The Housing Bubble

“There would undoubtedly be much greater confidence if prices in the U.S. real estate market, where the crisis originated, finally stabilized. That could happen as soon as the middle of this year.”

The Douche-Bag Meter is pegged on this guy. It seems to me that The Masters of the Universe have been pretty clueless throughout this thing. I predict that they will remain clueless, greedy, tools for many many quarters, not months.

That made my morning!

That is absolutely hilarious….because it is true. It is just that simple.

THanks for that link it is friggin’ AWESOME! I printed the pages and I’m going to use it as a textbook for some of the slow-people at work.

I hope the MSM picks up on this one, friggin fabulous! It should be emailed to every idiot involved in this mess from Senators to Realtors!

“What am I supposed to tell my villagers?”

Have to share that with some Norwegian friends…

RSG = “Really Sorry Guys”

Subprime explained through Google Docs:

really expalins the entire CDO mess in a form easily understandable so that even the most dim-witted 2nd grade level functionally illiterate joe shmoe can understand what the f*ck happened in the arcane world of cdo’s traches, securitations, bond insurers gettin whacked, ect, and how it affects the average lives of even the lowest bottom rung proletarian. . Should be posted up /printed in every newspaper cartoon feature or on every internet MSM news flash.

Stick people & “War” language for economic descriptions…we’re almost there…

That was gooood. I had to pass it along.

This explains it better than any attempt that has been made by our MSM. Very funny.

Thanks for the laugh arlingtonva.

Very cool. I passed it around as well. Thanks.

Super funny! Thanks!

But they are promising “change”! Surely, change must be good.

“The promises are only wind.”

I personally prefer when wind is leaned into rather than created…

We will repeat the same mistake with “New Deal: Part deux”.

WW2 and major consumer sacrifice, buying war bonds, rationing, and industrialization of wartime effort brought us out. The New Deal was a joke and a populist argument among Keynesian thinkers who believe that dropping money out of helicopters and government control of the free market can buy you out of a catastrophe.

The ganja, mon, what about the ganja?

“We’re getting the band back together …..”

“Then, between 2001 and 2004, they refinanced three times, ultimately borrowing $330,000. They used much of the money to repay thousands of dollars in credit card debts.”

Here it is again. Ben, what position is the MSM taking in these articles. This couple blew $330,000, and they are held up as the example of the kind of people who would be helped by mortgage bailouts.

Can’t they find anyone with a better excuse to be classified as a victim?

“Kim says she and her husband share responsibility for what happened. Lenders gave and the Canfields took. They accepted a larger loan than they could afford to repay. They didn’t take the time to understand the terms. And they worked with companies that encouraged and allowed them to make bad decisions.”

I don’t see any mention of either of these people having an illness so we can slam them the way they deserve to be slammed. That article is still trying to portray these pieces of garbage as victims. And yes they are garbage because they have lived like g-damned fools and now expect that everybody else should bail them out. Let them rot and maybe they will learn a lesson. Or better yet, allow the bankruptcy judges to perform cramdowns on primary mortgages and lock up the whole filthy industry. There is definitely a Stupidity Bubble in this country.

“Revere Beach is a totally different marketplace from the City of Revere,” said Bob Upton of Century 21 North Shore. “The City of Revere is more of a working-class area. Revere Beach is becoming a little more upscale, and buyers are coming from across the country to look at Revere.”

Dry heave. As is predictable, the Globe is cranking up the springtime REIC pump-and-dump stories. This one is a good one.

Revere Beach is a crap hole, and anyone from the area knows this. I grew up on the North Shore. In the 70’s and 80’s, Revere Beach is where blue collar white kids did burnouts up and down the street all night in Mustangs and IROCs, and crashed stolen cars onto the beach.

Nowadays, it’s Dominicans and others from the Caribbean and Central America, droning around in low riders all night long looking for a fight or a Honda to steal. MS13 is moving into this area. It is the same terrible hole it always was, but now it speaks Spanish and has more firepower.

Revere Beach is no place to live and these monstrosity condo complexes they built recently will decline in price for YEARS as the few remaining morons and elderly hold outs die off or move out of town. Then this entire area will be Section 8.

I thought you wanted to grow apples in PA?

What good is any of it if the only place you’ll ever find work is Red Lobster?

PSL is going to be declared a national disaster area as a result of this bubble bursting.

