Bits Bucket And Craigslist Finds For May 11, 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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On the subject of Mr Guettinger and the 3-hour commute in yesterday’s California thread.
When I was last in the UK, my relatives living in the English Midlands told me that several of their neighbours worked in London, and permanently rented rooms in boarding houses for Mondays to either Thursdays or Fridays.
They would then go home to their families for weekends, either by car or by bus/train/plane. Some people in their workplaces were doing the same thing from France, Spain even, using cheap flights.
At some point that has to be a more rational solution than spending 3 hours each way on the road. How much of “daddy” are his kids actually getting during the week?
I had a boss who owned a cabin in Big bear, CA and lived their on the weekends while renting an apartment close to work to live in during the week days.
I never understood how he could financialy justify supporting two residences, but different strokes for different folks.
Justifications include 1) having the kids in a house with a yard 2) a better school district, 3)being able to work longer hours without dragging yourself home (can’t tell the boss you have to leave at a reasonable hour and see/take care of you’re family now, can you - must be a team player.) and for some 4) being able to do things you don’t want your spouse to know about under the guise of working long hours…
And, based upon the way income distribution normally works in America, I am sure he - as a “boss” - had enough money to pay for both places (using what should have been your raise money, of course.)
This is a very common arrangement for federal workers & contractors in Metro DC. They live in NJ, PA, WVA, DE and even NY. They rent a room during the week usually for 3 nights a week as they have flex time and can get work done in 4 days and just go directly home thursday beating the Friday evening/weekend rush. Sunday evenings are a nightmare coming into Metro DC from all points because this population of super commuters are all inbound to their boarding rooms. This assists the folks that own places in the area, because they can generate soom extra income by finishing the basement and renting it out to help cover the mortgage. The cost of living here is way too high for most new federal workers so this is the solution, but I agree it does not make for much of a life.
God, is that why Sunday night traffic on 66 is always such a mess? I have lived here pretty much my whole life and the past few years Sunday nights have become unbearable. I had no idea!
Amazing that this madness could be considered sustainable. I am hoping that $4 to $5 a gallon gas has some say in the lunacy regarding how we love to lay out over-populated areas around tiny job cores with everything so costly that new workers cannot live near their jobs.
My dad lived out in San Gabriel Valley (Western edge of the now famous Inland Empire) and for 2 years worked in Englewood (all the way across L.A. near the beach). Instead of 2 hours of stop and creap traffic each way, he just drove his motorhome down and parked it in a parking lot. There were about half a dozen co-workers with him doing the same thing. He’d go home about noon on Friday and drive back in Sunday night.
Maybe I did an hour each-way commutes for a couple of years, in total, when I worked the city of angles…
The worst thing about driving a couple of hours each day, was the idea that you had to be ever vigilant, so the reality was, you were working 10 hour days, getting paid for 8, and the other 2 cost you both time & money.
Airline workers have been extreme commuting for decades. Aside from the obvious participants, pilots and flight attendants, even mechanics and ground crews have been doing this. Oft times, however, it is forced on them by layoffs and getting bumped to other cities to keep working.
In their case they do it to keep working and to allow the family to stay put - and the important difference is that they already owned houses and were settled. OTOH, these people who willingly subject themselves to such an arrangement - just to buy a house - are plain nuts.
Extreme commuting should be viewed as a survival tactic - not a lifestyle!
Lots of public safety workers such as fire and police types have been doing this for years. It causes problems when an earthquake destroys the infrastructure that prevents these folks from getting to their jobs. Some cities have offered these folks huge subsidy packages intended to position them closer.
fire and police types have been doing this for years ??
The Ass. Fire Chief in Belmont (?) Ca., Lives in Oregon…Another Fire fighter I know of does “shift swapping” so he can work 13 streight days or so…Then he jumps on a plane (taking his 12k monthly pay check with him) and heads home to Arizona for the remainder of the month…Not a bad gig if ypou can get it….
Regarding discussion on yesterday’s Bits Bucket regarding voting for McCain, because he doesn’t support a bailout (reuven, you mentioned this).
Guess what? That is NOT his stance anymore:
———
Last month, Senator John McCain, the presumptive Republican nominee for president, sharply pivoted and called for government aid to homeowners in danger of losing their homes.
His plan was more modest than the Democratic plan. But it was notable because, only a month earlier, he had warned against broad government intervention to solve the mortgage crisis, saying it was “not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers.”
Democratic strategists said the change reflected the importance on the electoral map of states like Florida, Ohio and Michigan, all hit hard by the crisis.
http://www.nytimes.com/2008/05/10/business/10bailout.html
========================
I think I’m going to write-in Ben Jones…just to make a point. (sorry Ben!)
–
Or, you can abstain from voting as I have been doing since 2004. BTW, McCain is a big admirer of Greenspan and Kudlow. We got three weak candidates to choose from.
Jas
Too bad you didn’t abstain from voting for the winning candidate in 2000.
Yea Jas picked well in 2000. For fun search on speeches by Bush in 1999. He was an idiot then and he’s an idiot now.
–
Guilty as charged. We ALL do stupid things at times and I am quick to admit to mine. The best of us fall victims to propaganda some time or other.
Jas
It’s important this time. You’ve got potentially big problems around the world security wise and the 20 year olds want to put someone in the WH who has no global stature and wouldn’t have a clue what to do.
The new occupant of the WH has got a VERY full plate this time. He’s going to have to be a cross between TR, Ronnie, and Monroe.
Would that be Monroe, as in “Marylin?”
As in “Doctrine”…
What was Reagan’s foreign policy experience before winning the presidency?
Nada
TR for getting a handle on out of control business, Monroe for FP doctrine (here’s what’s important to us - stay out), Ronnie for bringing back the country domestically from some very trying times.
What was Clinton’s foreign policy stature before winning the presidency?
Touche. And more importantly, what was Jimmy Carter’s foreign policy experience before becoming President?
Ronnie to the rescue to undo the serious damage Carter has done. And Carter is still going at it with his preaching of hatred of America to all the 3rd world hostile nations.
Herbert Hoover probably had the most experience with foreign policy(impressive resume!), of any incoming President.
How’d that work out?
http://en.wikipedia.org/wiki/Herbert_Hoover
“Herbert Hoover probably had the most experience with foreign policy(impressive resume!), of any incoming President”
Yes he did. W Wilson had a decent resume, academic and as gov of new jersey. F Roosevelt , T Roosevelt Calvin coolidge, all had great resumes, mainly as executives running fed, state agencies. Dwight E had experience running the entire allied command in WWII. Truman had little experience in national affairs though he had brief stint as senator, and no college at all in his resume.
Reagon had 8 year as Gov of CA. Nixon 8 years as veep. Lyndon J had vast congessional leadership background as well as 3 yrs as veep under Kennedy.
Presidents are either F*ckups or geniuses depending on your political point of view , and the prop BS u were fed in school, which nowadays is tilted heavily to the LEFT.
Cheney knows foreign policy, is interested in the security problems around the world and spends a lot of time thinking and acting on those issues and is efficient and knows how to work the system. Oh yea…and he and Bush have caused more damage than anyone ever thought they could.
Just look at Cheney, Greenspan, Rumsfield, etc.
Your logic that experience = good is broken
oh and Ben will probably cut this thread because he’s a republican and anytime the thread get to critical of the republicans he cuts the whole thread
‘oh and Ben will probably cut this thread because he’s a republican and anytime the thread get to critical of the republicans he cuts the whole thread’
You’re completely full of shit. I have voted for a republican once in my entire adult life. Leave me out of your discussions if you don’t know a thing about me.
Ben,
I’ve seen TxChick, Prof Bear and Hoz post so many threads pro-republican and you keep those, but when the threads go ant-repub you yank them.
I also believe that Obama has much more global stature than you realize. The Republican dirty-trickersters will try to use it against him, but the Germans, French and Brits are crazy about Obama….and all the broo-haa-haa-haa about Hamas supporting Obama is out of line b/c, let’s face it, the U.S.A. can not afford this policy of endless war, and we need a president who will be seen as an honest broker by the major parties in the Middle East….I mean Bush is despised in the M.E. (and just about everywhere else in the world except Albania, from what I’ve read) and thanks to Cheney’s energy policies, OPEC and Putin have made out like gangsters in the last few years and could do our economy in if they were to stop pricing oil in dollars or if the Gulf states stopped purchasing our treasuries….
arlingtonva you don’t know what is ‘yanked’ and what gets lost in the server, or anything else. STFU.
I’ve never had a post cut once it posted. I agree w Tx Chick we do have huge security problems around the globe all made worse by our current experienced administration.
1. War in Iraq - In terms of sale, and execution. Heck of a job Rummy.
2. Absolutely no effort to cut our consumption of oil.
3. Piss poor management of the economy.
Yep I’ll be voting for Obama, when a real conservative who believes in the seperation of church and state, who believes deficits matter, and eshews cowboy diplomacy and foreign intervention arrives I’ll look at the republican party again.
Ben does not his blog degenerating into political cat-fights. There are plenty of political blogs to take care of everyones’ issues…but this isn’t one of them. So go back to DU.
Housing discussion can’t happen without discussing politics. Deficits, the war, oil, inflation all have an impact on housing and thus I think politics in the bits bucket or end of a post is OK, just my two cents.
BS on me posting threads pro republican! I have voted republican and I have voted democrat. I vote fiscally conservative and neither party is that!
I try to avoid posting ANYTHING on politics. It is an endless boring argument.
I posted 2 years ago that I liked Sen. Barack Obama and I still like him. I hope he wins because I would like to see a goofball from Chicago as the next Senator. Where are the Jane Byrnes when you need great Sunday morning reading.
I love reading about Illinois politics.
Ben, I like your anger.
Those might be those most misguided posts I’ve ever seen on this blog. Arlington is way out of line to question your integrity. You’re the whole reason we are here, questioning this f-cking disaster in the first place. And questioning it from every angle, I might add.
Ben,
FWIW - sorry. When I said you were a repub I didn’t know what the f# I was talking about and this whole topic has nothing to do with the housing bubble.
I have yet to see a single post on this blog that was worth a damn which included the words “democrat”, “republican”, “liberal”, or “conservative”. Including this one.
Folks: if you have that tribal mentality, then you are part of the problem, not the solution.
I miss Carol Moseley Braun! She was a great read and symbolizes everything I love about elected representatives.
“We have to do more than just elect a new President if we truly want to change this country. ”
Dan Quayle 1992
Frankly, I think that this is the best group running for president in 50 years. It will not matter who wins.
I don’t think you can seperate politics from this. Certainly you can’t seperate interest rate policy, inflation, lac of regulation, lac of a conservation energy policy, the cost of the war, our poor standing in the world, deficit spending, outsourcing, immigration ect ect. I’m all for discussing politics in the bits bucket, as long as it has some substance.
I just assumed Ben has ALL our email addreses and if we got way out of line
he would send us a little reminder to be more civil….OR….the guillotine
I don’t think you can separate politics from the Housing Mania, either. But for anybody to accuse Ben of being a partisan is just silly. There are plenty of partisans on this blog and I have yet to see Ben be one of them. I think they all suck and I hope I’ve made that clear.
We are all American’s first. The greatest think about America is freedom. I love the freedom to choose who ever dam well I want to period.
Happy Mama Day and Happy Nanna Day
“We are all American’s first.”
It depends on whom you mean by “we” because there are many people in this country who are not “Americans first”.
“Housing discussion can’t happen without discussing politics.”
That’s because housing, like much of our economy, doesn’t function in a free market.
Wow! Go to church for two hours and see what happens…
arlingtonva says:
Ben,
I’ve seen TxChick, Prof Bear and Hoz post so many threads pro-republican and you keep those, but when the threads go ant-repub you yank them.
