Weekend Topic Suggestions!
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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Name:Ben Jones
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This calls out for discussion and analysis:
“The statewide median price stood at $339,000, 4.2 percent below April’s level and 30 percent down from the all-time peak of $484,000 in May 2007.”
“Statewide, the price decline produced improved affordability, as measured by mortgage payments for the median-priced property. At prevailing interest rates, DataQuick figured the typical mortgage payment last month for a newly purchased home was $1,569, down from $1,645 in April and $2,266 in May 2008.”
“Adjusted for inflation, mortgage payments are back to where they were in mid-2003,” DataQuick said. “They are 23.3 percent below the spring 1989 peak of the prior real estate cycle. They are 38 percent below the current cycle’s peak in June 2006.”
So what does this mean? Is this capitulation in California? Can you actually buy a home there? Or are very few houses (foreclosures, builders) as yet available at affordable prices? If it isn’t capitulation when? And if it is capitulation, where will it happen next?
Capitulation is underway, but it does not happen in one day.
“Adjusted for inflation, mortgage payments are back to where they were in mid-2003,”
I wouldn’t even bother until I see people talking about the asset price, not howmuchamonth.
I was about to put in an 325k cash offer on a bank owned house asking 369k. The house salvage rep (realtor) told me she already had offers exceeding the asking price (but mine was the only cash offer). Oh Well, the landscape is still rich with howmuchamonth knifecatchers who perceive value based on how much lower the price is than 2005, instead of traditional affordability ratios.
Don’t ever believe verbal assertions by a sales person ,unless your mother is the Realtor your working with ,than ask her to prove it
Nobody loves me but my mother,
And she could be jivin’ too
Nobody loves me but my mother,
And she could be jivin’ too
Now you see why I act funny baby,
When you do the things you do — B. B. King
Very true, but I take them at thier word and walk. No sense in competing with knife catchers or dealing with lying realtors!
The real bloodbath will not begin until interest rates revert to historic norms. When and if that happens, watch out below.
I agree stucco….Significantly higher interest rates will take “everybody” down..Even the niche strongholds…
The ten-year note is on a flyer this week. Now, granted, these mortgage rates are based on LIBOR, but you can’t tell me that ramping treasury rates aren’t going to “trickle down” to the bankers’ back room in London.
“The real bloodbath will not begin until interest rates revert to historic norms. When and if that happens, watch out below.”
Then cash will truly be KING!
Interest rate potential of going up ,might be the biggest reason
any knife-catchers are out buying right now . You know how sales people are …”Buy now before the interest rates goes up ,or we run out of foreclosures ,or land ,or government bail-outs .”
I am going there to CA for 2 weeks I will look around and see if its as bad as Phoenix. San Diego then to Thousand Oaks.
Does it also matter what you are getting for your money? I mean, the prices may be down, but considering that houses were going for 500K or more in places like certain bad parts of Long Beach or Compton, you’re still not getting a good deal.
What houses are being priced at these 300K figures? Decent sized houses in decent neighborhoods or tiny crap-shacks in “the hood”? I should think that would be an important factor in the equation.
What most people do not understand is that even with a 30% decline in the median home price, it is still cheaper to rent than buy in most areas of California. When you add up the mortgage payment, property taxes, maintenance, insurance, and an association fee (if it is a condo), renting is generally cheaper than buying. The places in which it is not cheaper to rent than buy are mostly places you would not want to live.
The error people make is assuming they are getting a great deal just because a price drops 25% or 30% from the peak. Just because a price is down 25% or 30% from the peak does not mean the price is a good deal.
I predict that prices in California will continue to decline until the cost of renting exceeds the cost of buying in most areas. Bubbles usually overcorrect, and it should be cheaper to buy than rent in any case because you can move more easily when you rent. The bottom line is that prices in California are headed to 2001 levels, and they will probably get there in 2010 or 2011.
Keep the popcorn popping,
Red Baron
So true Red! When you start adding Mello-Roos and bond measures to your basic property tax, you find that the government has successfully circumvented Prop 13. Between taxes, insurance, and homeowners fees, you have a pretty healthy monthly payment even if you pay cash for your house!
But the real question is: what is the median household income for the state vs. the median housing price?
I bet a quick check of that will reveal that housing is STILL grossly unaffordable in California and most Bubble areas, and that doesn’t even factor in vanishing jobs and runaway inflation.
The median income in California is $55K–the median house price in California is $339K. In other words, the median house in California is currently 6.2 times the median income!
To be reasonable relative to income, the median California house would have to be about $165K, not $339K.
Keep the popcorn popping,
Red Baron
The first inkling I has of the bubble in housing came way back in spring ‘03 when my neighbors sold their Palmdale house and moved to Tehachapi. The price they got astonished me at the time, $187K !!!
I’ve since realized that that home and the house we sold in Dec. ‘04 for $320K are essentially right at the median for that zipcode. That zipcode’s median for May was a cool $199K.
It won’t surprise me a bit to see those houses back at the price I paid new in 1991, $132K.
I did my monthly analysis in yesterdays Cali thread if anyone wants to look it up.
Oh, and my point?
Palmdale median for that zip is around $45K, even today, so that $132K in 1991 was just about right for that house and it will be again.
This is years out in the making. The bottom won’t be visible until a few years after 2020.
Corporations write off assets with a shrug (and a wink to investors)–they know what “things are worth.” Individuals can’t conceive of doing that–they don’t just “give it away” until the bills become insurmountable and lenders stop extending free unconditional money.
Is it really insurance if the “insured” event has already occurred?
