Quietly Turning Into A Major Bust
Some housing bubble news from Wall Street and Washington. Bloomberg, “Washington Mutual Inc., the biggest U.S. savings and loan, will write down the value of its home- lending unit by $1.6 billion in the fourth quarter and cut about 6 percent of its workforce as mortgage-market losses increase. It plans to shutter 190 of 336 home-loan centers.”
“Washington Mutual offered a bleak assessment of the mortgage market, estimating that industrywide home loan originations will probably shrink 40 percent in 2008 to $1.5 trillion, down from about $2.4 trillion this year. The company said it plans to cease lending through its subprime mortgage channel.”
The Seattle Times. “Seattle-based WaMu, one of the nation’s largest home lenders, announced a major restructuring of its mortgage-related businesses Monday and all but wrote off 2008 as a lost cause. WaMu said it expects to put aside anywhere from $7.2 billion to $8 billion next year for bad loans, compared with an estimated $3.1 billion to $3.2 billion this year and $816 million in 2006.”
“‘We had no clue this was coming,’ said one Seattle-area loan consultant who has worked at WaMu for five years. ‘We’ve heard some of the people in higher positions are losing their jobs, managers who that never would have happened to in the past. That has us scared.’”
“Another Seattle-area loan consultant said she joined WaMu in March, seeking job security, but was laid off on Monday. ‘I think it’s heartless,’ she said by phone while packing her belongings. ‘I guess this industry doesn’t have any security.’”
The Associated Press. “H&R Block Inc. said in a preliminary earnings report Tuesday that it…continued to wrestle with its disintegrating mortgage arm.”
“The company said its discontinued operations had a pretax loss of $551.2 million, including $367 million in operating losses and losses on sales of mortgage assets, $123 million to adjust the value of remaining mortgage origination and servicing assets and $61 million in costs for restructuring Option One Mortgage Corp loan origination operations.”
“‘We continue to move resolutely to end our participation in the subprime mortgage business,’ Chairman Richard Breeden said in a news release. ‘While we incurred a painful loss in exiting these positions, we determined to take our lumps and move forward.’”
From MarketWatch. “MBIA Inc.’s decision to raise up to $1 billion in new capital and set aside at least $500 million to cover expected mortgage-related losses puts pressure on rival bond insurers to do the same, analysts said on Monday.”
“‘This announcement puts more pressure on the other guarantors to both raise capital and recognize larger (actual and mark-to-market) losses,’ wrote Ken Zerbe, an analyst at Morgan Stanley.”
“The tumor in the financial markets known as structured investment vehicles is shrinking, reducing the urgency for a bailout sponsored by the U.S. Treasury.”
“HSBC Holdings Plc, bond insurer MBIA Inc. and other companies are arranging their own rescues. The steps are diminishing the threat that SIVs will dump holdings and further roil credit markets contaminated by losses in securities related to subprime mortgages.”
“‘Every day that goes by we are seeing more SIVs being reorganized to avoid a fire sale,’ said Priya Shah, a credit analyst at Dresdner Kleinwort Group Ltd. in London. ‘The longer the SuperSIV takes, the less of a need there will be for it.’”
From Reuters. “Investor Warren Buffett on Tuesday told CNBC television that a plan by some large banks to create a fund to buy tarnished mortgage securities is unlikely to cure what ails financial markets.”
“‘You can’t turn a financial toad (into a prince) by kissing it or by securitizing it or by transferring its ownership to somebody else,’ he said.”
“Mortgage finance giants Fannie Mae and Freddie Mac are changing their criteria for purchasing delinquent home loans they’ve guaranteed, in order to reduce the number they buy from investors, the companies said Monday.”
“Fannie Mae’s intention to match Freddie Mac’s move was reported online late Monday by The Wall Street Journal, which cited concerns among some financial analysts that the companies could use the new policy as a way to delay booking credit losses.”
“Freddie Mac and Fannie Mae, the other housing-related government-sponsored enterprise, after record preferred stock sales have about $6.5 billion and nearly $9 billion, respectively, in excess capital to help absorb losses through 2008, said Rajiv Setia, a strategist at Barclays Capital in New York.”
“But prospects linger that the companies will have to raise more capital if market conditions worsen, he said.”
“‘Fannie Mae and Freddie Mac are not expecting market conditions to improve any time soon, and they are now ready for credit losses to rise,’ Setia said on a conference call. ‘Secondly, neither is expecting to get capital relief from OFHEO any time soon.’”
The Denver Post. “Fannie Mae, the country’s largest backer of mortgages, is knocking 5 percentage points off the amount it will finance in areas with declining prices. Borrowers in such areas also can expect to pay an interest rate about an eighth of a percentage point higher than in areas where home values are holding up better, lenders said.”
“Jerry Kaplan, VP of capital markets with Cherry Creek Mortgage in Greenwood Village, said he hasn’t ever seen Fannie Mae tighten up like this.”
“Lou Barnes, owner of Boulder West Financial Services in Boulder, said the move makes mortgages tougher to get in areas that need them most, making a more severe downturn likely. ‘In every credit panic, the government must maintain a good supply of new credit,’ Barnes said. ‘The authorities have failed since the crunch onset in August.’”
“A borrower previously eligible for a 100 percent or no-money-down loan with a lender working through Fannie Mae will now have to come up with a 5 percent down payment starting in mid-January. A borrower using a loan with a 10 percent down payment will have to come up with 15 percent soon.”
“Wholesale lender Flagstar Bank has already put Adams, Arapahoe, Broomfield, Clear Creek, Denver, Douglas, Elbert, Gilpin, Jefferson, Park and Weld counties on its list of areas with declining values.”
“Those counties join others in California, Florida, Ohio, Michigan and Virginia, among other states, it expects will be on the list of declining areas.”
“Kaplan said the bigger down payments and higher interest rates in some areas are a small price to pay to make sure there is liquidity in the market. ‘What would our economy be like if Fannie Mae and Freddie Mac were not around?’”
“Commerzbank AG CEO Klaus-Peter Mueller said banks may make further writedowns after UBS AG yesterday said it will reduce the value of U.S. subprime mortgage investments by $10 billion.”
“‘The prices for subprime products drastically declined again in November’ and that’s why UBS had to write down the value of investments, Mueller said in an interview at a conference in Frankfurt today. ‘In such a market phase, further writedowns can be expected for the entire industry.’”
The Wall Street Journal. “Columbia Management is shutting its Columbia Strategic Cash Portfolio, it told clients late last week, after facing major withdrawal requests from large investors. The fund, which held $34 billion at the end of November, has been split in two.”
“The fund’s closure spotlights spreading uncertainty among investors as they yank money out of ‘enhanced’ cash funds like Strategic Cash Portfolio. Funds like these are designed to carry slightly more risk than money-market funds.”
“Enhanced cash funds have grown in popularity as investors sought slightly higher yields amid historically low interest rates. They achieved added returns partly by investing in complex securities backed in part by mortgages and other assets. However, many of these, even those with high credit ratings, have collapsed in price.”
“A report yesterday by Standard & Poor’s found that about 30 U.S.-oriented enhanced cash funds rated by S&P had lost a total of $20 billion, or 25%, of their assets, in the third quarter. In one of the more dramatic instances, one fund (which S&P declined to identify) saw its assets under management shrink by 98%, or $2.5 billion.”
“Issuance of securities tied to U.S. subprime residential mortgages may level off next year after falling further, Standard & Poor’s said on Monday.”
“S&P said in its report that it rated $26.3 billion of subprime residential mortgage-backed securities in the third quarter of this year, down 64 percent from the second quarter and 73 percent from the third quarter of last year.”
“Loans originated in 2006 and the first half of 2007, however, are likely to continue to underperform loans made in other years.”
The Herald Tribune. “How did the state’s money market fund for the use of schools, fire departments, county and city governments end up owning $2.3 billion in junk? According to two avid observers of the mortgage debt scene, the failures of the Local Government Investment Pool are but the latest example of an inherent conflict of interest: Bonds, notes and commercial paper get their safety ratings from firms that are paid by the issuers.”
“‘The run on the Florida fund is a primary example of the divergence of interest between issuers and investors,’ says Sean Eagan, managing director of Eagan Jones Ratings Co. of Haverford, Pa.”
“‘Generally speaking issuers want the highest rating possible, whereas investors, in contrast, are looking for timely accurate ratings,’ Eagan said. ‘They want to get to the truth quickly.’”
“For their part, both Standard & Poor’s and Moody’s say their rapid downgrades of the state fund’s investments speak to the unprecedented degree of pain that the housing market has caused the investment world. ‘What we have said repeatedly is that because of the unprecedented market dynamics of the past five months, there have been unprecedented downgrades,’ said Mimi Barker, a spokeswoman at Standard & Poor’s in New York.”
“The Local Government Investment Pool owns $170 million worth of an Axon Financial Funding security that matures April 25, 2008. In roughly a month, Standard & Poor’s changed its trading on that security from ‘AAA’ to ‘D,’ Eagan notes.”
“‘In our opinion, there is no worse a failure than this,’ Eagan said. ‘From Triple A to D in one month. If we had an analyst doing that, that analyst would be out the door in two seconds. There is no way these SIVs should have been rated at the Triple A level.’”
“Moody’s cut its AAA rating of Axon as a corporation by nine notches in one fell swoop on Oct. 23.”
Fin Alternatives. “Will losses from securities backed by subprime mortgages lead to litigation against my hedge fund and its managers? If so, will my directors and officers (D&O) insurance policy or other lines of coverage protect my firm and its individual directors and officers?”
“Already, at least 30 securities litigations have been filed against the subprime lenders, investment banks and now hedge funds that placed highly leveraged bets on packages of subprime mortgage derivative products. Investor-plaintiffs have even begun to prey upon directors and officers in their individual capacities, alleging untoward conduct and egregious mismanagement.”
“Will insurance companies cover the losses arising from the subprime debacle? In some cases, yes. According to Reinsurance broker Guy Carpenter, total subprime-related losses for D&O insurers alone could top $3 billion.”
“However, those firms that do obtain defense and indemnification from their insurance providers are likely to have to fight for that coverage every step of the way.”
The Street.com. “One of the biggest residential development projects in Arizona history is quietly turning into a major bust.”
“The question now is whether the big homebuilders involved in the deal, Toll Brothers and Meritage Homes are properly marking down their land investments in the much-heralded venture.”
“With the once-hot Phoenix market crash-landing, it now appears that Toll Brothers and its partners ended up paying too much for the land, on which they likely cannot build today for a profit.”
