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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I’d like opinions on how the young generation that has never been a through a REAL recession will handle things. Will everybody go back and live with mommy? Will there threrfore be much less household formation than forecast? Will more multi-generational family situations slow demand for new hosuing.
The long term trend has been very strongly toward people living alone or in smaller family units such as single parents with one child. A major reverse of that trend is probably not going to happen unless the whole culture shifts.
The long term trend has been very strongly toward people living alone or in smaller family units such as single parents with one child. A major reverse of that trend is probably not going to happen unless the whole culture shifts.
I think we are undergoing such a shift, and I think the result will definitely be more multi-generational households. Not a bad thing in and of itself, but when the formation of such a households is involuntary, and when the members of such households bring the same individualistic mentalities about sharing time, space and resources into the family that they carry into their everyday lives, I fear the repercussions may not be positive.
It’s already happening. I know quite a few old failed boomers who moved back in to “help” an aging parent. You know, drive them to the hospital and stuff, wrest control of the credit card and checkbook, hire someone to do the cleaning and yard work…things like that.
And probably put the house in their name. That happened to my grandmother.
I guess this generation isn’t called Generation Debt for nothing. If the younger generation is hit by a recession, I think one outcome will be a lesser tolerance for debt. I don’t think that’s a bad thing. With the destruction of pensions, the younger generation needs to save and invest more than going into greater and greater levels of debt.
I think it depends upon who has the resources & the do re mi, in terms of young adults and not so young adults going back home again.
If we are all in the same boat financially, (The Dollar being ruined by hyperinflation, or massive bank failures, or both) that’s the catalyst for fairly widespread generational angst, a war of the ages.
I read a survey the other night that showed 18-25 year olds expressed the greatest fear for their futures regarding the changes in our economy. The fear dissipated w/greater age.
I was curious if this was simply fear of the unknown, fear because they had not been properly prepared to deal in a tougher environment, or fear due to a recognition that their credit burden was probably going to bury them as this downturn gained momentum.
Have 18 - 25 year olds ever been responsible for so much debt going into any other downturn?
I think you’re assuming 18-25 year olds are more aware of macroeconomic matters than they really are. Most of them don’t have a clue they’re going to pay for a huge SS bill a lot of their lives. It seems it’s more of a low-grade fever type thing, they know something’s wrong, but they’re not quite sure what it is…
They may not really understand the SS bill they are facing, but they understand their student loans and they even know that previous generations didn’t have that level of burden to deal with.
I had less than $80K total debt for 4 years of college and 3 years of law school. And I paid off all the college stuff before I started the next degree. Someone doing approximately what I did now would be in the hole for at least $160K and probably a lot more. And I was able to find a livable apartment for $725 a month in NYC so I could pay off the law school debt in a few years.
And that doesn’t even cover the credit card debt.
Son who will be a junior is worrying about student loans already. And wondering how he will manage graduate school.
Teenagers definitely seem to have more anxiety about the future, partially due to helicopter parents who’ve cushioned them from learning street smarts. A symptom of affluenza. However, I have faith that these youngsters will become resourceful. Crisis often has a way of bringing the best out of humans. I’ve noticed that my neighbors are much more friendly these days after having witnessed the snobby boob job/Beemer couple down the street getting foreclosed.
Son who will be a junior is worrying about student loans already.
——————-
What about having your son live with you while attending a local junior college, then transfer to a local college or university?
IMO, there’s more of a push now for kids to attend 4-yr universities in distant places. That’s certainly not good for anyone’s budget.
I guess it depends on your definition of young. This mess will be at a low within 5 years, although it will take a long time to rebuild. The middle aged will be the most hurt as they are the ones maxed out with limited time to recover. The younger ones will find cheap housing and markets in the period of their lives when their incomes are the highest. They are the lucky ones.
“I’d like opinions on how the young generation that has never been a through a REAL recession will handle things.”
My hedgie friend says that because the average age of a trader now is pretty young, that explains why no one knows how to short stocks. Effectively, that is, without succumbing to squeezes. Looks like some OJT is on the way, though.
Perhaps it’s better to look at what happens when a system changes in entirety, as in say Czechoslovakia, where I had many relatives ranging in age from 10 to 65, when communism went away.
In the years that have passed since the Velvet Revolution, younger people were best able to make the switch to capitalism-cum-socialism, while older people set in their ways were the most resistant. My aunt, who is in her 80’s, actually longs for communism, because she was so used to gaming the system, which used to be, “we pretend to work, and they pretend to pay us”.
I think you make an interesting point.
Perhaps the young can get used to a lower square footage, lower energy use, spend what you earn lifestyle, and find it isn’t so bad after all. If they haven’t been living on their own, or living well on their own, there is nothing they will miss. Studies of happiness show that after a given point, well below the average income in the U.S., additional consumption has no effect.
On the other hand, the risk is older people will drain the young via the political system to go on living in the manner to which they have become accustomed.
Thus, older people will long for unfettered wide-open consumerism, no different than my aunt longing for communism…
What a crazy Mad Hatter ride it’s gonna be.
“Studies of happiness show that after a given point, well below the average income in the U.S., additional consumption has no effect.”
Ack! Don’t say things like that out-loud! No, no, NO! The TV is telling us to buy things, so we must! Buy something - anything - or you won’t be happy! Consumption is Amerikan! If you don’t consume like a swarm of locusts, you must be unPatriotic, and you aren’t that, are you?
A member of the Civilian Consumption Corp will be by to speak with you about your feelings regarding a lack of need for overconsumption.
Hehehe…
The Gulag Consumerpelago
“the Civilian Consumption Corp”
“The Gulag Consumerpelago”
Haw! Ya’ll are killing me today.
I only need one or two things, I just need to buy all the other stuff to figure out which one or two that is.
I’m 31 years old and I remember as a kid what it was like during the recession of the 80’s. My Dad was out of work half the time. We drove one really small econo car that all four of us crammed into. We took one vacation a year, and that was to Florida. ( I’m from TN). We grew our own vegetables in three large gardens. Mom actually saved Green stamps. If you filled a book, you could go to Green Stamp stores and buy stuff. She bought a lamp and an Iron with them. We heated the house with a wood stove during the winter and had a huge attic fan for cooling in the summer.
But- I never felt like I was deprived or did without. In fact, I think if more Americans lived like that, they would be better prepared and be able to save more.
I think what’s going to happen is that everything is going to get smaller: Smaller cars, houses, and portions. Homebuilders are going to have to make smaller, more affordable homes. Car makers are going to have to make more fuel efficient, cheaper cars. People are going to have to start using their brains again and become innovative in their ways to save money. It’ll be good for us.
Homebuilders are going to have to make smaller, more affordable homes.
They already do. It’s called “attached product.” And you’re going to live in it and LIKE it too.
Indeed. The concept of small, affordable houses set on a enough land so people don’t have to live jammed next to their neighbors is something most people would like - so they won’t build that!
Nope, instead they’ll shove people in crummy condos and tell us to like it. How else can you hear the sound of ghetto rap thumping through the walls all hours of the day? Or, the joys of listening to the couple next door scream at each other at 3 in the morning? And don’t forget the genius who leaves his garbage in the stairwell to rot in the summer, or his twin who dribbles garbage water down the stairs and doesn’t clean up after himself.
“Attached product” is just a nice way of saying “anthill, with higher living expenses.”
They don’t build the small house/small lot anymore because it’s not as profitable. Nothing is more profitable than making a house with as many empty (no plumbing or fixtures) sq ft as possibe, and nothing is less profitable than using expensive land for unnecessary grass. Result: As many houses made of big empty rooms as possible on the smallest lots possible.
