January 25, 2008

Weekend Topic Suggestions!

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180 Comments »

Comment by Bye FL
2008-01-25 02:49:03

A good suggestion is to give people ideas how far house prices in a given location will drop to and how soon based on fundamentals. What price point can a given location support and why?

I say south FL can support $70/foot, north FL $45/foot. In fact most locations should not cost over $50/foot for a “standard” house on a “standard” lot. Not talking about a mansion by the ocean.

Also those who decide to relocate, like the thousands of us leaving FL daily, where should those people relocate to? Texas? Ohio? Pennsylvania? The midwest?

Regarding rent vs buy, is a good rule 1:125? Thus whichever is cheaper. Can both the rent and owning be too expensive, say location A costs $500k to own, $2000 to rent. Location B costs $100k to own and $875 to rent. Therefore, relocate to B and purchase since its cheaper than renting.

People were saying house prices must drop to be in line with salaries and rent. What if they already are, such in Pittsburgh(theres some overpriced homes even there) and in most parts of Texas. Will house prices still drop any measurable amount? If so, won’t rents have to fall as well? Why are rents so high to begin with?

Lots of stuff to pounder

Comment by yogurt
2008-01-25 03:24:45

Can both the rent and owning be too expensive

No, renting can never be too expensive, because rents are determined only by actual demand for accommodation and current income, rather than by speculation and borrowing like house prices.

That’s not to say that rents can’t go down, they can and will if incomes go down or supply increases due to a building glut. But rents always reflect fundamentals at any given time, because they are a true reflection of what people are willing and able to pay to live somewhere.

Comment by KayLaw
2008-01-25 04:53:17

You are right about demand driving up the rentals. After Hurricane Andrew, rents throughout South Florida just skyrocketed. Not only did the residents whose houses had been rendered unlivable need housing, we also needed housing for construction workers and insurance adjusters.

 
Comment by nhz
2008-01-25 05:28:55

that is not true in parts of Europe, where the government heavily interferes in the rental market.

Our relatively small ‘free’ rental market has prices that are 2-5x higher than in the government-subsidized part (which is only readily accessible for ‘disadvantaged’ people like those on wellfare - or for government workers that are willing to spend 4-10 year on a waiting list). Rental prices in our free market are driven by speculators who ask ridiculous prices and accept that the home is empty for years, in return for having the chance to strike big in the rental lottery (sometimes companies out of necessity rent a home for their employess at far above comparable purchase cost). Obviously, the rental cost in the government-subsidized market segment is often below cost. Our free market rental prices are just as realistic as the wishing prices from 2006 on US realtor websites.

Comment by Bye FL
2008-01-25 08:53:04

That must explain why I can purchase a house in NW PA with a mortgage costing as little as a third the cost of renting the same house. I refuse to rent at those ripoff prices. Those telling me to rent, ok it’s a deal if they will chip in and pay 2/3 of my rent. I thought so. I am just gonna buy something for around $25k, ill lose less than renting even factoring in depreciation and when prices bottom out, ill buy a nice big house on acreage cheap.

In locations where people can neither afford to buy nor even rent(without several roomates) they simply relocate. Good because this will only cause prices to drop even faster!

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Comment by GH
2008-01-25 05:36:07

No, I am not seeing a real connection with rents relative to income either. What I am seeing more of is multi family dwellings all the time. This is a double edge sword for a landlord, since having 20 people in a small house may allow increased rent receipts, but also substantially increases wear and tear on their residence, but for many I doubt they are much aware of what they are getting themselves into.

Comment by phillygal
2008-01-25 06:33:26

Most municipalities have occupancy restrictions, i.e. one adult per x sq. ft. These new (accidental) landlords probably haven’t even glanced at their township’s housing code. If they do have numerous tenants packed into a house too small by zoning standards, they are in violation.

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Comment by Hmmmmm
2008-01-25 07:01:23

While that is true in principal, good luck getting that enforced. In Fairfax County, Va it is not uncommon to have houses with 10 immigrants liviing in them, there are 2 in my neighborhood alone,. In this county with over 1mill residents, there are 4 inspectors. They can knock on the door and ask if everyone is related. The answer…yes we are all cousins. No citation. The most that can be done is a citation is issued and the landlord continues on their merry ways.

 
Comment by Lost in Utah
2008-01-25 10:04:04

In Carbondale, Colorado (housing for Aspen workers), the town had to enact an ordinance re. the number of vehicles per house in order to reduce this kind of thing.

 
Comment by hd74man
2008-01-25 15:14:33

RE: Most municipalities have occupancy restrictions

Tell it to code officials in NYC.

Boarding houses and low-rent apartments are so loaded up with illegal tenants, CON-ED is telling muni politicos to be prepared for rolling black-outs this summer.

 
 
 
Comment by OTownCajun
2008-01-25 05:36:14

I don’t think that’s completely true. Not long after the condo conversion craze in Orlando 2-3 years ago, rents went up at a lot of remaining apartment complexes by a good 10%, simply because supply dried up quickly. Also, FBs who were trying to rent their houses were still asking too much (like $2k+ per month). Granted, your statement is still true in that this was due to demand, but it was secondary to speculation in the SFH and condo markets. As a side note, a good number of those asking rents have dropped since then, but there was a period of 6 months to a year where I would say that rents were artificially high. I’m sure that drove a lot of renters away.

 
Comment by Al
2008-01-25 05:59:40

“No, renting can never be too expensive, because rents are determined only by actual demand for accommodation and current income, rather than by speculation and borrowing like house prices.”

Renting can be too expensive. If supply of rentals decreases and housing prices have fallen, it can be cheaper to buy than to rent. That makes renting too expensive.
Also, If there is a shift away from renting it doesn’t mean that prices will automatically drop. A high number of vacant rentals in an area could be an indicator that rents are too high because the landlords do not want to drop their prices.

Rents do, however, tend to be more rational than housing prices because landlords are more likely to lower prices than a selling homeowner. There is less emotion tied up in renting which limits price run ups as well.

Re

Comment by Bye FL
2008-01-25 06:06:44

Too bad rents are not rational in most locations where housing is cheap. Its where houses are most expensive are rents “cheap” compared to buying. I see 1:50 rent ratios in locations of $10k to $50k houses and 1:500 rents where shacks go for half million.

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Comment by sagesse
2008-01-25 03:30:42

Dear Bye Fl, I have noticed that you keep asking the same questions. The internet can be a good source of information, and this blog provides a wealth of insight into current housing and economic issues. You are doing research, which is, in itself, a good thing. But if you keep trying to figure things out in your head without taking any actual steps, the same thoughts will turn like a record and get you nowhere.
Have you actually ever been to Pittsburgh? Maybe you will not even like it. Maybe you need to approach life not from the head, but through actually taking small steps: for example, like moving out of your parents’ house while staying in the same area for a little longer. You will thus gain some life experience, and no blog/internet site can do that for you.

Comment by jckirlan
2008-01-25 04:21:57

Well said sagesse. I wish someone like you around to guide me when I was younger as I did exactly what you are talking about.

 
Comment by newt
2008-01-25 08:39:25

“you keep asking the same questions…”
I’m almost positive Bye Fl is the same person that goes by the moniker Need_affordable_home over on City-data.com. Asks the same questions over and over and over, lives in Fl, wants to move to Oil City, etc. Became kind of a joke over there. Tiring.

Comment by Left LA Behind
2008-01-25 10:27:03

Any comment I come across by ByeFL anymore I quickly skip. Dreams of a $25,000 house in a frozen town… Yawn.

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Comment by Leighsong
2008-01-25 03:52:04

Spent two weeks in Pittsburgh recently…my grams fell ill.

Dang, Bye FL, I feel like you’re talking to me! Left NW FL in June 07, and we’re here in WI.

Don’t tase me! LOL.

I want to own for obvious reason(s): Queen of the castle, at the side of my King of course!

A home is a responsibility for me, renting or owning.

I’ve bought at the worst of all the market times, and fared well. Perhaps it was the mindset–it’s a home! I’ve also rented at the worst of times, and fared well–a home is what you make of it, at least to me.

We desperately want to buy, but people are out of their ever loving minds!

We see Joe and Jane, Heloced to kingdom come, wishing for a retirement on their investment (rolling eyes).

It was a toss up for us…PA/WI?

WI won for various reasons: family, opportunity, yada yada.

Going to an open house this Sunday, cream city brick, 23 acres, 4 outbuildings, organic, fruit/nut trees (confessed tree hugger), geothermal/solar.

Sounds and looks like heaven from the pictures (FSBO), wish us luck!

And absolutely not going to give them their wishing price. Jeesh. Going to courthouse today (we are not online here in God’s country) to get the skinny before we get our hopes up!

Wish us luck!
Leigh

Comment by danni
2008-01-25 04:51:47

Good Luck Leigh,
That does sound like a little piece of heaven.
Danni

 
Comment by Bye FL
2008-01-25 05:05:10

How much does the seller want? How much is it worth? Wow 23 acres, I would put up with the cold winters for that much land and a nice house on it and if it’s close to shopping.

Please do tell me more about Wiscousin vs. Pennsylvania. Jobs don’t matter as im self employed. Weather is pretty important, I hate extremes. Low crime and safely is most important. Affordable housing is a must. I haven’t looked much into Wiscousin, I did check out parts of Minnesota and the houses aren’t any cheaper than what I can get in Pennsylvania. I would definately take the mild(er) winters if everything was equal. Wiscousin/Minnesota can easily get down to -20 to -50(record is -60) depending where. Pennsylvania by comparsion will get down to 10 to -10 depending where. Most parts rarely get below zero, even in Oil City! One day per winter on average will it dip slightly below zero.

Alot of people say I won’t be able to handle the cold up north when I leave FL, but you did it! Is it as simple as slapping on a jacket? What about the risk of frostbite/hypothermia on a cold winter day? It rarely gets cold enough in Oil City for this to be a real concern.

