It Used To Be A Thriving Business In California
The Daily Pilot reports from California. “Orange County had the lowest job growth this year of any major urban area in California and may soon be mired in a nationwide recession, a group of business leaders said Tuesday at a forum at the Island Hotel. ‘To be blunt, we’re on recession watch,’ said Jack Kyser, the chief economist of the Los Angeles County Economic Development Corporation and the conference’s keynote speaker.”
“As of October, Orange County had added only 400 jobs to its total from last year, putting it far behind the pace of Los Angeles, San Diego and other areas around the state, Kyser said. The county also posted increasing numbers of unsold houses, unrented apartments and vacant offices, he said.”
“Jay Moss, the CEO of Mosaic Homes, compared the state of the economy to the Titanic submerged halfway in the Atlantic.”
“Even the more pessimistic speakers said they expected the economy to work through its troubles eventually. ‘California is going through a real estate recession, if you will, but it will recover,’ said Frank Foster, the CEO of Fieldstone Homes. ‘It has in the past, and it will in the future.’”
The Orange County Register. “In their 30th annual forecast, Chapman economists Esmael Adibi and Jim Doti are predicting that job growth in Orange County will turn negative starting in the second quarter of 2008 and stay negative in the third quarter. That qualifies as a recession, according to Chapman’s definition, which is two consecutive quarters of negative year-over-year job growth.”
“‘There is little doubt that the economy is hurting from the demise of real-estate related activity,’ the economists write. ‘It is clear that construction and financial activities are the weakest sectors of the economy followed by trade, transportation and utilities which are indirectly affected by the housing market.’”
“Altogether, Chapman is calling for a loss of 2,400 jobs next year. ‘Most of the job losses are expected to occur in the financial services and construction sectors,’ the economists write.”
“They also foresee an 8.1 percent drop in the median price of a resale single-family home in 2008.”
The Daily News. “Improbable as it sounds, a recession is not likely because of the housing and mortgage market meltdowns, according to a UCLA forecast that will be released Thursday. That scenario holds true for Southern California, the state and the nation, said the widely-watch UCLA Anderson Forecast issued each quarter.”
“Still, for anyone in a real estate related business, the next year or so will probably feel like a recession.”
“‘We’ve read this story for most of 2007 and the economy has pretty much lived up to our expectations, as bad as they were,’ said Ryan Ratcliff, an Anderson economist who wrote the California report.”
“‘In August everyone freaked out at once. There were more defaults than we were expecting and it seemed like everything hit the fan at once in late October and November,’ he said.”
“Economist Jack Kyser said that it could take a while longer for the real estate sector to bounce back. ‘Some people have been really gloomy saying it’s going to be 2010 before housing starts to recover,’ he said.”
“‘This slower job growth is still not enough to create a recession and that’s been an element of our forecast for two years now,’ Ratcliff said.”
From ABC 7 News. “It used to be a thriving business, making custom bunk beds in the growing bedroom community that once was Antioch. But with all the home foreclosures now lining the streets here, Ken Johnston’s workload has all but ground to a halt.”
“‘When the market was good, I would have two shifts of employees at this time of the year for Christmas. Right now, there’s no comparison. It’s just myself and one other person and I’m only working one or two days a week,’ said furniture maker Ken Johnston.”
“Johnston is not alone. Whatever they’re selling, in East Contra Costa County, businesses are feeling the pinch of the mortgage crisis.”
“‘We’re definitely getting calls from everything from veteran’s offices to restaurants to retail stores saying they’re concerned. It’s definitely more of a challenge right now,’ said Devi Lanphere from the Antioch Chamber of Commerce.”
“According to the county, more than 1000 people in the mortgage industry have been laid off in the East Bay this year.”
“‘They have lots of skills, but there aren’t necessarily an abundance of jobs out there that provide that same level of income right behind what they’ve been doing,’ said Stephen Bater from East Bay Works Career Center.”
“Pittsburg’s Michele Lombardo worked in the mortgage industry for 20 years, before being laid off in September. ‘It’s very discouraging because I loved what I did,’ said Lombardo.”
The Modesto Bee. “Youngdale’s, an appliance store and 85-year fixture downtown, is closing its doors. Store owners Joe Bonander and Sonia Caldeira, whose grandparents founded the store, told Youngdale’s employees Tuesday morning that the decline in real estate led them to conclude that the business should close.”
“‘We had a very good time when customer confidence was high and home equity was high, and customers were using that equity to upgrade their appliances in their homes,’ Caldeira said. ‘The trend is opposite now.’”
“Sharon Silva, president of the Turlock Chamber of Commerce, described the store as one of the city’s leading businesses for generations. ‘It’s very sad when one of the local businesses is leaving,’ she said. ‘I believe this is one sign of what’s happening in the econcomy of our country and in California.’”
“Turlock Mayor John Lazar echoed Silva’s thoughts. ‘It’s the end of an era,’ said lifelong Turlock resident Lazar. Lazar, a Realtor, said Youngdale’s was a preferred vendor for many home developers in and around Turlock. The dramatic slowdown in home construction probably hit the store hard, he said.”
“Bill Bassitt, chief executive officer with the Stanislaus Economic Development and Workforce Alliance, said Youngdale’s closure is a sign of real estate’s slump affecting other businesses.”
“‘This is the fallout that occurs, and this isn’t going to be the last one,’ he said.”
“A longtime customer, and lifelong Turlock resident, Realtor Jim Theis said Youngdale’s closing reflects an economy that’s been badly shaken by the collapse of real estate. ‘That’s the same segment that drove everything to such highs a few years ago,’ Theis said. ‘It ripples through the whole economy. I’m sure it’s a tough situation for them and other businesses.’”
“Caldeira said she and Bonander had planned to run the store until they retired. ‘We both have to find new jobs now,’ she said.”
“The credit crunch has taken a tiny bite from Orange County’s investment pool.”
“Treasurer-Tax Collector Chriss Street said Tuesday he discounted 17 county-owned securities by nearly $14 million after a ratings agency warned it might downgrade the securities.”
“Street said he doesn’t plan to sell the securities because ‘there’s no need. … These investments are still rated triple-A,’ the highest possible rating.”
“The securities are a type known as structured investment vehicles. They consist of bundles of different kinds of debt, including commercial bank paper and student loans.”
“Moody’s Investors Service said it was reviewing and might downgrade dozens of structured investment vehicles, including 17 in which the county invested $460 million. The county has invested another $370 million in other structured investment vehicles that are not facing a potential downgrade.”
“The county has been buying structured investment vehicles since at least 2001 but stepped up its purchases two years ago. Today it owns $830 million worth, or 14 percent of the pool’s total assets. That’s up from 5 to 10 percent two years ago, said Paul Cocking, the treasurer’s chief portfolio manager.”
“While about 15 percent of the assets are mortgages, they’re outside the troubled U.S. mortgage market in places like the United Kingdom, the Netherlands and Australia, financial analyst John Byerly said.”
“These securities typically pay about 5.25 percent to 5.65 percent, a fat return for risk-wary government investors.”
“Among the skeptics: Pimco, the Newport Beach-based bond trading giant. ‘We didn’t think they paid enough for the risk,’ said Josh Anderson, a Pimco expert on the securities. Pimco has bid on assets held by some troubled structured investment vehicles, Anderson said, and ‘they aren’t pretty.’”
Inside Bay Area. “City code enforcement officials now have the power to knock out eyesore homes. Starting today, a series of ordinances will take effect that give Manteca the ability to dole out civil penalties of $1,000 per violation per day, or up to $100,000 per structure per year.”
“Manteca now also has authority to abate a home by keeping it properly boarded or maintained at the property owner’s expense.”
“Plunging housing prices and bad lending practices have turned Stanislaus and San Joaquin counties into one of the nation’s leading areas for foreclosures. Manteca is in the center of the crisis.”
“There are 253 homes that are vacant or vacant with lockbox in Manteca, according to Metro List Services data. Some local real estate experts suggest the number of vacant lots could go up at the beginning of 2008 due to quarterly adjustments from when people bought homes at the crest of the market.”
“‘We’re not going to do anything until the banks own the property,’ said Greg Baird, the city’s code enforcement officer.”
“Manteca police Capt. David Bricker added he was unsure about whether larger banks or international banks who own Manteca homes would respond. Some in local real estate have questioned whether liens imposed on homes due to the ordinances would make it harder in the future for anyone in Manteca to get a loan.”
The Desert Sun. “Coachella Valley home sales are 30.1percent lower than this point last year. But that’s better than the statewide sales figures, which have dropped 40.2 percent compared to October 2006.”
“The exact number of homes sold in October was not available late Tuesday, according to the monthly information released by the California Association of Realtors.”
“Nearly 9,200 Coachella Valley homes were on the market in October and 9,593 were on the market last month, according to the local figures. That’s about a 1,000 more homes than were for sale in November 2006.”