This is the exact opposite of the most pleasant neighborhoods I’ve been in, which is rows of Craftman bungalow ($$$/sq ft) on small-ish lots, or even the 1960’s ranch house neighbohoods with about the same footprint.
It’s apartment living, without any of the advantages of renting. Also a very bad investment historically outside of Manhattan or other extremely space-limited settings.
Sure a lot of big house/small lot going on here. Bathroom windows up facing each other. Not sure I like that either. My first house was on 5400 sf and I loved it, but it was small, too.
Historically, buying a condo in Manhattan has also been a terrible investment.
People forget that the 90’s and 00’s were basically an aberration in the growth of the finance industry over all others.
True confession: With the price of this, that, and everything going up at the grocery store, I’ve cut way back on buying things that come in packages. Such as cereal, which has been replaced by oats bought in bulk at the food co-op.
Lately, I’ve been working on a recipe for salad dressing. Don’t have it down pat yet, but I’m getting there. Am also perfecting a from-scratch pancakes recipe, and the idea of making pizza in a solar oven also tempts me.
I’m having a whale of a good time using my brains on all of this stuff, and I’m not feeling at all deprive.
Did you try roasting oats with some nuts / raisins / cranberries / cinnamon / a ‘little’ brown sugar, on a cookie sheet in the oven. This is nutrition, cereal is one third sugar.
Good salad dressing is quite simple to make.
All you need is a whisk, and some good ingredients.
Make a classic vinaigrette: extra-virgin olive oil, vingegar, sea salt, fresh black pepper.
Or vary it up by adding a squeeze of fresh lime instead of the vinegar, or my personal favorite, half lime, half orange juice.
Thank you! I’m going to try that one.
I think you can also add some egg yolk to the dressing to give it “body”. At least that’s what a boyfriend used in his recipe, which was mighty tasty.
Good for you Slim - invention is 3/4ths of great cooking.
Intrested to know how your solar oven pizza goes - let us know the result.
“Lately, I’ve been working on a recipe for salad dressing. Don’t have it down pat yet, but I’m getting there.”
Golden’s Favorite Salad Dressing
organic olive oil
apple cider vinegar
agave nectar
spices/lots of spices
[don't forget the fresh crushed and chopped garlic--lots of garlic keeps those pesky fleas away]
I agree wholeheartedly. As much as it feels like we’re watching a train wreck, the bursting of this consumption bubble may the cure to what ails us.
As a kid I loved those Green stamp books, it was my job to glue the stamps to the pages. We got a cool stainless Toastmaster that I think my mom still uses. Ah…the days before CostcoPorn.
Probably better than the baby boomers. Sure someone coming out of college typically will have a lot of debt, but with the student loan debt it will be easy for them to get a deferment or forberance with a good reason. If they’re unemployed, they can get an unemployment deferment (which being a deferment causes the government to pay the interest during the deferment). There are even “economic hardship” deferments and forberances which if the economy is bad shouldn’t be hard to justify. Sure the student loan has to be paid off eventually, but it shouldn’t be hard to delay it enough until times are better. (Student loans 99.5% of the time can’t be discharged through bankruptcy.)
I seriously doubt any of them own houses either. Will they have to go back to live with their parents? A lot of that will depend on employment, but not necessarily. What about roommates? Beyond that with all of the excess housing out there, rent should be more affordable not less. It’s not like they’re stuck with a mortgage for a McMansion where the mortgage is worth more than the house.
I wonder how the standard 50% divorce rate will hold up in this country? Will divorce still be seen as a “jackpot” way to get the house and cash payments, or will people no longer want the house (can’t afford it) and/or actually work to live with each other vs. “trading in” spouses every 7 years or so.
The Economy!
Wages are stagnant, prices rising dangerously, government spending out of control, Federal Reserve creation of money and credit out of control, debts of every kind at record levels and one-half the Army occupying the Middle Eastern oil fields.
Gaahh!
Real conservatives will vote against the Republicans.
As the percentage of people in the US who own houses is now slipping back to levels of several years ago, here’s a question:
‘Owning a home lies at the heart of the American dream. Listening to politicians, you’d think that every family should own its home - in fact, that you’re not a real American unless you’re a homeowner. Today, the percentage of American families owning their own homes is no higher than it was six years ago.’
‘But here’s a question rarely asked, at least in Washington: Why should ever-increasing homeownership be a policy goal? How many people should own homes, anyway?’
‘Early last year, just as the mortgage meltdown was beginning, Austan Goolsbee, a University of Chicago economist, warned against a crackdown on subprime lending. ‘For be it ever so humble,” he wrote, “there really is no place like home, even if it does come with a balloon payment mortgage.’
Here’s what I don’t get; how come these guys can’t let this thing find it’s own level?
And isn’t it obvious by now that everything the government does to make housing “more affordable” and give wider “access to loans” has either produced the opposite or been proven a disaster?
(Here’s what I don’t get; how come these guys can’t let this thing find it’s own level?)
That level might be advantageous to younger and poorer people who rent, compared with older and more affluent people who own and want to sell.
I don’t think you can hang this one on the government. It was a cultural phenomenon. And we had a commercial real estate bubble in the 1980s without any public assistance.
One cultural commonplace that got lost — “buying a house is the biggest financial decision of your life.” People acted as if it was no big deal, a sure winner, in the past decade. They weren’t afraid. They needed to be.
‘I don’t think you can hang this one on the government. It was a cultural phenomenon.’
Oh really? Fannie and Freddie, two of the five biggest corporations in the world before the fraud came out. Failure by the SEC to oversee Wall Street and the securitization disaster. Congress ignoring petitions from thousands of appraisers pleading for relief from pressure to hit numbers. Also, not making one single reform at the GSEs.
Mortgage fraud almost invisible to the FBI, even though everyone knew it was going on.
And then there is the Federal Reserve making probably the biggest mistakes in its history, with Congress sitting by, praising Greenspan all the way.
I could go on…
I think the culture was acting through the government.
I have been amazed and disgusted by the way my federal, state and local governments have sold out the future over the past 25-plus years. Why didn’t elected officials give people the straight truth?
Perhaps because they didn’t want to hear it. Seeing the way so many people handled their personal finances in this housing bubble, it seems to be that the politicians and the government was the effect and not the cause, and fiscal irresponsibility has been a grass-roots phenomenon. Any politician who tried to steer in a different direction could not succeed.
“If it feels good, do it.”
That has been the mantra for a generation now. Don’t be responsible. Don’t save for the future. Don’t care about others. Don’t THINK.
Now, the bill for this idiocy will need to be paid… by the taxpayers, of course!
Hey, Cheney-Shrub are busy spreading “democracy”…for 7 & 1/2 years they left those other “domestic” issues to the “young republicans” in the “Shadow Gov’t”…now everyone complains because America is just a “shadow” of it’s former self…with x1 gallon of gas @ $4.77…now, everyone is as mad as he!! and aren’t going to take it anymore. What’s next, fist fights in Chevron’s parking lot?
Charlie Brown: “Good grief,…I’m going to join Linus out in “The Great Pumpkin Patch” …I’m going lie down and look at the blue skies and smell the damp soil and think about what sort of costume I’ll wear this coming Halloween, …come on Snoopy.”
Lucy: Charlie Brown…you’re such a Blockhead!
I think when you have so many areas of the country so dependent upon growth and development, it was in the governments best interest to keep the balloon in the air for as long as possible.