Comment by Leighsong
2008-01-25 06:27:47

Hi Bye,

Born and raised in ‘burbs of Pittsburgh. I’m retired AF and self admitted gypsy!

How much does the seller want?

They are asking for 375Kish.

How much is it worth?

I’ll find out today at the courthouse…get back to you on that one. If they are heloced, we may offer a short sale; We are not in a hurry (have to lock hubby in the closet at times!)

Wow 23 acres, I would put up with the cold winters for that much land and a nice house on it and if it’s close to shopping.

It’s west of Sheyboygan. North of Milwaukee…er…an hour.
I love many areas of our nation, and could live almost anywhere.

Pittsburgh temps are tame compared to these parts of WI ;)

Smiles,
Leigh

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Comment by Bye FL
2008-01-25 06:44:45

If this land is in a rural location and not within 5 miles to the nearest big town for shopping, I wouldn’t pay over $2000/acre. If it’s close to a big town, make it $4000/acre. 23 acres should cost less than $100k, preferably $50k.

How big and nice is the house and all following outbuildings? If it’s an old house, I wouldn’t pay over $30/foot for the house and buildings combined. If you get 3000 square feet of buildings(including the house itself) that’s $90k. So his $375k price could be worth around $150k.

I will check that area of WI, it will have to be significently cheaper than NW Pennsylvania cause the long harsh winters means less growing days and difficult conditions. I am still curious how you deal with that winter. Why did you choose WI over PA?

 
Comment by Leighsong
2008-01-25 07:25:00

Bye,

I keep myself entertained–not hard for me to do!

Smack hubby’s butt, cook good food, read, play with friends on Ben’s blog, oh, big one, I’m retired!

It’s so cold here right now, I’m double layered, but hey, no biggie.

More of my family is in WI vs PA and it was not an easy decision. (We actually like our family…LOL).

Here’s the house:

http://tinyurl.com/2443gm

 
Comment by CarrieAnn
2008-01-25 09:04:02

Nice cozy farmhouse there. Looks great for big get togethers. It sounds like you’re close to family so I’m guessing you’ll be hosting Christmas! LOL

As a comparison I looked up this farm. They bought 50 of the acres and the 2000 sq ft home in 2000 for $170kish. Admittedly they tore the home down to the studs and did major foundation improvements on the front so maybe add $100k to that.

I was impressed to see that they were paying less than a thousand more for all this in taxes then we were paying for our little 1+ acre in the same town and we didn’t even have a deck never mind a wrap around porch and 3 outbuildings. I’m guessing the difference is made up by the discount on working farmland.

 
Comment by ET-Chicago
2008-01-25 11:25:00

Leigh, that farm looks pretty darn sweet.

I like that area of Wisconsin, too. Milwaukee is one of my favorite mid-sized US cities.

 
 
Comment by Charles J Gervasi
2008-01-28 11:52:23

My parents moved to Florida when I was a kid. I moved back to Madison, WI a few years ago. I absolutely can’t stand Florida compared to Wisconsin.

The key to dealing with the cold is to use layers and cover every inch of your body. Covering every square inch, even with thin wicking material, is more important than using a thick Columbia coat.

The weather is highly variable. You’ll only experience sub-zero temperatures a few times each year.

If you live in a freestanding house with forced-air heating, it will cost you a few hundred dollars in the coldest months. Many large apartment/condo buildings include free heat in the rent or condo fee. This works out to be cheaper per person.

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Comment by CarrieAnn
2008-01-25 05:26:42

Good luck Leigh. I love my 80 acre farm I’m renting. Everybody is so calm here: the dog, the kids, the mother!
So if the land is what you’re into, I’m pulling for you.

Comment by Bye FL
2008-01-25 05:47:40

I am definately into land, but I will wait for prices to drop. Someone in the “know” said even around Oil City, the land will drop by half. I would like to own alot of land so I can grow a big garden, an orchid and prepare for peak oil or at least rapidly escalating food costs, ill save a fortune by growing most of what I eat. Ill also want a pond or creek to grow fish :)

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Comment by exeter
2008-01-25 06:12:41

geez…. You guys and your land panic. You’re gonna overpay for this junk land with that attitude. Even if you don’t you’ll be bled dry with property taxes. The peak oil/food inflation boogeyman is one of the primary reasons land is so inflated. Don’t we all take pleasure in harping on the old “they aren’t making any more land” lie? The dirt isn’t going anywhere folks. And it most certainly won’t go up in price for many many years; to the contrary, land will fall. It is the same speculative element that drove current land owners/taxpayers in the very position you’re considering putting yourselves in. Speculation.

 
Comment by Lip
2008-01-25 06:13:19

Bye FL,
Having worked in AZ, NM, and CA, I can tell you that the southern halves of NM and AZ have a fairly moderate climate, lots of land, and relatively affordable land. Maybe hot in the summer, but you’ll be amazed how the lack of humidity changes the comfort level.

If I were you, I’d take a road trip out west and touch bases in small towns in NM such as Roswell, Ruidoso, Alamogordo, Silver City and in AZ towns like Safford, Sierra Vista, etc.

 
Comment by Bye FL
2008-01-25 06:33:26

I would rather live in Minnesota/Wiscousin than some hot, dry, barren desert. I need lots of precipation for drinking water and to grow food plants/trees. I will die in the desert without a/c but up north I can simply burn wood and wear a coat to stay warm.

Well, if peak oil pans out, billions of people will die out and land will be so plentiful, it might be free in some rural locations. Food inflation is a reality, I could save thousands a year growing my own food. I will wait a few years for land prices to drop and ill buy a small plot of land and hope prices drop further then ill buy more land.

 
Comment by exeter
2008-01-25 06:39:44

Bye FL…… one question. Have you ever actually lived in the north?

 
Comment by Hazard
2008-01-25 07:39:14

Living in the north, thats a good question and something I’ve been wondering re Bye FL.

I’m from Ala, live there now in Mobile. However, many years ago I was transferred to Chicago for 3 years. Talk about cold, well it was to me anyway. My wife and I really liked the area but eventually decided no way do we want to live there forever. So we finally were transferred back to Ala. It certainly is different from a weather point-of-view, not to be taken lightly.

 
Comment by exeter
2008-01-25 07:46:31

I’ve spent a bit of time in FL where it rains like a cow pissing on a flat rock and a wall of humidity enough to knock you over but putting up with that is nothing like the pain of 5 months of bone chilling ice cold wind, snow ass deep at a minimum and the costs associated with moving snow and keeping a shack warm. I’m only here for the $$$ anymore.

 
Comment by Bye FL
2008-01-25 08:45:27

Ive lived in the north during the summer. I want to visit Toronto next month and see what the winter feels like.

Ill take the NW Pennsylvania winters over the BS going on elsewhere. Maybe I will actually enjoy four seasons and if not house prices will be cheaper elsewhere and I can always relocate again in a few years

 
Comment by Hazard
2008-01-25 09:47:02

Living in the north in the summer is nice. But as my old boss said when I moved to Ill “We have the best weather in the world 6 months of the year. The other 6 months we pay for it”.

Snow. When it falls you’d better be out there shovelling. If not it turns into blocks of ice in the driveway (can’t get your car out) and then you have to chop out blocks of ice for hours. I found that out the hard way. Hope the electric doesn’t fail, else the auto thermostat won’t come on and at below zero is a disaster. Frozen pipes are no fun, I found that out also. Even exterior pipes can freeze.

Clothes. Buy some good heavy sweaters, coats and gloves. Not those things they sell down south but wool, fleece lined, heavy-duty things. Gloves, you’ll need them. Scarves and hats come in handy as well. And your car better be in good shape and well winterized, found that out also. Poorly insulated houses - a disaster waiting.

It isn’t all bad, people are great, lots of nice things to do, good places to go. And if you are accustomed to it, winters are OK. But it is different from Fla. Just be aware.

 
 
Comment by Leighsong
2008-01-25 08:02:10

Thanks Carrie.

I envy you–I’d love to rent an 80 acre farm!

Best,
Leigh

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Comment by Greg
2008-01-26 00:06:26

I can’t believe I actually agreed with exeter for once…

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Comment by Al
2008-01-25 06:07:03

Leighsong,

One suggestion. Get preapproved for a mortgage that is what you want to pay for the place (less your downpayment.) Make sure your realestate agent knows this. You can bet somehow, someway, the seller’s agent will find out that this is the only offer you’re making.

Comment by Leighsong
2008-01-25 06:32:13

Al,

We are preapproved. This is a FSBO and I’m cash baaaaaaaaaaaby! (Shhh).

Leigh ;)

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Comment by Al
2008-01-25 07:36:02

Nice.

 
Comment by Bye FL
2008-01-25 07:58:10

$134,900
3 Bed, 2 Bath
974 Sq. Ft.

4327 S 12th St
Sheboygan, WI 53081
MLS ID# 977170

This price is a major joke!

$129,900
3 Bed, 1 Bath
894 Sq. Ft.

another ripoff!

$124,900
4 Bed, 2 Bath
1,515 Sq. Ft.

4 plus bedrooms, 2 full baths, only $124,900!! haha ripoff!

You could live in a safe Pittsburgh suburb for considerabily cheaper! The fact he wants $375k for 23 acres shows how much of a ripoff it is!

I can get 23 acres for around $100k in Pennsylvania!

You do live on east Wiscousin, zone 5a and your winters are 3-5 degrees colder than Oil City. Remarkabily similar weather thanks to the great lake moderating effect of east WI.

 
Comment by Bye FL
2008-01-25 08:41:00

Where did my post go? I posted(without links) the price of houses in Sheboygan, WI. Average costs appears to be $70/foot but some of them are $130k for 950 foot! You can get a house in FL for that much!