“The median price of a Coachella Valley home is $323,440 - a 6.5 percent drop since September and a 5.1 percent decline since this time last year. While the median price is used as a benchmark for tracking homes, it can be misleading when several high-end, multimillion-dollar homes sell in a single month.”
“While roughly 24 percent of Californians can afford the median priced home in their communities, 33 percent of valley residents can afford homes here. At the ‘height of the market,’ the local figure was as low as 11 percent, said reg Berkemer, executive VP of the California Desert Association of Realtors.”
“As there can be no causeless wealth, so there can be no causeless love or any sort of causeless emotion. An emotion is a response to a face of reality, an estimate dictated by your standards. To love is to value. The man who tells you that it is possible to value without values, to love those whom you appraise as worthless, is the man who tells you that it is possible to grow rich by consuming without producing and that paper money is as valuable as gold.”
John Galt
Paw Galt:
I’m gonna git me sum dollars and git rich: custom bunk beds!
Who is John Galt?
Interesting site: John Galt
http://members.aol.com/johng101/jonpol.htm
Where is John Galt?
I am John Galt…
I am Mr. Pink.
Irony of all Ironies:
According to the Wikipedia entry on Alan Greenspan:
“During the 1950s, Greenspan was one of the members of Ayn Rand’s inner circle, the Ayn Rand Collective, who read Atlas Shrugged while it was being written. “
~curtsey~
Leigh
“They also foresee an 8.1 percent drop in the median price of a resale single-family home in 2008.”
Now that’s gonna piss Watts off.
As anyone seen him lately? Maybe he committed suicide. A blogger can dream.
Someone posted yesterday that he was heard saying we’re at the bottom, and next year will see appreciation again.
he needs to up his dosage and stay silent
You mean OD? Can it wait ’til I can deliver the special JT I have reserved for him. After that, he’ll welcome an OD!
Coast to coast, la to chicago, western male.
Across the north and south, to key largo, love for sale.
Smooooooooo th operaa tur…
No need to ask.
An 8.1 percent drop.
LOL. Nothing like a precise number for a prediction for an event over a year away.
I’d like to think the decimal point was an accident
Actually, the correct number is 22.19% for 2008 and another 21.86% for 2009. Thereafter price drops will fall to single digits for 4 years, 9 months and 3 days after which prices will slowly start to level off. Don’t tell anyone though, this is top secret
Heard he hung himself on a price reduced sign
It was a ‘Price Improvement’ sign
“Pittsburg’s Michele Lombardo worked in the mortgage industry for 20 years, before being laid off in September. ‘It’s very discouraging because I loved what I did,’ said Lombardo.”
___________________________________________________
You mean screwing people over and forcing the “frezze plan” to bail US out??
Like I said below, anyone who loved this biz is definately scum.
Yeah, that’s exactly what I thought when I read that. And now they want us to feel sorry for them. Unbelievable.
‘It’s very discouraging because I loved what I did,’ said Lombardo.”
correction:
Its very discouraging because I loved making all that money.
Further correction:
‘Its very discouraging because I loved the money so much I borrowed against my home and now don’t know how I’m going to make the lease payments on my car nor pay off the credit card. Does anyone want to buy my flips? Hey Mister, “want a good time?” What do you mean “if it was 20 years ago?”‘
Now that’s what she really said.
Got popcorn?
Neil
‘It’s very discouraging because I loved what I did,’
You often hear mortgage industry people (brokers, loan officers, etc.) say this. I always think to myself, “Did it ever occur to you that the job you love so much is in one of the most corrupt industries that exists? Did you ever realize that the job you love so much involves weaving a noose of debt, and placing it around the necks of people? Did you ever for one single moment stop to consider the morality off our current debt-based monetary system? Have you ever stopped to consider the insanity of a system in which if you stab enough people in the back and sell them into debt slavery that you are judged a “success?” (You, too, can achieve this!)
QUERY: With respect to this Freeze plan, the difference in interest is being added as principal each year isnt it? Such that in 5 years they will have 25% more principal to pay off (assuming a difference in 5% between teaser rate and actual). Please tell me that is case. In such a scenario I really dont care when these people go down. Slow and orderly is probably ok. Just 5 more years of sleepless nights.
Difference not added to principal. Sorry we lose! They win!
What a horrible example to set. Are they giving subsidies to those with fixed rates and renters to even it out?
So how is forgiven interest being paid?
“Difference not added to principal. Sorry we lose! They win!”
It really is, A Great Society. One LBJ mortgage cum’n up!
While about 15 percent of the assets are mortgages, they’re outside the troubled U.S. mortgage market in places like the United Kingdom, the Netherlands and Australia, financial analyst John Byerly said.”
_________________________________________
LMFAO!!! Are you sure about that??
Nevermind, I hear those markets are solid.
At least we have these ass clowns on record…
The UK, Oz and the Netherlands…don’t the financial advisors for Orange County read The Economist or the FT? Or do they just scan USA Today??
It’s all good though, they just lost “a tiny bit”, 14 million. So when they lose 50 or 100 million, it will just be a tad. A smidgen.
These monkeys in Orange County have been stripped of their bananas before…don’t they remember?
They fired the ones who were “speculating” some years back, and the new ones were told only to “invest.”
And they will realize these big losses just as a hard recession hits with lower revenues… due in part to the collapse of the subprime lenders based in Orange County.
Talk about putting all of your eggs in a wet paper basket!
Bill Gross of Pimco wants the Fed to lower rates to 3.5%. Looks like you’ve bought some SIVs eh Bill? And you want the tax payers to bail you out.
That one got me, too. Sad thing is the public won’t know the difference. You’re lucky if they know what’s going on here let alone in those foreign countries.
I don’t often LMFAO about this stuff–but that comment was terrific. All three of those places have bubbles at least as bad as the SF Bay Area.
Clair, you really should try to lighten up a little.
Laughing your fu_king ass off now and then is good for the soul.
OC looks to get hit hard as many on this blog predicted a while back with all the subprime companies HQ’d there. What is inventory level in OC now, does anyone know?
With the jobs goes the excess consumption. It has been eons since I have been to Socal, but I imagine the exotic car dealers and high-end electronics stores are beginning to hurt.
According to a website called OCRealEstateFinder.com, it seems to be a county-wide inventory of 19,000. Quite a big more than a year ago (last report from ‘bubble markets inventory tracking’ seemed to be 12000 in Dec 2006).
That’s what I posted yesterday. By Feb the inventory dam will be at bursting.
“That’s what I posted yesterday. By Feb the inventory dam will be at bursting.”
Not to worry…sales ALWAYS pick up in the Spring!!
DOC
With the Super Bowl right around the corner, the shills are awfully quiet.
Zip Realty shows 18,328 in the OC.
That’s insanely high for this time of year. Trouble ahead indeed.
SD ziprealty inventory (SFRs + Condos) = 19,205, barely off the year’s high. Of course this count excludes FSBOs, Craig’s listings and myriad unsold vacant new homes in 131 “New Home Communities.”
Happy Holidays!
You mean people don’t want a “home” for the holidays?
“Pittsburg’s Michele Lombardo worked in the mortgage industry for 20 years, before being laid off in September. ‘It’s very discouraging because I loved what I did,’ said Lombardo.”
Anyone who loves the mortgage buisness is an insane a$$hole. I’ve always said that if it didn’t pay well no one would do it. Though i wasn’t dirty, I found myself coming home every day needing to take a shower to cleanse myself of the daily mortgage funk. I’m out, and I ain’t going back.
Funny - I’ve often wondered the same thing about dentistry. Would anyone ‘love’ cavities and halitosis if it didn’t pay well??
“Funny - I’ve often wondered the same thing about dentistry. Would anyone ‘love’ cavities and halitosis if it didn’t pay well??”
Beats the heck out of proctology…
“We praise the colo-rectal surgeon, misunderstood and much-maligned, slaving away in the heart of darkness, working where the sun don’t shine….”
And with my current crusade underway, Mr Proctologist will have plenty of buisness coming his way. At last, a recession proof job!
This will be a lucrative occupation once the Joshua Tree Suppository movement kicks into high gear…
My wife used to be in the mortgage business (loan processor) and she jumped ship over a year ago. She had that “daily mortgage funk” thing goin’ on, too. Her loan officers kept telling her it would turn around right away… apparently not.
Hotel rate at either the Grand Champions or the Esmeralda are at 5% for Dec. and the service industry/spa industry are at lows I haven’t heard about since the mid 90’s. Airline capacity is not booked full as it was 06 for DEC. Some yes, but not all.Say 75% +/- percentage or two.
Airlines are definitely not booked - had lots of choices when I bought the kid’s ticket home. Traffic is as bad as ever, though - all the white heads are lollygagging about as usual.
Whiteheads..bluehairs.. pink/purple hairs.. NO hairs.
Got my mother a booster seat for her driving..couldn’t stand the site of her barely above the steering wheel. Meanwhile praying constantly that she is safe.
