Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
And please do not send in your housing bubble pics just now. I think that gallery has outlived its usefulness. I’ll come up with something better and a separate place for the ‘On The Road’ pics.
And for anyone wondering about my change in post timing, I lost the ability to date these just before I left for California. (Note to Wordpress pros, a little help?) Murphy was right after all.
Name:Ben Jones
Location:Northern Arizona, United States
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Can we talk about how homes will be sold in the future? I wonder if housing is moving towards online listings (paid or free), what is the role of Real Estate agents, auctions, and will mortgage preapprovals and appraisals become a requirement for new home shoppers?
Yes!
If I had the time and ability, this is what I’d be working on.
And **really talented** techies out there who want to work on this with me?
I built an online listing site that used Google maps to display locations of the housing and had much more advanced search tools than I’ve seen on any other listing site. It’s pretty easy.
The hard part is maintaining a quality data set. The various Realtor associations all have rules and standards for listings that cover pretty much every aspect of a listing lifecycle. But during the boom even they weren’t able to enforce them, and they have the power to levy fines against agents and brokers.
If you really want an open, alternative MLS, you first need to figure out how to keep the data clean and up-to-date. Good luck. But if you figure it out, I’d be happy to toss in all the source code I wrote.
For those of you with this idea in mind check out the following web site, it’s great. You can view all coastal listings just by grabbing ahold of the map and pulling it up or down the coast.
http://www.locallinks.com/paso_robles_real_estate_mls.htm
Soooweeeet Salinas…Nice link…
Here’s a link to the mls listings in California:
http://www.mlslistings.com/
I think the key would be to eliminate the R-E racket!
People would be much better served if they simply hired an attorney for $500-$1000 to be with you during closing. If any of these FBs are telling the truth about “not knowing” they signed a wacky mortgage (and I believe 99.9999% of them are liars), having a lawyer there who gets paid whether the house sells or not would help that other .0001%
The problem of “showing houses” could be solved easily with licensed+bonded “house show-ers” who could take you to a listed homes with lockboxes for a per-showing fee paid by the seller. And lockboxes can go high-tech so they can log with RFID and photograph each person who enters.
The question we should ask is: Why don’t Frank/Dodd/Pelosi/Obama, etc try to go after the big R-E agencies? If anyone is to blame, they are! Creating hysteria, and misleading ads and statements. Sue them all out of business and use the money you can get out of them to help the .0001% of FBs who are actually innocent victims!
$1000 is alot of money
i mean i am only buying a home for 500k and you want me to pay a lawyer $1000
my broker says there is no need
most states have pay a lawyer for settlement bs
in FL you used to pay 1% to title co’s - even if paying cash
Don’t put the realtors out of business just yet. There’s still a lot of knifecatchers out there with access to money that need to be convinced that now is the time to buy, and the realtors are the ones that can convince them. It’s the money from the knifecatchers that’s going to save our collective a$$es, if they can be saved at all.
For now the realtors are our friends.
RE: big R-E agencies? If anyone is to blame, they are
The NAR is the complete dispicable package.
They are the most unprofessional, obnoxious trade organization under the sun, and at the same time the biggest contributor to politco war chests.
Both they and associated state realtor groups should be prosecuted for monopolistic and anti-trust revelant to their lock-up and discriminate use of MLS data, but are not due to their campaign pay-offs.
And I don’t mean to imply that I’ve had a change of heart and no longer want to hold the buyers responsible. To me, the buyers who actually signed the mortgage contract remain the most culpable.
But the Realtor(TM) industry shares in the blame. And I would think there would be widespread support for putting them out of business. But I guess they donate too much $$$ to the politicians!
Has anybody seen the new NAR TV commercial? Where the lady says “There’s never been a better time to buy a home”. She says that on average home prices double every 5 years. Woohoo! I can tell my paretns that their 30yr old 1200SF ranch is now worth 1.6 million (bought for 25K in 1978). And the neighbors just sold their much-nicer house for 75K. What were they thinking?
They really say that? “Double every 5 years?” That’s 14% interest (compounded monthly)/year!
You know how impossible that would be? (Unless we were having runaway inflation?)
If that were the true, Warren Buffet would take all his money and buy houses! You don’t see him doing that, do you?
My bad… just saw the ad on youtube… they say every 10 yrs not every 5.
Which is still insane. Does everyone’s salary double every 7 years? No, so housing (which DID double - or more - in the past 10 years) is clearly overpriced. But they won’t admit to that, of course!
How about going after HGTV and flip this house, property ladder and all the other shows telling people real estate only increases in price qucikly. It is free money. Now work required.
Settlement reached for online real-estate agents
http://seattletimes.nwsource.com/html/businesstechnology/2004442254_realtors28.html
The Justice Department gave a boost Tuesday to online real-estate brokers — and potentially their clients — by forcing new industry policies that give Internet-based agents access to home listings they were previously denied.
The tentative settlement, which requires court approval, could save consumers thousands of dollars when buying a home.
New ventures having access to the entire MLS will change how real estate is sold in the future. The NARs lock on MLS has been picked.
I would love to see Realtors cut out of the deal. The sad truth, however, is that we are more informative than most ppl and much more likely to perform our own due dilgence. For example, every regular on here can probably accurately estimate the value of a home in their area, knows what contingencies need to be in real estate contracts, understands financing, can push their own deal through, etc. I doubt it is true the average person that wants to buy a home can, especially at the lower income levels. I agree that Realtors have not performed their duties well, but there needs to be something in place for the ignorant buyer.
In addition, are you just referring to sales by an existing homeowner? There was an article today that foreclosure rates are still increasing. As more and more ppl lose their equity, I think the more interesting issue is how banks will ultimately be forced to unload their holdings. We have talked about an entity similar to the RTC. This will be a major, major issue in 12 months.
I agree that Realtors have not performed their duties well
The duty of a Realtor, like any other commissioned salesperson, is to get the best possible price for the seller, period. Nobody paid a sales commission is ever representing the interests of the buyer.
What is needed is a profession of knowledgeable people whose job is to act on the buyer’s behalf. That means being paid on the basis of getting the best deal for the buyer, not the seller. The job could perhaps be performed by paralegals working in concert with a lawyer. These people know what representing a client really means.
RE: That means being paid on the basis of getting the best deal for the buyer, not the seller.
Not gonna happen since the seller pays the commission.
That’s why the concept of a “buyers” broker is still a joke.
What do you mean “not gonna happen”? Buyers already hire lawyers to represent their interests in a house purchase. What I’m talking about is expanding their duties to include price evaluation and negotiation. They could be paid either on an hourly rate as now or on an incentive scheme based on getting the best deal for the buyer, or a combination of the two.
If you want to get someone to represent your interests you have to pay them yourself. That’s all there is to it.
RE: What I’m talking about is expanding their duties to include price evaluation and negotiation. They could be paid either on an hourly rate as now or on an incentive scheme
In my tenure as an appraiser I wasn’t aware of very many real estate agents working on an hourly basis for purchasers-the expected payment of future incentives in a world of deadbeats is dreamin’.
Hell, I use to call “buyer’s” brokers in circumstances where I knew people were over paying, and say to them-”Ah, since you’re acting in the fudiciary capacity for these purchasers and have assisted in the drafting of the P&S agreement, would you mind directing me to the comparable sales you utilized to arrive at your offer number.”
In the early days I might get some accommodation-but once the number hitters took over the appraisal biz, more often than not-the broker would tell me to kiss off.
The thing you have to remember is most buyer’s come to the table with JACKSQUAT!
I’ve seen deals blow up over $500.00 worth of seller concessions knocked from an appraised value.
While you and I see the prudence of hiring “professional advisors”, for JQ6P the idea of “THEM” ponying up the money for such services is BS. It happens, but only rarely.
Everybody wants something for nothing.
Yogurt -
One of the best things I ever did as a homebuyer in years past (I rent now) was to toss $100 at a buddy of mine, who acted as a ringer to learn what the *truer* scenario was before I even talked to the realtor.
That $100 was worth every cent and then some.
I agree “their duties” should have been “this function,” as there is question of whether such function is or should be one of their duties.
being paid on the basis of getting the best deal for the buyer ??
So are you suggesting the buyer pay the broker ??
I am suggesting the buyer pay someone to look after his own interests, if he wants a knowledgeable person to work on his behalf. I am not suggesting the buyer pay a realtor - that’s like paying a wolf to look after your sheep.
There are people who make a living advising people on purchases of used cars, I don’t see why something similar would not be possible for houses.
Got it…”A Home Purchase Advisor”…And what qualifications would you expect this advisor have ??