Let’s be honest, the housing bubble did create trillions in paper wealth and gains, for a short-time anyhow. The smart bankers took their cut in bonuses, Real Estate agents and Mortgage brokers got theirs in commissions, Developers and flippers made huge profits for quite some time.
Was it a positive investment for society as a whole? Heck no, but for five years it certainly was a nice distraction from economic realities. Now those realities are coming crashing back to earth with everyone wondering how it could have ever happened.
Luckily for the politicians, bankers and PTB….People are dumb.
I don’t know the answers to the countries problems, but I am rather certain that rather than face the truth the majority of the population would rather have another bubble of some sort to rally around, rather than make the hard choices required to get the country back on firm financial footing.
Yes, and Ben, add the fact that the POS I rented in Utah would never have been insured by anyone except the government - HUD - no sane bank would’ve loaned out 103k HELOC on a house worth about 75k w/o that government backing. It would’ve been one less house going into foreclosure if it weren’t for our venerable government HUD program - no oversight.
There was no mistake. Consider the fact that Federal Reserve employees are the most brilliant, albeit dishonest people on the planet. This housing BS was contrived by the international banking cartel and their minions on Wall Street. If it were a mistake, why were national insurance commissioners told to take a walk 2x when brought to the attention of DC? I know this is cliche-ish at this point but why were the deaf, dumb and stupid approved for huge sums that everyone knew couldn’t be paid back? Remember 2005? Remember questioning if you were even on the same planet after watching the insane shit going on?
Mistakes of this magnitude don’t just *happen*. Did the S&L fraud “just happen”? Please GTFO with that idea. Had my colleagues designed a massive dam and it failed, would any of them say “it just happened???? Hell no! All the regulation in the world wouldn’t have gotten in the way of an event that was planned from the very start. If it weren’t planned then the regulations would have worked.
[tightening my tin foil hat]
In addition to the things you’ve mentioned, Ben, we should also consider the elimination of the 30-year bond when rates were at historic lows…same behavior seen in home “buyers” who were getting ARMs when rates should have been locked in with FRMs.
This forced more fixed-income investors into the 10-year note (often used as a benchmark for mortgages) and other, more risky investments. Additionally, the Fed was dropping rates at the same time, right through the floor; forcing investors further out on the risk curve (securitized mortgages, anyone? how about some derivatives that just can’t lose?).
The Fed and the govt were working in concert to drive the credit markets into a frenzy.
[adjusting antennae on TFH now]
One could really go out on a limb and wonder if it wasn’t being done specifically so we could default on our collective debt via hyperinflation and/or currency destruction…
Amero? Global currency? The commodities markets are saying something, perhaps?
WT Economist, the FDIC here http://www.fdic.gov/bank/historical/history/137_165.pdf would argue with “we had a commercial real estate bubble in the 1980’s without any public assistance”. The FDIC argues that changing tax policies played an important role, also lax underwriting standards and changing appraisal policies.
Actually, the more things change, the more they stay the same.
Even when it makes financial sense, renting is unpleasant when you can’t make the space your own: i.e. knock down walls, tear out carpets, build equity (assuming an appreciating market), and have the property sold out from under you at any time.
Moving is rated psychologically as one of the most traumatic experiences anyone can go through in life. Purchasing a home decreases the likelihood of that happening, at least until the latest housing bubble craziness.
“Moving is rated psychologically as one of the most traumatic experiences anyone can go through in life. Purchasing a home decreases the likelihood of that happening, at least until the latest housing bubble craziness.”
While the moving process is hardly fun, is it really traumatizing? Losing a job, having a bad job, losing a loved one, having a major illness could all be more traumatizing than any move. Moving is more inconvenient than traumatic.
For those that crave the stability of always living in the same place and are willing to make all of the other sacrifices for that happen, then actually having to move might be a more traumatic experience for them.
Moving, changing jobs, getting married.
I think I read an article where people that were polled said these were the top 3 stressers that have occured in their life.
When I read that list I feel the need to qualify the word “moving”
Leaving a geographic area which causes a person or family to have to make new friends, connections, health and other support contacts, that’s stressful.
Moving across town while everything else remains the same, not so much.
The house part isn’t the cause of stress except for that period where you can’t find your stuff in your unpacked boxes. The loss of people and places that help make your life pleasant or easier is what’s stressful.
“Moving, changing jobs, getting married.”
I did all three one summer over a decade ago. Never again! (Two of the three worked out, but the job really sucked…)
OK, George Carlin is right, if you didn’t have so much STUFF, moving wouldn’t be very stressful at all.
When I move, all I have to do is throw a few things in my car, get in, and turn the key. For me, the hardest thing about moving is “coaxing” my cats into their carriers. Granted, I rented a furnished house, but now (after being an asset manager, er, squatter) I can survive w/o anything, I have a camp chair, a squatter’s cot, a little frige, a camp stove, a little bedding and towels, and a few dishes.
It wasn’t always that way. I remember moving after living in a 2,000 sq ft house I owned for a long period - it was a nightmare - moving van, flatbed truck, horse trailer, etc. etc. And most of that crap I gave away after moving it. Sheesh, what a waste of time.
All my stuff is currently in storage, 2 small units, and I’m planning on getting rid of most of that, now that I’ve forgotten what it is.
Moving doesn’t have to be stressful, get rid of all your crap. There’s a lot of good things about living a simple life. We surround ourselves with stuff because it gives us an illusion of security, IMO, but real security is being able to leave on a moment’s notice and laugh while you’re going out the door, really, think about it, it’s freedom. No stuff calling you, “But what about me, don’t leave me, you can’t live w/o me…”
“Junk and Disorderly”
name of a now defunct 2nd hand store in Downieville, Ca.
To CarrieAnn:
You made my point a lot better than I did.
“Leaving a geographic area which causes a person or family to have to make new friends, connections, health and other support contacts, that’s stressful.”
“Moving across town while everything else remains the same, not so much.”
“The house part isn’t the cause of stress except for that period where you can’t find your stuff in your unpacked boxes. The loss of people and places that help make your life pleasant or easier is what’s stressful.”
I think that moving is stressful for many people because it forces them into the unknown. I think that a lot of people would really benefit from moving more often. Here is why: 1) Get rid of a lot of junk; 2) See new places; 3) Make new friends; 4) Enjoy new career opportunities; 5) Challenge stereotypes about regions, ethnicities, etc.; 6) Re-focus on the truly important things, which are immediate family (wife and kids in my case).
I’ve seen a lot of people who refuse to move, and basically live a stagnant life with no personal or career development as a result.
Moving as a single/childless person is very different from moving a family (often with pets, swingsets, bikes, beds, & assorted “junk”).
When I was single, I could literally move all my posessions in the back of my truck in an hour or two, and really relished the simple life.
After getting married to someone who wanted a more “homey” environment (my places more closely resembled a hospital), we added “stuff” and then the kids came…
I’m seriously considering the possibility of buying our current rental (way in the future) just so we don’t have to move again. The house does NOT suit our needs (two story, layout, etc.), but moving is going to be he!!.
I have a SIL who refused to consider moving away from her large family. My brother lost several mamagement level jobs because of that. He had long commutes also. Don’t know how they are doing now. We don’t speak.
I have moved several times. At most it is annoying. Life long disability or death of loved ones, now that is traumatic.
Why do ppl have a need to paint and tear down walls? Don’t let HGTV control your life. I dont know anyone that truly has had a better life through granite countertops, stainless steel appliances, more open floor plans, etc. That’s just crap salesman say to get you to buy their product.
When you have an office and bedroom that is as small as a closet, a living room the size of a football field, poorly placed fixture/electrical/phone outlets, and hallways or floorspaces designed by some idiot from the ’70s, you appreciate being able to modify.