I strongly disagree with this. These contributors you name have drawn opposition argument on this blog. Not only has such argument from me and others been posted here, but when housing and the bubble are kept at the core of conversation such back and forth has on occasion resonated over time and multiple threads and enriched the discussion.
“Ben,
I’ve seen TxChick, Prof Bear and Hoz post so many threads pro-republican and you keep those, but when the threads go ant-repub you yank them.”
I reiterate Ben’s suggestion to refrain from making unfounded conjectures about people you don’t know. I am not a Republican nor a Democrat. However, I do go to great lengths to call attention to which party promotes bad housing policy, as it is in the nation’s interest to make sure such politicians’ efforts are thwarted, and if possible, that they do not get re-elected.
It just so happens that the pols pushing the $300 bn - $400 bn taxpayer-funded bailout proposals currently wending their way through the halls of Congress are primarily loud-mouthed Democrats (Dodd, Frank, etc). These folks have deep-pocketed contributors in the lending industry who would stand to gain the most from passing the bill for bad subprime gambles on to Uncle Sam.
“20 year olds want to put someone in the WH who has no global stature and wouldn’t have a clue what to do.”
Gee, txchick57, does this mean the junior senator from New York might be acceptable. Don’t want to mention her name so we don’t create any anxiety today
She who must not be named
Remember what Larry David said
Support for Clinton Wanes as Obama Sees Finish Line
“You’ve got potentially big problems around the world security wise and the 20 year olds want to put someone in the WH who has no global stature and wouldn’t have a clue what to do.”
Ahem….also keep in mind that Rummy and Dick Cheney were in cahoots with Saddam Hussein back in the 1980s…
Leader of GOP convention quits after Myanmar ties reported
ST. PAUL, Minn. - The man picked by the John McCain campaign to run the 2008 Republican National Convention resigned Saturday after a report that his lobbying firm used to represent the military regime in Myanmar.
Last month, our National Security Adviser went on TV & referenced Nepal 7 times, when he was talking about events happening in Tibet.
It ain’t no big thang, he was only off by one country, geographically.
http://www.youtube.com/watch?v=efnNm-5AFG0
“…who has no global stature and wouldn’t have a clue what to do”
For all you who believe “experience” is “the thing”
I’ll keep it in the modern era: Joe Montana was a 4th string quarterback at Notre Dame and a 3rd round draft pick in the NFL.
Oh, and regarding Tayhos…I nearly forgot about Joe’s performance in this game:
“In their final game of the season, Notre Dame defeated the number one ranked University of Texas by a score of 38-10 in the 1978 Cotton Bowl.”
http://en.wikipedia.org/wiki/Joe_Montana
I was at that game.
We attended the 1978 USC/Notre Dame game where ND lost after an unbelievably exciting comeback attempt engineered by Montana.
Re: 1978 Cotton Bowl. Tex had the Heisman winner (Campbell), the Outland winner (Shearer), an undefeated season up to that point and frankly the 38-10 score understates the scope of the blowout. A great day to be Irish.
The SC game the next season probably would’ve gone down as one of the best comebacks in ND history but for SC QB Paul McDonald’s late 4th quarter pass that was called an incompletion when he had clearly fumbled and ND recovered. McDonald’s son has committed to play at ND BTW.
You’ve got potentially big problems around the world security wise and the 20 year olds want to put someone in the WH who has no global stature
Sorry txchick, I have to disagree with you. The best thing the US could do is forget the international community and turn its attention to internal problems. We are not the global police force, nor can we afford to be. Obama I think understands this, McCain and Clinton do not.
Personally, I think political isolationism and trade protection is the only way to go at this point. Close our markets to foreign goods. If a company wants to sell products in the US, then they need to manufacture in the US. We need to build our industrial base up again, not commit our limited resources to imperialist pursuits. The last five years have gutted our military and it will take years to repair. In the meantime, we have removed our capacity to deal with real military threats, while “victory” is no closer to reality in Iraq and Afghanistan. We need to focus on our ability to manufacture domestically. We need to establish an energy policy that shifts R&D to renewable energy, nuclear, and alternatives to oil for transportation. We need to put people to work in reconstruction projects, repairing our dilapidated infrastructure. These need to be our focus, not what “terrorists” are doing in Iraq and Pakistan or a nuclear program in Iran.
I agree we have serious security problems, but another four years of Republican nonsense is not what we need. Our security problems are the result of Bush committing us to the wrong war. Our security problems are because of Fed induced inflation. Our security problems are becuase we have allowed unfettered global capitalism to gut our industry employment base while creating vast imbalances in finance.
We HAVE archived Victory in Afghanistan…they had the Largest poppy crops in history More heroin for all to dull the pain of stupidity.
—————————————————–
while “victory” is no closer to reality in Iraq and Afghanistan.
Toyota, Nissan, Hyundai and BMW all have plants in this country. Boeing, caterpillar have kept plants in the US. Why? margins, most maufacturing that has left is in consumer electronics and home appliances. Why? margins, they retail at extremely miniscule margins. Why? the size of the consumer base and competition. I have a NZ friend who’s father became a millionaire in the 70’s and 80’s. His business? one retail appliance store, in Wellington. Small population, no competition 100% mark-up. Deflating the dollar has one big plus, it increases exports, which makes our products more valuable. Protectionism and isolationism are bad populist ideas. The Clintons know this, as do the republicans. Obama either doesn’t or he is just pandering for votes.
Bring on Smoot-Hawley II!
Protectionism and isolationism are bad populist ideas.
Very true
but so is trade with countries that allow the theft of our intellectual and branded products, countries that have zero environmental regs, slaughter and jail their citizens who attempt to have a voice, and sell weopons to our enemies, ie China. If we are to trade with them it should be measured and carry a lot of incentives to change, and we have not been doing that lately. NAFTA doesn’t bother me nearly as much, Mexico and Canada have been our partners for the most part. If I’m going to increase trade I’d like to do it with countries that are democratic. Increasing the wealth of Mexico helps the US in the long run. I think we may have sold our soul to the devil with China, time will tell.
kisisdad,
I don’t believe protectionism is the answer, but the companies you cited in your post almost undermine your arguement. The automakers all get the benefit of tax concessions/handouts when they open up plants in rural Alabama or Tennessee, so that’s part of the reason these companies still manufacture cars here. Boeing probably can’t offshore as much production as they would like b/c the Pentagon might not like it if Boeing were to source parts from China…..seems to me like most manufacturing jobs that have NOT left the country are still here because of either handouts or national security reasons or simply b/c its not economical to do so because of the difficulty/expense to ship the item (ie. glass windows used in our pos McMansions).
I think at some point in the next 4 or 5 years, you’ll see Chinese companies get in to the act and start manufacturing cars made here in the USA….not because of the better margins they can make b/c of lower labor costs, but simply to court goodwill from our government and regular J6Ps…..and I don’t see anything wrong with that, either…
China has tried to export cars to Europe (and possibly the US) but has, of yet, failed to construct up to safety standards. There’s a rather scary video available online that shows the German testing of a Chinese car— the thing crumples like an aluminum can at 35 MPH and breaks the necks of the test dummies.
So exports to Europe have been refused. And obviously we don’t have any Chinese cars on the road. But you know what? They sell them in their own country, because the culture is still looking for low price over good value.
“protectionism is a bad populist idea”….
But going head to head on a grossly slanted playing field is “fair competition” in your mind. Yeah… competing with countries that enslave millions of it’s citizens is some competition.
Give up the Kudlow creed and play on words. It’s rotting your brain. If the warped, twisted word “protectionism” were rightly call “defense of markets” all the nutjobs who can’t think beyond a phrase or buzzword would be on it like an ethiopian poster child diving for a bowl of rice.
“protectionism is a bad populist idea”….
Recent story on NPR regarding Mexican truck drivers gaining full access to transport goods in the US from Mexico. Unions are against this idea. So am I. The Mexicans and “Free-traders” say it will save consumers hundreds of millions of dollars on the cost of goods as the cost of transportation will be reduced. I would rather pay a few dollars more for a product knowing that US drivers were employed.
What benefit is there to me if I save a few dollars on the retail cost of a product, but have to pay increased taxes to pay for unemployment for US drivers, increased taxes to pay for welfare programs, etc… at what cost to society for increased profit to corporations who will just use the savings to help their bottom line, not reduced prices for consumers. At what cost jobs lost in the US for increased share prices of corporations and millions in options for executives. This is free trade? Give me fair trade. Give me protected markets.
And this from someone employed by a Japanese company competing in the internet space. When our parent bought two US companies, they didn’t downsize anyone. In fact, they’re still hiring, still expanding in the US.
Agree very much with what you said, Northeasterner.
Fair trade is good, wage arbitrage so corporations increase their margins at the expense of the U.S. workers is definitely NOT good.
I have never understand the love of “saving a few bucks” and encouraging outsourcing when one will no longer have ANY bucks after all the jobs are gone.
It’s important this time. You’ve got potentially big problems around the world security wise and the 20 year olds want to put someone in the WH who has no global stature and wouldn’t have a clue what to do.
—
Scarier to me is the unspoken assumption that there IS a solution that solves all concerns and we just have to choose it now - SAVE THE FUTURE!
I used to run non-linear programming codes for a living. I’m a firm believer in the strategy of: go a little way in what looks to be the correct direction, then adjust and continue on. Charging off in the direction-of-the-day with blinders on is scary whether you are going to the left or to the right.
I don’t feel comfortable that Obama will be any better at changing strategies than Bush has been when they start showing warts. Liberals like breaking eggs as long as a few bread crumbs result. And no one was fainting when Bush was making decisions.
This is like the worst mixed metaphor ever.
Come into my kitchen. I will give you some eggs. You can even break them. If you manage to produce breadcrumbs out of it, I will give up science and reason, and worship you as the new god.
hehe, sorry
“global stature”: no one in Germany knows who McVain is. But the photo was published, when he walked in that market in Baghdad (with the bullet proof vest, the helicopter above, and a dozen armed forces on his heels). Some folks got a little laugh out of it.
“McVain”
The business of politics is always so rude! Of course we can’t rely on McCain for consistently reasonable positions regarding the housing crisis since he is one of the Keating Five and never really left the trough. The candidate that txchick57 is dismissing is getting attention specifically because of his alternative view of the big challenges facing us at this juncture, he has vastly superior stature overseas according to polls in other countries, and he has announced a range of specific plans and policies including a rapid yet realistic drawdown from the current biggest boondoggle. Continuing to dump national resources into failed wars, whether in Iraq or on drugs or on culture or whatever else, is what is bankrupting us.
What was Lincoln’s foriegn policy stature before becoming President?
Its easy to see that some have had the fear of God put into them by this administration. As they would have you believe, everyone is out to get us and we can’t talk to anyone anymore. Shoot first, ask questions later. Some would say 9/11 changed everything but the US got what it deserved after 50 years of bad foreign policy and trying to deal with the devil. Until we get a leader that doesn’t negotiate with the Saudis of the world until everyone cleans their act up, we will be doomed. Lack of economic opportunity at the lowest levels of the population around the globe is what causes terrorism. More of the same old foreign policy won’t fix that. Not every country is out to get us folks. Its okay to come out from the bomb shelter now.
Good post, Shake.
I really liked this quote:
Lack of economic opportunity at the lowest levels of the population around the globe is what causes terrorism.
—————-
touche!
Global stature and a clue what to do??? I could put a sock puppet on the end of a broomstick and that would have more global staure and a better idea what to do then the current occupant… Anything is an improvement at this point.
Dang…..I’ve sure missed an entertaining day at the HBB.