Which poses a great subject for this weekend… “Let’s have a MOCK buy of a home and all list the things we’d do to complete a sale.” Compile the info, make a laundry list with a rough timeline and what to do when along the timeline, and publish it for all to see. Let’s then get that scenario into as many peoples’ hands as we can and redirect/qualify buyers to EXPECT better transactions from the git-go. This would cause a two-fold reaction. It would protect/inform buyers of a better way to buy, and, slow the remain market down enough to force the market to be priced reasonably.
Too bad we can’t do it with fuel. Well, maybe…
Why hasn’t FSBO become more popular?
Is it because it is too much work for the sellers…therefore the RE agent actually is earning their keep? Is it because the listings always look dorky, with poor photography and writing on listings?
Is it a lack of referral base for good financing?
Realtors will always be around. There are always empty homes that need to be shown. There are people who don’t want to walk into a stranger’s home by themselves. There are people who don’t want to show their homes to strangers. They look for an intermediary. It’s the same reason that people take a big loss on trade-ins. They don’t want the hassle of showing their car to strangers and taking a bunch of phone calls and jumping in the car and taking a test drive with a stranger. The duties should change and the commission should go down, but the need for the services will always be there.
Its a 100% commission business with a survival rate about equal to brain stem melanoma particularly in markets like the one we have now…One of the biggest problems (IMHO) is the ease of entry…
Showings are the ONLY thing I need help from a realtor with. And that irks me. I wish there was a service out there that would simply show you homes, without expecting anything else.
simply show you homes, without expecting anything else ??
Whom ever opens the door also assumes “ALL” liability…Not the type of service that would likely come cheap…
As long as realtors are legitimized via public licensing, they will be difficult to go around. It’s hard to argue that a real estate professional isn’t an expert when the government gives them a license essentially saying they are.
I’m wondering what the next housing scheme will be come up with. I know that D.C. and NAR are burning the midnight oil. One of our (S.C.) Senators has proposed a $15,000.00 tax credit for first time buyers coupled with down payment assistance, for any income range. Another proposes a $25,000.00 tax rebate etc…
I’m not talking bailouts, these guys are working to spur home sales, they say. I just see any hand that Gubmint puts out as gumming up the process, but that won’t stop them. BHO says if elected he will keep sending out “stimulus’ checks for as long as it takes to ’stabilize’ our economy. Sad how economically illiterate these folks are.
If things are bad now I can just imagine what the next batch of tomfoolery that will be dished out will do.
I don’t think there needs to be any more tax breaks for home buyers. Writing off mortgage interest is more than enough. At some point all of this subsidy keeps housing prices expensive and is regressive in that it punishes renters.
Having a “home ownership society” does not encourage any national interests except the RE industry’s profits.
I would rather see a subsidy for purchasing one’s own health insurance. People being able to afford it would make US industry more competitive and decrease Medicaid expenditures.
Health insurance also makes healthcare more expensive.
Probably true. Malpractice insurance and defensive medicine are what make it stratospheric compared to other countries.
Of course, I’ll grow gills and learn to breathe underwater before the government talks about meaningful tort reform in this country.
At some point all of this subsidy keeps housing prices expensive
That point would be the first dollar, of course.
Well if not health care, lets subsidize alternative energy. Geez, we subsidize defense contractors, the housing industry and religion through tax breaks. At least health care and alternative energy actually bring tangible benefit to J6P.
I would rather see a subsidy for purchasing one’s own health insurance.
That would just be a handout to the insurance companies, just like all subsidies are handouts to suppliers.
If the socialized healthcare crowd is going to ‘mandate’ health insurance for all, then the least they can do is support or subsidize the cost. Otherwise, don’t make it a mandate.
Putting arbitrary limits on what healthcare providers can earn for their work is only fair if it applies to everyone else, like lawyers, politicians, CEOs.
Would someone please tell me what the insurance industry has to do with the practice of medicine?
No. Really.
Where in SC…i lived in Columbia Charleston Beaufort and Florence many years ago…
Born in Columbia, Lived for years on Sullivan’s Island and now back in Columbia last 6 years.
Idiots… if they hand out $15,000, then the price of all homes for sale increases by $15,000. Same with $25,000, etc. But that IS the point, of course - to prop up the market for as long as possible using taxpayer dollars so the greedy bums can continue to suck the life out of the savers, the economy, and the dollar.
How about “black” properties, the ones that are empty, yet have no signs or are not listed on the MLS. I see quite a few of them around here. Is it an attempt by the local banks to keep prices up. If they were dumped on the market, it would make things even worse in price reductions for them. I know that NW AR has that problem big time.
I see black condo buildings all over. Buildings with about 20-30% of the building on the MLS, and even during peak season, you will only see 10% of the lights on at 8PM on a weeknight (or weekend). I am sure that is the banks holding some back, the flippers holding some back, and the developer holding some back; all hoping against hope that it comes back.
I am serious, there’s a condo building by me that MIGHT sell for 1/5th of what it did at the top, and, even at that price, would be too much. Some of these buildings really should be torn down, there’s no way they will ever be used at intended, and they will just be a source of agony for those that live there, and those that live near them.
We have our fanciest neighborhood here surrounded by houses that are are just - empty. Nothing to indicate their status. You just get stonewalled when you inquire about them with the R.E. folk - “Oh? I didn’t know about that” BS. It’s a tiny town and those folk know about every inch of it…
I wonder where the line will be drawn for “affordable” housing?
Most economic experts have predicted more increases in the cost of living by at least 5% in the next year..considering that for many major cities, housing is within the financial means of people the further out from the city you go.. So when you consider the cost of getting to your job and everyday living will many lenders have to adjust their debt to income ratio? How will this change the word “affordability”? Will people move from their jobs because its too “expensive”? I have already heard of people my area that have moved to new jobs closer to where they live..even though the salary is less.. they are actually making MORE money when considering the expense of the commute..
I think that there will be another migration of people into different parts of the country who will start to look for employment based on costs..not just salary..How much will this job cost me in this particular area? Is it better to take the job in Tenn that may be less in salary than the job in NY, but my cost of living will put me ahead of the game…
I think that was a major factor in the move of Nissan Motors of NA out of Los Angles to Tennessee, so I think that your prediction is coming to fruition.
“Closer” I believe the operative term is. Folks went out in search of cheaper and cheaper land and housing but ended up so far away from work that now, gas costs are eating them alive. Livable city centers are still highly priced.
I think folks WILL move in search of lower living costs to include short distances to where they work and play. The Burbs are going to suffer serious depopulation and demographic shifts as the poor are squeezed out of viable urban centers and into those empty McMansions IMHO.
Once ppl give up unreasonable expectations of appreciation, theoretically houses should per se become affordable for a person earning the average salary or higher for the area, albeit there are exceptions and change may take time ppl dont have. Note that I used the term worker because if you are not working and tied to local wages, increased economic prosperity may make the cost of living unaffordable for you since you are not participating therein.
I agree, however, that 3x gross income is not very useful when other expenses are not rising and falling in the same proportion. It should be factor of net income after deducting all fixed and assumed annual expenses other than mortage debt service. I always questioned the 3x number anyway as even under the old regime I thought 2.5x was kind of high.
The Burbs are going to suffer serious depopulation and demographic shifts as the poor are squeezed out of viable urban centers and into those empty McMansions IMHO
It’s probably a little more complicated than that. In a lot of places, there are major job centers in the burbs. And other burbs have convenient commuter rail or express bus service to job centers.
The areas with job centers will hold up fairly well, as will the areas with commuter transportation centers. But the best spot in a region is going to be the one that has jobs and has all the transportation connections. For a lot of places, that will be the downtown area of the city, but in others it will be some burb.
Brian, just how long is the commute from “Chicaga” to Bangalore?
Brian, I agree with you. I was just making an overly simplistic comment (still too busy downing java)…
“I think that there will be another migration of people into different parts of the country who will start to look for employment based on costs..not just salary”
There’s nothing new here in the sense people have been migrating out of California and other high housing cost areas for a long time, in some cases decades. Every time there’s another rise in housing prices, there’s another surge of the middle class out of California. The rising cost of gas has just added commuting costs to the mix of cost factors driving migration.
I agree with Brian in Chicago that areas with job centers, including some suburbs and exurbs, will hold up better than those without and that those with transportation connections will fare best of all.
3x gross income was a standard from a different age. There are tons of differences between the time that the 3x general rule was set and now.
Traditionally, a couple or family had one primary wage earner. If that wage earner lost a job, the other could try to get something tempory to fill in while the primary looked for another one. If a couple or family is dependent on two wages, they have no fall back. Perhaps they should be looking at a lower ratio than 3x earnings so they can save more and have a larger cushion in case of job loss.