There is no such thing as a “one size fits all” when it comes to architecture and living requirements. Just because you don’t want to live in a hastily designed and musty old crapbox that someone’s dead grandmother was happy in doesn’t make you a granite-countertop worshipping FB.
I didnt intend to refer to you, but was referring to the need to own a home at any cost mindset. In most cases one should be able to know what their requirements are before they rent. If their needs change they can move. As I responded to PB though, I am a single minimalist, so my views might be different under different circumstances.
An SM - OK, a new term to go with DINKs, etc.
Me too, I’m an SM (and no smart comments from the monkey boy crows, I mean crowd - flippin keyboard).
I’m a SM, too, temporarily, but I live with daughter, SIL, and grandson. It’s sort of the best of both worlds. I come and go as I please and have no responsibility to the household on a day to day basis. I contribute monetarily and we hang out together sometimes. When I moved into one room, I really had to prioritize the stuff I brought with me.
I often try to get my wife to reveal her willingness to pay in order to avoid a move. I have not pinned down the figure, but I believe it is over $10,000, and possibly over $20,000.
You have a point. I may have a different mindset if I was married, had kids and/or had much furniture. Moving for a single minimalist is no biggy.
Not too bad for a minimalist couple either. We moved a lot in the ’70’s. I’d have to dump a lot if we were to move now. It accumulates. We’ve been in this house 18 years and rented a couple of blocks away for a couple of years. But then I’m dumping stuff anyway. I don’t want our kids to have the mess with did with my FIL’s stuff when he died. And less stuff means less house work. I hate house work. And since things change all the time, we could have to move or evacuate with little notice. I do not like being burdened with a lot of stuff.
I’ve moved almost every year of my adult life and am thoroughly sick of it, but not to the extent that I would buy real estate NOW of all times! In the Bay Area the question could be framed as: “are you willing to put up with crappy rental housing for another five years in exchange for a $400k or so discount from today’s real estate prices?” Yes, I am!
I don’t know about that. Moving is kind of fun. It’s an opportunity to throw out all the crap you’re never going to use, figure out what you really want to keep and reorganize in a nice new place.
It’s also awesome when the new place is cheaper than the last place. Every place I’ve lived has had some different feature that was really cool - the hardwood floors, downtown location and the view for the current place.
Even though I no longer move almost every year like I did in school, I get the itch to move after being in my place for awhile.
“…in fact, that you’re not a real American unless you’re a homeowner.”
Here’s the “modern” problem:
Home loan = 30 years / 40 years?
“Stability” is built into the equation as a constant:
x2 incomes = 30 years
Marriage / partnership = 30 years
Health = 30 years
How can anything possibly go wrong in 360 months?
Yep!
Let’s see:
I think people change jobs every 5 to 7 years or so on average these days (not by choice, in many cases I am sure!)
Then, you have the 50% divorce rate at 7 years… oh, but you need TWO incomes these days to have any hope of buying a place in Bubble-land… and both people need to make the median HOUSEHOLD income for the math to work.
As for health, that’s a wild card, but don’t expect to have good health care coverage when something does go wrong.
Buying a house does make sense still as an inflation hedge and a way to keep living expenses low later in life (when income is low) by paying off the house. Unfortunately, our brilliant system is now so screwed up that one can never afford the house to begin with, and once stable things in life (jobs and marriages) are considered short-term “committments” these days. Talk about “progress!”
‘Early last year, just as the mortgage meltdown was beginning, Austan Goolsbee, a University of Chicago economist, warned against a crackdown on subprime lending. ‘For be it ever so humble,” he wrote, “there really is no place like home, even if it does come with a balloon payment mortgage.’
Recipe for disaster! How’s it working for you now Goolsbee. Instead of stable neighborhoods what your thought created was rampant speculation by applying the Sears ‘How mucha month cost plan’ to everything in sight. Just wait until $5, $6 and $7 gas finally brings down the subprime issued CC’s.
What’s neat is that without any crackdown, subprime lending hoisted itself on its own petard (French for “fart”) and the problem is correcting itself as we speak.
Be it ever so humble, there really is no place like my rental apartment, which is less than half as expensive as buying some crappy condo would cost, let alone a detached house.
http://en.wikipedia.org/wiki/Austan_Goolsbee
He has been Barack Obama’s economic advisor since Obama’s successful U.S. Senate campaign in Illinois. (!!??!!)
B.A. summa cum laude (economics), Yale University, 1991; M.A. (economics), Yale University, 1991; Ph.D. (economics), Massachusetts Institute of Technology, 1995. He was an Alfred Sloan Fellow (2000-02) and Fulbright scholar (2006-07).[
Wikipedia links are….intriguing.
What I don’t get is how a U. of Chicago economist cannot grasp the absurdity of using severely backloaded principle repayments to create mortgages whose primary purpose is enabling households to purchase homes they cannot afford. Or does Goolsbee get it, but for some reason feels compelled to put lipstick on this pig?
Ghoulsbee may get “it” as in funding from some real estate company to continue spitting out this nonsense.
Makes one wonder how many of these morons actually believed that by signing up for a mortgage, one became rich.
Debt = Wealth and all that nonsense.
They say home ownership is a huge commitment. Commitment to what? Mainly it’s a commitment to society.
Home owners have skin in the game. They must stay and defend their property. Whatever happens in the neighborhood affects them directly. They must care about the future of the neighborhood and it’s surroundings. They are more affected by regional government decisions.
They are concerned with long-term social changes. They are affected by all facets of the local environment.. business and industry.. education.. roads and various infrastructure.
And they care about the kinda people who get elected.
All in all the home owners in a community are forced to build, maintain and expand that community and tend to it’s health because they own it. If it goes down, they go down.
Renters can be promiscuous, moving whenever they feel like it. They need be concerned only with what is immediately convenient, personally profitable and, by moving, can ignore the present and future problems of a particular area.
So, not to step on your topic suggestion, because we do need to re-examine our societal goals from time to time, but the fact that (good) government would much prefer citizens own rather than rent seems like a no brainer for the above reasons.
And in this scenario, the wise man would rent for precisely the opposite reason.
With the vast majority of your fellow citizens effectively enslaved, you can have your pick of jobs all over the world.
Stability is a virtue; it is not a panacea for all ills.
Joey,
The current crop of FBs seems even less concerned about their neighborhoods or local politics than most renters. They also couldn’t give a sh!t about what happens to the house or neighborhood after they’ve trashed “their” house and sold the appliances and copper pipes on the black market.
They have NO skin in the game.
It was never “home ownership” that made people responsible. Once upon a time, only responsible people (good income, credit, stable jobs, etc.) could qualify for a mortgage and buy a house.
Taking the former “party house” renters and shoving them into a house with a neg-am mortgage is NOT going to suddenly turn them into June and Ward Cleaver.
Here’s a question. Now that we may finally be heading into an economy-wide recession, will it become difficult for borrowers with good credit and a downpayment to buy even if housing prices drop to affordable levels?
Excellent question. I’m predicting an increase in hard money lenders who will expect higher interest in return for a variety of loan types…this may become the only area of finance where one can expect decent returns. I honestly think that major banks and Wall St. will lose their appetite for risk for at least the next year or so, and mortgage risk in particular.
You raise an important question of the day. After 30 months of sales declines, they rose in California last month. Even in South Florida it’s inching up. But everyone agrees it is because of the flood of foreclosures and historic price declines.
With all the overbuilding, recession and destruction in the credit markets, what I have been wondering is; are prices going to under historic means and if so, by how much?