No Mortgage Break For Non-VIPs
Rick Green
June 20, 2008
…
Sen. Dodd chairs the Senate committee considering a bailout of the home loan business that will cost taxpayers hundreds of millions (billions???) of dollars — and salvage Countrywide’s riskiest loans.
Countrywide is reportedly under federal investigation. This was one of the leading companies recklessly pushing the subprime mortgages that sparked the home foreclosure and loan crisis. This was the company where if you were an “F.O.A.” — friend of chairman Angelo Mozilo — you could get a sweetheart deal.
A Dodd spokesman told me the senator has no plans to publicly release additional documents and information related to the transaction.
…
Dodd should tell us everything about his VIP deal, release all documents and start banking in Connecticut while he’s at it.
This time, state Republican Party Chairman Chris Healy has it right.
“You are the head of the banking committee. You are about to light the fuse on a $300 million bailout … and nothing went off in your head?”
“This isn’t a Shaw’s card or a Blockbuster card,” Healy said. “This is a VIP deal for your mortgage.”
Which brings up the other thing about VIPs. They think they can do whatever they want.
I really have to stop reading this stuff. If you see the BS being farted out by Pelosi and Reid, you would too. Really, I can’t look at it anymore. It makes me physically angry.
But all the bullshit spewed by Bush, Paulson, Cheney and McCain is fine by you.
Nice war, housing market and strong dollar you got there.
This all looks like fancy variations of insider trading. Isn’t the SEC supposed to be prosecuting this stuff?
It makes people who usually vote for democrats mad too.
Yup. Agree with you on that one sfbubblebuyer.
This crapola makes me agitated, too.
You won’t catch me defending Dodd — or the Spineless Wonder Twins Reid + Pelosi.
With a Congressional plan in place to pass $300 bn in taxpayer-funded mortgage guarantees into law circa July 4, BOA’s timing of this purchase could not be better.
BofA Sets Closing Date
For Countrywide Purchase
By JAMES R. HAGERTY and VALERIE BAUERLEIN
June 20, 2008; Page C2
Bank of America Corp. aims to complete its planned acquisition of Countrywide Financial Corp. July 1.
…
Bondholders have expressed anxiety over whether Bank of America will take responsibility for all of Countrywide’s debt. Bank of America has declined to detail how Countrywide bonds will be handled, but bondholders appeared to welcome the news of a planned closing date.
On Thursday afternoon, investors were agreeing to pay $195,000 annually to buy protection against a default in $10 million of Countrywide bonds over the next five years. Earlier in the day, that same protection cost $240,000 annually, according to Phoenix Partners Group. The lower cost indicates that debt investors think Countrywide is less likely to default on its debt.
–Glenn R. Simpson contributed to this article.
How about this little gem that Dodd slipped into the housing bailout bill:
Payment Card and Third Party Network Information Reporting. The proposal requires information reporting on payment card and third party network transactions. Payment settlement entities, including merchant acquiring banks and third party settlement organizations, or third party payment facilitators acting on their behalf, will be required to report the annual gross amount of reportable transactions to the IRS and to the participating payee. Reportable transactions include any payment card transaction and any third party network transaction. Participating payees include persons who accept a payment card as payment and third party networks who accept payment from a third party settlement organization in settlement of transactions. A payment card means any card issued pursuant to an agreement or arrangement which provides for standards and mechanisms for settling the transactions. Use of an account number or other indicia associated with a payment card will be treated in the same manner as a payment card. A de minimis exception for transactions of $10,000 or less and 200 transactions or less applies to payments by third party settlement organizations. The proposal applies to returns for calendar years beginning after December 31, 2010. Back-up withholding provisions apply to amounts paid after December 31, 2011. This proposal is estimated to raise $9.802 billion over ten years.
It’s an astonishing expansion of Federal intrusion into the privacy of citizens. Even goes after eBay’s PayPal, Amazon, and Google Checkout transactions.
Next up: using cash will become a crime.
A “sweetheart” deal would violate the standard of independence if it were an auditor who had the deal. Isn’t it funny how “The Regulators” aren’t held to any where near the same standards? I guess we need some more regulators to regulate them. Additional tax revenues should cover it. lol
Dodd, Mortgage Bailout Bill Under Fire
By Mark Impomeni
Jun 20th 2008 9:00AM
The Senate is debating a huge mortgage bailout bill this week amid fresh allegations that certain high-powered senators and former cabinet officials received preferential treatment from mortgage giant Countrywide Financial on their personal loans. Sen. Christopher Dodd, Chairman of the Senate Banking Committee and chief sponsor of the mortgage compromise legislation, received two below market loans from Countrywide in 2003 under its “friends of Angelo” program. “Angelo” is Countrywide CEO Angelo Mozillo. After first denying it, Dodd has admitted that he knew he was receiving special treatment on his loans as a “V.I.P.,” but continues to deny that he sought any deal that would benefit him financially.
But Dodd’s troubles are growing, and may eventually wind up killing the mortgage bailout bill he co-authored with Alabama Republican Senator Richard Shelby. A new examination of Dodd’s campaign contributions reveals that since Dodd became chairman of the Banking Committee in 2007, he has received over $70,000 in contributions from Bank of America and its high-level employees. Bank of America recently bought Countrywide Financial and all of its existing loans. Since Countrywide held the most sub-prime mortgages at risk of default, Bank of America is potentially exposed to huge losses, unless a government bailout moves those risky loans off Countrywide’s balance sheet. Dodd has written such a bailout, and some are now questioning whether his low interest loans and Bank of America’s campaign money influenced that legislation.
