3) sell and move. Did they ever even think they could afford higher payments, did they plan to move every two years or more likely, are they just trying to keep up with the Jones’. I guess wealth (or perceived wealth) doesn’t always make you smart and being smart doesn’t always make you wealthy.
Comment by Flatlander
2007-12-04 14:21:27
“In addition, some wealthier buyers bought homes well beyond their means, taking ‘interest only’ loans. These buyers assumed the value of their homes would increase dramatically before they would have to start paying on the principle. But as the housing market has softened, these higher-income buyers are finding that they cannot sell their homes at the price they want - or at all, Burks said.”
This is the kind of thinking I just don’t get . . . sooner or later they have to either 1) make the re-set payments, 2) re-fi into a 30 year fixed and make those higher payments or 3) sell and move.
http://europac.net/Schiff-FBN-12-03-07_lg.asp
Robert Toll - CEO Toll Brothers & Peter Schiff toll in, along with others on bubble. Fox News clip.
One thing I noticed during the group discussion between Schiff and the other Fox guests was that Schiff was the only one who backed his statements up with specific reasons. I’ve noticed this whenever housing boosters aruge that “Now is the time to buy”, there is never specific economic reasons behind this advice. It is always “you can’t pick a bottom” or “homeownership is part of the American Dream” there is never data to back up these assertions, simply idiotic platitudes.
From Salon.com Today:
The case against homeownership
“Roots are for vegetables,” declares Free Exchange, the flagship blog of the Economist newsweekly. Homeownership not only inflicts an unnecessary drag on the economy, but encourages soul-killing complacency.
The efficient allocation of people to jobs depends to a great extent on the mobility of labor. Casual empiricism suggests that the anchoring effect of homeownership is huge. When people speak of “putting down roots,” they generally have house-buying in mind. But roots are for vegetables. Humans prosper by roving in search of opportunity. When opportunities are elsewhere, deracination is liberation.
Subsidizing homeownership through huge tax breaks not only reinforces a cultural ethos in which homeownership is considered central to the American Dream, but also reinforces pernicious communitarian myths of the profound romance in seeing nothing and going nowhere. This ethos is at war with the spirit of autonomy, exploration, and entrepreneurial dynamism at bottom of our wealth and well-being. I would suggest we not encourage it.
Free Exchange takes as its launching point a passage in an article by Clive Crook in the current Atlantic (subscription required) that references research by U.K. economist Andrew Oswald finding “homeownership makes workers less mobile, which brakes economic growth and worsens unemployment, especially in areas blighted by the decline of locally dominant industries.” A more detailed summary of Oswald’s views can be found here.
Oswald’s views are interesting, and give new life to the age-old rent-vs.-buy existential dilemma. But Free Exchange’s transformation of this argument into a denunciation against the very idea of “rootedness” is, if we exclude the likely possibility that it’s nothing more than provocativeness for provocativeness’ sake, a sad revelation of a different kind of cultural ethos bordering on libertarian nihilism. How the World Works supports economic growth and labor mobility. But there’s something also to be said for a sense of community and belonging. A healthy society achieves more than just “the efficient allocation of people to jobs” — a connection to place nurtures meaning.
And who, exactly, exalts the “profound romance in seeing nothing and going nowhere”? We’ll give Free Exchange points for knowing how to turn a phrase. But there’s a lot to see in one’s own backyard, and a walk around the block is a journey through a rich universe.
“Humans prosper by roving in search of opportunity.”
Is this how humans prosper or how those who employ labor prosper? The categories aren’t mutually exclusive, but neither are they the same. The “freedom” to treat human beings as fungible factors of production sure benefits someone, but I’m not sure if it benefits the “factors.”
very very perceptive. i am calling for a nationwide strike…say december 25th..no buying, no selling, no work, stay at home with your families…enjoy the games, the food and the company.
Oh no–I say we keep the buying, spending and consuming going like gangbusters–otherwise the terrorists win, dontcha know? And modeling our economic lives after “rootless” illegal aliens (who starting to go home in droves, by the way), makes perfect sense too! Merry Christmas simple!
Feeder fish in a sea of job sharks.
Very perceptive. This sounds like a front org. designed to lobby for repeal of the mortgage tax deduction.
Humans have tended to prosper through history when they did not have to wander in search of game.
ref.; Jared Diamond
And who, exactly, exalts the “profound romance in seeing nothing and going nowhere”?
Quite a few people in the red state where I used to live.
They’ve never owned a passport, never left the country (except perhaps in military uniform), had no interest in anyplace outside the US and seemed proud of their insularity and ignorance.