‘The housing crisis is entering a new and frightening stage. On June 24, Standard & Poor’s announced that the S&P/Case-Shiller 20-City Home Price Index had fallen more than 15% in April from a year earlier. Adjusted for inflation, the decline is the biggest since 1940-42′
‘The risk for the financial system and the economy is that the price drop, already horrifying, will start feeding on itself. That process has already started in parts of Arizona, California, Florida, and Nevada.’
‘The drop in those markets ‘is being fueled with jet fuel,’ says James L. Smith, executive VP for portfolio services at Fiserv . His unit works with borrowers to restructure delinquent mortgage loans. Smith worries that instead of settling at a reasonable price level, ‘we’re going to blow past [it] without even looking back.’
Well as it was put earlier, housing absorbed all the excess consumption in the boom and might absorb all the lost consumption in the bust, as people forced to pay more in tax, for energy, for food are forced to cut back on square footage.
I believe it will vary by location. In NYC and places like it, where land constrainsts limited overbuilding, affordable housing will attract occupants. But in places where supply boomed (or population is falling) prices might get really, really low.
Think of the 1940s and 1950s, when incomes were constrained and new housing boomed in the suburbs. It was possible to pay almost nothing for housing in many city and small town locations.
“Trailers for sale or rent; rooms to let 50 cents.”
This will raise some interesting political issues in the suburbs and exurbs. One way to fill an overlarge house is to allow group occupancy — by young people, immigrants, whatever. You’ll have less well off people able to live where less well off people were zoned out previously. You’ll have conflict between desperate homeowners seeking rental income to pay for retirement and desperate towns with no money to pay for services for additional occupants.
And in answer to the question above, the number of households could go down or at least stop rising. Lots of unused bedrooms in the U.S.
“One way to fill an overlarge house is to allow group occupancy — by young people, immigrants, whatever. You’ll have less well off people able to live where less well off people were zoned out previously.”
you hit the nail on the head! in the town of bakersfield, i have been purchasing my house for 16 years, and the neighborhood is changing. all the homes have at least 4 bedrooms. i live in a cul-de-sac with only 6 homes, and two of them have lots of tennants (mostly field workers) and one is in forclosure with squatters in it. the neighbor across the street is trying to sell his home, it was put up forsale last week. i really feel sorry for him if he decides to leave it empty and move before it sells. will it get better? only time will tell. the town is slowing down, you can see it all around. even going to the local foodmax store, there is alot of rotting veggies, fruit and meat on the shelves. it makes me wonder how can the store afford to lose money like that? the prices have to come down so the food wont go to waste. they have to be losing lots of money doing business like that. one of these days i will take the time to go to several different stores to see if it is just happening on my side of town. i will post what i see.
You’ll have less well off people able to live where less well off people were zoned out previously.
Yep, this happened in the last SoCal bust. I personally knew a number of ordinary engineers who were able to buy houses in Palos Verdes and Manhattan Beach without stretching too hard in the mid 1990s. We’ll get there again.
The pace of sales has also been seen to rapidly increase during stock market selloffs. I submit that increasing sales and accelerating price declines can go hand-in-hand under certain market conditions.
“I submit that increasing sales and accelerating price declines can go hand-in-hand under certain market conditions.”
Couldn’t that happen if potential sellers finally realize bubble prices aren’t coming back and all head for the exits at the same time? I think that realization could finally come to many in the next year. You still need buyers to make this happen, though. How many would buy into a sharply declining market and would have the means to do so if so inclined?
At some point, a confluence of lower comps with the end of seller denial could spark a major cascade.
“How many would buy into a sharply declining market and would have the means to do so if so inclined?”
In a sense this experiment is already underway, as the recently reported rate of price U.S. home price declines is historically unprecedented. The contrast between stock market crashes and housing market crashes is seen in the time scale and measurement frequency.
While a stock market crash may play out over a day or a couple of months, real estate market crashes have traditionally played out over periods of over three years, as there is no centralized exchange on which real estate is traded which reports up-to-the-minute price levels (as with stock market exchanges). Hence while the development of a consensus perception that a crash is underway may occur over a matter of hours or minutes in the case of the stock market, it typically takes months or years for a similar broad consensus to develop in the real estate market.
“You still need buyers to make this happen, though. How many would buy into a sharply declining market and would have the means to do so if so inclined?”
There are always buyers in a sharply declining market. They get a house for 15% below asking price and they thing they got a steal.
How quickly they find out that the 15% cushion of so called equity can evaporate in a heartbeat. They also remember that the house they just bought for 250k that they think is 15% below market once sold for 500k. They pull rib cage muscles from patting themselves on the back.
Sometimes a floor has a false bottom, as in we value the construction materials @ a minimum of cost, but the reality is, once you turn said items into a house, they really aren’t worth anything, are they, in terms of resale value?
I’ve never seen a used truss store…
Everybody in America with good credit, a “stable” job and a measurable proof of cash = “No problem”
Everybody else = “forget it”
This is the forward looking calculus for the “near term”
I don’t have the “statistics” on number of people affected…but I reckon the second group is a …”very large number”
However, there is the “remote” possibility that the Gov’t could open West Texas to homesteading…or someone might “discover” Gold in North Dakota, …improbable, but not impossible.
I really have no idea. I would think that you’re right, but so far the banks act otherwise. Recently, I got thing in the mail from one of my credit cards offering a 1.99% interest rate for any charge over $500 that I make between now and some date I forget. The 1.99% rate was for a really long time as well. While I’m sure there is some trick going on here, its clear that banks seem desperate to lend money to people like me.
As good as my income and credit is, I would think the banks would be retrenching at this point not trying to throw money at me.
That is something I’ve been wondering about. Everyday I either get mail or a call from a bank (or other financial institution) offering me some kind of deal.
I got one from Wachovia last week offering me a HELOC for quite a large sum of $$$s. And I thought these things were DEAD.
I throw these things in the trash or hang up abruptly. Still, whats going on?
I thought so too. But, just this week, I’ve gotten not one, but two robo-calls offering my small business up to one million dollars. As a loan, of course.
They didn’t call yesterday, but if they call again, I’m going to snag the number off my caller ID and post it here. Let’s see if we can call ‘em back and have some fun.
Well, guess who called a few minutes ago? My favorite small biz loan people, that’s who!
And, apparently, they’re calling a lot of other people and making them unhappy. Do a Google on this phone number, which popped up on my caller ID, and you’ll see what I mean:
432-897-0948
“One way to fill an overlarge house is to allow group occupancy — by young people, immigrants, whatever.”
This is already happening in many suburbs. Regardless of what the county or HOA restrictions say. Immigrants with family, yes, but I doubt there will be that much appetite for young singles to live in group homes 50 miles from where they work and party.
If all they can afford is shared housing, might as well do it in the city.
How would a big move towards shared housing jibe with a record number of vacancies?
It would exacerbate it. The higher percentage of used bedrooms means fewer houses occupied, total.
Question..how long will it take before financial money lenders start to hit those that lost homes in foreclosures with the common..”One/Two/Three years out of foreclosure we can get you a loan!”
Granted it won’t be with a high priced home, will require a good downpayment and other parameters..but the temptation of getting a high interest rate from one of those types of borrowers is very tempting..remember..not all of them were investors, and most fell under the demise of teaser/ARM loans..yes..there was a percentage that lied on income to get loans..but for many it was the adjustable rate that put the nail in the coffin…
I’ve believe from the start that the only way out is a credit eligibility “do over” from the madness.