BOA should of wrote in their purchase agreement of Countrywide
that it was subject to the Housing Bill passing …he he he .
I would like to see a topic on negotiating, gray economy and frugal living skills — this would be a great way to aggregate everyone’s ideas about how to get good deals on big ticket items, everyday stuff, bartering, craigslist, garage sales, make it yourself and so on.
I’ve already started writing about that, but from the point of view of public policy, as I now see no hope for public services given the generations in charge. What we have is a deal between those who don’t require public services and don’t want to pay taxes (today), and those who produce public services and want to give less (years of work) for more taxes.
Work til you die instead of Social Security, and just be nice to your kids.
In addition to dealing with you in old age, and working four jobs per couple, they’ll be homeschooling after all the education $ go to pensions.
You can hope for medical marijuanna and legal assisted suicide, cause you won’t get Medicare.
I’ve already switched to bicycle from public transit.
Any suggestions for when the police stop policing?
What you really need to watch out for is when they start replacing unionized officers with contractors. Can we say repeat of the 19th century?
Be your own police! Stop being such a wimp and get a gun fer chreisssakes!
In a similar - but more farfetched - vein, will rising gas prices, rising food prices, and the collapse of exurban housing help to build real communities? Neighborhoods that are tighter-knit, geographically as well as socially?
It seems a though a lot of people on this blog expect blood in the streets, but I haven’t heard of that sort of thing being commonplace during the Depression. Relatives have told tales of living in co-ops and communes (not the patchouli kind), where people shared skills and resources to survive.
My mother has told similar stories.
“I haven’t heard of that sort of thing being commonplace during the Depression.”
It was not. I recently read a book about life during the Great Depression and what struck me the most was how people really did what they could to help out others. From meals given to hobos to strangers buying the newly unemployed a drink at the corner bar… people seemed genuinely sorry to hear when a relative or neighbor found themselves out of work. They didn’t barracade themselves in their house hoarding their food, guns, and gold; as miserable as the times were, they still went to the park, to the movies, to those marathon dance contests, etc.
As much as I take a bit of satisfaction in seeing the REIC and greedy FBs get their comeuppance, if we did end up in another GD scenario, given modern day attitudes… we’d be really, really scr#*@ed.
“if we did end up in another GD scenario, given modern day attitudes… we’d be really, really scr#*@ed.”
I’m not so sure. As a witness to 9/11 and post 9/11 NYC, people can and do come together. I know my ‘hood in Flawda would. We might have to cap a few suckas, but we’d make it.
And I counter your 9/11 with Katrina and the Rodney King riots, not to mention certain cities after a major sports victory.
The moral philosophy of this country (if there is one anymore) has changed drastically since the GD, and the results will be ugly.
I think the difference, dude, is that many Katrina survivors and Rodney King rioters had no concept of working for money, possessions and time, and therefore didn’t care one iota about looting, burning down buildngs, robbing taxpayers by taking federal money illicitly, etc.
Yes, I’m speaking about typical welfare bums.
Nogte that I’m ALSO speaking about the offspring of well-to-do, yuppie parents who have no real concept of the value of work, money, possessions and time either. Hence, it’s way in addition to Katrina and Rodney King that there’s cars being overturned and street riots following sports championships at the professional level. Following the Chicago Bulls victories in the 1990s, there were hoards of suburban rich kids destroying property, etc.
If you need not work to obtain money, possessions, etc., then there’s remote chance that you’d understand the sweat and hard work of others.
Compare Katrina, Rodney King and professional sports “celebrations” against how hard-working Midwesterners are responding to floods.
I think that is the equivalent of blood in the streets to most Americans.
God forbid you have to work for anything or share anything or not drive your fancy car that says you are better than everyone else.
This is the same era where people shoot each other parking spaces or just for the “thrill” of it. Or, there was that event a few weeks back where a guy got run over by a car and was left dying in the street as people just walked by. Nobody cared - why call 911? That would require effort. And these events don’t even figure in the negative effect of gangs, etc. on our culture.
In post-mind Amerika, life is cheap and most people live for the moment and don’t care anything about anyone else. If a real economic crisis hits, expect rampant crime, not tight-knit communities.
Dude, it turned out that like 5 people called 911 almost immediately after it happened. Actually, the multitude of calls can sometimes cause a problem, because the dispatcher will choose to speak to one person and tell the others that someone has already called, with the expectation that the first person is a ‘first responder’. However, the first person may have been a concerned motorist who left the scene (now, leaving the scene, maybe not the nicest thing to do, but whatever).
At any rate, you can’t force anyone to provide first aid, and as far as I’m concerned, that’s a good thing.
Oh yeah, and whoever did the hit and run deserves jail time.
I like Frank’s topic and am also interested in exploring the notion of community - and its part in a life that’s satisfying and meaningful as well as sustainable and sensible, perhaps frugal.
It seems most of us live outside the conspicuous consumption box. Does being part of a community or communities provide satisfaction in life, and provide more social, less commercial goods and services? Do those things make it easy to see the banality of the “keep up with the Joneses” lifestyle?
Some of the regular discussions about mobility for work, providing a home and stability for kids, retirement make me think about how a relationship to a community / communities factors into one’s satisfaction in different circumstances.
“It seems most of us live outside the conspicuous consumption box. Does being part of a community or communities provide satisfaction in life, and provide more social, less commercial goods and services? Do those things make it easy to see the banality of the “keep up with the Joneses” lifestyle?”
I thought I could hide out from it in Brooklyn, but to the extent it could it followed me here.
