Buyers Have A Clear Edge Over Sellers
Some housing bubble news from Wall Street and Washington. Associated Press, “Sales of existing homes fell in December, closing out a horrible year for housing in which sales of single-family homes plunged by the largest amount in 25 years. The median home price dropped for the entire year, the first time that has occurred in four decades. For the year, sales of single-family homes were down by 13 percent, the biggest drop since a 17.7 percent plunge in 1982.”
“Lawrence Yun, the Realtors’ chief economist, said it was likely that the country has not experienced a decline in housing prices for an entire year since the Great Depression of the 1930s.”
“The national median existing-home price for all housing types was $208,400 in December, down 6.0 percent from a year earlier when the median was $221,600.”
“Total housing inventory fell 7.4 percent at the end of December to 3.91 million existing homes available for sale, which represents a 9.6-month supply at the current sales pace, down from a 10.1-month supply in November.”
“‘The fall in inventory in December is encouraging, but inventories remain elevated and buyers have a clear edge over sellers in many markets,’ Yun said.”
“Regionally, existing-home sales in the South are 20.9 percent below December 2006. The median price in the South was $173,400, down 4.1 percent from a year ago. Existing-home sales in the Midwest are 20.5 percent below a year ago. The median price in the Midwest was $159,800, which is 3.9 percent lower than December 2006.”
“In the West, existing-home sales are 24.8 percent below December 2006. The median price in the West was $309,800, down 11.1 percent from a year ago. Existing-home sales in the Northeast are 22.4 percent below a year ago. The median price in the Northeast was $258,600, down 8.9 percent from in December 2006.’
From Bloomberg. “Lennar Corp., the biggest U.S. homebuilder, reported the largest quarterly loss in its history as the deteriorating housing market led to a $1.86 billion writedown for land and falling property values. Revenue fell 49 percent to $2.18 billion, Miami- based Lennar said.”
“CEO Stuart Miller said market conditions are unlikely to improve this year and ‘might continue to decline in the near term.’”
“New orders for the period ended Nov. 30 fell 50 percent to 4,761 and the cancellation rate was 33 percent, unchanged from a year earlier, Lennar said. Orders fell the most in Arizona, Texas and Colorado, plunging 57 percent. In Florida, Maryland, New Jersey and Virginia they dropped 55 percent and in California and Nevada they declined 40 percent.”
“‘It was a tough, tough quarter by any stretch,’ said Eric Landry, an analyst at Morningstar. ‘2007 losses have just about wiped out everything from 2005 and 2006.’”
“The average sales price of homes delivered decreased to $291,000 in the fourth quarter from $302,000 a year earlier, primarily due to big incentives. Incentives were valued at $58,800 per home delivered in the fourth quarter of 2007, compared with $47,300 in the same period last year.”
“The company cut its work force by 35 percent in 2007 and in November, Standard & Poor’s cut Lennar’s credit ratings to junk status.”
From Reuters. “Ryland Group Inc, the No. 8 U.S. home builder, reported a quarterly loss on Wednesday compared with a year-earlier profit, partly because of large write-offs for land and inventory values, and an income tax charge.”
“Ryland’s quarterly results include charges for write-offs for inventory and property values of $242.7 million. New orders during the quarter fell 7.1 percent to 1,596, and the average value fell 14.4 percent, reflecting the generous incentives builders are offering to buyers.”
“New orders dropped 7.1% while closings slid 30%. Like others in the industry, Ryland has tried cutting prices - up to 25% during one November weekend - to move inventory. Many of its homes are in southern California, Arizona and Nevada, where real-estate prices have tumbled.”
The Atlanta Journal Constitution. “Officials for Atlanta-based Beazer Homes acknowledged Wednesday the many challenges facing the troubled homebuilder and the uncertainty of the slumping economy. Closings were down by 24 percent and new home orders dropped by 29 percent, the company said in a Securities and Exchange Commission filing.”
“Beazer also reported improved, thought still serious, cancellation figures. The cancellation rate on sale contracts was 46 percent in the fourth quarter, down from 68 percent in the previous quarter.”
“Neither the SEC filing nor the presentation included quarterly earnings. The company is currently recalculating its earnings for much of the past decade after revelations that certain aspects of its operation had been inaccurately recorded.”
“Chief Financial Officer Allan P. Merrill cautioned the investors not to expect sales or housing starts to show significant recovery anytime soon. ‘Our expectation is that this year is going to be very tough,’ Merrill said.”
“In addition to the staff reductions, which have cut the company’s workforce in half, Merrill said, Beazer has also reduced its land holdings, pared down the range of options it offers buyers in everything from floor plans to plumbing fixtures and even reduced prices on its homes in some locations as much as 30 percent to stimulate cash flow, according to Merrill.”
“‘We are aggressively defensive. That’s our posture,’ Merrill said.”
From BBC News. “French bank Societe Generale announced fresh losses of 2.05bn euros related to the sub-prime mortgage crisis in the US.”
“Sovereign Bancorp Inc. on Wednesday reported a 12-fold widening in its losses in the fourth quarter, as it recorded a massive write-down because customers defaulted on loans and the value of its investment in a New York thrift fell.”
“Results were hurt by a $1.58 billion write-down of goodwill — what a company is worth beyond its assets. About half the write-down came from a decline in business at Independence Community Bancorp in Brooklyn, which Sovereign purchased over some shareholder objections in June 2006. The goodwill write-down was higher than what Sovereign disclosed last week.”
“Sovereign also booked $180 million in pretax, noncash charges related to the decline in value of its Fannie Mae and Freddie Mac preferred shares. Another $27 million in charges came from loan defaults by two unspecified mortgage companies.”
“Sovereign increased its reserves for loan and lease losses — a buffer against bad debt — by $88 million to $738 million.”
“Bond insurer and reinsurer Assured Guaranty Ltd. said Thursday it will take a $302.9 million loss on the value of a derivatives portfolio and $18.1 million in losses tied to its home equity line of credit business during the fourth quarter.”
“Assured Guaranty had $7.01 billion in exposure to the U.S. subprime market at the end of December, representing about 27 percent of its total mortgage-backed securities exposure.”
“The U.S. Federal Reserve and other central banks are partly to blame for the financial-market slump that’s now threatening to derail the global economy, said investors and former policy makers at the World Economic Forum.”
“‘It’s hard to give central banks a very high grade over the last couple of years on recognition of bubbles and actions taken to address them in the policy or regulatory spheres,’ said former U.S. Treasury Secretary Lawrence Summers in a panel in Davos, Switzerland.”
“Fed Chairman Ben S. Bernanke is facing the same objections leveled at his predecessor, Alan Greenspan, who was slammed for not doing enough to prevent the Internet stock boom and then cutting rates too low to limit the fallout.”
“In 2003, the Fed reduced its benchmark to a 45-year low of 1 percent, leading to a house-price boom that turned to bust in 2006. That prompted a collapse in the market for mortgages to risky borrowers. It’s now derailing financial markets because so many banks bought derivatives linked to those mortgages.”
“‘Central banks lost control of the situation when they allowed financial institutions to develop new financial instruments which they themselves didn’t understand,’ said Soros.”
“Some Davos attendees came to the Fed’s defense. ‘We could pierce bubbles but we’d pierce a lot of non- bubbles and take a lot out of gross domestic product,’ said John Snow, also a former Treasury Secretary. ‘We need to reform regulation.’”
“The ECB nevertheless argues that it may be possible for central banks to ‘lean against the wind’ by raising rates in the early stage of a bubble to head off future gains.”
“The worsening real-estate recession is at the core of the economic slowdown and will probably prompt the Federal Reserve to lower interest rates next week and in future meetings, economists said.”
“‘We are not at the bottom in the housing market,’ said Nigel Gault, director of U.S. research at Global Insight Inc. ‘The Fed is trying to battle against the fundamentals which say housing is not going to recover until we have a substantial decline in prices.’”
The New York Times. “One day after the Fed slashed its benchmark interest rate to head off a possible recession, a small minority of economists warned on Wednesday that the central bank was in danger of invoking the same remedies that it did after the bubble in dot-com stocks burst seven years ago.”
“Critics say the Fed’s attempted rescue looks uncomfortably similar to the aggressive rate reductions that aggravated the speculative bubble in housing.”
“‘We’ve literally forgotten that this is the very policy environment that led to the housing and mortgage problems in the first place,’ said Michael T. Darda, an economist at an investment firm. ‘We’re not going to see another housing bubble, but we could see more inflation.’”
“But other central banks are not following the Fed’s lead. Jean-Claude Trichet, president of the European Central Bank, strongly hinted on Wednesday that European policy makers would keep their benchmark rate unchanged.’
“‘Particularly in demanding times of significant market correction and turbulences, it is the responsibility of the central bank to solidly anchor inflation expectations to avoid additional volatility,’ Mr. Trichet told the European Parliament. The Bank of England is not expected to reduce rates quickly either.”
The LA Times. “In the 1990s, when Latin America and Asia were rocked by financial crises similar to the one now dogging the United States, Washington officials were quick with stern advice: Don’t bail out distressed banks. Don’t intervene when stock market and real estate bubbles pop. Let your overblown economies shrink to their natural levels.”
“‘It was all, ‘You’ve got to be tough and take your castor oil,’ said Joseph E. Stiglitz, the Nobel Prize-winning economist and former vice president of the World Bank.”
