Bits Bucket And Craigslist Finds For March 5, 2008
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Well, Ben, here you are. The MSM finally admitting it.
http://www.washingtonpost.com/wp-dyn/content/article/2008/03/04/AR2008030402330.html
Now if they admit that there was a sizable group of ordinary people without insider or academic status who saw this coming more than two years ago….
naw… that’d be crazy.
FTFA:
Look at some numbers from the National Association of Realtors. From 2000 to 2006, median family income rose almost 14 percent, to $57,612. Over the same period, the median-priced existing home increased about 50 percent, to $221,900. By other indicators, the increase was even greater.
Ok, I have to call bull$hit. Maybe the NAR’s number show the median family income that high, but I don’t buy it.
They must be figuring it based on the average family’s STATED income or something. Last I heard, US median family income was a bit less than that.
Say WHAT? I thought the average HOUSEHOLD income was like $80K. Who can live on $57K??
this is a bit OT but the article brings the question comes to mind:
Sure, a drop in prices is a housing market fix. Homebuyers (and realtors) will be happy.
What about the economy as a whole? What about all the bad debt floating around out there? Seems to me that sellers, banks/lenders and business/labor in general will still eat it.
Seems to me that sellers, banks/lenders and business/labor in general will still eat it.
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Absolutely! And they should.
It is precisely these losses which will keep future bubbles from growing to such damaging levels.
Lenders should not have loaned money to people who had neither the ability nor inclination to pay off the loans unless housing prices rose in perpetuity. Borrowers should not have borrowed money they couldn’t pay back. Taking these losses would be the best kind of medicine. Many lessons need to be learned.
If there is to any kind of taxpayer-funded “bailout”, it should the the FDIC, SIPC and PBGC. Depositors should be protected up to FDIC-insured amounts, but the banks who participated in this folly should be allowed to fail, IMHO.
Yep, the only funds that should be honored are the FDIC insured accounts ,(I say this because without that FDIC protection , people won’t even deposit funds in the bank anymore ). If somebody or some group has a case for being wronged , than legal remedy should be the answer .If Investment firms and banks need loans to stay solvent ,they should apply for a loan or be bought up by stronger Companies or fail .
I have said it many times that you can’t make a bad loan good .Maybe you can delay the foreclosure ,but eventually that loan will go bad . With all this bail out talk ,borrowers have developed a attitude that they are entitled to a bail-out because they are victims . Sure the borrowers got conned into buying into a false market ,but nobody can change that it happened .New stable buyers who can afford the product at real market values are the only parties that can create a stable long term market again .The right motive for buying a home has to be present also .
If the lenders want to save some loans ,they can do it on their own dime IMHO ,but we all know that the speculators can’t be saved in most cases .(how much of the market was a fake demand that was driven by speculation or fear buying ?)
I don’t think it’s valid for the government to fund bail outs for borrowers who bought overpriced pieces of sh-t in a frenzied inflated market . Until everybody admits that all the problems stem from faulty lending and unsustainable real estate prices ,we can’t move onward .
I admit that this is a horrible situation and it will create a lot of losses ,but bailing out people who bought 700k houses they couldn’t afford is not my idea of how I want tax dollars spent . How about creating jobs for American by maybe re-building our roads and bridges or energy systems .
Every dollar that the government spends on this housing meltdown is a dollar that won’t be spent on something that our society is really going to need in the future . I would be more concerned about the unemployment situation that will build in the near future if I was in charge of spending taxpayers funds .
Preach it brotha! Wise words indeed. I nominate you for Fed chairman!
Yep. Agree with you 100%, Wiz…as usual.
ask yourself how much of the current bond float value has to do with funding current entitlement obligation.
Wallstreet is notorious for its lack of long-term memory. This won’t effect any future bubbles.
“Values that rose spectacularly will now fall less spectacularly — back to roughly 2004 levels; that’s still 30 percent or so higher than in 2000.”
Values in some areas have already fallen to 2004 levels (or lower) and are continuing to fall. I’ll be surprised if prices only fall to 2000 levels now that feedbacks reinforcing price falls have begun.
“Slumping home construction and sales have left much pent-up demand.”
Houses continue to be built, not just completed but also started, including in the peak bubble areas. This myth of pent-up demand persists in the MSM.
Look at some numbers from the National Association of Realtors. From 2000 to 2006, median family income rose almost 14 percent, to $57,612. Over the same period, the median-priced existing home increased about 50 percent, to $221,900.
hahahaha. I wonder how the NAR will respond? After all higher prices are a *good* thing. Except when few can afford your product. hahahaha.
Median housing price have basically doubled here in Maryland, while incomes have only gone up 14% or so. Yeah, that’ll work out well long-term - NOT!
“hahahaha. I wonder how the NAR will respond?”
Simple. “Now is a great time to buy A home!”
uugh..
That quote caught me too. The price runs ups in Sacramento began in 98/99. I don’t see any reason why we can’t roll back to 2000. We’re already seeing 03 and some 02 prices.
The PTB will try there best to ensure prices won’t roll back to 2000 levels. They will most likely succeed on a nominal level (you can’t put the inflation genie back in the bottle). On a real (inflation-adjusted) level, I don’t see any reason to think prices will not revert to pre-bubble levels, just like after every other bubble in the history of modern capitalism.
Houses in our old neighborhood (92057) are already at 2001/2002 prices…and still sitting. Over 50% losses in many cases. Oops!
In the year 2000, in the County of Los Angeles, a group of us were paying $2500 rent for a house whose market so-called value would’ve been about $600K. Thus, the 2000 prices were already largely in the negative-cashflow universe. IMO prices will fall to the point where LLs would at least break even purchasing SFHs.
LA was absolutely getting bubbly by 2000. 1995-98 was the sweet spot.
you can always put your savings in a “powerhouse mutual fund”
they have reopened to the public. a sign of the times
http://articles.moneycentral.msn.com/Investing/MutualFunds/IPOsForTheRestOfUs.aspx
It’s too bad there wasn’t a blog attached to that article.
Peter Schiff says that prices need to fall or wages need to rise. He says the Gov’t is trying to keep prices from falling by inflating everything else to save housing. They are throwing the baby out with the bathwater.
We have discussed why inflating everything else besides wages is a losing proposition, assuming the goal was to reflate the bubble. The basic problem is that without wage inflation, higher gas prices and higher food prices directly crimp the share of (permanent) household income available for housing expenditures. This, coupled with a reversion to traditional prudent lending standards, is plenty of ammunition to pop the housing bubble. Throw in a credit crunch and you have a recipe for a housing price crash.
One of the things I’ve noticed (and am impressed by) is how the “summaries” get better and better and more succint each passing week.
We’re all learning “on the job” as it were.
Good summary, PB!
–
“We have discussed why inflating everything else besides wages is a losing proposition, assuming the goal was to reflate the bubble.”
The goal seems to be to stop the deflation of the housing bubble. How does one create wage inflation during a recession that has all the potential to slide into a depression? One equation and too many variables and there is no way to solve the equation, or the problem. The ultimate outcome of all interventions now being considered and proposed would be unintended consequences.
Jas
You propose changing psychology through the Fed Funds Rate? That’s pretty ambitious stuff.
just sell houses to the Chinese and Arabs. They’ve got boatloads of worthless dollars.
–
“You propose changing psychology through the Fed Funds Rate?”
Just so that there is no misunderstanding I propose nothing and am against Fed or USG doing anything. Let the private parties settle it.
Jas
It was a joke, Jas, a snarky joke. You know the fun things that people here might even enjoy?
Ahh, I really disagree with the commodity inflation view. The commodities are going up at a far faster pace than the Fed can really be blamed for - yet. What is causing this is all the money that also caused the stock market run up, housing run up, etc. is now going to commodities. Commodities will decline. Oil really should be 85 to 90 a barrel and will get there.
Now, this does not mean that I no longer think that the Fed will try to inflate its way out of this. I remain convinced that inflation is exactly what the Fed is intending. It will take time to get it going. So, think later this year and early next when things will become more expensive on a permanent basis.
Currently, it’s speculation that is doing this. Don’t worry, in a little while we are all going to be screwed. It won’t matter if you had anything to do with it or not.
We are all guilty, it is the Fed’s job to figure out what we are guilty of. In our case, it’s being cautious and prudent. Bad choice.
Roidy
Wages will not rise. Not now, not ever.
When your job can be outsourced to 3rd world slaves or insourced to illegals, we all end up little better than slaves. That’s what the PTB want, but it doesn’t make for high housing prices!
I don’t see how wages are going to inflate. The states and cities are in trouble with the implosion and will be laying off workers. Big Corp’s are laying off workers. Those in RE and related businesses are laying off workers. Most of the aforementioned had better than average wages. We have a surplus of workers that need jobs and you don’t raise wages in that environment.
“Some economists now expect an average national decline of about 20 percent. The Federal Reserve estimates that owner-occupied real estate is worth almost $21 trillion. A 20 percent reduction implies losses of about $4 trillion.”
The same experts that thught there would be no drop…. Oh… They are dropping? Well, it won’t be more than 10%. Oh, already close to 10%? Well, it won’t be more than 20%.
“The largest part would be paper losses for homeowners: Values that rose spectacularly will now fall less spectacularly — back to roughly 2004 levels; that’s still 30 percent or so higher than in 2000.”
Yeah…. because wages are 30% higher then 2000.
This is every bit as deluded as the “prices won’t fall at all” articles of 18 months ago, and the “no more than 10%” articles of 9 months ago.
Hello!!! Prices are going back to historic normal affordability levels. No more than 10-15% above 2000 level….. And that is ONLY if they do not over correct to the downside (which they always do).
$4 trillion in lost values? Try $6-8 trillion with no less than $2 trillion of that being real loss to the lending industry and MBS holders.
I sure hope prices fall more than most people “predict” On another forum, most people were predicting prices to drop around 25%, I predicted over 50% and they all told me it couldn’t happen. I explained that a 25% drop would not make houses affordable for median wage earners. Either they all earn more than median or they think banks will let them buy with 5% down and 5% interest *rolleyes*
some parts of Europe need a drop of more than 75% in homeprices just to get back to the historic trendline. The introduction of all kinds of homeowner subsidies, tax incentives, crazy lending and buying on multiple incomes has pushed homeprices to levels that are crazy relative to median income. I don’t know what will happen to correct this situation, but it sure is unsustainable.
Today my newspaper reports than 85% of single people in Netherlands consider homes totally unaffordable; within the current system they will never be able to buy a home. Even average two-income families are struggling to buy ’starter homes’.
I wonder if a large part of that could be attributed to a *relatively* low rate of new construction? It would then be a reflection of landlords owning properties that have a “market value” based on the sale of a tiny percentage of total housing inventory. They continue to be landlords because their cash flow is based on their purchase price, an apparently subsidized mortgage and a rent that reflects what is in the wallets of the renters.
NHZ - do you have an idea about how a newly-built house is priced there, relative to an existing one? And if it is the sky-high price that apparently is the norm, who - what type of buyer - buys it? Wouldn’t seem possible to sell one to a potential landlord.
What the RE moonbats never ever acknowledge is that value falls 50% in REAL dollars when nominal prices stay flat for 20 years at the current rate of inflation. So we get to a 50% decline in real dollars via a combined nominal decline and losses to inflation make no nevermind to me.
Well keep in mind that 25% national price declines probably do imply 50% or more price declines in bubbley areas like much of Florida.
RE: probably do imply 50% or more price declines in bubbley areas like much of Florida.
More trouble for FLORIDA!
http://www.local6.com/news/15499175/detail.html
Very apropos. Would love to get a shot of a few dozen turkey vultures on a McMansion rooftop as the official HBB postcard.
Does anyone know what nominal-yen % decline accrued in the Japanese 17-year RE bust?b
“Helping today’s homeowners makes little sense if it penalizes tomorrow’s homeowners”
Today’s homeowners = senior citizens.
Tomorrow’s homeowners — younger generations.
Borrowing money, to be paid back by younger generations, to transfer more wealth to senior citizens, so they could continue to live in the style to which they have become accustomed, makes political sense.
Right — the younger generation has not received a big enough shaft from punitive OASDI contribution rates, so why not ask them to throw in a bit more of their permanent incomes to propping up home equity values at levels that contribute a “wealth effect” into current seniors’ retirement spending money?
15% (self + employer) is punitive?
Yes it is !! Self employment today makes Absolutely no sense today unless you cheat….In the past it was much easier…Today it is punitive is you play by “ALL” the rules…Best just to get the sweet government/muni job, put in your twenty five and go dance in the sunshine for the remainder of your years….
Preach it, Dave! Personally, I’d rather go to a self-funded retirement system, but the chance of that happening are between slim and none.
Slim - I’m beginning to wonder if we might see a return to defined-benefit plans someday. Either that or a major tightening of restrictions about how private plans are tapped early by their owners and how risky the investments can be.
Chip, that is very unlikely IMHO. The big companies with defined benefit pension plans (automakers, airlines etc.) are all in severe financial straits becuase they’ve underfunded the plans. Of course if we’ve learned anything here, it’s that memory is generational, so who knows, 30 years from now they may be the next big thing. But I wouldn’t count on them being any better managed that the current ones.
Of course. Younger generation does not vote. Older generations do.
I’m a young guy myself and I mostly float in a barely lower middle class ( if that ) circles. You would not believe the level of resentment towards older generations (50 and up) young people have.
That’s a very interesting comment and would be well worth an open discussion on the HBB as even though one may think it is a social thing, perhaps it also goes partially to the heart of the Bubble itself.