Some of those ol coots especially the ones the Snowbirds wealthy ones from up north..cain’t drive worth sht.
Driving all around with BUY American on their Lexus/toyota import cars.
Don’t get me started ‘aretheycrazy’.
My wife has her own little Spa business for 3 years now. She has undercut her competition but still her phone is silent. It is real my friends.
Ouch… Not sure what to say. Its going to take time for that business to recover. Good luck. Thanks for the anecdote.
Neil
A bit OT, but along the ‘cash is king’ theme that is growing stronger I find it fascinating to watch Buffett in action and Berkshire exploding in price. Buffett must be like a kid in a candy store right now as one of the only sources of serious cash. I love it - and imagine if he hadn’t pulled out of his huge short position on the dollar a year or two too early.
It’s all over. I’ve got quite a few contractor friends in various trades and they all say it’s hardcore cutthroat bidding to get any jobs right now. You got ten to twenty guys bidding for one measly job.
Hmmm…. I’ll tell my friends who want work to be done. One wants to build a new horse training barn His wife raises horses and teaches riding on the side. To get more serious… they need a barn to both teach indoors but also door indoor competition… They’ve been holding off (he made her do an actual business plan), but it sounds like the numbers might change.
Note: They can afford to do this as a hobby and will love doing it… so why not!
Got popcorn?
Neil
“It’s all over. I’ve got quite a few contractor friends in various trades and they all say it’s hardcore cutthroat bidding to get any jobs right now. You got ten to twenty guys bidding for one measly job.”
Back during the early nineties down-turn a CalTrans freeway off-ramp job near Santa Maria went out for bids. In normal times you’d receive three or four bids; over seventy bids from around the country were submitted, IIRC. It was that tight out there.
I was able to get a free SFO - HNL tix in January for 35K miles - haven’t been able get that tix on a month’s notice for a long time. Usually they are gone as soon as they’re available (11 months out). I’m looking forward to replenishing my miles by flying on reduced rates in the near future.
I saw a flight from LAX to Frankfurt for $416 RT on sidestep today. I think we might see some very significant discounts going forward.
Friend in airline biz got a FFT for $350 RT to and from Montreal= SFO just now for days before Christmas and a couple after. THAT is unheard of.This time of month.
NFN, but the mtge biz, the car biz, the re biz, should be rewarding.. helping people find a home, buy a home, finance a home or selling someone a good car should be a decent and honorable way to make a living..unfortunately, in most cases, it requires bending people over…
I, for one, would like to work with folks to get them into the right house, loan or car and make a decent living at it.. it’s sort of too bad that it’s nearly impossible to make a good living at it with screwing people over..
It’s just like life insurance.. you can’t make a living selling level/fixed term..no, instead, you have to put them in some variable annuity or whole life policy…
Funny you should mention insurance. I’m looking at changing homeowner’s policies, and I met with a local agency last month. But for the fact that my current insurer’s rate just went down (and I have my doubts about it being a long-term reduction), I was impressed with this agency.
Except for the lady’s life insurance pitch. She just wouldn’t give it a rest, even though I kept telling her that I’m single, have no dependents, and my parents have done a great job of setting themselves up. She tried to change tactics and tell me that I could buy a policy for charitable giving, but I’ve worked for an organization where many of the insurance policy gifts turned out to be duds. So, that pitch fell flat on its face. Besides, I can make charitable gifts without running them through an insurance company.
It’s just like life insurance..
My 80 year old father has always referred to it as Death Ins. Said it had nothing to do with insuring ones life, but would not sound as good trying to sell as grim reaper for the left overs ins.
I concur. As one in the insurance industry, with life insurance, you are betting that you will die early and the house (Insurance Co.) is betting that you will live a long life.
Real life insurance is an annuity, wherein you are betting that you will live a long life, and collect on the policy while you are still in this life.
ie, black is white and white is black!
I have a sweet 83-year-old patient who for the past seven years has told me that she wants to live to 100 so she can collect 10 thousand dollars on her life insurance policy. I’ve always kept my mouth shut, but today I just had to ask her how much she paid for it. She told me that she pays $106 per month - this is a retired county worker with a $1200 per month pension and no social security. Insurance agents are scum. On the bright side, looking forward to getting her 100 year payoff seems to cheer her up, so I still won’t say anything.
RE: I found myself coming home every day needing to take a shower to cleanse myself of the daily mortgage funk.
Hey -ex…
As far as I’m concerned any employment activity connected to real estate for the past 5 years, be it origination, appraising, underwriting, sales, you name it-has been the absolute dregs.
And unless you’ve been there, nobody can really understand how horrible it all turned out if you were the stand-up legit guy.
Welcome back to sanity.
Well said.
I loved selling RE in the early 90’s after the last bubble blew. The buyers were loyal and really need help sorting through the MOUNTAIN of inventory and were grateful for your time and service finding them a good purchase. Shortly after 2000 everything went to shit (except the money) when the lenders gave money to any chimp with a bananna. Then the sellers acted as if they were doing you a favor by letting you “have the listing” and the buyers would screw you at the drop of a hat no matter how much time and effort you gave to them. Around ‘02 the corruption started in earnest and it really became a game of “SCREW THE FB!!!!”. By the time we got to 05′ I had took the time to finish my Accounting degree and stopped selling to buyers. The corruption (actual blatant law breaking) became so common place with the new agents/lenders/title cos. that those involved assumed that “this is the way it works”… Break the law, get paid… wash, rinse, repeat..
I am getting ready to get my RE brokers license, but don’t think I will ever practice openly again. Will do my own deals, or for friends, but this bubble has crushed my desire to work actively with others that entered the business. I am sure that most of the shukamajivers will get washed out, but it just put a horrible taste in my mouth that will be hard to forget.
I feel better hearing you say that Rich. I always thought it would be fun to be a real estate lady when I retire from my job. I liked the real estate agents when I bought houses - they were nice and helpful, and it was fun to try to find the right house with them. They were people that had lived in the community a long time, and were always nice about referring me to good plumbers, electricians, etc. Things are different now, but maybe this crash will wash out the creeps and we can go back to just buying affordable houses to live in.
“Anyone who loves the mortgage buisness is an insane a$$hole. I’ve always said that if it didn’t pay well no one would do it. Though i wasn’t dirty, I found myself coming home every day needing to take a shower to cleanse myself of the daily mortgage funk. I’m out, and I ain’t going back. ”
LOL. My sister tried working for a lender in 03′ for awhile. She couldn’t stay with it. She remarked it was too scammy or something along those lines…I suspect she had the same feeling you had each and every day and got out. She tried it for about 4 months I think. I’m proud of her that she got out.
DOC
Funny, I don’t recall Adam Smith using “freaked out” and “hit the fan” to describe economic events.
Oh well, I’m sure Mr. Ratcliff will be just as effective an economist as Mr. Smith was.
–
‘To be blunt, we’re on recession watch’
When an economist is ‘on recession watch’ we are in recession for few months already.
Jas
I agree, Jas. I think we’ve been in recession for at least a year.
Bloomberg reporter says we have entered the third year of a “housing recession,” as though the situation has been common (and commonly reported) knowledge all along:
Paulson finalized the deal as the housing recession entered a third year, threatening the economic expansion. The collapse in the market for securities backed by subprime mortgages cost the chief executive officers of Merrill Lynch & Co. and Citigroup Inc. their jobs, roiled markets from Auckland to New York and forced the Federal Reserve to cut interest rates twice.
http://www.bloomberg.com/apps/news?pid=20601087&sid=asetzdsdmBUE&refer=home
I also like how the reporter uses the past tense, as though all the damage is behind us now.
You nailed it! I too have caught how MSM and RE bulls have been denying a housing recession all the way up to the point where the evidence was undeniable. Now that the housing bubble has been outted, they want to push the recession start date back as if somehow that will expidite the correction process. Nice try, knuckleheads.
Damn!….expedite…..sorry, I was all worked up.
Or how he says the Fed has cut rates 2 times. Try 3! .5% discount rate cut. .5% in FFR and discount. Then .25% in both.
“Damn!….expedite…..sorry, I was all worked up. ”
Jeez, Ex. No need for the pre-emptive “spelling Nazi” speil…
If you see you made a spelling error, so what? Your spot-on logic and candid humor are what count. Frankly, I’m sick of anal retentive, OCD a**holes pointing out spelling and grammatical errors on this blog.
By the way, if you’re a degenerate “spelling Nazi” and don’t like what I said then flame away. I still assert your pointing out miniscule errors is a pain in the a**, and a waste of everyone’s time. Here’s a suggestion; the next time you feel the uncontrollable urge to correct a mispelled word on an otherwise highly intelligent blogger’s statement…re-channel that nervous energy, grab your micrometer, and go back to measuring your turds.
Rant off.
DOC
Rant off.