“To date, U.S. officials haven’t followed any of the advice they so readily dispensed to others. They have tried to aid troubled banks. They have slashed interest rates to help the struggling housing and stock markets. They have made it clear that they will go to extreme lengths to keep the American economy out of recession.”
“But if the current prescription fails to provide long-term relief, what comes next? The answer, many economists say, could be that old castor oil.”
“‘People are going to have to buckle up their seat belts and expect some dicey economic times for much of the year,’ said William Grenier, chief investment officer at UMBS Management, a $12-billion asset management firm. ‘We’re going to have to let the excesses wash out of the system.’”
“When Latin American and Asian countries found their finances in an analogous mess in the 1990s, Stiglitz said, ‘we told them, ‘You have to face the pain…You can’t bail out people.’”
“Most of those governments eventually let the turmoil take its course. The countries recovered, but not before going through the economic wringer — for periods that in some cases lasted years.”
“America’s big bankers were supposed to be ’so good at financial risk management, they could regulate themselves,’ economist Stiglitz said. ‘It turns out these guys did very bad risk analysis and have created a mess.”
From CNN Money. “Without any intervention, an estimated 3.5 million homeowners could default on their mortgages in the next 2 1/2 years, says Mark Zandi, chief economist at Moody’s Economy.com.”
“Luis and Kelly Madera have done everything they can to save their house. They refinanced most of the $550,000 they owed on a risky, adjustable-rate home loan to a conservative 30-year fixed-rate mortgage. They emptied their savings accounts and pulled thousands out of their 401(k)s.”
“But the couple, who have a 15-month-old daughter, may still lose their three-bedroom Northvale, N.J. home to foreclosure. With gross monthly pay of about $10,000 ($6,000 after taxes)…they can no longer keep up with the $4,100 house payments.”
“And Kelly now wonders why she and Luis were able to get a mortgage they couldn’t afford in the first place. ‘I expected that if we were approved for a loan, we would be able to pay it,’ she says.”
‘The U.S. Federal Reserve and other central banks are partly to blame for the financial-market slump that’s now threatening to derail the global economy, said investors and former policy makers at the World Economic Forum. ‘It’s hard to give central banks a very high grade over the last couple of years on recognition of bubbles and actions taken to address them in the policy or regulatory spheres,’ said former U.S. Treasury Secretary Lawrence Summers in a panel in Davos, Switzerland.’
Finally, a retort to Greenspans lame excuse that there were bubbles elsewhere in the world, so it couldn’t have been his fault. It was all the CBs, as I’ve posted before.
BTW, both LEN and RYL still have gross profit margins in the mid to low teen %s. This means they would have decent profits if they just hadn’t overpaid for land and overbuilt.
It also means they still have plenty of room to undercut resales. Also, one analyst pointed out the other day, that as they write down the value of lots, they can then build on it later and show profits, pay debt and thus boost their stock. IMO, that’s exactly what they will do, continue to write down, continue to build until it is no longer profitable.
Hey congress, that means the longer house prices stay up, the worse the bust will be!
Finally, a retort to Greenspans lame excuse that there were bubbles elsewhere in the world, so it couldn’t have been his fault. It was all the CBs, as I’ve posted before
_____________________________________________
Agree!
We keep hearing the bubble burst because the Fed jacked up rates and they can save it by lowering rates - they cant have it both ways…
What kind of gross profit does a company like that need to make a net profit?
It depends on the company’s financial structure. You have to subtract SG&A (Sales, General and Administrative, eg marketing costs), interest payments on debt. Finally, there are taxes.
Good comment by Larry Summers, the only sensible president Harvard ever had. Too bad he was ousted by intransigent faculty.
Where is my gubernment check?Don’t they know we need more stuff from walmart?I am going to buy some toilet paper cause I ran out of dollar bills at my place.
I, too, want my gubbment cheque.
I’m gonna take my check and go to lap dance city…OH YEAH!!!!
Ripple for everyone!
Is Ripple still available? I ‘member the TV ad of the caboose wheeling down the tracks with a bunch of drunks singing “Are you rippling”.
If Ripple is not available in your area, try Mad Dog 20/20.
In a pinch, buy a couple of bottles of Nyquil.
Nyquil’s too expensive. Try vanilla extract.
He is a much better economist than he was a Harvard president! And the new president, Drew Faust, seems very sensible, at least, to me.
Hey congress, that means the longer house prices stay up, the worse the bust will be!
And Hey congress, it’s not the political heads that dictate home prices, it’s the consumer stupid! Listen to your customer or face the threat of being voted out of office.
Interest rates down, especially LBOR (220 bps in the last 30 days or so)
COnforming amount up to $700k
Reinflation here we come!
MSM - please report on the lack of controls in place to prevent this from happening again!
No one in the mainstream media is smart enough to report on something of that nature. They’re a bunch of unquestioning idiots.
The old media is indebted to the powers that be.
Be gone with them.
No doubt. For example, IndyMac just released the report of locks being at the highest level today since 2004. MSM goes nuts “Housing Recovering” and indyMacs stock going through the roof. What a bunch of football humping bafoons! First of all, locks do not mean a closed loan. I’d say 98% of these locks are pre-quals done over the phone with nothinbg being verified yet. No appraisal, no income documentation, no final lenders approval. I’m going to guess that way more than half of these locks fall through. But here’s the deal - people being able to refi at a lower rate does nothing to save housing. Almost none of these deals, if they go through, will be cash out refi’s. It does nothing for the economy. Also, people being able to stay in their houses does nothing to save housing. Foreclosures are only a part of the housing crash, not the main reason it’s happening.
Of course, MSM gets none of this.
“One day after the Fed slashed its benchmark interest rate to head off a possible recession, a small minority of economists warned on Wednesday that the central bank was in danger of invoking the same remedies that it did after the bubble in dot-com stocks burst seven years ago.”
“Critics say the Fed’s attempted rescue looks uncomfortably similar to the aggressive rate reductions that aggravated the speculative bubble in housing.”
“‘We’ve literally forgotten that this is the very policy environment that led to the housing and mortgage problems in the first place,’ said Michael T. Darda, an economist at an investment firm. ‘We’re not going to see another housing bubble, but we could see more inflation.’”
____________________________________________
Agree!
2 million people will still lose their homes this year, they will not be saved…However, we will simply create another round of speculative excess. Will we ever learn?
What is this “we” stuff?
The banks, lenders “saw the fools”, good advertising pulled more in, signed them up on toxie loans, made good fees, Christmas bonus,more fees,vacations for top exec, end of story. Doubt this will be taught or left in to read in “school book”. Debt slaves will once again do the same things over as history is soon forgoten. Sad.
If you live in the border of the USA you are “baked into the cake” so to speak, and yes you are a taxpayer, and yes you are left holding the bag….
“we will simply create another round of speculative excess”
Perhaps, but not in housing.
‘Reinflation here we come!’
If you’re talking about house prices, I’ll bet you every penny I have that you are wrong.
BTW, I read that GSE stuff was part of a reform bill. How long have they promised that. Anyway, put up!
Ben -
I have been with you for almost 3 years and agreed with what you have said, however, I see the same speculative excess happening again. see the NY Times article.
Worst case (bubble reinflates) - this blog continues forever.
I tend to agree with Ben…
If you didn’t buy a house in the last 6 years, you probably aren’t going to buy one anytime soon.
The “Crowd” is terrified of real estate, now.
http://www.amazon.com/Crowd-Gustave-Bon/dp/0486419568
It will mainly be refinancing going forward, IMO
Eh, if prices drop another ~15% here in San Diego, I might take the plunge. 30 year fixed with 20% down will be seriously approaching rent at that point…
Landlords aren’t going to be taking in those with busted credit and no do re mi, thus rents are going to drop along with the value of houses.
Patience…
‘”The “Crowd” is terrified of real estate, now.”
Apparently there are still a few hold-outs in “the crowd”:
http://blog.syracuse.com/news/2008/01/syracuse_real_estate_market_gr.html
“The National Association of Realtors today singled out Syracuse as an example of a healthy real estate market that is bucking the national trend of falling prices and slower sales……
“Here in Syracuse, we didn’t ride the wave of appreciation and multiple offers and frenetic bidding to the extent that many other areas of the country did during the big run-up from 2000 into 2005,” said broker Jeff Roney, of Keller Williams Syracuse. “Now a lot of those markets that were highly speculative are really significantly down, and we’re holding our own.” ‘
Hrrrmmmmph!
Crispy - It has long been the thesis on this blog that the late great bubble was caused by a confluence of events: (1) low interest rates and (2) complete abandonment of underwriting standards. We may get lower interest rates, but we won’t get a repeat of (2), so next low-interest-rate-induced bubble will occur in some other asset class.
It’s true. Even though none of my clients is in default, my own standards have probably toughened now that the decline is really upon us. Now I do only deals that look way too good to refuse. This does mean that the absolute number of borrowers on my books has declined (because there is a trickle of payoffs and releases), but so what. No Defaults is the main objective here.
The feds are going to step up and take over #2 for you. There are already proposals for the FHA to refi all the FB’s into loans at 1-2% and then sell MBS’s to Fannie and Freddie at 5-6% and you and I (the taxpayers) will eat the difference.
What a country!!
Even if conforming loan limits were to
increase and even if [mortgage] interest
rates were to further decrease, where
does J6P get the cash flow to service
the new [conforming] loan?