Sorry if this is repost of my earlier post (I didn’t see my orig. post go thru), but I thought this was an interesting look at the age-old rent-vs.-buy existential dilemma:
http://tinyurl.com/2gnvmn
“Mesa real estate agent Steffanie Countryman said she recently listed a bank-owned property in south Chandler for $469,000 — almost $200,000 less than what the former owner paid for it in 2006.”
Absolutely wrong. The previous owner didn’t pay $200,000 more for this. Nor did anybody else that “bought” houses. The BANK DID.
That is why this is a “BANK_OWNED” property. Folks need to get this straight.
The “buyers” are not losing the money, it’s the banks, which means it’s the investors.
The former owner is walking away from his agreement.
I just wish local Property Appraisers could understand the difference between “bought” and signed onto as a good gamble. Then assessments would be based on a realistic purchase price.
I have an idea. zero down. Not a comparable. Charge buyer full tax rate, the neighborhood remains unchanged.
Sorry if this link was posted somewhere already, but I love this story. “Bond Insurers Seek New Capital.”
http://www.marketwatch.com/news/story/bond-insurers-seek-new-capital/story.aspx?guid=%7B789076C9%2DEB01%2D4B39%2DA072%2DFE2758DB7070%7D&dist=hplatest
This is the best part:
“They’ve gone from a business that had very low defaults from the muni bond sector to one that’s experiencing rather substantial defaults in the mortgage securitization area,” he added in an interview. “The old business practices and models don’t make a lot of sense when applied to mortgage securitization.”
Great ! These people made money year after year providing backing on bonds that wouldn’t go bad. Now that they have to back bonds that are going bad (ie MBSes, ie what they should do) they are going to fold ! Great insurance, guys ! Way to go !
The real irony of the situation is that these people are supposed to be experts at figuring out risk. And they stunk at it. All they needed to do was come here and read a few years ago and they would have seen to stay the hell away from MBSes ! It was all laid out right here on this board what was going to happen, right down to the foreclosures and bank runs. But no, Mr. Bond Insurance MBA thought he knew it all and was out playing golf instead of listening to the collective wisdom on this board. What the heck did we know… we were just a bunch of bloggers with not enough education and too much time on our hands ! I guess there is something to be said for common sense !
“There’s been a fundamental misapplication of the traditional bond insurer business model,” Mason said in an interview. “It was definitely stretched too far in the sense that there won’t be the same loss recovery.”
Yeah, they thought that house prices would only go up, never down and that allowing the FB to finance 100% LTV (inflated value, not verified by anything) was going to allow them to recoup losses if the loan failed. HA ! How stupid ! You morons !
I guess this is another thing you didn’t learn in MBA school ! That of being able to think outside the box, think beyond imitating your business cohorts, thinking for yourself.
BTW: I have an MBA, so I feel I can criticize them.
I’ve worked with quite a few MBAs.
Some are quite intelligent; their careers never seem to live up to their potential. Most are dumb as rocks, including the ones who make it to the top — authoritarian-follower sheep, who seem to have learned nothing but preening arrogance in B-School.
What is incredible is the entire model for bond insurance relies on a AAA rating on the underwriter. A failed business model.
“…Without top ratings, the companies could struggle as even their bread-and-butter business of insuring municipal bonds becomes tricky….”
IT WAS THE INSURANCE THAT ALLOWED THE CRAP BOND TO BE RATED AAA. THEY KNEW EXACTLY WHAT THEY WERE DOING. WAS ANYONE IN THIS BUSINESS MAKING MONEY OVER THE LAST FEW YEARS?
Interesting news after hours on Fannie eh ?
A lot more dividend cuts coming.
Maybe you have WaMu in mind..?
Link ? What happened with Fannie ?
http://biz.yahoo.com/ap/071204/fannie_mae_capital.html
Dang… when I told coworkers I needed another $7 billion they just laughed.
My dad predicted the fall of Fannie and Freddie about three years ago. Now… he wants nothing to do with that prediction (it scares him).
As I noted before, I expect 25% down payment, excluding FHA/VA, to be the typical down payment. We have some pretty dark days ahead. Now, I expect the GSE’s to be kept afloat… but that isn’t the same as a return of the bubble years…
Got popcorn?
Neil
“Everybody who’s in the market to buy knows builders are going to do what they need to do to move product.”
————————————————————–
Everything except cut the price to where the average family can actually afford it.
Holy TED spread.
TED spread widens to highest since 1987 crash
http://ftalphaville.ft.com/blog/2007/12/03/9336/ted-spread-widens-to-highest-since-1987-crash/
From your link (Thanks Duke!)