Rock on Doc! Having gone off on the spelling Nazi’s myself, I’m feeling a little ashamed for correcting myself. Now I’m off to right the wrong with a post laden with misspelled words.
I kind of like it when people correct my spelling, especially when I realize that I have been misspelling the same word forever. Of course, I’m married to a high school English teacher, so I’m used to having him correct my grammar.
LOL!!! Exactly
I wish I could remember where I read it, but I read somewhere that we’ve been in recession since dot.bomb and it was just masked by the housing bubble.
shrub’s so-called “legacy” is crumbling faster than a termite-eaten shack in Florida. A whiff of true desperation is in the air, I mean, freezing rates? I’m gonna call and ask that my credit card rates be frozen at the promotional rate.
D’ya suppose that will work.. hello INDIA?
“I’m gonna call and ask that my credit card rates be frozen at the promotional rate. ”
would love to have mine reduced but dont’ hold your breath..HellooooooIndia…
Well, I can ask. Why not? Anyway, the customer service reps I deal with are here in the US. I’ll just call and ask. I think everyone should, if only to make a point.
Palmetto: the older I get, the more I mouth off to customer service reps. It’s not like I can talk to Stan O Neal or Angelo Mozilla, but if enough people complain, hopefully the message will get through.
It appears that the number of people planning on buying a ‘recreation vehicle’ has PLUNGED, and that this dynamic ’should’ be viewed OMINOUSLY, on a past-experience basis, in terms of the odds that the US is heading into an outright recession.
RV “Shipments” will decline this year, for the first time since 2000, and are down by a DEEPLY negative double-digit rate of (-) 11.1% thru the end of September. Of 86 Dealers attending the show, 66 said they would order fewer trailers and motor homes
Toyota is finding that going up against the Big 2.5 in the full-size truck market is not a walk-in-the-park.
They wanted to sell 200,000 units this year. To meet that goal, they have to sell approx. 22,000 trucks between now and December 31. Good luck with that.
“RV “Shipments” will decline this year, for the first time since 2000, and are down by a DEEPLY negative double-digit rate of (-) 11.1% thru the end of September. Of 86 Dealers attending the show, 66 said they would order fewer trailers and motor homes.”
Good. RV’s are freakin’ money pits on wheels. I have yet to talk to anyone that hasn’t gone through a continuous fiscal bleeding of repeated repairs, breakdowns and trouble-shooting nightmares with RV’s.
DOC
How true! Many economists apparently “forecast” while looking out the rear view mirror. If you go to the NBER web site (organization that retroactively dates recessions), you quickly discover that most recessions are essentially over before they are officially announced…
Announcement dates:
The March 2001 peak was announced November 26, 2001.
The July 1990 peak was announced April 25, 1991.
The July 1981 peak was announced January 6, 1982.
The January 1980 peak was announced June 3, 1980.
http://www.nber.org/cycles.html/
most recessions are essentially over before they are officially announced…
not this one however
Ah, but it hasn’t been announced yet! They may wait till it’s over before they admit it ever existed. Years and years of listening to CNBC mouths debating whether the housing slump will spread to a wider recession. YAWN.
“Still, for anyone in a real estate related business, the next year or so will probably feel like a recession.”
Yes, and getting kicked in the head with steel-toed boots feels like a spring breeze blowing through your hair.
I’ve been trying to think of something clever to say on that ‘next year or so will probably feel like a recession.’ I’m absolutely flabergasted that they think this will be confined to one industry. Its going to feel like a jack boot stomping fest in any of the areas that were heavy on REIC employment: Florida, OC/San Diego/IE/Sacramento, Phoenix, Las Vegas, DC, and anywhere its ‘different here.’
I’d love to see the wages all the ‘new jobs’ are really paying. I suspect we’ll find out a large number of Realtors ™, mortgage brokers, construction, and other employment just disappeared.
Got popcorn?
Neil
This is the first recession with a full-blown 24 hour MSM newscycle, with bloggers holding them to the fire. Mighty interesting….
Read about all the new jobs in today’s paper, but no mention of what they actually might be. Then some backpeddling that many of the jobs were temporary. All this adjacent to an article announcing Bristol-Meyers eliminating 4,300 jobs.
LMFAO
Jas,
When an economist…is an economist…how do I say this kindly?
I’m confused–are we on a recession or depression watch?
You are an easy target! (I’m just pulling your toes)!
Best,
Leigh
“Treasurer-Tax Collector Chriss Street said Tuesday he discounted 17 county-owned securities by nearly $14 million after a ratings agency warned it might downgrade the securities.”
“Street said he doesn’t plan to sell the securities because ‘there’s no need. … These investments are still rated triple-A,’ the highest possible rating.”
How do these people stay employed? “Still” (with reference to action or condition), when they “might downgrade”, what if they downgrade to ‘BB’? Stupidity runs rampant when its not your moneys. For a measly 0.5% edge he is risking 40% of equity. I wonder if he took orders from Lahde Capital or Paulson International hedge fund. Clearly a poor risk/reward ratio.
Has this year fried you yet? I hit the wall the other day and feel like a babbling idiot right now.
Tx, my fair young lass, I am exhilarated by this year. If only all years could be so easy. I am always a babbling ijyet, its the water. I will be out of every position by December 21. I will pay the taxes now, rather than later. If I can get back into them next year - awesome.
It was easy except for that obnoxious period from April to July. That one about put me in a rubber room.
Can I join you in the rubber room? Two’s company.
I am reviewing April - June 30, the question I have, is did I make a lot of trades from initial positions? Lots of trading is not a good thing for me. It means I got whipsawed. The only one that makes moneys in a whipsaw is the clearing house.
This Orange County Tax Collector can’t be worse than good old “Bob” Citron.
http://en.wikipedia.org/wiki/Robert_Citron
“Jay Moss, the CEO of Mosaic Homes, compared the state of the economy to the Titanic submerged halfway in the Atlantic.”
At least the hull is halfway above water…
Is your ship half sunk or half afloat?
Is that a personal reference?
lol
Both and…
–
“That qualifies as a recession, according to Chapman’s definition, which is two consecutive quarters of negative year-over-year job growth.”
So that HBBers are well-informed, YoY employment goes negaitive 12-18 months after the beginning of a recession! Employment is a lagging indicator for a reason.
Jas
–
“goes negaitive 12-18 months” should read as much as 12-18 months. Norm is 4-10 months.
Jas
In this particular case “recession” itself is a lagging indicator, since the powers-that-be are fighting tooth and nail to deny we’re in the middle of one.
As opposed to a sharp pain in your backside, which is a leading indicator. So if the talking heads are telling you one thing, but your a$$hole is telling you another, go with your a$$hole.
Hey Jas,
From your words, did you not, hmmmm…
Type…
That you love America? (I read Jas Jain).
Jas…correct me if I’m wrong…you are Mr. Jas–the deflationist?
WOW!
As in the Jas? As in “It’s the debt, stupid?” Jas?
Naugh!
Leigh
Santa Clarita homes sales:
http://www.the-signal.com/?module=displaystory&story_id=52066&format=html
“But don’t time the market, if you need a house just go ahead and buy it”
If you need a house just go ahead and rent one.
I have to laugh a little bit at real estate brokers borrowing wisdom from market analysts. The wisdom of not trying to “time the market” is a good one when it comes to high volatility equities markets.
But “don’t try to time the market” in housing? That’s almost funny. Housing is one of the longest-cycle, lowest beta markets there is. It’s practically glacial.
Glacial is right. Waiting for prices to come down is worse than watching paint dry.
“Street said he doesn’t plan to sell the securities because ‘there’s no need. … These investments are still rated triple-A,’ the highest possible rating.”
“The securities are a type known as structured investment vehicles. They consist of bundles of different kinds of debt, including commercial bank paper and student loans.”
The OC has a nose for ill-fated investment schemes.
http://www.worldfreeinternet.net/news/nws25.htm
–
“Ryan Ratcliff, an Anderson economist who wrote the California report.”
The same RATcliff who said a year ago that home prices never go down unless the economy is in deep recession or depression?
Jas
These guys never look back nor apologize for huge past forecasting errors.
From the original post:
The Modesto Bee. “Youngdale’s, an appliance store and 85-year fixture downtown, is closing its doors. Store owners Joe Bonander and Sonia Caldeira, whose grandparents founded the store, told Youngdale’s employees Tuesday morning that the decline in real estate led them to conclude that the business should close.”
“‘We had a very good time when customer confidence was high and home equity was high, and customers were using that equity to upgrade their appliances in their homes,’ Caldeira said. ‘The trend is opposite now.’”
To which I say, maybe those HELOCs weren’t such a good idea after all. (Now, is that a blinding flash of the obvious or what?)
Sooo…..how in the heck did they stay in business for the other 81 years before the bubble?