Unless J6P’s wages increase significantly, the
only possible outcome is lower prices.
The HBB should have a thread on the possibility of wages increasing for J6P. I see no possibility of this.
If you think about it a little, how many houses does the current conforming limit (417k) cover ??…Most of the housing accross the country is my guess…With that said, and the severe reductions in prices (see Stockton Ca.) a increase in the corforming limit will not help at all…It will help in higher priced locations (Silicon Valley, Chicago, NY) but not the others IMO…
17-20% of mortgages are jumbos - and 49% of the jumbos are in California. (OFHEO reports and data.)
Of course since ‘03, 50-66% of jumbo loans have been different versions of interest only………
The market is based upon psychology now…
I cut my teeth on the Silver Bubble of 1979-80, and yes houses are a different kettle of fish, but the human part never changes.
Here’s how it goes:
Heat of the bubble: Can’t get enough
Post-partum bubble: Couldn’t be less interested.
I agree alad. Carnage is everywhere. Housing has caught leprosy and no one will want to touch it.
Never underestimate stupidity.
Stupidity can’t get a loan, now.
No reinflation without HELOC. ATM is not there and CC’s are the next leg down. Government doesn’t see it, and banks need the respite to write off bad debt. May is going to be nasty.
I agree with Ben, people cant afford them now, how does re-inflating them help? We will see inflation in food and energy and stuff we have to buy, deflation everywhere else.
This will save a few FB’s and pull in some knofe catchers, but wages need to go up to save the deflating house prices and that ain’t gonna happen. Food, energy is going to go thru the roof. Thanks to helicopter Ben and the biggest piece of $hit in the world Bush. And I voted for that prick. The terrorist have officially won.
Gobernment will send them more rebate checks to stimulate the housing market.
Explain=$720,000 house at 0% interest 360 months is still $2000 a month, plus at least $10 maybe 15,000 a year in taxes, plus you do have to insure and heat the place….so we are back up to $3500-4000 mo..at ZERO interest rates.
Bingo, bingo, bingo! Fixed mortgages below 5% mean nothing now.
Ben,
http://biz.yahoo.com/ap/080124/economy_stimulus.html
near the bottom, the conforming limit raised over $700k in high cost areas.
F&&&ing bastards!
WTF!?!?!?
You guys and your conforming loan limits. BFD! So they get a 5.5% rate instead of 6.5% rate. THEY STILL HAVE TO QUALIFY! Puckerbutt lending guidelines still apply, and will be the rule going forward.
You sure? Without the need to package these toxic subprime loans into MBS and sell it into the market?
MBS and CDO’s may not be selling at all, but now many of these loans could be sold directly to the GSE’s.
If you make a few adjustments to who qualifies for a GSE buyout, at least some of the madness can continue.
Provided congress does as the market expects and bails out Fannie and Freddie.
This is the thing that really Pi$$es me off. I refused to get caught up in this stupid bubble. I could of overpaid by about 300% 2 years ago with a no money down loan on anything I wanted to buy. But I wouldn’t. I’m responsible and knew this was stupid.
Now , I found a deal on a real fixer upper. Bank REO. sell price 50k. Tax asessed @ 127k. Financed last year at 132k.
It would cost me about 20k materials and lots of my own labor to fix. But I could have a nice place cheap.
Now here’s the kicker. With not one bank payment late in ten years, FICO in the 700’s , good income verification,etc. The selling bank want’s 10k deposit to just make an offer, plus proof of funds. My bank tell’s me I need 20% down on sell price, doesn’t matter what it appraises for plus I’ll have to have the money to fix it . Guess banks don’t like to loan on fixers in a down market.
Point is , this is the only way I can find a house that’s remotely priced right as of yet, and I could come out exceptionaly well , considering what I’m paying in rent, i could cut my bills in half and be debt free in 3 years.
But with 20 years of constrution experience and plenty of free time and 50k of income without working , I still have to basically come up with 10k deposit , plus 3k closing costs, plus 20k in materials ,plus about 200 hours labor just to borrow 40K on a house that would be worth 150k plus when finished.
My landlord, bought 10 bare lots @ 300% markup from previous year sales, and 11 houses on spec 2 1/2 years ago for 2.3 million with a 40k a year job and no money down. Go figure?
It sucks when You can get the credit, houses are outragous. When they are cheap, You can’t borrow money.
This is why prices will continue to fall.
If you’re talking about house prices, I’ll bet you every penny I have that you are wrong.
————————-
If we can define it by increased volume and prices over time & determine which areas, I’ll take the other side of that bet (but limit it to something less than every penny you have).
I kind of tired of the crap being pulled on Wall Street and by our own government. Oh goodie! we all get a $1,200 ‘bonus’ from Uncle Sam. On the other hand, states like California are in a serious financial crisis. The budget for schools was severely slashed. The public schools were ailing before the housing mess, and now they’re reeling. I have no children, but most who do around here have to put their kids in lotteries JUST TO GET IN. Totally ridiculous. Yet because a Sh*tload of people bought homes they had no business buying, the US government is giving away trinkety handouts of money that we desperately need just to keep the lights on at local schools?? WTF?
The thing that bothers me the most is that the story is NEVER ever presented on the other side of the coin. SO what if home prices go down? What does that mean to the MILLIONS of us in California alone who were priced out? Why is that so bad? Why is it bad when homeowners have a hard time selling and we as buyers get better deals? None of the fixes proposed do anything to address that.
Instead the Fed is gonna keep right on inflating away the dollar, blow another bubble, and continue to process of crippling the US citizen to a point where we’re nothing more than mere warm bodies paying taxes. I’m sick of it.
Give em hell.I agree with you 100%.I cannot wait for the bush administration to leave town.
RE: I cannot wait for the bush administration to leave town.
And you think it’s gonna be any better for the next clown?
Exactly. No matter who gets in, “The [country] was being run by a bunch of four star clowns who were gonna end up giving the whole circus away.”
Yeah, it’s all Bush’s fault. Hillary or Obama will go in and clean up Washington, eliminate the housing bubble, put Wall St. in it’s place, and restore America’s proper standing in the world! Yay, capitalism.
Bush, el bozo presidente, has run the country into the ground, but Clinton really prepared the way for him. That 250K and 500k tax free housing gift, his outsourcing guru Alan Blinder and his “we don’t need no stinking manufacturing, we got a service economy” bullcrap, and his Nafta deal were major pieces of this disaster. I despise both Bushes and Clintons. A plague on both their houses.
…Spike - lest we forget, we can also thank old Bill for signing the repeal of Glass-Steagall. I know I know…numerous market fundamentalists here. I posit there have to be clear/enforceable/enforced rules to keep the gamers in check. Free market my @@$%.
“warm bodies paying taxes”
At last, my life has a purpose.
we are soylent taxpapers? or fiscal copper tops?
it’s so nice to be needed
“Oh goodie! we all get a $1,200 ‘bonus’ from Uncle Sam.”
Speak for yourself. I get nothing because of the limits and phase-outs.
One of the kids is over the limit too. So we don’t get our free Krugerrand on Uncle Sam.
Gotta think about how to get my AGI down so I can line up for the free goodies.
At least you can feel good knowing that you were forced to help others.
I’m with you. I won’t see a penny of it. Oh well, at least my conscience will be clear, I won’t be a part of this BS.
Yeah, we’re phased out too. Meanwhile, the rate cut means “safe” investments are earning nada while the dollar tanks and the coming tsunami means equities aren’t looking good either. Meanwhile, houses are still too expensive.
Think of it as a rebate on the payroll taxes. The “don’t pay tax” recipients ($3k-$8K) actually pay 9.5% payroll taxes (they get $300 rebate), while payroll taxes max out at $65,000. Rebate phases out at $87,000. Looks like some high income earners got free SS money.
Of course, I think this is super stupid. Won’t save any mortgages and it’s basically a payday loan (as someone here said yesterday).
I, once again get nothing but the right to pay more taxes. With the “targeted” for children last time, I got nothing then, either.
NO mortgage deduction, NO entitlements.
I’m thinking of dropping out and telling the whole system to K.M.A……….
BTW, I hate both the Clintons and Bush. They are all a bunch of appeasing socialist pigs. The purpose of government is to redistribute wealth and provide for various groups or classes who should recieve special entitlements……HUMMM??
Let’s see…..got rid of the Feudal system, no Lords and Ladies, No special titles, like “Your Lordship”. Guaranteed in the Constitution.
The new system:
I’m Black, I’m Puerto rican, I’m a woman, I’m a homosexual, I’m disabled, I’m foreign-born, I can’t speak English, I’m a “native american”, I’m………
Where’s my check????
They have to make their best effort to keep prices of RE from plummeting. If this happened, many banks would see HUGE problems in their assets and everything would come crumbling down financial-world-wise. The assets that these banks claim are *based on inflated values*. Those same assets were used as leverage on other financial instruments too complicated for ANY quant or ANYBODY to figure out what will happen if the artificial backing behind them poofDisappeared…
But, shouldn’t those magnificent gurus have seen that coming?
We sure did. Years ago.
The thing that bothers me the most is that the story is NEVER ever presented on the other side of the coin.
Completely agree. Completely frustrated by it.
“The public schools were ailing before the housing mess, and now they’re reeling.”