Old style, jobs were more stable in terms of keeping them once you had them and in location. In a world where changing companies is more common because lay offs are more common and changing companies is the best way to get a raise, fewer people should be owning houses at all. If you need to be mobile, you need to be able to sell, and the only way to be sure of your ablility to sell is to have a huge downpayment so you can’t get underwater. A lot of people don’t have a huge downpayment for a 3x house.
Interest rates are at historic lows which does make it easier to buy more house on a given monthly nut, but it means you are likely to lose money if you have to sell when interest rates are more normal. Is 3x appropriate when you may have to sell at a loss?
Student loans - lots of people have student loans they will be paying off until they are nearly 50. That is a huge source of debt that didn’t used to exist.
Cost of services peovided by state and municipality is going up (whether health care for current employees and retirees or taxmeupthebooty’s department of women’s affairs). The delusion that all that can be paid for off of “growth” is over. Taxes will end up going up unless people can figure out a way to drastically cut services or pay employees a lot less. Either one will be tough. I don’t think services will stay at the current level, but they aren’t likely to be cut enough to prevent all increases. If any number of states/counties/cities default on bonds, borrowing costs for those entities will skyrocket.
Oh, and energy costs a lot more.
Brian, just how long is the commute from “Chicaga” to Bangalore?
My last job involved a lot of cleaning up after Bangalore. All those MBAs that thought replacing an experienced developer with intimate knowledge of why and how your system was designed and developed with an inexperienced programmer that’s half a world away and is awake when you’re asleep and has little-to-no accountability not to mention zero feeling of ownership in the future of your organization, all to save maybe $50k a year, deserves a nice big Joshua tree.
Purchasing power, with the dollar at an all time low, how does one maintain purchasing power for the future home we intend to occupy?
I’m reading the very last pages of Crash Proof, and Mr. Schiff tomed compelling arguements on what methods to choose to maintain purchasing power.
The problem is, I follow all the rules, yet I’m an investment moron! Savings, frugal, more savings at a dismal rate of return (liquidity is a major factor).
Any input online or private would be appreciated - barbluvsong at yahoo dot com.
Best,
Leigh
I`m at chapter 8. Great book. He wrote in 2006 and it reads like he wrote in 2008.
Lane
People moving to other cheaper areas is indeed nothing new. That said, the argument that cities like Chicago or NY will still hold up better because of jobs might not hold true these days.
I’m originally from TN and moved to California because 10 years ago, there simply wasn’t any jobs in my industry available at home. But since then, there’s been a pronounced spike in those types of jobs in TN. I attribute this to the fact that if you look at what kinds of people are moving to less expensive metros such as Nashville and Atlanta, they tend to be young and educated. They have the skills but not the money to stay in places like CA. When you get that many young ambitious people in one area, you get economic development.
So in some ways, I see the growth of smaller metros as superseding that of the older,larger, more established metros.
“an inexperienced programmer that’s half a world away and is awake when you’re asleep and has little-to-no accountability not to mention zero feeling of ownership”
Sounds like my company’s experience with Tata, LOL.
When you get that many young ambitious people in one area, you get economic development.
So in some ways, I see the growth of smaller metros as superseding that of the older,larger, more established metros.
On the first point, I wholeheartedly agree with you. On the second, I partially agree. You have to be a little careful with the smaller metros. Some of them have had growth patterns that are financially devastating when energy costs get out of control. It doesn’t really matter how many jobs are available if the cost to get to and from the job is way too high and the other option (live closer to the job) doesn’t exist due to lack of density, etc.
How long til one of these buildings is converted into a jail to house the people committing property crimes?
It’s clear we’re entering the fan/shit phase. I’d like to revisit survival strategies. For some posters this is just another trade, for others it won’t be enough to have predicted the bust; they will become ensnared regardless.
In the current state I am sandwiched between “safe” and the edge of the bust. I’d like to hear where other people are and what their plans are.
I can say originally I had not planned on cutting back on eating out or buying premium foods, but I have because of agflation.
I am working from home more. (Witness yesterday’s first thread when I did nothing but natter on and on and on, jabbering about Godzilla doll friends and mithril appreciation rates and so on. Effective, that’s me!)
My car’s little and gets about 33 mpg but I live far out in north Thurston county and it adds up.
Also I decided to skip planting some gladiolus in my newest garden bed, in favor of more tomatoes, green onions, and basil. Later this summer I’m going to simply walk out there with beer, chips, lime and a bowl and plunk myself down and eat fresh pico de gallo alllllllllllll evening, without having to move anything but my jaws.
Sounds idyllic. If you can make fresh sourdough bread and serve up home smoked salmon and blueberry jam you might have a new roommate!
“you might have a new roommate!”
There appears to be a growing base of suitors desiring Olympiagal. Wed now, or be singled out forever! They aren’t making any more Olympiagal!
Hey, Oly, what’s with all the roomie offers lately? You need to capitalize on this trend…you could open a B&B, you sound like you have a touch for food and ambiance and you could give writing workshops on the side.
Shoot, maybe I’ll just move in too, if the museum gig doesn’t work out…
And I like it when you work at home…this blog gets way interesting!
Losty, you know I would be wild with joy if you ever came to visit. You could even bring all your rescue dogs, all 15 of them. They could hang out with Bigfoot, on the deck, drinking beer and telling lies. Meanwhile the civilized folks–that’s you and me, probably– would be inside eating and catching up on Battlestar Galactica. It’d be super!
Add some salmonberry pie and you have a meal.
NoSingleOne,
Oddly enough, I spent much of this afternoon fondling my blueberry bushes. Then a few more hours hanging off a bluff examining a salmon bearing stream. I only fell off once, too, because I am getting co-ordinated lately. It’s a sign!
I’d like a discussion concerning the money supply.
If all this fiat money has been printed up and the country is flooded with the stuff, then where’d it go? What I see around me a shortage of ready cash, not an over abundant supply.
As we de-leverage you wouldn’t not believe the number of collateral calls and reserves that are required to prevent defaults under various financing structures. We have already lost trillions in equity that was the collateral for existing obligations. Much of that collateral needed to be replaced. Our whole economy for the last 10 years was based on debt leverage, where every $ increase in presumed equity was valued at 80% or more of cash. Negative equity requires cash replacement.
wouldn’t not = would not
“Negative equity requires cash replacement.”
There it is. What the banks giveth, the banks taketh away.
The banks created money out of thin air using a small fraction of reserves to back the vast sums they created. Now the reserves are disappearing via writeoffs, so the banks have to absorb the thin air money they put into circulation to replace these depleted reserves.
Money circulates throughout the economy until it reaches the banks, then the circulation stops. The banks, up until last summer, acted to expand the money supply; now the banks are acting to reduce the money supply.
At least this is how I understand it.
I think it would be down-right scary to have the inside view, that some people on this board have, of this current mess.
Knowing that, if banks were to properly value their assets, they would be insolvent. Not just your little three branch local bank, but the huge multi-national banks.
If high commodity prices stick around too long there will be a lot more pain in many parts of the country, although some parts of the country might actually benefit for a short while at the expense of others.
Have we (as a country as a whole) finally reached the tipping point, where if we were honest with ourselves we would have to do some pretty serious soul-searching and make some major changes. Do we as a country finally address our energy problems, healthcare, water resources, infrastructure, Social Security and trade deficits? Or do we just say screw it, and enjoy the last few miles of the ride before we go over the cliff?
I think the type of pain that will be required to get back on track will be too intense for the population as a whole to agree to unless it is thrust upon them, so cliff here we come.
Good post.
pain that will be required to get back on track will be too intense ??
Nice coincidence…I was just at breakfast with my mother this morning speaking of this very same subject…The next president AND congress is going to need to dole out a whole bunch of pain if we are going to fix the enormous problems we have…If he/they don’t, I agree, its over the cliff….
A question for Tim:
You seem to be in the know concerning this banking mess, what’s you best guess as to how this will turn out?
All I am doing now is securitization credit wraps to move mortgage backed securities off of the investment banks books. Investment banks cannot operate efficiently while holding such securities. This is not a long term solution as they have to pay enormous credit enhancement and liquidity fees, not to mention post substantial collateral for the benefit of such wraps, when just last year a wrap was not even needed. I do not think it will be over until the buyers of the paper are comfortable with the ratings and credit worthiness of the obligors (which with respect to the work I do usually means the credit enhancers and liquidity providers). The rating agencies have a long way to go to rebuild trust, and as long as equity is vanishing, the strength of the credit enhancers and liquidity providers (e.g., Ambac, MBIA, LC and Standby Bond Purchase Agreement providers, etc.) is questionable. They are still getting downgraded or placed on credit watch routinely with the overall direction going down not up. Until we are certain of a bottom, their exposure is uncertain. Yes the paper can be moved at huge discounts, but as far as allowing the paper to move at prices that would make it efficient for investment banks to do new deals rather than salvage the pre-existing ones, we are not even close. I see another 12-18 months of this. The current injections are to prevent collapse, not spur new growth.