As an over 50 with 7 children i dearly would like to hear more.
Van Gogh -
I’m 34. The issue with discussing this issue is that it very quickly degrades into the “WWII, Boomer, Generation X, or Generation Y” is stupid, lazy,
Wow - most of my post got cut off. Oh, well - another day perhaps, although the short version will be easier to read.
My thesis was this: given that the under 40 group is being asked to fund many things (their own retirement and educations) that their elders were not, it is perhaps an understandable frustration when we are being expected to fund the boomer’s retirement through SS even though it’s been made perfectly clear that SS will be flat busted broke by the time we get there.
You may not agree with the POV but the idea that the under 40’s will work as hard or harder than their parents and have much less to show for it at the end of their lives might be an understandable source of anger.
“You would not believe the level of resentment towards older generations (50 and up) young people have.”
Interesting comment or generalization. Why the arbitrary age number of 50. I’m soon to be 68 and I have a generalized resentment toward those in your age group. Why? Because of your general sense of entitlement, lack of savings, lack of good work ethics, impulse buying, and lack of owning up to responsibility.
“sense of entitlement, lack of savings, lack of good work ethics, impulse buying, and lack of owning up to responsibility. ”
Funny, it seems there were many boomers in your age group, featured in various articles listed on this blog, that fit that description to a “t.”
Yes, but the people in the lower age group got their sense of entitlement from their parents. And their lack of savings (due to impulse buying) goes straight to the older people who aren’t satisfied with billions of dollars. Sure the super wealthy donate to schools which in turn raise tuitions which in turn leads to more debt for the students. *shrug* Perhaps the old people are all too greedy.
Coming from this under 30 generation, I can confirm that the resentment exists toward the older crowd. As with many stereotypes, the general hatred stems from the more specific instances of the older generation screwing the younger generation, which the younger generation is then generalizing to “all those greedy old bastards”. However, the hatred is not universal, and the specific example of Ron Paul fighting for the rights of everyone reminds us that we need to evaluate even members of the older generations on a case by case basis.
Admitting it, sort of. Comforting but false words about a 30% drop and return to 2004 levels, as if that’s the firm floor. We’ll see about that.
From the article:
From 2000 to 2006, median family income rose almost 14 percent, to $57,612. Over the same period, the median-priced existing home increased about 50 percent, to $221,900. By other indicators, the increase was even greater.
And then a few paragraphs later:
Values that rose spectacularly will now fall less spectacularly — back to roughly 2004 levels; that’s still 30 percent or so higher than in 2000.
I don’t think there’s been a spectacular rise in incomes since 2006. Not sure why the author thinks that when this settles out, housing will still carry a premium (relative to income) over the inflation adjusted 2000 values. If incomes are 14% higher than in 2000, shouldn’t the price of housing fall to about that level?
For the most part, the article makes good sense- Mr. Samuelson just needs to follow his logic through to it’s conclusion.
Excellent! Today’s “people’s economist” has an “aha!” moment on affordability!
“Gloom. Doom. Calamity. Home prices are tumbling. We’re bombarded by somber reports. But wait. This is actually good news, because lower home prices are the only real solution to the housing collapse. The sooner prices fall, the better. The longer the adjustment takes, the longer the housing slump (weak sales, low construction, high numbers of unsold homes) will last.
It’s elementary economics. Pretend that houses are apples. We have 1,000 apples, priced at $1 each. They don’t sell. We can either keep the price at $1 and watch the apples rot or cut the price until people buy. Housing is no different.”
Samuelson forgot to include tighter lending standards, which in some areas now include a 10 or 20% downpayment. Let’s see, with a negative savings rate, wages stagnant, and health care, food and gas costs rocketing upwards, how long will it take would be buyers to amass a downpayment to meet the new lending
standards?
Prices declining 30%? Samuelson is an optimist.
A friend of ours is a broker over at the east coast (FL) and has been refusing to renew listings of customers who will not lower their asking prices substantially after the initial listing period if a sale wasn’t even close. From what I know, this was unheard of, at least in central Florida, during the past decade.
I think that starving real estate agents - the ones who have to feed themselves on that income as opposed to the second-income ones - will become very aggressive in driving home to reluctant sellers that they have to drop their prices dramatically or, “Good luck in finding someone else to try to get your house sold.” It feels like we’re at that moment here.
The saying that somebody posted here a year or two ago from the LAST RE downturn was “It’s better to be the second wife and it’s better to be the third RE agent.”
Is it me?
or is the time between observations made on this blog and them appearing in the MSM getting shorter and shorter?
If so, what does this mean?
Spook
Yes, but its because the blog’s commenters have lost their edge, no longer capable of predicting the far-flung future.
That’s pretty funny coming from someone posting from a big RE firm. How’s that alligator?
Anyway, this guys big revelation is that prices need to be affordable? I think we called that early enough.
“I think we called that early enough.”
Early enough as in one of your basic premises for starting this blog, I believe.
Mwhahaha…. Spook got owned by Ben J. lmao.
pwnd and punk’d!!!
The future is now.
How can one predict the far flung future with so much market manipulation to be done by our politicians. With a couple fear driven swipes of the Pen they can change the rules!! In 2004-2005 we saw the products being advertised and were smart enough to take it to its logical conclusion. The Rescue of the monoline insurers, the SWF money, the Debt forgivenes, the freezing of foreclosures, Allowing municipalities bid on their own bonds …. the list goes on. As each one of these passes or fails to pass it will provide clarity. We still see the follies of many of these asinine plans and will quickly tear through their BS just like we tore through the BS of RE cheerleaders!!!
I agree that the politicians are scrambling to ‘contain’ this mess, but so far they’ve accomplished very little. The overall trends are continuing as predicted.
Speaking of which, I watched the Senate Banking Committee on C-SPAN last night for about 30 minutes.
Of the senators, only Chuck Schumer seemed to have a grasp on things, with a few pointed questions related to the ratings agencies and how much they screwed up.
Committee Chair Dodd is a clown.
The rest of the senators all did the appropriate hand-wringing act of concern for constituents, but really were more of the “humping football” variety (HBB version).
On the other side, Fed Chair Kohn was unimpressive, Comptroller of the Currency Dugan seemed little more than competent and FDIC head Bair was the only one of the whole bunch to mention anything about a “moral hazard” when bailing out those underwater.
Interestingly, the only person who mentioned anything about prices was a banking administrator from Iowa. He cautioned that before any government intervention related to FB-relief, it would be some time before “we find out what prices are in individual markets.”
In other words, he expected the market to play a role!
I now firmly believe that government attempts to “make it better” will do just the opposite, as others have predicted here for years.
What I find encouraging (in a self-serving kinda way) is that the pols’ ideas seem to all be predicated on the assumption that whatever lies ahead - no matter how sharp & painful - will be a relatively short event. One that can be solved, in say, a single presidential term. What will be hilarious is if 2012 comes along and things are still sputtering along. What then?
All they have is short term ideas tailored for short voter attention spans. They are not up to this challenge and time will prove that.
Nothing the pols can do can work.
The system has manipulated everything into the worst possible boxes. There is no way easy way out of here.
Bernanke’s speech yesterday was pure desperation.
How can one predict the far flung future with so much market manipulation to be done by our politicians.
Easy: I predict that politicians will manipulate whatever they can to suit their own best interests.
On the other hand, that’s been true since the time of the Pharaohs, so it’s not a big surprise to anyone, is it?
Yes, but its because the blog’s commenters have lost their edge, no longer capable of predicting the far-flung future.
Jackass! Posters on this board continue to predict the far-flung future, even though the unpredictabilities run right off the scale. We also continue to place the housing bubble in its proper context of societal, economic, and political trends - local, national, and global - that will have far-reaching and profound implications. Will we predict the future with the same uncanny accuracy that we displayed back in 2004/2005? Time will tell.
Now, Realtor-Troll, please retreat to your cardboard box and nurse your bitterness over a bottle of Thunderbird instead of venting it in here.
I don’t even really do much predicting. I see it more as batting down bottom-pickers, REIC lies, calling builder BS, and the like. But following the housing bubble closely does make things easier to see.
It’s like “predicting” that a marble is about to roll off the edge of a counter. It’s not really a prediction as much as projection based on what you already know and understand.
Sammy: I predict that my brother-in-law who just bought in Cape Coral, Florida is going to know more about the Florida housing market than I do. Also it will get very dark tonight.
RE: I predict that my brother-in-law who just bought in Cape Coral, Florida is going to know more about the Florida housing market than I do.
At least now from reading this blog you know the need for domiciled Floridians to obtain “vulture attack insurance”!
Bet he doesn’t!
Here’s one that the MSM won’t catch up to for a couple years, if ever: Real estate prices will bottom out and remain flat into the teens of the 21st century…
Joey,
This is close to what I told someone yesterday. IMO the RE market will slide/crash for about 2 years (2010) and then remain flat for another three (2013).
After that I don’t even think about trying to predict since there are so many variables.
Variable #1: Value of the dollar. As the Fed keeps dumping money into the system, at what point will the masses be able to use these dollars with enough volume to support the home prices and start bringing them up again.
Variable #2: Who gets elected and what policies will they bring. Odds seem to favor the Dems so I’m preparing to buckle down even more and keep my spending within my means.
Agree 100%, wonder of wonders! Look no further to what happened to the tech stocks (Nortel for example) after the crash and the crowd moved on. 7 years gone and still no where near the $800 a share in ‘01
http://finance.yahoo.com/q/bc?s=NT&t=my&l=off&z=m&q=l&c=
I simply think that the future is harder to predict from here. Look, it WAS obvious to most of us around here that the bubble couldn’t last. Linear extrapolation of bubble trends became asymptotic and absurd. But now the system has gone all nonlinear and wonky on us. If you’re inflating a literal balloon, it becomes pretty obvious that as the walls get thinner and thinner, it is going to burst. But predicting exactly when it bursts and where the pieces will fall is MUCH MUCH harder.
“or is the time between observations made on this blog and them appearing in the MSM getting shorter and shorter?
If so, what does this mean?”
It means the MSM does a lot of reading here.
It means the MSM does a lot of reading here.
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Exactly!
Is there a legal limit on prepayment penalties in the US?
If not I was wondering if Bernanke’s principal write-down proposal might just be made to work (in some cases). Say the lender instituted;
1. A fairly high interest rate, because the borrower by definition is no longer prime.
2. A thumping prepayment penalty, initially the principal amount written off. Bring this prepayment penalty down slowly, say 5% a year straight line.
Psychologically, J6P is whole again, albeit on the hook for a high monthly. However, if there is hyperinflation and the nominal price recovers to the level which supported the original loan, then the lender will participate in any windfall sale profits.
Debtor’s prison…..house arrest.
According to a few Google hits, there are State limits.
More than 35 states have already placed a legal limit on the maximum prepayment penalty that a homeowner should have to pay, and over half of the states have…
http://www.mortgagenewsdaily.com/Mortgage_Fraud/Predatory_Lending.asp
(In the way of an example:) my lawyer tells me the state of AZ altogether forbids pre-payment penalties. I have noticed that the termination of an AZ mortgage does cost the borrower some money. Lacking pre-payment penalties, the commercial lenders charge fees for everything from providing a balance statement to filing the release deed to brewing the coffee.
Banking got creative when the Supreme Court ruled that loans made from Banks to persons in other States, where governed by the rules of the State that the Bank was chartered in.
That led to the mass movement of Banks to places like North Carolina, where there were no rules on MAXIMUM interest charges.
That is how all this crap with 25% interest rates on loans got started.
I don’t know if mortgage loans would get the same treatment, but I imagine that they would.
So, it wouldn’t matter, whatsoever, what the State Laws were when dealing Interstate Commerce. If you are lending from your own State, then the rules would apply. Interesting problem when added to the slicing and dicing of loan portfolios into “bonds”.
Diogenes - that’s interesting. Thanks.
In Wisconsin, there is a three month interest penalty. No more under the usuary law, except, if at closing, you signed an opt out agreement, agreeing to the pre payment penalty. So, if you have a mortgage in Wisconsin, make sure you check the documents before paying that pre payment penalty!!!!!
IMO, the “forgiven” portion of the loan needs to be refinanced into an unsecured loan with no principal or interest payments due until the house sells. Interest should accrue on this unsecured portion for as long as the home remains in the FB’s possession. It should be a non-recourse loan BUT the “written-down” mortgage should be full recourse, and should not be discharged in bankruptcy. That should be the price FBs pay for getting the new loan.
Also, the FB won’t be able to gain by flipping the house as the total amount of the original loan PLUS higher accrued interest payments will preclude any hopes of flipping.
The banks, OTOH, should not be able to hold the new unsecured loans on their balance sheets — if they can do it with losing assets (SIV & “level 3″ accounting problems), they should be willing to do it with potential losses. Lets them have surprises to the upside that way (imagine that!).
The main problem with loan forgiveness would be responsible owners wanting their bailout. At least if we stuck FBs with the unsecured loans (due upon sale), the responsible people wouldn’t be quite as bothered by the bailout.
they should be willing to do it with potential losses = they should be willing to do it (keep assets off balance sheets) with potential gains — in the form of unsecured loans which represent the “forgiven” portions of the mortgages.
I smell money to be made somewhere around here ..
Aside from the banks, how about constructing a deal where private lenders/investors can safely take small pieces of the action. Just make it secure and reasonably profitable to get involved.. If they are serious about keeping FBs paying on their upsidedown mortgages, back-up such small investors with full faith and credit of the US Govt.
Everyone’s looking for someplace to park cash these days.