I don’t see what you’re talking about. My high school math dept. (14-15 teachers) get to split $98 dollars this year on supplies. We could buy one graphing calculator to share. Well, not a new one - maybe a TI-84. Luckily, they extended the educator tax deduction ($250). We are encouraged to continue spending OUR money to help educate everyone ELSE’S kids.
Public schools should be burned down, the administrators shipped to a more openly socialist country, and the ground where the schools used to stand salted.
I don’t see how forcing me to pay for a substandard education for other people’s children is any different from a socialist plan to bail out Moronic mortgage owners.
Those young folk you see no need to help educate will one day vote. That alone motivates me to work for better schools…….preferably more equal schools.
jetson_boy
Right on Right on!!
“And Kelly now wonders why she and Luis were able to get a mortgage they couldn’t afford in the first place. ‘I expected that if we were approved for a loan, we would be able to pay it,’ she says.”
This is the epitome of the “I’m not responsible” attitude in this country. Total lack of accountability.
I wanted to scream when I read this. If they’re applying for a loan, THEY should expect they should be able to pay it. Or don’t get it. Why is that so hard to understand??
Where’s that trout??
I can sympathize. I can’t believe the supermarket will sell me beer by the case, even though it’s never a good idea when I drink it all in the course of a single weekend. Why would they sell me so much if I couldn’t handle it. Completely unfair.
Although beers one through seven are pretty fun ….
Well, Kelly and Luis, the banks figured that the two of you sat down, went over your net income and came up with a workable budget - a budget that factored in all of the worst case scenarios and planned accordingly.
What a couple of idiots.
There have been times where paying the bills has been, shall we say, a bit of a challenge. But I’ve never been late on my mortgage.
Sure, I’ve had to cut back on frills and learn how to do things myself that I once hired people to do. But you know what? I’m still here, and am none the worse for wear.
Now, if I could just get that leaky shower faucet to fix itself…
Kelly, it is really simple math - $120,000 X 3 = $360,000 - not $550,000.
That’s pretty good math. But you missed the real math that made this decision (like all others promoted by NAR) to buy the MOST Expensive house they could get:
$550,000 x 30% “appreciation purchase year and 20% each year from here to eternity = $165,000 profit (gain) the first year, then (550,000 + 165,000) x 1.20 = 858,000 after just 2 years of “owning” a house.
I remember well here in Tampa Area prices in 2002..up 30%
2003….20%, 2004 …..20% 2005…5-10………2006…down 10%.
That was the plan. It didn’t work out.
Copy the same plan by MILLIONS OF BUYERS and you get the picture. The Realtor(tm) and the Lender lied to them.
They didn’t get a sack of free money.
“This is the epitome of the “I’m not responsible” attitude in this country. Total lack of accountability.”
Accountability for those who bought the lie but the seller of said lie is squeeking clean?
That’s some toxic logic there.
My, My, My, based on some earlier threads I thought only Californians were guilty of an “entitlement” attitude. Not so different elsewhere, eh?
Attributing accountability to the buyer does not necessarily absolve the seller.
Examine your own ‘toxic logic’.
If completely disregarding the seller (mortgage broker) isn’t excusing said mortgage broker then I’m a belly dancer.
Sexy. Can’t wait to hear the jingling at my table. Care for a $1200 tip? I’m sure my husband will fork it over?
Ex, just cause I didn’t include them doesn’t mean they’re necessarily excluded. The list is long, but it includes the buyers.
True, the buyers are certainly responsible for their own mistakes, but many of them were buying a house for the first time (this is where most of the demand came from during the boom).
All these fools knew was that their parents’ homes were bought for $26,000 in 1972 and are now “worth” $500,000. They were told by “the experts” that they would be priced out forever.
The mortgage lender told them they could easily afford it — if they couldn’t, the lender certainly wouldn’t want to loan them the money, right?
Many of these buyers don’t know what their net worth is or how much money that have in the bank (like…you know… if the receipt from the ATM says they have $1,000, it must be so!).
The lenders KNEW what they were doing, while the borrowers probably didn’t.
It’s my money in my pocket, I should know what the h*ell is there and how the concept of money works.
Then you know how fraud works too?
They were dealing with salesmen. Blaming a salesman for making a sale is like blaming a snake for biting you. What else do you expect?
I blame the borrowers. Primarily because I was in their shoes and somehow managed to actually, you know, think for myself.
No pity.
$1900 a month left after the mortgage and those nitwits can not pay the utilities, the insurance, taxes and buy food?
Ever hear of an older used car? Really recommend an older Escort with that 32/36 mpg and no one will steal it.
How about not going to Starbucks?
Really weird idea- try cooking meals at home and not eating out!
And lose the cable TV with the premium channels…..
Electric, VOIP phone, heat, water & sewer, trash and ISP (no cable TV) = $360-400
Food for 2 adults and 1 infant = $250-300 (give up the meat and cook)
Car insurance = $150
Gas = $250-300
That is $1150 max. So where does the other $800 go?
Could I make that income work to cover those payments? Oh yeah….
Up their nose?
Oh don’t do that …. I was sipping my coffee and you mad me inhale! LOL!!
mad=made (the hands are not co-operating today on the keyboard!)
I know we eat well (a lot of organic produce, etc.), but we easily spend $800-$1,000 per month to feed a family of five.
Don’t forget car repair, medical bills, toiletries, clothing, utilities, etc.
We easily spend $2,000 on living expenses in addition to rent.
$1900 a month left…Could I make that income work to cover those payments? Oh yeah….
No question about it…
I live in Orange County, Ca. (Irvine) and the
sense of entitlement around here is just over
the top.
O.C Households actually take home pretty
good incomes (per census data), but I am
quite certain that 9 out of 10 households are
living above their means.
Add to that mix an almost complete lack of
basic math and financial skills.
“Life is hard; it’s harder if you’re stupid.” - John Wayne
” “But the couple, who have a 15-month-old daughter, may still lose their three-bedroom Northvale, N.J. home to foreclosure .. . ”
so there is ANOTHER heart-tugging spin to make all the readers think ‘ oh gosh they have a small child, well golly they should just get a free pass on responsibility because, ya know, its all for the children, my god think of THE CHILDRENNN ” rallly cry.
the writer of the piece obviously spinning every angle to get sympathy for the parents. just as discussed on this blog.
ok, so I dont see where in the article having a 15 month old child greatly affected, if all, the financial apsects of this situation. it was just a cheap shot emotional comment included to garner sympathy.
some news writers are pretty good, the rest are lazy worthless tools sucking up to the advertisement-driven shill editor.
I agree. In my opinion there’s a sort of corrupt and outdated notion that if you have children, then hell or high water- you HAVE to buy a home and you HAVE to be the the BEST school district, drive the safest cars, etc etc , etc. Or in California and other ‘liberal’ states the thought is that lil’ Junior could never live anywhere else except the Bay Area because of all the diversity and other garbly-gook crap that reall has nothing to do with the child and everything to do with parents who ‘think’ that somehow their children will be superior to those who live in say- Atlanta or Albuquerque since their kids will be exposed to all those ‘worldly’ experiences while poor little George in Atlanta will be a sad case of ethnic ignorance.
Here’s the clinker: your kids will not know or care. Kids grow up everywhere. Whether they embrace ideas like diversity or worldliness is of their own accord and should be their decision,not the parents. I don’t have kids though, so what do I know?
I live in NYC and $1800 while a stretch is totally doable here.
Not with a sense of entitlement though.
San Diego. 5 month old baby. $1,400 to 1,500, on top of rent, just about covers it every month.
What’s ironic, is that it turned out to be a much better move for me to be renting when I had my daughter. Even though her mom and I are not together, we’re still quite friendly and the kicker is, that since I rent, I can move to any school district I please on a moment’s notice…..
Atlanta isn’t diverse?
Ann Scott,
You are trying to describe financial responsibility, but there’s a big problem with your solution.
This financial restraint needed to happen before they got into trouble. Now, everyone of those recommendations has a counter-party that will be seeing less income.
That spells a slowing economy. It’s already happening.
And as each “consumer” is forced to cut back their lifestyle, each counter-party gets a cut in pay and income, causing a generally spiraling down of the economy in general.
We are headed for a cliff! The government has a responsibility to keep the money system balanced. They failed. Credit creation looked like a magical “new economy”, but it was all just DEBT. Now the lenders are expecting to be repaid. The borrowers are welching on their bets. The lenders are going to have to cut back on their purchases of other stuff because their “cash flow” is stopped.
The spells Depression.
That’s why all the Panic from our “Leaders”, even though they are telling us the “Economy is strong, fundamentals are good, we believe in a strong dollar………blah, blah, blah.”
I don’t know where this will end, but My own company is down to about 25-30% of peak volumes. We are hanging on, but some people don’t have a paycheck anymore.
It’s bad when people quit buying………for everyone.
What’s up with L.Y.er?
“Lawrence Yun, the Realtors’ chief economist, said it was likely that the country has not experienced a decline in housing prices for an entire year since the Great Depression of the 1930s.”
Truth isn’t his forte, usually.
Well he had better read their own press release. Today the NAR is reporting the first ever annual YOY decline in prices on record. There goes their “RE only goes up” mantra.
I think he meant other than this year. The article on Yahoo said that records only existed back to 1968, so Yun was speculating that the trend (of no national declines in housing prices) was the first since the GD.
“That was the first annual price decline on records going back to 1968. Lawrence Yun, the Realtors’ chief economist, said it was likely that the country has not experienced a decline in housing prices for an entire year since the Great Depression of the 1930s.”