Eh, I mailed the Peter Schiff book 10/08/07. Thought the 07 part was obvious. Hope you find it NYC boy.
thread fell squarely on Atlanta Renter. Sorry if my repsonse was ill-concieved. I appreciate your sending in a timely fashion, and I did same…
In mortgage market, ‘walkaway’ homeowners may be urban myth:
http://tinyurl.com/6eu5xh
Seems to depend on who you ask and what’s being measured…or not.
Interesting stats on fraud, though:
“Fitch has also found a high level of misrepresentation in loan applications ‘by borrowers, brokers, and other parties.’ When Fitch analysts subjected 45 sub-prime loans to detailed examination late last year, they found ‘the appearance of fraud or misrepresentation in almost every file,’ a situation they termed ‘disconcerting at best’ in a report in November.”
Will there ever be mass prosecutions?
“Some 66% involved “occupancy fraud” — that is, the borrower misrepresented his or her intention to live in the home, rather than to buy it as an investment. That finding underscores the possibility that bankers are blaming owner-occupants for the more common, and not unexpected, phenomenon of ‘walking away’ by real estate investors.”
–
“Will there ever be mass prosecutions?”
These people need our help and the govt is there for that purpose. We need to “educate” these people and train them in other professions that can use their help.
Jas
Is it fraud to buy something you can’t afford expecting to either refi or sell for a killing after a couple of years ? If it is, then the article has a point. Plenty of speculators committed fraud to get into multiple properties and outright fraudsters accounted for what? 20% of the bubble maybe?
I think the article is trying to excuse the first category. Those people KNEW they couldn’t afford something but went for it anyway. Lake MTonka in MN (which is loaded with the truly rich)is lined with million dollar plus home and many of them were bought by families who’d bought into the bragging rights and keep-up-with-the-Jones thing (plus two fancy cars via HELOC).
However, they also couldn’t buy furniture, eat out, survive any systemic financial shock, or go for a couple of months without a paycheck. Is that fraud? I just think it’s just the plain stupidity that so many of our countrymen have in spades.
“Is it fraud to buy something you can’t afford expecting to either refi or sell for a killing after a couple of years ?”
If you misrepresent your INCOME, or the Purpose of the Loan, and in any way LIE about your ability to REPAY the loan, the YES, it’s FRAUD!!!
And, yes, FRAUD IS ILLEGAL!!!!
But did these folks actually know it, or were they able to rationalize it? Intent is what counts. I know quite a few folk who bought into the “biggest house you can buy” thing with every intent of paying their bills - until reality hit.
In today’s America overspending is encouraged to the point that if you DON’T spend, you get the fisheye (look at the anecdotes from the folks on this blog).
The sheeple are more than willing to buy into this (literally) which is why (as much as I detest these types) I chalk up much of the first category types as brainless twits with no idea of what it’s like to not to instantly gratify their every 5th Ave manufactured whim.
Even with the attempts to postpone the day of reckoning underway in Congress - Reality hasn’t been suspended and it’s hit these people between the eyes. Will they learn? I doubt it.
You clearly don’t live in Manhattan.
The dreams are manufactured on Madison Ave; the products are manufactured in Chindia and elsewhere; the products are sold on a particular stretch of Fifth Ave.
Admittedly, the windows of the shops on Fifth Ave. may also contribute to the dream manufacturing machine but that’s not what you meant.
You need to clean up your metaphors, my lad.
I stand corrected - Madison Ave.
“Plenty of speculators committed fraud to get into multiple properties and outright fraudsters accounted for what? 20% of the bubble maybe?”
Given the percentage of loans in CA that were liars loans in the 2 to 3 years around the peak and the percentage of those loans that had significant misstatements of income, I’d argue that far more than 20 percent of the transactions during the peak of the bubble were fraudulent. This drove prices higher for anyone who bought during that period or for those that didn’t buy because prices had been pushed too high. Is there any other period in American history where fraud in real estate transactions was as rampant?
Post above stated that 60% of mortgages were non-owner occupied fraudulant loans. That means at least 60% were speculators and the borrowers were illegally obtaining them. IMHO 2005-07 75% of all mortgages were fraudulent in some way. Makes you worry about the future. I doubt if all thought they were doing something illegal. I think almost all would probably do something similar in the future, unless there is some fear of prosecution.
Bleach the Bast@rds:
1. 14+% mortgage interest rates
2. Mandatory Felony charges for “false misrepresentations” on loan amounts over $100,000
From the article:
“How would you know what someone’s true ability to pay would be?” asked Todd Sinai, an associate professor of real estate at the Wharton School of the University of Pennsylvania. “I’m not sure you could even come up with a definition.”
If that’s the case, then how the heck do you decide whom to lend to in the first place?
The Ticking Time Bomb….
http://www.gold-eagle.com/editorials_08/schiff050908.html
Limited to only the cash in their wallets, Americans will finally be forced to dramatically curtail their spending, and the recession will finally gather serious momentum.
My question is: How many credit cards do people actually have? I have 1. I’ve never had more than 2 and I got rid of the redundant one years ago.
If cash strapped Americans are able to keep up spending then they must really have some debt built up out there (pretty obvious point) but how many cards does the average J6P have?
A major shake-out might be a good (but painful) thing.
I have 3 but the Mastercard and Visa are on the same credit line so they are really the same card and issued by the bank I have been using exclusively since the mid 90’s. The other is an Am Ex blue which I have because I figure that if the network of the bank was compromised or their system was down it would be good not to lose all access to credit and my own money. It is USAA, so I don’t really think it is a problem, but keeping one free Am Ex card isn’t a huge burden.
Nothing else. Nothing. I don’t do store cards. My first card was a Sears card that we could apply for in school after we had a job offer, but I didn’t have a car, there was no Sears within walking distance of campus and I didn’t get the catalog. My mother made me go out and buy some socks when I was home on break, because she said it wouldn’t really help me establish a credit history if I didn’t buy and pay off something.
Yesterday I paid $29 for a plastic bag and a 1/2 of food. It was to take a salad over to a dinner party and some aspargus for 7 for today’s Mother’s Day dinner.
It was the first time I went shopping and thought dang! (Amy Pohler’s Brittany Spears dang) I’m going to have to rethink how I do my shopping.
(Shoot! It suddenly dawned on me if this keeps up, I’m going to have to give up my weekly bottle of better Cabernet. Sigh, things are getting bad.)
At this point we have no credit obligations. I own my 4 year old fully maintenanced car outright. Everything’s cash and IBs are paying us instead of the other way around. Yet I think if I’m shaking my head w/worry, what is going on in other’s homes. I didn’t notice any signs of stress yesterday. In fact, my fellow Wegman’s shoppers looked pretty darn oblivious. Maybe it was the SU graduation and Mother’s Day that had everyone smiling.
Oh, I would be smiling if I shopped regularly at Wegmans. Drool.
From information gleaned from articles I have read over the past several months, I think the proportion of CC holders who carry no continuing balance; i.e. pay off every month is about the same as the proportion of homeowners who have no mortgage (35-40%). Is this correct? An are the two connected?
My question is: How many credit cards do people actually have?
I have 6. (If you mean card-with-unpaid-balance at the end of the month, then zero.) Each one has a purpose: to maximize the cash back. Many of the 3% cards max out at $300 back, so we have multiples.
I miss my 5% card, does anyone still have one of those? We put only groceries on it, so they probably really were losing money and so reduced it to 3%. Now we try to make other purchases with it too.
Pentagon FCU has a 5% card. Pretty good deal.
My first CC was a Visa card issued by Norwest Banks in 1982. I still have it, though it’s morphed into a Wells Fargo card. It’s the only CC I have, aside from a Best Buy card that I use for the occasional larger ticket purchase–the three month same as cash deal can be handy at times. Visa card is paid in full, every month, all the time, no exceptions. Co-workers occasionally ask me what the interest rate on my CC is and when I tell them I have no idea because I never pay it, they look at me as if I’ve grown a second head.
I have three credit cards, and like you, I am not sure of what the interest rate is on any of the cards.
I would love to say that I never paid interest on my credit cards in the past, but that would be a huge lie. I have paid my share to the leeches, and hope to never have to do it again. I can say without a doubt that a big ticket purchase made with cash is much more rewarding than one that requires a monthly payment for …….Years?
We have a revolving balance on one card due to one thing— $7K of dental work. It was one of those situations where paying interest is more than worth it for the quality of life improvement my husband has experienced. (And yes, this is with dental insurance— long story short is that with “deferred maintenance” there was a lot of work to be done but now with keeping good dental health he should never have to do this again.)
>My question is: How many credit cards do people actually have? I have 1.
> I’ve never had more than 2 and I got rid of the redundant one years ago.
I have 3.
One is Amex I use for business trips. Then I have Visa I use for all personal charges (and which I always pay off completely at the end of each month), and a second Visa card with a 100$ or so max limit on (but with 1000$ of debit prepaid) I use for my internet/ebay purshases. (this would rather be considered a debit card?)
I have a lot of friends that have many many cards.
They also all have a lot fancier cars than I. Cars I could never afford even though I make twice what they do or more.
(Though in 4 years I paid off my morgage enough so that it now is less than 1x my annual salary. yeehaaaa)
Take away the credit cards and it’s all over, baby.
The only thing our hapless government could do, would be to print large quantities of paper money, run commercials on the tv 24/7 saying how cool it is to use cash, hyper-inflation notwithstanding.
I agree 100%..but how do you feel sorry for financial institutions who give out 50-100K in “unsecured debt.” They are getting paid hefty interest for the risk…I know of tons of people right now who have done the HELCO, have used up their HELCO, and are now using the CC..at some point the rollercoaster ride comes to an end…
“..but how do you feel sorry for financial institutions who give out 50-100K in “unsecured debt.””
Why?
Look at the “illegal” Term Facility Auctions of the FED right now. All the big Playerz, who made all the bad loans and leveraged up to 30 times the supposed income stream are SELLING their bets to the FEDERAL RESERVE and the US Treasury.
This is to avoid the so-called “credit crunch”.
In simple terms, that means no one else wants these crappy pieces of worthless paper, but the Fed will take them as “collateral” for more money. They are taking bad mortgages, car loans and, yes, credit card accounts as collateral. Its completely OPAQUE what’s in the paper the banks are holding, and most certainly toxic waste, but here come the FEDs.
Got to keep the Wall Street money flowing.
Who is going to lose here? The Banks? The brokerage houses? or……….The Taxpayers?
All these firms are technically BANKRUPT! They are writing off bad loans every quarter and are insolvent, but we still play musical paper shuffle with the Fed, so their cronies can keep the game going.
The bad debts will be buried, the Banks credit restored, and we will go on as before, with greatly depreciated DOLLARS.
The losers are US.
“The bad debts will be buried, the Banks credit restored, and we will go on as before, with greatly depreciated DOLLARS.”
It appears to me that dilution is the common denominator between the effect of banks raising capital on existing shareholders and the effect of the Fed handing over massive loans with toxic debt as collateral. In either case, those with the extant paper are taxed to pay for the bad gambling debt incurred by subprime gamblers.
I was pretty spooked. I thought you might be from the future.
Yeah, that day vs year thing is pretty confusing.
Happy Mothers Day.
Sacramento has been experiencing a little (dead cat) bounce in the housing market. Many foreclosures have been selling in March and April, many with multiple offers, some above the lender’s asking price. Lately though, there has been a lull in the action. It seems people are starting to suspect housing may still have another drop coming and have backed off to wait and see what happens with the alt-A and option arms that are resetting in the next two years.
The good properties are selling, but the mediocre ones are just sitting. Even the retirement communities are seeing foreclosures and increases in inventory. Prices are truly down 50% in the bubble markets where new subdivisions were completed in 2004-2005. Prices in these areas have dropped from $250-$300/sf to $110-$150/sf.