The problem with exchanging social goods and services is that they require time, which is more scarce than money for most Americans. Of course, they are working those two jobs just so they can afford to purchase what used to be social goods and services.
Take one idea I had — providing a dinner for some less well-off member of the community, or sharing cooking with another family in a series of joint dinners. Who could guarantee they wouldn’t have to work late that day (especially with a deadline and time wasted on blogs)?
If the community (and dys-community) topic is pursued, I would like to resurrect the article from the (Florida) post of the Saturday before Memorial Day. It was about a development that had promised community in its promotional literature, but had gone bust and the FBs were whining and b1tching about how they hadn’t gotten the “community” that they had been promised.
The comments in the original article that Ben linked to reflected a controversy in the development about one woman (a faith healer, as it happened) having too large an angel statue on her porch. Some thought that the HOA standards should be enforced, others thought that she should have her angel.
For me, that was probably the most interesting article I have encountered here.
This America is a lot different than that one. We probably won’t have a full on governmental (civilizational?) collapse, but I don’t think it’s unreasonable to believe that there will be quite a bit more social strife this time around.
Also remember that back then people didn’t have a whole lot to begin with, so losing it wasn’t a monumental event in their lives. This populace is much more “soft”, with an entitlement mentality that will morph easily into a ‘taking what’s mine’ criminal lifestyle.
But one that that will be the same- a communal co-op will be necessary. With protection being a primary motivation. A single family won’t be able to last long on it’s own.
To have a true community, there needs to be common ground. Everyone talks about excessive mobility and long work hours being the cause of the lack of community spirit we see today. However, the elephant in the room that no one will talk about is that most middle class and lower middle clas neighborhood have become too culturally diverse or morally bankrupt for its inhabitants to have true connections. As an example, I used to rent a condo in a middle class area. Each building had 4 units. My neigbors in my building were Forrest Gump who worked at Korger bagging groceries, a Korean family who had a penchant for cooking something that smelled like fried dog, and American “Single Mom” who left her teenaged daughter on her own each weekend to have drug parties while Mom visited with different men. In the building across the street, there was a Brazilian lady who ran up enormous debts then moved back to Brazil, a lonely militant lesbian who’s main goal in life seemed to be trying to look like the Adams Family’s Pugsly while being despondent over her lack of a love life, a Russian lady with a drunken child beating American husband, and a Vietnamese lady. I tried very had to be friendly to everyone–Having dinners (Except with the Koreans. No dog for me), going together to the community swimming pool, etc., but it honestly was a struggle, and it was difficult to really get along with people who were so different. I think that if we do have a depression, the different backgrounds and lack of personal values will make it less likely that neighbor will help neighbor.
Good points Kid Clu …….I have always expected that if we go into a Big Depression ,that the government would provide food for hard-luck cases and perhaps temporary shelter ,like they do after a Natural Disaster . I believe this sort of government -backed relief will be needed if the economy gets that bad .IMHO tax money should be saved for the true needy Americans in the future ,rather than bailing out the lenders and American dream investors and fraudulent market-makers.
Time at last to short commercial real estate
June 17, 2008, iTulip
by Eric Janszen
A combination of macro economic and credit market factors have finally made commercial real estate (CRE) ripe for a multi-year decline. It’s been a long time coming.
We are in the early innings of a CRE bubble correction that will be compounded by recession. Vacancy rates will rise, cap rates will rise, prices will fall. The time is ripe because sellers are still hanging on in typical post-bubble fashion, refusing to acknowledge that buying commercial properties at a 2.5% cap rate when the historical average is 9% was driven by speculative fervor, that prices are still too high and are falling, and that the game of pass the CRE hot potato among PE firms using securitized debt or commercial bank lending to finance the transactions is over.
Was there an actual CRE bubble? Were people flipping hospitals, office buildings and golf courses? I don’t recall seeing evidence of that.
Two factors that may cause CRE’s decline are the credit markets and a possible recession… definately agree. But a whole lot of other un-RE-related markets and industries are at least equally at risk due to those economic factors.
So, while the “RE” in CRE might make it appear at first glance to be more vulnerable than those others, i wonder if it is.. or why it should be.
A local contractor told my husband the only reason they’re building so much CRE here is because the projects were planned and approved 3 years ago. Which supports with the financing requirement to build or default which I read about here…whole floors of suites are dark and unleased.
In general you didn’t have overbuilding in CRE, except for retail in some markets (the usual suspect — Texas!). Vacancy is not likely to soar, and rents never spiked to unaffordable levels.
But you did have a big run up in office building prices in prime markets relative to rents, based on assumptions of massive rent gains that aren’t going to happen. The building prices are going to adjust down — it’s already happening.
Valuations in the 2nd & 3rd tier markets for commercial real estate is just ridicules…The quality and quantity of the income stream is “numero uno”…Molly’s nail salon and Cup-A-Joe (Even if Anchored) does not hunt in a rising interest rate, rising unemployment recessionary environment…These type of properties have been chased by “Hot Money” for the last several years very similar to housing speculation…These secondary markets in the past used to carry a risk premium…I can easily see 30-40% losses if they need to sell…6% CAP rate in Visalia California is just STUPID !!!
bingo
don’t forget the “outlet malls”
those were big busts in the 80s
Heh heh, the pointless LaZBoy Furniture store that opened on SW 34th St 6 months ago is “going out of business forever.”
Mmm, I love me some popcorn.
Time to buy more SRS.
