Throwing Good Money After Bad?
Readers suggested a topic on the possible future of the housing market. “Instead of just timing the bottom, let’s map it out. Will there be more or less regulation? Heads rolling at the Fed? RTC 2.0? Unrest in the suburbs threatening the gentrified city core and art district riverside lofts nearby?”
One posted. “Will we see an acceleration in the decline of prices once the FDIC begins taking over multiple financial institutions? My understanding is that in the past they generally have moved to dump properties relatively aggressively.”
Another asked, “How did we go from, ‘It’s not a bubble; it’s froth. Heck, use an ARM; you’ll save.’ to ‘Hurry, Mr. 6Pack. You’re doomed unless we get a signed blank check that we don’t need and promise not to use?’”
A reply, “I don’t know who the government is going to take the money from in order to pay for these bail-outs. Keeping the interest rates low is creating inflation and taxing everyone right now.”
“So far I have lost about 70K on my house (I put 50% down on my house when I bought it ,and I have a fixed rate). My earnings have gone down about 25k a year because of the low interest rates, my buying power is getting creamed with this inflation.”
“This baby is hitting everybody. Still, there are people that are getting hit harder than me, especially people who are losing jobs or can’t find jobs. Job creation, by any means, is the best way to stimulate the economy in my view. I wish this whole damn world would get off real estate as the only industry that Americans can generate income from.”
One asks, “I’d like to see more discussion on how state and local governments are likely to react to the new twists and turns of the bubble collapse. For example: Farifax, VA wants to buy 10 foreclosed houses to turn into affordable housing.”
“What happens when they begin to see the funds they have invested start to drain away (let alone decreased transfer tax revenue)? Do they change direction on the purchases? Raise taxes! (you can be burned at the stake in several parts of VA for suggesting such a thing).”
The Toledo Blade. “Yesterday morning, Toledo and Lucas County officials, neighborhood groups, housing advocates, and others gathered to discuss what to do about the vacant homes that blight a host of neighborhoods. A study released earlier this year estimated that vacant and abandoned properties cost Toledo taxpayers at least $3.8 million in 2006.”
“Cuyahoga County Treasurer Jim Rokakis said the situation in Cuyahoga County is dire and that the number of foreclosures jumped from 3,000 annually before the current crisis to more than 15,000 last year.”
“‘What do you think a property is worth if there are 20 homes on your street and 10 are vacant and three have been torched in the last year?’ he asked, referring to the plight of one elderly homeowner in the Glenville neighborhood on Cleveland’s east side. ‘The reality is there is no value on that house.’”
“‘We need a responsible body that can take possession of the properties and decide what to do with them based on what’s best for the community,’ he said. While he said a land bank would not be a cure-all, ‘if we sit back and do nothing, I can only tell you it’s going to get worse.’”
The Columbus Dispatch. “Ralph Stover has good credit and a steady job. But he took out a risky interest-only first mortgage and a second mortgage to buy a new 1,900-square-foot condominium in 2003 with no money down.”
“He paid $170,900 for his three-bedroom, three-bathroom unit near Polaris, but an appraisal he had done in April because he was thinking about refinancing showed it was worth $160,000. Other units are selling for $150,000 or less, he said.”
“His first mortgage is going to reset to a higher interest rate early next year. That means his monthly payment will more than double and then float every six months based on national interest rates, he said. Locking into a fixed-rate mortgage would be even more expensive, costing him close to half his monthly income plus a hefty down payment and thousands of dollars in up-front points and fees.”
“He’s beginning to think foreclosure might be the best of his bad options.”
“‘My fear is that we haven’t seen the bottom of this, and if we don’t see the bottom of this for another two years, my home might be worth 120 (thousand dollars),’ said Stover. ‘Then you start wondering: Am I throwing good money after bad?’”