“At the time of the purchase, Toll Brothers, the general partner of the joint venture, trumpeted the deal as the ‘most expensive’ land transaction in Arizona history, citing research from the Arizona Republic.”
“The fact that Simon Property wrote off its entire investment in the project is turning some heads. As the company now likely pulls its retail development, some wonder whether the project will ever get built.”
“‘My understanding is the venture itself, the whole group, is not thinking it is going to work at this time,’ says RBC Capital Markets analyst Rich Moore, who covers Simon Property and other real estate investment trusts. ‘It is rare for a developer to write something down unless they feel pretty certain it is not going to work.’”
“Regardless of whether the homebuilders abandon the project, the Simon Property writeoff raises questions about whether the companies are being conservative enough in their valuations of land holdings.”
“‘Builders are not being aggressive enough, generally speaking,’ says an analyst who was on the Toll call last week. ‘They are not doing what Simon did.’”
“Stephen East, a homebuilder analyst with Pali Capital, says he visited the market a month ago and was surprised at the ’sheer amount of property.’ ‘There is such a massive oversupply,’ East said.’”
“In early 2006, when the deal closed, ‘the market had begun to slow down, but I don’t think anyone had bought into that idea yet,’ says Jay Butler, director of realty studies at Arizona State University. ‘People were still buying land with the idea that Phoenix would grow forever.’”
BTW guys, if I stop posting, it will be because I lost power or something. I don’t think it’s likely, but it has been snowing for three days and a lot of ice is piling up on the trees and lines out there.
Ben — Good luck with the ice, and stay off the roads! More people have died so far in the midwest ice storm than did in the SoCal fires…
I’ve never seen anything like it. Don’t worry about driving. I can’t even see the thing anymore.
73 degrees here in Dallas today.
This is whacked out.
80 in North Carolina.
We’re frying down here in Houston…
in the 40’s in the Los Angeles area.
70s here (Southern Indiana), ice in the northern part of the state.
Close to the bulls-eye of the storm (Eastern Kansas). Didn’t freeze as bad as expected last night, but it has been raining all day, with the temp hovering around 32 degrees. It’s gonna get ugly after sunset. The trees and power lines are taking a beating. The airlines are/were still flying out of MCI today, but every other airport around here has been basically shut down since Sunday afternoon.
Well, it’s now 54 in Dallas and heading colder into the high 30’s tonight. So, we’ve got a little bit of winter/fall moving in.
Low 70’s in South Central Kentucky. Today I mowed the lawn and rode my bike, all in short sleeves.
Best of luck Ben…
I went thru The Great Ice Storm of ‘96. It was woodstove city and oil lamps for 4 days in the dead of January in Maine.
Some people in the outback were without juice for a month.
All ice storm victims have my complete empathy.
Ice storms are the worse. They really shut everything down.
Ice storm in Maine was 98. Didn’t live in the outback and was still powerless for 14 days.
Ben: The weather in Tampa is also bad today, sunny and 82.
Ben, hang in there, recall coming through Flag one time when I was actually pushing snow with my pickup bumper - it can get gnarly there. Stay warm!
I thought you lived in the desert. Perhaps AZ isn’t so bad afterall!
“Regions of Arizona where the most snowfall occurs”
http://www.azdot.gov/knowsnow/snowmap.asp
He lives in Flagstaff. 2 hours north and 6,000 ft higher elevation than PHX. PHX is desert that regulary breaks 110 in the summer. Flagstaff is pine forest thate rarely breaks 90, and has a ski resort for winter.
Okay, last year the resort was open for about 2 weeks in March. This year, they are opening on Thursday.
Sounds like time to go out to Arizona Snowbowl…
That’s what everybody is doing. These people love this stuff.
Well, if you’re a skier, the ol’ saying is:
“Hell on the highway is heaven on the hill!”
Since the Snowbowl has hugely variable seasons, some have been 500 inches, others without much snow at… now’s the time for them to go.
Thursday. They open Thursday.
“Open” right now… by going “backcountry”.
(not really such if at a ski area)
Skin up, ski down - just be prepared (equipment and training) for and wary of slide conditions.
NOAA is predicting low of 14F and high of 37F tomorrow for Flagstaff.
Brrrr.
Sounds like you need to move to California, Ben.
EVERYBODY wants to live here!
If you need firewood, it will likely be coming shortly. We get these in Oregon from year to year - all you can do is wait, build a fire, and admire the beauty of Nature.
Emergency stuff for those who have winter storms:
(1) 4500 watt generator in garage
(2) Aladdin lamps - not kerosene lanterns. Lehman’s Hardware has a website and catalog. Great source for non-electric stuff
(3) Woodstove - and NOT a pellet stove that needs electric
(4) Solar shower - you can heat the water on the woodstove, fill the shower and hang it in the tub/shower. Think Real Goods in Ukiah CA has them - most camping supply places do.
(5) Go to a gas water heater that does not use electric to ignite. I’m very fond of the Bosch tankless heaters that use a pilot and the new hydrogenerated ignition ones are very nice. (And they cut hot water fuel costs by up to 65%)
(6) Firewood cut and stacked
(7) Lantern fuel - smells less than kerosene
(8) Stove that does not need electric to start - even most gas have an electric ignition so check
(9) And the ultimate in security, a gas/electric refrigerator
I have always lived in the north and we had this cabin in the mountains in an area where if lines went down, they had to walkthe lines to find the break. It was equipped with all that stuff.
Ann: We used to use a solar shower at our cabin in Alaska. We had 55 gallon drum for water and would heat on woodstove, fill solar shower and hang over antique, clawfoot tub. Had no running water. Going to outhouse in winter was a trip and one didn’t waste any time there. When we lived in Mountains above Palm Springs a few years ago we went to tankless water heater and it was the bomb. Had woodstove to stay warm and I could cook on top. Love winter living for short periods of time.
Alaska pushing it for me! I never got further north than Maine and now we live in the upper end of the lower penninsula of MI right on the lake. Weird microclimaate though here on the shore- it is warmer than palces further south. I grow roses that should only grow in Virginia or south.
We have used the Bosch (formerly Aquastar) tankless heaters for over 20 years. We retired early and travelled for about 3 years, and (being sensible) opted for a long term lease until real estate got sane. This house had a gas tank heater. We pulled it out, stuck in the garage and put in my beloved Bosch last spring. We are on propane and the prices jsut took a 21% leap up. That’s okay. Switching to the Bosch cut the propane use by 45% a year. Between the fuel savings and the $300 Fed. tax credit for it, even with the price leap, I’m still money ahead for the year even after buying it,.
Isn’t is amazing how one can manage without all the ‘must have’ mod cons?
I adore the Lehman’s Hardware catalog (4th generation of the family has it now) and Real Goods. I’mnot doingit to be environmentally correct - I’m just cheap.
It isn’t always how much you make - it is how much you save.
“Alaska pushing it for me! ”
It is 20F right now, here in central Alaska. Positively tropical.
It’s 57 degrees here at the beach. We are huddled around the servers to keep warm.
Enjoy your snow day - you deserve a day off anyway. Never been to Flag in the winter - only spent summers there. Woodstove, good beer and good food, good company can make for a pretty damn nice day.
Wow. And I was complaining yesterday afternoon because the mud is chilly as I planted the last of my tulip bulbs. Guess I’ll shut up now.
And Ben, I made you a pretty Christmas card. It’s made from recycled beer cans!
“WAMU…cut about 6 percent of its workforce as mortgage-market losses increase. It plans to shutter 190 of 336 home-loan centers.”
Can any economists in the virtual room offer comment on the implications of this news for (1) housing demand and (2) recession risk?
(Mole Man — you out there today? We could use some non-idealogical perspective on this news…)
I’ll say one thing. There is a complete disconnect between the news that is coming out of the credit markets, and NAR’s projections that sales are actually going to _increase_ next year. How is that going to happen given the large contractions in the availability of credit that we are seeing?
Complete disconnect between the news and Wallstreet as well. After the anouncement, WAMU’s stock went up over 1%!
In an attempt to explain the stupidity of Hedge Fund modeling, there is a closed end mutual fund that is trading at 50% above book value (book value is the value of the underlying stocks). I cannot get very many shorts off in this stock, but every time I get some off I buy the underlying stocks. The model that the Hedge fund is using is based on past performance when the fund was trading at 25% below book. This trade has been available for several months -just not much stock available to short in an illiquid stock. At some point in time the managers of this fund will sell “authorized but unissued shares” for the benefit of the current shareholders.
question:
What is your definition of an “illiquid stock?”
I need volume.
Simple. Just click your heels together three times, and *wish* for an increase in home sales. That’s probably the source of the NAR’s projections.
I believe the NAR’s predictions are ideology-based (”real estate always goes up”).
Probably they will re-open all the home-lone-centers the day the rebound arrives.
(1) Housing demand:
Probably little if any effect. Fewer and fewer people want to catch a falling knife. I’m not sure this announcement changes this much one way or the other.
(2) Recession risk:
Big effect. I don’t care what nonsense the NAR is currently spouting, mortgages continue to get harder to get, and this action will contribute to that. Less available credit = even lower home prices = we might get back to something approaching a rational housing market someday. But it will cost us the pain we’ve been putting off for years.
“It plans to shutter 190 of 336 home-loan centers.”
This certainly does not imply that WaMu-funded purchase demand is on the increase or is even soon to return.
Apologies, I thought you were asking what effect this news might have on demand, not what information the news might provide about demand. I think we both agree there is not much demand to speak of.
Thanks for the clarification.
“Another Seattle-area loan consultant said she joined WaMu in March, seeking job security, but was laid off on Monday. ‘I think it’s heartless,’ she said by phone while packing her belongings. ‘I guess this industry doesn’t have any security.’”
Welcome to my world Honey, hope you put six months salary in the bank to ride it out between gigs.
“I think it’s heartless”
But gouging people on fees and vastly over-inflated home prices was O.K?
No dear, THAT was “heartless”. ( Soon to be @$$less )
Here’s a good one Mo, why are these people eligible for un-employment benefits? I didn’t realize shaking down clueless borrowers was considered “work”?
RE: ‘I guess this industry doesn’t have any security.
My cousin got laid off from the WF Portland, ME op center after 22 years in the processing/underwriting field.
And if the mortgage processing centers in Portland are layin’ off, you can assume real estate activity in the entire state is pretty much dead.