My 76-year old Mom told me a fun fact about my grandparents. It seems that the only time they ever bought a house and a new car was during the Depression. My WWI vet grandfather worked for the post office and prices actually dropped enough for them to be able to afford these items on a working man’s salary. I’m certainly not wishing for a Depression, but housing prices have to come down so the middle class can afford them.
My grandparents bought a ‘nearly new’ house in 1931. SOlid brick, Tudor revival, sun porches,……It was built by a bootlegger who got caught and the IRS sold it for taxes. It has the coolest secret cellar. To get into it, you have to know where the hidden button and latch are.
It is still in the family.
“‘We are aggressively defensive. That’s our posture,’ Merrill said.”
http://en.wikipedia.org/wiki/Scorched_earth
RE: “Luis and Kelly Madera have done everything they can to save their house. They refinanced most of the $550,000 they owed on a risky, adjustable-rate home loan to a conservative 30-year fixed-rate mortgage. They emptied their savings accounts and pulled thousands out of their 401(k)s.”
LMAO!
$120k in gross income and this couple is wiped out.
This country’s totally fooked.
May the American Dream of home ownerhip RIP
This couple is hardly that leveraged. $550,000 house / $120,000 yearly income is only 4.5x income. Imagine the suckers, and there are millions, that are in a 7x, 9x and so on. San Diego for a while was at 11x (median income to median price).
Median price / median income for a given area is a meaningless stat. Median price only includes homeowners, whereas median income includes both homeowners and non-homeowners. On average homeowners (using the term loosely of course) have higher income than non-homeowners, I would imagine.
I disagree. As long as the income distribution bell curve remains somewhat similar (i.e. no major change in taxation of a given segment along the years) the ratio is still very meaningful. You can use it to compare trends from year to year, just as well as you could with the median income corrected by removing the renters.
It’s fairly well accepted that the top 10% of population have gotten more in the last 10 years than the rest. Therefore even with the median unchanged the income of the home buying population could go up. I looked for some data to back this up, the only thing I could find was that the median household income in Santa Clara County was flat over the last few years, but the per capita (average) increased. This happens if the high end gets more while the middle does not.
Imagine that 5 people are in a room. Bill Gates walks in. The median income is unchanged. But the average is higher.
Regarding the 3x income. It seems to me that in California higher than 3x can be supported. If the median income in santa clara county is about 2x the US, but most goods (excepting housing) cost about 10% more, then there’s more money that one can spend on housing. 10x is unreasonable but 5x is not, and in fact historically it’s been over 3x.
Not to say that prices in Santa Clara County are not falling, or won’t fall more. But waiting for the median to get to 3x median income (around $270k) will be a long wait. That’s pre 1999 pricing. And there is more money floating around nowadays from cashed out stock options. Not everyone gets those but many people do.
Don’t forget that a portion of SFR are rented. That means the mortgage, taxes and insurance have to be 60-80% of what it will bring in rent.
Some areas do not have those large rabbit-hutch type of apartments.
This couple is hardly that leveraged.
Exactly. 4.5X HH incomes is actually on the LOW side for pre-bubble California. Somethign about this story doesn’t add up.
Those two still have $1900/month left over after paying for housing, which is enough for comfortable living, even with a kid. If they haven’t sold one of the two expensive cars they’re doubtless making payments on, they haven’t “done everything they can to save their house.” Same with the cell phone plans, the cable TV, the expensive daycare place, the vacations, the eating out, the toys. They’ve done everything they can, provided it doesn’t involve sacrifice in any way.
Assuming they both work, daycare, unfortunately, can easily run as much as $225 per week per child. That corresponds to $900 - $1125 per month right there. Unless infants and toddlers are expected to stay at home by themselves nowadays?
Guess they need to find an old-fashioned sitter and not a fancy daycare place. Maybe someone who babysits in their home for a lot less cost. (And they should have thought about THAT before they did what they did that ended up with a kid….)
My sister and BIL never made that kind of money and managed to pay for daycare and then after-school care.
Maybe one of them needs to do a career move and work from home OR he can work days and she can works eveings or nights (quite possible for an MRI technician.) There - daycare problem solved.
You are being to reasonable. When push comes to shove, with declining incomes, people will figure out a way. If not, I refer to the thinning out of the herd, or shrinking of the gene pool.
people will figure out a way.
I dunno! Many people buy the “Value size” or “sale price” because it is cheaper.
I just can’t get the mindset. I’d probably go into cardiac arrest at closing - that much debt would scare me to death.
Our incomes are about the same as the couple in the article. However, we paid $169,000 for our place. We’re not in CA, but there are plenty of communities in the 300-400 range in our immedate area. I’m very glad I don’t live in one of them -it’s only a house. Why put all your financial eggs in one basket?
“And Kelly now wonders why she and Luis were able to get a mortgage they couldn’t afford in the first place. ‘I expected that if we were approved for a loan, we would be able to pay it,’ she says.”
For crying out loud, you have an income of $10,000 per month. You MUST have some sense of reasoning in your day to day decisions?
“They refinanced most of the $550,000 they owed…to a conservative 30-year fixed-rate mortgage…And Kelly now wonders why she and Luis were able to get a mortgage they couldn’t afford in the first place. ‘I expected that if we were approved for a loan, we would be able to pay it,’ she says.” ”
Yes, I can see how the loan documents you signed on those “tricky” 30 year fixed rate loans could be so difficult to understand especially the part that shows your monthly payment as a line item.
The hard part with those 30 year fixed rate loans is that the loan payment (principal and interest) doesn’t change over the life of the loan, so I can see how tricky it would be to estimate your monthly payment when all you have is the EXACT FIGURE staring you in the face on your loan documents.
Well, the ReFied into the 30 year fixed, which probably means they used to be on an I/O or O/A ARM. But did they pay dearly for the privilege… $4,100/mo on a 30-year FRM of $550k means that they are paying - wait for it - 8 - 1/8% !!!
After getting into that mess by buying 75% more house than they could afford, they got screwed once again on the “rescue” refi by paying 33% more than the going rates. That’s why scammers love to go after those who’ve already been hit… the mark has a proven track record of being a sucker.
Taxes, ins & utilities. Take home pay around $6K. Car payment, time share, and hello rice and beans.
Nice work, Anon E. Moose.
8 1/2%!! I smell cc debt, late payments, a crummy FICO and more.
Yet, somebody is paying these folks 10k a month. Go figure.
Pacific Photographic Images Photo Gallery. Thank for the pictures arroyo. Man the wife and I just love it over there, especially Cambria. We hope, no We “Expect” to live somewhere along the CC area some day. My folks lived in Arroyogrande for a few years. My dad worked at Blacklakes. My mom hated the wind she said it blew-all-the-time? True?
Thanks! We have microclimates galore over here, so if you don’t like the wind off the dunes, go a bit north to the Pismo-Avila area and you should be fine.
Prices have dropped from the peak (10%-20%), and I expect them to drop more, so keep up hope.
Or you could just rent here at just 50% the cost of owning…
Is there much available for rent in the Avila / Pismo area?
my wife and make more than these people and would not even consider taking on a payment of $4100 a month try half that
and btw we have no kids so if we did it would be even less
kids are real expensive
these 2 a knuckleheads, i wonder what their 2 cars are?
let em drown
How can they be smart enough to earn 120k a year, but too stupid to determine a mortgage payment? I remember when I paid $300 to get a lower interest rate of 4.75% after I had agreed to 4.875% on a 15 year fixed. I knew it would pay off within a couple years, so it made sense. I am not an accountant, mortgage broker, calculus wiz, or PhD, but I was able to determine what I could afford! These clowns are merely losers who were going for the big payday and they deserve no sympathy. But thier kid deserves some sympathy for having such loser parents.
Is the rebate $300?
I encourage everyone to take a humor break and track down:
http://en.wikipedia.org/wiki/Three_Hundred_Big_Boys
President Richard Nixon gives the riches away to the citizens of Earth in the form of a three hundred dollar tax rebate (in the form of the $300 “Tricky-Dick Fun Bill”).
That is one of my top 10 favorite eps of Futurama.
HAROOO!!!!
I am totally going out and getting 600 cups of coffee!
“Fed Chairman Ben S. Bernanke is facing the same objections leveled at his predecessor, Alan Greenspan, who was slammed for not doing enough to prevent the Internet stock boom and then cutting rates too low to limit the fallout.”
“In 2003, the Fed reduced its benchmark to a 45-year low of 1 percent, leading to a house-price boom that turned to bust in 2006. That prompted a collapse in the market for mortgages to risky borrowers. It’s now derailing financial markets because so many banks bought derivatives linked to those mortgages.”
i sure hope the rest of the world can see how scared the powers of this country are. they are trying to do anything they can to save a sinking ship. it is very hard to watch these idiots destroy what little we do have left in the name of saving the housing market!
Bond Insurer Bailout
http://www.minyanville.com/articles/MBI-abk-HSY-kelya/index/a/15653
‘Bond Insurer Bailout’
- Yep, it’s the old “Whos Got Your Back”
Goldman Sachs, etc were supposed to be ‘hedged’ with insurance, as in ‘they got our back’.
Now their backs are ‘butt naked’.
Wrong, but funny.