Plymouth has about 8000 people, similar to Oil City/Franklin. Both locations have low crime and high percentage of white people. However, Oil City is 3 times cheaper. Would I be correct to say Plymouth is 3x overpriced?

$83,900
2 Bed, 1 Bath
1,008 Sq. Ft.

Cheapest in Plymouth, WI!

Wow why are the prices so high?

$148,900
3 Bed, 1.5 Bath
1,319 Sq. Ft.
less than half acre lot
More than $100/foot!

 
Comment by CarrieAnn
2008-01-25 08:43:27

“This is a FSBO and I’m cash baaaaaaaaaaaby!”

Wahoo. You go girl. You’re living my dream.

 
Comment by Lost in Utah
2008-01-25 10:09:21

Bye Fl - sagess and exeter both made good points above. Don’t buy until you know if you like the area. You can beat an idea to death from fear of the unknown, but usually it’s not that big of a deal.

“Change comes through action.” -Dalai Lama

 
 
 
Comment by hd74man
2008-01-25 15:16:18

WI won for various reasons

Wisconsin is nice country with good people.

You chose wisely.

 
 
 
Comment by Ben Jones
2008-01-25 03:26:59

I have watched some posters here get really upset about some things this past week, and I am going to tell you why I think it is misdirected energy.

I recall in the giddy days of the summer of 2005 here in northern Arizona. When homeowners would excitedly tell me how their house had appreciated $10,000 a month. My construction friends were very flush, often telling me that they had 5 job offers for every one they had time to take. That summer one younger guy I knew, who also worked in construction at the time, and who had just found out about this blog, approached me. He quietly confided how he and his wife were priced out of the market and how it ‘really pisses me off.’ He asked me if I thought prices would ever possibly come down.

I told him, yes I did, but that if I was right about this housing bubble, we would likely get a pretty big recession in the bargain. I looked at his face and could tell he didn’t really know what a recession was. And it was understandable in those hyper days of 2005 that he may not have grasped the connection.

Well now everyone is talking about recession, and it seems imminent.

I was excited, too, in 1984, when I went to become a real estate major in Dallas. And why not? It had been the hottest market in the world for 5 straight years. And then things started to fall apart. Looking back, I can see we had a real estate bubble and those prices were unsustainable. And as we slipped into what was probably a mini, regional depression, lots of people were angry as the resolution trust commission came in and started to carve everything up.

But those feelings gave way to concern about our failing economy, our friends and family. Everyone soon knew people that had lost everything, financially and personally. Some fell to desperate measures. Those were tough times. And just this week, I saw two stories that reminded me of that time. One was an executive at a failing mortgage firm that killed his wife and then himself. Another was a couple that lost some houses to foreclosure and the mom inexplicably killed her baby. It is impossible to make sense of stuff like that, but people make big mistakes in strained times.

So now when I see the Fed losing their head, and congress and the media freaking out about housing and the economy, we are at a place I suspected we’d be. It’s just happening faster that I imagined. Sure, cheaper houses are on the way, but so is the fallout. And IMO, these are not the times to lose perspective, but rather to keep a cool head. Pay attention to where we are headed, and act accordingly.

Comment by wmbz
2008-01-25 03:41:05

“So now when I see the Fed losing their head, and congress and the media freaking out about housing and the economy, we are at a place I suspected we’d be. It’s just happening faster that I imagined”.

I concur Ben… One thing that has surprised me though is how many of the powers that be/experts claim they”didn’t” see this coming. I can, to some extent understand a younger age group not grasping the depth of what’s to come, but the older crowd (myself included) knows that you can not dispense with the fundamentals no matter how you try, or no matter how smart you think you are. What goes up must come down…

 
Comment by de
2008-01-25 04:11:50

I got upset, too, when a Bloomberg TV crawler announced a “bailout of MBIA and Ambac.” Bailout - their words, not mine. And, it was coupled to a several hundred point stock market jump as the wall street sheeple reacted predictably (buy first, analyze later). Turned out the NY Insurance Commissioner was trying to find out what would be needed to shore up these companies. He found out it was beyond the capability of the now struggling investment banks. Much ado about nothing.

These are turbulent times. Unfortunately in time such as these calm, reasoned legislation (like calm, reasoned thought) goes out the window as every elected official in 50 states tries to come up with a “solution” and every individual is afraid their ox is the one getting gored. My fear is that as the situation gets worse - as it will - some really dumb solution, such as an out and out bailout will take place, totally devestating the economy through unintended consequences.

Men are accused of thinking with their sex organs. Politicians appear to think with their misguided compassion for people they can’t help, and lash out anyway, spending public money on bridges to nowhere. My concern is that eventually they will be successful.

Comment by Ben Jones
2008-01-25 04:14:38

‘My concern is that eventually they will be successful.’

If you really believe that, then go buy a dozen houses.

Comment by txchick57
2008-01-25 04:22:44

I don’t know why I am so interested in this topic. I haven’t owned a house in over 15 years and I’d say it’s better than 50-50 we’ll rent forever. I go back and forth. I guess it’s the human factor.

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Comment by Bye FL
2008-01-25 04:53:17

Wow I didn’t know that! Houses weren’t bubbly 15 years ago, even 10 years ago. I hope you are getting a good deal on rent where it’s cheaper than buying the same house. My attitudes towards renting was very negetive(throwing money away) before the bubble, but ive since changed my tune and realized the smart people are renting now(if cheaper than buying) while waiting for house prices to return to fundamentals(and if they don’t just rent forever or relocate)

I remember you almost spent $225k on a house that’s worth $125k. Very interesting story you told us, someone bought it for $300k(possible mortgage fraud) maybe youll be able to buy it for $150k or less from the bank :) Good luck!

 
Comment by txchick57
2008-01-25 04:59:24

No, I never tried to spend 225 on a house worth 125. That’s not me. I know what I’m doing and I would try to spend 225 on a house worth 450.

 
Comment by Bye FL
2008-01-25 05:08:11

That house I saw, I strongly believe will drop to $125k. Theres some very overpriced houses in Texas, but 90% of them are only slightly overpriced. Nowhere in FL or CA is there such a huge disparity where one house costs $50k and another house costs $500k!

 
Comment by txchick57
2008-01-25 05:10:28

you’re wrong but whatever, not worth arguing about

 
Comment by Bye FL
2008-01-25 05:33:30

I don’t wish to argue either, ill just say that ive been told you can get a $75k house in a middle class neighboorhood in Texas. Here in south FL, the same house can’t be touched for under $200k. I don’t care about upper class neighboorhoods and they aren’t worth the price by a long shot either.

$60/foot gets me a very nice middle class house. I see brand new to a few year old 2500 square feet homes for $150k. That same house can’t be touched in south FL for under $375k and in parts of California, it’s over a million.

Funny thing is ive been told those “affordable” homes in Texas are still going down in price! Where will it end at? $40/foot? This will get me my dream 2500 square feet house for just $99,900! I would probably relocate to Texas if I see this price point in a safe, middle class neighboorhood. So will my brother and possibly my parents too!

 
Comment by GH
2008-01-25 05:45:42

One thing that is important to keep in mind is that what a house is worth today has nothing to do with what it was worth in 2005-2006. At that time there was EZ credit everywhere and all important no doc loans. Today, a property is worth by my best estimate a multiple of it’s rent receipts, probably 100 - 120x.

Just because a house was worth say $500K in 2005, does not make it a bargain today at $350K. It might be, but you have to look at time tested fundamentals to make sure,

 
Comment by saywhat?
2008-01-25 05:51:23

“Funny thing is ive been told those “affordable” homes in Texas are still going down in price! Where will it end at? $40/foot? This will get me my dream 2500 square feet house for just $99,900! I would probably relocate to Texas if I see this price point in a safe, middle class neighboorhood. So will my brother and possibly my parents too! ”

Please, stop teasing and just do it! The roads in Texas are paved with gold.

 
Comment by Snapfroze
2008-01-25 05:55:19

Good comment. I think it is so interesting for me because of the human factor also. I haven’t owned the house I live in for more than 15 years. I own a place I’ve rented out for many years and may never live there again. I have rented many other places during the past, in several different countries, all with their own interpretations of what property ownership is. The human factor of perceptions of value has been pretty consistent in North America, Europe and the Middle East, at least in the locations I’ve rented in. That is as the price has gone through the roof for property, the vast majority of owners have been so happy with what their home is “worth” even if they don’t intend to sell it and realize the gain from the original price they paid. The psychology of personal worth as measured in local currency and accumulated stuff continues to be of interest to me, as balanced against people’s capacity to be happy with themselves. The deflation of housing prices should be a good thing for many people who desire the stability of a home purchase, but I also believe that there will be a lot of pain to go along with the price reductions. Attempting to look ahead at the recession part of the equation and get financially, mentally, and spiritually prepared for it is also part of the reason I read here. Thanks Ben.

 
Comment by aladinsane
2008-01-25 08:37:51

One of the biggest traps for people in our country, is they’ve been trained to be shoppers, not buyers.

Imagine how crappy you’d feel if knowing what you do from reading this blog, and then went head-first into a house that had dropped 30%, on it’s way to dropping 75%?

 
Comment by desertdweller
2008-01-25 23:21:11

Spent a few hrs looking at furniture in Big dept store in Chicago and as I was looking downstairs at sale stuff later, another looker and I agreed that the furniture on sale was still overpriced and would possibly sit for quite awhile longer till minimum 50% were slashed.
So, as looking around peripheral things to buy, it would seem that even the majority of our furniture which is made in China is overpriced and like housing, the reluctance to lower prices aggressively won’t happen for a little while longer.

 
Comment by desertdweller
2008-01-25 23:23:16

ps I was only person I could see in over 10,000 sq ft of furnishings in the afternoon looking at furniture.