I can easily see 30-40% losses if they need to sell
If they need to sell. But these CRE owners aren’t strawberry pickers or young sweethearts who bit off more American Dream than they could swallow.
They’ve generally got very deep pockets.
About 10 years ago some nearby ag land was rezoned commercial. Someone built a ton of flat commercial buildings.. Paved roads, utilities, etc. The development was nice single story brick buildings with tile roofs… huge tinted glass windows all around. Classy entrance ways. I guess they were meant for offices or similar.
A local supplier was near them so i drove by often. After the buildings sat empty and vacant for a quite a while, i noticed something was occupying a couple of the buildings.. What looked like bales of hay was stacked to the ceilings. They had been leased for storage. That lasted well over a year.
Point is that commercial owners might not be in immediate jeopardy if a project doesn’t work out as planned. Aside from having the staying power to wait it out, they are generally sophisticated, experienced long-term RE investors.. and most likely have preplanned alternatives to selling if things get sour.
Joey,
Those type of centers are mostly institutional, REIT’s, TIC’s LLC’s etc….Yes most having staying power depending on how long they have to stay ?? However, that does not change the fact that they purchased at a certain rate of return, with anticipated increases of that return and that investment is now underperforming…That effects the value of the whole portfolio which then effects the price a new entrant would be willing to pay….What I was really talking about is the small strip centers that have sprouted up all over…The same rampant speculation that occurred in residential occurred here…These buyers are not “deep pockets” they leveraged up because the expectation was they will just continue to go up in value even though (I Repeat) they have tenants like Molly’s Nail Salon & Cup-A-Joe…These tenants are NOT quality OR quantity…They are the first to go and when they do these small strips will be halved in valuation…They will likely revert back to replacement cost, if that…
Ummm . . . remember the late lamented electronic stores (publicly traded in some cases) and other retailers that went belly up and filed Chapter 11? Then they reject the leases leaving what looked like an anchor tenant gone. Remember Macy’s bankruptcy? We haven’t even seen the half of that yet.
How old are you Joey?
I can remember developers going belly up left and right in 1989 - 1993. Two of Dallas’ biggest - Trammell Crow and Craig Hall for instance. Crow barely made it out alive, Hall went bankrupt and came back. Last summer he got out of the CRE market and proclaimed it over. Given the cycle he experienced last time and then this time, I give that a lot of credibility.
Chasing Craig Hall and his companies for the RTC were Dallas lawyer full employment act for a long time.
This is nothing like that era in commercial. Overbuilding was rampant then. What happened then in commercial happened this time in residential.
Your correct when we look at new construction WT….However, we have seen a tremendous increase in commercial space due to outsourcing, downsizing, anemic growth and underutilization of space since 9/11…Not new construction but increase in available space all the same…….
http://investing.meetup.com/447/
Stock market Investing club Meetup Group
Santa Monica California
JUNE 21st at 10 am.
Dow headed south of 10K?
This is not fun. Nine years ago I wasn’t thinking much about mortgage fraud, terrorism, energy costs, and the outsourcing of American jobs. Y2K was the buzz before 9/11, and Saddam was that Iraq dictator who cut business deals with American politicians. The Middle East was seen through pictures in the National Geographic.
Life is a like a roller coaster ride with yelps of fear and joy. While I’m hoping for more of the latter, I realize that no matter what we do, the ride comes to an end.
Any predictions on what’s the next big thing?
Any predictions on what’s the next big thing?
Credit card blowup.
Yes, I think Credit Card Debt&Defaults will become a much larger issue, in the not to distant future. As HELOC lines are reduced and closed off debt junkies turn to Credit Cards or any other avenue that keeps borrowing alive. Reducing ‘lifestyle’ spending is a last/forced occurrence for most people.
Meanwhile, the credit card pushers are still at it. I’ve been working on redesigning my business website, and I’m expecting to hear from the subcontractor who’s doing the back-end programmer.
Well, the phone just rang. And it wasn’t my programmer.
Instead, it was yet another one of those credit card processors’ telemarketeers, trying to get me to sign up for their plan.
Well, truth be told, I shut down my merchant account (the bank account that a business needs in order to take plastic) last year. Reason: My clients prefer to pay by check. So, it didn’t make sense to keep that merchant account going, just on the off chance that someone will lose his or her checkbook and want to pay me with plastic.
When I shut the merchant account down, the bank (Chase Paymentech) told me that they’d get to it pronto-pronto. And they did — after a few months of continuing to charge me a fee for it. When they finally got around to closing the account, they whacked me for a $500 cancellation fee.
I fought them on the $500, and I did get that amount refunded. (Thank you, Better Business Bureau, for actually being helpful. For once.)
So, when the telemarketeer of this morning launched into her pitch, I said, “I don’t accept credit cards anymore. It’s too expensive.”
Predictions for the coming depression:
The S&P 500 will drop to about 750, where the dividend yield will be 4% and stocks will be a reasonable investment again rather than just a speculation.
Many regional banks will fail in the next few years. Just watch the news on Friday afternoon, which is when the FDIC likes to swoop in.
Equity holders in other large banks–Wachovia and Washington Mutual come to mind–will be wiped out as the banks are bought by other banks and most of their employees are laid off.
Keep the popcorn popping,
Red Baron
Winter heating costs set to soar; 60 million Americans heat with propane. Pig men doubling the price of nat gas. Frozen water pipe repair should be the next big industry.
Bio Terror….
Hobo nickels.
Self-sufficiency. Getting to know your neighbors and helping each other. Simplicity. Valuing people for how well they do something, not how much they make doing it. Valuing each other for who you are inside, not how you look outside. Taking care of our kids and animals.