Pretty much, but don’t forget az_lender has just approved a new $85K loan on a fixer-upper in Stonington. Hope I don’t find this is the only new money in the whole state.
RE: $85K loan on a fixer-upper in Stonington.
Stonington is a decent place, albeit 100% dependant on lobstering and off road tourist trade.
Big with the 2nd home summer crowd.
Pretty isolated though.
Purchasers better put in a socket for a future electric car.
Just remember that Washington Mutual’s stock symbol is WM, the same call letters used by another local company, Seattle’s Waste Management. (Perhaps they are the same company?)
I don’t understand what is heartless about what WaMu or if any other company cut staff. You are in the business to make money not create jobs! Creating crappy jobs is what the government does.
No creating ‘crappy’ jobs is far better done by the private sector.
McDonalds and fast food places
Walmart
Restaurants
Hotels
Shopping malls and retail
Pretty much all retail, food service, amusement (think Disney who pays so little their workers can’t live within 40 miles of Anaheim), hospitality, call centers,……and the list continues.
The vast majority of the jobs created every month are those types of jobs.
Uh huh…..all of them dependent on people spending money they do not have and dependent on paying employees as little as possible - so what if they can’t afford the rent?
Yep - all that job creation is bottom of the barrel low wage dead end junk where you can’t support one person let alone a family. Gotta keep up profits and make sure those at the top are treated well.
Which is why so many people are resorting to the scam type jobs. They can’t find anything else.
exactly and it will get worse. When things get tight, the crime rates go up. We’ve seen a lot of white collar type fraud but that’s changing. People will go to great lengths keep food on the table and roof over their heads.
Which is why so many people are resorting to the scam type jobs. They can’t find anything else.
I think it’s that they’re not qualified for anything else.
Choices around here a pretty limited. A tourism based economy is fundamentally disastorous for the population.
For example, retail operation with several stores and over 400 employees.
Store manager with BA in business = $23,400 and health insurance after 6 months employment
Regional manager with MBA overseeing 4-8 stores = $35,000 and insurance after 6 months employment.
Not really workable when the median listing priced is $389,000 because of 2nd home buyers.
For over the past 5 years, nationally the incomes of college graduates have been falling when adjsuted for inflation.
I don’t know where you’re located, but if job choices are so limited, generally people who are serious about their careers move away.
Store manager with BA in business = $23,400 and health insurance after 6 months employment
BA in business…what kind of degree is that? As for MBAs they’re a dime a dozen nowadays. Unless they graduated Wharton or Stanford or that caliber, they’re not the hot commodity they once were.
“Which is why so many people are resorting to the scam type jobs. They can’t find anything else.”
I think it’s that they’re not qualified for anything else.
Even qualified people have been having a hard time finding work. We just hired a guy at the office with two masters degrees (in sciences), plenty of real world experience in the profession and he had been unemployed/underemployed for about a year.
In the end I suppose a lot of guys like him decided that it was more rewarding to hustle houses and mortgages, than to compete with Indian H1-Bs and being repeatedly laid off. I think that what might have hurt him was that he is in his late 40’s (and looks even older).
I could definitely understand someone saying “to heck with this” and jumping on the easy money bandwagon.
For over the past 5 years, nationally the incomes of college graduates have been falling when adjsuted for inflation.
Oh yes! We don’t cost of living raises anymore where I work, even though profits are at record levels (operating profit was about $10B). And “merit” raises are capped at 2%.
RE: A tourism based economy is fundamentally disastorous for the population.
REALLY?
Geez, all the politicians in Maine think an industry which is seasonal in scope; provides no health insurance or benefit packages for it’s employees and provides wages maybe a little bit above minimum, works just fine, to the extent that it is the leading employment sector in the state!
(sarcasm off)
I think that what might have hurt him was that he is in his late 40’s (and looks even older).
I don’t dispute that there’s a built-in bias against “seasoned” job candidates.
Maybe I’m projecting my own experience onto the world at large. My geographic area is pretty strong as far as diversity in employment and availability of jobs. Also, I’ve been up, down, and all around as far as work goes, and I’ve learned to adapt. Accepting less money than was previously the norm is one of the concessions.
BA in business…what kind of degree is that? As for MBAs they’re a dime a dozen nowadays.
That’s the problem, too many college grads chasing too few jobs. I am really beginning to doubt the value of a degree from an “average” (non Ivy league) university. At a place where I used to work they were able to replace all of the HS educated tech support people with University of Colorado grads with Comp Sci degrees. Starting pay: $12/hr! So much for the “average” CS degree starting pay being around 60K. Maybe if you have a degree from Berkeley or MIT.
With mediocre private schools charging 20K per year just for tuition, it might be a better bet to send the kid to the local auto mechanic school (perhaps at the Community College) and use the rest to get him started with his own shop.
Comment by phillygal
2007-12-11 13:37:15
I don’t know where you’re located, but if job choices are so limited, generally people who are serious about their careers move away.
The people who stay here do it more, I think, because they value the quality of life over the worldly success. Among others, we have an MA in econ (McGill Univ) who runs a small hotel/resort (15 rooms) and waits tables. A Wharton MBA who works construction. Cornell MA who is the school psychologist and has a B & B and waitresses on the weekends and summers. Ironically, on a per capita basis, the population of this county is the most educated in the state. We have 2 times the number of college grads as % of the population as compared to all of the US. Does make for fun conversations around town - not often in other places can you lean against the checkout at the grocery and have serious discussions about national healthcare policy with other customers and the store staff.
No - the money is not great although by careful saving quite a few do go to Australia or Thailand or the Caribbean once every 2-3 years. Cars tend to be functional with the basic questions being ‘what is the mileage’ and ‘can it get through the snow’. (Answer is Subaru wagons are real popular.) Houses purchased by locals are smaller (900 -1700 sq ft.) as compared to the 4000 sq ft summer ‘cottages’ of the seasonal people.
The upside is that it is one of the most beautiful places on the water in the US. Look up Sleeping Bear Dunes National Lakeshore. It surrounds us and the Park Headquarters is here in town. (And having told you that, any one of you could come to this town, walk in any business and ask “where can I find Ann who is interested in economics and has big white dogs?” And they will not only give you directions and my phone number but probably know if I’m at the garden center or the beach. So yes, it is very safe here.)
The local school district is absolutely fabulous. The taxes on all those super-expensive 2nd homes pay for a lot of amenities. The town library has a bigger budget for purchases than I have seen in cities of 200,000 or more. No crime - only see the deputies when they stop for coffee when on patrol. Don’t need to lock doors. Kids can go anywhere and not only are they safe, everyone knows who they are (and their parents’ phone number.) And the beach goes 20 miles in either direction and it is all public. We are early retired (I’m ex-PA) and it is great to live here but I worry about what happens to the younger people.
Downside: you will probably only have a household income of $35000 -75,000 a year.
“BA in business…what kind of degree is that? As for MBAs they’re a dime a dozen nowadays. Unless they graduated Wharton or Stanford or that caliber, they’re not the hot commodity they once were”
Those kind of degrees are what the politicians keep telling the masses they should get. “Go to college.” “Get a college degree.” There are only so many slots at the best schools. You have to be in the top 2% of all applicants in the US to get into the colleges I attended. So what happens to the other 98%?
The powers-that-be keep preaching ‘go back and retrain at the local commnity college.’ Right - an associates in anything is bloody useless and an associates in social work means they get hired to clean houses but people spend the money believing what they are told.
Very sad. These people do what is recommended, follow the rules they are given, get the 4 year degree from the cow-college - and make $10 an hour working 45 hours a week while trying to pay back their $40,000, 60,000 or more in student loans. No one told them that the deck is stacked against them and that rules secretly read “get the bachelors degree from a top 100 school and then go to a top 10 grad school.”
More ‘money from the masses’ while someone somewhere laughs at them as suckers and moves the goal post again.
Comment by In Colorado
“place where I used to work they were able to replace all of the HS educated tech support people with University of Colorado grads with Comp Sci degrees. Starting pay: $12/hr! So much for the “average” CS degree starting pay being around 60K. Maybe if you have a degree from Berkeley or MIT.
With mediocre private schools charging 20K per year just for tuition, it might be a better bet to send the kid to the local auto mechanic school (perhaps at the Community College) and use the rest to get him started with his own shop. ”
Yep - comp sci people are a dime a dozen. Web designers around here are lucky to $7 an hour basis and then commissions. Unless it is a BA from MIT or some school of that calliber, comp sci is pretty much a dead end and even for the best and the brightest in those fields, the work can be outsourced to someone in India who is just as good and will do it for $6000 a year.
What jobs are left that can not be outsourced and pay enough to allow a middle-class/upper middle-class lifestyle like my grandparents and parents had? I frankly don’t see a lot that requires the actual physical presence of the person outside of (1) medicine where they have to be in the same room as the patient; (2) law - you have to show up in a courtroom; (3) sales where you have to meet facr-to-face with the client and (4) skilled trades such as plumbers, mechanics and similar jobs.
All these paper-pushing jobs consulting and manging and handling information …..well, if you can telecommute, so can someone in another country.
The US sure as hell doesn’t MAKE anything anymore. If this were 1941 and we only the manufacturing capcity then that we do now, we would all be speaking German and saying ‘heil.’
BTW Colorado, you are low on your college costs. Medicore public colleges end up being $20000 a year. Mediocre private cost even more.
Comment by hd74man
“REALLY?
Geez, all the politicians in Maine think an industry which is seasonal in scope; provides no health insurance or benefit packages for it’s employees and provides wages maybe a little bit above minimum, works just fine, to the extent that it is the leading employment sector in the state!”
Seems like politicians think that whatever is in existence is just great. Must of all had a lobotomy.
I think any politician, once elected, should have to live on the median income of the area that they represent. Only fair. Gives them a good chance to ‘get in touch with the problems of their constituents’ don’t you think?
That means our local state legislators who represent about 4-5 counties (and we are the wealthiest ocunty at $44,000 median) have to live on $39,000 a year. Really really like that idea……. Might get them real motivated if that is all they get a paid - and, of course, no healthcare since living like that is good enough for their constituents. Ditto the governor…..hmmm…the Schwarzenegger getting by on the CA median….what a delicious thought. No more ski trips for him…..
Agreed with the above. The long-term goal of all of this, IMHO, is to bring into being Corporate Feudalism, a system very much like the old feudal system, but with corporations basically owning the employees since their pay is so poor they cannot save for their future and jobs are so rare that they can’t go anywhere else. Slather a nice, thick, layer of debt atop this crapcake, and we have a wonderful “new” economic system in which the masses live in squalor and have no hope as they work to support the lifestyles of the rich and corrupt.