If banks are starting to forgive principle, what would stop people from buying a house and simply defaulting as prices go down then make the bank refinance the principle every year all the way down to the bottom? And if banks won’t refinance, just walk away.
well.. nothing has ever stopped people from walking away.. people can walk if they want to. It just means they need another place to live… new schools for the kiddies.. finding a new job somewhere else is likely, etc.
There is zero profit in walking away for the FB and the proposed plans won’t change that, imo. I see these plans as bait… get hooked, stay and keep paying off your dream home. Uncle Sam wants YOU to keep sending that check every month.
Whether you like it or not, this is already the norm. They were always playing the “heads we win, tails the banks lose” game.
It’s gonna become even more explicit, and credit standards are gonna tighten even further.
IMHO, this cramdown plan is DOA. Not going to happen. The incentive functions are all wrong for the lenders. Nothing much to gain, plenty to lose.
Has the MSM referred to the latest bailout measure as “the cramdown plan” yet?
joeyinCalif, all of which are WHY the house is probably worth MORE to the FB than to random-dude buying an REO. The problem IMHO is that a foreclosure/REO sale takes the ultimate lenders remaining money OUT of the RE backed bond business. In principal writedown scenarios, the lenders still have their money in a tanking market sector. It doesn’t really make sense unless you believe that it will STOP price declines. And IMHO it doesn’t stand a chance of stopping price declines until prices are sustainable on a long term basis. In another year or two, principal writedown might very well be a good tool to prevent a REAL market crash. But we’re not there yet IMHO.
I dunno. I had the visual of folks trying to throw up after a night of hard partying, and other people trying to “cram down” the hurl back down their throats.
Same level of efficacy, I would argue.
I am skeptical. Right now today, an FB could come to me and ask for a second (to pay down his first), and could say that I would be paid off only if/when his/her later sale occurred…I would laugh in his/her face.
no 2nds.. i want to be in first position .. perhaps a share of the first, along with the note holder.
AND I get a commesurate % of the FB’s monthly payment.. AND I get my % of the eventual sale price, which may be more than (but cannot be less than) my committment.
I have no idea how to structure such a thing or even if it’s possible.
btw, i don’t know how to figure this out either, but lets say some bank does reduces the principle by 10% and leaves interest rate alone.
How much less will the FB actually pay over the term of the loan? 3%? I think it’s gonna be way less than the 10% discount.
oops.. principal
Now we have regular home buyers who can afford the payments making the decision to walk because they don’t have equity . The powers are beginning to see what happens when a inflated market crashing causes dead beats and fraudulent buyers to walk ,causing real buyers who can afford the payments to walk because they are up-side down with the equity .
Did the powers really think that all this bail -out talk wouldn’t cause every one who could afford the payments or not to say they are entitled to a bail-out on being up-side down with equity .
The powers now understand why borrowers would rather walk than get a re-write on a loan .It is no longer the issue that home buyers bought just to have the American dream ,but they bought to get in on equity appreciation and without that ,why not walk ? People do not feel a obligation to a lender that conned them into a toxic loan in a inflated market anyway . Do you think that borrowers are going to be pissed when they hear that lenders inflated appraisals ? The lenders didn’t practice law and order and they breached their duty to underwrite loans ,causing even good people to buy inflated real estate . The investors bought the loans because of faulty ratings on risk .
The loans and appraisals that were made in the last 3 years of the boom were based on mania prices and faulty lending for most part . So ,if the lenders don’t bail out all parties that bought in the last three years of the mania by lowering the loan amount by the amount of the crash in values ,they can’t just bail out some and not others because those others will walk also .
The fact that BB and Paulson are now talking about reducing loan amounts tells me that they now understand why the homebuyers are walking .
So that is why I say ,no bail-outs ,and the lenders just foreclose and get new buyers who can afford the payments and price and want long term home ownership . That is the only way to create a stable market again unless you forgive the loan balance on the mania prices for all people who bought during the crime wave .
Joey - “How much less will the FB actually pay over the term of the loan? 3%? I think it’s gonna be way less than the 10% discount.”
I dunno — seems to me that it would be directly proportional, relative to the remaining term and balance on the day of forgiveness. Easier way to see it might be to think in terms of halving (or doubling the debt). If the interest rate doesn’t change, I’d think total interest earned should remain directly proportional.
I think that the lenders know they are going to lose the cramdown amount anyway, so are trying to figure out how, exactly, they want to take the bullet.
Chip, you’re right.. I used an online loan calculator.
Reduce the principal by 10% and the total amt paid is reduced by 10%.
The monthly *payment* is reduced by less than 10%.. it’s a 9% reduction on the example I used ($100,000 - $90,000, 10 yr @ 7%)
And, about the same 9% with $150K - $135K, or with 500K - 450K.
auction rate failure:
March 5 (Bloomberg) — Auction-rate bond failures show no sign of abating after investors abandoned the market for variable-rate municipal securities.
Almost 70 percent of the periodic auctions in the $330 billion market failed this week as investment banks stopped buying the securities investors didn’t want. Yields on the debt averaged 6.52 percent as of Feb. 28, up from 3.63 percent before demand evaporated in January.
http://tinyurl.com/36b63q
There’s opportunity awaiting for someone who knows his way around in this area; I suspect the good is being flushed along with the bad.
Time for me to to visit the library this weekend.
How did California’s $5Billion offering go? Or is that later in the week?
The reason I ask is if that doesn’t get funded, the whole state of CA is in trouble; I know people get tired of hearing how big the California economy is… but that failed bond auction will have ripples…
Got Popcorn?
Neil
don’t worry, the Pimp will be happy to buy all the bonds …
Indirectly related:
Elk Grove board issues layoff notices for 217 school jobs
http://tinyurl.com/27avkh
‘The board’s move Tuesday night comes as the state plans to cut $4.8 billion from education. Elk Grove Unified, for its part, faces a state funding shortfall of $25 million for the 2008-09 school year. Personnel is the largest district expenditure.’
My tiny but much lauded school district is 4 mil in the hole. Repeat this over and over across CA and that will leave a mark.
Directly related fair lady. A lowering of the standard of living.
Yeah, inflate those wages!!!
Or as the smarmy Brits once put it, “Sorry you lost your job. Hope you made a killing on the house.”
Yeah….Cut the teachers and hire more prison guards…..Three hundred and fifty thousand state employees and we are cutting teachers…The terminator wanted 10% accross the board…At least he recognizes the depth of the problem…That was a non starter in Sac…They want “Revenue enhancements”….
I goggled Elk Grove and it said that they HAD 61,000 students and 61 schools. So now we have layoffs and a declining school enrollment. Declining enrollment, less dollars, more layoffs?
In Bakersfield last weekend and I had two family member teachers (elem and making better then $60K) complain that next year classroom size was going from 19 students to 30 students.
I’m not so sure that 6.52% for an average long term municipal bond, given the threat of inflation and widespread bankruptcies due to pension and retiree healthcare obligations, is so great. Could be somewhat lower, but not too much. It’s 2 percent over inflation after (lack of) taxes.
I wonder how the investors are factoring in 2009 changes in income tax and capital gains rates, depending on who wins the election?
double bubble trouble:
AMID increasingly turbulent credit markets and ever-weaker reports on the economy, the Federal Reserve has been unusually swift and determined in its lowering of the overnight lending rate. The White House and Congress have moved quickly as well, approving rebates for families and tax breaks for businesses. And more monetary easing from the Fed could well be on the way.
The central question for the economy is this: Will this medicine work? The same question was asked repeatedly in Japan during its “lost decade” of the 1990s. Unfortunately, as was the case in Japan, the answer may be no.
http://www.nytimes.com/2008/03/05/opinion/05roach.html?ref=opinion
We only have to keep this patient on life support until the election.
Yep…I think thats why the reps are willing to hand McCain the nomination…They don’t see a way to the white house given the anger of the country…They are willing to hand off all these problems to the Dems (hold on to your wallets), then come back as Saviors in 2012…
Of course, it won’t. It’ll just fuel a “dollar carry trade”.
Why would you invest money in a collapsing asset, or expand businesses in a contracting economy?
These newspapers are full of shee-yat. They don’t bother thinking about incentives, motivations, etc.
O/T - there is an excellent piece on new news about colon cancer in the “Most E-Mailed” list in the right-hand pane accompanying this article.
Thank you, Chip! Good info.
europe housing slows:
House price growth across Europe slowed sharply in the second half of 2007, according to a report.
A survey by the Royal Institution of Chartered Surveyors (Rics) said rising interest rates, not the credit crunch, were the prime reason for the slowdown.
http://news.bbc.co.uk/2/hi/business/7277588.stm
a lot of inaccurate reporting in this article …
mortgage rates in most of Europe have not changed significantly over the last 1-2 years and are still near alltime lows. The UK (plus Ireland probably) and Spain are exceptions to the rule and even there the increase was modest - although maybe too much for highly leveraged speculators. Also the ”previous European housing market crisis in the 1990’s” is nonsense, this only applies to the UK. Homeprices in many parts of Europe have kept climbing for 15-20 years (sometimes slowly, sometimes at double digit rates for many years). The few corrections that occured were isolated events (in just a few countries, at different times and short lived) that proved to be nothing more than minor bumps in the road.
Ultimately this article is about a new preemptive bailout proposal for housing speculators, paid for by taxpayers, similar to the Dutch National Mortgage Guarantee system. I’m sure many EU countries have their eyes on this clever Dutch system to keep home prices rising forever (at least until it chokes the tax office).
Explains why ive been told some of those houses can go for $1000 USD per square foot! The bubble in Europe appears to be bigger than anywhere in America!
Homeprices in some parts of Europe are up more than 1000% over the last 15-20 years, while wages have increased maybe 50-75% (often a bit less than inflation). I think the US housing bust will be a picnic compared to what will happen when the EU bubble finally pops. Too bad the kleptocrats will spend all our tax money to prevent the inevitable
and regarding $1000/sqft: some luxury apartments in my neighborhood (low income area) sold last year for 15000 euro/m2, that is about $2500/sqft … The current asking price might be around $3000/sqft, prices of expensive properties are still surging over here.
Filings for Bankruptcy Up 18% in February
http://tinyurl.com/3d2ge7
February was the busiest month for filings since Congress overhauled the bankruptcy law in 2005. Bankruptcy experts said the rise was particularly worrisome because those changes made filing for bankruptcy more complicated and expensive.
“This number of bankruptcies may be under-representative of the true financial distress consumers are feeling because of the steps Congress has taken,” said Jack Williams, a scholar in residence at the American Bankruptcy Institute and a professor at Georgia State University.
Ms. Warren says that the increase also reflects changing attitudes about bankruptcy. Many Americans now understand that filing bankruptcy is legal, something many did not appreciate a few years ago. Studies last year showed that one of seven families were dealing with debt collectors, who often encourage families not to file for bankruptcy, she said.
“The word is leaking out that the bankruptcy courts are open for business,” Ms. Warren says.
I can hear it now, You mean you haven’t filed for bankruptcy yet? We did it and sent in jingle mail. It’s somewhat easy to do and now we can afford to take that vacation to Hawaii with the cash we saved on making those pesky mortgage and credit card payments.”
Just a little cynical this snowy upstate NY morning.
Sometimes two moral wrongs make a right. A series of unconscionable loans deserves (and creates) deadbeats. The nice thing about this cycle is that at the end the lender can no longer loan (out of capital) and the deadbeat can no longer borrow (out of credit). So, the process begins with one or two immoral actors. By the end, they are no longer immoral.
Anything that brings back lending standards is a good thing IMO. If that means, lots of losses for lenders, well, that’s how capitalism works.
Increased unemployment would be a factor as a lack of income defeats the chapter 7 means test.
How much harder is it to file bankruptcy?
I read a few years back that somewhere around 85-90% of people get their stuff written completely off anyways because they didn’t make enough.
The CC companies and banks had what they thought is a golden parachute. Turns out that it isn’t opening and they are falling to the earth at terminal velocity.
Lending more money to some poor peon that they can afford to pay back invites the loss of principal. Lending more money to some well-paid guy than he can afford to pay back simply invites the loss of MORE principal. Blood from a turnip boys, it’s just a bigger turnip and you want more blood.
That should be “…more than they can afford to pay…
Interesting. Does the bankrupt have to remain unemployed until the case is finalized? This could lead to some short term wage inflation, as jobs become available, and seekers sit on the sidelines (ceteris paribus)
You will find that it is actually in their incentive to NOT have a job. One of the more bizarre provisions of the law that many of us criticized when it first came out.
The way to get out “scot-free” is to actually have no income at all, and that’s what they will do.
Sounds like food for a burgeoning underground economy. I’d look for a sharp increase in barter.
OPEC says all is well:
VIENNA (Reuters) - OPEC ministers on Wednesday agreed to keep output steady and said record high prices had been driven by factors that were beyond their control.
U.S. crude hit a record of $103.95 a barrel on Monday and was trading above $100 on Wednesday.
http://biz.yahoo.com/rb/080305/opec.html?.v=5
I think they report oil numbers today? If inventory numbers rise a lot, look for prices to tank in the very short term but continue to trend higher as the FED continues to ease… but investors may decide to find a better hiding place than oil if they get stung.
Oil prices won’t go down much. Google “peak oil”
Yes, if you do the reading, Peak Oil is going to make the darkest days of the housing/credit/stock market bubble crash look like “the good old days”
Peak oil is a misnomer because it is relatively useless in the long term scheme of things. We don’t rely on oil, we rely on energy. We are likely never going to see a peak energy crisis.