Thanks Tim.
That was good info Tim…
I would equate Tim’s job as a guy working at NASA watching a meteor hurtling towards Earth. It looks as though it will be a head-on collision, but your mind can’t accept that….because if that were to actually happen it would be the end of the world as we know it.
Can’t happen, something will make it go away…it has to go away…..there isn’t any other option. So he keeps going in to work with a few other co-workers and watches the mess unravel in front of his eyes. What he sees the rest of us couldn’t really fathom. That it will only take a small fart in space to push the meteor out of harms way, but likewise it will only take a small space fart somewhere galaxies away to push it towards a head on collision with Earth.
In banking as inter-connected it is with derivitives and all of the rest of the crap, all it will take is some over-leveraged and under-hedged bank in some small country to start the meteor onto it’s path of destruction.
Some scary crap out there right now. In many ways, I am glad that I have no real clue as to how messed up things really are right now. I hate waking up from nightmares. And it would be even scarier if you were fully aware that that wasn’t a nightmare that is the reality in the World at this time.
Do you ever wonder that keeping interest rates artificially low keeps investors from wanting to transfer cash to traditionally safe and liquid instruments (i.e. treasuries)? If there is no good safe haven for money, maybe it means fewer margin calls and therefore fewer immediate writedowns over the short term.
The only thing that would throw in a monkey wrench is the commodities bubble and foreign investments siphoning off investor cash.
Printing up a bunch of banknotes is something a despot 3rd world dictator type does, because he can’t game the system any other way…
The end result is the $5,000,000 soda, in Zimbabwe.
Our subterfuge is more along the lines of the Fed bailing out every too big to fail financial brobdingnagian, no matter how shaky their collateral.
Currently on NPR:
“North Minneapolis has become a bargain hunter’s dream.”
Bwahahaha. Tell me more, Mr. Funny Man. Oh god, that hurts. I’m laughing so hard. Bwohoho. Oh, man, North Minneapolis and the word “dream” were used in the same sentence. Quit it! You’re killing me. With material like that, how can you not make people laugh?
North Minneapolis before the boom: $hithole
North Minneapolis after the bust: $hithole
I would bet this phenomenon will be repeated throughout the country. My grandparents lived in North Mpls. in the 1970s. It was already rough back then. They were burglarized several times and that was before the world discovered crack.
Once the entire Jewish population of North Minneapolis moved to St. Louis Park the fate of North Minneapolis was sealed. But the clowns reporting this failed to mention to the world how awful the area was before subprime lenders began handing out loans like they were Tic-Tacs. Now the “investors” are going to make a killing? Have a good day, everybody. I’m going to go slam my head in a door a few hundred times. It’s therapeutic.
I listened to that too. You forgot to mention that local government (I forgot if it was the city or state) is now buying up significant amounts of these foreclosed properties at their now “discounted” post-bust prices. They’re plan is to upkeep the properties until the market turns around.
right….
NYCity Boy,
Wednesday night on Larry King there was a real estate book authoress who was telling people to sell their SUVs and buy houses in downtown Detroit because the price of houses there is only $37,000. She had this really sick grin on her face, so I am sure she would slam your head in the door for a small fee
Condo-moan-ium - how will the rental and buyers market be affected by the changeover from condos to rentals (a trend that has finally hit NYC hard, btw):
http://www.nysun.com/real-estate/credit-crunch-turns-condos-into-rentals/79861/
CPI up more than expected - All is well, we don’t count food and energy…
http://www.marketwatch.com/News/Story/Story.aspx?guid=%7BAA0B7528%2D6E79%2D438F%2D9488%2DD3F38BEC5B91%7D&siteid=mktw
The MSM is crowing about the 1 pct increase in retail sales. Is this a nominal or a real increase (I am guessing nominal)? If nominal, what percent of it reflects inflation rather than real spending increases? I guess we may have a slightly better idea when the CPI comes in today.
Tax rebates aid surprise rise in May retail sales
From Tribune news services
June 13, 2008
Retail sales rose more than expected last month after many Americans received their tax rebates from the government, a welcome sign of some resilience in the primary engine of the economy.
The Commerce Department reported Thursday that retail sales increased 1 percent last month, the biggest gain since November.
A wide variety of retailers enjoyed a good month, including the biggest increase at department stores and other general merchandise stores in a year.
The May increase was double what economists had been expecting and indicated that the economy is receiving a major boost from the $50 billion in economic stimulus payments the government sent out in May, less than half of the total stimulus aimed at consumers.
The retail sales report is considered a good gauge for consumer spending, which accounts for more than two-thirds of the nation’s economic activity.
Analysts were surprised by the solid increase in retail sales and noted that sales in April also were revised to show a respectable gain of 0.4 percent, instead of the original estimate that sales had fallen by 0.2 percent.
“Recession? What recession?” asked Joel Naroff, chief economist at Naroff Economic Advisors. “Spending in April and May was solid in just about every category.”
Well that’s good news, so long as we never make it to the future where we have to pay that money back to where ever it came from.
Of course this is inflationary. A huge part of that increase in retail spending is on gas, food, other fuels, energy, airfares, fees, and on and on. Those numbers are way up, and do not represent increased wealth on the part of Americans. On the contrary.
And this inflation shows the resiliency of America? These people are the enemy. A bad, bad thing and they are pretending it is good.
How much longer will foreclosures keep rocketing skyward. And when (if ever) will the resulting inventory glut deliver the governmental housing policy objective of affordable housing prices?
Foreclosures Rise 48% in May As U.S. Housing Woes Deepen
Associated Press
Word Count: 683 | Companies Featured in This Article: Bank of America, Citigroup
WASHINGTON — The number of U.S. homeowners swept up in the housing crisis rose further last month, with foreclosure filings up nearly 50% from a year earlier, a foreclosure listing company said Friday.
Across the U.S., 261,255 homes received at least one foreclosure-related filing in May, up 48% from 176,137 a year earlier and up 7% from April, RealtyTrac Inc. said.
One in every 483 U.S. households received a foreclosure filing in May, the highest number since RealtyTrac started the report in 2005 and the second-straight monthly record. RealtyTrac monitors default notices, auction sale notices and bank repossessions.
Can we discuss the impact of rising energy costs and general inflation expectations on the decision to rent or buy a home? What are the risks of waiting to buy?
Mortgage rates are ticking upward. And with heating costs skyrocketing, renters are at the mercy of the energy-efficiency levels of the house they are in.
My heating costs have almost doubled since I went from owner to renter 2.5 years ago. I believe that even though home prices may drift downward, if I owned the home I’d have control over investing to make it very energy efficient and potentially save more in a few years than what is at risk in the house price. I am in a cold climate, and in a non-bubbly areas (though lots of foreclosures).
I think a more important variation on this question should be, when will the energy costs associated with a living space (purchase or rental) start being truly reflected in the price?
Perhaps the reason why we don’t see much discussion of this sort is that IMO the energy performance truly sucks in about 98% of the existing homes. In other words, there’s no meaningful differentiaion to be had. Older homes, though usually better built and sited, have substandard insulation. Newer homes, though better sealed and insulated in their walls, are too large and are rarely designed and sited to take advantage of any natural heating and cooling.
I’ve noticed this too. I moved into an older (1890’s) house from a newer one. As far as insulation goes, the newer home was easily the winner. The older house that I moved into doesn’t have any insulation at all. On the other hand, the older house only needs heat three months out of the year and air conditioning for one month out of the year to stay comfortable. In the newer home, however, I was only able to stay comfortable without climate control for maybe three months out of the year. Is this a pretty common experience?
I’ve wondered this too.All the newer homes, condos, and townhomes I’ve looked at in the past few years, one of the first things I ask the realtor/salesperson is “what is the insulation rating in the walls and roof? are the windows low e? What kind of roofing material do you use?” etc. In other words, I ask what the energy efficiency of the homes are. In many new home developments most of the sales people don’t even know the answer to that question, and it requires them digging some paperwork out of a file folder somewhere in their office to find the information. (Coincidentally, I’ve found many brand new homes by the big name builders often have insulation equal to that of a poorly constructed apartment building).