Nah, just dreaming.
Ahhhh…The good old days….
Speaking of this as a weekend topic, I would be curious to hear how people in different areas of the country view their neighbors/community/societal values and how that affects how they deal with this energy/economic crisis.
Jon Stewart did a hilarious piece on Beverly Hills and how they’re “suffering” because people don’t buy a new Bentley every year, and people can’t afford plastic surgery every 3 months.
I am a little bummed that I LOVE so cal, yet, undeniably, there is a lot of fakeness and materialism in society here, that supposedly doesn’t exist in places like Iowa, were people are more deep and true to each other.
I have grown very used to it however, so I probably don’t even know to the full extent what I am missing.
I just hear about it from red staters who come here for a few years and then move back home.
(although I would like to meet people who are more rooted, more interested in discussing books and philoposohy, more interested in the environment, less interested in prices of purses . . .and they are here, but you have to work harder to find them, as in take extension college courses, etc.)
in any case, do you think there are areas of the country where people will more easily pull together to the “old values” to get through this thing, or have we all just lost those values to the worship of the SUV and Juicy Couture purses?
It’s hard to say what people will do in a crisis, but we just moved into a new neighborhood (newly developed) and we have about 10-12 neighbors or so (rest of the houses yet to be built - not expecting them anytime soon). We’ve met a couple of them so far and they are all very nice. We’ve even discussed what skills we all have in case anyone needs help with anything… like building a deck or computer work, cooking, etc. Our neighbor to the right has already offered to watch our pets while we’re away or let workers in if we need her to - and just keep an eye on things. Nice lady, homeschools her kids. Several of us exchange tips and information regularly on where to go locally for good deals, things we’ver heard about the community or what kinds of quotes we’re getting from contractors or landscaping people, etc.
I would like to think if push came to shove, at least our block would band together and help one another. We all seem like fairly reasonable and down to Earth people who aren’t afraid of a little work.
What will people do in a crisis?
Depends on how bad the crisis is.
“What will people do in a crisis?”
“Depends on how bad the crisis is.”
Think Donner Party.
Read “The Road” but be prepared to keep reminding yourself…..”its only a story.”
‘…people who are more rooted, more interested in discussing books and philoposohy, more interested in the environment, less interested in prices of purses…’
Lots of people like that where I live! I live in a GREAT place.
re: people interested in interesting things…
My first professional job, I moved to Oshkosh WI and didn’t really fit in (except that I liked beer).
Then I went to the public library and met the reference librarian. Through her, I met a great social circle - varied and diverse. What they had in common was that they were all really interested in something, had ended up at the reference desk, she found them interesting, and drew them into the group.
That was way pre-Internet of course.
I had some very good neighbors before moving in March. One neighbor lived there as long as us, almost 10 years. We are good friends now. He and I used to share yard implements all the time. I had a wheelbarrow that got old, he took it apart and took it to a guy he knew who powder coated it. It was better than new. He owned a fertilizer spreader which he kept in my garage (I had space for it). We both used it. We helped each out all the time. When the wife and I left town, he took care of things for me, fed the dogs, mowed, checked the mail, etc. I did the same for him. There was also several other sets of neighbors during that period that came and went and we were friends with and did the same sort of stuff. Still are friends with all of them.
There was a time when there were 4 of us (households) that knew each other’s garage codes. Also, for almost 2 years we had a round-robin weekly dinner among three houses. Every Monday, one of the three houses would cook for everyone. When it was your turn to cook, we all came to that house. We did that every week for almost two years. It finally broke up when one couple moved and then my wife and I moved.
I’m not sure if it’s a regional thing, or a urban/rural thing. I lived in a subdivision in a medium size town (about 50k people now) but over all it’s still a rural tradition type town. I haven’t really lived in other places so I can’t say what they do elsewhere.
I suspect that it was partly a function of the financial class. This was small houses, 1100 sq.ft. Blue collar neighborhood, working folks. My aunt lives in a fancy subdivision in Little Rock. 500k and up for those places. They have never met any of their neighbors.
Getting to know your neighbors and helping each other.
Yeah great, so that my grasshopper neighbors can get to know that I’ve worked like an ant. Which ending to the fable do you think is more likely? The Disnified version, or the original Aesop version?
OK, community! We’ve got the guy who doesn’t come out except to shout at the kids to get off of his ****ing lawn.
Every community needs one. ; )
Hey Hip, got your package (Maxed Out), thanks a bunch!
Will send the audio version of Maxed Out to the first to contact me, as soon as I’m done with it. You can contact me w/ your info via my webpage (click on my handle).
Cool.
Nine years ago I was already thinking about terrorism & energy costs, I had already retired.
As far as the future goes, this sign says it all.
How about a topic on the new law enforcement actions this week? I see reports from all over the country.
‘The indictment unveiled this week against 11 North Texans suspected of mortgage fraud was one of dozens of similar cases handled by federal authorities in recent months, the U.S. Department of Justice said Thursday. The cases, grouped under the name Operation Malicious Mortgage, have resulted in 144 mortgage fraud cases in which 406 defendants were charged, convicted or sentenced since March 1.’
‘Sixty people were arrested on Wednesday alone, including suspects in Chicago, Miami and Houston. In the Dallas-Fort Worth area, eight people were arrested to face a 51-count mortgage fraud indictment. Three others were also named in the indictment; one turned himself in Thursday and the other two are expected to do the same.’
‘Law enforcement officials said their stepped-up focus on mortgage cases aims to combat problems that have grown out of the risky lending practices prevalent until the mortgage market collapse started last year.’