“Because the purpose of a down payment is to ensure that the lender can recover the full amount of the loan in the case of default, the potential fallout from people in Stover’s situation could be ‘a sucker punch’ to the economy, lenders and neighborhoods, said James Newton, chief economic adviser for Commerce National Bank in Columbus.”
“Walking away ‘is becoming more and more common,’ Newton said. ‘If this were done on a large-scale basis, this would extend the credit crisis into the far future,” by dumping more vacant homes into a bloated market and onto banks’ balance sheets. It would be devastating. It would just take the credit crisis and amplify it that much more.’”
“A common thread among these homeowners is that they purchased exotic mortgages rather than the traditional, fixed-rate products.”
“‘It’s the people with interest-only and (adjustable-rate mortgages) who are really having a problem,’ said Kevin O’Brien, a Columbus lawyer who represents banks in foreclosure cases. ‘Some of these people just get pushed off the financial cliff, and then you’re done.’”
“Until last year, the price decline affecting Stover hadn’t happened in recent history. Before 2007, the median condo sale price declined only twice in Franklin County in the past 20 years.”
“But in 2007, the median condo price plunged 8.5 percent. Single-family house prices peaked in 2005. By the end of last year, the median house price had dropped about 5 percentage points.”
“‘If things continue to go the way they seem to be going, it’s going to be unaffordable,’ Stover said. ‘I’m just not going to make it.’”
The Merced Sun Star. “The Merced City Council tackles more fallout from a housing boom gone bust tonight. The council will vote on whether bonding companies will perform $8 million of infrastructure work that developers failed to complete in two stalled subdivisions.”
“At both Bellevue Ranch East and Highland Park, developers say they haven’t sold enough houses to pay for the infrastructure they were required to put in. At Highland Park…shortly after the builder installed some streets and curbing on the 17-acre site, work halted. The 124 houses planned for the neighborhood were never built. In March, the city declared the site a public nuisance.”
“Bellevue Ranch opened its first model homes in 2005, as Merced was riding a wave of real estate speculation and unprecedented home price appreciation. When it’s completed years from now, the community could hold as many as 6,000 houses and apartments.”
“Today, parts of the subdivision are occupied, complete with green lawns and cars in driveways. But other sections are swaths of overgrown land. Cables and pipes that were meant to be hooked up to future houses now poke through 4-foot weeds.”
“One partially built neighborhood, Riverstone, seems completely abandoned. A row of four deserted model homes is fronted by a bone-dry yard. On the next street sit 15 lifeless houses. Half are finished, but empty, the rest are partially built plywood husks.”
“City Attorney Diaz said the city has been approached by investors interested in buying parts of the Bellevue Ranch development.”
“Between May 2007 and May 2008, the median price of a new home in Merced dropped from $360,000 to $243,990, according to the California Building Industry Association. Sales of new homes during that period dropped 64 percent, with 84 new houses sold in May 2007, compared with 30 sold in May 2008.”
i would like someone to explain to me why interest rates are not going up?
or maybe they are just a bit slower that i expected.
When Fannie and Freddie are bailed out interest rates and inflation will double!
Now the ‘hyperinflationists’ think that Ben will just print up money and drop it from helicopters, whether literally or otherwise. Well, you’ve already seen what injecting $250 billion in ‘excess liquidity’ has done to the dollar, to oil, to the price of food.
Now consider this - the losses involved here that have to be “papered over” are somewhere between $2.5 and $3 trillion dollars. Or more importantly, 10x what’s already been injected. Would you like your gasoline to be $10/gallon? It could easily be, when they try to paper over this whole problem in that fashion.
Got Metals?
If the demoncrats and Pelosi continue to be controlled by the bolshevik Sierra Club and Environmental Defense terrorists look for gas at $6 / gal. What we need is for the idiots that are commuting 50 or more miles each way to lose their stated income loan houses. Let’s get this recession over sooner rather than later. No bailouts for lenders as well as borrowers. Boo Hoo, I forgot, save the little bitty children and their stupid victim parents from ——— (fill in the blanks). hehehehehehe
It’s in your best interest to plan your affairs using negative real interest rates. Nevermind unstable prices and rising unemployment, these are all temporary in nature. Do you understand, Winston?
