The Housing Bubble

My sweetheart works in education for a Sacramento area school district. She just received a promotion a year ago and started at the bottom of the pay scale for her new position (more responsibility). It appeared likely she would get a 5% increase in pay each year, plus a CPI increase of 2-3%. The numbers looked very attractive. She just told me last week that the State of CA budget cuts means no raises at all this year. Batten down the hatches. The reality is that just having a recession resistant job is going to be comfort enough.

Fears Of Global Fallout From Subprime Debacle
2008-02-01 00:50:29 (7 hours ago)
Posted By: Intellpuke
(Read 107 times || 0 comments) Submit to Digg
http://freeinternetpress.com/story.php?sid=15149

January payrolls “worse than expected” (to the tune of 102,000 jobs).

ECONOMIC REPORT
U.S. payrolls contract by 17,000 in January
Major surprise: economists were forecasting 85,000 gain
By Greg Robb, MarketWatch
Last update: 8:59 a.m. EST Feb. 1, 2008

WASHINGTON (MarketWatch) — U.S. employers cut back their hiring in January for the first time in more than four years, government data released on Friday showed, perhaps providing the smoking gun showing that the economy has entered a recession.

http://www.marketwatch.com/news/story/us-payrolls-contract-17000-jan/story.aspx?guid=%7B925AC561%2D3996%2D496A%2DB147%2D4B3F2DB3714A%7D

Well sad to say that most of a cities budget IS wages and benefits.

So the MORONS in the past have chosen to cut sports arts music fire houses police precincts garbage pickup to 1 day a week..you know everything to make the sheeple miserable… and not pay/benefits

Lordie Be! Now that’s the best news I’ve heard in years, safety members getting salaries moved in the right direction. You really don’t need to lower the salaries you just need to do away with safety retirement and move retirement standards back where they were before the Ventura decision by the 9th circus court!

RE: Expect this trend to grow.

Urban unionized firefighters will let a few landmark properties burn down to intimidate the herd.

In the end they’ll get what they want.

More info…….sorry no link

a collection of $opinions in the bond market

Fitch: As of July 2007: Industry gross insured portfolio = $2.5trillion; industry shareholder equity = $24.5bn.
The industry guarantees $1.2trillion municipal bonds and around $800-900bn in structured finance products. CDS portfolio is $463bn (net seller). $287bn (or 61%) of CDS written on corporate bonds; 14% on RMBS.

Ackman from Pershing: detailed data show that MBIA, Ambac may each lose $11.6bn (”Open Source Model”); $15bn bail-out envisaged by regulators insufficient.
Thain, Egan-Jones, Independent Strategy: Private-sector financed solution unlikely, need capital themselves, asymmetric exposure

Egan-Jones: insurers probably need more than $200 billion to keep their “AAA” ratings in the face of the $80bn expected losses in the industry, not $15bn.

JPMorgan: insurers are sitting on $41bn of losses

Oppenheim: Citigroup, Merrill Lynch and UBS together stand to lose 45 percent of the total if insurers are downgraded–> risks are concentrated among those banks, not systemic.

ACA Capital Holdings downgrade to CCC provoked $1.9bn counterparty writedown at Merrill Lynch. If we multiply that by 8 monoliners we are close to $15bn
Davies: The average ratio of monoline equity to total net exposure is about 1%, so a new vehicle operating on a similar basis would need more than $21bn to take on the full $2,400bn in existing industry liabilities.

Also: six biggest insurers’ most toxic exposures amount to about $130.7bn, suggesting starting point for equity of only about $1.3bn for a new vehicle.
nc: Banks and securities firms posted cumulative $133 billion of writedowns and credit losses tied to mortgage securities in Q4, may need $143bn additional capital if monoline downgrades worsen (Barclay’s).

IMHO, the United States has been losing power for at least a couple of decades. We created a facade of “growth” via a credit bubble, and funded our military expansion via deficit spending.

At some point, we will no longer be able to simply roll over and increase our debt load. We’ve reached the point of debt saturation, and lowering rates is not going to solve the problem.

I expect we’ll see a global recession, with the U.S. leading the way. There might be a war in there, somewhere; and when the world rebuilds, I think the U.S. will no longer be the “leader of the world.”

China? Russia? A “socialist/communist” coalition? Not sure, but it probably won’t be us.

‘As America cuts interest rates to keep banks solvent, the dollar becomes less attractive to those countries who are keeping America afloat. Yet we need their capital to keep our ailing banks afloat.’

Sounds like a great recipe for fire sales of U.S. assets to sovereign wealth funds from abroad.

One of the ways that central banks affect the economy is through their influence on the price of assets, like shares or homes. Other things being equal, a reduction in short-term interest rates should bump up asset values, because their stream of future earnings is discounted by a smaller factor. Now that America’s housing boom is ending, the worry is that the Fed is less able to stimulate the spending that comes with rising housing wealth. Assets are already dear, it is said; there are no bubbles left to reflate. Falling home prices make for a nation of savers, not shoppers. And firms are not keen to invest when the market value of their assets is shrinking.