‘Officials have identified 10 “mortgage fraud hotspots” nationwide in California, Colorado, Texas, Minnesota, Michigan, Illinois, Ohio, New York, Georgia and Florida.’
‘In the Dallas-Fort Worth case, the indictment accuses the 11 defendants of profiting by obtaining mortgages based on inflated sales prices. Prosecutors allege that the defendants recruited straw buyers to purchase the homes, then let the loans go into foreclosure after making just a few payments.’
‘To people who have committed fraud or are contemplating doing so, FBI Director Robert Mueller said: “We will find you, you will be investigated, and you will be prosecuted.’
‘The dream of many Americans, most of us, is to some day be able to own our own home,” said Richard Roper, U.S. attorney for the Northern District of Texas. “Unfortunately, opportunists and fraudsters have derailed that opportunity for many Americans now.”
I’d be quaking in my boots right now if I’d committed mortgage fraud, on any level.
And part of this topic could be to explore how this new level of fraud exposure reflects on what some legislators/politicoes want to do with bailouts. More and more light shed on the fraud to the general populace will make those bailout/relief actions more and more suspect - I would think so, anyway.
Question: why now, why not sooner than later, Mr. Mueller?
You wonder how far it will go. It appears that millions of people lied on mortgage applications, and millions of brokers abetted this behavior. You wonder if it is a “go for the big fish” policy, or if they will start hauling in little fish to get them to flip.
There aren’t enough jails for all these folks.
The two guys they got in Utah were little fish, to the best of my knowledge.
Yes, it seems like that to me, too. I read some news articles on them, they seemed to be just average more or less middle-class guys who lied about their loans.
I’m a little confused. I don’t see Utah mentioned in the article Ben posted. (?)
The articles I’ve seen seem to involve people doing something a little more brazen than just overstating their income on a mortgage application. My supposition would be that if a borrower who overstated his/her income is actually performing effectively on his/her mortgage, there won’t be much scrutiny. In that way, maybe the whole business is designed to keep those who lied on their loan applications from walking away when they’re underwater!
I posted the link to the article and some excerpts in the Bits Bucket, re. the Utah guys. Different deal.
You sometimes need little fish for bait for the really big ones.
And people don’t want to pay for the public employees to work these jails, right WT? pension obligations and all that.. I think that confiscation of future earnings and community service would best serve the public. That hedge fund manager who faked his death, rather than serve jail time is the perfect example. Why would a judge think that a guy looking at 20 years is going to stick around, while on bail? If you know your giving him heavy time, then keep him in jail. These big-time, white collar crime guys have millions stashed overseas. Give him a year and then make him pay 30%, of all future earnings, and we the people would receive some justice. Watching him ski in Switzerland, on 20/20, does’nt work for me.
I have notice that the local police here in my small town in Northern Utah are in “revenue enhancement mode”. They seem to be everywhere and always writing tickets.Yesterday I went to the store and when I left I saw a policeman pull over a young driver….. ten minutes later when i returned he had pulled over another driver in the exact same spot! Before I always observed them in a passive mode… ala sitting on the corner. It seems to me that maybe tax revenues are down this spring and the local police force now needs to earn their pay.
“revenue enhancement mode”
yeah…We are getting our newest version here in Cali starting July 1st….Hands free driving on the cell phones….This is going to dwarf the amount of tickets that were written from the seat belt law…We may have just solved our 15 Bil dollar budget deficit or at the very least, have now fully funded the California Peace Officers Pension Fund…
really want to talk about the elephant in the living room there?
the number of minorities and foreigners who are involved in this fraud and being indicted
“How about a topic on the new law enforcement actions this week? I see reports from all over the country.”
Wake me up when Sen Dodd of Connecticut and the Tan Man of Countrywide get their FBI “knock-Knock”
I would like to see this topic — the Malicious Mortgage program — discussed on here, too, and I’d especially like to see posters naming names. Six from the same company here in San Diego got busted yesterday. They were involved in several inflate-the-price to-get-a-larger-loan-amount deals in which the various parties split up the extra cash.
It’s on the front page of today’s signonsandiego (SD Union-Tribune).
Posted on: Friday, June 20, 2008
Mortgage fraud unusually high in Isles
FBI claims schemes here outpacing those in Mainland markets
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By Peter Boylan
Advertiser Staff Writer
Lax lending standards and the high cost of housing caused an increase in mortgage fraud in Hawai’i during the past few years, outpacing the majority of Mainland markets dealing with similar schemes, according to the FBI.
http://www.honoluluadvertiser.com/apps/pbcs.dll/article?AID=/20080620/NEWS01/806200396/1001/LOCALNEWSFRONT
My dream is to be able to dance like Fred Astaire. Unfortunately, that dream is derailed for now.
Where’s my check?
Sorry. I sent all my money a couple days ago to the poor RE professionals who lost the “fortunes” they had built up.
I’ll have a garage sale this weekend and send you the proceeds Ronin. You DESERVE your dream.
Given how systemic this was how in the world could you find and prosecute even a small percentage of the fraudsters..
406 defendants??? They had a loan for fraud called a “liars loan”….there should be 50,000 defendants by the end of the year. Will they really go after the j6p, or is this just another smoke screen.
When they start going after the j6ps, I’ll know they’re serious. Until then, its about political posturing and calming Wall Street.