Even stong investors are having a harder time getting financing. Fannie and Freddie recently imposed new guidelines. Last month, an investor could have up to 10 agency based residential loans. Now, the limit is four. So if you have four houses with loans insured by the agencies, you have no more agency based financing available. You must go with a portfolio lender…..and we all know how much spare lending capacity WAMU has to offer…..
It is all marks a huge difference from the day when you could buy 10 houses with no money and receive $1,000,000 cash back from over financing them!
many with multiple offers
How do you verify this? It’s very interesting info if you can.
I buy houses and saw 23 offers (including one of mine) for a house listed at $329,900 that ended up going for $375,000. That is why it had multiple offers. The bank priced it to sell and they unknowingly set the price lower than the market. The market took care of that, the same way it takes care of over priced properties that just sit there.
Lots of multiple-offers here in San Diego, too.
Same story. Some areas down 50%+ already (I’ve seen “year-2000″ prices on very rare occasions).
I’ve tried to make a few offers myself & they are already in escrow.
Surprise, surprise…there’s no shortage of buyers; just a shortage of fools willing to overpay for a shack.
It’s all about the price.
Still think we have a long way to go, though.
Last night’s Calif thread (which I saw just now) caused me once again to check the inventory of under-$600K units in Morro Bay. Creeping ever higher. The inventory I mean, not the prices!
Pleasant little coastal community. Maybe not a bad place to settle down and write books or retire.
Time for AZlender to write a book!
Going down there for three days this week
Another idea for a “savers’ strike”:
I know many of us are sick of getting 2-3% returns on “safe” CDs and MM accounts. All this, while inflation is screaming higher every day (real inflation, not the govt numbers).
What if we write “maturity instruction” letters to the banks when the CDs are about to mature, requesting a minimum return (say 5%, min — on a 12 month, max, CD) or we cash-out of their bank?
For money markets, same thing. They either give us our rate, or we walk with our money.
If you get the money, buy gold or something else of value, and put it in a safe place.
Take the cash out of the banking system in an effort to force rates closer to where they belong.
If enough people did this, we could finally get rates that at least get closer to real inflation rates.
I’m totally sick of the Fed destroying this country with its irresponsible monetary policies.
We need a revolution (or a “full reserve” bank).
Negotiating with tariffists is playing right into their hands…
CD/Treasuries are only investments you will (likely) not loose money. That has is the goal nowadays. Making money is no longer a reasonable expectation. What you save from working are your only gains for quite some time to come.
Seems like we are right on schedule in this decline…. 2008 and 2009 will be big drop years, with 2010 a “mop up” year more drops. 2010-11 winter could be a good time to buy.
I would predict the following.
CA IE, Fla, NV up to 75%-80% down from 2005 prices.
NorthEast, SanFran, LA, AZ - 40%-50% down from 2006 prices.
Midwest down anywhere from 30%-60% depending.
TX-GA-NC-TN (which contains these “bust proof” markets) down 20%-50% depending with suburbs (exurbs especially) down at the higher end.
Other - 20%-80% down depending…
Now if we get permanent gas prices over $5 /gallon and or rationing in 2010-13…. the outer areas w/o rail nor local employment…keep going down - unless it is a mining or farming center or recreation for the rich.
This article is printed in the Syracuse NY paper. The local NAR is always publishing its different here. There has been a pin drop silence in our local papers about the credit crisis as well as the housing meltdown. Syracuse is different is their main propaganda.
http://tiny.cc/H6t4h
10-4 most of upsate NY RE lags even inflation
that is different
Upstate NY RE lags even inflation, but they make it up with oversized property tax increases….
SUGuy,
I’ve often wondered why the local economics professors have been so silent. Any insight?
Ties to the real estate and banking communities? Schools run partially on money from business grants and trusts, so slapping the money monkies is not good financial policy for the school.
The curse of Cassandra.
How many people believed Mr. Gross from 6 years ago or Mr. Rogers from 5 years ago or Mr. Roubini from 3 years ago? If you believed these individuals and acted accordingly you made moneys. Few did. CNBC still regards Mr. Roubini as a nut case…
Then there are the predictions from the fear mongers. Howard Ruff et al have been spewing economic collapse for 35 years.
It is much safer for local economists to work on the micro level.
Actually, Bill Gross has been dead wrong on a number of calls. Specifically, his timing on interest rate policy was way, way off. The guy is a fraud. He believes strongly in maintaining the bubble economy that resulted in million dollar houses in questionable neighborhoods.
How many people believed Mr. Gross from 6 years ago or Mr. Rogers from 5 years ago or Mr. Roubini from 3 years ago?
You can add Peter Schiff to that list. Interesting how Faux News Channel hasn’t had Peter Schiff on the Saturday morning business shows lately. They moved him from “Cashing in” to “Bulls and Bears” for a couple of weeks. I suppose the “Cashing In” folks hated him for being right they chased him to “Bulls and Bears.” The regulars keep laughing at him and I think they chased him away finally off of all those shows. But as Cavuto says, Schiff was right on his predictions for the last few years. Ever see hothead Wayne Rogers (”Cashing in”) lash out at Schiff? Shameful.
No happy talk = no invites to speak to Rotary.
You’d think there’d be at least 1 or 2 that would worry about his or her reputation for calling this thing instead of maintaining the network .
You know what I mean: a Roubini among profs, Greenburg among industry writers, a Jim Rogers among investors, or even my buddy, Rick Santelli among MSM reporters. Confidence is part of leadership. I guess we’re in short supply of that around here as the crickets chirp whenever someone tries to bring up the credit markets.
Unfortunately, it’s likely only a tenured prof would even think of rocking the boat. Why risk your tenured job/retirement for something as unimportant and inconsequential as ethics or truth? It seems that the mavericks; those who try and cut through the thick hide of spin, deception, cronyism, propaganda and rhetoric, are few and far between these days.
I’ve often wondered why the local economics professors have been so silent. Any insight?
I am sure at this point every educated informed person who is aware of the current US economic conditions knows what is going on and what is coming our way. Imho the papers are only publishing the CNY NAR distorted version of the local housing market.
I am also now wise enough to have learned you can never figure people out. You will drive yourself crazy trying to figure why people do what they do.
Our system of higher learning discourages those that teach from speaking their minds, outside the classroom.
“I am sure at this point every educated informed person who is aware of the current US economic conditions knows what is going on and what is coming our way.”
Most PhD economists are not confident that they have a sufficiently accurate crystal ball to accurately predict what is coming our way. The majority of empirical research is devoted to retrospective analysis of historical data, not forecasting, as crystal ball gazing is neither easy nor respectable.
P.S. I have noticed a tendency of certain PhD economists to predict through the rear view mirror, pretending they made this “forecast: ex ante, when the media record clearly documents they were saying something entirely different back when an accurate prediction of future conditions would have been useful. I won’t mention any names, but anyone who has read and posted here for any length of time could probably cook up a lengthy list.
Bitter homeowners would blame them for the crash, and even friends might wonder if their home sale fell apart because of their friend’s statements in the local rag. Why deal with the crazies?
I did the math on this one. 752 sales in Q1 = 251 per month. Divide that by the 3,529 homes for sale on realtor.com for the Syracuse area gives you around 14 months of inventory. There is only one direction for prices to go.
I know 3 people that tried to own and maintain rental properties upstate. Of the 3, 1 was killed collecting rent and the other 2 say it was the worst investment ever (and they’ve owned since the 80’s). I think part of the reason why the denial is so thick is because prices did skyrocket. Really they should have declined.
This is yet another issue the HBB correctly pegged over a year ago.
Sorry, there are a few problems with my post:
1. It’s a response to SUGuy
2. prices did *not* skyrocket
Sorry about your friend who was killed.
–
http://flatiron.sdsc.edu/projects/jla/main.php?page_id=37
From history of Los Angeles:
1887 — Southern Pacific Rail Road brings 120,000 people to Los Angeles during the peak year of the “Boom of the Eighties,” the wildest real estate boom in Southern California history, with property tax assessments jumping from $3 million in 1885 to $103 million three years later.
1888 — The “Boom of the Eighties” collapses, driving real estate speculators out of business…
Jas
PS: I believe that during this bust the home prices in nearby San Diego declined close to 80%.
You know, all the ‘experts’ are talking in hushed tones these days, like the guy yesterday mentioning that it took 6 years to fall 20% last time. All along they’ve used the last bust as a measuring stick, when nothing compares to this bubble. Still, prices are up 200% in some areas from 2000. People just forget how long this ran on.
This bubble has no peer.
That’s right, people aren’t getting it yet. The next four years of the unravelling of this bubble will define our world for the next 50. Get smart people. Hone your usable skills and hoard what will always have value.
And if you have a good job then keep it. Put off any plans for early retirement.
That’s the one that hurts the most. I am tired. And thanks to Alan I need double the funds to retire now than I did only 4 years ago. If we assume only safe Treasury/CD investments once retire, at currrent rates of @3.7% less taxes, you need 2m working capital to net 50K a year.
2m working capital to net 50K a year ??
Exactly why I pull my hair out when I see these muni pensions given to 52 year olds (Some, friends of mine)…To open their eyes a little I tell them that I would need 4 mil + liquid to achieve that level of income with no risk…
Yes. For those not on gov pensions, the amount of working capital required, even assuming you own your home outright, is beyond comprehension. What exactly are the retirees doing today? Rates have been so low for the past four years and why is AARP not rioting in the streets? We should start to see a large increase in homeless and sick elderly.
A few economists realize the scope, FINALLY:
This one is really, really painful. In the years from 2000 to 2003, the housing market was in the middle of a bubble. House prices were soaring, especially in the markets with lots of sub-prime loans. When house prices rise, homeowners accumulate equity. Homeowners with equity don’t default on their mortgages. They either borrow against their equity or they sell the home and put money in their pockets.
The New York Times tells us that the Fannie Mae and Freddie Mac, the huge government-created mortgage intermediaries, could be facing financial troubles. I wonder how that could be?
Let’s see, we have two financial corporations, one with $2.8 trillion of mortgages or guarantees on mortgage-backed securities, the other with $2.1 trillion of mortgages or guarantees on mortgage-backed securities, and $45 billion and $38 billion, respectively of core capital. House prices are seeing their sharpest plunge since the Great Depression, which is in turn pushing default and foreclosure rates to the highest level on record. Now, how could anyone think that there could be a problem here?
It looks like the folks who missed the bubble before it burst still can’t seem to understand it even as it is bursting all around them. Anyone connected with the housing market is going to see serious losses. When the economy loses $6 trillion in real housing wealth over the course of a year (roughly the current rate of price decline), there is no way that the financial institutions that sit in the center of the mortgage finance system can escape without serious damage.
http://www.prospect.org/cs/articles?article=the_meltdown_lowdown_050808
“when nothing compares to this bubble”.
That is 100% correct!
That is why I think we are still in the denial stage. I talked to a realtwhore yesterday, asked how things were going…Answer ‘a little slow’ but sales will pick up soon. What makes you think that I asked. Because real estate is a persons biggest investment and the Government has to step in and keep it going.
We are surrounded by people that are enamored with socialism but don’t view it that way. Our freedoms are just being widdled away… And so it goes.
“That is why I think we are still in the denial stage.”
Agreed — particularly since top economic leaders with bully pulpits and media megaphones are doing all they can to help keep the masses in the denial stage.
” …particularly since top economic leaders with bully pulpits and media megaphones are doing all they can to help keep the masses in the denial stage.”
Yeah, well, after all, it is an election year …
Find out what the voting masses want to hear and then mouth the words. Whomever mouths these words in the most convincing manner wins the election.