Oil has been used for a very short period of time because the energy that oil stores is high versus the cost and space requirements. This may no longer be the case as energy technology progresses. People don’t like change, but it isn’t something we are adverse to when the pocketbook tells you to change.
I’ve been investigating the short term energy efficiency R&D markets, and I fully believe that oil will be less and less necessary in my life. My DW and I drive a combine 60,000 miles per year, but we’re already making changes immediately. We also consume about $8000 a year in utility costs at our homes.
Our first goal is to add the new high efficiency solar panels to our home this summer. We live in Illinois, so solar panels lose efficiency in the cold/dark months, but they are ultra efficient in the warm/sunny months. Two of my friends who live further north converted last year and have negative electric bills in the summer, even with A/C running at 72 degrees. We’re ready for this to offset our energy costs by over 50% in the first year.
Secondly, we’re upgrading our house’s insulation and windows to be much more efficient. I estimate that we are 40% inefficient due to bad insulation and windows. The cost is high (over $10k) but the long term payoff is likely 3-4 years at which point it is a profitable move.
Third, battery efficient will skyrocket in the next few years, with nanotech and newer storage specifications allowing for much more energy to be stored in the same space and weight. There are numerous nanotech and other tech efficiency gains for battery storage coming in a few years.
Oil will be forgotten for us, if we’re lucky, in just a half decade to a decade. I have no fear for oil price spikes. If you can prepare for the same changes, you won’t worry either.
Oil will be forgotten for us, if we’re lucky, in just a half decade to a decade.
Good for you. Increasing efficiencies to save energy has been my mantra for years.
Though let’s note that you have A.) the knowledge, B.) the willpower, and C.) the capital to make these changes toward fossil fuel independence. Many do not.
“We don’t rely on oil, we rely on energy. We are likely never going to see a peak energy crisis.”
I completely agree we rely on energy not oil but I wish I was as optimistic as you. I think the ’sheeple’ are the last to clue in. The sheer volume of ’sheeple’ and their dependance on oil without understanding basic economics and cash flow will not head this off completely. I bought solar panels about a year ago and everyone is impressed when I tell them that I save over $200 a month on electricity But and it is a big BUT they can get past the $28,000 price tag after incentives. It has just under a 10 year payback period but it will cost them 1fully loaded Honda Accord just to save $200 and change a month. How are they to keep up with the Jones’s?? I hope It will be fashionable to be economically smart but like I said earlier I am not that optimistic.
Just my 2 Yens worth
Trucking Headlines
Diesel shatters all-time record; experts predict $4 mark
By eTrucker Staff
For the week ending March 3, the national average retail price of a gallon of diesel soared 10.6 cents to $3.658, setting a record high for the second consecutive week. Having climbed 37.8 cents in the last three weeks, the price is $1.032 higher than the same week last year, according to the U.S. Department of Energy.
The average price now has been above $3 for 24 consecutive weeks.
All regions tracked by DOE saw prices increases. The Central Antlantic had the most expensive diesel in the nation, up 13.2 cents to $3.825 per gallon.
The nation’s least expensive diesel was in the Rockies, where week-over-week prices climbed 10.0 cents to $3.573 per gallon.
Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service, told the Associated Press that diesel may well pass the $4 mark this spring, thus boosting prices of virtually every consumer product transported by truck, train or ship.
What’s to blame? A slumping dollar and tension in the Middle East were among the factors in February’s 19 percent rise in crude oil prices, which are poised to rise above $103.76 a barrel. That’s the price many analysts believe to be oil’s all-time inflation-adjusted high, set 30 years ago during the Iranian hostage crisis.
Gas prices last week rose 0.3 cent to a national average of $3.164 oer gallon, edging closer to last May’s record of $3.227 per gallon, according to AAA and the Oil Price Information Service.
Gas and diesel prices are following light, sweet crude oil, which spiked to a new record of $103.05 on Feb. 29, before falling 75 cents to settle at $101.84 per barrel on the New York Mercantile Exchange.
http://tinyurl.com/3avj8g
Isn’t diesel a lot cheaper to make than gas? I remember diesel always being cheaper at the pump until recent years.I think the consumer is getting the shaft.I woner how many truckers are running off road, red fuel?It is about 50 cents cheaper.I bought some red a few weeks ago for 3.03/ gallon for my tractor.
I couldn’t believe it - yesterday I was filling up at a Sunoco station - $3.18 for regular, and a worker was changing the sign to put diesel at $3.80. I had always thought that diesel was cheaper to produce than gasoline. It was only in 1978 or so, when GM began pushing our converted V-8s that ran on diesel (I had one) that I noticed the price of diesel rising above gasoline. If the production capacity isn’t an issue (that surely could have been corrected in the intervening 30 years), then why is there such a gap, to the “wrong” side?
Not sure if this has been posted here yet. Instead of “jingle mail”, some wealthy people are still staying in their homes 2 years after they stop paying the mortgage…
http://bigpicture.typepad.com/comments/2008/03/foreclosure-pro.html
“There is a very important phenomena that is occurring that has only been covered in an only “glancing” manner. Beyond the concept of “jingle mail” — which suggests that folks who can pay their mortgages may just choose to walk away given the dramatic loss of equity due to housing’s collapse — consider the following: As a developer, I had stepped to the sidelines and rented beginning in 2005, because I was sure that housing was unsustainable and was bound to collapse; it took 2 more years for it occur.
Nonetheless, as I have followed several of the homes that my wife and I were interested in a few years back, they are all on the market now. What is shocking, that in each and every case, I have been told by brokers and banks that the owners, have ceased paying their mortgages in some cases for nearly 2 years and have continued to occupy these homes. Now, these are homes in excess of $2,000,000 in the very best neighborhoods in South Florida. Brokers have added that these buyers further complicated things by putting huge home equity lines on top of their mortgages and now have no possibility of selling their homes for amounts needed to cover their accumulated debt.
It will get increasingly difficult to find house sitters who will pony up for the kind of furnishings needed to stage a $2M house ;). These deadbeats are serving a useful purpose.
Or for detecting banks to stay away from.
same situation happened in a luxury development in my area (Netherlands) some years ago, when many owners went under water and tried to sell (homes in 750K-1M euro price range). I think the banks calculate that the owners can earn a lot of income in the years ahead to pay off the mortgage. Forcing a lot of luxury homes onto the market at the same time means a sure loss to the bank. So despite the fact that many of the owners were under water with the mortgage they accepted that the owners will not pay for a year or so, or just a small amount. In some cases the terms of the mortgage were changed, e.g. they had to pay a slightly higher rate because of what happened.
In this case it seems the bank was right, prices in the development seem to have increased significantly over the last few years so most of the pressure to sell has disappeared.
“Banks do not want to spend the $50,000 required to take a home through a foreclosure and clear the title — only to put the house back on the market for a deeper loss afterwards. Most likely, they have not revealed these owner occupied defaults to their shareholders, thanks to the sheer numbers of non-performing loans on their balance sheets, and the daunting task of foreclosing on all of them.”
I think the S&Ls tried this, until they couldn’t. That said, it might make sense, perversely, for the banks to let these deadbeats remain in the houses because the properties are less likely to deteriorate during a period in which they will not sell anyway. Can’t last forever, though. Stockholders ought to be getting nosy.
I don’t think these were built to be rental properties.
http://tinyurl.com/3ahaon
Rental $3,500
4 Bed, 3.5 Bath
3,651 Sq. Ft.
http://tinyurl.com/2w4wvz
Rental $3,500
5 Bed, 4 Bath
5,120 Sq. Ft.
1.3 Acres
I wonder about so many rentals priced to rent at over $36,000/year; are there really enough well-heeled wannabe renters out there to fill all the places offered at such high rental rates?
Here in FL, in an area that cannot command more than $2,000/mo no matter how big or expensive the place, there is an out-of-state owner asking almost $4,000. My guess is that he is writing off the house under the deduction concept of actively holding it out for rent. But this is a lie, because it is impossible to rent at that rate. He’s in the second or third year of that charade - wonder how long the IRS lets people like this engage in such deception and take a depreciation writeoff. He’ll be home free, of course, when he eventually moves in to his retirement home.
WAMU protects executive bonuses from subprime fallout:
http://news.yahoo.com/s/nm/20080305/bs_nm/wamu_bonuses_dc_1;_ylt=AkcVWAM8ioNnNnfsRRIwkUwE1vAI
They also awarded the execs a ton of bonuses earlier this year at the new low stock price. It lost 70% of its value in 2007, so their option base will be nice and low.
I predict shareholder lawsuits. Nice big distracting ones.
I don’t get that .. wouldn’t a shareholder want to attract and/or keep valuable leadership? Sure, the current guys could be blamed for the problems, perhaps deservedly so..but there is more than a small element of luck involved in running a bank in the black while the financial world goes nuts.
As a prospective CEO who is expected take over and to turn things around, I would expect a lot of money and a guaranteed bonus.. otherwise, get someone else.
As a shareholder it might be wiser to offer lots of money in return for (hopefully) good leadership, as opposed to offering uncertain and/or low compensation.
The management is supposed to be highly paid for good performance. Wamu followed every other bank into a financial disaster, costing shareholders 70% losses in the stock. If a lower level employee did that, they would be fired, not given millions in stock options as reward for their stupidity. Management made a bet ‘heads I win, tails shareholders lose’, and it was a losing bet.
If CEO Kerry Killinger is an example of who we’re speaking of, he’s been there since 1990, at which point WaMu stock was worth about $2 a share..
what i see is Wamu stock is back down to around 1999-2000 levels.. Should a loss after a runup be considered an unforgivable mistake and should this guy be thrown out?
I expect someone making this kind of money to be able to anticipate market changes at LEAST to the same accuracy as the HBB’rs, and then position his company accordingly. Since he did not, I draw the conclusion that it was either deliberate or he is a dolt (and thus overpaid).
All of them should be fired with no golden parachute, they are undeserving.
“…he’s been there since 1990, at which point WaMu stock was worth about $2 a share…”
Anyone who rode Easy Al’s bubble runup in all asset prices deserves sole credit for their own company’s stellar results…
Anyone who rode Easy Al’s bubble runup in all asset prices deserves sole credit for their own company’s stellar results…
no way! Only certain individuals qualify as minor gods and truely deserve the blame/credit.. like your “Easy Al”, ferinstance.
The compensation committee was asleep on this one. There will be a lawsuit.
As a prospective CEO who is expected take over and to turn things around, I would expect a lot of money and a guaranteed bonus.. otherwise, get someone else.
And if you can’t take the hit when you f*ck up, I absolutely will get someone else.
This isn’t the 90s anymore. Some boards have been slow to catch on.
CEO Kerry Killinger is an example of who we’re speaking of ??
Its my understanding that most of WAMU’s problems stem from a aquisition of a large sub-prime lender in Long Beach California in 2005 or so ?? If that is the case, then the CEO should be held accountable because the risky gamble did not pay off to the detriment of the shareholders…Rewarding that decision does not make sense….
Yes, but again and again when people measure company performance versus executive pay, they aren’t correlated. But everybody so wants there to be an easy way to improve performance, they’re willing to pay more on the off chance that it helps.
guaranteed bonus
Isn’t that an oxymoron like “large shrimp”. I mean, if the bonus is guaranteed, whats the point? Wouldn’t it just be your regular pay?
Gratuity included….
jumbo shrimp
thunderous peace
old grandma
There are no words adequate enough to express how I feel about these repugnant pigs.
But how much are their mortgages, and did WAMU write them?
mark to meltdown:
Start with Merrill Lynch’s giant $15 billion write-down of mortgage-related securities in January, which CEO John Thain introduced with a curiously contradictory “I think we’re being conservative, but I don’t think that we’re likely to get much back on these things.” Mmm. Either Merrill’s write-downs are conservative, in which case many of the assets will come back, or they aren’t. Is it any wonder Wall Streeters kibitzing about possible spectacular “write-ups” once the credit crisis passes point to Merrill as a top candidate?
http://tinyurl.com/29ogw4
I would be very surprised if any of the writedowns come back. This seems like a ‘Warren Buffett’ type of rumor to save a market. These are real losses. There are some good ones that got thrown down with the garbage and maybe Mr. Warren Buffett or Mr. James Simmons can isolate the few good items, but like Enron when only 2% of the Enron bonds had value the other 98% were worthless. The article smells bad.
Smells to me like falling knifecatcher encouragement…
“I would be very surprised if any of the writedowns come back”
I disagree. Some of these CDO writedowns are 10 cents on the dollar -> 90% default rate with 0% recovery (ie, houses backing the bonds are worth exactly $0), as I read the quarterly report on how they are valued. As much as I think housing will be down to flat until 2015, I don’t think default rate will be 90% and I certainly don’t think houses are worth $0.
IIRC, ML was the first to write down, but they also were the least involved in SIV’s, by a large margin.
i heard a report on the local nbc news this morning about stuyvesant town offering a free months rent on any new lease.
this is a huge development in nyc that was rent controlled until it’s recent sale for $5 billion. now they must be having trouble renting at the insane prices they are asking.
manhattan rents are still very high but have been getting softer of late. trouble in paradise maybe?
All those people leaving NYC as salaries aren’t enough for those insane rents. I know people paying 2/3 of their post-tax income on rent. They live check to check. Whats the point of living in NYC then?
When I was a pup in NYC, I paid that much for rent, but then again I paid nothing at all for food or drink. I went to art openings, book parties, promos for whatever, etc. every night of the week and had dinner on the appetizers, whilst scarfing up drinks. That, a pound of coffee and 7 bagels would get me through the week.