Work for the government or work for yourself looks like the 2 best choices for most people these days.
BTW Colorado, you are low on your college costs. Medicore public colleges end up being $20000 a year.
FWIW, tuition at Colorado State and University of Colorado was under 5K per year not too long ago.
japan created jobs ! and most pols offer to “create” jobs
gov workers never die, they just get pensions
Not really. My friend works for the government and he has:
1. Excellent health coverage
2. Excellent pension
3. Very good livable salary
4. Great job stability
Please name one private company that offers these things.
The Fortune 20 company where I work currently only offers #3, and inflation will soon rub that one off the list as well.
The computer storage company that employs my husband, which was in the top ten of the “Best Places to Work” last year.
Enjoy it while it lasts. All it takes is a couple bad quarters, and the axe comes out. Technology is a rough ride, even at good companies like NetApp.
Now that’s funny…
I guess this industry doesn’t have any security.
Duh.
If we continue on the path cut out for us by the elites, we are guraranteed to create a society filled with liars, gamblers and thieves.
We need to get back to basics, give the power and money back to the people who make this country great — the workers.
Whenever we’re told to get more education (always pushing college) in order to make the same wages or have the same job, it means we are sliding down the slope WRT quality of life.
When hedge fund managers and passive income earners are making thousands of times more than what productive workers make, it’s time for a change.
“[I]ndustrywide home loan originations will probably shrink 40 percent in 2008 to $1.5 trillion, down from about $2.4 trillion this year.”
Somethings are simply too big to bail. In the end, the invisible overwhelms our very best intentions.
Editorial suggestions:
…the invisible hand overwhelms our very best
intentionsinterventions.Thank you.
Home loan originations will shrink by 40%.
Let’s see, that could be another 20% off home sales volume and 25% off house prices, or it could be another 30% off sales volume and about 14% off price. Or…
A bump up in down payments will be a component too. Fannie wants an extra 5% in “declining markets”. By the middle of next year, there probably won’t be anything else.
By the middle of next year, home prices may again be low enough so that down payments are doable.
‘At the time of the purchase, Toll Brothers, the general partner of the joint venture, trumpeted the deal as the ‘most expensive’ land transaction in Arizona history, citing research from the Arizona Republic..In early 2006, when the deal closed, ‘the market had begun to slow down, but I don’t think anyone had bought into that idea yet,’ says Jay Butler, director of realty studies at Arizona State University. ‘People were still buying land with the idea that Phoenix would grow forever.’
Yeah, and saying that out loud sounds kinda silly doesn’t it, Butler? It was ridiculous then and it still is. I remember that deal well, the way the RE goons in the valley went on and on. Now it looks like that was the peak, and Toll got handed the biggest bag in Arizona - ha!
That was the thing out by the superstitions, right? All that far-east valley development needs to be shelved for at least 10 years, if not forever. Without a new source of water and cheap power, Phoenix will need to get to a zero growth rate with very little reliance on building, or even begin to shrink. Big ice storms across the midwest are usually “good” for Arizona growth though.
No, Surprise is the extreme NorthWest of the valley.
http://tinyurl.com/22u2qf
There are really only 3 ways in and out. Bell road leads east into Peoria where you can pick up the loop 101 freeway. Bell is VERY crowded and it takes many cycles to get through each stop light.
Grand Ave (US60) heads south east towards downtown, but it too is crowded and it is a LONG drive with a TON of stop lights. You can head west and catch 303 south (not a freeway, so lots of stop lights) to the I10, but 10 is an utter parking lot.
My wife’s ex moved there. Only 14 miles or so from us on Bell road, but it takes him 45 minutes to bring the kids to school over here during moring rush hour. When he lived here in Glendale he took them 50% of the time. Now he only takes them every other weekend so he only has to do that drive 2x a month. Other times he works nights so he can miss the crunch.
More child supprt for us. Less visitation time with the dad for the kids.
http://tinyurl.com/yqdstc
Whose the lender? I bet its Western Alliance Bank corporation (WAL). There’s a relationship at the board level between WAL and Meritgage Homes. By-the-way, WAL is heavily into construction loans in CA, AZ, and NV. The stock has had a significant bounce and I think I’ll add to my short position (if there still are shares available for retail guys like me).
I know, sounds silly. How come so many here figured all this out, but the “experts” just sat on their hands and shook their heads. And they were the ones with the numbers!
I forgot to post that on Sunday night, their was a story on the local news about people trying to rent out their homes for Super Bowl…one clown, an obvious flipper, had a 5 bedroom house in GLENDALE, for chrissakes, stucco and all, he wanted to rent for $30K for the week! $30K!!! You could stay at the Phoenician, eat room service from Elaines all day and night long, have hookers, massages, and limos and still not approach that!
So, anybody here want to rent a nice Pulte for superbowl week, for a mere 30K, step right up!
No thanks, think I’ll go with the hookers, limos and massage!
“I know, sounds silly. How come so many here figured all this out, but the “experts” just sat on their hands and shook their heads. And they were the ones with the numbers!”
How true. As news comes out, some of my acquaintances are starting to treat me like I’m some sort of psychic freak. I don’t understand why it’s so difficult for most people to see two steps in front of them, but I am starting to accept that the majority of people simply don’t have this ability. I guess myopia and the herding instinct are just part of human nature. I talk to a lot of really smart (and I mean really smart people) who just can’t seem to put all the pieces together. I don’t think I’m smarter than they are, but I have decided that my brain is wired very differently from theirs.
AC, this is the feeling I get too - and probably many of us here at the hbb. It’s hard to understand how others just didn’t (and still don’t) ‘get’ most of this. That’s what I don’t get.
‘You can’t turn a financial toad (into a prince) by kissing it or by securitizing it or by transferring its ownership to somebody else,’ he said.”
I think the correct word you were looking for was “turd” not toad.
or load. TurdLoad?
I thought Warren’s most interesting comment was; “In waiting for the other shoe to drop, I don’t know if I am dealing with a one legged man or a centipede”…
Buffet also thinks that: “On U.S. President George W. Bush’s plan to negotiate rate freezes on some mortgages at risk of default, Buffett said it was the right course of action but “not revolutionary.” go figure. i thought he was smart.
I saw the interview. He said he didn’t like contract modification or the govt. pushing the changes. But, he said that isn’t what is happening. Lenders want to keep people in houses, if they are paying and the house can’t be sold to cover the debt, and that’s all they are doing.
This is the lenders using govt. to announce that they want to keep people in houses, it is not the govt. ordering lenders to keep people in houses against their will.
He is a great investor but not necessarily smart on all issues. For example, he thinks we need to raise taxes in this country.
Anyone who has a debt problem would probably get the following sensible advice: Maximize your income, cut spending as much as you can, use the excess to pay down debt. The US has a debt problem. Nobody with a lick of financial sense would advise someone with a debt problem to go to their boss and ask for a salary decrease. If we don’t pay the taxes now, the next generation will pay more in the future. Saddling them with that is unforgivable. We should get our financial house in order so that we CAN lower taxes later. The easiest and most painless way to raise tax revenues is to tax an estate after the owner has died, especially if you’re only taxing the wealthiest individuals. (The estate tax doesn’t apply to the vast majority of Americans.) It also has the side benefit of keeping America a land of opportunity where capitalism can be defended as a moral economic system. If individuals start with a somewhat level playing field (access to education, etc.) and are free to make their own economic decisions, it is morally justified that they privately enjoy the rewards they reap from their own private efforts. If some are insanely privileged from birth, true capitalism dies.
Understood, and I am not saying to lower taxes, but raising the taxes only enables the politicans to wreak additional havok on our precarious financial health. What we need is responsible budgetary sense, read: major spending reductions.
I always hear “we can’t keep the farm our parents had because of estate taxes” Nice argument from the rich saying see you can’t tax us you will ruin these poor farmers.
I find it funny that Republicans always talk about cutting taxes, especially for the rich. I really don’t understand this brand of patriotism.
Is the idea to give as little as possible back to your country? Is that true “patriotism”?
I always question the death tax, though. How is this not a form of double taxation? The income was already taxed when the parents earned/made it.
Do we own the money we earn or not — especially after it’s already been taxed? If we own it, we should be able to do whatever we want with it (give it to charity, to kids, spend it, etc.).
OTOH, I have no problem with taxing cap gains at the same levels as ordinary income. Also, have no problem with progressive tax structures, but…once it’s taxed, that should be the end of it. Adamantly opposed to taxing the same money multiple times.
Right even with Uncle Paul’s new and improved turd compound & polish its gonna be ugly.
Oh yes…. A polished turd. Lawrence Yun might fit that description. Perhaps David Lereah?
Now if we can only do something about the smell…
“Fannie Mae, the country’s largest backer of mortgages, is knocking 5 percentage points off the amount it will finance in areas with declining prices.”
Glad to hear that Fannie Mae has is finally taking some action to achieve its affordable housing mission. Knocking down the amount it will finance in areas where prices are already falling should help kick the legs out from under the bubble era’s spurious demand.
We kind of touched on this briefly yesterday over at Patrick.net. If only GSE’s had made the banksters keep random loans on their books they might have had a taste of their own cooking!
Say… make them keep every 10th loan on even numbered Tuesdays they would have been forced to at least LOOK at the loans they were forwarding through the pipeline. As helpful as that “might” have been we concluded they would probably have fought that tooth and nail as well!
Excellent, DinOR, but one would’ve had to devise a system that the loon originators could not predict. If they knew they were going to have to keep every 10th loan on even numbered Tuesdays, they’d have first made sure that only extra-special people who might pay off their mortgages would receive funding on even-numbered Tuesdays. I remember meeting a guy at a party about 4 years ago who said he was a subprime mortgage lender. I said “me too” because I had no idea that “lender” meant “salesman,” and no idea that “subprime” meant “little or no chance of paying off.”
PB~
You can knock that 5% risk premium right off any purchase offers.
Since home values are really tied to the monies willingly to be lent, valuation declines continue to accelerate, while the NAR shills repeat their mantra that it’s a great time to buy.
No shame for the NAR hucksters.
Due to my training, I prefer to view that 5% risk premium as a material instantaneous shift to the left in the housing purchase demand schedule. The predicted implications (based on Econ 1-level analysis) are as follows:
1) A wider gap between the rate of houses coming on the market (”supply”) and the rate of qualified new buyers entering the market (”demand”) will result.