PSL is in constant competition with Palm Beach County, it has to be MUCH cheaper to live up there then in PBC, because there are simply not enough (not even close) higher paying jobs to support the home prices. I fully expect that much of PBC will be down to 100/sq/ft (or lower) in the next 2 years, and, in that case, PSL will have to be even cheaper then that to attract residents. There’s very little reason to live in PSL (for most people) at even 90/sq/ft when you can live in PBC for 100, and most people will not do it.

I wouldn’t jump into that market yet, you have to see how S. FL plays out before you have an idea of the real “value” of homes up in PSL.

Frankly, theres just SO much inventory up there, it would not surprise me at all to see the bulldozers up there plowing under lots and lots of homes (see: Texas) in the next few years.

I don’t think that 100/sq/ft is overpaying, but, at the same time, I wouldn’t want to be so dependent on the fate of the S. FL housing market. PSL could just (and may very well) collapse entirely; there’s almost nothing to keep it there, other then it’s proximity to S. FL.

If you do get down to the $50k or below range (which I consider VERY possible out there before this mess is over), then why bother with windstorm insurance (just have a liability policy…if possible - or maybe just don’t get a dog). That, coupled with real low property taxes, may make it cheap to live in Florida again…for those who want to.

sounds like four to five times cheaper than current EU (UK, Netherlands) prices. In my country a small ’starter home’ costs $250-300K, and the worst fixer-uppers start around $225-250K. That ‘upper middle class home’ would set you back at least $ 750K. And that is while income is significantly lower than in the US; there is one major difference though, at least almost everyone still qualifies for a mortgage in Europe

No surprise they are still selling FL homes to EU buyers …

So are you thinking of changing your name to “Hello Florida”? Assuming you are not looking for employment and are free to move wherever you want, I would focus on finding a place that provides you the most opportunties to do what you love most rather than on finding the cheapest place to live wherever that may be.

Bye FL previously mentioned western PA as the destination of choice. I’m sure most are familiar with what’s available in the Pittsburgh and Youngstown areas. Better yet, Central PA has some good prices on land. More specifically, towns surrounding Centralia like Ashland might be a good place to start looking.

http://www.offroaders.com/album/centralia/centralia.htm

You are dumbfounded because you are not a real estate professional knowledgeable about the local market. There are literally tens of thousands if not hundreds of thousands of uber-wealthy Europeans eager to by condos in Minnesota.

Plus, once those $600 checks start hitting the mailbox, the market is going to take off and return to double-digit growth.

(it’s too early in the morning to figure out emoticons)

VB

There are over 10,000 lakes in Minnesota. A view of one is not that rare. I am more surprised by the lack of pics. Who would take the time to make a post and not add pics? Would anyone really respond to an add that just has a few sentences on how great the place is without pics? I would just assume it looks like crap.

Apology accepted…although I have no idea what the hell you’re talking about.

You’ll notice I didn’t touch that one. You got to have some sense of what’s relevant. That one wasn’t.

“I want to apologize for creating a divisive thread yesterday.”

Congratulations!

Hey danni, what is with Long Islanders? The level of arrogance just astounds me. I hate when I take a subway in the morning that has to stop at Penn Station. All of the white collar trash getting on is just awful. These are people with no manners and attitudes that make you want to ring their necks. They will run over a little old lady to get to their train. A lot of that comes straight from the LIRR (and some from Jersey Transit). But the Islanders seem like a particularly vile set of people. And their real estate is “just plain gold”.

Warren Buffet is 100% right! When Berkshire bought General RE, he stripped out all the derivative contracts (didn’t TRUST ‘em). The above NYT article illuminates was Warren was preaching YEARS ago. Scary characteristics of the contracts are they are totally unregulated, no regular posting of prices (like on the NYSE), the seller can palm off the contract to a 3rd party without notification (like a homeowner buying insurance from Allstate & they sell it off & you get pennies on the $ if the place burns down).

These derivities are the source of much of the recently created “thin-air” money destined to disappear.
The disappearance of this phantom money will make the real stuff (cash and cash equivilents) that much more valuable, IMHO.

Once again the Times is 10 days behind the news.

Insight: CDS market may create added risks

By Satayjit Das

Published: February 5 2008 15:31 | Last updated: February 5 2008 15:31

In May 2006, Alan Greenspan, the former Federal Reserve chairman, noted: “The credit default swap is probably the most important instrument in finance. … What CDS did is lay-off all the risk of highly leveraged institutions – and that’s what banks are, highly leveraged – on stable American and international institutions.”

The reality may prove different….

As the credit crisis deepens, the risk of actual defaults becomes real. The CDS market will be tested and may be found wanting.

CDS contracts may not actually improve the overall stability and security of the financial system but actually create additional risks.”