Be careful not to think that interest rates (Maginot Line) mean anything, in this new brave world of economic warfare.
The powers that Plan B know that in the conventional wisdom, high interest rates are what the sheeple are looking at, along with the DJIA, and that’s about it.
Nonesense! The benevolent powers that be are doing it to save us. We must save Fannie, Freddie and the others so they can save us. Are you feeling the love, Winston?
We shall fight them on the laptops, we shall fight them on the pc’s, we shall fight them on the cell phones, and we shall fight them on their street, and we will never surrender!
The benevolence is everywhere, Winston. You can’t escape it. You can’t defeat it. It is omnipresent. Bask in the love, Winston. Don’t fight it. It got us into this mess and it promises to get us out of this mess.
[A]lthough unitary, the story is three-fold. The first describes the world of 1984 as he perceives it … the third is his capture and imprisonment, interrogation, torture, and re-education in the Ministry of Love.
http://en.wikipedia.org/wiki/Nineteen_Eighty-Four
test
yeah but…didn’t the germans just go around the maginot line?
or was it your implication that mr. market would just find a work around…soon.
The powers that be are doing an end-around of the mind, and the results will be as shocking to us, as it must have been to the average Frenchman in 1940.
Coup d’Lameduck
That’s poppyCrotch! The Ministry of Love just mailed billions of eXXXtremely stimulating checks and promises more, lots, lots more…
There’s 72 vestal versions, on-line*
*all major credit cards accepted
I thought allah said 72 vestal virgins on line…..and we only accept a platinum card
‘Last week’s collapse of IndyMac Bank will make home loans harder to obtain and more expensive, said a local Realtor who will feel some personal pain. ‘It will raise the interest rates faster than you can shake a stick,’ said Thomas R. Wilkins, CEO of Wilkins & Associates Real Estate. ‘It has stopped the lending business. It’s tougher to get a loan.’
‘The values of the homes, particularly where they lent, have gone down,’ Wilkins said. ‘I don’t think they understood it was going to get this catastrophic this fast.’
I continue to find a lot of people in denial about the whole situation. Perfect example is a couple I know - they just bought a house in the suburbs - saying “We saved $30,000 and it’s never been a better time to buy, this house won’t drop”. Why do people continue to believe that rubbish - that their property is something special and immune from greater market forces?
A number of my friends continue to believe the solution to housing is not declining prices, it’s more government guaranteed mortgages and less downpayments. Aren’t those two things what got us into this mess?
Heard a radio advertising the higher amounts of guaranteed loans by Freddie and Fannie and I just shake my head - giving an alcoholic a larger glass so he don’t need to refill it so many times is not the solution.
“I continue to find a lot of people in denial about the whole situation.”
Good. These are the people who will sacrifice their money to help keep the system functioning.
My sister said the same thing in early 2006 when she bought a foreclosure for 30K less than her first investment property. She’s down about 200K and is trying to ‘flip’ her way out of the situation. The resets are coming but ungracious tenants keep leaving…
It’s amazing how many people attempt to dig themselves out of a hole by continuing to dig.
Or drill their way out of a hole by more drilling….
My experience has been similar to yours. No one except for people, who actually sell their house and lose money think that the value of the particular property they own has gone down. I think that there has a propaganda campaign of such magnitude about what a no-brainer home ownership is, that for people to think in any other way for many is impossible.
“I think that there has a propaganda campaign of such magnitude about what a no-brainer home ownership is, that for people to think in any other way for many is impossible.”
Most people I know would not be able to compare renting vs. owning in any meaningful manner. Even right now, in Florida…
Even now with what is going on in real estate I still get odd looks from people when I tell them I’m renting. There is a mass hysteria when it comes to housing. For many it is inconceivable that home ownership isn’t a great way to accumulate wealth, even when all evidence points to the contrary.