And if I look at any homes older than say, 15-20 years, I estimate in my mind how much it would cost to rip out and reinsulate the house, among other things to make it energy efficient, and add that onto the purchase price.
What can I say, I’m picky about these kinds of things. I’ve lived in a 2000 square foot brand new energy efficient house that had lower utility bills than my first non energy efficent apartment that was only 800 square feet. And with the rising cost of energy, you bet I’m taking into account how much the utilities are going to cost me in addition to the housepayment.
And I’ll agree, one of the downsides to being a renter is that there are only minor alterations you can do to the property to make it more energy efficient. (Like the current property I’m renting from, I did some minor, temporary, removable improvements to the property to make it a little more energy efficient, all of which improvements I plan on taking with me when my lease ends. But there’s no way I’d go so far as to add new insulation, windows, etc. to improve my landlord’s property).
but it should be easier to upgrade the insulation on an older house than to re-site or significantly downside the newer construction? Plus, I’d worry about maintenance/repair costs on a lot of the newer (almost by definition, crappier) construction…
The unknown is inflation. What will the Fed do?
Rates are going up as soon as the FED thinks the markets are stable…The question is, how high of a unemployment rate are they willing to accept…
The most important unknown is the future cost of utilities & other necessary expenditures to maintain a home. Since I bought my home in 1980 the cost of the natural gas to heat it has risen 500%+. These costs will go up. No one knows how much. “Energy efficient” calculations always include the cost of the energy vs. the cost of the improvement, so are just a guess.
Ok so it’s not a housing thing, but you guys are fun and smart about this stuff.
For all the Cassandras out there, when and where in America do you predict the first violent protests over rising fuel costs like have been seen in other parts of the globe? What will be the spark to ignite them?
Prescience can be a real pain in the ass. Ignorance may truly be bliss….
False entitlement fuses have been laid all over Los Angeles, the city of the automobile…
Add in a public transport system that might be the worst of any 1st world city of size, and there’s your spark.
Americans are entitled to cheap oil from other countries
“For all the Cassandras out there, when and where in America do you predict the first violent protests over rising fuel costs like have been seen in other parts of the globe?”
“False entitlement fuses have been laid all over Los Angeles, the city of the automobile…”
“Add in a public transport system that might be the worst of any 1st world city of size, and there’s your spark.”
I doubt that it will be Los Angeles. Southern California has long had some of the highest gas prices in the country. Los Angeles riots over other things, but typically not gas. Even with the supply disruptions in the 70’s coupled with high prices I don’t believe there was civil unrest due to gas.
Public transportation in Los Angeles has improved tremendously in the past 20 years. There’s now an extensive commuter rail system that extends into Orange County, the Inland Empire, the Antelope Valley, and Ventura County. Los Angeles also has a subway and light rail system. The options are far better than in the 70’s, though there’s still much room for improvement. One could look at Houston, for example, as a large city that has far fewer transit options.
If there is civil unrest due to gas, I’d guess it’s more likely due to supply disruptions than prices and more likely somewhere east of the Rockies. It should be noted that some of the greatest outrage from higher prices following Katrina was in these areas, though those higher prices were no higher than those on the West Coast.
There’s a lot of economic pain in the pipeline, but I’m not sure it’s high gas prices that will incite civil unrest or be the most significant contributing factor if it does.
Lost Angeles will be ground zero.
Next question.
And we are a tad rusty @ revolting en masse, how much longer before scenes like these on the home-front?
http://www.thisislondon.co.uk/news/article-23494001-details/Gridlocked+cities,+empty+shelves+and+bloodshed+as+fury+at+soaring+costs+spreads+around+the+world/article.do
I live in LA and I am hoping for gas to go to $6. I realize this will affect the prices of virtually everything I buy but LA needs a good cleansing. $6 / gallon will be a good start. Traffic is already easing up. The last time we had a good cleansing here was the Northridge earthquake in 94. I think the gas and real estate collapse will cause much less “pain”.
I fear for the future of freeway chases, L.A.’s version of Nascar.
It is starting…
http://www.msnbc.msn.com/id/25139749/
‘Kiss My Gass’ Protest Kicks Off In Los Angeles
LOL what a waste of time and energy.
I fear for the future of freeway chases, L.A.’s version of Nascar.
Indeed.
Between the repeated attempts to crack down on taco trucks and the potential extinction of televised freeway chases, some of LA’s most charming attributes are highly endangered.
I don’t know why, but the local truck stop (last gas for 100 miles in two directions, 60 in the others) is crammed to the gills lately with trucks hanging out, just idling, even in the daytime. It seems odd, can’t explain it.
Maybe they’re hiding from something.
August - East Coast. It’s the heat & humidity. People get tired, sweaty and cranky.
Aside from obvious Bull/Bear argument where is the market likely going.
Ex; I was impressed Txchick predicted the market would run-up instead of down as I had expected a couple weeks ago. With Lehman, MS, and most of the big houses seem to be on the brink I am so surprised how well the boys are keeping the game going, yet…..
“If total investment grade and junk bond defaults approach historical norms of 1.25% in 2008, then $500bn of these default contracts will be triggered, resulting in losses of $250bn or more to the protection-selling party once recoveries are inserted into the equation.”
Pimco’s Bill Gross quoted in the January 9, 2008 Financial Times
….which led me to believe MBIA, and Ambac would exacerbate this when they were downgraded….yet the party seems nary to slow.
Which ‘boys’ are you talking about? I assume you mean the government policy makers who realize the stock market is one of the last intact pillars of optimism?
Didn’t you notice how Mr Market cannot figure out how to rationally price in expectations for future Fed interest rate hikes?
We are in the silly season. There are few trades worth risking moneys on in the US markets. The problem is not getting in, the problem is getting out.
I’d like to hear from posters in the midwest on the weather. Iowa is getting even more rain, Cedar Rapids is underwater, and NBC had a weather expert pointing out that the Mississippi is getting close to flood status, as it did 15 years ago, potentially affecting cities all along its banks. Add to that the corn and soybean crops that are affected. Is it too late for farmers to replant underwater fields? Insurance costs must be huge. It seems to me this is another huge set of problems being thrown into the mix.
As somebody that was travelling all around Southern and Western Minnesota in 1993 I can tell you that the mere thought of a repeat of that spring and summer brings chills. Minnesota became The Land of 1,000,000 Lakes. Got corn?
Bad weather must be due to global warming…
“Bad weather must be due to global warming…”
C’mon GS. Those disintegrating polar ice caps is a normal thing. Honestly!!! lmao.
“Bad weather must be due to global warming…”
Gee, and all this time I thought we Americans pissed the gods off.
The whole world is experiencing weather like this, too little rain over long periods of time, punctuated by deluges that come all too quick.
It’s playing havoc with our ability to grow enough food for over 6 billion human beans…
The best possible investment opportunity is yourself, your well-being.
I’d be putting away a minimum of 1 year’s worth of food.
(ignore if you don’t eat)
This just posted on Bloomberg, this threatens housing,businesses, infrastructure, insurance costs, and food prices. Man, troubles seem to be arriving in battalions.
Thunderstorms Threaten U.S. Midwest Again, No Letup in Flooding
June 13 (Bloomberg) — Thunderstorms, record flooding and potential tornadoes threaten the U.S. Midwest again as rounds of severe weather move from Oklahoma to Wisconsin.
The National Weather Service issued thunderstorm warnings for areas of Illinois, Missouri, Oklahoma, Arkansas, and Lake Michigan. Several tributaries of the Mississippi River are overflowing their banks, and record flooding has hit areas across the Mississippi Valley. A brief spell of relief should come with drier weather tomorrow, before new storms arrive the next day.
And here in California, farmers are having to abandon crops & orchards, due to a lack of water…
“Farmers pace the dusty fields, eyeing their almond trees and grape vines, both heavy with unripe fruit, trying to decide which ones to allow to die. “It’s like which kid to keep and which to get rid of,” Coburn says.”
“At noon on a Monday, the small town’s streets are full of pick-up trucks and vans that would normally be in the fields this time of year. Butch Fleming, who owns the town’s Ag & Industrial Supply, gestures at his empty store, which he says is usually packed with customers. “Farmers don’t know what they’re going to do — you don’t just let orchards die,” he says, adding that business in his store is down at least 25% from last year because people are afraid to invest in equipment. Fleming has had to lay off all of his full-time employees. Down the street, Jack Minnite, owner of Jack’s Prime Time restaurant, says: “We all are going to suffer from this. And it will escalate from the community to the state to the nation.”
http://www.time.com/time/world/article/0,8599,1814128,00.html
When they stop demanding hugely subsidized water allotments for all the rice paddies (!) and cotton fields down there in what is essentially high desert, maybe I’ll start to take all their bitching about the drought more seriously. Last time I looked, somebody’s brother-in-law was still flooding the sectional fields to grow rice for export to Japan, while down the aquifer a bit, Pyramid Lake is showing sandbars all around and LA is starting to look a bit dusty around the chrome rims.