“The writer is a risk consultant and author of Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives”
http://tinyurl.com/2b22ce
FT

If you have not adjusted positions accordingly, it is probably to late now. “…Investment based on genuine long-term expectation is so difficult to-day as to be scarcely practicable. He who attempts it must surely lead much more laborious days and run greater risks than he who tries to guess better than the crowd how the crowd will behave; and, given equal intelligence, he may make more disastrous mistakes. There is no clear evidence from experience that the investment policy which is socially advantageous coincides with that which is most profitable. It needs more intelligence to defeat the forces of time and our ignorance of the future than to beat the gun….” John Maynard Keynes

The question I have is the same as the one I have for subprime.

Where the F was our government?
Why was there no regulation?
Why would you allow a system like this to exist?
Either - Require those buying insurance to actually own the bonds, or at the very least make those who buy insurance contracts value those at toilet paper levels.
How many Hedge funds used assets like this as collateral to leverage their other bets???

Al Quida must feel really inadequate after reading about this.

My average price per ounce of platinum is around $1100. I’m not selling any for the forseeable future. I buy some of that metal sparingly and my next purchase will be sometime in March or April. I imagine a big correction in platinum prices is due, but not before the next interest rate cut.

I am happy that gold came down to around $902 (since I bought a gold Philharmonic coin yesterday). Either platinum must come down to about $1800 or gold must go up to $1050. Methinks gold will go up to $1050 prior to the next interest rate cuts. Talk is that on March 18 there will be another federal funds rate cut. But I suspect that will be the last one for this cycle and the rate will be unchanged for the rest of this calendar year.

But even after rates go back up the next crisis to handle will be much higher energy costs due to shortages of crude oil and natural gas. That will be significantly known starting sometime between now and 2012. This will be bullish for precious metals and push platinum above $5,000 per ounce, silver above $50 per ounce, and gold above $2,500 per ounce.

did they fire any gov worker parasites ?
hel no ,they got transfered and then raises

I’m surprised that Plat has gone up so much without Palladium going ballistic. The two are virtually interchangeable, and both are about 10 times rarer than Gold. Yet, palladium is trading at half the price of gold. And, unlike gold, palladium is actually used for something. I think the proper metal to be chasing here is palladium, since the differential between plat and palladium has never been this high. At least, that is how I’m playing it.

Pretty soon, only rich guys and those who read blogs will have access to information…

BTW, financial transperency, access to high quality information and (relatively) high asset prices go hand in hand.

I saw that. Here’s the link:
http://www.economicindicators.gov/

Does that mean that the info will still be released to the news media while that website is shut down? Or — more ominously — does that mean that the government is no longer going to provide that info to anyone?

I guess the moral of the story is that those that created the structures didnt necessarily do so with bad motives, nor was the bubble a necessary consequence. Rather, risk was not appropriately identified and managed in some of the permutations.

Um, how many municipal bonds were expected to be paid from the increased tax income from ever rising property prices and rising populations?

Tim, thank you, that is good color.

I have a friend who worked at C-BASS, a NY mortgage investment house that bought residential mortgages, sliced and diced them, but kept the BBB and unrated tranches (highest risk). The bottom line was when the loans defaulted, all the different traunch owners had to re-negotiate their interests. The AAA tranches did not automatically get to keep their priorty piece of the pie. The structure gave way to reality and the reality was a severe shortage of cash flow and default on principle. It did not matter so much what the written agreement stated for the original structure.

C-BASS, by the way, folded its tent and let everyone (150 employees) go since they burned $900 million in value into $150 million in ashes. Their two parent companies probably got a nice write down. The bottom line was the fraud in home lending and appraisal valuations did them in. That probably won’t happen in the muni bond business…..unless the municipality was corrupted by the home builders into floating the costs for schools, streets, and sewers no one will use for a long time. Hmmmm…..oops, that does seem to be the cae in a few places like Sacramento. Mello Roos bonds come to mind. Are they considered municipal or private bonds?

“The default rate with respect to munis has not really changed as a result of the housing bust.”

The default rate on San Diego housing was really low up until the point when the tsunami hit the shore (late last year). Credit market tunamis move at a glacial pace compared to the physical kind out on the open ocean.