Another smoke screen…they are only going after the worse offenders evidenced by the bust in Beverly Hills…this guy “Joseph Babajian, 54,” from this article http://www.latimes.com/news/local/la-fi-lehman31-2007dec31,0,4612702.story has been slimey for a long long time, shaking his hand gives you a strong urge to find the nearest shower…He’s not the only one on that side of town or in that office for that matter…that deserves a closer look…
Someone call 911, I am addicted to this HBB!!!
Internet addiction is a ‘clinical disorder’
By Andy Bloxham
“They suffer four symptoms: They forget to eat and sleep; they need more advanced technology or more hours online as they develop ‘resistance’ to the pleasure given by their current system; if they are deprived of their computer, they experience genuine withdrawal symptoms; And in common with other addictions, the victims also begin to have more arguments, to suffer fatigue, to get lower marks in tests and to feel isolated from society.”
http://www.telegraph.co.uk/news/uknews/2152972/Internet-addiction-is-a-%27clinical-disorder%27.html
So, is anyone exhibiting the four symptoms?
Hmmm. I had a bit of a party here last night and I DID excuse myself at 1 a.m.-ish to just take a ‘quick peek’ at the HBB, where I noted with pleasure that there was already a bits thread up. Whew. My hands stopped shaking right away when I saw that…
But I can quit, anytime. Really. No, really. I mean it.
I still eat. Hey it’s time for lunch - off I go…
I’d call 911, but I don’t know the number, sorry.
(OK, it’s Friday…)
Yea, where’s the “11″ button?
Now that the FBI is finally turning it’s attention to the National Real Estate Crime Syndicate, how far and wide will they cast the net? Will they collar perps at the local level, wide and far? Will Pinocchio Lereah and Lyin’ Larry (fun)Yun be indicted? They certainly ought to be. For this individual, I demand they be brought before a gran jury.
How about a discussion of the “forced lifestyle center” - for example, this discussion in Massachusetts.
http://www.boston.com/realestate/news/articles/2008/06/19/big_dreams_for_downtowns_delayed_by_sleepy_economy/?page=1
I couldn’t imagine being excited about moving into a forced lifestyle center that featured the following stores:
Verizon Wireless (you might go there once every two years)
Mattress Giant (maybe once every five years).
A museum dedicated to the 19th century straw hat factory (I kid you not).
A bit OT. I was in Charleston, SC (daughter went to college there) doing the usual tourist things one late summer afternoon. At the old market down town there was one stall selling sraw hats and baskets. Two older ladies were sitting near-by making these things by hand. I talked to them for a while, they said they learned this from their parents who learned it from theirs, etc. They also said they made pretty good money but could not talk their children into even think about doing it, their kids had rather do McJobs even though they made less.
Their work was beautiful, my wife bought a couple of baskets that we still have.
those baskets are works of art. The kids are nitwits.
McJobs come with a uniform and the illusory promise of someday making assistant manager.
“The FBI arrested 400 people for real estate fraud”.
What a joke. There are not enough prisons (if they ever get jail time) in the USA, Mexico and Europe combined to house the number of people who were involved in fraud and deception in the real estate mortgage scams. It isn’t going to happen of course because of the NAR’s powerful (pay off for politicians) lobby in Washington but legislation needs to be brought in to control the realtors. POWERFUL legislation with some teeth which would include massive fines for deception, mandatory jail time, confiscation of their property, etc.
Who gets hurt in a run on shadow banks?
WEEKEND EDITION
Brokers threatened by run on shadow bank system
Regulators eye $10 trillion market that boomed outside traditional banking
By Alistair Barr, MarketWatch
Last update: 2:37 p.m. EDT June 20, 2008
SAN FRANCISCO (MarketWatch) — A network of lenders, brokers and opaque financing vehicles outside traditional banking that ballooned during the bull market now is under siege as regulators threaten a crackdown on the so-called shadow banking system.
You would think that before Senate/Congress passed any bills that they should get more of a handle on the true causes of the housing crash IMHO.CountyWide has such a huge faulty/fraud mortgage default rate that this is a crime problem at this point . The politicians need to answer the question on why can’t the borrowers pay loans they took out during the boom,and why did the market crash in such a extreme way, and why did the foreclosure rate skyrocket ? Why were borrowers incomes inflated so much on loan applications and why were appraisers forced to hit the mark or starve ? The real answer is that it was a loan crime ridden speculative bubble in real estate in which the lenders breached their duty to prevent fraud and liar loans ,and the borrowers
committed fraud for whatever gain they were looking for .
The lawmakers make the statement that poor homeowners can’t pay for their mortgage ,but than they don’t explore why can’t they pay for their mortgage .
What is taking place in the market is a correction of a speculative bubble , a widespread real estate Ponzi -scheme that was funded by lenders that breached their duty to prevent fraud .I can’t feel sorry for borrowers that got in on the ponzi-scheme and bought more than they could afford or were fraudulent on their loan applications because their objective was to make short term killings in real estate .
I would be interested in a discussion of “smart growth” and the “new urbanism.” And whether the reality has belied the original intent.
In Austin, “smart growth” has NOT reduced suburban and exurban sprawl one iota. It seems like it just led to the current situation, with the smaller houses and trees of the near-in areas destroyed to construct McMansions (now “green” ones are the thing) and very expensive luxury condos.
And the prospect of $5 gas means that everyone (beautiful people all) is supposed to leave the suburbs and exurbs and buy one of these overpriced condos downtown or near downtown. And really expensive bicycles. And Vespas.
I guess everyone is too special and hip and moneyed to think of things like bus service or carpools from the ‘burbs?
In local observations, I would love to hear about what is happening in the Midwest land grant university towns.