Those in over their heads would do well to walk and save for a few years. It might be 3-4 years rather than 2-3, but without it there will be no one to buy.
I would like to see a in depth Bank Death Pool discussion. Which banks are most at risk and why. Most HBBs have money in the bank or investments. I would not like to see the same old stocks, cash, and gold argument.
Are small banks better than big banks? Are big banks too big to fail? Which banks or credit unions are better run? Which banks/credit unions have less exposure to sub prime etc. Most HBBs would buy a house if it makes sense. But are we going to have the money available to use our money to buy a house?
My father has a CountryWide C.D. It matures in August. He always says so far so good. I always say were not to August yet!
Will Bank of America pay off your dad’s CD if their acquisition of Countrywide goes through (scheduled for July 1, I believe)?
Here is a troubling sign for SD economy: A die-hard optimist changes his view.
Can folks offer other examples of long-time Pollyannas who have recently done a major reversal in their position (Restsinas comes to mind as another example)? Or real estate mouthpieces of yesterday who entirely stopped talking to the press (Gary Watts)?
S.D. index points to a continuing economic slump
By Emmet Pierce
STAFF WRITER
June 27, 2008
San Diego County’s economic slump shows no signs of reversing itself anytime soon, according to the University of San Diego’s May index of leading economic indicators.
USD economist Alan Gin, who compiles the monthly index for the school’s Burnham-Moores Center for Real Estate, said it suggests that a recovery isn’t likely until the second half of 2009 at the earliest. The index, which fell by 1.1 percent in May, has dropped in 25 of the past 26 months.
…
Less optimistic, Gin said residential building permits remain down considerably for the year, despite an uptick in May.
“Right now residential building permits are off about 45 percent compared to the first five months of 2007,” Gin said. “That is both single-family and multifamily. If that same pace continues, we have just a little over 4,000 residential units authorized for 2008.”
By comparison, in 2003, the recent peak of construction activity, there were about 18,300 residential units authorized countywide by building permit.
The slow pace of construction is tied to falling home prices and tightening credit among mortgage lenders. Residential real estate prices in the county dipped in May, with the median price hitting $380,000, the lowest level since September 2003, according to DataQuick Information Systems. London said the bright side is that the slowing market has made homes more affordable.
BTW, the percentage drop in countywide residential construction permits from the 2003 peak is (4,000/18,300-1)*100 = -78 percent.
“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one!”
Charles Mackay
What does this say for those of us who think for ourselves?
We the few that could see with our own eyes, the folly of “Extraordinary Popular Delusions and the Madness of Crowds”
“What does this say fot those who think for ourselves?
It says the majority of people will think you are a fool, an idiot, a nutcase, a Chicken-Little, an alarmist, a pain-in-the-ass,…
It also says you will be buying from the majority, at your pleasure and at your prices, when they all rush to sell.
didn’t somebody forget their tired ‘cash is king’ thing?
The lead article in today’s WSJ says we are not in a bear market yet, but looking at the low reached this morning, I see the DJIA has fallen by quite a lot from the Oct 2007 high. Are they technically correct?
Low: 11,408.07
52-Wk High: (10/11/08) 14,279.96
Percentage decline on DJIA off recent high to today’s intra day low:
(11,408.07/14,279.96-1)*100 = -20.1 percent
To put this differently, does kissing a bear count as entering a bear market?
The “bear” is just “a little bit” pregnant.
We may have entered (and left) an osculatory bear market.
The DJIA just morphed from bear market osculation to penetration.
(11,387.22/14,279.96-1)*100 = -20.26 percent
Is it time to declare a market bottom now?
Where did the MarketWatch.com folks larn their ritmetic?
June 27, 2008 4:11 P.M.ET
BULLETIN
DOW OFF NEARLY 20% FROM HIGH, SIGNALING BEAR MARKET; INDEX LOSES 4% ON WEEK
Investors are out for bear
Dow industrials, Nasdaq down about 4% in bleak week; S&P off 3%
Market is off day’s lows, but are still pressured by financial issues, credit conditions, record oil. Dow’s off about 20% from last October.
Dow 11,346.51 -106.91
(11,346.51/14,279.96-1)*100 = -20.5424245 percent
(That would be OVER 20% OFF HIGH according to my Grandfather’s one-room K-8 grade school arithmetic lesson.)
More red carpet treatment for Wall Street bulls today?
Christmas carpet (six mos view)
Two-year round trip across the top of the hill on a slow-moving roller coaster…
Did somebody pour oil on the roller coaster tracks today?
I feel compelled to point out that unlike the early-2000s bear market, this one is compounded by a beastly housing bust.
MARKETWATCH FIRST TAKE
Dow’s a bear, now what?
Commentary: One good thing about bear markets is that they end
By MarketWatch
Last update: 3:10 p.m. EDT June 27, 2008
NEW YORK (MarketWatch) — It was bound to happen right before a weekend. The Dow Jones Industrial Average is now off 20% from its high, making this officially a bear market.
But bear markets have a certain quality about them: They are, by definition, preceded and followed by good times. A rally is coming; the only question is when.
A bear market is a historic event, so it’s good to put the current climate in perspective. According to the Stock Trader’s Almanac and some other research, you might be surprised to know this has happened before.
In the last 65 years or so, bear markets have lasted about 10 months on average. About a third of them last between a year and two years.
The most recent bear market was between 2000 and 2003, and was one of the longest ever. At one point, the Nasdaq Composite Index fell 75% from its high and the S&P 500 Index slid nearly 50%.
“Ef you’s got hairy arms en a hairy breas’, it’s a sign dat you’s agwyne to be rich. Well, dey’s some use in a sign like dat, ‘kase it’s so fur ahead. You see, maybe you’s got to be po’ a long time fust, en so you might git discourage’ en kill yo’sef ‘f you didn’know by de sign dat you gwyne be rich bymeby.”
“Have you got hairy arms and a hairy breast, Jim?”
“What’s de use to ax dat question? don’ see I has?”
“Well, are you rich?”
“No, but I ben rich wunst, and gwyne to be rich agin. Wunst I had foteen dollars, but I tuck to specalat’n', en got busted out.”
-Huckleberry Finn-
by Mark Twain
How about things are so bad in California that whole towns (and Hell at that - Needles) want to secede and join AZ or NV since they will get better state services? Does this really have even deeper consequences than the surface appears?
And we can make fun of Taco Bell more. And Max, Taco John was pretty good. I grew up in SLC.
I don’t see them getting any better services from two other nearly defunct states. They’ll have to start their own country.
Well, since the Colorado River defines the border between the two states maybe it could be arranged. A few bulldozers may be enough to do the job.
Mark Twain described how the Mississippi would now and then change its course and thus alter state lines. There were instances where a slave would go to bed at night in a slave state and wake up the next morning in a free one.
Did the Fed have a gold rally in mind when they decided to stand pat?
COMMODITIES CORNER
Gold revs up
Thanks to the Fed, the precious metal has broken out of the trading range barrier it’s been stuck in for the past month. Gold tops $920
The only thing propping Uncle Buck the last few months has been Fed jawboning about raising rates. Now that the market sees the emperor has no clothes, no more prop. Down goes Buck. We will test the gold highs this year.
The emperor has no close (liquidity)
Falling stock prices are also propping up Uncle Buck, through a flight-to-quality move into Treasuries. Time will tell whether gold (inflation hedge) or Treasuries (deflation hedge) were the better move at this point in time.
There is nothing secure about Treasuries priced in a collapsing currency. They are a tar pit that will ensnare bears who think they are being prudent. Bennie and the Feds are inflating away your wealth.