I was waiting for friend to come out of appt. And no sales agent approached. Which was perfect for me, but gosh, it looked to be a slow slow day or wknd a coming.

 
 
Comment by de
2008-01-25 04:39:38

No - that implies that I think they will be successful in putting money in the borrower’s pocket. As stated, my concern is that they will be successful in wasting money.

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Comment by Ben Jones
2008-01-25 04:44:16

I have stated over and over that IMO the government has, is and will continue to do that. Personally, I quit worrying about it and plan accordingly.

 
Comment by de
2008-01-25 04:45:15

That’s what they do, isn’t it?

 
Comment by shakes
2008-01-25 05:52:18

KNOW THY ENEMY and if you are a saver then the Govmint is your enemy. He is currently allowing inflation tick off at 4.1% and growing while only guaranteeing 3.5%

 
Comment by david cee
2008-01-25 07:51:30

“allowing inflation tick off at 4.1%” I guess you are not eating food of pumping gas. More like 12% for things that matter.

 
 
Comment by Evil Capitalist
2008-01-25 06:14:50

My concern is that eventually they will be successful.’

If you really believe that, then go buy a dozen houses.

I think the question is what’s the definition of “success?” Do I believe that these and other actions in a few years will unwind the mess we got ourselves into? Absolutely. Would I consider that to be a success? Certainly. For some reason a lot of people think that successful unwinding of this mess implies maintaining current valuations…

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Comment by wmbz
2008-01-25 04:30:42

“My concern is that eventually they will be successful”.

I think it’s a very safe beat they will NOT be successful. Why? Simply because this leviathan is far to large and will run it’s course no matter how many obstacles ‘they’ put in the way. For what ever reason there is a pervasive attitude that ‘Nanny’ (Big Government) can cure all ills and heal all wounds. This BOO-BOO is far larger than any of their band aids and time will show it… Never fails.

Comment by de
2008-01-25 05:44:38

Let’s clarify what I mean by ’successful.’ I mean that the PTB will succeed in passing a band-aid which will blow things up… the unintended consequences sort of deal.

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Comment by nhz
2008-01-25 04:23:56

good points, but … I did see all this coming for some years, like many have been surprised by the speed at which things started unraveling in the last 1-2 months (without a doubt first of all thanks to Uncle Ben panicking). A quick look at the gold price every day says it all. I’m also VERY pissed off that the correction in the housing market is very minor (except for some US hotspots) compared to the damage that is now occuring outside the housing market, like the intensifying War on Savers and the rapidly tanking economy. All thanks to disgusting central bank policy, directed at saving the big speculators in the housing and stock market. After this bubble has run its course there will be many loosers and very few winners (mostly the corporate crooks and banksters that are above the law).

Dutch politicians are freaking out now that the housing market has stopped climbing; I wonder what they will do when prices go back to where they belong, at the historical trendline (about 85% below current level).

Comment by Frank Berlin
2008-01-25 05:11:26

“Dutch politicians are freaking out now that the housing market has stopped climbing; I wonder what they will do when prices go back to where they belong, at the historical trendline (about 85% below current level).”

nhz, that’s what I am interested very much too. Not just the Dutch government, but also the Spanish, both are Euro countries. And of course the UK. And the EU commission and the EU council.

There will be elections in Spain this year, in the UK and Germany in 2009. Could be interesting.

How wil the ECB cope with the upcoming and escalating disparities within the Eurozone?

Will Europeans buy all the made in China stuff now that the US consumers have absorbed so far?

Robert Reich, President Clinton’s former secretary of Labor, tells Newsweek,

“…but the good news is that consumers in Japan, China, India and Europe are now far better able to fill-in the gap when American consumers fail to do the job they have been doing for decades, which is to buy enough of the world’s goods and services to keep the world out of recession. Remember American consumers have been the Energizer Bunnies of the global economy for some time. Now others around the world are wealthy enough to become Energizer Bunnies themselves.”

http://www.newsweek.com/id/101108/page/1

Well, Japan is out already. China’s economy is not even as big as Germany (GDP), at least not yet. And will the Europeans be ready to take in so much debt? Not even close. Some countries, such as the UK, simply can’t, and others just won’t because of a different culture.

Comment by Ben Jones
2008-01-25 05:22:34

‘Whatever kind of correction the U.S. is headed for, policymakers don’t want it to happen all at once. The Fed’s rate cuts and the roughly $145 billion stimulus plan currently being mooted by the White House and Congress are all about pumping enough demand into the economy to make the journey downhill smooth and gradual.’

‘Consumer spending used to make up about 67% of all the economic activity in the U.S., but over the past few years, it’s ratcheted up to around 72%.’

‘If we take the 5 percentage points out this year, it will be the mother of all U.S. recessions,’ Roach says.’

‘But putting the adjustment off indefinitely isn’t a great idea either. ‘It’s just pushing the fundamental problem down the road,’ says Columbia University economist and Nobel laureate Joseph Stiglitz. ‘The problem with the U.S. is excessive consumption.’

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Comment by CA renter
2008-01-25 05:38:02

‘It’s just pushing the fundamental problem down the road,’
———————
Exactly. My worry is jobs. As long as the correction is taking place, we will have big problems in the job market.

If they get the pain over with quickly — and maybe put people to work on infrastructure projects, etc. in the meantime — we can get back to creating REAL jobs, and the economy can get back on track.

If the PTB keep the recession going for years and years and years, we will have very severe socio-economic consequences, IMHO. Much worse than if we had a very violent and quick trip to the bottom. The sooner we get through this, the better.

(BTW, Ben, agree that we don’t have a foreclosure “crisis”. Foreclosures are the solution to the **crisis of lax lending and too much leverage/debt**. Thanks!

 
Comment by CarrieAnn
2008-01-25 06:07:01

From Ben’s link:
“The surprise move arrested the rout, and the markets have since rallied, but investors are left to absorb an unavoidable truth: the U.S., still the world’s biggest market for exports, appears to be in real economic trouble.”

It’s difficult for me to believe investors have absorbed anything when I see the size of the repeated rallies in world markets.

 
Comment by aladinsane
2008-01-25 08:43:49

The 70’s in the USA was a little similar to what’s going on now, with 2 major differences…

Wages increased along with inflation, somewhat.

People had savings.

(And the clothes were uber funky)

 
 
Comment by nhz
2008-01-25 05:39:46

Spain has elections in March, first test of this kind in Europe. Zapatero must be hoping that the great unraveling is delayed another 2 months, otherwise he will for sure loose the elections. The conservatives will blame the few years of socialist government for the popping of the housing bubble and all the economic fallout that results. Of course the reckless policies of the PP party AND the ECB are the real culprits - although Zapatero could have done a lot more to take some air out of the bubble. I heard politicians in Spain are very nervous about this.

What will happen? Nobody knows, today I read that Dutch producer confidence is at an all time high and consumer confidence is extremely low (all blamed on the subprime stories now). Go figure …

But I’m sure the downside in Europe is bigger than in the US. I think Germany is about the only EU country left where the economy still makes some sense; all the rest are strongly based on reckless financial speculation (either directly through real estate, or indirectly through financial activities) and/or they have very severe ‘entitlement’ problems (like France).

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Comment by Frank Berlin
2008-01-25 06:23:10

Zapatero could have done a lot.
In Germany, it doesn’t make much sense to flip houses. Taxes and notary fees are simply too high.
So, governments can stop such bubbles quite easily.

But now, the Spanish government cannot do very much. Spain has a very high current account deficit (6,4% of GDP in 2005), and getting worse. Debasing the currency is sth the US can do, but Spain can’t. A huge stimulation plan? Will not work, and is limited by the Eurozone rules. Lower interest rates? Not as long as inflation is up in major Euro countries.

A look at mentalility:

I recently met an Englishman, he is now working in Germany for three years. It would make any sense for him to rent a decent home, but no, he bought one. Of course, it was very cheap compared to London. I asked him if he would keep the house when going back to the UK. He said he expects to sell it with a sizable profit. Good luck to him.

The German producer confidence is even higher than in December, consumer confidence is stagnant. Germans will not buy more than in 2007. 45% of Germany’s GDP are earned in exports. Most of these exports go into other Euro countries, but also to the major oil exporters. Even though the economy is in a relatively good shape, it will be affected. Germany should probably spend more, the huge current account surpluses accumulated over about 50 years would allow that. Germany could become a net importer for a while. But I don’t think that will happen. The trade unions will achieve real wage increases this year, but the Germans will simply save more.

 
Comment by sagesse
2008-01-25 09:37:42

Are notary fees there not comparable to closing costs in US? Is it not mainly the difference in attitude, wher in Germany, the cost of buying weighs more heavily on the consumer’s mind?
Also, just met a young couple, they are spending some time of the year in Berlin, and ‘bought a house’. They are not German. Different attitudes. (embracing change versus fearing it…after this bubble, don’t know which I prefer).

 
Comment by Frank Berlin
2008-01-25 10:25:29

Sure, different attitudes are very important. But even then, even foreigners with a different attitude cannot flip houses so easily to make a profit.

First, the tax when buying a house is 4,5% in Berlin, notary fees 2%, the realtor gets another 3-6%. If you need a mortgage, the banking fees need to be added. So, closing costs are about 10%. Then, if you sell the house earlier than 10 years after purchase, you have to share the profit (if there is one) with the ‘German IRS’ again.

A house usually does not appreciate 10% during a couple of years, for the last 10 years, house prices have been flat in nominal terms and down in real terms. I am still paying the same rent as I did 10 years ago.