Falling asset prices hurt the market for credit too, interfering with another policy channel. Monetary policy affects the choice between spending now or spending later and, for the cash-strapped, credit provides the bridge from the present to the future. Interest rates are the cost of using tomorrow’s income to pay for today’s spending. Lower rates lift spending by more when there is access to borrowing. Firms and homeowners can borrow cheaply with good collateral, but funds are less abundant when asset values are falling. Consumers may in any case have had their fill of borrowing. Household debt in America has vaulted to more than 130% of disposable income from less than 100% in 2000 (see left-hand chart). In Britain the ratio is higher still. And even if credit demand holds up, banks reeling from subprime-related losses are less willing to supply it.

http://www.economist.com/finance/displaystory.cfm?story_id=10566838

http://www.latimes.com/news/opinion/commentary/la-oe-stein1feb01,0,6343556.column

No doubt America has been going down the wrong road. It has been the triumph of “I want for me now” over the future, whether common or even personal. I used to blame elected officials for selling out the future, until this bubble revealed so many individual Americans doing the same.

What has anybody done about it?

When I couldn’t stand it any more, and found that when I went to vote for legislative offices or Congress there was only one name on the ballot, if finally ran as a protest candidate for state legislature myself. Didn’t make much of an impact, but at least I can say “sorry about the diminished future kids, but didn’t Daddy do all he could?”

The coming financial collapse of America.

http://www.naturalnews.com/022528.html

From the article:

My prediction for 2008 - 2012 is a massive wave of municipal bankruptcies, state bankruptcies and escalating national debt. We are going to see cities and states go belly up, pension programs terminated (or watered down), and financial institutions teetering on the brink of disaster.

And the worst part of it all? The only way out of this financial mess is for the Federal Reserve to steal yet more money from the American people by printing more money and hyperinflating the currency.

This is the part where the late Aaron Russo and his film Freedom to Fascism comes into play. If you haven’t already watched this documentary on the massive fraud of the Federal Reserve and the IRS, watch it now at Google Video (the link follows)…

Much of what he has to say, many have predicted here, but there are a few gems too.

Best,
Leigh

And without a conductor to lead the global orchestra, there will be no concert.’

Just a bunch of shouting, lots of noisy clashing of cymbals, trampling of papers, and cello players slapping the crap out of the violinists.

“bursting housing bubble marks a fundamental shift in global power and finance.”

Great topic. A world superpower vacuum. that will be negative for the US dollar and the low interest rates on treasuries that the FED wants, might just market forces drive rates higher? Thats why so many are buying Gold. I can only explain low treasury interest rates now because of fear of losing money. I hope this shift in power does not cause Resource Wars in the future but can hardly see how it won’t. like Iraq.

Let’s start with the word “homeowners”. When you own something, you don’t trash it. Generally.

Oh please don’t tell my BF. He’ll want to locate the abandoned houses and salvage the furniture.

Totally agree, TX. That’s exactly what you’re going to hear.

A lousy job number today and a monoline downgrade after today’s close would quickly dispel all of those notions, however.

– Judge Smales
“You’ll get nothing and like it”

Based on what I heard on Bloomberg, you’re understating the offer by an order of magnitude.

$$$$$$$$$

TXChick wrote: “Get ready to hear for the next 4-6 weeks that all problems are behind us. Housing market to bounce, stocks are undervalued, all is right with the world.”

So the FED can increase the rate by a 1.25% and my savings accounts won’t be losing money anymore because the rate is below inflation, right? right?

Sarcasm off.

“Get ready to hear for the next 4-6 weeks that all problems are behind us. Housing market to bounce, stocks are undervalued, all is right with the world.”

You will hear it on MSM but I doudt many will beleive it. Worry is what I see now. Where was it 2 years ago at the top of the RE bubble?

I have one, anyway. Start doing trade agreements on a nation by nation basis. And if it doesn’t make sense for us economically, end it.

Oh, and let Wall Street stand on their own. And why DO we need a central bank?

“But to get the job you have to give them a 10 point plan that will create a long-term stable economy.”

$200 billion to Iraq this year, and McCain says we could be there for 100 years. Number 1. in getting ahold of this economic mess.
STOP THE WAR!