After all, not all seniors retire or sell their homes and move to smaller places. Many prefer to age in place and live out their lives in the houses where they’ve built a lifetime of memories. But eventually, as they die off, most of their homes will come on the market.

interesting, because in Europe researchers say that our boomers (who are relatively wealthy like in the US, but on average probably have much better pensions) will remain in their expensive and far-too-big homes for many more years. They are not expected to sell for another 10-20 years. Probably they will keep tapping the equity in the homes but have no incentive to sell, one reason being that smaller homes often have less value-for money (obviously, that is a result of the EU housing bubble). Only those having severe disability problems will have to move, because their grand EU homes are often not suitable for people in wheelchairs etc.
Unlike some US states, most of Europe does not have the problems with extremely high local taxes either (e.g. in Netherlands the property tax for a 1 million home is just a few thousand euros a year, no problem even for those on a small pension).

There is nothing bad about renting in large corporate apartments. Some of them are very luxurious. And despite lies I see here every once in awhile, you can make improvements in rental apartments. I have. Pictures on walls? Yes. Ceiling fans? Yes! You can be very creative. I lived in two apartment complexes with well equipped fitness rooms, a jacuzzi, and several pools, built in washer and dryer, and so forth. I laugh at those who say they need to buy a house! When I was a mortgage slave, I was living alone in a SFH neighborhood. It was extremely boring!

I expect that if boomers sell off houses and prices go down a lot, the rents will also go down, but more so! There will be a saturation of rentals. A friend of mine has rented a 3 bedroom apartment for several years without having anyone live with him. He likes the space. Nothing wrong with that.

Boomers to retire! Retirees to sell oversized houses! It’s a bubble!

Some genius.

You just get the feeling sometimes like the journalists are stealing all our ideas now.

I guess this is the same Aldi we have in Europe? They have been selling such stuff for years in their EU shops (e.g. Aldi is famous for relatively cheap computers; until recently customers lined up before the store opened to make sure they could get one). Probably it is part of the business model, to attract new customers with deals on relatively cheap gadgets; they can offer more spectacular discounts on those than on daily grocery items.

ej, the local Goodwill sells a crapload of new Chinese junk products alongside their usual donated used clothing, furniture and gewgaws. It’s ticking the usual customers off. One mentioned to me the other day that they go to Goodwill to hunt for good used goods, not new crap from China. Besides, you can get that crap cheaper at the dollar store anyway.

Aldi has been selling laptops and other non grocery items for many years here in the USA. This isn’t the oldest, but a 2006 example i could easily find:
http://forums.slickdeals.net/showthread.php?p=4209805

Yeah whats up with the retail model these days. Tractor Supply is another oddball chain. They’re popping up everywhere hawking some of the strangest chit you’d never expect in the middle of suburbia. 99% of the people around here wouldn’t know what to do with a lynch pin, draw bar or hay tedder parts if you explained it to them. Also, most of it is chinese and just like wall mart, you’ll a splitting headache from all that chinese junk off gassing formaldehyde.

I want to write a recession cookbook.

Frugal Sue’s eating on a shoestring during the Great Recession:
No Snacks
Chicken broth
Rice
Dried fruit
Nuts
No bakery goods
Paper Plates
Propane hot plate
Pay cash
It’s too early for Gloom and Doom.
Continued later.

How can it cost $100/sf to build a warehouse? That seems absurdly high?

I guess someone (like a company owned by Mozillo or similar guy) could offer a free software agent to answer the questions

I lost the article and will try to find it, but I recently read that there’s a bit of a battle going on at our institutions of higher learning. The battle pits tenured faculty, which largely espouse liberal arts, and adminstrators, who increasingly favor more “occupational” cirricula.

Having taken both the trade school and college paths - there is a lot to be said for both sides. Still, when it is estimated that only an additional 1% of jobs will require a degree than already require one today, the wisdom of taking on such huge loans seems increasingly flawed - even in the noble pursuit of education.

It will be interesting to see how this pans out. IMO degrees from 2nd tier universities will increasingly be of dubious value. The good jobs will go to the grads of the elite schools, and all the others will end up waiting on tables at chain restaurants.

Yeah, Florida’s bitching and crying poor, too, on education. College kids may not get their scholarships. Boo hoo. What the hell was that lottery money supposed to do?

According to wikipedia:

“The median income for a household in the city was $30,366, and the median income for a family was $42,103.”

I’m willing to bet that the median price is a lot more than 120K. “Attractive home prices”? Pffftt!

Remember what I said the other day about posters and victims? msprompt was a little more explicit, but you can see what I mean.

As far as what to do, how about planning a nice vacation with all the money you are saving by renting? While there, contemplate what it’s like to be a FB with a limited future and choices because of a financial mistake.