Owning a home, of course, is not free either, there are of course property taxes and insurance fees. You should also add opportunity costs. Instead of owning the house, you could have invested into the bond market, in Germany, that has been much more profitable…

 
Comment by nhz
2008-01-25 11:34:44

regarding buying/flipping cost:
in Netherlands closing costs are around 8%; most of that is a ‘transfer tax’ for the government, realtor/notary fees are relatively low nowadays. Any gain on selling your home is tax free (even if you pocket more than a million) while all the buyings costs and the mortgage are tax-deductible. As a result, nearly 50% of the cost of buying/owning a home is paid for by the tax office. Over the last 15 years the closing costs were irrelevant, because you could always add them to the mortgage amount plus the homes appreciated at more than 10% yearly anyway. Also Netherlands has a special pro-flipper regulation: if you sell the home within 3 months you don’t have to pay the transfer tax, so the closing costs are close to zero. Government says this special tax exemption is to prevent housing speculation, in reality it does exactly the opposite and increases the incentive to flip homes for a quick profit (driving up the price with every resale).

Just these few differences (there are more ….) that explain why Netherlands has a huge housing bubble and Germany has no bubble at all.

 
Comment by Frank Berlin
2008-01-25 13:22:52

“Also Netherlands has a special pro-flipper regulation: if you sell the home within 3 months you don’t have to pay the transfer tax, so the closing costs are close to zero. Government says this special tax exemption is to prevent housing speculation, in reality it does exactly the opposite and increases the incentive to flip homes for a quick profit (driving up the price with every resale).”

Oh my, that explains a lot. It appears the Dutch government is even worse when it comes to telling the truth than the German government. Germans still have some of the scepticism against the government left from the past. For quite a long time, children were raised not to trust the government too much. The German constitution effectively limits the power of the government and gives a lot of power to the people, not as in Switzerland, but with the freedom rights and the constitutional court. The German MSM are not as critical as they used to be, but not as bad as CNN has become.

It appears that the EU is trying to override those freedom rights. And the lessons learnt in the past are fading.

 
 
Comment by shakes
2008-01-25 05:47:27

China’s economy is not even as big as Germany (GDP
I recently read that in China that ’stocks’ is searched more than ’sex’ As a red blooded male I found that information extremely unnerving!! I think the Chinese will lose a lot of wealth when their 50 times P/E crashes down and takes out many in its wake

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Comment by ChicagoANT
2008-01-25 17:08:31

The correction will pick up pace once more jobs are lost. If you had a good paying job before, most likely your next job will be less……not enough to make that mortgage payment.

The slower everyone wakes up to reality of truths, the more time I have to pay down my debts and pad up the savings.

 
 
Comment by danni
2008-01-25 05:08:31

It’s funny, I had a conversation with my 65 year old mother about a recession and even the possibility of a deep one and she was one of the first people to take me seriously. she doesn’t pay much attention to housing, stock market, etc… but she did raise 11 kids during the seventies.
Mom has started to cut back on her spending and has told my 75 year old Dad that he needs to start walking more to get in shape because she wants him to be able to get about during hard times.
My sibling and friends, however, shrug and pretty much say easy come, easy go. And when I explain the importance of cutting back, saving money, etc.. they politely smile but otherwise think I’m nuts. Our long island town is still living high on the hog…their houses might not be doing anything but sitting there with their high wishing prices but everything is the same.
Danni aka chicken little still runs around screaming the sky is falling and nobody cares.

Comment by Ben Jones
2008-01-25 05:17:35

All you can do is all you can do. I try to take time everyday to camly assess where I think we are in the cycle, what steps would be constructive at this point and that. Other than this blog, I don’t bother discussing real estate except with interested friends.

Comment by Faster Pussycat, Sell Sell
2008-01-25 17:13:33

It is an extraordinary waste of time. I just change the subject these days.

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Comment by ChicagoANT
2008-01-25 17:26:51

We will not have hit the bottom of this economy until many of us HBBers are affected by either job loss and disowned by credit-loving relatives bc we’re not sharing our savings stash with them.

As much as I’d like to see the bottom coming soon, I imagine something worse than a personal Katrina. There will be no rescue for us Joe Schmoes unless there’s something in it for the PTB.

I choose not to be a debt slave, and choose devotion to only one God……my Lord Jesus.

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Comment by eedork
2008-01-25 05:21:35

Hi -

This is my first post, although I’ve been reading this blog for probably 1.5 to 2 years. Thank you Ben - this has been my sanctuary during the craziness of the past few years.

This particular comment really strikes a chord with me. While it is good to finally see the housing market, generally speaking, descend back towards reality, there will unfortunately be a lot of stress and bad news as a result. The collateral damage is what worries me the most. Many people that do not deserve to get burned by this will get burned, and there will no doubt be many more horrific stories of people doing terrible things as they try to cope with the stress. I don’t have a crystal ball so I don’t know how this is all going to shake out. My hope is that people learn from this mistake and move on. Unfortunately those that repeat this mistake will probably far outnumber those that learn from it.

‘these are not the times to lose perspective, but rather to keep a cool head. Pay attention to where we are headed, and act accordingly.’

I think this is solid advice and I agree with Ben 100% on this.

-Matt

 
Comment by guess who's
2008-01-25 05:40:16

Good post, Ben!

It just annoys me sometimes that the panic only happens on the way down. The government and the Fed should have stepped in when things were going up so rapidly. When things go up, it’s the market and you shouldn’t try to control the market. When things go down, somebody has to do something urgently to control the market.

 
Comment by reuven
2008-01-25 06:03:01

When homeowners would excitedly tell me how their house had appreciated $10,000 a month.

Let’s see if we can find ONE EXAMPLE of a person who, in 2005, with the belief that he was making $10,000/month, gave away $1200 of it to some needy person.

 
Comment by exeter
2008-01-25 06:07:23

B Jones said “we are at a place I suspected we’d be.”

Correction: We are at a place we’re supposed to be.

Ben, my experience of the bubble/bust of the late 80’s and early 90’s was quite similar to yours aside from the asynchronous timeline and differing geographical region. Both bubbles induced by greed, both busts mushroomed out of fear and this bust is no different other than the fact that it seems all geographic regions appear to be imploding within the same timeframe, say 6 months plus or minus 30 days. It is because of this tight alignment of time that I believe the fallout from this bust could be far more dangerous than those we experienced years ago. Based on my recollections of our boom/bust cycle of years ago, every metric related to the 2000-2005 insanity went way off the charts. From building to transactions to level of euphoria….. off the charts. The PTB are acting in a way so as to hold this thing together and considering the past, I have no doubt they will fail even in spite of all parties efforts to do so (NAR’s new propaganda, FED rate cuts, getting our packages stimulated, etc etc)

 
Comment by mrktMaven FL
2008-01-25 07:34:17

This ain’t over. Any entity willing to play chicken with this bust is going to get wiped out. Many middle class families are preparing to walk away from their homes and specuvestments. These families will dictate the outcome of this debacle. The rest is smoke and mirrors. Don’t be sheep.

 
Comment by Professor Bear
2008-01-25 08:27:30

Ben,

I sincerely appreciate your level-headed perspective on the topsy-turvy economic transition currently underway.

 
Comment by crispy&cole
2008-01-25 09:13:55

:)

I am prepared, I just hope the PTB are. Unfortunately, they are not -IMO. I think once this conforming limit rises FNM and FRE will simply gobble up the crap that forced 100 companies to go bust. I know FNM has “controls” in place that the other lenders don’t have, however, when these slimeball brokers need money to eat they will repeat the same crap.

Comment by salinasron
2008-01-25 10:26:17

“I am prepared, I just hope the PTB are.”

Interesting statement! I think that the PTB are prepared in the sense that they will react to the stimuli of the moment. I don’t think they have a long range plan, how could they or us without knowing the total depth of this financial debacle. I would like to say that I was prepared, in truth, as I sit here today I feel that I’ve taken the necessary steps to comfortably sleep at night but in truth there are no guarantees. There is no guarantee as to what the financial institutions or government will do in their behalf. There is no guarantee what will happen to pensions for those retired. There is no guarantee as to how your fellow man will react when pushed to his limits. What happened in Texas(80’s)didn’t bother me here in CA but what’s happening now will effect us all. I think all here need to think of what it would be like to live in a depression and thank our stars if things stop with a moderate recession and depressed RE values for many years to come.

 
Comment by Dont Know Nothin About Buyin No House
2008-01-25 20:43:09

Yes. Surprised how few on HBB are discussing the implications of FNM/FRE limit rises.

 
 
Comment by Lost in Utah
2008-01-25 10:27:50

Ben, your post really moved me. I have friends in Charlotte who have worked hard all their lives, in high tech, investing everything they could in the stock market. One donates all her free time to helping the pets of the homeless (driving them to vets, paying for it, free dogfood, etc.). They are both wonderful people. She just confided to me that, to date, they’ve lost 1/3 of their retirement from the stock market going down. Another friend in Oregon who has been very frugal all her life (won’t use a dishwasher, makes her own soap, etc, I mean FRUGAL), told me last night that a stock she’s depending on for retirement income (inherited from her parents, and she’s 70) has decreased from a value of 46k four years ago to 6k. My aunt and uncle in Alaska have invested heavily in the stock market through the years and I worry about them.

These are real people, good people, and they contribute to charities and to helping others - so this is already having a domino effect. You’re absolutely right, time to focus on outcomes as opposed to getting caught up in fears. The paradigm is shifting, and the wise will see this and make the shift. Let’s focus on what we can do to help not just ourselves, but others, too. Thanks again for this blog, and for those of you who haven’t donated to Ben lately, please do so (unsolicited advertisement).

Comment by Paul in Jax
2008-01-25 13:16:35

During the Great Depression the stock market lost almost 90% of its value. Once people begin running out of money to pay their bills, including their mortgages, they begin selling stocks. Inflows of money into mutual funds is beginning to decline rapidly worldwide (for example, 5 straight weeks in Asia); without that new money stocks have to decline.