I have a friend who has been a RE appraiser his entire adult life. I called him about 6 months ago just to catch up. He tells me how awful his business his and how broke he is and how the market is in the toilet, etc. etc. etc. He then follows this up, without any irony, by saying, “So when are you going to finally buy something?”
I believe Moman was the one who brought up the Resolution Trust Corporation above. I have seen RTC posts on this blog before. They share an IP with the FDIC.
It sure would be a hoot to see what institutions originate what proportion of hits and posts.
Sorry Ben, it wasn’t me who posted about the RTC…today’s the first day I’ve posted in about a month unless someone is using my name (and I am posting from a wireless hotspot).
I do believe the RTC will be re-created.
I agree, and have stated that here in the past. Son of RTC or RTC II. It’s coming.
LIke a Stephen King movie…aaaaaaaaaaaaagggghhhhh
Ben,
I’ve also suggested an RTC-like entity, but I think it’s tooo beeeg for a single entity.
Perhaps breaking it down into districts:
North, South, East, West
or
The 12 Fed districts.
Getterdone!
Leigh
London (Reuters)
Citigroup chairman Win Bischoff has warned home prices in Britain and the U.S. culd drop for another 2 years.
I am sure Profesor Bear can find the story
Jeff,
Here’s the link, it’s a video
http://news.bbc.co.uk/2/hi/business/7515141.stm
Thanks
“Job creation, by any means, is the best way to stimulate the economy in my view.”
Job creation is a matter of perspective. There are always plenty of opportunity to meet the current needs of society. The problem is expecting someone else to “put you to work”.
Job creation by means of inflation will not stimulate the economy.
“City Attorney Diaz said the city has been approached by investors interested in buying parts of the Bellevue Ranch development.”
This is exactly what needs to happen. Failed developments get sold off, the new builders have a lower cost basis, build less expensive houses that people can afford and jobs are created.
I agree in part. But why does Merced need 6,000 more houses? So the construction workers have a place to live? As the poster above noted, this RE based economy is in question.
Sam Walton used to fly a small plane over America, looking @ things from a few thousand feet up, when searching for new locales…
We fly occasionally in the Central Valley, and from the flight deck, you can not only see bunches of new housing developments with nary a car in the driveway, but also the littered corpses of failed housing projects.
There’s a lot of ag in the Central Valley, and it looks orderly from up high, rows of plenty.
The failed housing projects have a stillborn look to them, in contrast.
IMO, we could use more ag and less housebuilding in the CV.
It’s a bit of a joke…
In some ways here on the ground, you feel like there’s a Grapes Of Wrath story by Steinbeck, just updated a bit.
Instead of the CV being invaded by dust bowl refugees, the refugees are home-grown this time.
I highly recommend “The King Of California” if you’d like to get the skinny on how mega-ag ended up largely in the control of one man…
http://www.amazon.com/King-California-Boswell-Making-American/dp/1586480286
“I agree in part. But why does Merced need 6,000 more houses? So the construction workers have a place to live? As the poster above noted, this RE based economy is in question.”
I’m not saying they’d be successful at it. Instead of trying to prop up the market thereby freezing the market, letting market forces proceed allows supply and demand to come into balance. If there’s no demand, the new owners will have to sit on it, perhaps for decades. If they also can’t afford to hold it, they may also lose it.
Sounds like somebody needs to buy this and turn it back into a ranch. At what land price does ranching again become profitable in this part of California?
That’s what I’d like to see.
They should offer a price that would work even if they turned it back into ag land.
Or, perhaps the 4,000 sf house on a 5,000 sf lot isn’t really what people want??
How about they design a residential/mini-ag development that uses solar power, water reclamation/rainwater catchment, and spread the houses out enough that each owner could have a garden or mini-ranch? I think there’s a market for that, they just need to get the land at a low enough cost to make it work.