Truth? You want Truth?
Sorry, this Truth thingy will have to wait until after November.
It’s only “socialism” if the government is helping someone else. If the government is helping me it’s “my tax dollars at work”.
Good one! LOL
You keep using that word. I do not think it means what you think it means. –Inigo Montoya
Perhaps you mean, “whittled,” or cutting little slices off repeatedly.
I agree about the Denial stage. People in coastal NW California still believe that because they are behind the “redwood curtain” prices will never drop. A few finally admit that Sacramento, inland LA, and inland SF are falling, but EVERYONE here thinks that even if things got so bad that median house prices in Nob Hill or Marin fell into the $300’s, that Eureka would still be in the $300s as well. The mentality here is as strong as any place I’ve ever visited or lived in this country, and that has been everywhere but NYC practically.
Now, these same people are really smug because they actually all know about the pending government intervention to try and prop up housing prices…and most genuinely believe now is a great time to buy a house. Very sickening.
While no one can predict the future, except maybe the Fed–and even they can’t predict the exact future, what economists can comment on now and what could have commented on for the past serveral years his how horrible fundamentals are. Do they even know what fundamentals of the economy are? It hardly seems that is ever described, since I suppose profit lies in imbalances.
Not only are our lives out of balance, but the rest of the planet’s inhabitants as well…
Die-offs in the usual range that Mother Nature likes to use (80-90% of a species) are happening right under our very noses, and we notice when it matters to us, (bees-pollination, chinook salmon-food) but not so much otherwise.
One of the most amusing aspects of the housng collapse has been the duplicity of statements from RE professionals and cheerleaders. Many builders, agents, brokers, etc have called the bottom one day and supported a gov’t backed bailout for the crisis on the next. I think that we should have some kind of award for RE doublespeak… maybe we could call it the [Lawrence] Yun-y Award. Anybody have good nominees out there in HBB land?
–
Economist Ryan Ratcliff of UCLA Anderson Forecast — “Home prices in California never fall unless the economy is in severe recession.” Now he says that CA, or SoCal, are not in a recession. He is in big demand by industry people to give a positive spin and outlook.
Jas
No wonder Chris Thornberg got the bum’s rush from that house of shills. He told it like it is in 2005 and he’s still telling it, from his own firm now.
“Home prices in California never fall unless the economy is in severe recession.”
By implication, the economy is in severe recession.
–
Actually, he was lying because the home prices in CA started to fall more than a year before the recession of 1990-91 began. All thru the recession the YoY price change was negative.
There was a small blip in prices in 1991 after the Fed started to cut rates but decline continued for few years. In San Fernando Valley it took 11 years for nominal prices to come back to where they were before the decline began. The L.A. Area did lot worse in early 1990s than the state as a whole.
Jas
We moved to CA in 1996, after which point the dust had finally settled on real estate price declines. The CA recession lasted much longer than March 1991, which was the official end data according to the National Bureau of Economic Research.
1991-1995 were tough times…
There was a saying in around 1991-1992:
Stay alive until 95!
What would be a good one for this bust?
“What would be a good one for this bust?”
Auction Heaven in Twenty-eleven
Jas,
I remember it just as you do.
The housing bubble was collapsing BEFORE the recession/layoffs in the SFV.
All the nut cases at the George Mason University cheerleading group for real estate developers - bought and paid for by the same.
When Should the Fed Crash the Party?
http://www.nytimes.com/2008/05/11/business/11view.html?_r=1&ref=business&oref=slogin
In the real world, however, managing prosperity is just as complex as managing recessions. How does anyone know precisely when the party gets too good? Mr. Martin’s timing with the punch bowl was less neat than he would have liked. Real G.D.P. declined by an average of 2.5 percent during the three recessions that followed his removal of the punch bowl. During Mr. Greenspan’s tenure, which lasted just about as long as Mr. Martin’s, G.D.P. declined by an average of only 0.7 percent over two recessions.
How do we know when the party is getting too good? This “financial consultant and economic historian” couldn’t tell that no doc loans, 125 LTV, appraiser scams, 40% yoy property value increases, massive overbuilding of homes, etc., was too good a party? Appears to be a case of wearing blinders on the upside.
The lie that GDP only dropped less than 1% is easily displaced if you go to Shadowstats, where one econogeek tracks changes in HOW we measure GDP, inflation, and unemployment. Greenspan is and always was an idiot. Hyper-inflation keeps prices going up, thereby keeping GDP up, even when its not.
Example: I sell 25 pigs last year for $100. GDP added is $2500. I sell 20 pigs this year for $200. GDP is up to $4000. I have increased sales and earnings. I sold less.
The net production is DOWN, not up.
But government lying about what constitutes “inflation” makes tracking what production actually is.
In a non-fiat currency world, increased productive activity should make prices continually fall. Better, less-costly ways to produce the same product result in savings to the consumer.
However, in Fiat, Fed-money world, the increased savings get taxed away by more money printing and credit. You get less and you pay more.
The flaws with Shadowstats:
They are not reproducible.
The graphs congruence suggests the addition of some additional number that may or may not be made up. Real numbers and graphs do not work that way.
As an example: Compare the S&P500 graph for last year and then make a graph of the S&P500 minus the financials for the year. There is congruence for the first 4 months then wide divergence as the Financials head South. That same pattern should occur when adjusting for Inflationary and deflationary items, when calculating GDPs and GNPs.
As a result I do not trust Mr. Williams numbers.
i sold 10 42inch plasma last year for 2000, gdp is up 20000. is sold 15 42inch plasma this year for 1000, gdp is only up 15000. net production is down?
A few of the Washington Post on-line chats were amazing this week - Michelle Singeltary especially. She is constantly reminding people that refinancing isn’t “paying off” anything, telling people with only $7000 in the bank that they can’t afford to buy yet, etc. But this is a new FB problem:
“Edgewater, Md.: My husband and I did not buy a home we could not afford but recently managed to buy a nice home at a foreclosure sale. The problem is, our new neighbors hate us for having done this! Apparently the house was previously owned by a beloved elderly couple who fell on hard times. We, of course, were not responsible for those hard times and in fact knew nothing about them. However, we’re now the so-and-sos who bought the X’s house, which elicits alls sorts of unkind comments, even hisses on occasion! Other than being the best neighbors we can be, is there any way to counter this unfair perception? There have to be lots of people in our situation.”
For the rest of the chat:
http://www.washingtonpost.com/wp-dyn/content/discussion/2008/05/07/DI2008050702730.html
And the real estate chat on Friday included a nice rant about prices in the DC area:
Silver Spring: All the recent news about price drops and discussion about what a house should cost in metro D.C. has really started to annoy me. So, for the sellers out there, allow me to share my 2 cents. I gross 98K a year and each month I pay my rent, car loan, student loan, credit card, insurance payments, and a whopping 200 to retirement. I can’t afford a 450K house, nor if I married my 60K significant other could I buy a 450K house.
Sellers groan and fret about how low prices will go before the market will pick up. For me, that’s 275K-300K and no more than an hour commute to downtown… Gaithersburg, Columbia, Manassas, Ashburn, etc are all out. I’d rather rent for the rest of my life than spend yet more time commuting.
When I can get a decent 3-1 SFH for 300K or less I’ll do my portion to reduce inventory and no free TV, granite countertops, or even paid closing costs will change that. (And just so there isn’t endless debating about decent… IMO, that’s at least no basement bedrooms and with off-street parking and central air.)
Sounds like we may just have finally hit the bottom of the first inning in the DC area.
Polly, Agreed Metro DC is getting back in line w/ affordability but it is going to take years to get us out of this affordability mess just like it took 5-7 years to get us into this mess. I make 140k, have 250k in investments, no car payment, base shopping privileges to avoid food inflation & bike to work to avoid gas inflation. I rent & have no desire to own until prices come down. I keep an eye on THs in the alexandria area and I’ve seem prices come off their highs of 500k+ in 05 to the low to mid 400s now, but its still cheaper to rent. Going w/ 130x rent pricing for these units should be in the mid 300k MAX. So it will take at least 2-3 more years to get all these sellers to sober up, but if they bought b/t 2003-2006 then they can’t drop price to what is should be, but of course they should not be selling so soon unless something unexpected happened in their life. Lease is up in the fall of 09 & I will likely renew for another year or go month to month to own.
I keep an eye on THs in the alexandria area and I’ve seem prices come off their highs of 500k+ in 05 to the low to mid 400s now, but its still cheaper to rent.
Roger that.
FWIW, our townhome zillowed $500K when we moved in (paying 1450/mon in rent) 3 years ago. We just renewed @1550, and zillow says $400K. I believe the zillow, since 2 townhouses in our row have sold for $420’s ie right at the conforming limit.
This is not near old town, but is out near Annandale along Little River.
Polly and Joe should go out on a date - they have something in common.
I gross 98K a year and each month I pay my rent, car loan, student loan, credit card, insurance payments, and a whopping 200 to retirement. I can’t afford a 450K house, nor if I married my 60K significant other could I buy a 450K house.
You sound like my wife and I. Exactly same situation here in Massachusetts. It’s not different here. Your house isn’t special. Everyone doesn’t want to live here… and yet, 3/2 2000sqft houses are still $450K and up.
According to government statistics, our income is in the top 20% of the country and the median family income for Mass is about half of what we make. Why do I feel like we can’t afford these prices? Oh, that’s right. We actually save for retirement and have CASH left over at the end of the month…
So, say you have only $7,000 in the bank but a 100K income and no debt. You can’t afford to buy anything?
Chick, was that for me?
I have way more than $7K in the bank and I make a bit more than $100K too. I was giving a summary of some of the advice the Wash Post columnist gives to the people who write to her for financial advice in the on-line chats.
I think I would break out in hives if I ever had only $7K in the bank. That is 3 months living expenses. Not a good idea.
The US housing bust has been headline news for over a year and yet the koolaid drinkers in Vancouver, Canada are still convinced it’s different there.
Housing dreams clash with reality
Carlos Hinkson is what you would call a believer.
He believes in Vancouver’s housing market, that it’s not likely to crash, even amid apocalyptic predictions by some of a post-Olympic bust.
Sorry Carlos, but in the last month sales have dropped off the cliff and listings have surged. The last domino, Vancouver, is about to fall. He’s right about one thing - there will not be a post-Olympic (2010) bust. It will arrive a year sooner.
Sorry, bad link:
Housing dreams clash with reality
The olympic saga is almost always the same…
The host country spends like a drunken sailor, always under a deadline to get everything done, so it turns into a big payola for local construction companies, budget be damned…
For the games must go on.
My sister bought in 2004 and my mom bought in 2005. Both over extended and bought with ARMs against my wishes. I warned them, and was told that I should seek mental help because I was becoming “negative and paranoid” with respect to my views on real estate and my job. They both informed me they they spoke to the experts (that’s what they call realtors) and that real estate doesnt go down in value is always a great investment, you had to be a fool to not be in the current market buying as much as you can qualify for, and that their areas were particularly recession proof.
Both have since called me crying for money and asking me what to do because they are upside down. My sister called this morning in tears again. She is very emotional since she is pregnant and will have have to take off work and lose income. I am scared to call my mom, as her home’s drop in value which she says is destroying her retirement plans is all I hear about.
The worst is that they get real pissy with me and say, well it looks like you finally got your wish. Have you bought yet, all I hear is what an amazing time it is to buy. I tell them I expect at least another 25% off and will look in 2010. They usually hang up on me at this point.
I guess that’s my version of Happy Mother’s Day.
Hope the anger subsides and they sober up to the reality that you were just providing an unbiased, rational counterpoint in light of the craziness of the market and not trying to be negative then nor mean spirited now, just consistent.