Maybe it’s a seasonal thing, or maybe it’s my imagination, but the fast rising rents of Apr-06 to Nov-07 time period in San Francisco have slowed recently.
And in just the last few weeks (again, perhaps this is seasonal), there seems to be more available at rental rates that have moderated.
Not the case down here so far jack…..Apartments right now are “White Hot” with investors and there is lots of upward pressure on rents in the west side of the valley…
Rents on the San Mateo area just went up a lot and good places are not very plentiful. We found a nice place at less than half of the interest+taxes+HOA of the selling price, and this is one of a small number of stuck owners that just came on the rental market. The only concern is if the owner continues to try to sell, we may have to move again. (The place is still above water so foreclosure shouldn’t be a problem.) I predict by mid summer there will be tons of new rentals from stuck FBs and the rental rates will finally go down again. Maybe even faster if recession gets into full swing. I have been telling my friends that rents are jumping up now, but pickings will be great in a few more months.
Foreclosures up in suburbs (Rochester, NY); experts blame rise in layoffs
http://tinyurl.com/2b6roh
There were 639 foreclosure sales in the suburbs last year, double the 320 such sales in 2000, according to a local foreclosure task force that includes representatives of the city and county governments, the United Way of Greater Rochester and The Housing Council.
During the same period, foreclosure sales in the city dropped to 884 in 2007 from 1,050 in 2000.
Alex Castro, executive director of The Housing Council and a member of the local foreclosure task force, said some laid-off workers aren’t able to find other employment that pays the same wages.
He said the resetting of adjustable rate mortgages is another issue. People who bought during 2003, 2004 and 2005, when the market was especially strong, took out mortgages with low initial interest rates, with some of them thinking they would sell before the rates reset. But the Rochester-area market has softened and there are fewer potential buyers, making it difficult to sell if a homeowner gets behind on payments, Castro said.
Few surprises in the continuing demise of upstate NY and its housing market.
Ever since they tried to fashion Pittsford Wegman’s into a high end eatery with NY prices, things were destined to go downhill.
The Pittsford Wegmans is such an attraction for both locals and tourists, that they are talking of store expansion to handle the visiting hoards. But you might be passing a few more foreclosure signs on the way.
Around this area, it seems as if real estate outfits try and sell foreclosed properties at the same price as they were listed prior to foreclosure. I don’t quite understand that logic.
five simple rules for dating inflation (but they missed the big one):
NEW YORK (MarketWatch) — Call it stagflation or what you will — it’s getting harder to make ends meet these days. It’s time for action.
Rising health-care and education costs have topped the headlines for years. We’re getting used to paying more at the pump. But recent figures show rising prices hitting closer to home. Higher commodity costs are driving prices for food, clothing and other basic necessities.
http://tinyurl.com/yvmaup
bankrupt:
Americans filed for bankruptcy in growing numbers in February, buckling under the combined weight of rising energy prices, a weakening housing market and sky-high personal debts.
http://tinyurl.com/3d2ge7
Will Bankers Adopt Bernanke’s Suggestion?
Northern Trust Global Economic Research
March 4, 2008
“Chairman Bernanke’s speech to the Independent Community Bankers of America this morning contained measures to address the current housing market crisis from a new front. In other words, the Fed is attempting to manage the market turmoil by more than easing monetary policy. The crux of the subprime mortgage problem is that a vast number of these mortgages are subject to reset at prohibitively higher rates in the months ahead, and holders of these mortgages have little or no equity with every incentive to walk away as house prices continue to decline. Consequently, delinquencies and foreclosures will continue to rise with a lower federal funds rate per se being of no immediate assistance to correct the situation. In light of these circumstances, Bernanke suggested that bankers and other mortgage lenders should write down a part of the principal on these mortgages to minimize foreclosures and enable refinancing under new terms. The Chairman’s suggestion is essentially to reduce the negative spill over effects of the housing market crisis and contain the adverse effects on the larger macroeconomy. He also added that “this arrangement might include a feature that allows the original investor to share in any future appreciation.” The implementation of this strategy will be complex but could be worthwhile considering because there are benefits for both the lender and the borrower - the lender is minimizing loss instead of facing a spate of defaults and foreclosures, and the borrower and community are saved from imminent economic disaster. There are other alternatives being examined to remedy the crisis such as the proposal from the Center for American Progress (Strengthening Our Economy: Foreclosure Prevention and Neighborhood Preservation) and Senator Dodd’s plan for a Federal Homeownership Preservation Corporation. It is not clear if private sector programs such as Bernanke’s suggestion are a better bet than the these broader government-related intiatives. But it is becoming abundantly clear that the housing market crisis and credit crunch has a larger role in the near term path of the economy than the Fed is willing to admit in its forecast about the economy.”
Asha G. Bangalore
She could have written NO.
“The crux of the subprime mortgage problem is that a vast number of these mortgages are subject to reset at prohibitively higher rates in the months ahead…In light of these circumstances, Bernanke suggested that bankers and other mortgage lenders should write down a part of the principal on these mortgages to minimize foreclosures and enable refinancing under new terms.”
Actually, the reason Bernanke recommended what he did was the realization that resets weren’t the problem, the size of the debt relative to the debtor’s income and asset was the problem.
“…the size of the debt relative to the debtor’s income and asset was the problem.”
Maybe he found this blog? Many posters here (myself one of them) have been preaching this message for years already…
“…and the borrower and community are saved from imminent economic disaster.”
But are they saved from long-term economic doldrums? This remedy appears to serve a primary purpose of delaying price discovery which might otherwise occur if banks were left to respond to market forces. Without this intervention, one could expect foreclosures to continue surging, followed by bank REO auctions at fire sale prices. This would quickly establish the post-housing-bubble market value of housing at affordable levels (affordable housing is very bad, you know!).
Instead, the plan is apparently to collectively encourage banks to write down the value of debt on their books, without allowing the (implicitly) lower prices to show up in market. The equilibrium adjustment process to lower market prices would play out far more gradually under this scenario, possibly mitigated by an ongoing pattern of “higher than expected” inflation over time. A reversion to prudent mortgage loan underwriting standards pretty much guarantees that prices will continue adjusting downwards to realign with household incomes, but this process would play out over a series of years instead of months.
Meanwhile, so long as price discovery is delayed, builders may find encouragement to keep adding to the supply glut, pretty much helping to sink prices further through another channel. But the economy will get short term stimulus if overbuilding perks up, and the homebuilder stocks might enjoy another near-term rally before the final post-bubble bottom is reached in a few years.
Of course, the way this plays out also depends on whether the cram-down-encouragement policy has any teeth, and if not, whether banks decide to follow it anyway.
Correct me if I’m wrong but don’t the banks get to pass the financial hit down to the insurers in a default but take the hit themselves if they write down rates and principle (shorts sales, loan mods, etc)?
“insurers”
= FHA?
Wouldn’t it make more sense to bring in private insurers to guarantee the “larger mortgages and mortgages on which the borrower is, or is about to be, delinquent,” in order to properly account for how much of the lending industry’s bad gambling debt is getting transferred to the federal tax base? Perhaps one of Buffett’s companies could offer a suitable insurance product at an affordable price?
“She could have written NO.”
My (non-economist) wife’s comment: “Wouldn’t asking banks to reduce the amount owed on their loans make them more reluctant to lend in the future?”
She could have written NO.
In other words instead of considering a reduction in principle banks should be forced into short sales or foreclosures because those will work better … for what? For you? For great justice? In your Capitalism haggling is only allowed before the purchase, then the Socialist ideals kick in?
“forced into short sales or foreclosures because those will work better”
Thanks for the propaganda message.
Hey, I’m just trying to understand your anti-Capitalist stand, that’s all. You say that price corrections should not happen like this and I immediately wonder if that would apply to other such cases like the iPhone refund that some received. Should the government be involved there to? You shouldn’t be embarrassed. This kind of all prices belong to the government always was enforced by law as recently as the Nixon administration, so these aren’t really radical ideas, just questionable. If you can’t explain how it would work better then I suspect it won’t, but in that we are both just exchanging theories.
Troll man,
Capitalism requires free markets, free from government interference. There is no do-over clause in contracts.
Ms. Asha G. Bangalore used banker speak to say ‘no’.
I offer no opinion on the matter. Northern Trust is one of the major banks that stands to profit big time from BAC, C, WFC, WB et al fiasco.
If one of my borrowers were in default and no easy restructure would fix it, I would foreclose. If all of my borrowers were in default etc, I would follow Bernanke’s suggestion in some fashion. So long as none of my borrowers is in default (so far so good), I don’t have to decide.
How Clinton Won TX and OH
“This definitely puts her in striking distance of the popular vote lead that includes Florida. She has to win the remaining vote by about 6 points to draw even with him on that count. While it is far from assured that she will do this, it is quite plausible. ”
“The point is that if she catches him in the vote count that includes Florida, she will have an angle on victory. She took a big step toward catching him last night.
http://www.realclearpolitics.com/horseraceblog/2008/03/how_clinton_won_tx_and_oh.html
Well folks, it looks like we have a real horse race in the Dem party, which is certainly very entertaining from my point of view. All we’re going to hear about until August is Hillary and Obama duking it out while McCain gets all of his press on page 6. Man is this going to be fun to watch.
OT: A close friend of mine went on a cruise sponsored by Air America and he said that he and his wife were about the only people on the ship that were voting for Hillary (He actually harbors pro Obama leanings but he can’t tell his wife that
)
I don’t think the TX caucus numbers are complete yet but it’s very possible that she lost the delegate count here. There was a big “ha-ha” movement of Republicans voting in the Democratic primary for the candidate that they thought was the easiest to defeat. I registered and did that myself. The interests of the big cities here are quite different from the South TX types who fondly remember the giveaways and social programs from the prior Clinton administration. Personally, I find it appalling that they apparently are the ones who decide our race.
So if one backs out the GOPers crossing over, she may have won big in Texas??
Most polls I am aware of show McCain beating Hillary and losing to Obama. Even if the election were not so far away, I would doubt these polls a/c demographics — seniors more likely to get to the polls than college students, hence McCain’s chances against Obama improve.
Yes, when I heard about Rep voting for Hillary and thought about it. I couldn’t do it. But it does seem that quite a few Rep did cross over and voted for her.
On Fox and Friends this morning she was charming, affable, and relaxed. Everything they’ve done has contributed to these results: SNL appearance, the questions about BO’s readiness, & the BO housing scandal that’s brewing under the radar. (Rezko gavel-to-gavel: Jury selection nears)
http://www.chicagotribune.com/news/local/chi-rezko-court-story,0,7957753.story
Scary beyond belief because you can see the hope in her demeanor. I don’t ever want to see that hope again.
http://www.huffingtonpost.com/dylan-loewe/hillary-the-new-huckabe_b_89965.html
whoa the comments below that piece make for some fiery blogging…
woo hoo hoo
but not on this blog i guess
I wonder when this Clinton scandal will hit the airwaves?
http://www.worldnetdaily.com/index.php?fa=PAGE.view&pageId=56868
Here’s a blurb from NRO online which kinda tells what was going on here yesterday.
From Another Texas Republican [Kathryn Jean Lopez]
I am a Texas Republican who voted in the Democrat Party for Hill and left the rest of the ballot blank. If you go to the Texas Sec of State website and look, 22% of the registered voters in Texas voted in the Texas Democrat Primary, but only 17% voted in the other statewide race on the ballot, for US senator. That is such a huge difference ( the difference on the republican side is about 1% ) that I think its pretty convincing evidence that Republicans crossed over big time. Since we really only wanted to watch the mudslinging for a bit longer and cared nothing about those down ballot clowns, we made one mark on the ballot and left.
Unfortunately, my voter registration card is now branded with the Scarlet letter of having voted in the Democrat Primary, but I can claim I lost my voter registration card and have a new one sent to me, if I can bear the shame.
No shame. New certificates are mailed out every two years to the most recent address you gave to the voter registrar. If you do not recall receiving a new light orange certificate in late 2007, it could mean that you have moved without updating, or there is some other problem with your registration. If the certificate was mailed to an old address, it was returned to the registrar, and you were placed on the “suspense list” in that county. This means you have a grace period that allows you to vote in the same county in your old precinct, but if you do not vote, your name will be removed from the rolls after two federal elections have passed since you were placed on the suspense list. If you did not receive your certificate because you moved to a new Texas county, you will need to re-register.
or: claim you lost it:
If you are a registered voter and you have lost or misplaced your voter certificate, you may vote without your certificate by providing some form of identification (see list below) and signing an affidavit at the polls. This is the procedure to follow if your voter registration is still current and your name appears on the voter rolls in your county of residence. You may also contact your county voter registrar to obtain a replacement certificate.
Acceptable documents are:
a driver’s license or personal identification card issued to you by the Department of Public Safety or a similar document issued to you by an agency of another state, regardless of whether the license or card has expired;
a form of identification containing your photograph that establishes your identity;
a birth certificate or other document confirming birth that is admissible in a court of law and establishes your identity;
United States citizenship papers issued to you;
a United States passport issued to you;
official mail addressed to you, by name, from a governmental entity;
a copy of a current utility bill, bank statement, government check, paycheck, or other government document that shows your name and address; or
any other form of identification prescribed by the secretary of state.
How is voting in the democratic parties primary election democratic. You undermine the democratic process.
It amazes me that you guys still support the republican party after the last 7 years.