‘Until last year, the price decline affecting Stover hadn’t happened in recent history. Before 2007, the median condo sale price declined only twice in Franklin County in the past 20 years. But in 2007, the median condo price plunged 8.5 percent. Single-family house prices peaked in 2005. By the end of last year, the median house price had dropped about 5 percentage points.’
IMO, Ohio and Michigan entered the bust just ahead of other states simply because their prices peaked earlier. Some say it’s the economy there. But it could be said the economy is worse in California and Florida today.
Based on Case Schiller index the price of the houses in Detroit metro area peaked during months of Dec 2005 –Feb 2006. Latest April 2008 report indicates that the current prices are down to the levels of June 1999. The index values are based on two months old data. If we assume that the over two months the prices of the homes will decline by 3% the prices should be back to Sep 1998 levels. IMO decline of 3% is reasonable.
I need to spend more time on Case/Shiller’s website, can anyone provide a link to historical charts with “real” numbers instead of just line graphs?
I have an online, free spreadsheet where I enter the values of many items over “all” of history: gold, silver, DJIA, NYMEX crude, etc. I’d like to start adding some Case/Shiller information there (targeting maybe 4 areas around the country). I’d also love to add median incomes in areas, if they have information going back far enough.
It would be a hoot to compare all the various numbers, and then do an analysis as to what the “best” investment would have been had you had perfect timing. Then look to see what the “worst” investment would have been, and then the “average” investment. See what the high/low/mean is.
A.B. Dada
Here is the link
http://tinyurl.com/3cz3kg
click on April 2008 for the latest values
Dada, keep in mind that you have to subtrace carrying costs for residential housing–taxes, insurance, maintenance and repairs. I reckon at least 5% of the replacement cost of the building plus land cost.
Most investments don’t cost as much as housing to carry, so their net returns are much higher. In fact, US Residential housing has been a terrable investment over the 100+ years or so where reasonable data is available (see Schiller). NRA types convienently forget to subtract the losses when bubbles burst from from profits during the booms. Also, few people keep track of their actual ownership costs. How many roofs do you replace in 40 years? Heat/air condtioning units? Light bulbs? It all adds up.
“His first mortgage is going to reset to a higher interest rate early next year. That means his monthly payment will more than double and then float every six months based on national interest rates, he said. Locking into a fixed-rate mortgage would be even more expensive, costing him close to half his monthly income plus a hefty down payment and thousands of dollars in up-front points and fees.”
The problem with this situation is not only that he had a adjustable rate mortgage, but he 1)put no money down 2)has two mortgages 3)and more than likely has the toxic NEG AM loan as a first..
He was pretty much doomed from the start…
“Because the purpose of a down payment is to ensure that the lender can recover the full amount of the loan in the case of default, the potential fallout from people in Stover’s situation could be ‘a sucker punch’ to the economy, lenders and neighborhoods, said James Newton, chief economic adviser for Commerce National Bank in Columbus.”
That’s why banking stocks aren’t even appealing to me at $3 a share. In the next couple years they may be completely worthless. As far as the down payment stuff goes, I keep hearing about how people are STILL getting loans with 5-10% down. With prices still relatively high, that doesn’t make any sense to me. Are banks doing this to try to encourage buying and prevent the home prices from dropping faster? What happens when the 5% down buyer today ends up upside down on his loan next year? How many of today’s buyers will end up in foreclosure in the next few years?
“How many of today’s buyers will end up in foreclosure in the next few years?”
Many.
And it doesn’t make any sense to me either, until you understand the MBS market; that is. The lenders can still sell these loans (granted, only the FRE and FNM, the ultimate suckers), so they will continue to make the loans. There’s money in it for them. Would they sell the loans if they held it on the books? Not very likely, imho.
I am bullish on the bank stocks (at these levels), not because they did anything right (in fact, the opposite) but because the govt has set themselves up as the ultimate bagholder for all these bad loans. Frankly, without the govt interventions, I think that most of the big banks/lenders would/will fail.