Maybe some of these entitled so-and-sos should think about planting more ecologically appropriate crops along more reasonably allocated water district reservoirs, and realize that maybe Ahnode is actually seriously standing up to this cartel of thugs and demanding more rational land use and fees per acre foot of public-owned water in the best interests of the state. (Did I just write that?)
Lad, I believe you were the one who recommended “The King of California” about the Boswells and their water empire amassed at the expense of the California taxpayer. Even more relevant now than when it was published, it’s a great read for anyone interested in how water rights/political sleeze kings really work in this state…even now
There is a good reason much of California’s ag industry is quietly relocating to Mexico. Cheaper water, cheaper land, cheaper labor, and cheaper distribution runs. The water aristocracy (at least,) may be about kaput. But it’s been transitioned too…to all that nice real estate development you see throughout the central valley.
Eating is just a bad habit. You can give it up if you try.
When we in the USA eat, we’re taking food away from the less fortunate in other parts of the world.
If you stop eating, think of how much you’ll be saving financially.
If you banked the amount of money you blow on food each day, even at these revoltingly low Bernanke rates, you’d have quite a “nest-egg” in no time.
It’s said you can’t be to rich or thin.
How about finding out?
Eating, like renting, is throwing your money away.
And, corrected for inflation, the value of the dollar is as good as ever!
All jokes aside, Des Moines is being evacuated.
Oh man, jeezlouise! Craziness.
And out here it’s still chilly, more like I’d expect Colorado mountains, not Utah desert. Good thing, I guess, since my landlady took the cooler.
The southeastern half of Iowa essentially is toast for the remainder of 2008. By the time the water drops and the soil dries to depleted muck, it’ll be late June. Too late to replant.
Southern Wisconsin is a mess. Same with southeastern 1/3 of Minnesota. Parts of Indiana are underwater, but the effects are fairly localized.
Thus far, the vast majorities of Illinois and Michigan are unscathed. Missouri also is in decent shape. Ohio, too.
Relatively few crops are grown in the floodplains of the Mississippi. Definitely fewer crops grown than in 1993 (when the last regional flooding disaster occurred).
Fortunately, the worst possible scenario (Iowa and Illinois underwater simultaneously) hasn’t happened. Corn and soybean fields in Illinois are in excellent shape.
Pity those folks in Cedar Rapids. They’re really screwed. Of all the natural disasters that can occur, I think a massive flood would be the worst….in front of earthquakes, tornadoes, hurricanes, etc. To not be able to even assess the damage for upwards of 2-3 months to get the insurance process moving…unreal. At least you can stand on your property and search for valuables following other types of disasters. With floods, that’s impossible.
sales are picking up in my hood 22151 ,but the foreclosures and short sales sit there= wierd
are the banks committing big time balance sheet fraud?
“…are the banks committing big time balance sheet fraud?”
Ben mentioned last Saturday that lenders are not repossessing homes after owners stop making payments and vacate them, putting the homes into ownership limbo status. I personally don’t understand this, as it would seem that when the owner defaults on contractual obligations, the collateral would automatically go into the lender’s asset column.
Any insight the accountants in the virtual room can offer would be appreciated.
One does not own collateral they are given until they legally exercise their remedies against such collateral to take ownership thereof. They should be marking down the value of their mortgage notes however. Until they are sold, however, valuation is just a game.
“sales are picking up in my hood 22151 ,but the foreclosures and short sales sit there= wierd
are the banks committing big time balance sheet fraud?”
Same observations in NY. And same question. Although I say that none of the 300-600k price range is moving and I’m not sure those that people that are buying are getting adequate financing.
I think that there are short memory spans/knowledge of history on numerous topics covered on this site. While most commentors are extremely knowledgeable from the nuts and bolts on math, finance and housing, they are somewhat naive when it comes to the history of America, politics, immigration, labor,capital, etc.
In order to understand how we get out of this mess, we must look at how we got here. The problems we are in didn’t happen over night. Some of our problems goes way back in our history.
I believe that this screw-up has been beaten to death. I suspect anyone who has followed this site for any length of time has heard most arguments/facts indicating that we are in a crisis. We need to move to the next phase in the process…solutions.
Just a thought…
First we need to help get the rest of the world past the denial stage of the housing bubble stages of grief.
As we are headed off into never-never land, in terms of experiencing what is about to happen, solutions to unanticipated problems seem far, far away…
In the meantime, enjoy the ride.
This is history as it happens. I liken it to World War 2 in many ways, but instead of people dying by the millions, fortunes are dying by the trillions…
With the hindsight of time, I can look back and piece everything together very nicely and make sense of it all, but imagine being on the home-front in 1942-45, trying to figure out what was really happening?
Aw yeah, we’re living history alright. And to think, they said history died when the Berlin Wall fell. Nah, it just took a breather.
The momentum of this thing is huge, but I’m still keeping an eye out for that single watershed event that will take root in the collective conscience as the point of no return. Not the cause mind you (as there are many and this is already well underway), simply the common cultural reference point.
Kind of like the Wall Street crash of the GD? It didn’t cause the Depression, but most think it did.
Look, ma, it’s a black swan.
If the government doesn’t think dropping prices is a good thing, then homeowners can always pass their homes down to their kids as the primary method of acquiring real estate if prices never decrease substantially from where they are now.
It would have the effect of guaranteeing squabbling amongst heirs, lack of mobility to get better jobs, making divorce and inheritance law even more complicated, and allowing homes to rot for years without making energy saving improvements.
On the plus side, you would see people staying more in urban centers, keeping neighborhoods from becoming too blighted, and a decline in energy and mass transit costs for communities.
what are you buying ?
even gold is scking
Stocks up, gold down — buy stocks! The stock market always goes up…
June 12, 2008 6:30 AM
Obama Pays Bail Money
Three poster children for irresponsible lending and borrowing have taken center stage in the debate over the housing bailout.
By Stephen Spruiell
The resignation of James Johnson from Barack Obama’s running-mate selection team capped off a great week for that odd coalition of renters and responsible homeowners who think the housing bailout working its way through Congress is a horrible piece of legislation. If you listened long enough to the lawmakers who back this bill, you’d probably come away convinced that 90 percent of the people currently facing foreclosure were suckered by predatory lenders — an uncanny bunch whose business model was apparently built around lending money to people too poor to pay it back.
Until this week, that predatory-lending narrative dominated the housing conversation. But in the past few days, three poster children for irresponsible lending and borrowing have taken center stage in the debate over the housing bailout.
How many Congressfolk would be direct beneficiaries of the Dodd-Frank mortgage rescue?
Only 100%
More like 170%. Most would go for second helpings.
Just a market observation-
10 year treasury yield is at a 6 month high, 30 year at a 9 month high. Definitely a reversal of the downard trend and hopefully it won’t stall this time. If there’s one sure way to squeeze the life out the housing BS, this is it.
How about the REAL number of forelosures as opposed to the fake numbers? I stayed at my son’s in Granada Hills this week (Southern Ca) and took a drive around the area. Many, many properties with FOR SALE signs but (because I know the signs like overgrown front lawns, trash around the front door, etc.) I saw AT LEAST double possible foreclosures but no FOR SALE signs. Obviously, the realtorwhores, banks, etc, do not want to really flood the market with hundreds of FOR SALE signs or should I say thousands of FOR SALE signs, they seem to be feeding the properties into the pipeline slowly. Makes one wonder what’s happening in other places. How much mis-information is out there. The NAR not telling the truth? Say it isn’t so!
Weekend Topic Suggestion:
We’ve heard all about Florida, Nevada, California, Michigan, etc. I would like to hear more about “small town America” or perhaps small city America. Here in N. Louisiana we appear to have more houses that are far and away more expensive than locals with the income to buy them. This seems to be true no matter where you look. How many $350K houses can N. Louisiana support … or rural Texas, Missouri, Arkansas, Alabama, Colorado, Georgia, etc. for that matter?
Whereas ten years ago a house in Metairie in southeast Louisiana would go for $100K it is now listed $250K. Peoples incomes have not gone up 1.5 times in that period. So, there must be an adjustment at some point. It will be small pain but really widespread like a skin rash vs. brain cancer analogy to N. Georgia vs. California.