I bet the real story goes like this: “the decline in real estate led them to conclude that the business should close….because we withdrew a ton of cash out of the business to invest in real estate, buy his and her Chevy Tahoes, spend a buy a condo in Cabo……;who would have ever thought we should hold onto the business equity in case things slow down?”
Yes, unless both a Lowes & Home Despot moved in to compete with them there is always the replacement sales and repair/parts business to deal with. Lose a few salespeople, run the place yourselves.
I believe they have both in Turlock. I know they have a Home Depot.
I thought the same thing. They were have a great time when things were booming, but just one year of slow sales and they go under.
Keep in mind that this business was started by their grandparents in 1926… and survived through the depression.
Actually, many businesses fail right after expanding. They probably borrowed to get more space and didn’t have enough cash flow. Perhaps they played fast and loose with supplier credit, too.
David Packard used to say that more businesses die of indigestion than starvation.
They probably didn’t have Walmart so much on their backs.
But that is just a guess.
They survived the great depression but they couldn’t survive this. Cool.
OMG you’re right! 85 years ago was 1922. Bet those Dustbowl Okies in the 30’s didn’t buy many appliances either.
Anyone remember those tub washers with rubber rollers to wring out the water ?
Maytag
still in use.
Got my arm caught in the rollers when I was six. Didn’t break anything, but still have the scuff mark on my elbow where it just sat and spun.
Those were the days……..
my grandmother had one
Think I’ll buy one for my wife for X-Mas. Nothings to good for her.
Don’t you dare, OCBear! The only thing worse would be to pull a Homer Simpson and by her a men’s bowling ball.
My mom had one of those, and I used to help her feed the clothes through the wringer. It was fun. We also line-dried everything, and I ironed everything except the socks - sheets, tshirts, etc.
I grew up in Turlock, some of my earliest memories are of buying toys at Youngdales, decades ago. I was in there a couple of years ago and the toy section still looks about the same as I remember. Their closure probably has as much to do with competition from all the big box stores which were built on the edge of town in the last few years as it does with the bubble bursting. Youngdales did a good job competing too, but downtown Turlock is almost an empty shell and they were one of the few old stores left. I wonder if some of the big box stores will be empty shells soon too. I’ve kept myself as insulated as possible from the bubble economy but it sure is sad and strange to read here that the bubble has killed off one of my childhood memories.
Was talkin to a customer this afternoon and he said sales growth is slowing down. Sales are not down, but the growth curve is going flat. He also said pay periods are getting longer. Even some long time customer are taking longer to pay their bills. He watches cash flow very carefully.
Hey Simiwatch, I am an Ex-Wood Ranch homeowner. Glad we sold our garage mahal. Nice views, but no quality of life in that PUD.
“As of October, Orange County had added only 400 jobs to its total from last year, putting it far behind the pace of Los Angeles, San Diego and other areas around the state, Kyser said. The county also posted increasing numbers of unsold houses, unrented apartments and vacant offices, he said.”
I realize my data is not as complete as the state, but I have negative job growth in High Tech, negative job growth in biotech & pharmaceuticals, negative job growth in Chemicals, negative job growth in aerospace and defense. I show job growth in hotel and leisure and in Restaurant and beverages. If I were to extrapolate the higher paying jobs have gone bye-bye.
Are you certain the negative job growth you mention is not more than offset by positive growth in RE sales and construction?
OT — the fix is in, to be announced tomorrow.
Good day to not be caught short the U.S. stock market, I am guessing…
Subprime Rate Five-Year Fix Agreed by U.S. Regulators (Update8)
By Alison Vekshin
Enlarge Image/Details
Dec. 5 (Bloomberg) — Federal regulators and U.S. lenders agreed to freeze interest rates on subprime mortgages for five years to stem rising foreclosures, said a person familiar with the measure.
President George W. Bush will announce the accord tomorrow, which was negotiated by officials including Treasury Secretary Henry Paulson. Paulson will hold a press conference at 1:45 p.m. in Washington to discuss the plan, Treasury said in a statement.
“We have got to do something drastic, and we have to do something quickly,” said Representative Elton Gallegly, a Republican from California. “I don’t like the government getting involved in the private sector, but we have potential problems we are already seeing come to pass.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=asetzdsdmBUE&refer=home
Is bubble price reflation an unannounced provision of the plan? How would this work w/ 17m vacant homes dotting the landscape?
Risk to Spending
Paulson and Fed Chairman Ben S. Bernanke are concerned that falling home values will choke consumer spending, which has driven economic growth since the last recession ended in 2001. By heading off further deterioration in the $11.5 trillion mortgage market, officials are also aiming to stem losses on securities backed by subprime loans.
“Paulson and Fed Chairman Ben S. Bernanke are concerned that falling home values will choke consumer spending,”
And that’s a bad thing because…..?
Because a recession of any depth will bankrupt the nation. Our economy is built on a tower of debt. In recession, debt is destroyed. Thus in a recession, our economy will be destroyed.
“In recession, debt is destroyed. Thus in a recession, our economy will be destroyed.”
So, we get a new economy based on something different. What the heck, who says we have to continue with this debt-model economy? I mean, da boyz change the rules all the time. De govmint changes the rules. So, I know it can be done.
My thought exactly. When did the work ethic the US turn to the “debt ethic”. Since when is it healthy to encourage the entire populace to gorge themselves on debt. Is there no voice of reason that can drown out the utter BULLSHIT being spewed by THEM, THEY, WHOEVER!!!
I tell you guys, it seems to me that the only thing that will wise up the US majority is the total collapse of the US economy and a return to depression era pressures. How people can watch the bullshit MSM telling them all is good and still tune is while their wages have gone nowhere since 2000 and it now cost them $65 to fill their tanks and $50 to take the wife to applebees for lunch (on their credit card, which they can’t pay off) and $300 for power and heat in their homes, etc………
If they don’t get it now they won’t till the chinese take away their toys and tell them to get off their fat..lazy..arrogant asses and produce something the world wants or piss up a rope. It is really sad that the US economy must be sooo obviously brought to it’s knees (causeing much pain to the majority) to line the pockets so few greedy elites. I for one look forward to the future pleebs importing the guillotines and putting them to good use. Not joking here, all these hedge fund, CEO, politicos and their kin know exactly the dammage they are causing at the publics expense and should pay dearly for their sins.
It will never happen, but one can hope.
The only thing I forsee after the dust clears is a major majority of the US voting to take my meager share in revenge, along with any other hard assets that can’t be loaded onto a ship and sail away with the real wealthy.
RANT OFF, sry…
Welcome to the third world
from Argentine’s past to our future
“Argentina quickly lost the confidence of investors and the flight of money away from the country increased. In 2001, people fearing the worst began withdrawing large sums of money from their bank accounts, turning pesos into dollars and sending them abroad, causing a run on the banks. The government then enacted a set of measures (informally known as the corralito) that effectively froze all bank accounts for twelve months, allowing for only minor sums of cash to be withdrawn.
Because of this allowance limit and the serious problems it caused in certain cases, many Argentines became enraged and took to the streets of important cities, especially Buenos Aires. They engaged in a form of popular protest that became known as cacerolazo (banging pots and pans). These protests occurred especially during the period of 2001 to 2002. At first the cacerolazos were simply noisy demonstrations, but soon they included property destruction, often directed at banks, foreign privatized companies, and especially big American companies. Many businesses installed metal barriers because windows and glass facades were being broken, and even fires being ignited at their doors. Billboards of such companies as Coca Cola and others were brought down by the masses of demonstrators.
Confrontations between the police and citizens became a common sight, and fires were also set on Buenos Aires avenues. Fernando de la Rúa declared a state of emergency (illegally since it needed confirmation by the Congress) but this only worsened the situation, precipitating the violent protests of 20 and 21 December 2001 in Plaza de Mayo, where demonstrators clashed with the police, ended with several dead, and precipitated the fall of the government. De la Rúa eventually fled the Casa Rosada in a helicopter on 21 December….”
Wikipedia
“At first the cacerolazos were simply noisy demonstrations, but soon they included property destruction, often directed at banks, foreign privatized companies, and especially big American companies.”
The Argentine economic collapse and attendant capital flight were a direct result of privatization and liberalization of finance forced on Argentina by the IMF/World Bank. The targeting of foreign privatized companies (especially banks) was far from random. This was essentially anti-globalization violence. I don’t see the analog in the U.S.- the companies that are the natural targets of wrath have outsourced their production and facilities.
Yeah, but they haven’t outsourced the a-holes that made the decision to throw their fellow citizens under the bus, in favor of 5 buck a day workers from China.
Just selling them the rope, I guess.
An amazing series of posts on the situation in Argentina from someone who lived through it:
http://siliconinvestor.advfn.com/readmsg.aspx?msgid=24081216
The Washington Post ran a series on the 2001 Argentina Currency Collapse, and it was excellent. Google it, if your interested.