It’s no fun being the designated driver during a real estate keg party–even less fun after the party’s over.
The anger will never subside. NEVER.
Reason has nothing to do with it. Consistency doesn’t matter.
They will blame you for everything. Sad but true.
“Kill the messenger” instinct rules stupid people’s thinking.
Well, they view it as “killing their dreams”, etc. and other forms of woolly thinking.
It’s actually worse with family and friends because they somehow resent that you got it “right”. That you arrived at being “right” by actually thinking through the problem never occurs to them.
Tim,
That is a sad Mother’s Day tale if ever one was told. I occasionally tell similar tales here of family members who ignored my advice — in particular, my sister, who bought an extra home at the end of 2006 with the intent to sell the current residence and move in 2007 (instead she still owns two homes!), and my SIL, whose purchase of a brand new unaffordable McMansion in Summer 2007 turned out to be a prelude to divorce (the home now languishes on the market).
Tim,
I think this is the most compelling reason that real estate, in the form of houses, should never have been allowed to become “investment property”. The easy money loans should have been curtailed before they started and the MANIA avoided. Speculating in houses made it difficult for people, like myself and others, to simply find affordable places to live.
The entire market psychology changed to that of speculators. In that world, greed and fear dictate people’s actions.
I feel for people like your relations, in some respect, as I understand the motives….FEAR…. and GREED.
The Realtor(tm) mantra……….buy NOW or be priced out forever…..FEAR, and real estate is your best investment…prices are going up 30% per year…hurry, don’t miss out………Greed.
These should not be reasons to buy a house. But the market that was created made these motives extremely powerful. Only extremely rational people can overcome such adrenaline driven desires.
Sorry for your circumstances. Hope it all settles soon.
That’s a tough spot to be in. Helping them would probably just be throwing money away, to delay the inevitable. It’s my belief that when people are in the position of paying everything they make each month to try services debts and still not making it, it’s better to let the house go. Reduce their monthly living expenses till their in a positive cash flow situation and move forward from there. Since credit repair takes time, the sooner someone takes their lumps the better. Some of the comments we’ve seen, in recent articles, people are actually expressing relief over being out from under the burden and into a rental with much lower expenses. It’s like having a bad stock investment, once you dump it you stop thinking about it and start looking forward.
Thanks everyone for their comments. My sister is 35, so she has plenty of time to fix her mistakes and learn from them and it will be good for her. My mom worries me, however, as she put 25% down and then Heloc’ed substantially for things she didnt need including a $40k new car (this is a woman that is retired, and living off 401k funds). For a variety of reasons I wont go into, I dont see her going back into the work force in any meaningful way, and worry about taking care of her the rest of her life. I dont get it, as I dont buy anything I cant afford in cash, including cars and houses (I know this is extreme even for most regulars here). As someone posted earlier, you would go crazy if you tried to figure out why ppl do the things they do.
Since she HELOC’ed substantially she’s effectively gotten much of her down payment back. Except she spent it. So now she has a huge debt that will probably out live her ( not knowing her age). If she let the house go and can substantially lower her living expenses, she’s probably better off. In her situation getting cash flow positive is critical. If she has enough in her 401K to pay off the house and can afford to live on Social security, that’s another option. Whatever, she does it’s important that she not drain her 401K paying interest. Since she can’t earn extra income, she has limited choices. Maybe, she can live with your sister and help her pay the mortgage.
Whatever they do they have to get past the emotions and deal with the cold hard facts and numbers. It’s time for them to make a “business ” decision.
It’s your own money but if I was you, I wouldn’t give them a dime. If my parents were broke (they aren’t), I’d let them move in and I’d provide for their needs but they wouldn’t get a dime from me to help them stay in a stupid situation they created for themselves.
Tell Mom & Sis about the miracle of jingle mail. It’s the best thing you can do for them.
“I dont get it, as I dont buy anything I cant afford in cash, including cars and houses (I know this is extreme even for most regulars here).”
I don’t think it’s extreme at all for us regulars, certainly not for me. I’ve never financed a car and never will. As far as houses go, I always make sure I have enough to buy with cash, but perhaps choose to finance for a while. With low enough interest rates and our screwy tax disincentives toward savings, sometimes it’s better to let the lender take the inflation hit, as long as the terms allow me to payoff in full if whenever I want to.
Tim, just keep saying “oh man, this is so terrible…wow, this is just terrible…oh, I’m so sorry…gosh, I’m so sorry to hear this” and follow it up with “oh gee, no, I’m so sorry, but I really don’t have any money to lend you.”
They don’t want your constructive ideas or observations, they just want you to feel sorry for them.
Oy, such craziness.
“Both over extended and bought with ARMs against my wishes.”
1. A handwritten… Thanks Mom, you’re the Best!
2. A small box of See’s candy
3. x2 tickets to Dr Phil’s show: “I have a family member who recently bought a house, it’s not my fault!”
It’s been a real bitch having to be “negative and paranoid” over the past several years and trying to live in a parallel universe far and away from the maddening crowds as possible.
Unfortunately, more likely than not, in order to try to survive the coming onslaught one will have to continue to be “negative and paranoid” and the prize for all of that is that we will end up being blamed for the misfortunes of others. I have the same problems with family and others that have been bound up and hard wired real estate fanatics that either have started to have their real estate epiphanies or are about to enter them.
I hear this all the time:
“Your negative or You always have a negative input/output/comment.”
This drove me nut for a while, until I replied:
“You just did a double negative….your really negative to point out my negativity! What does that make you?”
“You must be an expert in negativity to point out my little negativity. What does that make you?”
I usually get no comment, other than that look (you’re an assh…).
Ouch.
Sometime I wish I could just be one of the sheeple.
No, you don’t. You think you do but you really don’t.
I hear this all the time:
“Your negative or You always have a negative input/output/comment.”
This drove me nut for a while, until I replied:
“You just did a double negative….your really negative to point out my negativity! What does that make you?”
“You must be an expert in negativity to point out my little negativity. What does that make you?”
I usually get no comment, other than that look (you’re an assh…).
This drove me nut for a while, until I replied:
“You just did a double negative….your really negative to point out my negativity!”
I have a simple solution that will make everyone happier: Learn to smile more and refrain from making unsolicited comments.
I only offer my take on the real estate situation when asked. On at least one occasion, my quick, candid response led to thirty seconds of concerned silence before the conversation instantaneously turned to other topics.
I have been drilling it into my mom and dad to hopefully insure they don’t get into a bad situation. I was hearing the “You are so negative crap” every time. Now that it is playing out as I said, including the kids that bought my house “jingle mailing according to my old neighbors” and brand new “more than likely Heloc money” store built down the street from the one I sold, they are finally asking my advice.
Drywall contractor “To reduce costs, Silva had to trim employees. He had about 60 last year; now Silva has about 25.” & “For me, I won’t see anything move until sometime next year in August or September. Then, I would be real happy.” Seems to have a better grasp than most economists.
Article has a few Eeh? moments but fairly balanced for MSM
http://www.sanluisobispo.com/news/local/story/356847.html
Percentage of vacant homes for sale sets record for 1st quarter
By Alan Zibel
ASSOCIATED PRESS
May 11, 2008
WASHINGTON – The percentage of vacant homes for sale in the U.S. set a new record high in the first quarter of this year, the government said recently.
The Census Bureau report shows that shows that 2.9 percent of U.S. homes – excluding rental properties – were vacant and up for sale, compared with 2.8 percent in the fourth quarter of 2007. It was the highest quarterly number in records going back to 1956.
That works out to 2.28 million properties, up from 2.18 million in the same quarter last year, according to the report.
The West had the biggest gain in vacancy rates among homeowners, rising to 7 percent in the January-March period from 6.5 percent in the fourth quarter of 2007. Vacancy rates fell in the Midwest and South, but rose in the Northeast. The national vacancy rate, including new and existing homes, has been steadily rising since mid-2005.
…
The housing market’s five-year boom is quickly becoming a faint memory, as sales and home prices have fallen dramatically over the past two years in once hot sales areas such as California and Nevada.
A recent Commerce Department report said sales of new homes plunged in March to the slowest pace in 16½ years.
Centex Corp., Pulte Homes Inc., Hovnanian Enterprises Inc. and other builders have been caught with unsold properties over the past year as mortgages became harder to get, sales slowed and the economy soured.
Builders have slashed prices, but the discounts have done little to lure buyers who are holding out, uncertain about when the price-drop will stop.
The National Association of Realtors reported earlier that sales of existing homes also fell in March, dropping by 2 percent, with prices declining on a year-over-year basis by 7.7 percent.
Tim, thank you for sharing. All of my siblings bought 2 homes each.
I rent and also hoard food and cash. My brother suggested I take a happy pill. No problemo! Is it just me or do people with money worry about the economy too?
I took several proverbial “happy pills,” which include (1) maintaining a low household debt burden, (2) living in a home with plenty of amenities at an affordable rent, and (3) trying to not catch a falling knife in the wake of the housing bubble.
I get that same $hit at work. I get called negative. I am told to stress less. The funny thing is that I have the least amount of stress amongst the crowd. I let my anger and frustrations out. I have stayed out of the path of the cyclone known as The Housing Mania. My finances do not teeter on the brink on a daily basis. We can eat what we want. We can drink what we want. We save money.
We do not need the happy pills. The miserable jerks that listen to all of the real estate fools, like brain-dead drones, are the ones that need the happy pills. For clearly they turned to real estate for their happiness and that is giving them the Ned Beatty treatment. I feel bad for Tim but I don’t feel too bad for his mom and sister.
That takes me back to the few unhappy years I worked in car sales. Living close to the bone as a carefree bachelor was a liability in the eyes of my managers. One day my manager called me in to his office to berate me for my low sales and lack of the hustle and drive of my fellow salesmen. I said, “Well, I guess it’s because I have a little nut.” The manager jumped out of his chair and screamed, “I have a HUGE NUT!! Start selling!!!!” That explained a lot.
Most of the managers I worked with lived in big houses, bought boats and other toys while looking like walking heart attacks as they popped antacids from the economy-sized bottles on their desks.
So . . . who was happier? I’ll bet one or two of those managers has had a heart attack or two–if they’re not already dead. Needless to say, I’d bet they also HELOC’d the crap out of their McMansions.
It’s commonly encouraged on Wall street for brokers to live beyond their means, for the same reasons.
It’s commonly encouraged in EVERY business.
My sister’s boss in Silicon Valley went totally ape$hit ballistic when she coolly informed that she would be able to buy a house in cash after the bust.
The various implications were completely clear to him.
Of course, she listens to me.
When I was an associate at Biglaw, one of my bosses (a partner, obviously) harped on me for weeks while we were house-shopping. He thought we should spend way more than my budget. Golden hancuffs, much? I suspect he had ulterior motives; he was really sad when I quit a few years later ;).
One of the things I encouraged my sister to do was state somewhere in the middle of each interview that: “I rent, and only stupid people buy when anyone with an engineering degree can see that price/rent is wrong”
You have to do it in the ultimate polite decent way at random points during the interview but it’s one of the best ways to tell where you want to work or not.
Take the blue pill!!
Graphs of headline U.S. stock market indexes immediately above this article in the SD Union-Tribune PERSONAL FINANCE section suggest this “slope of complacency” has a near-vertical downward orientation.
Investors appear relieved, even becoming complacent
By Conrad De Aenlle
NEW YORK TIMES NEWS SERVICE
May 11, 2008
Now that public opinion is solidifying around the idea that the Federal Reserve has made its last rate cut for a while, stocks may be poised atop a slope of complacency.
Recent activity certainly suggests that this is the case. After achieving double-digit percentage gains since the lows in March as recession fears continued, broad market indexes are showing signs of exhaustion, including a reluctance to react well to positive developments.