2) The rate of home sales will slow further below its already-depressed level.
3) The implied equilibrium value of homes just fell, but due to sticky prices on the downside, it will take a while for prices to adjust to the level where the flow of purchase demand and supply equilibrate.
P.S. I hope my ideology has not offended any readers’ delicate sensibilities.
P.S. I hope my ideology has not offended any readers’ delicate sensibilities.
The only ones offended are from the NAR. I happen to agree with your assumptions.
After Mole Man’s vicious personal attack post yesterday, I begin to suspect he works for one of the leading REIC institutions. This is just an unfounded suspicion, however…
Ew, I missed that one yesterday, Bear. Too much work in my life lately. Gotta pay the adjustable rate mortgage, you know.
Personally, I think you’re right on target with your projections above. And yes, the stickiness will hang on, and on. This could go for a long time, much to the NAR’s dismay.
Ah, Mole Man - I read his fascinating discussions defending terrorists and illegals. I guess he intends to sell houses to them, or something.
Do they list those areas?
‘What would our economy be like if Fannie Mae and Freddie Mac were not around?’”
Yeah…. I got a pretty good friggin idea but I wager you don’t.
I think it would be something like last time Fannie Mae was not around.
That would be 1932.
They may not be around as long as everyone thinks. What will their loan portfolio and guarantees look like when/if real estate really does decline by 40% to 50% or more (and this may well happen)?
–
The “Major Bust” will become monstrous when recession can no longer be denied:
December 11, 2007
US Recession Confirmations: Small Business Index + Marco-economics Track
Today we had two data points that confirm the beginning the recession in the US.
The most important data point is the Small Business Economic Trends index at 94.4, a fall of 1.8 from last month. This low level is ONLY reached during or after recessions (many series don’t bottom out until 2-3 years after the beginning of recoveries). At the beginning of recessions the index is at higher levels than the current reading.
The Macro-economics’ GDP track for 2007Q4 went negative for the first time in years (reported on CNBC). This is based on estimate of the GDP growth based on the incoming data.
I feel high degree of confidence in my call of recession to have begun in Oct’07. Stupidity of those who peddle positive employment as a proof of “no recession yet” can be easily verified by looking at the historical data that prove that employment is a big-time lagging indicator. Unfortunately, the great American Propaganda Machine will keep peddling lies until it can’t.
Jas
Unless this time is different, the recession will be denied until it is over, at which time it will be retrospectively dated by the NBER crew.
Can’t do that with a long, deep recession, which is what it looks like we are setting up for.
I think the FEDs might just show a negative GDP for the 4th quarter. This would give them something to point to and justify the rate cuts. If its not negative it will be well below 1.
There’s no such thing as “the FEDs”; you may just as well write “they.” There’s the Commerce Department, the Treasury Department, the Federal Reserve Bank (called the Fed), etc.
The Bureau of Economic Analysis (BEA), a division of the Department of Commerce, calculates GDP.
Spot on with that lagging employment indicator. You’d think the talking heads would realise where that unemployment number stands in the scheme of things. Denial?
“Another Seattle-area loan consultant said she joined WaMu in March, seeking job security, but was laid off on Monday. ‘I think it’s heartless,’ she said by phone while packing her belongings. ‘I guess this industry doesn’t have any security.’”
This is just too much. YOU WORK FOR A FREAKING BANK! HOW MUCH MORE HEARTLESS COULD IT BE?
It’s the loan biz. If she wanted security, she should have joined the Operations side. But I’ll bet the income over there wasn’t to her liking.
Bwaaaahahahaha! Joined WaMu THIS YEAR, seeking job security? And I’ll go wander over to WCI Security (Iraq division) for a comfy, cozy, safe job assignment. I have to ask, what was she thinking? (Yes, I know, just ignorance…)
That said, my good friend laid off in loan underwriting tells me that there is quite a lot of work in collections these days. But maybe there’s a skill set required in collections that you don’t have in mortgage closing. People skills, yeah, but of a whole ‘nother type — yikes!
YOU WORK FOR A FREAKING BANK! HOW MUCH MORE HEARTLESS COULD IT BE?
My sister and I were the only grandchilden on my mother’s side. When we were kids, if I borrowed a $1, she charged me 100% interest a day. Our maternal grandmother once commented that my sister was so tight that she squeaked when she moved. She grew up to be a mortgage banker specializing in foreclosures and later moved on to doing investments.
Yeah…..it fits.
No, she works for a savings and loan (WaMu is a “trust” (S&L), not a bank). They are like the Bailey Brothers….right? George Bailey isn’t going to up and fire Uncle Billy. Is he?
As I recall, when the chips were down, George was ready to turn state’s evidence against Uncle Billy.
GEORGE: “Where’s that money, you silly, stupid old fool? Where’s that money? You realize what this means? It means bankruptcy and scandal and prison! That’s what it means. One of us is going to jail. Well, it’s not going to be me!”
There was a Dana Carvey as George Bailey SNL skit where Uncle Billy realizes what happened to the money, and a Bailey-led mob beats up Mr. Potter (Lovitz).
Fake George Bailey: You made one mistake, Mr. Potter; you double-crossed me and you left me alive!
“Another Seattle-area loan consultant said she joined WaMu in March, seeking job security, but was laid off on Monday. ‘I think it’s heartless,’ she said by phone while packing her belongings.”
She should have seen it coming. The market is contracting.
Maybe her beauty school didn’t offer courses in economics?
re: the money market story
“Only some investors will be able to get their cash out. Several of the fund’s biggest investors are being redeemed “in kind” — that is, they have been given their share of the underlying securities, rather than a cash payment.”
No, you can’t have your money back. Here are some worthless frozen securitized loans. Let’s call it even.
If a “small investor” had to put in at least $25 million, how much did it cost the “biggest investors” to get royally screwed? You would think they could find cheaper male prostitutes on Wall Street.
It’s like borrowing someone’s car, returning it totalled, and just dropping off the keys and leaving.
Totally EXCELLENT!
“A borrower previously eligible for a 100 percent or no-money-down loan with a lender working through Fannie Mae will now have to come up with a 5 percent down payment starting in mid-January. A borrower using a loan with a 10 percent down payment will have to come up with 15 percent soon.”
Stand by for a massive intergenerational transfer of down pmt money.
Oh, the humanity. 5 pct down! Are they crazy?
You should not buy a house if you do not have at least 5 pct down.
Really, you shouldn’t buy a house without 20% down, and 6 months to a year of salary in the bank.
So, rent for next 2 years. With house prices falling everywhere, you’ll have what you need sooner than you think.
That intergenerational transfer has already been ocurring here in the San Francisco bay area, and I suppose throughout coastal California. Eventually I suspect even the Bank of Mom and Dad will encounter liquidity issues…
Nah…..Susie and Billy can go join the military. If they don’t get killed in foreign military excursions, once they get out, they can use a VA loan that will do 100%.
RE: they can use a VA loan that will do 100%.
The VA loan bureaucracy sucks.
They talk out of both sides of their mouths.
Come in low or require repairs on a VA appraisal and the applicant will write his or her Congress-person and demand you be thrown off the VA panel for impeding their progress in the American Dream.
Then when the POS goes into foreclosure, the VA sends you a letter demanding an explanation as to why the great discrepancy between the original appraisal and foreclosure number.
Your tax dollars at work.
all gov programs sck
va-fha-sba
all have high failure rates, that’s what gov rewards, failure
I loathed having to do real estate tansactions when the client was goig VA/FHA . (Retired lawyer) Knowing that most realtors would have trouble pouring piss out of a boot if the instructions where written on the heel with a ig red arrow saying “instructions”, I would take charge of getting the documents in order for a real estate transaction.
Client: I’m using a VA (FHA) loan
ME: (to my assistant) Go buy 3 bottles of asprin and 3 bottles of wine. I’m gonna need it.
THe paperwork is intense, the standards are fussy and the home inspection was invariably a nightmare.
Interestingly though, except for subprime fixed, the FHA and VA loans have a default rate that is less than other loans in relation to their % of mortages. Could be all the obsessive requirements for lending have a lot to do with it.
RE: the FHA and VA loans have a default rate that is less than other loans in relation to their % of mortages.
Sub-prime took a lot of their action over the last 4 years.
Qualifying was easy; the purchase price was rubber stamped by the appraiser; no repairs to property were required; and underwriting was non-existant.
Why go Gov’y?
BTW-THe paperwork is intense, the standards are fussy and the home inspection was invariably a nightmare.
Very apt description of government program loan process.
What is inherently wrong with parents helping kids buy their first home? Granted no one should be buying right now, but I don’t see what’s wrong with the idea - it’s been commonly done forever, particularly in the bad old days when you needed at least 20% down.
Because it reinforces the whole landed gentry status quo.
That is silly. “Landed gentry” my foot.
If, instead of stupidly spending $25,000 on a wedding - pretty much the going rate anymore - the parents on both sides handed them a combined check for $30 -40K, that $30K would be 10% down a $300,000 house, 15% down on a $20000 house and 20% down a $150,000 house.
Why spend these huge amounts on a single dinner party? Pure craziness - given the divorce rate, it would simply be more time efficent to burn the money.
I did a formal wedding for $6K. 6 person wedding party, tuxes, big wedding dress, professional photog, prefessional dj, full reception with prime rib buffet for 100 guests, etc., etc.
I had to hunt and choose, and hunt and haggle, and hunt and hold the line…. I can’t tell you how many times I was called a cheap bass-turd and accused of trying to deny them the ability to make a decent living.
$300 an hour for a photographer with 4 hour minimum, and I don’t own the rights to the pictures? Try $200 an hour for 2.5 hours and I own all rights to the pics! $500 is still insane for 2 hours work, but most quotes are $1500+.
“How am I supposed to live on $500 per wedding?”, I was asked. Ummm… not my problem.
What I found was that the $3 per person cake was just as good as the $10 per guest cake. The venue that I got for $25 per person, meal included, was “almost” as nice as the places that wanted $90 per guest. A $70 per person tux was as good as a $250 tux.
It helped that I got married on 7-14-07. Everyone else getting married last summer wanted 7-7-07, so NO ONE was booked for 7-14. Work for me for cheap, or sit at home! That is bargaining power!
My niece married into a Chinese family that pools money to lend to the kids for 100% of the cost of the house. Kids pay back in for the next generation.
A person is free to do as they wish with their money, but parents helping kids buy homes has not “been done forever”.