I, President Lip, hereby declare the following:

1. Get out the Constitution and instruct Congress that starting day one, we’re going to start downsizing the Federal Govt, giving back the rights reserved for the states.
2. Build the fence along Mexico and Canada, installing electronic sensors immediately, and building the phycial fence ASAP.
3. Instruct the State Dept that their budget will be receding, ie, no more aid for foreign governments other than stuff the Peace Corps can provide.
4. Start pulling back on the military, gradually drawing our forces back to the US, and placing them on the borders with Mexico and Canada.
5. Begin a public relations campaign for term limits for all congressional positions. These are to be filled by people who intend to go back to their jobs once their term is over, not by career politians.
6. Nationalize the new immigration law that AZ enacted effective 1/1/08, in effect, if we catch you hiring “undocumented workers”, you will loose your license to do business.
7. Repeal McCain Feingold, allowing candidates to speak freely about anything leading up to an election.
8. Impose reasonable import duties on products made in other countries, providing a barrier for those countries that are using slave labor to manufacture goods.
9. Return Social Security, and all other unfunded liabilities, to the budget where we can see what our real deficit is.
10. Encourage savings and self reliance from the bully pulpit every day, every opportunity.

Newbies should just jump in and get their a$$es kicked around for a while, until they learn how this works. That is how all the rest of us did it. Ben runs a great school where bumps and bruises are the best teacher.

Just do like I did and read for two years or so before posting anything. I didn’t feel like I had much to add to the discussion, so I sat back and listened. “Better to be silent and presumed an idiot than to open your mouth and remove all doubt.”

I would assume a general statement such as the more difficult the profession is to learn, the more recession proof it is. IE. Doctor, Farmer, Unix admin may generally hold up better than Realtor (1 week class?), Retail clerk, Widget production line.

Granted many skilled people will lose jobs, but I would rather be in the technical or medical profession at the grunt level rather than a manager of a retail chain store.

“What product pricing will unwind?”

Starbuck is offering one-dollar coffees with free refills. If that isn’t a price cut I don’t know what is. I always viewed Starbucks as a symbol of consumer extravagance, sort of the Rodeo Drive of the Yuppie crowd. Glad to see a sea-change in frivilous consumer spending, if that indeed is what is happening.

I’d be interested in suggestions for recession-proof retirement funds but am fairly certain that as soon as I put money into one it’d be a sign that the recession was over. I have terrible timing.

Bank examiner.

I go with the Socionomics explanation. When people are in a sour mood and are fearful, as during recession/depression, people are not amorous. When things are doing well and people feel hopeful, they get more amorous.

I really think most of economics revolves around mass fear and hope.

I think they have their work cut out for them in making a convincing case. Don’t couples who want to have kids normally need to first have a secure financial base which enables them to afford both a home to live in and the various expenses associated with raising kids? Money plays a huge confounding role in helping afford both kids and housing; this is a missing endogenous variable if they try to directly make the connection between financial means and fertility.

I think fertility rates tend to fall off in all developed countries, regardless of the relative price of housing. Places like India with teeming masses of very poorly housed people always seem to do pretty well in the fertility department.
What people say they want & what they actually choose are not that closely related.

The second word is borrower. The first rhymes with “trucked.”

“What WOULD cause you to pull the trigger and buy now?”

Your deal sounds good when measured by the pre-bubble yardstick. It makes the assumption of a return to the “good old days”. But I keep wondering what if, after the meltdown, we end up with a totally different economic model of some sort? Different currency, system, etc.

“What WOULD cause you to pull the trigger and buy now?”

Alien abduction followed by weeks of anal probing. Anything short of that and I say, “no thank you”. Mobility in a changing economy is a wonderful asset to possess.

“What WOULD cause you to pull the trigger and buy now?”

Their capitulation. Nothing less.

1) Cheaper to own comparable property than rent on a long-term basis

2) Widespread mainstream consensus that home ownership is a high-risk proposition which can lead to large financial losses if one is not prudent

3) Bottom-caller brigade is silenced because they have been wrong too many years in a row

(OK — I am not really counting on number 3…)

Where is it and what’s the asking price??

Instead of you locking in the rate, you’ll be locked in the house with no exit. Let the pain spread. I’ve detected the resurrection of the deadly RE mob induced phenomena call “A Sense of Urgency”. Horror stories could be cast into a box office hit with this BS. Don’t give into it as it is EXACTLY what the RE crime syndicate wants to instill in the public. Lock and load your weapon my friend and keep a hair trigger but I don’t see right now as the time to fire.

I converse frequent with RE believers so as to keep a pulse on their psychology. These guys are in the fear stage at the moment. These guys come to me and concede prices are dropping. The fearful part for them is not knowing where the bottom is. In twisted language and a very roundabout way, they want to know how far it will drop. After hearing my forecast of 50% decline in real dollars, they clam up, kick their feet and act as if they didn’t hear what I said. Very much like a child closing his/her eyes to make the boogeyman disappear.

Market behavior is fascinating to me.

I may buy a place in Vegas when I think the bottom is in. Probably another 4 or 5 years from now.

How about are the job prospects pretty good, can the wife kids get jobs too. until they all graduate High school?