I will never go so far as to say you guys are wrong, but you might be early by a few decades.
Traditionally, gold has been both an inflation and a deflation hedge.
The former as something that yields 0%, and the latter because it is perceived as money.
Observe carefully, economist, it’s not just straight out of Samuelson.
Time is on my side, yes it is.
I must acknowledge the implied anti-gold remark last week that mentioned DZZ, x2 short gold ETN, DZZ.
http://www.247wallst.com/2008/02/leveraged-gold.html
Moved 6 figs into DGP, x2 long gold ETN.
I wonder who had to short-cover yesterday and today?
Thanks!
I think we should talk about what’s obviously happening on Wall Street. For the past year, I’ve sort of been happy about the shape of things. If stocks fall- well good. That just means more pressure to push housing prices downward. But we’re getting to a point where if things keep moving downward at this pace, homes will be the last thing on my mind.
Secondly- fuel. For years, I’ve been saving and saving specifically so that I can move out of California and buy in a semi-rural area elsewhere. The idea was to live say- 30 minutes from a minor metro, and commute in. With gas prices as they are and with the likelihood that I will make less, I’ve had to re-think this plan a bit. I imagine that this too is affecting future plans of other people besides myself.
I do a variety of business assessment, mostly gas stations, fast food, and casinos. Part of my assessments is to time a purchase transaction. Counting the number of people in front is part. Lately, I have been the only person. I went into one well known ff chain place. No other customers. The employees had been just talking to each other. They were tripping over themselves to jump down and help the ‘customer’. Normally it would have been much busier. So, are people so broke they aren’t going to the regular gas stations and big cutback on fast food? Oh, and the ff prices were upped about 15%. Even the casinos appear to be less busy. Not a good sign.
Thus Exxon is planning to sell it’s service stations.
Here’s a topic that could be interesting.
We have become aware that eventually, median housing prices will generally reflect some multiple of median incomes.
What do the HBBers see as the trend in real incomes in the USA?
Given the political and economic realities, will unemployment drag down median incomes over the next few years?
Are there any industries or segments of the ecomomy where wages or income are stable or rising?
“will unemployment drag down median incomes over the next few years?”
Inflation adjusted incomes are down 2000-2006 per Census Bureau. The more apt question is how will earned income be distributed across income levels? Will their be a demand side stimulus or will the status quo of higher income levels getting most of the increases continue?
Answer: It’s a function of the election.
More precisely, the rich will get richer, and everyone else will have to get used to being poor.
Nope
The elite top 0.1% will get richer and everyone else will get poorer. Even if you are in the top 5% you are not guaranteed a spot on the life raft. Yes they told you during dinner that you were one of them so you would vote them into power, but now that the ship is sinking you will be tossed into the water with the masses where your gold trinkets they gave you will weigh you down and cause the others to claw at you.
“Moving, changing jobs, getting married.
I think I read an article where people that were polled said these were the top 3 stressers that have occured in their life.”
Where does divorce, death, unforeseen medical diagnosis, and BK fit into the equation. In this current environment you have to add another stressor: you can’t sell your ‘dream house’ that’s decreasing daily in value that will probably force you to move, lead to divorce and possibly lead to a job loss.
Local Observation in Dutchess County NY.
Two REO shacks I’ve been watching for 6-8 months just showed up on MLS with 50% price increases over the REO price. Upon further investigation, both of these were bought by a local speculation outfit that “specializes in residential real estate” (according to their web page).
The specu-vestors are still out there folks. I have a hard time believing it but it’s true. I so much want to see these idiots get their heads handed to them.
We still have them here in So Cal, too. They’re often the ones buying the 50%-off starter houses so they can rent them out while they wait for the appreciation.
To be honest, they’re likely to get a slightly positive cash flow with 10-20% down…as long as rents hold up (I doubt they will).
I definitely would like to see everyone’s thoughts on finding and keeping a job in this economy, especially if you’re just starting out like me (26 yo, EE degree, in AZ).
Dunno about Arizona, but if anything I am hearing about more openings from headhunters in the last few months than in the previous year combined. Job market still seems very strong for engineers in Silicon Valley.
EE? Supervise solar installations. That should be hot for a while. But be prepared to jump elsewhere if that busts.
E-mail me a resume if you’re interested in moving to D.C. area, I know a few companies looking for EEs.
Thanks for the suggestions everybody!
Xpovos, unless I’ve missed something, I don’t have your email address. I’ve put my resume up at
Thanks again!
So you have a PhD?
Nope; BS and aborted Master’s attempt :(.
Do falling San Diego home prices warrant an act of Congress to prop them up? This and other interesting questions were addressed on Gloria Penner’s Editor’s Roundtable program this morning.
SD Real Estate, Border Fence, Congressional Actions
Jun 27, 2008
Audio posted Friday afternoon.
Mortgage defaults and foreclosures remain at record high levels in San Diego, and there are signs the region’s real estate woes are hitting the coastal communities. What can be done on the local and national level to repair our housing market?
Plus, the Homeland Security Department will waive environmental laws in order to complete a fence along the U.S.-Mexico border, following the U.S. Supreme Court’s decision not to hear a case challenging the fence project. How will the border fence impact relations between the U.S. and Mexico?
And, the House agrees to an overhaul of the nation’s Foreign Intelligence Surveillance Act (FISA), while the Bush administration refuses to comply with a set of congressional subpoenas. Does the Democrat-controlled Congress need a gut-check?
Guests
* Scott Lewis, co-executive editor of voiceofsandiego.org.
* Ruben Navarrette, Jr., a member of the editorial board of the San Diego Union-Tribune.
* David Rolland, editor of San Diego CityBEAT.
Growing up, i’d have never thought we’d lose the Berlin Wall, only to be replaced by the San Diego Wall.
One of the comments on the show was a very emotional one from a German immigrant to the U.S. She took strong exception to the notion of erecting a wall to prevent free movement of individuals across borders.
Maybe we can get a good deal on one, from Wal*Mart?
I believe they mentioned Halliburton as the firm with the contract…
Dave Bowman: Open the pod bay doors, HAL.
HAL: I’m sorry Dave, I’m afraid I can’t do that
The existing metal wall that runs along the Tijuana border was built from metal sheeting used in the Vietnam War. Maybe Halliburton can pillage pieces from shattered public facilities in Iraq to extend the US border wall.
Is the typical consumer smarter than the average economist?
ECONOMIC REPORT
Consumers descend further into economic funk
Two-thirds in survey expect inflation, sluggish growth to persist for years
By Rex Nutting, MarketWatch
Last update: 10:41 a.m. EDT June 27, 2008
Due to the Narcostate that Mexico is fast becoming…
Are broke bordertowns like San Diego especially vulnerable to takeover by these druglords?
The Narcos are filthy rich.
That could never happen because the Govt. strongly regulates the movement of money and…..
Wait….nevermind.
This could restart the San Diego real estate investing craze. I am imagining that high-end homes are a good place to park drug money for a few years, provided that home prices are not dropping like a rock.
I realize some posters here are annoyed by Ira Glass, but I still recommend checking out the episode of This American Life entitled The Giant Pool of Money.
Nothing said on the show was whatsoever new to me. By contrast,
my wife was just listening to it, and called to say how depressing she found it. She finally grasps what Ben’s bloggers have discussed for three years running.
I’ll second that recommendation.
My girlfriend has a similar reaction when we first heard the episode, even though we’ve been talking about different aspects of the bubble and bust for three years now.
Looking through the transcript has also been interesting, thanks for posting the link to that. There are some nice details in the transcript that I missed when listening to the original broadcast.