Just after 9/11/01, I was reading articles in Forbes that said, “Don’t buy stocks, don’t buy bonds, don’t buy RE.” What must one then buy? PLANE tickets! but of course. That’s why I went to Argentina in late fall. All was well when I arrived. Then, on a Thursday, there came an announcement that as of Monday nobody would be able to withdraw more than $100 a week from a bank account. Giant sucking sound: the $8B (?) that went out of the banks on Friday. Comical scenes Saturday: people rushing from one empty ATM to another. Monday I took a tourist boat to Uruguay for the day. Tuesday I tried to cash a $50 traveler’s check. The bank was like a cartoon of a 19th-c mental hospital. Wednesday I tried again, and succeeded after about an hour. Stores that had been busy and cheerful now were shuttered up. Towards the end of the week the ugly demonstrations started. Glad I had a plane ticket out the next day.
az - please give us your travel itinerary for the next year, so we know where not to go.
“Paulson and Fed Chairman Ben S. Bernanke are concerned that falling home values will choke consumer spending”
Hey, why does the federal government get to start pyramid/ponzi schemes, backed by my tax dollars (as we all know will eventually be the case) , but when *I* try to get a pyramid scheme going, they throw me in jail? What’s up with that?
My Uncle Vinnie’s numbers game paid out 90%, Powerball pays out 50%. Uncle Vinnie made a lot of moneys.
Did you really have an uncle Vinnie, Hoz? I pictured you as kind of a WASP. Sorry . . . .
Just a question. How is this going to affect the future appetite for MBS investors? If the government can and now has proven that they don’t have a problem re-writing contracts (in favour of the FB, and against the investor), won’t this destroy any remaining desire of investors to buy this paper in the future?
As I see it, this simply increases the risk profile of these investments, while does nothing to increase the expected returns…
Am I wrong? How come Paulson doesn’t understand this (He is about 1000x richer than me), and if he does understand it, why would he support it knowing that it will crush the secondary market for future sub-prime loans?
Thoughts?
“How is this going to affect the future appetite for MBS investors?”
Act now, worry later…
Have posted on previous thread, I received today a plausible request for a loan ($75K on $120K purchase; $25K to be paid off in 08 when borrower gets access to IRA). If the govt is unilaterally altering existing mortgage contracts, I will not make this loan, and I will be very specific about the reason.
Can you explain the exact reason for you to not make this loan, assuming it pencils out for both you and the borrower?
“assuming it pencils out for both you and the borrower?”
I’ll be bold an answer for him: maybe because those ARM’s they are talking about freezing originally “penciled out” for everyone as well, until the Gov’t decided to change the rules after the game started.
Who’s to say they won’t do it again next month for his loan product?
OT: I live next to an exchange bank, and am STRONGLY considering taking my paycheck there from now on to cash 80% in Euro’s. Good or bad idea?
It was explained, why risk making a loan of any kind if the government may decide to “adjust” it at some later date. The risk to capital is too great. One might as well just buy T-bills, oh wait, I guess they could “adjust” that rate as well. Is there any safe investment in the US?
Foreign capital is booking passage for safer shores as we speak.
It’s sort of along the lines of “do what you wish everyone would do.” If the govt can change legitimate loan contracts ex post facto, all lenders should refuse to lend.
“We are working aggressively and quickly, utilizing available tools and creating new ones, to help financially responsible but struggling homeowners,” Paulson said in a speech to a national housing conference sponsored by the Office of Thrift Supervision.
…creating new ones???? Oh nooooooooooo….
BTW, this freeze looks completely voluntary (with the lenders), it is just Ahnold’s plan writ large. Though I would not be sure that Paulson is not dangling a few carrots and sticks in front of big lenders, behind closed doors.
It is voluntary for the lenders. Is it voluntary for the investors who hold MBS? I don’t think they could even ask all of them.
You’re right az. This bailout deal will wipe out any trust that lenders or borrowers would have for one another, by introducing the element of changing the rules midstream (ouch - mixed metaphors.)
Rob: you answered your own question. Old Hank has made his tens of millions - screw everybody else. He’s going for the very short term stock pop, hoping to keep the party going until the administration ends.
BTW, Ben, do you still say no bailout will be passed?
This bubble is too big to be bailed out by a government/country that has to borrow $3 thousand million dollars a day abroad. I think its funny you guys call a half-baked LOAN MODIFICATION scheme, that few think will work, a BO. Remember a week ago when the CA gov announced some big plan, then the next day I found an article quoting the lenders saying they were already doing what they ‘agreed’ to do?
BTW, get some lotion for those hands, their getting mighty chapped.
*They’re* not chapped just yet…
Spelling schmelling. Why don’t you address how a country with the outside cash needs of the US can afford to bail out a ten trillion $ market?
I thought so.
Just put president bush’s face on the one trillion dollar bill.
One sheet aught to do it.
(Argentina here we come.)
Ben — Sorry to razz you.
I honestly don’t know about how the U.S. can afford to bail out a ten trillion $ market. It seems as though money would need to be created out of thin air, given the current account deficit situation.
Oh, is that all it is? $10 trillion. I thought surely it was more. Why, if it’s only $10 trillion, that would mean we’d only have to double our outstanding debt. Bush already doubled from 5 to 10, what’s 10 to 20?
I don’t think this will happen, primarily because of the backlash they’re already getting for the freeze. But they would do it in a second if they thought they could get away with it.
Ben, just more happy talk to please the masses.
IMHO, this will accelerate the decline. It will detract from foreign investment in the US. I believe anything the government does will accelerate the decline.
My thoughts are along the lines that the ‘fall guys’ will be Fannie and Freddie and that the US taxpayers will be doing a loan guarantee.
“I believe anything the government does will accelerate the decline.”
http://en.wikipedia.org/wiki/Primum_non_nocere
True
I absolutely agree Hoz, we are headed into liquidity deep freeze. For those of you not fortunate enough to grow up in Idahole, I’ll tell you a story.
When it gets down to about -10 F (-40 C) and you go outside and take a deep breath you can actually feel the water vapor in your lungs crystalize and crackle. To stay among the living you either breath through a scarf or take very, very shallow breaths.
This is where liquidity is heading, IMHO.
Now the million dollar question. Which industry/company as yet unscathed by the credit crunch gets hurt the worst by a freeze of liquidity?
-40 F = -40 C that is the only time when the temperatures are equal. -10 F is more like -23 C. I knew about the -40, I looked up the rest. Smiles,
The two most frightening words in the Russian language: minus sorok.
Which.. gets hurt the worst by a freeze of liquidity?
I’m gonna guess new business startups. New businesses being stillborn/aborted and forever lost is not a good thing for an economy.. entrepreneurship = growth.
The loan modification plan helps a very narrow band of FB’s. It really looks like they are targeting the people with no equity, the banks will foreclose on anyhouse with significant equity and rent to the others for a few years before foreclosing. That’s all this is, I just don’t see it helping. I’ll wait until this and the next rate cut pump up the market and then I’m shorting again.
I think it’ll help through the winter.. there’s an aversion to moving out in bad weather.
Come springtime the FB’s will wise up, pack up, and drop off the keys.
“The loan modification plan helps a very narrow band of FB’s.”
These folks are also in the first round of lay-offs when TSHTF. Plan B?
From the bloomberg article:
The freeze may apply to mortgages issued between January 2005 and July 2007 that are scheduled to reset between January 2008 and July 2010, said a person familiar with the plan. Borrowers whose credit scores are below 660 out of a possible 850 and haven’t risen by 10 percent since the loan was sold will be given priority. …Those with scores above 660 will be more closely scrutinized to determine whether they are eligible…
Forgive me, I must be tired. This seems to be saying that a worse credit score will be better for the FB, as it will earn the FB “priority.” I can hear the FB now, “Honey, Don’t pay that credit card bill on time, we have to get our credit score under 660 to get our priority!”
This is indeed Bizzaro world.
Per the news items I have read the home owner “must be current on the mortgage”.
Until I read the details, NODs would seem to be ineligible.
My take on the ‘bailout’… I think this is voluntary with the lenders aka servicers. They are only going to renegotiate loans when doing so will maximize revenue. Bleeding the FB slowly might be a better deal than foreclosing- especially if you can get your lender buddies to also avoid foreclosing (and flooding the market with more unsalable houses). There will be little or no teeth to this ‘agreement’. It will not have an appreciable effect in any event. Why bother? Pres and Paulson get to look concerned. The servicers might get tossed some FED goodies ‘in return’ for the ‘voluntary freeze’ they would have implemented anyway. And it gives servicers a little extra coverage in case the conduits/bondholders try to oppose the freeze (servicing agreements are amazingly loose when it comes to allowing exceptions/modifications made by the servicer if such modifications ‘appear’ to maximize money sent to the trust fund/bondholders. This whole sheebang might just be a public announcement of servicer’s intention to modify payments terms, to discourage bondholder lawsuits.