The TED spread (that’s the difference between 3 month T-bills and Libor) is up at levels not seen since the 1987 stock market crash. If this isn’t evidence of a liquidity drain then who knows what is. Note also the dip before the current high - the September/October “easing” when everyone thought they could breath again.
Anybody else see in the graph something else similar to 1987. A spike up, a relief, and then a high peak indicating…
Credit crunch.
‘Calibrated eye says we are within 6 weeks of the crash.’ GULP!
Got popcorn?
Neil
I just choked on my popcorn!
“‘We’re doing everything we can,’ said Mark Long, VP of Saddletree Homes and Symphony Homes in the Springs. ‘We’re advertising. We change the incentives that we do frequently. Everybody who’s in the market to buy knows builders are going to do what they need to do to move product.’”
How about, “We’re lowering the god@#%ed price” ?
Nah… That would mess up the comps. Time will correct this train of thought, the bitch is waiting while these A-holes keep playing games.
The bank’s’ll hold on as long as they can so that they can straighten as much of this mess out as possible. If they dump all the properties “at once” - BANG! - down go the “values” of their assets… We all want the prices to drop, but they won’t for a little while more…
“Hambrick said the reason he talked to the ADR is that the county wants to ‘be at the bottom of the market. Our goal is to reflect the market as accurately as possible.’”
Uh, Mr. Hambrick…I would be more concerned with the AZ Dept of Real Estate investigating your association as County Assessor with a developer that has since gone bankrupt and that little issue of your illegal land splits. You and your ilk should be ashamed of what you’ve done to Yavapai County.
I love how these guys get all passionate about “reflecting the market accurately” when they were right in there, digging with both hands.
Even Nevada won’t gamble with the taxpayers money!! Good for them.
I have said it a few times that one of the reasons why real estate value has to be based on sound principles is because so many calculations are based on real estate values such as :
(1) tax rates (property tax )
(2) insurance rates
(3) yields on pension funds
(4) Insurance company investments
(5) Government spending
(6) School systems spending
(7) stability of neighborhoods
(8) rental rates being in sink with local incomes as well as home purchasing (so areas can be serviced )
(9) control of crime and solid neighborhood development in keeping with local job base and incomes .
(10) the planning of housing developments so areas aren’t overbuilt or underbuilt ,or the wrong type of housing built for the demand .
(11) Overbuilding and speculation buying creates a short term job base that crashes when the people in the industry get laid off .
(12) Value of real estate even determine if a older person might be kicked out of a house based on rising property taxes .
(13) Budgets are based on stable market values ,not fleeting market values .
(14) Vacant housing and foreclosures and vacant houses with pools causes health and safety concerns ,increased crime concerns ,and of course unstable prices in neighborhoods causing lending to become strained for all or unavailable .
When you have a bunch of building taking place based on real estate appreciation and speculation buying ,it creates a false world of funny money with many agencies and companies false reliance on that faulty demand and appreciation .Lending and housing has to be a extremely watch and regulated area, in which appraisals are on sound footing .
Going to be a whole lot of pain with this correction . I guess the Wall Street market makers didn’t account for the mayhem that fake demand for housing would cause a neighborhood . Buying to flip will become the great evil of this decade .
Well said Wiz.
“Jeremy Aguero, a principal in a Las Vegas financial consulting firm, said the news media is creating a bad image of Nevada as a boomtown state that went bust. ‘It seems we have emerged as the Paris Hilton of states,’ he said.”
Bad comparison. At least Paris is hot. Nevada…temperature hot yes but the whole state is a big desert. You know what a map of Nevada is? A piece of sandpaper.
BOHICA!
I live in Colorado Springs and can tell you the builders started 3000 houses this year and have sold approximately 1000 year to date. I don’t know if that includes cancellations or not. This market is tanking realtors are flat desperate. I currently rent a house for 1500 I could not own for 3000. Our problem isn’t overpriced by sqft approx 100 now its that all they built in the last 5 years is 2500 sqft and up homes. Average wage is 43000 average house 205000 nothin else to say.
One advantage for first-time buyers is that they don’t have existing homes to sell, experts say. That’s a problem plaguing many move-up buyers in today’s market with more than 50,000 existing homes for sale…
Why do I get an image of a roach motel in my mind when I read this? They just keep coming in and getting stuck.
Where can I buy a Chris Thornberg Action Figure? He’s my hero!
When it’s required to call bullsh*t, bullsh*t there’s Chris Thornberg. He has become a thornberg in the side of the Real Estate spin machine countering all of their crap with the truth.