In a brilliant article in the Wall Street Journal, Carrick Mollenkamp and Serena Ng detailed the rise and fall of a collateral debt obligation (CDO) called Norma, ushered into existence by Merrill Lynch. This is a $1.5 billion CDO created in March of 2007 with over 90% of its paper rating “A” or better, and $1.125 billion rated AAA. In November 2007, the entire CDO was downgraded to junk.
That is not particularly news, as there are a lot of subprime CDOs that are being downgraded. What caught my eye was how this CDO was created. Quoting (and emphasis mine):
“For Norma, [the manager] assembled $1.5 billion in investments. Most were not actual securities, but derivatives linked to triple-B-rated mortgage securities. Called credit default swaps, these derivatives worked like insurance policies on subprime residential mortgage-backed securities or on the CDOs that held them. Norma, acting as the insurer, would receive a regular premium payment, which it would pass on to its investors. The buyer protection, which was initially Merrill Lynch, would receive payouts from Norma if the insured securities were hurt by losses.
—–It is unclear whether Merrill retained the insurance, —or resold it to other investors who were hedging their subprime exposure or betting on a meltdown.
By the way, I’d like to thank you for two specific things (among many), Chick: yesterday’s excellent chart reel AND Riding the Bear. Stock market wise, due largely to your (probably unintentional) tutelage (tu tambien, Hoz), I actually feel like I might be on to an uberworthy new hobby.
Shank shoe!
P.S. Anything in Riding the Bear I should apply more than my usual skepticism too? It just seems toooo easy. (I’ve just gotten past using the MACD index…)
Ah yes, a new craps player has discovered a winning “system”. As the dealers say: “Good luck.”
If you have any criticism, FutureVulture, please advise. I said I was skeptical.
Thanks for any additional info, if not for the snark.
I recommend reading:
Reminiscences of a stock operator
pdf link
263 pgs.
http://tinyurl.com/2uglau
1: It is a fun book
2: It might help you
3: There is a lot of good practical information in it
I meant it mostly as a snark at our society’s gambling mentality — which people on this board seem to despise when it comes to homebuying, but love when it comes to stock trading. Also, as a snark at txchick. I don’t question her heart being in the right place, but IMO she does more harm than good by trying to teach people how to trade for fun and profit.
I don’t have anything against traders; we all do what we have to, to get by. But short term trading is very similar to poker or any other zero-sum game (actually negative-sum, once the brokers take their vig). Some people have the skills to win, but a greater number don’t, and never will. If you’re trading with a “system,” you will in the long run be one of the losers, for the simple reason that you are thereby predictable, so sharper traders will take advantage of that.
So my attitude toward trading is the same as my attitude toward poker. I admire people who do it well; I play it myself sometimes; but I realize it’s not productive, and is a negative-sum game, so I wouldn’t encourage anyone else to do it, especially not with money they need for retirement or the like. I’m not saying that’s txchick’s intent, but it might be the result anyway.
Everyone thinks they’re smarter than everyone else. No one actually is, when it comes to joining a new game. Rather than paying the expensive tuition to learn an unproductive game, why not spend your time and money learning a positive-sum game: long term investing. Read anything you can find on or by Warren Buffett and Charlie Munger.
Also, hllnwlz, I apologize for not giving a more constructive post in the first place. I sometimes forget there are real people on the other end of this internet thing.
Dude, I teach English. if 120 teenagers a day can’t destroy me, no blog poster can. Besides, I figured your comment wasn’t wholly directed at me, so no apology necessary.
However, more pertinent to this convo is the following rant.
I’m listening to the Chick (and other competent traders on this blog chock-full of mostly A-list intellects) because I’m WORRIED about retiring in 35 years from Cali public schools.
Look, I get paid very well, and I was happy to see how deeply my benefits deeply subsidize my income when i took this job, but, basically, I think my entitlements suck ass for everyone other than me and my fam.
If I wasn’t a teacher, I’d be effing pissed at all educators for the following reasons:
a) Why in hell should they get 80% of their pay FOREVER until they die for putting in 25 years? (If you’re intelligent and responsible — this job doesn’t merit hazard pay; it’s not that damn hard, despite how whiny most of us are.) My dad was a roofer. If ANYBODY deserves to retire, it’s the guys who worked like him mopping hot on LA high rises in the middle of blazing summers.
b) Medical insurance for my family forever too? Seriously?
c) Most teachers — to be honest — are lazy-ass gov. employees.
d) Cali schools do NOT get results. In general, with a few shining examples of good teachers sprinkled here and there, the kids come out knowing next to nothing. (But at least they can get past the district firewall into MySpace, right?)
Those kids — the taxpayers who are going to pay my pension — aren’t savvy enough to move politically to get rid of my lazy, leeching ass. But I feel bad that they have to pay us for doing nothing to help them now, later, and, again, forever.
However, given the bubbly and our legislators bacchanalian spending, the state might just put its hands up and say, “Sorry, we just can’t afford pensions and benefits anymore. We’re willing to match some funds in your 403b, but pensions are done.”
So, I NEED to prepare for my future as though I will not have a pension, and the sooner I learn the fundamentals of investment (not interested in being a day trader, my type-A OCD-ness would land me in the loony-bin within months if not a maximum-security pen) the sooner I can begin investing as safely as possible instead of what I’m currently doing: handing my hard-earned money to Fidelity and trusting THEM to invest it for me.
I respect so many of the people on this blog for their thoughtfulness, caution, intelligence (and spelling and grammar skills! — seriously, I can’t read most other blogs/comment sections; I recoil in horror at the errors) that I’d rather have THEIR advice than the dudes trying to sell me shite at brokerages.
Besides, I do know one thing about investment: no one’s going to look out for your interests with the same ferocity that you will.
Rant off.
hllnwlz,
good post. My youngest brother is principal of a ’special ed’ elementary school in the hood. Noticed that you confined your comments to students. His descriptions of the parents are truly terrifying.
Agreed though, that looking out for you and your family’s financial interests is job one, especially now. I think the underfunded public pension bomb is still waiting to go off–not just teachers, but cops, firemen, et. al. There’s so much unexploded ordnance just lying around.
Gee Wally, what’s up with the Beazer?
“Officials for Atlanta-based Beazer Homes acknowledged Wednesday the many challenges facing the troubled homebuilder and the uncertainty of the slumping economy. Closings were down by 24 percent and new home orders dropped by 29 percent, the company said in a Securities and Exchange Commission filing.”
“‘The fall in inventory in December is encouraging, but inventories remain elevated and buyers have a clear edge over sellers in many markets,’ Yun said.”
Yun you’re a deceptive douche bag. Inventory drops every December and guess what…… Nationally, December 07 inventory was 10% over the rising inventory of Feb/Mar 07 inventory.
Read my words of wit while you eat little balls of shit (fun)Yun.
exeter, I was thinking the same about falling Dec inventories. What I was wondering was, how much (MoM) did the Dec 06 inventory fall? Anyway your pointing out the Dec/Mar comparison is helpful.
I dunno AZ…. I’m relying on OSG/Hardtack data but it would be interesting.
“Total housing inventory levels fell 7.9 percent at the end of December to 3.51 million existing homes available for sale, which represents a 6.8-month supply at the current sales pace — down from a 7.3-month supply in November.”
So December 2007 housing inventory’s up 11.4% YoY.
http://www.realtor.org/press_room/news_releases/2007/ehs_dec06_sales_ease_supplies_tighten.html
We have a rogue trader gap in this country and it must be addressed…
Where’s that poster named Strangelove when we need him?
Dr. Estranged Love (Alan Greenspan)
“When Latin American and Asian countries found their finances in an analogous mess in the 1990s, Stiglitz said, ‘we told them, ‘You have to face the pain…You can’t bail out people.’”
Some people matter, some people don’t.
“But if the current prescription fails to provide long-term relief, what comes next? The answer, many economists say, could be that old castor oil.”
After the election, when Bush hopes some other administration will get the blame. Blame all the bailouts on the Democrats taking Congress, so the Republicans could stick some blame on them if they tried to be responsible. Now, no one dares until November 6.
No kidding. Why on earth would anyone want to “win” control of Congress & the Presidency now? To accept ALL the blame when the SHTF for real? I think Democrats are also complicit in this mess (look back at all the pro-speculator housing tax breaks passed & GSE growth during the mid-90s). Even so, you’d have to be a masochist or a fool to want to take the reigns of the economy right now.
All of my adult life, we’ve gone over potential political candidates with a fine tooth comb looking for flaws, and found none…
And look where it got us?
Who ever wins, I personally believe that It will be a one term presidency!
Actually, a big part of that castor oil was to open up their markets to foreign investment and deregulate. What Stiglitz conveniently doesn’t mention is that in the end, they devalued their currencies big time, and rescued a lot of companies anyway. If they hadn’t rescued their banks, the only banks operating in those countries would have been foreign banks - the domestic banks were in that deep. Stiglitz’s information about foreign virtue is, unfortunately, wrong. The amusing thing is that they are once again inflating huge domestic asset bubbles - the problem now is that US manufacturers based overseas are about to cut back their production because of an impending US recession. That’s another way of saying that when the Asian bubble pops this time around, our manufacturers making stuff there will make their recessions worse by laying people off in response to slowing US demand. Talk about a double whammy for Asian stocks.
Question. When you guys say investors are buying financials do you mean companies like CFC, C, WM, BAC, WFC?? I see all their stocks on an upswing.