“Bleeding the FB slowly might be a better deal than foreclosing …”
That’s how I see it. All this talk is designed to offer hope to the FBs that the mess will get fixed, that the bottom will soon be in.
Nobody wants to sell out at the bottom, so the desperately gullible and hopeful FB will endure whatever has to endure to keep hanging on.
But this will be a new life-line that will encourage sellers to keep their prices high, not to mention that ridiculously high Dow industrial average.
I think it’s that they think people with poor credit scores won’t be able to rent, and therefore have to be kept in their houses to avoid homelessness. That may be true in some places, but in California landlords are still not discounting foreclosure in looking at tenants’ credit scores.
Elton Gallegy is an ultra conservative. Rumor was he wanted to retire last election, but stayed on to keep the Republican seat.
Also, was Elton a Relator before he became a congressman?
Today’s LA Times, front page article, says that the five-year rate freeze would only apply to borrows who “have accrued at least some equity in their homes.”
Let’s see, that would work out to how many homeowers in Florida, Nevada and California?
“Street said he doesn’t plan to sell the securities because ‘there’s no need. … These investments are still rated triple-A,’ the highest possible rating.”
CNBC reported that the Orange County investments are going to be ‘Re-Rated’ by Moodys, probably downword. This jackass is toast.
LMFAO!!!
He is probably not allowed to hold junk in his portfolio either, which means he will be FORCED TO SELL in a decling market. I hope he rats out the IB’s that sold him this toxic waste!
Ah, the magic comp!
OT–
Are you still reeling from Senator Clinton’s trenchant (”I’m for shared responsibility”) argument today — during her on-air, girl-on-girl bout with Bug-eye Bartiromo — for universal homeowner care? Well, here’s a cure for the reels: After clicking on one of Ben’s Google display-ad links (the guy’s gotta eat), then on your browser’s “Back” button to finish reading today’s left-coast comments, go enjoy this week’s puff piece at the Santa Barbara Housing Bubble Blog. Here’s the tease: an ‘05 specuvestor in a modest little home located in Santa Barbara’s original suburb (the San Roque area) might have, uh, miscalculated.
Saint Barbara
how many dems does it take for the GOP to cave in ?
8 to 10
better to lose the election and stand for something
they’re all whres now
Yeah, Edward’s is showing his true colors now, too. A ‘populist’ who wants to bankrupt the country bailing out bankers. Yep, nothing like a former hedgie playing populist…
Take Congress/Senate and give the WH to Huckabee or some other schnook and wait for the next round.
Who would need the headache coming down the tracks now..
Oh yea, give it to that sleezebag olman Fred.YIKES>
So what is with the Federal Gov’s rate freeze plan? It sounds like someone is going to get a free ride.
If by free ride you mean a ride on the Joshua tree, then I agree.
Sounds more like noone is ever again going to get a mortgage!
I’m guessing that with the rate freeze plan announcement (or shortly thereafter), a federal govt mortgage funding program will be announced.
Just a hunch
I just love watching the HBB predictions come true. Was there ever a thread that predicted the variety of bailouts that we have watched over the last two months? I’m not surprised by Democratic bailout plans, but I never could have foreseen the likes of Bush and Paulson pushing foreclosure prevention plans. Amazing. I can hardly wait for the next installment of this drama.
Citys that make loans to low income individuals use funds allocated to them from the federal government to make bridge loans so that these people can qualify for some other crappy loan. So the City basically is in second position and only charges 3% on the loan and the kicker is that most people do not even have to make a payment until they sell the home, yep that is your tax money at work. Now they want Cities to issue muni debt and charge what interest rate to the borrower 3% again and pay 6% or more to the dumb ass who actually buys the muni debt. WHO DO YOU THINK WILL MAKE UP THE DIFFERENCE THE TAXPAYER SHMUCK LIKE YOU AND I HATE BUSH AND THAT FREAK TREASURY PUNK PAULSON!
I know, the plan to have local governments issue bonds and refi FBs makes me want to puke. So, the governments at ground zero that are unable to fully fund their pensions and have falling tax revenue are supposed to loan money out to people who won’t be able to pay them back. What happens when the issuer defaults? Perfect set up for the Feds and Bankers, though- the local smucks will do all the paying. Don’t most states already have their little pet Freddie/Fannie versions already (and I wonder how these are doing- such as Indymac and Alaska Housing Finance Corp.)?
Now, now, now, Ben - the headline in the Desert Scum today read: Valley home sales jump 16.4% in October. Of course the rest of the story was a downer, but I love how the spun that headline.
biggest piece of dog crap reporting. Always spinning.
How can you determine a change when the total number of homes sold is unknown??? Must be that NEW math they are teaching.
“Now, now, now, Ben - the headline in the Desert Scum today read: Valley home sales jump 16.4% in October.”
The papers will really have a field day when house sales drop to 0 one month and rise to 1 sale the next month: “Infinity percent rise in house sales!”.
What an administrative clusterf*ck this is going to be…third party servicing of mortgage loans is sloppy at best and predatory at worst…can you imagine the amount of disputed terms there will be over who gets this break and who doesn’t? Or am I missing something here?
“What an administrative clusterf*ck this is going to be”
You have expressed my fondest hope for the teaser freeze. And of course my joy that it will have clinton and bush’s grubby fingerprints all over it.
It’s weird to watch Hillary and W agreeing on everything from foreclosure bailouts to Iran this week. What’s this world coming to?
–
Ratcliff some 16 months ago…
****July 27, 2006****
Tortured Logic Of a UCLA Economist On CA Housing
One Mr. Ratcliff, a UCLA economist, appeared on the boob-tube to talk about California housing. He said, “The California home prices have never declined except when the economy was in a severe recession.”
OK.
Then he continued, “Since we are not forecasting a recession, the prices should level off and remain flat.”
When was the last time that an economist, who appears on the boob-tube, did forecast a recession ahead of time? This sort of logic is ridiculous because can’t home prices go down based on their own fundamentals of supply-and-demand?
Jas
All RE is local and since Ratcliff never leaves UCLA.He is safe or sorta of safe or might be safe if nothing changes like a recession.
I know a large back-tax assessment due on any real estate for sale would put a damper on the process, so if I was grand-chef-in-charge ‘o the gubment in modesto/manteca, I’d require any new purchasers to pay only a small portion of the total back taxes, say %10, then waive additional 10% off the remaining balance each year of ownership. However if the house sold/changed owners during this time then I’d make the balance due in full on sale or new owner assumes remaining balance.
Just an idea to encourage people to bid on repo’d houses with huge back tax liens if they happen. Of course the gubment is always too thickheaded to act reasonably … they’ll probably just sit on their azzez w/no incentives, thinkin they got a pot ‘o gold in housing inventory for when the ” market comes back”.
“Jay Moss, the CEO of Mosaic Homes, compared the state of the economy to the Titanic submerged halfway in the Atlantic.”
Thank you for the quote of the month. I was watching Kudlow and having a snit fit but this quote eased the pain, now for a good glass of wine with dinner. One thing is clear about this mess and that is the clarity being shed on the lies by the financial powers and government. You couldn’t buy this type of education for $100K.
” $100K or $1.50 in overdue library fines “
I apologize if anyone has already posted this.
HGTV Dream House owner defaults on loan.
http://www.cnn.com/video/#/video/showbiz/2007/12/05/hgtv.dream.house.foreclosure.kltv
Good lord, the lucky “winner” ran up $1.4 million in debt over a couple of years!!! I know medical bills can get expensive, but did no one have insurance? And even still….$1.4 million!
At least I give him credit for that. He could have spent it on Hummers. If he were in Canada or the UK then he wouldn’t have went into debt to get them care.
He looks like he ate most of it.
“Manteca now also has authority to abate a home by keeping it properly boarded or maintained at the property owner’s expense.”
Now we’ll see how the whiney neighbors who wouldn’t lift a hand to maintain the property or chase off vandals with a neighborhood patrol feel when they see a house with boarded up windows and a construction door to prevent break in’s. Oh yes, they will be so attractive to buyers too. Instant slum, bring your own graffiti.
“According to the county, more than 1000 people in the mortgage industry have been laid off in the East Bay this year.”
“‘They have lots of skills, but there aren’t necessarily an abundance of jobs out there that provide that same level of income right behind what they’ve been doing,’ said Stephen Bater from East Bay Works Career Center.”
Makes one wonder how much utility is contained within said skills. Does the phrase “a dime a dozen” ring any bells? Bank tellers have more skills than mortgage industry professionals. Want to guess how much they’re making?
OK , I want to know what the government powers promised the lenders if they put a freeze on the teaser rates . Any incentives promised ,assurances of bringing the discount rate down to 1 % so the banks can afford freezing teaser rates? Perhaps a deal cut that the lenders get a additional tax write off for every teaser that is frozen ?