I think it is quite telling that Huckabee managed to get 38% in Texas. Throw in Ron Paul’s 5% and thats a hecka lot of Republicans that are not on the McCain band wagon. I am not too sure that you can count on Texas remaining a Red state in November.
don’t spend even one minute worrying about it.
You mean, democracy is only for those who you agree with?
No, that’s diversity.
I crossed over myself yesterday… what covert fun! When asked if I was a democrat, I smiled and said, “Today.”
There is a variance in opinion about who was best to vote for- it all depends on your distaste for Billary compared with the belief that Obama would be harder to beat. I was an Obamite yesterday- haven’t voted Dem since the ’70’s. Wow.
I harbor pro-cheesesteak leanings but can’t tell my waistline that.
No seriously, I was watching the morning talk shows and Hilary was all aglow in the winners’ circle last night. The talking heads said that her appearance on SNL swung the voters to her, but is that show so influential anymore? Couldn’t it just be there is a real divide between the Hill folk and the BO peeps?
SNL is still on the air? News to me.
this is why I love Arizona. Is there a more beautiful sight in the U.S.?
http://www.johnmccain.com/Splash.htm
100 more years of this:
http://www.youtube.com/watch?v=Acn3fwwNH00
A beautiful landscape sullied by the name of the GOP Hollow Man candidate, John McCrazy of Keating Five fame. A hundred years in Iraq, anyone?
Come on Sammy,
What have you got against a hundred year’s war??Just cause the fiasco has already bled the country for 3 trillion is no reason not to double down and go for broke.Hey, it’s not like anyone is going to draft you or anything. It’s all entertainment.
Besides, you gotta love a candidate who announces “I don’t know much about economics” as we face a fiscal crisis of catastrophic dimensions. I guess all the scams he learned in the S&L crisis have slipped his mind. Age will do that.
The crash is on, and whether Nero or his sister is elected, it won’t make much difference.
I guess we’re going to have to break up
I signed up to work for him.
My unscientific two bit analysis of why the nation will choose John McCain for prez:
Of the current choices, who will the country accept as First Spouse:
Michelle Obama
His Billnezz
Cindy McCain
The First Lady Factor comes into play. Subliminally maybe, but it’s there.
Maybe MO and HRH can get together with Gloria Steinem and Eleanor Smeal to have a summit on gynocide. LOL
I thought gynocide was what you squirted in your diaphragm
More LOL.
I don’t think we need the term “First Spouse”, can’t we keep using the term “First Lady”? If my wife were president, I think that would pretty much make me her b!tch, right?
Why do I get the sense that is actually the case?
LOL
I guess we’re going to have to break up I signed up to work for him.
We’ll never know what could have been….
Wait until the question is asked; “will you Re-intorduce the draft”…..
intorduce = introduce…Dyslexia getting worse I guess…
That saddle is a great site for a McMansion!
(g,d,r)
Watched cnbc this morning and Kay Bailey Hutchison was being interviewed. I don’t care for Mccain because of his Iraq position but if Hutchison ends up being his veep pick it will be that much harder for me to make my decision in November.
She’s not going to do that. Don’t worry. She’s going for Governor of Tx.
That would be a refreshing change from the knuckle head that we have now. I could actually vote for Hutchison, even if she is a republican.
The question is - where is Gov Rick “good hair” Perry going?
I have a very smart aleck answer to that one based on scurrilous rumors I’ve heard over the years, but Ben would ban me if I said it. Hahahah
“Watched cnbc this morning and Kay Bailey Hutchison was being interviewed.”
(r)’s don’t seem to feel repulsed by someone who looks like SNL’s church lady and dresses like Aunt Mildred.
Since we have morphed into politics….IMO, If Hilary wins, Obama is the V.P……..If Obama wins, Al Gore will enter stage left as the V.P and neutralize the “Call @ 3:00 AM” attack from the right..
Anything but more of the same…. please God?
I wouldn’t wish th office of VP on my worst enemy. KBH is much too nice to adorn such a worthless position.
“this is why I love Arizona. Is there a more beautiful sight in the U.S”
Was the July temperature 110 degrees or 118 degrees when they took that picture? Didn’t notice a whole lot of living things walking around. That’s the Arizona I left for the beaches and cool breezes of Santa Monica.
I love hot weather.
There are pretty sights….. But the 115 degree summers are not quite as pretty.
I just dug out of a foot of snow, at 2 different houses, so 115 sounds kinda nice right about now.
Absolutely. Places that actually have water!
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/03/05/cnbonds105.xml
Euro bond spreads hit record as panic grips markets
By Ambrose Evans-Pritchard
Last Updated: 1:30am GMT 05/03/2008
“Investors sold Italian and Greek debt yesterday in signs of near panic liquidation, driving bond spreads to the highest level since creation of the single currency.
The yields on Italian 10-year government bonds reached 52 basis points above German Bunds, approaching levels that risk setting off a self-reinforcing spiral of investor flight. Spreads on Greek bonds also jumped to 52.
The wild moves on the euro-zone bond markets came as gold plummeted by $29 an ounce to $957 on automatic stop losses and forced selling by funds. Crude oil futures tumbled almost $3 a barrel in New York.
The Dow Jones index fell 226 points at one stage.
Traders said the market was swept by rumours that a distressed hedge fund was being forced to sell profitable contracts to meet margin calls, triggering a cascade of sales in loosely correlated assets.
“We’re in the middle of a big panic in the market,” said David Keeble, a strategist at Calyon. “There are simply no buyers for anything with even slight risk on it.”
The grim mood caused a reflex flight to safety, boosting Bunds and refuge currencies such as the Swiss franc and the yen.
Funds dumped bonds from the more vulnerable emerging markets and picked off the weakest members of the euro-zone.
“There are forced sellers out there having to liquidate assets,” said Dominic Konstan at Credit Suisse. “There are also people out there who always felt EMU wouldn’t work and this is bringing them out of the woodwork.
The blowing up of the spread does not help sentiment and these things can become self-fulfilling.”
Mounting evidence that Italy is sliding into recession have raised fears of a ballooning fiscal deficit, putting the country’s debt trajectory on an unsustainable course. The collapse of Romano Prodi’s government has left Rome in limbo and raised doubts about the viability of economic reform.
The rating agencies have already downgraded Italian debt twice. A growing number of banks have advised clients to take “short” bets against Italian debt, including Goldman Sachs and BNP Paribas.
Simon Derrick, currency strategist at Bank of New York Mellon, said flow of funds data show that foreign investors have suddenly liquidated half the Italian and Greek governments bonds accumulated over the last four years.
He said the markets were starting to price in risk that these countries would be hit much harder than Germany by the strong euro and a cyclical downturn. Brussels has halved its growth forecast for Italy to 0.7pc this year.”
Comments on above article on i-tulip by “Fred”"
“AntiSpin: Some readers wondered why we suggested cash instead of gold in a recent interview on CNBC. The reasons will become increasingly obvious.
First we assume our readers already own, as Dr. Peter Warburton put it a “rump of gold” and that the bulk of money is in other assets which are also dollar hedges. We suggest that rather than think of gold as purely an anti-inflation hedge think of it as a leveraged anti-inflation hedge. As long as the leverage is there, gold will do well inflation or not. With inflation and leverage, gold does well. But if the leverage retreats even in the presence of inflation gold will decline along with everything else leveraged.
That is what we were reminded of again today watching gold and silver just before noon EST. “‘
the cause of the latest gold selloff is nothing more than rumour. It is obvious that all the selloffs of the last week or so were starting on Wall Street just after the London exchange closed (at exactly the same time). My guess is it is caused by (anticipated) IMF gold sales, or some big party that is trying to bring the price down.
“The Dow Jones index fell 226 points at one stage.”
Luckily, due to white noise price movements, the DJIA almost always rallies back to the flat line on days when it drops like a rock.
News from our local paper in Oak Park, Illinois which is just outside Chicago:
“According to the database maintained by GMAC-ResCap, Oak Park’s four ZIP codes-60301, 60302, 60303 and 60304-and River Forest’s one ZIP code-60305-all rate C, for “elevated risk.” The lowest rating is D, for high risk.
This rating system mostly raises red flags on loans for first-time buyers with minimum down payments.”
Higher downpayments willpush our house prices down quickly.
Seems like a lot of organizations could build a better “credit score”-ish system for mortgage decisions with all the wide ranging data they have coming in these days.
1. If the application is fraudulent, -100
2. + downpayment% * 5
3. minus last year’s writedowns per originating broker / $1M$
4. …
(Ran out of steam. Like the banks, I couldn’t be bothered to study Underwriting 101.)
Wow, who would’ve thunk it, Oak Park? (I say that without sarcasm.)
I lived there from 1998 until early 2000-ish, still think of it as a place of relative wealth and a population with their heads screwed on straight — as opposed to some garish, McMansionized outer burb filled with debt-heavy automatons.
Guess there was a lot more irrational exuberance in Oak Park than I realized …
PS: I really miss the Oak Park library. What a gem.
Posters that use bold and italics and fail to close may not see those posts come through. I don’t have time to fix them and sometimes it’s impossible anyway.
the single line of instructions (printed below this comment box) are less than intuitive…
For instance, they don’t show how to close any of the options. And the a href thing is difficult to figure out.
Could you or someone write a page with explicit instructions?
Dude — we had a forum on the href tag a couple of days ago…
And I didn’t understand a single word of it.
I took notes, and my first attempt still failed.
Yes, and thanks to you, Prof, I got to join The Club of Hreffers. Now where’s my pretty club badge?
One option is to use a search engine such as AltaVista, Clusty, Lycos, or some other, to find explicit instructions. There are quite a few blog posting manuals out there. This blog was originally hosted by Blogspot which makes it really easy to start a practice blog that makes use of the same “markup” syntax, so that’s another option you might consider.
Most HTML tags use the same symbols as, say, “Word”.
Want italics?
Use “i” with pointy brackets, and close it with “/i” in pointy brackets - (”")
Same with bold (”b”), underscore (”u”). Remembering to close the tag by using “/”.
For including URLs its “a href=”YourURL” /a”. In pointy brackets
Or you can go to tinyurl (www.tinyurl.com) and cut/paste the resulting URL directly into your post.
That’s pretty much all you’ll need, unless you’re creating a website.
Rather than risk the wrath of those who are expert at it, I found that an asterisk on either end works as well, in that it is understood. And it is failproof. I leave the fancy stuff to those more adept at its use.
It’s hard to believe, but there are still hacks out there pushing the “prices will go up this spring” BS.
This morning, I was watching the local Fox station. They had on this guy named Eric Stewart from E-Mortgage (apparently he also has his own show). When asked about how people are going to cope with rising mortgage and energy costs, he said:
” First of all, Maryland, and I’ve said this for a long time, is geographically protected from the bubble happening where you see these home values just plummeting and it’s happened around the country. I believe that, in the Spring, we’re gonna see an increase in home values and an increase in sales here in Maryland.”
Patrice (the anchor) asked, “Why?”
Stewart: “Because the employment is coming in, because the BRAC is coming in. ”
Then, he went on to explain how “lenders are stepping up to the plate” with increased “loan modifications and workouts”. He said that lenders are also now doing write downs. He explained that if you owe $100K on your house and it used to be worth $105K, but now is only worth $95K, they’ll write it down to $90K.
After talking about lender loan modifications, workouts, and write downs, Stewart went on to say:
” I think that you’re gonna see with Baltimore, and, especially with Maryland, numbers are going to be on the increase. Its going to be a positive. I know we’re always talking about the bad news, but I think that we’ve got good news coming here when the weather breaks with the Spring. You’re gonna see home values starting to go up again and you’re going to see purchases starting to go on the increase.”
I wonder how many of the sheeple will hang their hopes on this guys words thinking they will be fine in the Spring. They then gave the sheeple this guy’s e-mail address and phone number if they wanted to contact him with questions.
Unbelievable that this is what passes as news these days. It was nothing more than a commercial for this guy’s company.
The fatal flaw in his reasoning about the loan mods kick-starting sales is his implication that the lenders are in the biz to help out house buyers. No, they’re in business to make money. Coddling deadbeats doesn’t do much for their bottom line.
I wonder how many of the sheeple will hang their hopes on this guy’s words thinking they will be fine in the Spring.
In my area, probably quite a few. Three doors down from me, a TH was for sale for over a year. This past week a SOLD sign finally appeared. I was burning to know: Did someone finally meet the seller’s wishing price, or did the seller finally accept what they previously considered an unacceptable lowball?
Turned out the answer was the former. Some knifecatcher stepped up to the plate, thinking they were getting a steal, since in Springtime prices were bound to recover. The house went for about 3% less than ask.
I agree that the lenders aren’t being “do-gooders” but are only trying to protect their own interests.
I just don’t understand how anyone can buy what this guy says. If the prices were really going to go up in the spring, why would the lenders be willing to write down current mortgages?
I’m sure most of the sheeple in our neighborhood will willingly believe him too. They fed us the same line about this area being immune to the bubble and prices going nowhere but up because of BRAC when we rented our house here last summer.
We had realized the bubble was bursting back in the fall of ‘05 and decided to sell our townhouse in the Spring of ‘06, take the profits, and rent a single family home. The house we are currently renting already had been on the market for a while and the owners had lowered the price a few times with no results. The neighbors, of course, thought the house was a “steal” and that we should buy it and take advantage of the “temporary dip”. They hit us with this the moment we pulled into the driveway for the first time. We were both dumbfounded and, not wanting to cause waves with the new neighbors, just smiled and nodded.