I think they also buy the XLF etf a lot here lately.I think the include the brokers in there too.I would not touch cfc w/ a 100′ pole.Bunch of crooks running the show there.
Looks like I will get $1800 back from this stimulus package…. sweet. That is like half my BoA cc.
Hmmm… wonder if BoA is going to enjoy losing the interest they are making on that money…
Wonder if this will be 2007 taxes or 2008.
I meant 2006 or 2007…. Of course they aren’t going to wiat until end of 2008.
If it is 2006, then my (now) wife only paid $178 in fed taxes last year… subtract $122 from that $1800 IF they use 2006 tax info. Now that we are marreid, we’d get the full $1800.
You’re friggin welcome.
If Pelosi had asked me, here’s my bailout plan. It’s designed to help people hurt the most by the war on savings: The Victims of lowered interest rates
1. You get $200 for every $100,000 you have in any bank account or CD
2. You get $200 for every $100,000 you have in fed government bonds
3. Taxes on dividend payments lowered to 5%
4. $100 for every cat
There! That’s 100% fair.
Giving away money doesn’t turn into economic stimulus if you give it away to people who won’t spend it.
GSE loan limit raised to $620K…just announced as part of the stimulus package. While MSM and sheeple may cheer, I think this may be another nail in the coffin….conforming loans require a down payment, income documentation, loan to income ratios, etc. So now, you have to prove you can afford that $620K house, instead of that $417K house. Banks won’t want to write non-conforming loans for $620K, when they can write a conforming one.
What does the board think?? Does this have any real chance of propping up home values??
Every move they make is a desperate attempt to do something, anything.
“Every move they make is a desperate attempt to do something, anything.”
It’s an election year. This all may be about CYA, with no real impact on the housing market. And yes, it really smacks of desperation. Runaway train on the tracks.
Ode to financial stalking…
Every move they make
Every step they take
Every bond mistake
Every half measure too late
I’ve been watching, too
Every single day
Every word they say
Every game they play
Every time they prey
I’ve been watching, too
Oh, can’t you see
They played fraud to a T
How my poor heart aches
With every step they take
Every move they made
Every vow they break
Every market they fake
Every claim that fades
I’ve been watching you…
http://www.youtube.com/watch?v=BnejNGprm3I
You were supposed to give the link to Bernanke’s every Breath you take video!
You wimped out, Private Aladinsane
My bad.
http://www.youtube.com/watch?v=iIdavEGR9to
Guess i’ll have extra KP duty, eh?
First polish up them gold coins.
Gold doesn’t tarnish, ever.
Darn it I knew I shouldn’t have bought that pre-columbian Mexican gold coin dated 1491. lol
Aladinsance, the sad thing is that the move(s) that are desparately needed, i.e. medicine, is/are the one(s) most aMerikuns don’t want to take. You see, everything is rosy and the trees grow to the sky forever and ever. Nothing ever goes down and when it does we need intervention form the goobermint, the Fed (see crooks), overseas help, you name it, we got it.
It is so sad to see a country where there is no:
-accountability, see NJ couple above
-debt slavery
-privitization of gains, but socialization of losses
-the idea that everything goes up forever, but never down
-the idea that when things get tough, we look to everyone but ourselves, family, and friends to help
-no savings, and when there is it is drained to maintain something that is not worth keeping
-no sense of value anymore. As has been said before on this blog, “Everyone knows the price of everything, but no one knows the value of anything!
But it doesn’t have to be so sad for you or for me. I value some things, and actually have them. I have savings and will use all my wit to guard them. I don’t expect to be treated like a child. I’m not a slave to debt and I have passed this philosophy on to my children. I will be more of a help than a burden to my family and friends, God willing.
Might have trouble avoiding the socialization of loss as long as I am in the system.
This is not all bad. There may be an awakening to reality.
Their lack of planning probably resulted in a family full of children that they can’t afford to raise the way they “should”. I don’t say all parents don’t consider their economic status before those pregnancies, but to use the kids as a shield against foreclosure or for gobment entitlement (just to keep ahead of others who did plan and avoid disasters) are breeding more FBs which are not good citizens (it takes a village?) for the rest of us to endure.
Go OC DAN !!
I think it will help some people refi for lower rates. I don’t think it will help many knife catchers into the market since they would still need down and qualifying income.
“I don’t think it will help many knife catchers into the market since they would still need down and qualifying income.”
I’m hoping it will take buyers OUT, as now there will be no such thing as a non-conforming jumbo loan up to $625K.
Frank is trying to modify it too; 125% of median….
It been addressed before, but the LTV requirements will be a killer. People with a lot of equity aren’t the ones at risk of foreclosure. The ones who deperately want to refinance into a fixed rate mortage are underwater, and therefore can’t get a conforming loan. This will help the move up market, to an extent, but they will still need to sell their current homes… hard to do in a collapsing market. New home buyers? How many first time buyers out there have the cash 20% downpayment and income required to purchase a $600k home?
Impact: neglible.
Groundhog,
At this point 20% on 600K is 120K. Therefore, if I can get a decent job w/benefits out of state where I could buy cash, why would I look for a 600K house.
These goobermint knuckleheads just don’t get it. At this point, it is all about pricing.
And say I don’t want to move, why would I spend 120K as a downpayment on something that is losing value before I even move in?
We are so toast if this is all our esteemed leadership can come up with.
Not to mention closing costs. Gotta pay them when you refinance. And they can work out to several thousand dollars.
With most subprime lenders out of the game and a return to prudent lending measures like income verification, it is quite hard to envision how the move to increase the conforming limit to $620K would do any more than slow down the rate of price declines. It should mainly work to the advantage of helping owners of $620K homes who actually can afford them to be able to refinance into lower interest rate loans (courtesy of a bit of implicit insurance provided by the U.S. federal tax base, I am guessing).
“slow down the rate of price declines.”
that must be why thet did it!
“helping owners of $620K homes who actually can afford them to be able to refinance into lower interest rate loans”
Yep, all those with 20% equity in their home, $200k/year income, and currently hold a bad loan can refinance. This will stem the tide…
“I can’t say that I’m totally pleased with the package, but I do know that it will help stimulate the economy. But if it does not, then there will be more to come,” Pelosi said.
ok, so i encourage everyone to save the money they get so that the government will just keep sending checks!!!
sorry link:
http://news.yahoo.com/s/ap/20080124/ap_on_go_co/economy_stimulus_411
I am still seeing stated loans w/ 5% down out there.I make 200k / year greeting my friends at walmart.I get to greet lots of hot chicks with teeth.
Perhaps they felt that if the GSEs are the only game in town, they will be the only way to buy a $620K house for $620K. (Not a $417K house for $620K). So it isn’t about cutting the price decline at all, but just allowing houses to sell in some markets at 3X income.
Here is what they don’t get. There is a way to buy a $620K house with a $417K loan. It’s called a big downpayment. You come up with a big downpayment by owning a less expensive property and paying down the mortgage, and then selling.
In cheap housing markets you might sell a small house to get a large one. On the coasts, maybe you need to start with a 2-bedroom condo, then buy a house. Either way, what they are saying is people don’t need to pay off their loans, they can go on HELOCking the equity.
When do thing that the foreign investers’ will look on the US Govt.’s implicit backing of GES’s as below AAA rating?
I repeat:
Raising the GSE conforming loan limit to $700k (or $620k) is not about re-inflating the bubble –that train’s already left the station.
It’s really about delaying/slowing the inevitable bust to a “manageable” pace (not causing a macroeconomic panic/crash), and bailing out the only people who really matter to politicians: the banksters. They thought they had already transferred all the default risk to MBS/CDO investors, but it turns out, they were on the hook for more than they bargained for. So, now it’s time for Mr. Taxpayer to step in and take care of the rest.
What a great system (for the top 2%)!
As I posted above…It appears Barney Frank wants it modified too 125% of median….
The key is to keep as many people making payments as possible, so as to slow the bleeding. I think it could have the unintended effect of accelerating the drop in house prices. The refi’d will be a prisoner in his house, taking him and it out of the market for a long time.
The first thing is that it will lower the price of many houses in California.
You can sell at 740K or your house can sit and rot.
No chance of propping up bubble in Cali, unless they allow stated income/liar loans…
It looks like they are trying to make it for only a year, but it will probably be effective forever, as housing crashes even more:
“Increase the availability of mortgages by providing a one-year boost to the cap on loans that Fannie Mae and Freddie Mac can buy, from $417,000 up to $729,750 in high-cost markets.”
Home Prices Fell in ’07 for First Time in Decades
New York Times - 1 hour ago
By MICHAEL M. GRYNBAUM It was a notable year for the housing industry, and not in a good way. In 2007, the median price of an American single-family home fell for the first time in at least four decades, according to the National Association of …
“Lawrence Yun, the Realtors’ chief economist, said it was likely that the country has not experienced a decline in housing prices for an entire year since the Great Depression of the 1930s.”
How could the NAR’s chief economist make such an irrelevant comment? Certainly he realizes that all real estate is local?
Credit Scoring=the next area of manipulation
The only bailout I approve of. If you overpaid at the peak, can’t pay the mortgage, didn’t HELOC, and have otherwise paid your bills, you get a “do over” after foreclosure. Rather than stop the foreclosure and downward price adjustment, you get to buy at a price you can afford.
Nope (and I’m one of the “liberals”).