The Fed’s small April 30 cut was taken as a signal of central bankers’ confidence that the worst of the credit/housing crisis had passed, but after an initial burst, stocks sold off sharply in that day’s session. Over the next few days, surprisingly strong reports on job growth and activity in the service sector of the economy supported a rosy view, but stocks again were unable to mount or maintain healthy rallies.
That trading pattern – using good news as an excuse to sell – suggests that the buyers have run out of gas and that other investors think there is less to the recovery in stocks and the economy than meets the eye. Robert Arnott, chairman of Research Affiliates, an asset management firm, is one of the skeptics, and he warns that such nervous market action is likely to persist.
Participants in the six-week rally may have underestimated the depth and length of the economy’s woes, Arnott said. He calculated that the declines in home construction and second mortgages, hardly the only soft spots, account for 5 percent of economic output.
“It’s hard to imagine losing 5 percent of GDP without a recession,” he said.
…
MONEY MAKEOVER
Couple seek even keel after real estate storm
By Melanie Stevens
May 11, 2008
As San Diego’s real estate market has struggled the past couple of years, Antwane and Holly Rucker felt the financial implications in more ways than one.
The South County couple, both in their mid-30s, own three properties, including the house where they live with their sons, Tyden, 6, and Jaden, 3, and two rental homes. Just like so many other homeowners in the county, the Ruckers’ property values have depreciated considerably. Most notable is their residence, which they purchased at $700,000 a few years ago and is now worth around $550,000.
The market drop has also negatively affected their livelihood.
Antwane, 33, who was accustomed to making a six-figure salary as a mortgage broker, saw business slow to a near halt. After trying to stick with it over several months – while admittedly spending more on business expenses than the income he was bringing in – he decided it was time for a career change.
I would love to see stats on how many self-educated financial geniuses in SD County leveraged up to buy multiple homes in the 1998-2005 period. It just has to be an eye-popping number, given the weight of anecdotal evidence that keeps coming to light.
Tyden and Jaden. LOL. I could tell you what’s in the DVD player, what’s in the refrigerator, what’s on TV and what magazines are on the coffee table.
Me too, me too!!!
All those years living on the South Side of Chicago pay off after all.
Old English the drinking kind not the cleaning kind of liquid?
“I could tell you what’s in the DVD player, what’s in the refrigerator, what’s on TV and what magazines are on the coffee table. ”
And you can be absolutely certain there are no books on the shelves.
LOL
“…saw business slow to a near halt.”
“and then…it went dark.”
Lets see $1 million in properties $250k cash out refi, leaving no equity left to pay a broker to sell them…..
And renting is out of the question
GAIL MARKSJARVIS
Diversifying is antidote to decade’s downswing
May 11, 2008
Investors who thought they could count on the stock market to make up for the mediocre savings they have socked away in 401(k)s and IRAs are having an awakening.
And it’s not a happy one.
For eight years now, the stock market hasn’t cooperated. Instead of providing the 15-percent-a-year returns people enjoyed in the 1990s, the market has turned into a Scrooge.
Not only hasn’t the stock market lived up to its historical average of 10 percent annual returns, but the benchmark Standard & Poor’s 500 stock market index stands significantly lower today than it did at the start of the decade. Last week, with investors worried about plunging home prices and surging oil, the S&P 500 fell below 1,400. That was well beneath the 1,469 at the start of 2000 and far below the 1,527 peak in the index on March 24, 2000, the turning point in the technology stock craze.
“It’s a lost decade,” said Howard Silverblatt, a senior index analyst at S&P.
Even with the dividends that the 500 large stocks in the index pay, investors have only earned 8.9 percent total, he said.
I am quite sure he failed to consider real (inflation-adjusted) returns, which have to be negative. And imagine how the S&P 500 returns look to a foreign investor in the U.S. stock market?
Sooner or later (probably a week after they retire) the Boomers (I’m a Boomer -61) will have to sit down and actually do the hard math. When they do, they’ll probably pull their funds en-mass from the market. Wonder if part of the frantic government efforts to prop up Wall St has something to do with the realization that if this occurs WS is sunk?
It has more to do with the fact that if the entire country deleverages even modestly in a very short time frame, then the banking system is sunk.
Deleveraging = deflation.
They just want to control the time frame. They know as well as anybody else what is coming.
I’ve been pondering this for years. We boomers have been keeping the market going with 401k and IRA money.
Kinda makes me laugh when I think about my late father, an intrepid investor and computer nut..he got too decrepit to play the market, and consolidated into some aggressive equity fund and it just grew and grew in the late 90s while he was stuck on the barcalounger watching TV. That worked out for him, probably won’t work for me.
most of the boomers i know who are retiring within five years have already moved a big chunk of their investments to bonds and mm, as per advise of their financial advisers.
Question regarding Homeowner’s Insurance:
I got my insurance bill this week. $605 for the year. I looked back through the files and see that when i first bought the house in 1994, I was paying $285.
When I look at the details on the billing, it says the Limit of Liability is $224,515 for the Dwelling, $22,452 for “Other Structures” (what the hell - is this the (attached) garage?) OK, that totals $246,967. And, Personal Property is $168,386 — what the hell is this? My mostly old, crappy furniture, clothing and electronics? I couldn’t get $20k for the whole lot of it (I’d be happy if I could).
Now, there’s no way my home is worth $246k. The assessed value on my home (per the town I live in) is around $169k, and the “market value” is listed at $173k. A neighbor about three lots away from me, with identical floorplan (newer house), recently sold her house for $165k after it had been on the market for 2 years.
Any advice for me? Is my insurance company ripping me off? How the hell does this happen? I notice in the terms there’s listed “RM-184 Automatic Value-up 6%.” So does this mean that they automatically bump these values 6% every year?
Probably need to call my agent (who I haven’t spoken to in years) to go over all this stuff. But wondering if anyone has any advice for me before I do ( like — “hey, cool your jets. You’re obviously overlooking something here”)
Thanks…
I think what you need to look at for the structure is, what would it cost to rebuild the house if it were destroyed. As far as personal property, they really screw you on it. You have to have documented records, receipts for everything you own, pictures help. Even then they depreciate the value of your possession’s for age.
Property coverage is based on sq ft rebuilding costs. I believe “Marshal/Swift” and other companies issue quarterly material and labor costs in your county. Your agent or library or bookstore maybe able to help. By the way, some agents include the value of the land in the estimated value of the buildings (If recent purchase, use sales costs. This is over valuing since the insurance will not cover land. “Other Structures” (what the hell - is this the (attached) garage?)” covers detached from the dwelling. Most policies are written in the Midwest and the East where garages are detached. Would also cover any other structures on the property.
The 6+ is most likely an automatic built-in inflation factor tied with a guaranteed preplacement of the damage to property. Have not seen this in a while, do to actual repairs were exceeding coverage.
My advice to you would be to shop your policy around to different agents. By the way there is a penalty for midterm cancellations of any policy, but may be worth it if you are not getting adequate coverage or you have lost faith in your agent.
Are you a Yankee or a Dixie?
Take the test.
http://www.alphadictionary.com/articles/yankeetest.html
The expression “jingle-mail” is making the rounds now. Like all of a sudden it was coined this year. You guys were on the ball years ago calling things for what they will become. You all saw this before. That is why I am convinced that we will have some more upset for the koolaid believers.
Good morning all and Happy Mother’s Day to the moms.
Today is my last paid day at my rental.
I’m going to experiment and see what happens with being a squatter. I thought about posting a day-by-day blog and getting rich from millions of hits, but decided the tension would kill everyone off (Day 1: waited by the door with shotgun - sheriff never showed up. Day 2: repeat. Day 3: repeat…). So instead, I have my few possessions in my camper and can be out quickly. I will continue to water the lawn and keep the frige stocked with Bud Lite, fried pigsears, and bologna sandwiches, in the spirit of squatting (what did I forget?). Wish me luck…
A life without somethin’ goin’ on ain’t worth sh**. —Butch Cassidy (who came through my little town many times and hid out in the canyons nearby).
PS For those of you unfamiliar with my ongoing saga, my LL declared bankruptcy.
Be sure and file your notice of appearance.
Thanks, I already did.
Good luck, and happy squatting!
1960’s: G.I. Joe statue
2000’s: St. Joe statue
Totally OT: Here’s a little Mother’s Day gift from me to all who love the outdoors (thanks for the music, Lad) - watch in high res if you can, as the photos are actually very sharp.
http://tinyurl.com/533pqa
Great Job!
I fell in love with the Reefer, the first time I laid eyes on her, such bright colors and textures, and petroglyphs a’plenty, some up high.
A very underrated National Park…
Bonus Tommy:
http://www.youtube.com/watch?v=4kmrwUnc4y4
Just what I needed today, thanks - beautiful. He is SO amazing…
Dang it Lost… can’t you keep quiet about these kinda location’s…
Ben delete his link! Better yet, link it to Chula Vista or Bakersfield city home pages!
Thanks, hwy50. I can’t help myself, wanna share the beauty. Also, Lost is a her not a his.
Nice post….
Gorgeous - thank you!
I don’t live within a thousand miles of SE Utah, but I find myself pulled back there every couple of months. I can’t get enough of it.
Going off on a Menage-a-tree, the ultimate May to December Romance.
I’m 46, she’s 1,143.
With affairs like that, age only adds to the attraction…
She always tries to overlook my shortcomings…
–
Interesting story…
May 11, 2008
Losing a Home, Then Losing All Out of Storage
By DAVID STREITFELD
ELK GROVE VILLAGE, Ill. — The foreclosure crisis is hitting yet another American locale: the self-storage center.
As they lose their homes, people are turning to these humble cinderblock and sheet-metal boxes to store their stuff. But some people cannot keep up with their storage bills any better than they could handle their mortgage payments, and storage companies are auctioning off their property for a pittance.
…
http://www.nytimes.com/2008/05/11/business/11storage.html?_r=1&adxnnl=1&oref=slogin&adxnnlx=1210527109-HqAepH1V7swP0tfhnJOzkA&pagewanted=print
Jas
Growing deficits threaten pensions
Accounting tactics conceal a crisis for public workers
By David Cho
The Washington Post
updated 7:45 a.m. ET, Sun., May. 11, 2008
The funds that pay pension and health benefits to police officers, teachers and millions of other public employees across the country are facing a shortfall that could soon run into trillions of dollars.
But the accounting techniques used by state and local governments to balance their pension books disguise the extent of the crisis facing these retirees and the taxpayers who may ultimately be called on to pay the freight, according to a growing number of leading financial analysts.
State governments alone have reported they are already confronting a deficit of at least $750 billion to cover the cost of the retirement benefits they have promised. But that figure likely underestimates the actual shortfall because of the range of methods they use to make their calculations, including practices that have been barred in the private sector for decades.
Local governments use these same techniques for their pension funds and face deficits that further contribute to what some investors and analysts say may be shaping up to be a massive breach of faith with a generation of public employees.
Yawning gap
This gap is growing more yawning with the years. It has already presented taxpayers with a whopping bill that is eating up a vast portion of government budgets at the cost of other services. In Montgomery County, for instance, pension and retiree health care costs are already higher than the combined budgets for the departments of transportation and health and human services. Eventually, officials responsible for the funds will have to choose whether to continue paying out or renege on benefits promised to retirees.
By their own assessment, state and local governments acknowledge that their funds for retiree benefits are increasingly falling behind, with the number that are severely underfunded soaring to 40 percent in 2006, a five-fold increase from 2000, according to the U.S. Government Accountability Office.
But even these grim calculations are based on assumptions that some analysts consider too aggressive, including projections about how the investments of pension funds will fare and how long retirees will live.