At some point, valuations become meaningless on the downside, just as they did during the bubble on the upside. This is a lesson that has not been re-learned since the 1930s. There is no natural floor for stock prices - none.

Because the overvaluation of assets is so great on a global scale, there is the possibility for a meltdown in the stock market, sooner rather than later. I predict that by the time of the Olympics there will already have been a rather large crash in the Shanghai market and that Chinese equities will be trading below half their peak valuations.

Real estate on the beach in Panama or Vietnam will hold up rather well, relatively.

 
 
 
Comment by Russell
2008-01-25 03:35:39

How about the bundling of the Fannie Mae’s and Freddie Mac’s conforming loan amount raise to $729,750 from $417,000 into the bipartisan free money handout that isn’t going to help the economy much if at all.

Makes it political suicide to vote against free money handout, makes big banks/big mtg companies happy, able to unload billions of sh*t paper off the books to reduce further write downs and make millions in refi fees for everyone who can afford their current jumbo who still have a decent LTV?

I guess it’s good news for those people, but isn’t it just going to delay the inevitable decline to reasonable prices by the year it’s supposed to be in place?

I’ve been thinking 2010, maybe now 2011-2012 for jumping back in…

Comment by Kim
2008-01-25 08:57:49

“How about the bundling of the Fannie Mae’s and Freddie Mac’s conforming loan amount raise to $729,750 from $417,000 into the bipartisan free money handout that isn’t going to help the economy much if at all.”

Just because Fannie/Freddie can doesn’t mean they will take on those mortgages. They can’t be forced to, can they? Jeeze… one would hope their management has learned something from this whole mess.

 
 
Comment by de
2008-01-25 03:54:42

After thinking about it, I’ve come to the conclusion that the conforming loan extension – while it won’t help many people – is needed in order to prices to get back to a reasonable level. This assumes that Fannie/Freddie won’t touch a toxic loan for this amount but insist on reasonable underwriting standards. Yet to be proven, of course J

This will simply underpin the jumbo market, allowing these higher priced houses to sell – at much lower prices than they were purchased – and allowing the market to correct. Without it you run the risk of simply having a situation where a qualified buyer is unable to get lending for a $500K or $600K house.

“Bipartisan free money handout?” Who is getting free money?

I’m not dumb enough to believe that no one will default on one of these things, but if the underwriting standards require anything reasonable (PITI not exceeding 29 percent of take home, for example, along with fully documented income) the net effect should be to restore some order to the high end market, and as it comes down it will hasten the decline of the non-jumbo properties as well.

NAR.

They see that it is needed to even make the beginning of a dent in homes in CA, and they’re right.

But, running the numbers,supporting a $700K mortgage with reasonable lending standards requires a take home income well north of $200K a year (twenty-nine percent of housing load

Comment by Ben Jones
2008-01-25 04:25:19

‘Among those sounding skeptical notes was UCLA economist Edward E. Leamer, who said higher loan limits “are not going to matter much now” because the housing markets are still destabilized by bubble-era home prices that must continue to fall.’

‘The proposed new conforming loan limit is far beyond the reach of most people, Leamer said. “Most Americans can’t afford a $700,000 house,” he added. “They don’t have the down payment; they don’t have the income.’

‘Mortgages that size seem realistic only because “in the good old days, a year or two ago, you didn’t have to have the down payment or income” to get such a loan, he said.’

‘A bill wasn’t expected to be signed for six weeks. Banking consultant Bert Ely of Arlington, Va., a frequent critic of Fannie Mae and Freddie Mac, said the final version could be considerably watered down — restricted by region or available only to borrowers with significant equity in their properties.’

Comment by de
2008-01-25 04:42:37

Yes, and each restriction will permit some sort of a market to develop - while prices continue to come down.

Comment by phillygal
2008-01-25 07:28:11

What I see is significant about the lowering of interest rates and raising of conforming loan limits: the effect on seller psychology in areas where the slide is not as pronounced, such as the PHL metro.

Average Joe Seller, who is unaware of the big picture and could give a rat’s behind about growing inventory (cause his house is special), will believe that these govt. interventions are breathing new life into the market - and will price their house accordingly: Too high for prevailing conditions.

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Comment by nhz
2008-01-25 11:38:40

I’m even reading this in the Netherlands: some people think they can now ask a higher price because rates in the US went down 0.75 and Europe will surely follow. People only know the FED funds rate here, of course they never see actual US mortgage rates. With our already low mortgage rates (e.g. 4-5% for 5-30 year fixed loans) a rate cut of 0.5% could easily increase homeprices by 10-20%, as long as the bubble psychology is intact.

 
 
 
Comment by WT Economist
2008-01-25 07:40:45

Ben, how about discussing this quote from the Los Angeles Times:

“And in a provision crucial to high-housing-cost states such as California, there would be a significant one-year increase in the size of mortgages that could be backed by the government. That would make it far easier for homeowners to refinance into more affordable mortgages.”

http://www.latimes.com/business/la-fi-stimulus25jan25,0,1560249.story

“Backed by the government?” Does the MSM have the facts wrong about Fannie and Freddie? Are you sure “the final version could be considerably watered down — restricted by region or available only to borrowers with significant equity in their properties.”

 
Comment by Professor Bear
2008-01-25 08:45:09

Other than qualifying another generation of knifecatchers to bring liquidity to the moribund resale market and reprice the comps at the next leg down, I don’t see this raising of the GSE limit as having much effect on demand. Prices were driven through the roof in large part by making loans to unqualified buyers, and that in turn was only made possible by ignoring prudent lending practices like income verification. With 100+ subprime lenders gone for good, demand is far more dependent at this point on fundamental considerations like household income and credit history.

 
 
 
Comment by txchick57
Comment by Paladin
2008-01-25 04:37:11

….Appraiser Sean Nguyen….hmmm. I see a lot of Vietnamese and Filipino names pop up in the course of my mortgage fraud investigations in California. Kimberly Nguyen, Cynthia Nguyen, NG, Do, ….. one after another. A lot of them are from Fremont and the SF East Bay…. This seems to be a trend in CA….

Comment by txchick57
2008-01-25 05:01:16

Dallas is a hotbed of this type of activity and was in the 80s too. And yes, I used to comment a lot a couple of years ago about the role of non-citizens in this bubble making things worse than they probably needed to be. The Nigerians were particularly active here.

 
Comment by txchick57
2008-01-25 05:12:51

from the article. Amazing considering there was never any bubble in Texas and it is so cheap (sarcasm off) but how many times have I said it is as crooked here as any acknowledged bubble area?

In a 2006 report by the federal Financial Crimes Enforcement Network, Texas ranked fourth in real estate mortgage loan fraud. Only California, Florida and Georgia had more instances of mortgage fraud than Texas.

 
Comment by Patiently Waiting
2008-01-25 05:33:22

Vietnamese run most grow-ops in Vancouver.

Check out this Vancouver Sun story from 2005:
http://preview.tinyurl.com/3ytg4c

“Because 70 per cent of Lower Mainland grow-ops are believed to be run by the Vietnamese, they turn to real estate agents and brokers in their own community when purchasing properties, Nadeau said.

“A lot of people are much better at exercising willful blindness than they are at exercising due diligence. If I don’t know, it is all right. They just turn a blind eye to it and off they go,” Nadeau said. “I think you are dealing with a number of cooperatives within the Vietnamese community.” “

 
 
Comment by guess who's
2008-01-25 06:09:22

“A man with a briefcase can steal more money than 100 men with handguns.” Don Corleone, The Godfather

Comment by aNYCdj
2008-01-25 06:30:08

Even better:

We should drug test all executives, because they can steal 100 times more then the guy on the loading dock!

Comment by phillygal
2008-01-25 07:14:30

why? - all you’re going to get is a bunch of Viagra positives.

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Comment by Leighsong
2008-01-25 04:28:38

From the article:

…But a local mortgage expert said that while there were concerns about appraisals in North Texas earlier in the decade, for the most part there aren’t problems with appraisals happening today…

I want to take the keyboard away from this flipping “journalist”.

LOL,
Leigh

 
Comment by Lee
2008-01-25 04:35:15

The congressional helicopter will do no good. The package won’t stimulate the economy and even if it could it will come to late. The payments won’t start until May and June.
I shudder to think what new fix our political saviors will come up with then.

Comment by combotechie
2008-01-25 10:01:56

But the helicopter will offer hope to the FB voters, and this hope, however false, will encourage the FBs to dig deeper into their pockets and keep up with their mortgage payments.
This is a good thing; their fresh money into the financial meatgrinder will keep the meatgrinder lubricated, will keep it from freezing up.

The RE market needs to be let down slowly, IMO. It took years for the bubble to reach its zenith; years need to pass before it bottoms out. It it bottoms all at once (as in a crash) then the economy will freeze up and we will all be screwed.

Comment by Gulfstreamsitter
2008-01-25 16:23:17

Most of the commentary/letters to the editor around here are from people laughing at Congress/Bush, for thinking that $600/$1200 bucks is going to help with anything.

 
 
 
Comment by wmbz
2008-01-25 04:36:15

Just for sport… Which national home builder will be the first to close up shop/BK?
I am going to say… Beezer, if for no other reason than they have to build what I would say is the poorest excuse for a house that I have ever seen.

Comment by aladinsane
2008-01-25 08:53:26

Ya think they’ll be in Rezeeb’ership?

 
Comment by AZtoORtoCOtoOR
2008-01-25 11:05:44

I was quite happy with the two Beazer homes that I owned in Mesa and then Chandler AZ. Of course I was happiest about getting the Chandler (85249) house sold in May of 2006 for a profit close to $250,000 after “owning” it for 1.5 years.