These FBs made their beds. Unless they can come up with a compelling reason for lifting the f/c off their credit reports (major medical crisis or somesuch), they need to pay the price for their foolishness. That means they need to be foreclosed on and they need to have their credit affected because of it.
Many of us have been renting for years while waiting this bubble out. No reason they can’t do the same.
In Tucson, the yuppies will save the condo market:
http://regulus2.azstarnet.com/comments/index.php?id=221940
But Arizona Daily Star readers are skeptical:
http://regulus2.azstarnet.com/comments/index.php?id=221940
Aww Slim, don’t be coppin’ our condo buyin’ yuppies - they’re needed up here ya know!
“‘The fall in inventory in December is encouraging, but inventories remain elevated and buyers have a clear edge over sellers in many markets,’ Yun said.”
Hmm, the fall in inventory is attributed to the realtors telling people to not list their house unless they really need to sell and as a result of the homes going into foreclosure. Looks like Yun and the NAR is trying to fool the public again!
“Luis and Kelly Madera have done everything they can to save their house. They refinanced most of the $550,000 they owed on a risky, adjustable-rate home loan to a conservative 30-year fixed-rate mortgage. They emptied their savings accounts and pulled thousands out of their 401(k)s.”
http://www.knightsedge.com/medieval-weapons/dungeon-ball-chain-2613g.jpg
Sweet! $1,200 for me and the wife! Maybe we’ll make like Joe Buttnugget and go buy a Plasma TV at Best Buy and some furniture from WalMart.
It’s the ‘Merikan way.
“Buy now, or be priced out forever!”
“They aren’t making anymore land.”
Ha!!!!!!!!!!!!!!!
Everybody is so happy in Washington now all parties came together for a love fest, of course if this wasn’t a election year the love fest would have been a tag team battle and nothing would have past.
I must say though(i’m a fence sitting independant) the dems are a DESPERATE BUNCH just as decitful as their counter parts, first they tell us vote us in and we will end the war what happens we now have to elect a Dem to be president to end the war, and just 8 months ago the speaker said, the country is near bankruptcy we can’t afford any bail outs today it is all smiles and we can afford it, i don’t know about you but i’m for a bailout all right a Boston tea party again where we don’t bail anybody out from the waters we thru them in?
Heck, a month ago they were holding the line on the AMT patch because of the PayGo rules they wanted to stick to.
PayGo? Out you go!
I’m fairly open minded when it comes to politics. I dislike both parties equally.
shadow7
goldanggint I just finished my Evelyn Woods Speed Reading course so I can better comprehend yer posts and now you go & use punctuation.
Ok, so I might be able to finish my G.E.D. English course plan but I draw the line if you start usin college words on me . . . aint goin to no Cosmetology College to keep up with you. damn showoff !
shadow7
I Believe someday we will have another Boston TP and it will be internet based.
That $1200 coming my way is going into a forex account muhahahaha.
We make too much, so have fun with the money guys, I encourage everyone to save (not spend) the windfall. Freaking federal government.
Hey arroyogrande wanna start a movement - titled ‘I want my bail out too’ (hum Dire straits song ‘money for nothing’.)
I’d rather not get the damn thing at all. Between the handout and the FHA adjustment, I’m cheesed off beyond belief. I’m just trying to find a way to take that money as far out of US circulation as possible. Serves them bloody right.
Convert to Ringgits - then you can try to find them on the map. (as well as make money).
I know exactly what a ringgit is >; )
Worked on a project for the Malay gov in 00′ back when i still worked in tech.
I get no gubmint’ money either. apparently the 90k in taxes they will take from me this year will be financing J6pak’s new plasmas. :-/ grrrrfrickingrrrrrrrrrr!!!!
I think the latest “rebate” scheme is a sad joke too, but anyone making enough dough to pay 90k in taxes doesn’t really have anything to complain about.
only redeemable @ walmart-target and best buy
they are gift cards
From BBC News. “French bank Societe Generale announced fresh losses of 2.05bn euros related to the sub-prime mortgage crisis in the US.”
Then add this little gem:
http://articles.moneycentral.msn.com/Investing/Dispatch/RogueTraderBlows7Billion.aspx
Edgies to the rescue! This time, they’re going to save Tucson’s condo market! So said our local paper.
But the paper’s readers are skeptical. Read the comments after the story.
‘Scuse the double comment! I thought that the HBB Comment Eater had munched my first attempt.
this 31 year old trader dude losing billions is too far fetched to believe. its almost like giving a 17 year old keys to a vintage vet…poor kid sounds like the fall guy.
I agree. To lose 7.0 billion required huge positions and lots of trading. He’s the fall guy for higher ups who made bad strategic and tactical decisions.
Wonder why they grabbed this guy to take the fall? The whole story stinks…yeah, this trader blew thru 7.2 billion in a few months, and nobody, not compliance, not accounting, nobody saw a thing. Really, nothing at all unusual.
Saw that all three evening news broadcasts used this as their “humor” segment. As in, yeah the USA may be in the toilet, but look at those stupid French bankers.
We know they don’t bother to research or fact-check anything, but is there no journalist anywhere with a bit of skepticism?
‘is too far fetched to believe’
- There is a saying on Wall Street amongst the traders,
“He had Fat Fingers’, meaning that when he placed the orders his fat fingers must of hit the wrong digit on the keyboard….or added a couple of hundred extra zeros!
“French bank Societe Generale announced fresh losses of 2.05bn euros related to the sub-prime mortgage crisis in the US.”
Add this little tidbit:
http://articles.moneycentral.msn.com/Investing/Dispatch/RogueTraderBlows7Billion.aspx
My apologies on this double post.
I’m confused. In July 2005, we experienced the first y-o-y decline in median house prices since the Great Depression. Then, in 2006, we experienced the first annual decline in median house prices since the Great Depression. Now, we’re experiencing the first y-o-y decline again?
“And Kelly now wonders why she and Luis were able to get a mortgage they couldn’t afford in the first place. ‘I expected that if we were approved for a loan, we would be able to pay it,’ she says.”
I expect that before you buy a house, you run the numbers to ensure you can pay for it.
“Fed Chairman Ben S. Bernanke is facing the same objections leveled at his predecessor, Alan Greenspan, who was slammed for not doing enough to prevent the Internet stock boom and then cutting rates too low to limit the fallout.”
They say one man can’t make a difference, but if Ben Bernanke were to up and quit and explain the colossal fraud that took place, i’d stand up and cheer.
Does anyone know if this $600.00 “free rebate” is another bait and switch like last time? In other words are we really just getting 600 a year early and will in reality have to pay 600 more in taxes in 2009? Few people seemed to notice that that is what happened last time, and of course the MSM never pointed it out.
“We could pierce bubbles but we’d pierce a lot of non- bubbles and take a lot out of gross domestic product,” said John Snow, also a former Treasury Secretary and now chairman of Cerberus Capital Management LP. “We need to reform regulation.”
“reform” regulation - Perhaps by restoring the regulations that you eliminated and putting people in charge of regulatory agencies that will enforce the regulations? It wasn’t enough to run a railroad (CSX) into the ground, you had to do it to the economy too?
John W. Snow - “The dumbest man in whatever room he is in.”
Is the rebate a tax credit or a refund anticipation loan?
ah … tax credit, free money
It’s not FREE money! *I’m* paying for it. You can thank me if you want.
We no longer have democracy in this country when the MAJORITY of people pay little or no taxes.
Then I must be a minority because the hubbie and I are getting raped this year.
“When Latin American and Asian countries found their finances in an analogous mess in the 1990s, Stiglitz said, ‘we told them, ‘You have to face the pain…You can’t bail out people.’”
“Most of those governments eventually let the turmoil take its course. The countries recovered, but not before going through the economic wringer — for periods that in some cases lasted years.”
These other governments did not enjoy the key advantage of controlling the printing press which generates the world’s reserve currency. Unfortunately, with advantage comes responsibility, and abdication of responsibility often leads to subsequent forfeiture of privilege.
“And Kelly now wonders why she and Luis were able to get a mortgage they couldn’t afford in the first place. ‘I expected that if we were approved for a loan, we would be able to pay it,’ she says.”
Traditional underwriting practices, where loans were only made to those the lender expected to be able to repay the debt, would dictate that her assumption was perfectly reasonable. Mathematics would not.
Just got back from a luncheon with Alan Greenspan in Vancouver… He says the worst thing that could happen is over-regulation and protectionism… many in my group noted that it’s lack of enforcement of existing regulations which got us in the present mess. Greenspan doesn’t seem to want to take any blame for this crisis…
Is this a quote from someone else or are you saying you just had lunch with AG?
Nevermind…answered my own question.
————–
There’s a good chance that the United States is headed for recession and the culprit is not subprime mortgages, but the fact that the mortgages were collateralized, former U.S. federal reserve chairman Alan Greenspan told a Vancouver audience Thursday.
http://www.financialpost.com/story.html?id=261256
“‘It was all, ‘You’ve got to be tough and take your castor oil,’ said Joseph E. Stiglitz, the Nobel Prize-winning economist and former vice president of the World Bank.”
“To date, U.S. officials haven’t followed any of the advice they so readily dispensed to others. They have tried to aid troubled banks. They have slashed interest rates to help the struggling housing and stock markets. They have made it clear that they will go to extreme lengths to keep the American economy out of recession.”
——————————————————————————–
Thats because Castor oil tastes bad to Investment bankers. Yucky