That was fantastic, PB. Thanks for the link!
I guess we are near the bottom, because I see houses in Forest Hills, Queens similar to ones that were for sale a few years ago at $699K are now listed at $699K.
Makes no sense to me either.
How about this as a topic
http://news.yahoo.com/s/ap/20080627/ap_on_bi_ge/fed_private_equity;_ylt=AkjfY5aQs2whGuPzFN4TlLys0NUE
WASHINGTON - The Federal Reserve is looking into making it easier for private equity firms to invest in banks, a move that could usher new capital infusions to cash-hungry banks and help them cope with credit problems
It’s called consolidation of power, I hear it works wonders for democracy. Let’s see private equity can now be bailed out by the FED and they can get the grubby little hands on banks. Next up rolling back regulation on banks.
Has a bursting credit bubble provided the serendipitous benefit of increasing the honesty of the big three credit rating agencies?
P.S. What is the difference between announcing that you “may” downgrade a company’s debt, and actually doing so?
Moody’s says Morgan Stanley may get downgrade
By Alistair Barr, MarketWatch
Last update: 2:01 p.m. EDT June 27, 2008
SAN FRANCISCO (MarketWatch) — Moody’s Investors Service may downgrade Morgan Stanley, the ratings agency said Friday, citing big trading losses recently that have undermined confidence in the investment bank’s risk management.
Moody’s placed the long-term ratings of Morgan Stanley (2:39pm 06/27/2008 MS 36.72, -0.11, -0.3%) and its subsidiaries under review for downgrade.
The likely outcome of the review will be a downgrade of the firm’s long-term rating to A1, the agency added. Morgan Stanley’s senior, unsecured debt is currently rated Aa3.
Roughly $200 billion of long-term debt would be affected by such a downgrade, Moody’s noted.
Is anyone else thinking about telecommuting these days? If the oil bubble fever does not break within the next month, I will start doing so one day a week.
Countdown to the close:43min10sec
June 27, 2008 3:13 P.M.ET
BULLETIN
CRUDE FUTURES CLOSE ABOVE $140 A BARREL FOR FIRST TIME
Crude tsunami swamps Dow
Stocks struggle after latest data show lower-than-expected core inflation, as oil prices keep rising into record territory.
I don’t claim to know nothin’, but wouldn’t a price crash in oil tend to drag down (inflation hedge) gold along with it?
BULLETIN
CRUDE FUTURES CLOSE ABOVE $140 A BARREL FOR FIRST TIME
Contrarian investor prefers gold over oil
Investor Marc Faber offers thoughts on commodities; $300 oil a possibility
By Nathan Becker, MarketWatch.com
Last update: 3:07 p.m. EDT June 27, 2008
SAN FRANCISCO (MarketWatch) — Contrarian investor Marc Faber said he could see oil rocket to $300 a barrel if the U.S. attacks Iran, but he prefers gold to oil in normal circumstances because of the U.S. government’s potential curbing of speculative trading.
“I personally would rather buy gold at this stage than oil,” said Faber, a famous contrarian and publisher of “The Gloom, Boom and Doom Report” during a conference call Friday hosted by U.S. Global Investors.
Faber plays the role of a contrarian — often going against the grain, and stating on his Web site that the path not taken by the masses many times is the right one. Read more about Faber here.
Although he said he wouldn’t rule out oil prices rising to $150 or $170 a barrel, Faber said the U.S. government’s recent discussions about how to limit speculative trading in oil futures could pull the plug quickly.
“I think we could have a serious correction — to $100 or below,” he said. “To curtail speculators in commodities in the U.S. could drive people like the pension funds … to go and buy gold.”
I can currently get 196 gallons of gas for a troy ounce of Gold…
Just before 9/11 hit, I could get around 196 gallons of gas for that very same ounce.
Gold is well known to retain its real value against consumer goods through time. Not necessarily so for Uncle Buck…
In 1961 a house in L.A. was $12k, and an ounce of Gold was $35. It took around 240 ounces to buy a house.
About the same, a house in L.A. should be priced right now. (around $225k)
bad math attack…
Make that 340 (around $300k) ounces instead of 240, as previously mentioned…
Yes, but in 1961 the London gold pool was fixing the price of gold near 35USD and US citizens could not buy gold as an investment in the US. That LA house could not have been bought for 340 ounces of gold.
The only oil bubble was the supply of oil, and it has popped already.
It seems one bubble follows another as night follows day.
From Atlanta, interviews with some recent employees of a homebuilder who don’t have to worry about commuting to work anymore:
http://tinyurl.com/3pgrlw
From Fort Worth, a TV commercial that’s nominally about the politics of urban gas drilling, but really serves as an object lesson on bubble psychology.
http://www.askchesapeake.com/EN-US/Pages/NoBustVideo.aspx
By the way, Tommy Lee Jones is a Texas native.
How about “The Housing Bubble Bust is finally crossing the 49th Parallel into Canada”?
See
http://www.reportonbusiness.com/servlet/story/RTGAM.20080627.whousing0627/BNStory/Business/home
Got popcorn, eh?
NR
Hi all!
Long time reader, first time poster.
I post quite a bit on MSN real estate boards where most people are very pro home buying, the markets will bounce back, etc. My question for those of you that have way more knowledge than I do:
Can you help me please explain why now is not a good time to buy because interest rates are at “historic lows”?
Interest rates will rise so some of these people who are sitting on the fence are ready to jump into the market before 2009 to fend off rising interest rates. I explained that if your house price goes down then that equates to lower property taxes and interest rates can always be refinanced. But most don’t seem to understand or care about those arguments. They look at the monthly payments alone. ugh! I am in O.C., CA by the way where we are finally seeing some prices drop but not at the rates I’d like.
Thanks,
genepha
‘Can you help me please explain why now is not a good time to buy because interest rates are at “historic lows”?’
House prices and interest rates are (loosely speaking) inversely correlated (much like other long-valued assets, with l-t Treasury bonds a leading example). Low interest rates are one of the key reasons that housing got so overvalued. Though hard to imagine, when interest rates revert back upwards to historic norms, housing prices will fall considerably more than they have already.
If your telling people it’s better to get lower prices with maybe a little higher interest rate in the future verses higher prices and a lower interest rate ,than you are telling them right . If the people don’t listen to you than that’s not your fault .
But it’s always foolish to buy when prices are declining and the market isn’t stable yet .But everybody has a different opinion on when is a good time to buy ,but as you know ,sales people always think it’s a good time to buy .It’s never a good time to buy if you can’t afford it .Also, during recessions you have to worry about being laid off, so again, that makes it a risky time to buy .
I would like to see a discussion on whether Indymac will be to Alt-A what New Century was to subprime.
Jun 27, 2008
Page 1 of 2
Bernanke’s words strike false note
By Julian Delasantellis
In 1968, the Australian rock band The Bee Gees sang the song Words, a melancholy ballad of a penurious lover, trying to win the hand of his intended through verse and prose, the only romantic tools at his disposal:
Talk in everlasting words, and dedicate them all to me.
And I will give you all my life, I’m here if you should call to me.
You think that I don’t even mean a single word I say.
It’s only words, and words are all I have, to take your heart away.
Now, 40 years later, US Federal Reserve chairman Ben Bernanke tells the world that he has reached the point where “only words, and words are all I have” to deal with the simultaneous problems of inflation and unemployment now bedeviling the global economy.
i noticed our local paper has started marrying news with advertising to pump up real esate
http://www.cleveland.com/realestatenews/
enjoy and cant wait to hear comments