I thought I was the only moron that would purchase a house for $440,000 and then have a huge mortgage of $325,000. Most of the motivation to sell was to get out from under my mortgage which had rendered me house poor. I have gone from my 5400 sq. ft home to renting a 2500 sq. ft. home. Funny thing, it is the same bed that was in the big house, but I sure sleep better at night now. I know that renting makes the most economic sense, but there are many days I miss my large 3 car garage. (And the status that comes with “owning” a 5400 sq. ft McMansion that you cant afford. (sarcasm intended))

Comment by aladinsane
2008-01-25 11:09:14

How much longer before we start seeing the captains of fraud hanging out in “the big house”?

 
 
 
Comment by Mormon_Tea
2008-01-25 04:40:21

Time for me to reiterate the notion that the deflation in housing prices and the debasement of the currency, otherwise known as monetary inflation, are happening at the same time - now.
I’ve used the analogy before that an individual can be caught in a riptide at the ocean. The effect is that in certain places, the current runs exactly opposite of the onrushing tide. Economically, this is what’s happening now. Housing and real estate prices are falling and will continue to do so. Our economic base is rapidly eroding. The recent government actions, announced and unannounced, can only add to the problem on both ends. The dollar will continue to fall versus gold and more stable currencies. Our domestic housing and real estate prices will continue to fall as the bubble bursts. Domestic economic growth will be negative for some time. If it is negative for four or more quarters it is properly referred to as a depression. So, yes, we have monetary inflation at the same time we have an economic depression. These are NOT mutually exclusive events. For the validation of this notion, ask yourself the following: Are not gold, silver, and platinum making NEW HIGHS right now, new highs for the move? Are not real estate values making NEW LOWS for the last 4 years right now, new lows for the move?
Monetary inflation is debasement of fiat currency, which happens when a government PRINTS and enables deficit spending.
Cost-push fiscal inflation is when WAGES rise faster than productivity PUSHING prices higher.
We are in a time of massive currency debasement (monetary inflation tide) where there exists a strong riptide, or countercurrent,
where relatively WEAK wages are PULLING prices down.
This to me is basic economic stuff, but most on this board are stuck on “is it inflation or deflation” - an irrelevant question founded on incorrect assumptions, not validated by empirical evidence, IMHO.
Lecture concluded; snap quiz next week maybe.
GLTA

Comment by Bye FL
2008-01-25 04:55:56

Too bad wages aren’t keeping with inflation. This causes people to go into debt in order to afford a middle class lifestyle. I hear the dollar is going out and the Amero is going to be the new choice of currency and this will give America a fresh start.

Comment by Leighsong
2008-01-25 05:20:47

Hi Bye,

This has probably been posted here before, and it’s a good read for many of the questions you pose.

Best,
Leigh

http://blogs.marketwatch.com/greenberg/2007/12/straight-talk-on-the-mortgage-mess-from-an-insider/

 
Comment by Evil Capitalist
2008-01-25 07:09:51

Huh? Baseline wage growth always accelerates inflation.

Comment by bluprint
2008-01-25 09:24:56

This is a circular argument. Wages are prices. Prices increase as a result of inflation. If wages cause increasing prices, then you are saying prices cause increasing prices.

Another similar argument, is that increasing oil prices cause increasing prices. Again, this is circular as oil prices themselves are prices.

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Comment by Blue Skye
2008-01-25 12:40:08

Is a spiral circular?

 
Comment by Evil Capitalist
2008-01-25 15:02:49

I said -baseline- wage growth. I did not say wages growth.

 
 
 
Comment by aladinsane
2008-01-25 08:51:12

All throughout South America in the 1980’s and 1990’s, countries did away with their currencies, and came up with new currency names, in addressing old economic problems…

It didn’t help 1 iota.

Comment by Paul in Jax
2008-01-25 18:52:31

You say cruzado, I say cruzeiro. . .

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Comment by salinasron
2008-01-25 10:33:02

“This causes people to go into debt in order to afford a middle class lifestyle.”

What the ####ing planet are you living on? Causes, causes people to go into debt. Drinking water may cause you to pee in you pants but going into debt is a choice. It’s a choice of ‘entitlement’ for having been born into the human race by you and those of your ilk.

 
 
Comment by kerk93
2008-01-25 05:30:36

Inflation is most correctly defined as an expansion of the money supply where the demand for money does not grow at the same rate. Deflation is the contraction of the money supply where the demand contracts at a slower rate.

What is used as a measuring device is the important concept.

Right now, the supply and demand for Fed Notes is not changing at the same rate, and the price is falling. As its price falls, the price-denominated in many cases in Fed Notes-of many other goods is changing as well, based on the fundamental changes in supply and demand for these goods.

As for precious metals, this phenomenon occurs as well. Depending on their use and exchange values, they are reacting based on the laws of economics.

I see the US gov’t on the path of creating more Fed Notes. They are doing this explicitly and implicitly, depending on whether the individual understands how the monetary and fiscal system works.

 
Comment by shakes
2008-01-25 05:42:35

I have just recently come to this conclusion after many back and forths. What are you invested in to protect yourself from the current environment? I am in Gold, oil (although much less) I am short the consumer (SCC), REIT’s Real Estate, The dollar. In the next few days to a week I plan on purchasing Ultrashort index funds both domestic and international. I am trying to time the rally. Once we get back to within 10% of the peaks I am entering my ultrashorts.

Comment by txchick57
2008-01-25 05:55:45

You can use former support at s&p 1375 - 1400 as a backstop.

 
 
Comment by nhz
2008-01-25 05:51:04

I don’t think the dollar will go down much vs. most other currencies. Just look at the euro: despite the recent 0.75% cut, another rate cut around the corner and Trichet saying they will certainly NOT drop rates, the euro/dollar exchange rate is essentially unchanged over the last few weeks. It’s a race to the bottom where all fiat currencies will take the lead from time to time but they are all going to zero.

As for housing deflation: except for people who purchased in the last 2-3 years, most of them are still WAY ahead of the tide. That could change, but I think the central banks will fight the deflation of homes and stocks so strongly that many homeowners will end up with a net profit (because their debt are erased much faster by real inflation than the value of their home gets eroded by deflation). I think one should look further than just wages (which will probably not rise much in the next years, but who knows). Forcing rates down and easing lending standards again will do FAR more for home prices then rising wages. It will not work forever, but no one knows for sure how long they can keep this con game running. Seems to me the house always wins, and all the small players always loose.

Comment by Frank Berlin
2008-01-25 06:42:06

The USD has already gone down a lot. It is still lower than it had ever been against the DM. Currency traders expect an ECB rate cut in June. I am not so sure. A lot depends on the trade unions.

Most German families still keep some banknotes from 1923. Unless the dumbocrats can hide inflation really well, they will not get away with it. ‘Inflationsangst’ is a very deep social memory in Germany.

Comment by In Colorado
2008-01-25 08:18:21

Most German families still keep some banknotes from 1923.

I was under the impression that the old European currencies are no longer legal tender.

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Comment by watcher
2008-01-25 08:23:35

Neither is confederate money but there is still a collectors’ market.

 
Comment by aladinsane
2008-01-25 08:57:07

In 1913 100 Goldmarks was roughly worth $25

in 1923 1 Billiarden Marks wouldn’t buy you a loaf of bread.

 
Comment by Frank Berlin
2008-01-25 10:30:14

Yes, they keep these hyperinflation bills a warning and a reminder. Teachers also show them to every kid.

The 1923 bills are worthless, but indeed a good reminder of how bad it can get when the government is in charge of the printing press.

 
Comment by aladinsane
2008-01-25 10:47:30

When I used to travel to Europe a lot, i’d always buy a crisp brand new bundle of 100 banknotes (cost me $6 to $10) of the failed country d’jour, and clandestinely drop them in public spots, as I like to watch people and their reactions…

There was always a choice of perhaps a dozen countries at any given time, to choose from.

Countries go bust all the time…

 
 
 
 
 
Comment by Ben Jones
2008-01-25 05:25:29

Now he tells us:

‘Former Federal Reserve Chairman Alan Greenspan said he’s worried that an ‘inevitable’ global recession will create a backlash that forces countries to retreat from worldwide markets. ‘Globalization has been extraordinarily valuable,’ Greenspan said. ‘I’m concerned that if we get into some form of global recession, which after this extraordinary boom is inevitable at some point, that there will be a very significant retrenchment in the opening up of markets.’

Comment by txchick57
2008-01-25 05:34:25

Why not. He’s got his book money and his hedge fund job. What does he care anymore.

Comment by crispy&cole
2008-01-25 09:16:24

He is now short this market!

 
 
Comment by wmbz
2008-01-25 05:43:11

They always return to the scene of their crime.

 
Comment by CA renter
2008-01-25 05:52:41

And then there’s this quote:

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

And in November 2002, Greenspan was saying this:

Financial derivatives, more generally, have grown at a phenomenal pace over the past fifteen years. Conceptual advances in pricing options and other complex financial products, along with improvements in computer and telecommunications technologies, have significantly lowered the costs of, and expanded the opportunities for, hedging risks that were not readily deflected in earlier decades. Moreover, the counterparty credit risk associated with the use of derivative instruments has been mitigated by legally enforceable netting and through the growing use of collateral agreements. These increasingly complex financial instruments have especially contributed, particularly over the past couple of stressful years, to the development of a far more flexible, efficient, and resilient financial system than existed just a quarter-century ago.

(BTW, lots of good stuff in this last link…he was largely referring to secuitized mortgages and the dispersion of risk…look how that turned out, “Maestro”.)

http://www.federalreserve.gov/boarddocs/Speeches/2002/20021119/default.htm
————————–

So…was he a fan, or wasn’t he? Looks like he’s now trying to distance himself from the disaster he created. Too bad, we know better.

 
Comment by GH
2008-01-25 05:58:39

IMO, while it seems as unpopular as it is unlikely large scale wage inflation is the only possible way out of this mess which does not involve massive credit defaults in the near future. This also implies protectionist policy which seems very unlikely. Amero here we come!