There’s no reason to buy, or to lend money right now, other then the idea that “somebody else is holding the bag anyway”. Until that changes, this market is going nowhere but down.
Precisely why the government can’t let FNM and FRE fail. If they did, their MBS would be liquidated and the true market value of all sorts of hard to price assets would be identified, giving rise to write-downs so large that most big banks would be insolvent.
yes.. government intervention is worth a few points.
Going back to the idea of mapping out the next few years, here’s is a scenario I think that will play out:
1. 2006: A couple buys a house with an adjustable rate mortgage.
2. 2008: They’re already very much underwater.
2. 2011: Their interest rate resets.
3. The can’t afford the higher payment, so they start withdrawing money from their 401(k) accounts.
4. 2012: A year later, the 401(k) money is gone, so they stop making payments. Their lender, however, is so overwhelmed with foreclosures that couple can live in the house for a year.
5. 2013: The bank finally forecloses, evicts the couple from the house and puts the house on the market.
Since there are millions of people in this situation, foreclosures will still be a major factor in 2013, pushing down house prices.
How does this sound? Does anyone see any flaws in my prediction?
I took a look at my post and noticed the typos and the 1, 2, 2, 3, 4, 5. I guess that I haven’t had enough caffeine this morning. Anyway, I hope everyone can undertsand the point I was trying to make.
2. 2008: They’re already very much underwater.
2. 2011: Their interest rate resets.
There’s room for yet another #2.. a fork in the road that leads down an entirely different path.
2b. They abandon the joint, and rent, saving their 401k as well as saving lots of ‘extra’ money from every paycheck.
1. 2006: A couple buys a house with an adjustable rate mortgage.
2: 2008 They`re already very much under water.
3: 2006 They could not afford the adjustable rate mortgage to begin with.
4: 2008 They stop making payments and cry foul I am a victim and wait for government intervention.
5: 2008 The FED opens the discount window to the banks, but they don`t loan the money they simply keep from having to write down all of their bad debt.
6: 2008 Sen. Dodd sponsors the 300 billion dollar Bank of America bailout bill.
7: 2008 Bernanke, Paulson and congress saddle the U.S. tax payer with Freddie and Fannie.
8: 2009 The chosen banks are solvent and bread lines are forming with the couple who bought in 2006 near the front.
9: 2010 If you have money you can buy a house for next to nothing and President Mccain is saying I`m too old for this, why didn`t I tell everyone Obama wasn`t a Muslim.
i find it difficult to absolve the people of this country for the negative effects of the housing bubble.
It was they who signed the phony loan docs.. they who gambled on property appreciating forever.. they who borrowed the HELOC money and blew it off on crap.
but the dice rolled snake eyes, just as many realized must eventually happen..
Now, the bill comes due and they don’t want to pay it.. instead, they want the businesses that financed the party to go belly up.
This walk-away mentality has spread from walking away from one’s underwater loan to walking away from any and all financial responsibility.
Agreed
Maybe “old school” but my father raised me telling me that my word or a hand shake was a deal, and if I didn`t stand behind that I didn`t stand for anything.
It seems like it`s everything today, run up credit cards just file bankruptcy, paid too much for your home just walk away. Even proffesional athletes that sign multi year multi million dollar contracts have one good year and want their contract redone for more money, but if they have a bad year that`s o.k.
1. 2006: A couple buys a house with an adjustable rate mortgage.
2. 2008: They’re already very much underwater.
3. They walk away, for there is little else for them to do,
Second set resets in 2011, many have already packed the van in the middle of the night.
I shudder to think at how fast this is unfolding, and I do not condone walkaways.
Leigh
Current RE Loan law in states like CA appears to support a person’s right to walk away. I believe this is a mistake and must be reversed.
“Current RE Loan law in states like CA appears to support a person’s right to walk away. I believe this is a mistake and must be reversed.”