IMO, there are no real victims in economic matters. We make our choices. They may turn out to be poor or work out well, but they were choices. Financial manias should be prevented if possible; that’s something that is beginning to be understood, even by the MSM and the powers that be. It’s one of the top priorities for me. I use every chance to promote that concept. But we are also dealt the cards we’ve got, and I can’t see how feeling downtrodden helps.

Here in northern Arizona, many people live without running water. Substance abuse is rampant, economic opportunity is slim. But I don’t hear much complaining about it. That’s one of the things I like about this part of the country.

I hope it’s as beautiful a day where you are as it is here. I hope you and yours are healthy. There are many things more important than owning a house or having a high return on CDs.

Unless you really saved a huge amount ($100K plus), why focus on buying? We are heading into a period of government turmoil and owning a house with cash in it could prove to be a bad choice. Rent! Until it is cheaper to buy than Rent, you are just locking yourself into a house where tax increases, bad neighbors, who knows what else.

But like I said, if you really have a lot of $ saved, you can afford to blow some on a house; just live within your means (not based on what you saved over the past years, but what you will earn in future years).

msp,

You’ve been doing the right thing and the deals are going to be coming in the near future, but not just yet. With a good credit score and money in the bank you’ll be able to make the deal that you want or walk away if they don’t take your deal. You have the power, just wait a little longer, just a couple more years of patience and it’ll be all right.

So climb off that ledge, keep looking for the house you want for the next two years, then when you’re absolutely sure you’ve found the house you want to live in the “for rest of your life”, buy it.

How’s that, are you off the ledge now?

msprompt: I understand your anger, but Ben is right… being in the same situation as you, I have to put my resentment aside about being a good saver, and be thankful that I’m doing better than FB’s, appreciate my health, etc.

That being said, the system has picked winners and losers.

Winners:
-direct REIC participants who have made money hand over fist during the boom (”Realtors”, mortgage brokers, Wall Street folks who made huge bonuses founded on the bubble, builders, others?)
-consumers w/ bad credit who got to live in nice houses for awhile, due to easy credit, and will be no worse off once they are foreclosed on, and just go back to renting
-retail industry pumped up by additional consumer spending from the housing ATM
-generally, borrowers and spenders

Losers:
-people on fixed income (e.g. seniors), as low interest and inflation eat at the value of their savings
-more broadly, all savers for the same reason, unless you have been sufficiently financially sophisticated to ride various investments up during the bubble, and short them on the way down
-homeowners who just bought to have a place to live, not as an investment, due to higher property taxes on inflated home values
-investors in MBS instruments now holding the bag

Coming soon: The People’s State of England

“where has personal responsibility in our country wandered off to”

We’ve lost it. It’s far too difficult and tiring to be responsible for your own life, and to learn from your own actions. You wouldn’t want to make people tired by having to research things that impact their lives, now would you?

To the hairdresser lady and Mrs. Clinton - look, if renting is good enough for me, my wife, and my three kids, it’s good enough for you. Period.

Continued ARM resets and house price drops will squeeze consumer spending more and more over the next few years. So I don’t think the recession odds are dropping.

Old cars has been another bubble. The media loves to hype depressed, middle-aged men looking for their old cars that reminds them of picking up chicks in high school back when they thought they would be someone and not a typical office drone.

I love old cars, but the prices of some of those old pieces of junk is ridiculous. I remember being able to get a 1968 Mustang fastback V8 for 5-6K. We sold one for $2000 in ‘95 that would easily be worth $20k today. For 20k, I’ll just buy a new one which is faster, safer, more comfortable - better in every way.

In other news, now that I can affod a camper I don’t want one. Funny how that works…..but I might keep an eye for a super good steal. It seems in FL suburbs a requisite feature (beside the big 4×4 truck or SUV - in Florida, mind you) was a boat or a camper.

Hitlary recently was talking about the mortgage crisis. She blamed bankers and never even mentioned there were individual speculators who may have lied about their incomes. She is a witch! Does she expect that her listeners think there were no individuals who lied about their incomes? Whatever happened to contract law? If one claims he did not understand his contract, that’s his own frigging fault - hire a contract lawyer to understand that contract for you. No excuse, commie political power-hungry Hillary!

I don’t care if she gives them a hug and a juice box. I just don’t want her to give them (my) money! Either directly, or indirectly by lowering interest rates and devaluing our dollar.

Agree with you, msprompt.

We are very happy with our family and “more important stuff” but that doesn’t mean we should be happy that the govt is debasing the currency and forcing us to lose purchasing power every year (yes, I know about gold & foreign currencies, but this goes beyond that).

I don’t consider myself a victim. Just mad as heck.

When you have nothing left to lose you have nothing left to lose.