My parents now 80 had no help from their parents when they bought their first and only house. My older sisters were 6 &7 when they moved in. Until that time they rented an apartment.
When my wife and I bought our first place in 1986 no one helped us and we had to scrape the bottom of the barrel to come up with the 10% down. The place cost $52,000.00
Dang, and now we’re trying to come up with $52K just for a 10% downpayment on a ramshackle . . . SHACK in West L.A. *sigh* I need a new state.
My grandparents helped my parents and most everyone I knew had parents that helped them with down. I don’t see that the idea is bad just because it wasn’t done for you.
It was done in the old days when 20% down was required… but if the lender knew about it, the loan was denied. This is the reason the borrowers had to show their last few years of pay stubs and 1040s… to show that they had the means and that the funds were their own.
To show that you borrowed the d.p. from families was to have your mortgage application denied.
No one said the parents were LENDING the money.
The comment was that it could be a gift.
Nice wedding present sort of thing.
No one said the parents were LENDING the money.
——————-
I don’t think that was their issue. The lenders just wanted to know that the actual borrowers earned their own down payment because they would be less likely to walk away from it.
Kinda like the kids who get exotic cars for their 16th birthdays. They are much more likely to crash the car than a kid who went to work and earned the $$$ to buy their first car.
“Washington Mutual offered a bleak assessment of the mortgage market, estimating that industrywide home loan originations will probably shrink 40 percent in 2008 to $1.5 trillion, down from about $2.4 trillion this year. The company said it plans to cease lending through its subprime mortgage channel.”
WaMu takes a $ham-u dive…
I find the predicted change in home loans even more facinating.
In other words, they are predicting another 40% cut in broker commisions.
They are also predicting another 40% cut, effectively, in the sales rate. Calculated risk has had some great articles on this. Stealing a figure, the NAR predicts 5.67 million homes get sold in 2007. So WaMu is predicting ~3.5 million homes trade hands in 2008. (Yes, I’m extrapolating…)
That is less than half of the peak year!
The REIC is hurting from a ~25% sales rate drop. Compound onto that another 40% drop…
Got popcorn?
Neil
0.75 x 0.60 = 0.45 or a 55% reduction in 2 years. Ouch.
False hope springs eternal here in the Centennial State:
http://www.denverpost.com/business/ci_7686780
My favorite lines:
“The housing downturn will limit growth in financial services, which covers most real-estate and mortgage-lending jobs. That sector is expected to add only 400 jobs. ”
There os a voice of reason however:
“Retiring U.S. Bank regional economist Tucker Hart Adams, who has called for a recession in the near future, held by her forecast. ”
“I just don’t think the American consumer can continue to spend more than he earns,” Adams said. “That is exactly what will cause the recession.”
“Job losses in construction will be more severe than the 1,000 predicted in the 2008 Outlook, she said.”
“I just don’t think the American consumer can continue to spend more than he earns,” Adams said. “That is exactly what will cause the recession.”
I was under the distinct impression that the American Consumer had already been spending more than he earns through home equity extraction. The recession will be worse than expected if JP6 cuts back to less than he earns.
“The recession will be worse than expected if JP6 cuts back to less than he earns.”
If he is even earning anything.
Colorado,
I’m sure Ms. Adams is correct. Here’s the good news though: When consumers ( I thought we weren’t going to use that term anymore ) finally get fed up w/ paying 60% of their income to basic shelter and THEN get a MEW driven shopping orgy on the back end, they’ll have as much or more disposable income when their house payments are cut in half! We cheer when gas and food prices go down but somehow declining home prices are… BAD!?
When the people finally latch on to that they too will cheer declining and then flat home prices as they get re-introduced to their paycheck! ( At least I hope so! )
Paycheck? Is that YOU!? I haven’t seen you in SO… long!
Glad to have ya’ back… little buddy.
We cheer when gas and food prices go down but somehow declining home prices are… BAD!?
As far as I’m concerned, falling home prices are good. Of course, my sole purpose in buying a home would be for personal use as a long-term residence…
>”“I just don’t think the American consumer can continue to spend more than he earns,” Adams said. “That is exactly what will cause the recession.””
Read, “I just don’t think the American consumer can continue to spend more than he can run up on his credit cards and house loans”
“H&R said that it…ontinued to wrestle with its disintegrating mortgage arm.”
Good one from the AP.
Sounds like Obi Wan wacked it off!
“Liquidate labor, liquidate stocks…liquidate real estate. It will purge the rottenness out of the system…. People will work harder, live a more moral life.”
I read this quote last night in a book about the 1929 crash: it is attributed to Andrew Mellon’s thoughts on the market mess. We really need to purge the rottenness from the system, even if it causes a bit of pain.
So we want another Great Depression?
no- but all of these attempts to prop up the economy and housing is going to just drag things out.
Given a choice between that and the Weimer Republic, hyperinflation, and the aftermath leading to radical governments, yes, I’ll take a Depression any day of the week.
True now more than ever. Does it take hardship and pain to teach the sheeple certain life lessons?
Got popcorn?
Neil
This is always my favorite thread…
Ben causes tens of Billions of Dollars to vanish, before our very eyes.
MBIA Capital Infusion
Yesterday it was in the press that MBIA, the big debt insurer, received a capital infusion from the privately-held Warburg-Pincus ($1.0 billion stock sale). Was it really Warburg-Pincus money or are they fronting for those who can’t afford to see MBIA lose its AAA credit rating? Warburg-Pincus doesn’t have the deep pockets of a sovereign investment fund — seems to me like an awfully big risk.
Any thoughts or info?
Imagine that the top executives of a company, and the board members they recruited, voted to issue each other hundreds of millions of dollars in stock, devaluing the existing stock owned by investors. Sounds illegal, doesn’t it? Something out of the robber barron era.
How about if it is done in two steps? In step one, a company borrows money and buys back stock to high prices, while issuing stock and options to the executives. The investors dont’ worry about it, because the buybacks prevent their equity from being diluted.
In step two, the company has to issue new stock and sell pieces of itself at low prices, and the investor’s equity is diluted.
There is a lot of Step Two going on. Any relationship to Step One, or am I being too cynical?
Corporate equity extraction, except the extractees are not the owners and don’t have to pay it back.
Corporate equity extraction, except the extractors are not the owners and don’t have to pay it back. (Unless sued and the judgment is collected.) Think of the shareholders as HOLA lenders with no say in the credit decision.
I knew there was a good reason why I gave up common-stock ownership a number of years ago.
http://tinyurl.com/3×2oe2
Freddie Sees $5.5B-$7.5B More Losses
“I honestly think it’s going to get tougher before it gets better,” Richard Syron, the company’s chairman and CEO, said in a discussion with financial analysts in New York.
Freddie’s shares fell $2.09, or 6 percent, to $32.95 in morning trading.
While the mortgage crisis has brought a rising wave of foreclosure notices into public view, less evident have been “pictures of people standing with furniture on the lawn” after being forcibly evicted from their homes, Syron said. “As that begins to happen, and it will happen, I am afraid of the impact that this has.”
Breaching containment.
Most of the folks being evicted:
1) have no skin in the game and can rent for less, OR
2) HELOCed themselves into foreclosure
Most people going into foreclosure overall don’t actually live in the houses they are walking away from.
It will be hard to generate much sympathy for this crowd.
“Most people going into foreclosure overall don’t actually live in the houses they are walking away from.”
Source? Link?
groundhog overstates the numbers. MBA data about a month ago showed that in the hardest hit areas, 30%+/- were non-occupied. Could be investors, could be 2nd home people
could be they already packed their bags and moved out ahead of the foreclosure.
I didn’t make it clear, but I’m suggesting that of the rest (not 1 or 2) the majority of foreclosures will be for non-owner occupied houses. The reported numbers have certainly suggested this, though I don’t think there are any comprehesive national data available.
If 30% are officially non-owner occupied, how many lied on the loan application? There was a study of Nevada real estate recently, just comparing addresses for owners vs. house address and the numbers were very high. Anyone remember those results?
That was the one I was thinking of. Done by the Mortgage Bankers Assoc about 3-5 weeks ago. It was staggering - they came up with close to 30%.
Recent report from the MBA was that nationally, it is 1 in 7 that is not owner-occupied.
From WSJ:
Fannie Mae, the giant government-sponsored mortgage investor, last week raised costs for many borrowers by quietly adding a 0.25% up-front charge on all new mortgages that it buys or guarantees. On a $400,000 mortgage, that would mean an extra $1,000 in fees, almost certain to be passed on to the consumer.
We are getting screwed coming or going……………!!
For the most part, “we” are not borrowers.
No, but “we” are all taxpayers. Forget the “teaser freezers”, if the banksters can convince Congress to raise the GSE conforming limit to $1 million like they want, or get the FHA to purchase toxic waste en masse, then we are all on the hook.
I’d like to believe what Ben believes (that a large-scale taxpayer bailout is impossible). However, knowing what ruthless, inconceivably greedy, arrogant pigs the people running the financial system are, and what ignorant, easily-manipulated sheeple so many Americans are, I cannot feel so comfortable that they won’t/can’t pull it off.
Bingo. I’m with you. I hope Ben is right but this place is so rat-infested with gangsters anything can happen.
I rule out nothing.
I’m also with you, HARM.
It’s not the “teazer-freezer” I’m worried about. That’s meant to distract us from the FHA/GSE bailout which will dwarf whatever the private market intends to do.
We need to stay on top of what’s going on with FHA/GSE bailouts.
If you are a potential buyer, then you should thank FNM for just making housing more affordable…
I particularly love this one from the same WSJ article:
“Loan applications have been so slow lately, says Lou Barnes, a mortgage banker in Boulder, Colo., that it feels like “our client base today is limited to people who don’t read the newspaper or watch television.”
“our client base today is limited to people who don’t read the newspaper or watch television.”
Odd, I thought you had already made all the loans you could to mouth breathing illiterates ?
Commercial real estate bond values fall sharply
http://www.ft.com/cms/s/0/2d5d8f7e-a75a-11dc-a25a-0000779fd2ac.html
thanks for that info. Anyone with some SRS might enjoy that article.
An idea just came to mind and I don’t know if this is how this economic stuff works, but:
Lets say someone like Citi or BofA borrows from the Fed, turns around and loans it to a Hedge fund with toxic instruments at full value or close to it. The hedge fund, turns around and purchases stock in the bank, in exchange for discounted toxic instruments. Does this help the bank financially by increasing tier ! and decreasing tier II and tier III assets?
Is this hypothitical possible?