 
Comment by shakes
2008-01-25 06:01:13

This was one of the major concerns with the book “THE WORLD IS FLAT”. If this happens it will decouple and the efficiencies gained by globalization will cause huge turmoil!!

 
Comment by palmetto
2008-01-25 06:19:56

‘Former Federal Reserve Chairman Alan Greenspan said he’s worried that an ‘inevitable’ global recession will create a backlash that forces countries to retreat from worldwide markets.”

That would be a positive side effect. Man is just not advanced enough ethically for globalization at this time.

 
Comment by Professor Bear
2008-01-25 08:35:57

Here’s info on another forthcoming book about AG…

http://www.amazon.com/Greenspans-Bubbles-Ignorance-Federal-Reserve/dp/0071591583

 
 
Comment by reuven
2008-01-25 05:59:56

I think our weekend topic needs to be the “National Handout”. (I can’t call it “tax relief” because, as proposed, you’ll get it even if you paid no taxes! In fact, the people who pay the most taxes are excluded from it.)

Comment by exeter
2008-01-25 07:33:57

Are handouts to those who have underpaid for years unacceptable too?

Comment by aladinsane
2008-01-25 09:01:36

The situation currently isn’t really so much about a hand out, more that things are out of hand.

 
 
 
Comment by mrktMaven FL
2008-01-25 07:03:15

Is it safe to leave the bunker?

Comment by phillygal
2008-01-25 08:00:45

heck no.

the party’s just getting started! Come to think, if you like a “lively” scene, come on out!

 
 
Comment by Blue Skye
2008-01-25 07:36:08

An old friend has been subjected to my rants for many years. The gist of them should be obvious since I read Ben’s Blog. It’s safe to say we were not of the same opinion. While I shifted from owning to renting he HELOC’d. While I cut back on expenses and saved he took more loans to grow his business. Newly divorced, he has indulged in a lot of expensive dating activity while I practiced making venison stew . He couldn’t resist the Harley (financed). My outlet has been a project boat (cheap and cash). We took different approaches based on what we thought might happen.

Now he hears things in the news that sound like stuff I was blabbing about a couple of years ago. He asked me yesterday “What does this mean for me?” A long period of silence followed.

I don’t know, but i think it’s going to get interesting.

Comment by In Colorado
2008-01-25 08:20:37

He asked me yesterday “What does this mean for me?”

I think he already has a pretty good idea.

 
Comment by auger-inn
2008-01-25 14:09:13

Next time ask him if he has practiced squealing like a pig? :)

 
 
Comment by hwy50ina49dodge
2008-01-25 07:56:29

“says Columbia University economist and Nobel laureate Joseph Stiglitz. ‘The problem with the U.S. is excessive consumption.”

Ben, thanks for the story and history lesson…I lived through those times as a young worker starting a family…the only thing I would add to your remembrance, is that my “feeling” is that “everyone” involved this time are far more “leveraged” than at anytime in the past. Job losses & wage stagflation and “needed items” price inflation have not yet joined forces to cast the sick feeling of “financial flu” to epidemic levels across the Nation…soon the pantry’s of America will be storing more & more of “financial chicken noodle soup” ….humility & savings…. Potage du jour :-)

 
 
Comment by aladinsane
2008-01-25 09:03:41

The 300 million not so little pigs…

(an updated fairy tale, of woe)

 
Comment by CarrieAnn
2008-01-25 09:19:25

No bits today? So what happened to FTSE at 3:00?.

http://www.bloomberg.com/index_eu.html

 
Comment by aladinsane
2008-01-25 09:37:44

“No one can possibly have lived through the Great Depression without being scarred by it. No amount of experience since the depression can convince someone who has lived through it that the world is safe economically.”

Isaac Asimov

 
Comment by stewie
2008-01-25 10:04:23

Comment by Bye FL
2008-01-25 05:33:30
I don’t wish to argue either, ill just say that ive been told you can get a $75k house in a middle class neighboorhood in Texas.

Someone is lying to you.

 
Comment by Professor Bear
2008-01-25 10:07:32

Is it safe to assume the concern about inflated appraisals of GSE-purchased loans, which lead to Andrew Cuomo’s subpoenas issued to Freddie and Fannie last fall, has blown over, now that the political juggernaut to permit GSE purchases of loans up to $730,000 has been unleashed?
———————————————————————————-
January 20, 2008
Inflated values fueled crisis
Real estate appraisers say lenders, brokers applied pressure to raise mortgage levels

http://www.indystar.com/apps/pbcs.dll/article?AID=/20080120/BUSINESS/801200343/-1/LOCAL17

 
Comment by Professor Bear
2008-01-25 10:51:28

Political promises appear to be a fairly weak offset to the economic equivalent to the physical force of gravity…

http://www.marketwatch.com/tools/marketsummary/

Comment by Professor Bear
2008-01-25 11:39:03

It seems hard to believe, but it looks like it might almost be time to buy the dip once again. I can’t wait until Tuesday to see how the markets respond to the CIC’s ongoing discussion of the already-announced stimulus package.

 
Comment by Professor Bear
2008-01-25 11:45:39

The only thing bulls have to fear are their own shadows.

MARKET SNAPSHOT
U.S. stocks falter as Goldman reports trigger selling
Slew of positive earnings reports had helped offset economic worries
By Kate Gibson, MarketWatch
Last update: 12:42 p.m. EST Jan. 25, 2008

NEW YORK (MarketWatch) — U.S. stocks on Friday faltered as nerves frayed in the face of reports, including one that Goldman Sachs might trim its workforce in making annual reviews, which dimmed earlier optimism from a slew of bright profit reports.

“Fear and greed dictate the market in the short-run, when cooler heads prevail we’ll pay attention to earnings,” said Anthony Conroy, managing director and head trader for BNY ConvergEx Group.

http://www.marketwatch.com/news/story/us-stocks-turn-mixed-fear/story.aspx?guid=%7B4FD758F9%2DEF81%2D4441%2DADE5%2D2B3EAC0092B9%7D&dist=TQP_Mod_mktwN

 
 
Comment by Professor Bear
2008-01-25 11:50:08

Honest reporting can be highly detrimental to those who make their living by lying about real estate.

SD Housing Market, Presidential Campaign, City Power Struggle
Jan 25, 2008

Audio will be posted Friday afternoon.

The local housing market experienced a record number of home foreclosures last year. With the instability in the national and international financial markets, should we expect to see more economic hard times in 2008? How might the Federal Reserve’s interest rate cut impact the local economy?

Also, the presidential candidates are preparing for the “Super Tuesday” primaries that will take place in less than two weeks. What are the candidates doing to attract California voters? What kind of impact will California have on deciding who the next president is?

And, there’s been much debate about the power structure at San Diego City Hall. What are the proposed changes to the City Charter, and how will those changes alter the balance of power between the mayor and City Council?

Guests:

* Scott Lewis, co-executive editor of voiceofsandiego.org.
* Ruben Navarrette, Jr., a member of the editorial board of the San Diego Union-Tribune, and a nationally syndicated columnist.
* David Rolland, editor of San Diego CityBEAT.

http://www.kpbs.org/radio/editors_roundtable;id=10747

 
 
Comment by Majisto
2008-01-25 13:24:44

I have some anecdotal evidence that this new lower rate business is starting a mini boom at least on Long Island…

Long story short, the landlord broke our lease after 8 years and we’re looking at all options (rent, buy, move). We’ve been working with a family friend who is a realtor and over the past 2 weeks we have noticed that many of the listings we are trying to even see a showing of are already sold or under contract.
Granted, I cannot comment how long all of these houses were on the market and what the selling price was …and it may just be a coincidence…but I can’t help but feel that it’s deja vu all over again…we got screwed out of buying in ‘03-’04 during the great bidding wars…and just when we thought things maybe were turning (YES, we do see price declines…not much (or should I say not ENOUGH) it looks like it’s going nuts again.

Is anyone else seeing a surge of knife-catchers on LI or in their local area???? Or am I just losing my mind??? :)

 
Comment by aladinsane
2008-01-25 13:32:38

Just back from going out to breakfast, and the conversations of the tables to the right and left of us, were all about the housing bubble.

I listened in, as I was reading the el lay times, which told me people were “jubilant” over the proposed manna from heaven, plan.

The folks next to us, that were talking about the bubble, really had no clue to what’s what.

Comment by Paul in Jax
2008-01-25 16:33:18

Old Knowledge: Prices never go down in California. New knowledge: Prices are going down in California.

Would make it kind of difficult to figure out what’s what - your basic mind fc$k, kind of like discovering that in non-Euclidian geometry the shortest distance between two points isn’t necessarily a straight line.

 
 
Comment by aladinsane
2008-01-25 14:59:21

In honor of a heretofore unknown French rogue trader’s losses of $7 billion+…

I nominate him for “Black Swan” of the week… (B.S.)

 
Comment by FB wants a do over
2008-01-25 16:49:03

This weekend’s topic should be -

What will you be spending your Bernanke Bucks on?

 
Comment by edhopper
2008-01-25 17:12:22

Here’s something we haven’t talked that much about. Food prices.
I just went to the supermarket and eggs were $2.50/doz! A year ago they went for $1.20. Producing corn based ethanol has driven up the price of grains and feed (for the chickens who lay the eggs) and I don’t see lower prices at the gas pump because of it.
Now bio fuels and grain based ethanol are good ideas. But corn is a bad crop to use for it.
The big check we get from this so called stimulus package will probably go to higher food cost. End the subsidy for corn ethanol and use the money for something important, like the S-Chip program.
Oh yes, the bread from my little neighborhood bakery, that used to cost $1 is now $1.70.

 
Comment by ugh
2008-01-25 21:35:20

I’m investing in Zimbabwe currency.

It’s going to the moon!

 
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