Now I’m feeling like Paulson,the Senators , and the Feds are serious about these bail-out plans and it isn’t just lip-service . I just can’t imagine where the money is going to come from …oh must be the tax payers .No justice I guess ,and worst ,will the powers half-backed plans even work and at what cost to the system .
The worst part is that according to two (unscientific, unofficial) online polls I have seen, about 84% of people are against the plan. A 16% approval rating is even lower than Bush’s, I think.
At some level, one has to admire a leader who is so overwhelmingly confident of his personal vision that he completely ignores voter preferences.
Oh my goodness, Professor, try overwhelmingly crazy! What do you think is his personal vision of the economy? Probably didn’t include bailouts until now. His “visions” never include the possibility that they won’t work out, which they never seem to do.
Well, since Shrub’s personal business track record has always relied on bail-outs from papa bush and tax payers, he’s quite comfortable indeed with his Vision. Never could understand why GOPs would get behind a guy who so aptly describes the phrase: All hat and no cattle.
“… completely ignores voter preferences.”
And I would add:
… completely ignores logic.
… completely ignores reality.
Ben expressed it best in another thread: remember, this is the same President who also promised to rebuild New Orleans.
“Paulson, who has been leading the effort to craft a plan, said on Monday that the program would only be available for owner-occupied homes — to ensure the break is not given to real estate speculators.”
Oh OK, so there will still be a deluge of speculator homes available in foreclosure to drive down home values for those “lucky” enough to qualify for the program. Seems like you’re still better off walking away.
If someone can make the payments, why not stay put? I think the few who qualify will do so.
The lifeline is stretched to the max, but it’s all good until some unexpected bill arrives and it breaks them.
“The administration plan is designed to deal with the crisis by letting subprime borrowers who are living in their homes and are current on their payments to avoid a costly reset for five years. The hope is that by that time the housing downturn will have stabilized, clearing out the glut of unsold homes and halting the steep slide in prices that is hitting many parts of the country.”
And if wishes were fishes we’d all throw out nets.
How are you going to clear out the inventory glut if sources of loanable funds dry up due to perceived risk of Federally-mandated ex post contract modification?
“Sharon Silva, president of the Turlock Chamber of Commerce, described the store as one of the city’s leading businesses for generations. ‘It’s very sad when one of the local businesses is leaving,’ she said. ‘I believe this is one sign of what’s happening in the econcomy of our country and in California.’”
Aww, come on Sharon! Don’t you keep up with the news??? The stock market’s up 190+ points today on reports of the STRONG economy!!
Sarcasm off.
DOC
@Housing Wizard:
This is just political window dressing that ia just nibbling around the fringes of the problem. Look at the past actions: first rate reduction = no effect. second rate reduction = no effect. so let’s try this plan. AND they’re still talking another rate reduction. yes, taxpayers will get soaked for these failed policies. but nothing will stop this decline, and those pols that backed this crap will pay at the voting booth eventually.
I wouldn’t be so opposed to people getting 6 or 7 % teaser rate freezing verses 9 to 12% adjusted up rates . It’s shocking that borrowers went on such bad loans .But,if they are going to freeze 1 and 2% teaser rates ,thats insane .Don’t these borrower realize that because they didn’t put anything down they were paying a higher rate as well as the fact you need to pay a higher rate if you are sub-prime.
The borrowers were paying for the opportunity for leverage in the form of being charged later ,and now they won’t or can’t pay the piper
But, I’m sure nobody told these borrowers about tight money markets or that it might be possible that money is not available and they would be stuck with a high rate loan . The industry did a disservice to people by qualifying people at the teaser rates . Still, these were gambler borrowers that bought into the real estate leverage gamble ,and a good % of them committed loan fraud .The prices were driven up by these borrowers ,and never again should qualified buyers in the market for a home be subjected to being in competition with unqualified buyers .A lawyer could make a case for the fact that the lenders created a false market causing damages to investors and any buyer that relied on sound lending and proper ratings and appraisals .
I don’t know ,the gov. is trying any way they can to make this a long drawn out correction . The fact is that a lawyer could make a point that if the lenders qualified people at a teaser rate than in good faith they should keep the teaser rate until the borrower can qualify for the adjusted up rate .
But ,I would of expected that these concepts would of been tested in a court of law , rather than the government stepping in and coming up with a remedy .
I am playing this scenario in my head:
“I’m sorry ma’am, we think that you can afford your mortgage with a frozen 5% interest rate on your present salary, but you’re going to have to sell your Yukon, cancel your HBO, and give up Starbucks and Coach purses.”
What will the FB say in response?
How is wallstreet any different than these guys
http://news.yahoo.com/s/ap/20071206/ap_on_re_us/televangelists_finances
Wall street guys wear better suits, and like to snort cocaine off the stomachs of guys named Tiger.
Other than that, they’re cut from the same con-man cloth.
(fasten your seat belts, pull it real tight)
The roller coaster ride is about to take a very STEEP turn down. These toxic, radioactive FUNDS are cropping up all over the world. Even a little village in northern NORWAY. They had to freeze the funds because the fund is bankrupt.
~Cheatin, U.S. style
They are all finding out that we EXPORTED our paper shit all over the globe. Cheated every single pension plan, every community they’re all finding out the same thing: Radioactive rotten crap. Paper that’s not even worth using for toilet paper.
~ Surprise!!~
=====================
The entire world - one big ENRON.
Isn’t it amazing? After Enron’s collapse. You would think that they learned something, or at least made it tougher for them to cheat and get away with it.
What happened?
It got worse! A thousand million billion times worse.
OMG. Enron was Tea Time down at the local kindergarten, compared to this.
“…After Enron’s collapse. You would think that they learned something”
“They” did!…economies of scale…think bigger…eh, global
I guess the Powers That Be should just freeze the whole financial systems . The whole world can go into a deep freeze .
Freezes can hide or even precipitate free falls…
“Street said he doesn’t plan to sell the securities because ‘there’s no need. … These investments are still rated triple-A,’ the highest possible rating. The securities are a type known as structured investment vehicles. They consist of bundles of different kinds of debt, including commercial bank paper and student loans.”
And inside that mix, like a cancer gnawing slowly away, are all the spurious loans made within the last recent years. Like a cancer too, they’ve spread themselves heavily into retirement pensions, IRA’s, mutual funds and other previously sounds investments. We’re going into a recession and the dollar is nosediving.
I lived in Argentina for a few years and saw this EXACT same thing happen down there with their economy. In fact we too now exhibit all the same traits of a third-world nation. Our government issues false stats of every kind, everyone cooks their accounting, there’s massive stock market-manipulation, a socialistic willingness to bail-out speculators and rampant denial among all.
VIVA AMERICA! Bienvenidos al 3er mundo!.
“Johnston is not alone. Whatever they’re selling, in East Contra Costa County, businesses are feeling the pinch of the mortgage crisis.”
Maybe most people have everything they need at the moment. There’s nothing wrong with having a surplus - in fact, it means we can all work less next year, or even take the year off. I did that last year and can highly recommend it!
What are peoples view of the employment reports today.
I loved this line from bloomberg
Today’s report showed a decline of 8,000 jobs in goods- producing industries which include manufacturers and construction companies. Service providers added 197,000 workers to payrolls. Employment in construction fell by 6,000, the smallest decline since January, and financial firms added workers, ADP said.
OK they’ve been telling us how well manufacturing is doing yet they are shedding jobs which are replaced by more service sector jobs??? Could this support the idea that more than all of the gains in manufacturing are an illusion created by the collapsing dollar.
How many of the jobs created in the financial sector are temp help to clean up the collapse of subprime FB’s. How many are temp help for retailers prior to Christmas.
Nope still waiting for the rate cut (or just before) and then going short.
“Street said he doesn’t plan to sell the securities because ‘there’s no need. … These investments are still rated triple-A,’ the highest possible rating.”
“The securities are a type known as structured investment vehicles. They consist of bundles of different kinds of debt, including commercial bank paper and student loans.”
OH yea! How the hell does he know. He is just covering his ass!
Know one knowsa as many of the vehicles cannot even be rated accurately. I bet his losses next year a huge!
Posted this yesterday, but it is a good read…
OT, but an interesting article comparing America just before the Great Depression and the situation now:
Boo Hoo! Deja Vu by Stephen Pizzo:
http://www.smirkingchimp.com/thread/11374
The article cites an interesting book (online) from that era, about pre-depression America:
Only Yesterday, and Informal History of the 1920’s, by Frederick Allen:
http://xroads.virginia.edu/%7EHYPER/ALLEN/Contents.html
Argentina, Weimar Germany, the 1998 “Asian Flu”, Russia of the 1990’s, US of WWI, the “roaring 20’s”, the mid-70’s, late 1990’s and early-mid 2000’s have had the same thing in common - an utterly unrestrained increase in money supply, whether by printing of bank notes (Weimar Republic, Arthur Burns’ Fed ) or the creation of credit.
And there’s always the end to these schemes and never a pretty one.