Certain loans are non-recourse, secured by the property. I have no problem with states that want certain types of loans to be non-recourse including California. Lenders could response by not doing business in those states, having higher down payment requirements, etc., but they haven’t. No one forced them to make loans under those terms. They were more than willing to make those loans, at a hefty profit at the time, even though there was little likelihood many borrowers would be able to repay the loans. That a state is non-recourse is not the problem. The problem is/was with the lending practices of many lenders. I expect a much higher level of knowledge from the lenders than from first time buyers. The law should be skewed in the direction of protecting those buyers.
Agree 100% Greg!!!
RE: Does anyone see any flaws in my prediction?
I got a problem with No. #5.
Hubs will be left alone in the house with the family dog, as the Mrs. will have filed for divorce and run off with the pool cleaning guy right after Step #3.
Of course.
15. 2045 - They have no savings for retirement, Social Security is still paying out but isn’t enough to live on, so they either move in with adult children who resent them for making terrible decisions and make them pay for it with every breath they take, or are stuck living in a 6 bedroom McMansion with 5 to 8 other elderly couples for relatively low rent, but very high monthly bills for utilities and are all constantly squabbling.
New sitcoms are built around this lifestyle.
20047 - Medicare is bankrupt so they both die of pneumonia after catching nasty colds from one of the other residents of the house (only employed person) who managed to get a job as a teacher’s aide in a nursery school.
“Unrest in the suburbs threatening the gentrified city core and art district riverside lofts nearby?”
This is a modest concern–crime is definitely on the rise in the IE.
But the real concern is still the price of those f’in condos. Holy crap. I would consider buying one, but they’re $600,000. For a condo. In Riverside. What do they think this is? Amsterdam? NY? Paris?
http://www.msoleriverside.com/
Riverside wants to have an art district downtown, but it isn’t there yet, and certainly not on a sustainable basis. The university supports the Culver Art Center (student work, although the building was donated, I am pretty sure), the California Museum of Photography (not a bad little museum, and their stereograph collection is world-famous, plus you can order Ansel Adams reprints from the negative for $500–they look amazing), and a new building being renovated right next door for an unknown purpose. They call it the arts block, and it’s way better than what we had before, but it’s not a “district” by any means.
There is no justification for condo prices like that in Riverside. All the paper millionaires who would have bought at that price are too busy hoarding gold or whatever.
Downtown Riverside, thought beautiful in many ways, is surrounded by old neighborhoods with wonderful ( some renovated, some in massive neglect/disrepair) homes.
You have The Mission and some deco or spanish revival or craftsman architectural buildings, then you have the 60’s crap commercial bldgs and fast food spots that just make it so darn hard to make that entire area a people magnet.
But condos in the 600’s , fuggetaboutit.
This is a great article that sums up everything we’ve been saying for years - http://www.nytimes.com/2008/07/19/business/economy/19econ.html?ex=1217131200&en=a9adc5b41087589c&ei=5070. The only thing it doesn’t mention is Social Security and Medicare. I have yet to see any discussions on the looming crisis with both of these. All I know is that the likelihood of higher taxes for all of us is very high!!! But doesn’t everyone who lives in the United States have the right to free housing, a government check and health care????
mike
didnt even notice the number sequence until you mentioned it. I just skim thru the highlights of most postings then trackback if they are interesting.
personally, the ultra-light laptop I use w/6pt font for postings lets a lot of typos, odd formats & other less than perfect postings thru without me able to catch em all . . . unless I spend an hr proofing every one. yah, right!
I DO have a life outside of this blog, so as long as the main message is presented or read in a coherent (HA) way, I’m good to go.
BTW, good post, Mike.
Read today that Japan’s housing prices are at 10% of 1990 levels.Thats an 18 yr. down tread..are they at bottom yet ?
Not sure but my sister just bought an 1 BR + den apt in one of the best part of Tokyo and it was just slightly > $1 million USD. I shudder to think what that apt would have cost in the late 1980s.