“Very small shifts in actuarial assumptions can generate huge changes over time,” said Susan Urahn of the Pew Center on the States, which has studied the issue. “It is not very transparent, and even where it is transparent not many people understand it.”
Pension funds generate money from worker contributions, government payments and the returns from investing that money. These funds pay an annual pension salary and health benefits to retirees for as long as they live.
But with workers retiring earlier and living longer, governments have been struggling to keep up with the promises they made. Many are taking out loans to restock their pension funds, which is akin to using a credit card to cover monthly mortgage payments. Others are passing the bill to future generations by using sunny projections of what their investments will return, claiming they do not need to dedicate more money now to their pensions.
‘Accounting nonsense’
Such “accounting nonsense” has been “pushing the envelope — or worse — in its attempt to report the highest number possible” for their investment returns, wrote billionaire investor Warren E. Buffett in a recent letter analyzing pensions for shareholders of his company. Taxpayers ultimately will pay the price when these forecasts prove wrong.
http://www.msnbc.msn.com/id/24449812/print/1/displaymode/1098/
Roger Lowenstein Discusses San Diego’s Pension Crisis in New Book
May 08, 2008
Tom Fudge: If you live in San Diego, and you follow the news, nobody needs to tell you the city has a problem with its pension fund. But what caused it? On one level, it’s a simple question with a simple solution. The city underfunded it and offered benefits that were too generous. But simple explanations like that don’t necessarily lead to simple solutions. San Diego’s pension problem becomes much more ominous when you consider the extent of the problem it represents. A lot of public agencies and private firms have courted financial insolvency by failing to financially manage their pensions. In this end, it says some very profound and troubling things about politics, and the changing demographics of America.
You can hear Roger Lowenstein talk about the economy and the nation’s pension problems this evening at the UCSD Revelle Forum at the Neurosciences Institute at 7:00 p.m.
Guest
* Roger Lowenstein, contributing business writer to The New York Times and author of While America Aged, a look at the nation’s pension debts with particular attention to San Diego.
‘“Very small shifts in actuarial assumptions can generate huge changes over time,” said Susan Urahn of the Pew Center on the States, which has studied the issue. “It is not very transparent, and even where it is transparent not many people understand it.”’
Here is a useful strategy for private firms which still maintain defined benefit pension plans:
Invest the pension fund in the riskiest, most pro-cyclical assets possible. During the boom years, the pension fund will be essentially self-funded through investment returns, and outlandishly high assumed investment returns (as supported by actual results) can be used to support an unrealistically-high discount rate assumption which will shrink the present value of unfunded liability.
In the bust years, about the time the company goes out of business (thanks in part to CEOs who were paid way more than the value of their services), a black swan may wipe out most if not all of the pro-cyclical gains and force the actuary to adopt a lower discount rate assumption, rendering the pension fund insolvent. At that point, the pension plan’s unfunded liability can be dumped on the PBGC, the government insurance agency which stands ready to bail out pension plans which go bust.
Unintended consequence of the PPT’s efforts to make sure the stock market always goes up?
“With stock prices generating high returns on investments in the bullish 1990s, G.M. decided to underfund its obligations.”
In the Sunday Portland Oregonian there’s a 3 page ad in section A for “one of the largest coin and jewelry buying organizations in North America”. Just bring your jewelry, coins, bullion, historical documents, whatever and they’ll give you instant cash. Guess they’re trying hard to part Joe 6P from any gold, silver, etc. he has. Obviously somebody thinks it’s time to buy.
“Obviously somebody thinks its time to buy.”
Or the bling buyers have caught on that people long on bling are short on cash thus creating excellent conditions for paying pennies on the dollar for their bling.
http://news.yahoo.com/s/nm/20080511/us_nm/california_foreclosures_dc
A California man who has defaulted on nine homes and expects banks to foreclose on all of them, forcing him into bankruptcy, says he now considers it a mistake to have invested in the real estate market.
Shawn Forgaard, a 37-year-old software company project manager, bought one home for his family to live in and nine more as investments. He stands to lose all the investment houses in the mortgage meltdown but says he has come away wiser from the experience.
“Everyone stumbles. I’m not going to hide or run or live in denial, or with regrets,” Forgaard told Reuters in an interview. “On the surface it looks like total devastation but it’s just the opposite. I’m confident our lives will be much, much richer as a result.”
Forgaard bought a house in Santa Cruz, about 60 miles (100 km) south of San Francisco, in 2000. Four years later, using $800,000 in stock options, he began snapping up investment properties, putting 10 percent to 40 percent down on negative amortization loans — in which payments do not cover the interest so that a borrower’s balance grows over time.
It was those “neg-am” loans, which include triggers causing payments to balloon if the debt reaches a certain percentage of the original balance, that would come back to haunt him.
“I knew I was sitting on time bombs,” Forgaard said. “I knew the market was going to go soft and I knew that property values would decline. But I figured that I had enough equity to survive the storm and sell or take the loss and refinance.
“I didn’t anticipate a downturn of epic proportions such that home values are 40 percent less than they were,” he said.
Why can’t the press properly refer to this taxpayer-funded bailout proposal, instead of using the “rescue” euphemism?
FYI, the editorial suggestions shown below are my own — not included in the original article I linked.
Backlash grows as Congress moves toward housing
rescuebailout13 hours ago
WASHINGTON (AFP) — As Congress moves to aid distressed US homeowners, the prospect of a new rescue is drawing fire from a diverse array of activists, economists and consumers opposing
what they calla bailout.The House of Representatives on Thursday approved a bill to create a 300-billion-dollar
federaltaxpayer-provided guarantee for new mortgages for people who may be at risk of losing their homes. President George W. Bush threatened to veto the measure, calling it a reward for speculators and lenders.While lawmakers are eager to avert a wave of foreclosures that could trigger further economic shock waves, some argue that any new program would help a small segment of the population who made risky bets on the housing market.
“Do not bail out greedy homeowners that took out risky mortgages to buy homes they can’t afford,” wrote a Norwalk, California, resident identified as David R. on a website called AngryRenter.com launched by the conservative activist group FreedomWorks.
The website has collected over 44,000 signatures of renters opposed to using tax dollars to aid what it claims is about two percent of the US population facing foreclosure.
“What happened to personal responsibility? What happened to living within your means?” added another commenter identified as Jennifer M. of Houston, Texas.
Back from a walk in the woods and was gassing up afterwards, and ran into the German Version of the Griswold family, all on rental Harley-Davidsons. Grand-dad, grand-ma, mom & dad and 2 young adult children.
I asked how long they were on vacation, they said 3 weeks.
That’s gotta cost a pretty penny…
any number of pennies wont get you a blueberry seedling where Im at, there is a run on blueberry …I shit you not.
half pound chocolate dipped blueberries, 6 bucks…..for a HALF pound…got caught sleepin through the stimulus.
Here is a lengthy article on commodities speculation with nary a reference to the potential role of the special below-market lending rates the Fed currently offers investment banks through the TAF. Is my conjecture that the tsunami wall of liquidity that was supposed to restart the U.S. mortgage market has been diverted into commodities speculation somehow unfair?
Speculators feast on soaring commodities
By Tony Jackson
Published: May 11 2008 17:46 | Last updated: May 11 2008 17:46
In times of famine, Vladimir Ilych Lenin took a robust line on speculation. “We can’t expect to get anywhere,” he told the Petrograd Soviet in 1918, “unless we resort to terrorism: speculators must be shot on the spot”.
In descent foreclosure (heh heh…)
Scenes From the Mortgage Mess
A California Couple’s Descent
Into Foreclosure, Bankruptcy
By LISA LERER
Special to THE WALL STREET JOURNAL
May 12, 2008
This article gets to the heart of how the Fed’s easy money policy stands any semblance of rational household financial decision making on its head. It is high time for the Fed to accept responsibility for the perverse incentives they have created in opposition to financial prudence at the household level, and to cease and desist from their duplicitous policy of blowing a new bubble the very moment the bubble du juor has burst. Relying on hair-of-the-dog punchbowl respiking operations to help plankton mire himself in a quagmire of unrepayable debt is not a sustainable strategy.
In June 1995, the Floyds bought a four bedroom, 2,100 square foot home in Vallejo at auction for $170,000. After cashing out of Mr. Floyd’s retirement fund, they put $11,000 down and financed the rest with a 30-year, fixed-rate mortgage from Countrywide. Their monthly payment was $1,500; the rate slightly under 9%.
Current Status: After refinancing several times, their monthly payments reached an unaffordable $5,600. They stopped paying in April 2007 and filed for bankruptcy in December 2007. A hearing in bankruptcy court is scheduled for Monday.
The Debt: The Floyds owe $670,000 in credit card, mortgage and auto-loan debts, according to the claim estimate from bankruptcy court. Since 1995, Mrs. Floyd estimates that they pulled roughly $100,000 out of their mortgage to pay off credit-card bills, broker fees and penalties.
Background: In 1999, Mr. Floyd had an operation on his knee. He missed six months of work and the couple fell behind on their payments. They filed for a Chapter 13 bankruptcy and the court set up a payment plan. They followed it for two years.
In 2001, Mr. Floyd contacted a mortgage broker who offered to refinance their home. The Floyds say that he claimed this would help them pay off their debt and get their credit back on track more quickly. They refinanced into an adjustable-rate mortgage that year and again in 2003.
In 2005, just as their rate was about to go up, Mrs. Floyd got pregnant with her fifth child. It was a high-risk pregnancy, and she switched to part-time work — taking a substantial salary cut.
…
They refinanced again through Option One Mortgage, a subsidiary of H&R Block.
…
At the time, their house was appraised at $610,000. They took out a $505,000 loan — roughly $452,000 went to pay off their prior loan, about $15,600 went to other outstanding debts and fees and the Floyds took out almost $23,000 in cash. (Their house was recently reappraised at $470,000. See info on local housing prices.)
…
The family of seven plans to split up and stay with different relatives until they can find a new home. “I want to pay my debt. I pay my federal and state taxes like I’m supposed to, I go to work, and I just can’t find any help,” said Ms. Floyd. “It just isn’t fair.”
Wow.
Drip, drip, drip…
From The Times
May 12, 2008
Mortgage giants to unveil new writedowns
Miles Costello
Some of the biggest players in the British mortgage market will report investment writedowns of more than £4 billion this week as investors brace themselves for more bad news from Britain’s embattled banking sector.
HSBC, the UK’s largest banking group, is expected to write down as much as $5 billion (£2.5 billion) today as the credit crunch continues to take its toll on its American unit.
The bank, which owns the Household sub-prime lender in the United States, was one of the first British-based banks to give warning about the dire consequences of soaring defaults among American mortgage borrowers with patchy repayment records.
HSBC has already written off $14 billion in US bad debts and scaled back its local lending activities.
Shipbuilding Torpedoed by Subprime Leads to Freight Cost Surge
By Todd Zeranski
May 12 (Bloomberg) — The biggest shipbuilding boom in history collided with the largest credit-market losses ever, undermining forecasts for a plunge in freight rates.
The global slump of 2008-09 has begun as poison spreads
By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 6:44am BST 12/05/2008
…
As the Fed’s latest loan survey makes clear, lenders have dropped the guillotine. With the usual delay, the poison is spreading from banks to the real world.
IEM 2008 U.S. Presidential Nomination Markets graphically document the
collapse of HC’s nomination prospects
So much for HC’s success with the futures markets…
Release: May 07, 2008
Clinton Contract Takes a Beating on Iowa Electronic Markets
The contract for Democratic presidential candidate Hillary Clinton lost well more than half its value in trading on the University of Iowa’s Iowa Electronic Markets following her defeat in the North Carolina primary Tuesday.