Can you afford to lose 10-15% of the price in case you had to move quickly?

=============================
I have a house I am looking at, 2x income, 35 yr old house(not a McCrappy), very well insulated, new 50yr roof, basic home, 1500+ sqft for the family at the cost I can rent. Got a 5.5% 30 yr rate locked….??

“What WOULD cause you to pull the trigger and buy now?”

A 50% drop in price. I don’t see Northwest Chicagoland going that low (I’d love it if others familiar with the area would differ with me) but that isn’t what you asked. I’ll risk catching a falling knife for a 50% drop on the home of my choice.

As mentioned above, second word is borrower, first rhymes with “trucked.”

Hey django - I’m on LI too. Did you buy in Syosset or were you looking at commercial there? The residential taxes there are murder! (I’m browsing the market now and peek in on Syosset since it is near where I grew up but nowhere near what I can afford)

“How do people stop consuming gas? Don’t they have to get someplace?”

People will do what they have to do. If curtailing driving is what they need to do then they’ll do it, otherwise they won’t.
People need money; the easy money days are gone. People are finally learning that debt sucks and that cash is king.

Interesting times await. Times are really getting interesting for those who are used to overspending.

How do people stop consuming gas? Don’t they have to get someplace.
Motor fuel use is not an all-or-nothing phenomenon. All many consumers needed to do was cut back on frivolous or not-strictly-necessary trips, like unplanned shopping expeditions, visits to restaurants, frequent visits to relatives, etc. I did this in 2007 & actually saved hundreds or thousands of dollars in money not spent to fill my gas tanks. If consumers just used their vehicles to get to & from work & school (one trip per day) and to buy food & essential supplies, the use of motor fuels in this country would fall drastically. Businesses dependent on optional travel (tourism industry) will really suffer. I suspect this is happening to a small degree, and will snowball as the economy worsens in 2008.

Damn, I hate seeing covers like that.

The Fed reduced the federal funds rate by three quarters of a percentage point on Jan. 22 and followed with a half-point cut on Jan. 30—an extremely rapid move for a major central bank.

They can reduce the funds rate to 0% and I’d bet 90% of the people in trouble still wouldn’t qualify for a loan.

We had some sears repairmen in the house to fix an appliance. They told me for some reason a few weeks ago, their service call counts fell off a cliff. They said they were humming right along, busy every day and then all of a sudden they’re the Maytag Repair Guys.

Maybe this inflation of food prices will help the obesity problem.

Does that count todays loss? LMFAO. Troll!

Newbie alert???

The economy is not adding jobs Will.

Don’t feed the troll.

Got my HSBC statement. The latest set of 150 checks cost $19.50. I was stunned. I spoke to the lady in India, who informed me that new fees went into effect in November.

Hey guys, it wasn’t my idea for you to buy a bunch of U.S. subprime lenders. How come the folks who did it got golden parachutes and I’m getting the bill?

big hop in price of beer ??

Its already happened…Several places I frequent are up 10% +…

We could also debate whether it is a “New Economic (World) Order” now, where emerging market economies take the lead… (Is anyone else remembering how Japan was poised to lead the global economy into the 21st century circa 1989?).

About as well as spitting into the wind.

What’s the Fed up to, and will it work out as planned?

Another great topic!!
Trying to reinflate, will it work? I don’t know? it may inflate the wrong things and not Housing at all.

My guess, 0 percent intrest, hyperinflation, printing of money to keep banks solvant…The truth is in today’s world they don’t need to print money becuase e-money is supposedly backed by real paper dollars, but who know’s it all the money in the databases is actually backed by real paper somewhere, that being said the fed and treasurey just have to do is “inject liquidity” by
opening acount’s and doing a electronic transfer of a couple billion…Who would know, would’nt surprise me if Bank of America is litterly the bank of american with the gov backing them with billions why else would they take on CFC….

It’s different here — never mind that San Diego is a poster child for the housing bubble. Gary Watts and David Lereah — care to offer comment?

“Economists consider three consecutive monthly changes in one direction (in the national index) as a sign of a potential turning point in the economy, so the latest index suggests a downturn in the national economy,” Gin said.

But Gin stressed that the local economy will fare better than the national average.

“We don’t have a concentration in the old-style, cyclical jobs that other regions have,” he said. “Our industries are newer – biotech, research, software. Those will hold up better.”

REO = one of many elephants hidding under the living room rug…

They’re out there. In some areas up until last Fall, the banks didn’t like to advertise them as REOs. I’m seeing more and more of them give up that charade.

The REO process is terribly slow….Kinda like our government….

Ouro, are you still off the (shopping) wagon?

InfraStructure. New power plants, roads, sanitary and sewage and water source development. Starting in August 2009

All bets are off if a Republican gets elected. lol

dont be tryin to figure out why gas is going to 4 bucks a gallon in Vietnam.