Roidy
That’s my problem - the $100K 10 years ago houses listing for $250K+ now. My salary is nowhere near that much higher in 10 years. What to do? What to expect?
What to expect? The same thing I expect in Maryland, sadly - for things to drag out forever and beyond before housing prices return to something sane.
Here, housing prices have doubled to tripled since about 2003 or so. Salaries, naturally, have not come close to keeping up, so housing at 5x median household income is rather common, with almost nothing available in the 2x to 3x median household income range unless one wants to life in the violent pit of Baltimorgue.
I don’t see it getting better for a long while, if ever. This area is just too full of stupid DINKS and other people who will gladly burn 2 professional incomes or more on absurd mortgage payments. They may not have any savings, but their 4,000 square foot McMansion will be the envy of the neighbors! Argh!
“What to expect? The same thing I expect in Maryland, sadly - for things to drag out forever and beyond before housing prices return to something sane.”
The rate things are turning, we may not have as long to wait as we thought in the slower areas.
Colorado’s been slow, but now it’s turning fast, and I mean fast, like in just the last few weeks things are crashing down. It’s just not in the MSM yet much. Believe me, we’ll see things come down fast from now on.
A topic I guarantee NO ONE will like: What is the future of mobile homes? I like to harass the local affordable housing lobby because I know they’re a bunch of phony bastards. Most the low-income I know go for trailers - either renting both trailer and lot, or owning the trailer, or buying land they could put one on. But this is getting harder and harder to do.
There hasn’t been a new trailer park in or near town in decades. The ones that remain are worth their weight in gold if they’ve been kept up. A couple palces went up catering to 55+ and the units have to be just so - all doublewides in the one near me. Most parts of town they’re zoned out of course, and they’re getting covenanted or zoned out in a lot of rural areas too. There was a real crunch here finding trailerable lots here about 10 years ago and I think it’s still pretty hard. Lot rents 250-300 now.
During our mini-bubble, rental trailers were being scraped off lots and were replaced with these two-story rowhouse type things in the $160k-180k range, on narrow lots. Lots of flips and rentals going on there. Where are the owner-occupants these were targeted for?
I know that mobiles depreciate like a bomb. I know they’re declassé and some the hoods they’re in are tacky and crime-ridden. I know that they have their own peculiar maintenance problems especially in winter.
But why does the affordable housing lobby insist on stickbuilt for everyone when it’s more practical to use mobiles? I think there is a complete disconnect between the nonprofits pushing for affordable-sustainable-urban-density building in town and the people who are supposed to benefit from these efforts.
“I know that mobiles depreciate like a bomb.”
As do other structures. Turn off the heat and stop maintaining them for 2 years and watch them depreciate in a hurry.
I agree mobiles are practical, but the popular prejudice against them is overwhelming.
I visit the very small town of Sharon ND (IIRC) in the summer of 2006. Like many small ND towns the population has fallen a lot and many businesses have closed. Driving through the residential area I came across a large RV, like an Airstream, parked on an improved lot among the houses. It was obvious that an entire residential lot had been remodeled to accommodate this single RV, with a paved pad, patio, mailbox, landscaping, etc. The setup looked very nice & was an asset to the neighborhood. Zoning in 99% of this country would forbid such an arrangement. I imagine the owner was a retired former full time resident of Sharon who lived far to the south during the winter.
I was thinking this morning that RV dealers could improve business by marketing them as, “your home away from …. [your foreclosed] home.
I know someone posted here recently they knew of some people moving into their RV, due to foreclosure.
Seriously — “RVs — like a mobile home, with the wheels still on!”
I reiterate…not gonna buy an RV until they get over 30mpg. The industry needs to recognize the new reality vis-a-vis gas prices.
I just purchased a new one and I can easily justify the gas cost…
that won’t happen anytime soon..
Air resistance is what eats fuel. At 60mph the average car requires only about 10 hp overcome wind resistance to cruise down a level road at steady speed. The unused 200 horsepower is held in reserve and used for acceleration when needed.
(There are other minor resistances like gear/bearing friction, tire-road friction, etc, but these are insignificant compared to wind resistance.)
Even so, that 10HP eats up the fuel, and the average car might get only 25-30 mpg at freeway speeds on level roads, and car-aerodynamics is far superior to a motorhome’s with it’s relatively large frontal area.
Anyway, a motorhome would need good aerodynamics.. It’d need to be shaped like a fish to reduce wind resistance. If you’ve seen those old tear-shaped trailers with pointed tails, that’s the idea behind the shape.
Unfortunately, it’s not the ideal shape to be inhabited by furniture and beds and people and stuff.
I have a pickup with a nice self-contained Lance camper, well insulated, too. I could pull my car behind it if I had to and then just setup camp and seldom actually drive the RV, just use my car. This is pretty common, esp. with the larger units.
The p/u gets about 15 mpg with the camper on it, fully loaded. I keep thinking I should sell it, but for some reason it seems like it might come in handy, if not for me, for someone else, maybe, who knows?
..I just purchased a new one and I can easily justify the gas cost
i’m still shopping. Fuel costs are no big thing but justifying the overall cost requires using it quite a bit..
For a $100K rig, money saved in hotel room cost at $100 a nite, it’s a thousand nights.
That’s like everyday for 3 years straight.
Twice a week for 10 years.
5 days a month, every month, for 16 years.
One 30-day vacation, once a year, for 33 years.
Hey Joey….You just focused on Hotel…How did you get to the Hotel & back..?? Many other good reasons, food, convenience, time management etc. but I hear ya when it comes to the initial cost…
I’m talking fuel efficient technology. They need a hybrid RV that is designed to achieve maximum fuel efficiency.
If we landed on the moon, we can design one that gets at least half the mileage of an electric car or prius..
Absolutely, there are lots of good reasons for the RV.
Home cooking.. or ease of providing a particular diet. 5,000 strangers haven’t slept in your bed. Pack all the clothes and toys you want. Come and go whenever and wherever.. carry a gun. ( i hear the motorhome is considered an actual home, and can be defended as such.)
From what i’ve read about it, RVing can be a lifestyle choice, or maybe an expensive hobby, and the cost comparison is kinda irrelevant anyway.
nosingleone, that’s what i’m talking about too.
A gallon of gas has only so many BTUs in it. A motorhome has certain minimum requirements for utility.
There are ways around the low fuel efficiency. LostinUtah spoke of one.. a truck-camper style.
There are also hard-sided pop-up campers and trailers. (the pop-up reduces drag) And there are tent campers and car-camping, which is a whole other way of camping.
But a motorhome is a home. Some have crystal chandeliers and 2 fireplaces, granite countertops, etc. They require a real engine, maybe not for cruising straight and flat, but for hills and things. And they must be box-shaped because we are cubic beings… and most rigs need to have all sorts of things sticking out, which further increases drag.
If you want to design a low-drag motorhome, go for it.. I’m positive you could do one for yourself
But for a production model, someone will have to invest lots of money to build them, and people will have like it enough to buy it… and the average people interested in RVs are not necessarily short on money and desiring to save on fuel cost.
joey, I agree that there are only so many BTUs in a gallon of gas, but how efficiently they contribute to powering the drive axles depends on the design of the engine. From what I’ve read, only 15% of the energy per unit of fuel goes into actually moving the vehicle. 62% gets dissipated as heat.
Other things to be factored in besides aerodynamics is weight, tire pressure, and ease of maintenance. From what I can tell, those factors haven’t been optimized on consumer models because there has been no demand for it. RV companies have put more money into making shiny pretty interiors than they have into R&D.
absolutely right as far as what RV consumers demand.. they must have style and comfort and power to pull the boat/car. Demand is of utmost importance if we ever expect to walk into a showroom and see a fuel efficient RV for sale.
Improved, efficient engine designs would probably filter down to RVs eventually.. right now, the best of them have the diesels that long haul trucks use.
btw.. simply put, weight / mass only matters when accelerating. Climbing a hill is a form of acceleration.
For instance, on heavier vehicles, tires press down harder and have a larger footprint, which adds a bit of friction , but the amount is still tiny compared to wind resistance.
Two vehicles with vastly different weights but of the same aerodynamic profile will get near the same fuel milage at steady speed on level ground, all other things being close to equivilant.
I know that is counter-intuitive but it’s true.
As an example, i still own a genuine moped.. a 49cc Honda with pedals.. rescued from a junkyard. It gets only 79 mpg @ 30 mph with a 145lb rider. But make no changes except to encase the bike in an aerodynamic fiberglass body and gas milage doubles.
Why? Because a motorcycle has the aerodynamics of a truck.. literally. Truck = motorcycle.