At that time, there was another house for sale around the corner asking $950K it is still on the market asking $775K. They recently received an offer, but it is contingent and has a kick out. Can’t wait to see what they actually get for it.
Houses in here are renting for about half of what it would cost to buy one. I would guess that when all is said and done, these houses will be selling in in the $400-450K range.
They hit us with this the moment we pulled into the driveway for the first time. We were both dumbfounded and, not wanting to cause waves with the new neighbors, just smiled and nodded
haha
they were so desperate for you to relieve them of the stigma of having to live next door to “renters”. Oh the horror!
And … they had a personal interest in keeping the prices high. After checking the land records, I found that the most vocal of these neighbors have an ARM and HELOC for way more than what the houses are worth. They desperately need to believe that prices will recover.
I live at ground zero for Maryland “BRAC”. It will be two years yet before any significant increase in employment/housing. It was just yesterday that they awarded the design/build contract for the replacement hospital for Walter Reed. Additional facilities for NSA/Ft Meade have not yet started.
And I don’t think that adding that kind of traffic to Bethesda will RAISE house prices…. In fact in that case most of the employees won’t be moving anyway, Walter Reed isn’t that far away.
Oh, heavens - I HATE that guy! E-Mortgage Solutions is a scumbag organization run by crooks! During the Bubble Years, they spewed lots of BS about the wonders of toxic loans, and even into this year, they warned people about, “the dangers of making a down payement, since it means your money is tied up in your house” and told people to, “Take all the money out of your house and put into investments, especially if you’re living paycheck to paycheck.”
Total lies and BS: Eric Stewart should be rotting in prison for such blatant dishonesty. Yeah, he’s a salesman, but that protection only goes so far - I can’t imagine how many people he’s ruined because they made the mistake of listening to his lies!
Unbelievable. And, Fox has this guy on like he is some sort of authority without telling the viewer any of his qualifications. He just gives his opinions with no facts to back them up.
Yes, apparently the current thinking around here is “BRAC is going to save us all.” Course, that’ll really kick in in a few years, so I don’t know how it will help this Spring’s sales.
And of course the real problem with that thinking is simply the magnitude. 1.) In a major metropolitain area with strong employment like DC, a few thousand here or there won’t make a big difference. 2.) Good paying government jobs just don’t support house prices that are pushing the million dollar mark. It takes real money to afford 850k for a house, and a government salary won’t support that kind of price.
I’ve been a HBB reader since about mid 07. I have not posted before because I was content to listen to the collective wisdom which I have followed. Although I live in DFW area of TX, I’ve been renting as I want to maintain my liquidity despite being able to easily purchase a home (which I dearly want for need of a workshop).
I recently started investing in the market and made quite a bit going long GLD, only wish I was more aggressive. Options would have been great here. However, I’m ready to change brokers as sharebuilder seems limited and the $10 trades seem a bit pricy. I am still a newbie and don’t know how to do limit orders, options, etc yet. Can anyone please give me hints on where I can:
1) get a good discount broker? I’ve been eyeing Lowtrades
2) a forum where I can glean stock info and trends
3) a book or preferably online source where I can learn about the various means of trading such as limit order, stop-loss, options, etc.
Any and all info will be gratefully appreciated.
I bought the dip in silver yesterday. So far that is working.
I am also shopping for a new discount broker, have not found one yet. There are many financial forums and some of them get posted here, like Minyanville. I like Prudentbear. There are many PM forums also, mostly associated with dealers, like Kitco. As for market orders, you can find most of that information online through Google or buy yourself a basic trading book. It will have a definition of terms. Good luck.
I wouldn’t mess around with options if you don’t know what a limit order is IMNSHO.
I know, that is why I have not used them yet. However, I really want to know about them thoroughly before I start. Likely with small amounts and only for long calls and long puts.
Txchick, who is also in your area BTW, has recommended M B Trading and ThinkorSwim for trading sites, as opposed to the better known discount brokers. I’m going to start with M B, but they both look good so far from this angle.
Re: books, you can find them online or at Borders, etc. For example, I just purchased at Borders “Options Made Easy” by Guy Cohen. I don’t know anything about him, but I like the book ’cause it’s set up like a college course textbook with lots of good study examples. Also just finished “Technical Analysis” by Jack Schwager, which is another good intro book IMHO.
Just my .03 (adjusted for inflation).
I hope this works:
Survey - Which Online Broker Is Right For You?
It is kind of basic, but give it a try.
Crap… it didn’t work. Here’s the link:
http://www.kiplinger.com/tools/online_brokers/
And two more articles on the subject:
http://www.kiplinger.com/magazine/archives/2006/07/brokers.html
http://www.kiplinger.com/magazine/archives/2007/09/onlinebrokers.html?kipad_id=6
Presumably the 2008 ratings will be in Kiplingers July issue. Its interesting reading, but keep in mind there are lots of brokers out there they do not cover.
Best comment from p. A3 WSJ article on BB’s cram down proposal:
‘Reducing the principal rather than the interest rate is a “very different framework for thinking about the problem,” said Andy Laperriere, an analyst at ISI Group, a brokerage firm. He said with so many borrowers under water, “any proposal that helps them will be very expensive for either the financial institution or the taxpayer,” and a large program would potentially sweep in millions of borrowers who weren’t going to default anyway.’
I have a hard time understanding how mortgage bankers will find any appeal in a proposal that asks them to proactively eat massive mortgage debt writedowns. If it were in their individual self interest to do this, there would be no need for a market-intervention policy from on high.
“and a large program would potentially sweep in millions of borrowers who weren’t going to default anyway”
I had questions on this as well. Wouldn’t it be incentive to those that can and do pay their mortgage to stop paying, in the hopes of getting their principal reduced by $100,000? Hmmm, I seem to remember the “law of unintended consequences” being brought up here a lot…
That is why it would seem wise to price out the cost of guaranteeing this program to the private insurance market, as otherwise there would be no way to gauge the amount of liability that was getting shifted by this cramdown program from lenders to the U.S. federal tax base.
Sadly, I have too much equity to get in on this moral hazard stuff unless I take out about a 30% HELOC. I guess I need to start writing down all the sobbing excuses for where the money went for when I need them for my cram down. I’m not certain Texas will drop more than 20 more percent though, darn it
Financial Times
Lex
“What a downer. A couple of analysts now reckon Citigroup will make a loss in the first quarter. Citi’s stock continued its relentless march lower and the head of Dubai’s sovereign wealth fund said the bank needed more capital. That is more news in one day than is strictly necessary.
That does not mean, though, that Citigroup needs yet another round of capital injections, having raised about $30bn in recent months. The key Tier 1 capital ratio, which measures the bank’s ability to absorb losses, would stand at 8.8 per cent, if one included the slew of new securities. This gives the bank a cushion in excess of $15bn to cope with more writedowns and still hit its targeted ratio of 7.5 per cent. Furthermore, Citigroup could always slip below this ratio for a while, as long as it had a credible path towards rebuilding it.
That cushion could come in handy. Investors may be longing to hear a banking executive say they are done with the kitchen-sinking. But that is not going to happen, for several reasons. First, it is highly likely that there will be more bad news on the values of mortgage-related collateralised debt obligations, and Citigroup is exposed to a lot of that stuff: $29bn net and $40bn gross – the difference being hedged exposures – at the end of the fourth quarter.
And there are signs of distress spreading into other types of assets. JPMorgan Chase gave a frank assessment of deteriorating trends in home equity loans last week. Citigroup has a fairly big portfolio of highly geared loans of this type, which increases the potential for higher credit costs. Leveraged loans are another weak spot. So there is more pain on the way. But raising evermore expensive capital might well be the last straw for some investors.”
Lex is subscription (link may not work, entire article posted)
http://tinyurl.com/yuszcu
One of the many analysts I respect estimates Citigroup to write down $30B this quarter.
I realize we have the FDIC, but if my money were there, I’d take a look a around to see what else is available.
I did not see this posted but in the Current New Yorker Mr. James Surowiecki has an interesting article
Home Economics
“…Buying and selling houses, though, is a far slower process. The good thing about this is that housing prices never suffer crashes on the scale that you sometimes see in the stock market. The bad thing is that it can take a long time for housing prices to reflect reality. Homeowners, as economists have shown, tend to remain unreasonably optimistic about the value of their homes, and they hate to drop their asking price. As a result, existing-home sales in the U.S. are now at a nine-year low.
Homeownership also impedes the economy’s readjustment by tying people down. From a social point of view, it’s beneficial that homeownership encourages commitment to a given town or city. But, from an economic point of view, it’s good for people to be able to leave places where there’s less work and move to places where there’s more. Homeowners are much less likely to move than renters, especially during a downturn, when they aren’t willing (or can’t afford) to sell at market prices. As a result, they often stay in towns even after the jobs leave. That may be why a study of several major developed economies between 1960 and 1996, by the British economist Andrew Oswald, found a strong relationship between increases in homeownership and increases in the unemployment rate; a ten-per-cent increase in homeownership correlated with a two-per-cent increase in unemployment….”
http://tinyurl.com/2breje
WT-Economist (I think) posted a link to this the other day.
James Surowiecki is one of my favorite Big Picture business writers.
I got an advertisement for some Norfolk, Va condos. It has the NAR line of renters having a net worth of $4,000, and homeowners have an average net worth of $184,000. It has some of the other lines, like stop throwing away money renting and what not. I was going to flame them in email, but…. I… I did it. I signed up to go, so I can flame them in person. They are going to show how to do market analysis. This should be funny.
Leave your checkbook at home. And post a follow-up on how it goes.
Oh man, I wish I could do this, could you video tape it somehow…
…stop throwing away money renting….
-Because throwing it away on interest is SO much better?
WS bulls who want to once again experience that wonderful euphoric feeling had best stay focused on the rallying DJIA, and ignore the
FOREX markets…
March 5, 2008 10:24 A.M.EST
BULLETIN
Cheerier morning on Wall St.
After four days of losses, blue chips manage a higher open, with Citigroup and Intel among those making early gains.
• Factory orders fall | Private-sector job rolls seen dropping 23,000
http://www.marketwatch.com
Oh, I do so hope they rally a bit, maybe bounce around 1375 for a while again? They’re getting so predictable it’s getting pathet…er, profitable.
What happened to the big ambac bailout? Wasn’t it supposed to be announced this morning? lol
be careful what you wish for
long
Here is a great contrarian buy signal if ever there was one!
Stock sell-off weighs on investment advisers
Schwab survey reveals few bright spots for U.S. market over next six months
By Jonathan Burton, MarketWatch
Last update: 8:15 a.m. EST March 5, 2008
SAN FRANCISCO (MarketWatch) — Investment advisers are increasingly pessimistic about U.S. stocks, with many expecting further losses as higher inflation, rising unemployment and a weak housing sector take their toll, according to a survey released Wednesday.
The survey of 1,006 financial advisers by brokerage firm Charles Schwab & Co. Inc., taken in late January, showed investment professionals are much gloomier about the U.S. market’s near-term prospects than they were in a similar poll in July.
Another “Challenger shot” rally in the making this morning? No worries — white noise movements will bring the market back up circa 3pm EST…
PB,
LOL. I was thinking about what you term as ‘unusual’ movements and I think I have an answer that might appeal to you.
Generally, lunch is from noon to 1:30est, since many would go to the ‘Hog and Heffer’ for lunch, while gone the market would reverse course from its early day trading. Then when getting back to the desks (after having had a few mart’s), looked at the current prices and said “WTF”, scanned the news to see if anything else happened, called the floor to see who was buying or selling , then loaded our cannons (we were already loaded) and fired.
So quite often, the market will reverse from lunch hour actions in the last hour because of over indulging at the ‘Hog and Heffer’ or other fine establishments. True
Sounds like you don’t believe in white noise.
lol
Having a few at the fine establishments with friends and talking about the market unfortunately creates positive feedback. Like all individuals, I am susceptible to conformational bias. Under the wrong circumstances, this can result in booboos (see Mr. Jerome Kerviel). But on slow days like these, traders are gone from the desks for a lot more than 1.5hrs. A lot of booboo potential.
If you look at daily charts of the S&P500, you should notice the lunch hour/ late afternoon reversal - it is pretty consistent.
that’s what I said yesterday about selloffs that intensify in the 11-1 CST area. You can usually buy those.
The DJIA appears to have reached a temporarily-slightly-higher plateau level of 12,300. I find it quite amazing how white noise can magically lock a headline index on a level…
It is working on a new paradigm!!!! (4 exclamations to show how important the point is to me.) I love new paradigms,pair of nickels and pair of aces.
More “white noise” reversion to the flat line today?
This makes perfect sense, as markets are omniscient and forward looking, and hence priced in the effects of the AMBAC meltdown long ago.
Countdown to the close:20min39sec
March 5, 2008 3:39 P.M.EST
BULLETIN
Stocks take Ambac in stride
Markets pare deep losses after bond insurer reveals plan to sell $1 billion or more in new stock, while commodity prices and economy data also stoke concern. Nasdaq pulls higher as closing bell approaches.
Distillate down another 2.4M, diesel is already running $3.5 to $3.7.
Oil up big today.
Slate writer “gets it” when it comes to foreclosures…
http://www.slate.com/id/2185303/
Great Article.
Sorry if I’ve posted this before, but it seems that if I post a comment about a “bayul-owt”, the comment takes hours to show up (moderation?).