Would not be kosher. Can’t lend more than 50% to purchase or carry stock (Fed Rule) plus insured banks can’t make loans for the purchase of their own shares. Of course Bank A can lend to purchasers of Bank B while Bank B lends to purchasers of Bank A - just don’t get caught.
‘Mortgage borrowers that do not qualify for a government plan aimed at stemming a tide of home foreclosures may resort to lies or even trash their credit scores to access the plan’s benefits and avoid higher interest payments, a CreditSights report said on Tuesday.’
‘We find it hard to believe that borrowers who have too much income and/or too high credit scores to qualify for the modification will not find some way to convince their mortgage servicers that they do in fact qualify,” he wrote. ‘The incentive to lie, or even to damage one’s own credit score, is too high,’ he added.’
‘ Holders of RMBS are hurt because they will not receive additional cash flows from the higher interest rates, as was originally expected, Stracke said. This may ultimately lead to RMBS securities being downgraded and pushed closer to default, Stracke said.’
‘The combination of option adjustable rate mortgages and traditional Alt-A adjustable rate mortgage resets will be just as bad, if not worse, in terms of the absolute par loan dollar amount as the subprime reset problem, although it is not set to peak until 2010-2011,’ Stracke said.’
‘Assuming the housing market has not shaken off the current slump by 2010, the wave of resets could create yet another wave of foreclosures among a class of homeowners that is going to remember the forbearance offered to subprime borrowers all too vividly,’ he added.’
‘Fifty percent of mortgage loans since 2002 have been made available via lending from the securitization markets, Stracke said.’
‘The potential contagion into the broader RMBS market could jeopardize the extension of credit through the securitization market, further undermining the benefits generated from the modification plan.’
Sorry. I also am very skeptical of the idea of trashing your FICO to maintain the same rate when, by definition, other options are available.
Anybody devious enough to think of trashing their credit score will not waste it on keeping paying $8000 a year interest on a $100,000 loan on a house worth $90,000.
You don’t care about your credit - let ‘em foreclose. You can rent better for less.
‘Fifty percent of mortgage loans since 2002 have been made available via lending from the securitization markets, Stracke said.’
Let’s see… we’re down ~25% in volume from the peak. WaMu is predicting another 40% drop…
Right on schedule.
Got popcorn?
Neil
“Another Seattle-area loan consultant said she joined WaMu in March, seeking job security, but was laid off on Monday. ‘I think it’s heartless,’ she said by phone while packing her belongings. ‘I guess this industry doesn’t have any security.’”
Payback is a bitch ain’t it? Welcome to the real world of working and laying off while others get rich off our backs…taste that medicine…tastes like a$$ doesn’t it.
Looking at the quotes Ben posted, it appears that the trout-whacks are coming fast and furious. Trout size is increasing as well.
In related news, park rangers at Joshua Tree National Park in the Mojave Desert are reported to be tracking a band of thieves who have been stealing the park’s iconic namesake trees. Fortunately, the Joshua Tree is able reproduce vegetatively, sprouting from roots or branches. This allows for a much quicker recovery after damaging floods, fires, or untoward financial events, which may kill the main tree.
May have to retire the trout in favor of the Taser
My favorite is actually the American Beauty Model 3198 - 550 watt heavy duty soldering iron. Scroll to the bottom of this page for specifications:
http://www.americanbeautytools.com/products.php?cat=heavyirons
The high-heat handle accessory is a recommended option when operating at high temperatures.
the only evidence left by the perps was what appeared to be…popcorn
hahaha
Oh my. Only 25 bps on the discount rate. Maybe I’ll need to stay awake after all
and the dow fell off a cliff
yeeeehaw!!!!!!!!!!!!!!
I think most were looking for min. 50 bips on the DC, I even heard 75
market will not like this
methinks BB got tired of being bullied by the market. .25 was still too generous.
Retest of 1400 in order. Some fool was calling for dow 15k regardless of the fed.
GeronimOOOOOooooo…..
“and the dow fell off a cliff”
Ingrates! Dow would have fallen if they hadn’t cut, but at least it wouldn’t have deflated the dollar even more.
The cut was enough to do a “reversal of the carry trade”
Short stocks in the US, convert the proceeds to (pick your currency - I picked Reals), buy foreign Gov Bonds.
Sharpe Ratio 1.25
Did I see that the decision was NOT unanimous? That could cause a market stir if the traders and interest-rate wishers think that there might even be Fed scrooges who voted to keep the rate unchanged. or were the dissenters wanting a half point? Might have to wait for the minutes to be released.
One dissenter wanted .50 cut
Oops, never mind, then. Thanks for that clarification.
“….Readings on core inflation have improved modestly this year, but elevated energy and commodity prices, among other factors, may put upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.”
and
“Recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic growth and inflation. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth….”
“Voting against was Eric S. Rosengren, who preferred to lower the target for the federal funds rate by 50 basis points at this meeting.”
Stagflation
spot on…its gonna be an 84 recession…. didnt we boycot just before, in 80…..nows its all coming back.
More waterfall pics………..
http://quotes.ino.com/chart/?s=FOREX_USDJPY&v=s&w=1&t=l&a=0
I hear that giant flushing sound.
Bahrain to ditch dollar peg:
Bahrain will move towards tracking the dinar against a currency basket rather the US dollar, without changing the exchange rate, Al-Wasat newspaper quoted the finance minister as telling the advisory Shura Council.
http://tinyurl.com/2dd7xa
Uh oh. Another one gone. But then, eventually those countries have to consider their own self-interest, and while a peg to the dollar was fine as long as the dollar was fairly stable, you can hardly blame anyone for decoupling now.
Market not liking that .25 drop!
No 50 cut probably means hot inflation numbers are on the way. Market won’t like that either.
cant be true, with GDP near 5%, inflation hasnt been lower in a half century, I guess you missed the memo.
just profit taking if you ask me.
I don’t think so, blew through the 50 day ma and pushing the 200 day.
To quote Megatron (seems appropriate somehow) in the last battle against Optimus Prime: “Fall! FALL!!!”
I want to see the Dow’s back broken and it head into a death spiral ASAP. Maybe that’ll wake up the sheeple and get the crooks at the top racing for the exits as the whole thing burns down around them. Damn crooks have ruined the whole thing - the sooner they lose the ability to hypnotize the sheeple with the magical Dow Daily Numbers (sounds like a lottery!), the better. Then, maybe some tough questions will be asked.
yup.. half of it is smart(er) people anticipating what people had anticipated..
200 points down in minutes after the cut is announced.
Nice!
Way to go, douchebags!
200 points down in minutes after the cut is announced.
That is the price paid for speculation! More to come!!
Market should have gon back to 5.25% so we could see where the stock market really sits.
What’s weird is that gold, silver and oil are also down.
Bernanke already said *not* to expect another cut because inflation was looking scary. Then he went ahead and cut anyway. You’d think that would be one hell of a sign that inflation was about to get nasty…. go figure.
or deflation
“‘We had no clue this was coming,’ said one Seattle-area loan consultant who has worked at WaMu for five years.
They are obviously not reading the right blogs.
Seems like almost everyone here at Ben’s blog had at least a couple of clues that this stuff might, just might, just maybe might be coming.
Was too busy listening to Lawrence Yun and Dennis Neal at CNBC.
“But many analysts still believe the Fed will be able to respond forcefully enough with rate cuts that it will keep the current expansion alive. These analysts believe that the economy will start to rebound to faster growth by the middle of next year, when they expect that lower mortgage rates will have spurred a rebound in home sales.”
Lower mortgage rates…and who will qualify for them?
Deadbeats. Who else?
not those that have to come up with a 5% down payment.
(let’s see 5% and then average is 4 or 5 and then)
my quick calcs say in california you’ll have to put down at least $20,000-25,000 to buy a home. that should work.
You mean “buying” for 40 years should require you to come up with more $ than renting for 1 year? what a concept.
“Lou Barnes, owner of Boulder West Financial Services in Boulder, said the move makes mortgages tougher to get in areas that need them most, making a more severe downturn likely. ‘In every credit panic, the government must maintain a good supply of new credit,’ Barnes said”
An over abundant supply of new credit got us in this mess to start with, now this genius wants to fight too much credit with more credit. Great plan! Like making more crack available to a crack addict so he can get over his addiction…he might get a heart attack and die.
Trying to reflate the housing bubble won’t work now regardless. With falling prices, few fools are going to leverage to the hilt to buy that McMansion.
Anyone with a significant gold position considering lightening up on it?
No.
If gold drops to $700/oz in some broader market liquidation, I will load up on it. Right now, I’m holding pat and continuing to acquire a ounce or two at a time (dollar cost averaging).
No but I would buy a big dip.
I’m looking for a sell-off over rest of year now that Fed move has disappointed the market, as I was expecting. Will wait ’til political pressure on Fed builds a little more, once more weakness in economy is more apparent. Would be surprised if we didn’t go back through that $780ish low of a couple weeks ago.
With interest rates falling? You must be kidding. It gets cheaper for me to hold it as rates fall.
no
I say this bust is right on time. I’m beginning to think that the experts and leadership in our country or whatever you call them really were clueless as to what’s going on. I’m sure that some of the people in DC and in Wall Street were trying to game the system like they did in the dotcon crash, but I have a hard time believing that the ‘experts’ in this country are actually experts on anything, except maybe hot air. Anyone with a brain can figure out that the housing markets will take a big dive. All the PhDs and MDs and MAs in the world won’t counter the reality that a $230K house is unaffordable to a workforce that has a per capita income of maybe $30K. I call BS on a lot of Americans making $60K per year. Maybe in some big city, but the big cities are all obscenely overpriced too. Who cares if some hedge fund falls apart. That’s what you all want, right? It’s all fraud and gambling. I can’t take seriously an economy that is composed of weather derivatives (no joke) and sports bets. As for the jobs being created in America, most of it is in fluff industries that don’t bring in much revenue anyways.
Got Lube?
I call BS on a lot of Americans making $60K per year.
It all depends on your education level and your drive to succeed as to the income you will earn. Without an education or starting up your own business, you probally would not have earnings in the 60K or above level.
Accordiing to the US census bureau
the median household income for 2006 (most recent figures) was
$48,201
http://tinyurl.com/2wb7h8
However approximately half of all workers make less than $20K per year. The census bureau uses the Median household income, there are also charts showing percentage of men making less than 20K/yr and women making less than 20K/yr. So much for a booming economy.