Look at the modern alternative fuel / hybrid vehicles. Aside from engine tricks which offer barely enough power on demand and almost no power the rest of the time, the main differences are that the bodies are aerodynamically efficient. Weight reduction is another important factor with these small cars because of city driving.. (lots of time spent accelerating, and weight matters a lot there).
This stuff has been a hobby of mine for a long time. I’m very interested in fuel economy. I’ve build electric bicycles from the ground up, including the electronic controlls. I don’t know it all but i understand most of the basics and i keep track of industry developments.
“It was obvious that an entire residential lot had been remodeled to accommodate this single RV, with a paved pad, patio, mailbox, landscaping, etc.”
I always thought it would be kinda cool to have a mobile development where you could buy a small lot and not just rent. It must not work out financially else we’d see more of that.
They are available Montana….Look at the resort areas and you will find many of them…You buy the pad and then pay HOA dues for the common area and property tax…Some are reasonable and others are quite expensive…Its a great way to go if you are a destination R/V’r…If you like to bounce around alot (Like Me) then buying the pad does not make much sense…Much better to just pay daily rent…Check out some R/V magazines and you will find more info…
There are places here in California, where you can buy the lot with the mobile home. I believe Santa Cruz has a mobile home park with that type of set up.
There’s several around the Sacramento area; I have a friend who has a house on one. (It’s the newer sort of mobile home that feels just like a stickbuilt.)
Not a bad idea, if you’re a quiet type like her.
SFgal….These are set up for R/V’s only…Some have golf courses, club houses etc…Think of a retirement community for R/V ers and you get the picture…
scdave,
I stand corrected. It’s in Capitola.
Here’s a link for a mobile home with the lot:
http://www.mlslistings.com/Reports/Main.aspx?propertyId=828414
scdave,
Here’s another link to a co-op park in Santa Cruz:
http://www.mlslistings.com/Reports/Main.aspx?propertyId=842411
Hey Ben, how about a thread looking at Alaska and Hawaii (it has been awhile), or maybe even Guam, Puerto Rico, American Samoa, Marshall Islands and/or the Virgin Islands? They probably deserve to have their day in the sun at least once a year.
Has anyone posted this yet?
What to do with unused construction equipment and lots that won’t be developed for another decade.
http://www.digthis.info/
Will August be the time for another downward leg for financial stocks as credit crunches even tighter?
Which banks and industries have yet to feel or report the effects of the crunch? How does the energy price spike play into this?
We should discuss which one of us wanna-be writers is going to pen the ultimate bubble novel.
If we pooled our resources and made it a joint effort, we’d come up with something good.
I think Ben’s got it covered, isn’t he writing a book?
And reading this blog would be a fascinating account for future historians, IMO.
Don’t know about Ben’s plans…
some of the regular posters here have an insider’s perspective: mortgage brokers, appraisers, a builder or two…I could offer some play-by-play from a realtor’s marketing department. (But I didn’t have access to the money shenanigans, I wasn’t in sales. Anytime I asked my boss a relevant question about a builder’s finances she started speaking in tongues.)
I say we appoint Olympiagal as the writer-in-chief.
I will be in charge of illustrations.
i’m in charge of food and booze.
How to handle costs associated with acquiring a rental house?
There’s no way I’m handing a realtor $3,000 (one month’s rent) in fees for 15 minutes of “work.”
“Here’s the kitchen, here’s the bathroom, here’s the yard, now give me $3,000.” Not a chance.
Just saw a nice rental house at a decent monthly rent, but the realtor fees are a non starter for me…
Thoughts? Suggestions?
Depends on which area of the country you’re in. If you’re located somewhere feeling bigtime bubble pain, they’ll be more willing to negotiate. Otherwise, just continue looking for a mom and pop situation with no realtor involved.
Remember, even in a renting situation, the realtor is working for the seller (owner).
In my locale, the rents on properties “waiting out the slump” are already too high, then add the realtor’s fee to the owner, and it’s jacked up another 10 per cent. I just signed a lease on a really small place in a building whose owner is an acquaintance of mine. He gave me a slight break in the rent, and a month to month lease. It’s not a palace, but then again I’m not dealing with a bunch of extraneous fees.
Ben, are you taking photos of posters so we can see who we’re attacking in our posts? If so, where do we send them?
Lost, you can send your photos of you and your housing market to me via ben or:
annmoorman@att.hairnet.com
leave out the hair part.
LOL!!! That’s a big can do, will send a shot, hope others do, too.
Hey Montanans,
Better bag the party. We still live in a non-disclosure state.
Thanks to Dept of Revenue Director Dan Bucks, sales prices must now be written on the realty transfer certificate filed with the MT Dept of Revenue. But the realty transfer certificate is not public info.
“The legislature finds that the demands of individual privacy outweigh the merits of public disclosure.” http://law.justia.com/montana/codes/15/15-7-308.html
According to one of the property assessment experts at the Dept of Revenue, in the last 10 years, there have been some court cases challenging this, but the court has always upheld the Code. So, for prices to become public, the legislature would have to change the Code.
Even without disclosure, things are not looking too peachy in MT these days. According to the Missoula Org of Realtors, median prices in Missoula fell more than 6% in April and more than 3% in May, with volume down 17% in April and 31% in May (all figures are compared to same month last year). http://www.missoularealestate.com/index.php/fuseaction/market.main/ID/0d95f240
Not that anyone really knows, short of having a crystal ball or calling yourself an economist, but whaddya think:
70’s style recession?
OR
Depression?
There are a lot of opinions out there about this, how to make sense of all the predictions?
SF, it feels so much worse than the 70’s, let’s just call it a 70’s style redemption.
My feeling is property and everything related to it, like jobs in supportive industries, and especially as an investment, will be dead for at least 5 years.
Due to the tremendous pains taken to avoid disaster, I think the banking / financial system will survive but will take a serious hit. The weak, the small and any of those lenders that went deep into mortgage related stuff will suffer greatly or go under. As an industry it will be stagnant at best, for years to come.
Of course, the general economy will be affected. There will be less lending, less spending all around and therefore less business investment. Growth will be slow. Big business deep pockets will live off their fat. Small businesses will fail.
Although economic shrinkage is possible and seems very likely, we have a lot of untapped capacity. If people put their minds to it and cooperate, anything is possible. However, being naturally lazy we have to be driven to it by some sort of urgency or hunger.
I lean toward the depression side. Not depression as in Great Depression, but depression as in a contraction of financial activity.
The financial expansion we’ve enjoyed for the past 25 years ended last summer with the credit freeze up. That’s when this contraction began. This contraction will continue until the excesses has been driven from the financial system.
This means money circulating in the economy will be taken out of circulation by the banks because the banks need the money to rebuild their depleted reserves, reserves depleted due to writedowns. This will continue until all the bad loans have been written down. This will take years.
Because the banks will relentlessly taking money out of the system any money remaining in the system will become more scarce thus more valuable. The billions of dollars of government cash infusion into the system (some call them money drops) will hardly put a dent into the unknown trillions of dollars destined to be taken out of the system. This means those with money will rule over those without money, or put another way, cash will be king.
Just my opinion, of course.
Big V,
I spent the day looking for the ghettos of o’side. I never found a slum or a barrio. I do know there are places where most people speak only spanish, but i didn’t see any roosters or stray dogs.
No crack houses or street dealers. Now there used to be some street walkers but the cops are everywhere and so are the tourists. With three brand new gigantic Condotels it’s all cleaned up.
Filmstrip show at eleven.
Hey, Ms. Ouro,
(I’m still dazzled, btw.)
Ya gotta remember, Oceanside has The Marines. Competing social elements, one arguably better armed and marginally more accountable. Guess who wins?
Hint: It’s not the roosters.
Ahansen, I have a photo of your son. email me:
annmoorman@att dot net
Does anyone see mass debt forgiveness out there on the horizon?
I cannot imagine today’s young workers willingly paying for boomer pensions, student loans, credit cards, medical care, taxes for social services, inflated housing, food, energy, AND interest on our unfathomable US national debt forever–there’s just not enough income to sustain it all and still live a semblance of a life. At some point (who knows where…empty grocery shelves? Inability to get to work because of fuel prices?) resentment will translate into rebellion and wage slaves are going to make things pretty dicey for the Amaristocracy.
What happens when everyone just says, “The hell with it. I quit.” and walks away from their credit card debt like they now do their upside down mortgages?
We’re already seriously considering letting mortgagees off the hook; forgiving student loans is an obvious next step. So after that…?
Do we all end up working either for the government or a collection agency? Is The System about to go bye-bye?