Bless the good people
but
Damn the Fed
There are to many house’s already for not enough buyers.
so STOP building any more, until the market turns
which means, that it will never get back up to “peak” level for many years to come.
The MAIN problem is the the FED keeps on making these boom & then bust cycles by have interest rates to low, 1-2% for too long (where people didn´t take a historical LOW fixed rate loan), and then by raising it, 5-6% TO Late TO Fast and now they are trying to “dope ” the economy Again with TOO low rates Again.
Our Euro land stopped at “2,5% and got it earlier to now 4.25%. and now the euro is very strong against the us$, although it too is a Fiat paper money.
Why is the interest rates SET by the FED & central banks, in a FREE market ??, as the free market will chose WHERE the loans will be made anyway, and that won’t be in the USA for long.
The RETURN of investment is more important than the Return ON investment.
Why do Americans accept The FED and the useless Bernanke & Paulsen, knowing that the FEDeral reserve is unconstitutional, coeped in 1913, and fail to see the link of Kennedy’s assasination in 1963, when he wanted to move off the Fed $ and BACK to the silver dollar. = 1$
Silver is now at 18$ which used to be a days wages, and will be again in the future.
It looks to me, very much so that the USA is being systematically destroyed, like Argentina,comes to my mind,( they defaulted just like Russia).
My guess is, that the very people that should pay for this is going to move to Europe,middeleast ect.. so that they Don’t have to “share” in the cost of the MASSIVE debt that is accumelating, as the int. rate will RISE to 15% +.
Why don’t people move together in those big houses on a collective basis, and share the cost of those Mega mansions, rent out some rooms instead of walking away and moving to ? ….jep… a smaller place.
You can vote R or D in nov
but if you WANT to get rid of the FED, vote ” silver”
TODAY.
why ?
(The Centralbank in Vietnam just forbid the Import of gold, so that the People can not protect themselves from inflation and debasemant.)
Good luck, out there
Mike
In the 1980s they bulldozed away entire tracts of Danny Faulkner’s newly but shoddily constructed condominium real estate in eastern Dallas Co. funded by ultimately failed Empire Savings.
Here’s why I think now is different: 1989 was a commercial real estate bust, not one born of and fueled by the common man’s mania. Now that everyman understands (from an experience dating to 1994) that in theory he can actively participate and drive a RE investment craze, the bubble that was pumped is still there (if slowly deflating).
As a result any concentraion of RE—no matter how much overhang—is still viewed as financial potential for the budding magnate, of which there is no shortage. So in geologic time they’ll continue to buy and sell to each other, always digging in their heels on the selling price when they can’t carry it anymore, always believing the worst is just around the corner.
“Readers suggested a topic on the possible future of the housing market. “Instead of just timing the bottom, let’s map it out.”
JOBS
The loss of jobs will not be made up fast enough to prevent a further decline in housing.
The loss of jobs has and will prevent the economy from recovering at a pace fast enough to keep the credit mess from getting bigger.
The jobs that will be created will be lower paying, even if a lot of them are created these jobs won’t be able to allow increased spending/borrowing at level that will keep housing prices from going down.
The jobs that came to be during the boom were of the higher paying sort and wage increases were not uncommon. We can see a lot of jobs are lost in finance and real estate with insurance in decline because of the other 2.
The engine that drives the economy is people spending money that they have or think they have. They have money if they saved or planned, they think they have money if they have a job that pays above what it costs to live plus credit, which they get because they have a job that pays.
Just as leverage was used to destroy the finance, insurance and real estate industries the loss of jobs and not being able to crate higher paying jobs will take out the economy, as we know it.
When I hear some bonehead say anything about the worst is behind us I ask where are the jobs that pay. The same boneheads drone on and on about how the fed has saved the day, everything is OK your money is safe, too big to fail, bail outs, stimulus and more and more. All I ask is where are the JOBS!