RE: Bernanke’s plan - Despite the plan actually making some sense (have the banks and investors “eat it” instead of taxpayers, etc.), the backlash against the perceived plan has been large, swift, vocal, and ANGRY. On blogs such as LA Land and the Wall Street Journal, about 80% of the responses to articles on programs that even *resemble* a “bayul-owt” have been very emotional and angry, mostly focusing on the concepts of “fairness” and “personal responsibility”. To be truthful, even though I see the benefits of such a plan, I myself still feel the emotional tugs of the ideas of “fairness” and “personal responsibility”, and I feel irked about the whole thing at random times throughout the day. Any sort of program perceived to be a “bayul-owt” may be a non-starter on political reasons, as tempers on the subject are starting to run a little hot, and getting hotter.
“instead of taxpayers”
Did you miss the proposed FHA guarantee?
Geesh! At 195 comments, this has probably been blogged. Sorry if its a repeat, but here is the URL
http://tinyurl.com/28paph
The article suggests that fraud (gasp!) may have been a big part of the housing bubble!
Paul
Wow! Commodities just exploded. Oil is up $4, gold up 25, silver up 57%!! Why didn’t I buy more yesterday? And the dollar is tanking again.
Market Last Change %
Crude Oil 103.25 +3.73 +3.92
Natural Gas 9.534 +0.181 +2.39
Corn 568.75 +14.25 +3.05
Soybeans 1549.00 +38.25 +3.10
30yr Bond 116.3125 -1.546875 -1.34
10yr Note 116.34375 -0.6875 -0.61
NY Gold 990.9 +24.6 +2.92
NY Silver 20.915 +1.075 +7.17
Market Last Change %
Crude Oil 103.86 +4.34 +4.56
Oil up almost 4.50; SUVs to be abandoned on freeways tomorrow.
Market Last Change %
Crude Oil 104.34 +4.82 +5.06
Oil up over 5%. Got moped?
No shite. I thought another silver dip was in the cards today and then I’d “pounce.” Doh!
Dude, silver went up $1 today. I have never seen that before. This is amazing…
I bought yesterday.. today’s gain covered my transaction costs
ambac halted.
BULLETIN
AMBAC SHARES HALTED; NEWS PENDING ON BOND INSURER
Bond insurer Ambac halted for pending news
By Greg Morcroft
Last update: 12:12 p.m. EST March 5, 2008
AMBAC has a most interesting stock chart.
What do you think is interesting about it? Basing at a very low level.
Looks like the banks are looking for a sucker with the private placement for rights deal.
And importantly, the banks balked at putting up the additional $2B that S&P asked for. Prisoner’s dilemma, so they invited in new prisoners. Brilliant!
I thought the stock market always went up, but I guess not so for individual stocks…
hahah. We may be rolling into the Jan intraday lows now. This is one sick market.
Non-event, crude oil is the real story.
I dont think its a non event.Both are big.
Ambac? more smoke and mirrors until they decide what to do.Halting trading does not sound like good news.Time will tell…
Oil? the biggest bit of bad news lately.If oil was to drop back down we would be okay.But maintaining $100 or more and shooting up to $104 today?OUCH………gas in San Diego is at $3.51 a gallon as of yesterday.This will kill the economy.Food,vacations,basically everything will skyrocket..The average consumer will be paying alot more for everything.Even if certain items do not go up consumers will have much less to spend as it all goes towards gasoline.
Funny how Markets reacts to carefully written negative productivity releases. “better-than-expected” “slowing of negative growth” “close to bottom” “10% less foreclosures compared to last month” etc… a new spin. All tell tale signs of economy is in shambles.
Stocks Rise on Service Sector Report
Wednesday March 5, 11:36 am ET
By Tim Paradis, AP Business Writer
Stocks Extend Gains After Better-Than-Expected Reading on Service Sector Calms Recession Fears
NEW YORK (AP) — Stocks showed broad gains Wednesday after a stronger-than-expected reading on the health of the service sector and figures on worker productivity calmed some fears about the frailty of the economy.
Things are getting tough at Needless Markup. Alt-A canary in the coal mine?
http://www.dallasnews.com/sharedcontent/dws/dn/latestnews/stories/030608dnbusneimansearns.25289b27.html
maybe.. and/or, portfolio problems.. bonus belittlement.. property price plummeting..
One bank told me not to worry about them because they weren’t deep into subprime .. subprime? That’s so 2007..
$2.5 billion sale of AMBAC shares? That’s it? That is the big bailout?
1) Who will buy those shares?
2) $2.5 billion is going to cover $100 billion in coming claims?
Nice shell game. It is ALL about keeping the losses hidden, for just a little bit longer…..
This is a little hard to read but amusing:
http://www.thesmokinggun.com/archive/0327062extreme1.html
I’m a single mom with a 180lb pooch that has hip dysplasia. I don’t think he’ll live to be 10. Think they would come and re-do my kitchen?
lol
You may enjoy this story. Here in Montreal, the city has upgraded a few streets and sent the bills to local homeowners, some for as much as $35,000. The city claims that a recent housing subdivision means that they can treat the upgrades as equivalent to new homes, and thus bill the homeowners there (some who have lived there for three decades) as if they were new homes in a new subdivision (whose prices normally include the costs of infrastructure). I’m not wording this too well… my apologies (also if this has been previously posted, since I can’t keep up with all the comments here). The URL is
http://www.canada.com/montrealgazette/news/story.html?id=6331b316-5a35-4de4-bb3f-7cf66488a6b4
Regards to all,
NR
“”No one - not the developer, not the real-estate agent, not the city and not even the notary - warned me I’d have to pay a $10,000 tax bill on top of property tax and the welcome tax…”
A “welcome” tax? Hahahahaha
Yeah, but all y’all Canadians can afford it since the Loonie’s worth more than a buck, right? ; -)
I am not a troll. I am not a realtor and my job is not related to the housing market. I’ve been reading this blog for almost two years now and I must admit that it can get addictive. I have the highest respect among the regular posters and I think most are smart and well educated. I’m just curious what will happen 5 - 10 years from now. Will the renters finally buy a house or will still be frequenting this site to air their disgust to anyone working in real estate. Will getstucco finally afford a house in San Elijio hills or will be posting news clips from SD Union T as part of his daily routine? I think it will be a waste of talent, energy and opportunity for those regulars on this blog if they end up exactly the same way when this blog was started. Just thinking….
I don’t know about the others but I will buy RE when it stops going down AND if it costs the same as renting. I owned RE for 20 years. Its over rated and only real value is an inflation hedge at least in CA.
How are talent and energy positively correlated with real estate ownership?
Will the renters finally buy a house…”
Only with cash, and only after I finish cleaning up in the markets. Why put my money in something dead like real estate?
will still be frequenting this site to air their disgust to anyone working in real estate.”
I don’t think many people will be working in real estate, much longer. I will probably air my disgust of them at the drive-thru window as they supersize my order.
“End up exactly the same way”…in what respect?
I can only speak for myself. I believe as long as an individual can breathe and is mentally capable, there’s always room for improvement and growth. At some point I would like to devote more time to being an artist again. Right now because of the current economic climate, I have opted to remain in a job that is stable, but nothing to do with graphic design or creativity. However, I am acquiring additional marketable skills for my 5-10 year future timeframe.
“Will the renters finally buy a house or will still be frequenting this site to air their disgust to anyone working in real estate.”
Count me among the posters on this board who could buy a house TODAY with no mortgage. But why buy a declining asset? I think that would be a terrible waste of opportunity.
“Will the renters finally buy a house ?
I just started reading this blog not to long ago. I found it while searching for info on the housing market.
I too owned RE for over 20 years.I have been renting by choice for the last 8 years.The last “home” I owned was back in 2000.I am semi retired and the wife is close to retiring.
I will only make a purchase when houses or land fall back to affordable,sensible prices in the area we prefer.If I do not purchase there will be plenty of rentals available (at lower prices)with landlords begging for a renters.Its only a matter of time.
I have very little debt.Just enough to keep a credit score level.Either way I will be fine.
I am not a regular poster on this blog. I found it when I was searching for information on skyrocketing house prices in west palm beach Fla. I had owned a half a duplex that I bought in 1984 for $55,000, the next year an identical unit on the same street sold for $35,000,so I knew realestate did not always go up. I sold that half a duplex in september 2005 for $192,500,put most of the profit in the bank and have been waiting and watching prices drop while I am renting. Iam hopeful that I will soon be able to buy a home I can finish raising my kids in.
I plan to buy a house (as in, buy back into ownership), for cash, once prices retreat to 1998-99 levels, which I’m confident will happen. Even then, it might be a lot longer before owning costs almost as little as renting. I’m willing to eat that difference for the stability of owning and the ability to change the place exactly as I wish.
And I’ll read whatever Ben Jones blogs about, if he continues, because he has a great nose for what’s interesting to me and runs the blog very efficiently.
Article from San Diego on city owned property.
http://www.signonsandiego.com/news/metro/20080305-9999-1m5land.html
Slumping market hits city land sales
“Peters, speaking for the majority, said it “doesn’t make any sense” for the city to hold on to residential property, especially in the case of what he referred to as “a ratty house in an otherwise nice neighborhood.”
Yet someone close to him makes the purchase for $1.55 million…
Amazing how some will spend that kind of money for a shack even though its down in price.Too bad the online article does not show the picture of this gem.
Citigroup’s Job Cuts Could Total More Than 30,000
Citigroup’s job cuts could reach 30,000 or more over the next year and a half because of increasing writedowns from subprime-related debt, CNBC has learned.
The layoffs would exceed the previously reported 24,000 job cuts that had been expected at the banking giant.
Chief Executive Vikram S. Pandit is currently conducting a massive cost review and could cut as much as 10 percent of the bank’s workforce of 370,000, according to people familiar with the situation.
In the past, Citigroup would lay off people and then hire them back as consultants. But with more bad-debt writedowns looming, Pandit wants to make the cuts permanent, sources say.
“They are asking managers if you have a task that takes six people, implement a plan where it only takes four people to complete,” said one manager.
The cuts are expected to occur over the next 12-18 months.
Citigroup posted a fourth-quarter loss of $9.83 billion, its first loss since the bank was created in 1998 from the merger of Citicorp and Weill’s Travelers Group.
The loss stemmed largely from $18.1 billion of write-downs and related expenses for exposure to subprime mortgages, plus a $5.41 billion increase in credit costs, including a $3.85 billion charge to boost reserves.
Many analysts think Citigroup will have to write down more subprime debt in the coming weeks.
Meanwhile, the head of Gulf investment agency Dubai International Capital said that Citigroup may need “a lot more money” from outside investors, Reuters reported.
However, unnamed people familiar with the mater later told The Wall Street Journal that Citigroup executives are confident with the company’s capital levels and aren’t looking to raise additional funds from outside investors.
Citigroup in January slashed its dividend 41 percent, and has since November raised some $30 billion of capital from investors including Abu Dhabi, Kuwait and Saudi Prince Alwaleed bin Talal.
But Sameer al-Ansari, chief executive of the investment agency owned by Dubai’s ruler, said more would be necessary.
“It’s going to take more than that to rescue Citi,” al-Ansari said at a private equity conference. Dubai International Capital manages about $13 billion of assets, and has invested in HSBC Holdings and India’s ICICI Bank.
Separately, Merrill Lynch analyst Guy Moszkowzki was said to have forecast a first-quarter loss at Citigroup of $1.66 per share, after $15 billion of mortgage-related write-downs.
http://www.cnbc.com/id/23454681/print/1/displaymode/1098/
I read this yesterday.I always laugh at the double talk.One statement says 30,000 jobs then later they say 10% of the 370,000.
The average american with any IQ could figure that out as 37,000.
I guess they figure another 7,000 people losing jobs is no big deal.
Double Bubble Trouble
NYT
“…That’s not to say Washington shouldn’t help the innocent victims of the bubble’s aftermath — especially lower- and middle-income families. But the emphasis should be on providing income support for those who have been blindsided by this credit crisis rather than on rekindling excess spending by overextended consumers.
By focusing on exports and on infrastructure spending, we might be able to limit the recession. Such an approach might also set the stage for a more balanced and sustainable economic upturn in the next cycle. A stimulus package aimed at exports and infrastructure investment would be an important step in that direction.
The toughest, and potentially most relevant, lesson to take from Japan’s economy in the 1990s was that the interplay between financial and real economic bubbles causes serious damage. An equally lethal interplay between the bursting of housing and credit bubbles is now at work in the United States.
American authorities, especially Federal Reserve officials, harbor the mistaken belief that swift action can forestall a Japan-like collapse. The greater imperative is to avoid toxic asset bubbles in the first place. Steeped in denial and engulfed by election-year myopia, Washington remains oblivious of the dangers ahead.”
Stephen S. Roach is the chairman of Morgan Stanley Asia.
http://tinyurl.com/2ntaym
Did Thornburg just set off a daisy chain of defaults?
Thornburg?
Is that Mortimers brother?
seriously, more government debt to satisfy infrastructure, and dollar devaluation for net export gains? thats not gonna work. Banks are goin down, the Hedge funds are goin out feet first. Bennie primed us for the “small” bank failures….we are gonna test it.
Keep asking yourself, what is money?
Collaterized Commodity Bonds are, IMHO the next bubble.
we test equity lows tommorow, not ass grab, serious testing. oil goes 105 and gold goes to 1000.
We used to live in these apartments years ago. Tiny, but a good location. Current rent $750-805/mo.
http://www.bradenfellman.com/apartments/inmancourt/
An identical complex down the street converted to condos. The idiot who did the development decided to knock out a few walls, and sell the resulting 1 bedroom units.
http://www.trulia.com/property/1052302303-780-Dixie-Ave-NE-Atlanta-GA-30307
Words fail me.