RE: All the PhDs and MDs and MAs in the world won’t counter the reality that a $230K house is unaffordable to a workforce that has a per capita income of maybe $30K.
These type of overeducated, ivory tower types used to put on the occasional Appraisal Institute/Society of Real Estate Appraisers continuing education seminars.
They’d get up and proceed to ramble about procedural, technical and ethical facets of the appraisal process which had absolutely no connection to what was being practiced out on the street.
You’d listen to their BS for about 20 minutes and think to yourself-why fookin’ planet are these twits from.
And when you start throwin’ them questions-they’d do the quizzical academic frown and proffer some sort of condescending drival that like maybe you had a severe perception problem.
Their crediblity and practical insight about what was going on in the biz was virtually zero.
“RE: All the PhDs and MDs and MAs in the world won’t counter the reality that a $230K house is unaffordable to a workforce that has a per capita income of maybe $30K.”
Glad to see I am not the only ideologue who thinks this way…
60k a year for a household doesn’t seem too high. I know you said per capita, but aren’t most houses bought with 2 incomes? You have to look at local incomes and home prices. Where I live the average household income is around 40-45k. My part of town is one of the nicer areas and you can get a house starting at around 200k.
It’s probably one of the few exception. Big employers have been moving in for a few years now. The income differences between medium sized cities and big cities on the coasts aren’t that different, but the home prices are way different. I job where I live may pay 5 or 10% less, but home prices are 1/3 to 1/2 the price of CA. Appreciation never went double digit. Were are seeing some reduced signs, but houses don’t sit for more than 2 or 3 months by my observation. It’s easier for the seller to let go of 5% of the asking price when that is only 10k. Whereas in CA that would be 30k just for 5%.
Also, I wanted to add that this is Nashville. With 10% down and a 30yr fixed, payments would be roughly the same as rent. Is it possible that a few areas won’t have significant price declines? I don’t see why people wouldn’t buy in some areas if they would prefer to be a homeowner.
Comment by Tiger
2007-12-11 15:20:30
60k a year for a household doesn’t seem too high. I know you said per capita, but aren’t most houses bought with 2 incomes?
NO - the poster said $60,000 for a HOUSEHOLD - not per person.
Here are the stats:
Nashville Tenn - median HOUSEHOLD income is $41,194 in 2006. (2007 data isn’t in yet.)
- median household size is 2.23 people
US median HOUSEHOLD income = $48,200
median household size = 2.61 people
median per capita income per household member (working or not - remember kids?) = $26,036
36.75% of households had an income in excess of $60,000.
If the range of incomes is divided into fifths, the middle fifth where 40% have more and 40% have less would range from households with a total income of about $35,100 to $55,700.
That means an income of $60,000 is above the middle group.
So for over 63% of the households in the US, $60,000 is HIGH.
Only 24% if all households have a total income over $80,000.
Only 15.73% of all households have an income over $100,000.
Some guy whose house burned in the CA fires last month was whining in the NYT about ‘Gee, we aren’t rich. Why do people think we are rich? My wife and I only make $140,000 a year beween us.” Yeah - right and that puts them in the top 7.8% of all households in the US.
140K is not that much when POS ranch style homes are going for between $700K and 1 Million.
I understand that 60k is above the median. I conistently hear that prices are out of line with rent almost everywhere. Why buy when you can rent a place for half the cost? That makes sense. But that’s not the case where I live.
I can rent out my house for the same amount that it would cost in house payments with a 10% down and 30 yr fixed including taxes and insurance. If people are affording to rent a house for $1400 a month, why wouldn’t they be able to afford the same amount in payments? Am I in denial? Do house payments need to be significantly lower than what the same place would rent for?
Home renters in my area from my observations are people who just moved to the area and want to get to know the area before buying or their house burned down and they are rebuilding or a couple with a baby who are finishing school. There doesn’t seem to be many people renting houses because it’s way too expense to buy, like you would have in CA.
“I’m beginning to think that the experts and leadership in our country or whatever you call them really were clueless as to what’s going on.”
In fairness to these experts, it is far easier to notice a major problem than to fix it.
Now I really am not sure PB is GS. That sounds like something I would say.
I’m becoming of the opinion that the Fed has no desire to avoid a recession with their cuts. It was Greenspans opinion that recessions should be avoided at all costs. To meet the demands of paying interest on the national debt and to pay Social Security, we needed flat out economic growth.
The result of Greenspan was an economy based on debt, stacked on top of debt, topped off with a huge chunk of debt, followed by another pile of debt….
We buy stuff from overseas, they loan us the money back, we buy more stuff, they loan us the money back, repeat until the pile of debt is over $12 trillion. The very few people that control the giant mountain of debt get unimaginably rich while the vast majority of Americans see prices rise much faster than their income…but don’t worry, we have debt that will let you continue consuming despite your income not keeping up with inflation!
I think the Fed wants to disassemble the giant stacks of debt rather than inflate it away. Much of it will simply evaporate. $10 trillion in mortgage debt??? ooops. Foreclsoures. Now it is only $6 trillion in mortgage debt.
The lower rates, I think, are not to save the banks, most of whom with large mortgage debt exposure are doomed.
The more I see what the Fed is doing, the more I’m convinced it is about keeping enough money in the pipeline for manufacturing businesses to keep going. Devalue the dollar, boost exports and cut off imports, get American back to work making stuff, and disassemble the stacks of debt.
True, slow and steady. The Street was expecting the fed to create another asset bubble (stocks) to offset housing.
so you are certain that the pathway to prosperity is through the de-valuation of our currency?
hmm…i’m not so sure that will work.
“…The more I see what the Fed is doing, the more I’m convinced it is about keeping enough money in the pipeline for manufacturing businesses to keep going…..”
The Federal Reserve is in a “save any business that we can mode”. The problem that you and many others miss is the enormous debt is not just consumers, it is American business. It is fine and well for a business to be in debt (leveraged) when the business is producing earnings of 15%/yr. In the next year, leverage works the other way. As growth slows (halts?), earnings will not be sufficient to cover the debt. In the current leveraged business, a 1% drop in GDP is a 50% drop in earnings.
(Should read ‘a drop in GDP to 1% growth’)
Exactly - the whole thing is one HUGE web of lies and debt. I fully expect to see rising defaults in everything debt-based in the near future. We already have scares on credit cards, rising losses in car loans - even something about student loans within the past few weeks.
This is what happens when an eCONomy is based upon basically pulling money or “value” or whatever out of thin air, using it to bid up the prices of everything until it is all grossly overpriced, and then trashing all the jobs and substituting debt for income so nobody can actually buy anything. Eventually, people run out of the ability to take on more debt or service the debt they have, and the whole thing comes crashing down. Naturally, plenty of money will be made on the way up AND down with lots of fees for the Wall Street swine! Oh, and this doesn’t even factor in leverage, the corruption factor of “Enron accounting” and so on…
RE: Devalue the dollar, boost exports and cut off imports, get American back to work making stuff, and disassemble the stacks of debt.
Only way out…but you really think you’re gonna get the “I’ll only work in a place with air conditioning” GEN XYZ crowd to acutally make somethings, like a pair of shoes or a slab of steel?
Too many vocational skills have been lost in the past 2 decades.
Plus why work, if you can knock up your GF and live off her welfare benefits? Deal a few pounds of weed/coke on the side for gaz, cigs, booze, and life is goooooodddddd.
our parents raised us poorly and spoiled us with technology. we are products of the environment.
Will GEN XYZ actually make something? Yes. I have seen it. They do quite good work.
The attitude is different though. They saw their elders get ripped off by the company (layoff with no warning, eliminating retirement plans) so they learned to grab what they can now. If employers don’t like that attitude, they need to rebuild that old trust by (gasp) proving they are trustworthy. That should take 20-30 years.
yea you’re right they have seen it their whole lives. I saw good company = good retirment for the first half of mine. Now i’m just digusted.
Well said, LIL!
People don’t mind making sacrifices for their employers if they feel the employers are on their side.
We’ve created a situation where employers and employees are adversaries, with each only looking out for their own interests.
Want good employees? Be a good employer. Used to be common sense.
Even good employers can turn bad very quickly these days. All it takes is a quarterly loss, which is immediately followed by offshoring plans and/or similar strategies to cut costs, such as slashing benefits. The problem is that the “cost reduction” is seen through an amoral lens. But when workers see this and stop spending their evenings and weekends at work, it’s perceived as a moral or character failing (disloyalty). Give me a break.
“The more I see what the Fed is doing, the more I’m convinced it is about keeping enough money in the pipeline for manufacturing businesses to keep going. Devalue the dollar, boost exports and cut off imports, get American back to work making stuff, and disassemble the stacks of debt.”
I hope you are correct, and I seriously hope they avoid the worst scenarios people are currently worrying about behind the facade of news stories discussing endless boom times.
>>”“But prospects linger that the companies will have to raise more capital if market conditions worsen, he said.” [Speaking of Freddie and Fannie]
Two ways to raise capital: 1) Take out a loan. 2) Sell stock.
Which one of these would even be successful?
>>‘In every credit panic, the government must maintain a good supply of new credit,’ Barnes said. ‘The authorities have failed since the crunch onset in August.’”
Lou, you are correct. It is a fundamental law of nature that the role of the government, as outlined in the Constitution, is to maintain a good supply of new credit.
Can anyone explain to me exactly what the purpose of our government is?
Let’s see…
1. Protecting us from attackers?
Nope. 9/11 proved how completely incompetent they are at defense. In fact, they really shouldn’t call it the defense industry. I don’t see a lot of emphasis on defense. Offense yes. Defense - no.
2. Help us out during emergencies?
Nope. Katrina proved how completely incompetent they are.
3. Make sure people have good health care?
Nope. That would be SOCIALISM.
4. Protect our borders from illegals?
Nope. Big business needs them too much.
5. Spend our money wisely for the good of the people?
Now that’s funny!
Okay, I got it…
6. Bail out real estate speculators and start illegal and immoral wars
Now THAT they excel at.
“what the purpose of our government is”
1. Establish justice
2. Insure domestic tranquility
3. Provide for the common defence
4. Promote the general Welfare
5. Secure the Blessings of Liberty to ourselves and our Posterity
During the cold war, Ike said:
Beware the military-industrial complex.
Now, during this “war on terror/drugs/X”, creamofthecrap says:
Beware the military/industrial/prison/real-estate/banking/health-insurance complex.
We are *so* ruined.
Dropping home values are the least of our problems. It’s just the tip of the iceberg, a symptom of a system that is completely unsupported by fundamentals.