Bits Bucket For July 28, 2008
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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The National Australian Bank has written off a ton of U.S. debt and it appears that many are betting on a hard landing.
I am not convinced either way. Any one have any data and want to make any predictions?
I am so f—king enraged at all “The Bailouts” that I’m at the point of converting even more cash to precious metals not for possible upside, but just as a vote of no confidence in the INCOMPETENT PARASITE BASTARD THIEVES who run our government and financial systems. Don’t even care if my purchases going forward are overvalued. F- YOU, BERNANKE!
(And if it does hold its value or better, hey, all the more REOs for me come 2010:)
I think you would do better to put your cash in real estate in Westside Los Angeles. Now. Before it goes up even higher.
lol!! they are not making any more in west LA. It is however, getting hotter, more crowded and more dangerous each yr. LA is one nasty city.
Visited my sister in W L.A. and I was surprised to see even more tagging on buildings than the last time I was there a year before.
test
‘I am so f—king enraged at all “The Bailouts” that I’m at the point of converting even more cash to precious metals not for possible upside, but just as a vote of no confidence in the INCOMPETENT PARASITE BASTARD THIEVES who run our government and financial systems. Don’t even care if my purchases going forward are overvalued. F- YOU, BERNANKE!’
And people wonder why I resist efforts to turn this into a “bailout blog.” This post shows how this crap is a wasteful, blinding, paranoia.
And then there is this from below:
“The bailout of IndyMac’s depositors”
Folks, I’ll bet if your bank goes under, you would appreciate the insurance to pay off what ever it can. Get a grip folks. This is thehousingbubbleblog.
I’m not talking about Indymac, Ben, now we’re talking FANNIE MAE AND FREDDIE MAC.
what will the “bailout” do…a big load of nothing. 400k homeowners helped you say? thats not even one quarter worth of foreclosures nation wide. Now spread this 400k over 4 years… a big juicy nothingburger.
I hear that each big juicy nothingburger now comes with a bowl of rock soup, on the house…
Bon Appetit
And a pasture pastry.
I’m a little confused as to how much tax payers will end up having to pay for the bailout bill. Would it be the future defaults on the 300 billion dollar number or the full 300 billion?
“Would it be the future defaults on the 300 billion dollar number or the full 300 billion?”
Supposedly $300 bn is the proposed amount to be insured, and the actual amount to be paid out was most recently estimated at $25 bn. However, the Congress also proposes to raise the federal debt ceiling by $800 bn in connection with the bill, which seems like quite a bit of debt ceiling increase to cover a projected payout of $25 bn. I have to wonder what unannounced goodies they have in mind to cover with the extra $775 bn?
The debt ceiling gets raised almost every year, because every year the U.S. gov budget is about 400 billion in the red. The debt ceiling was raised last year as well - from 8.97T to 9.815T.
So to put that in perspective - that’s about a 17% raise of the debt ceiling is just two years.
Now we know where the next bubble is - U.S. debt. Only I doubt we get out of this one so easily.
The Real Estate Industrial Complex managed to vote itself 300 billion in one fell swoop. I find that very impressive.
But it only highlights what organized lobbying groups for industry do all the time - namely, vote themselves money.
The builders, realtors, lenders all talk a good game about taking risks and that’s why they’re making such great returns and blah blah blah. But when the musical chairs stop, and the tide goes out and they’re actually naked, they start howling about how they need to be bailed out. Hah. Some capitalist movers and shakers they are.
I’m just impressed that the REIC was able to do such a big chunk all at once.
I just heard a Maryland Congressman saying that this is just the beginning, as it may only help 8000 Maryland households. If they need to do more to help our families, they are poised to do more he said. I think it was Steny Hoyer. The station was WTOP.
So, everyone gets paid, the politicians get some political benefit from the 70% of Americans who feel this could help them, or who think that it might help the economy, and who desperately want another bubble.
And renters, savers and the fiscally conservative get another slap.
That’s democracy in the aggregate I guess - 2 wolves and a sheep deciding what to have for dinner.
Am I upset, angry, hopeless about any of this? No. I’ll continue to save, enjoy the net worth, look for non-idiotic places to obtain interest. But I am bemused, because bills like this just keep me out of the RE market that much longer.
And no, I do not regret NOT taking out a suicide loan, and eating Ramen noodles every night for the next 30 years.
Well, not just yet anyway
For every person who is angry about this bill, there are 100 people who couldn’t care less. I agree that there is no use crying over spilled milk, but it’s hard not to at least vent to a sympathetic crowd. It’s not the death of America, or even capitalism…it’s the death of deceptive laissez-faire speculation.
I think we should hold a wake, not a funeral.
Ben ,I have always believed that they should bail out FDIC or insured accounts by the government .Everyday banking commerce is needed for a society to even function . How much need does a society have to try to keep real estate values up by interference with those corrections in pricing and bail-outs of gamblers and liar loan borrowers or the lenders that made these bad choices ?
The F&F tampering directly relates to home loans and depending on how it’s received or treated or used it could affect volume and prices and taxes and costs in the future . Bailing out stockholders and investors in loan companies or investment banks is directly related to tampering with the natural correction of real estate . It’s almost as if you have to watch what the government moves are to see which way the tides are
going . If the government is doing every thing in their power to spike the punch bowl again ,than it drags out these natural corrections that would normally happen .If the government becomes one of the the only lenders that will provide financing
and they back it by the tax-payers dime ,the government has made the “people ” the possible biggest lender in town .
But, I agree with you Ben that some Bail-outs do help certain people while other don’t .The conditions of the credit markets or the loan markets have so much bearing on real estate because people need loans to buy real estate .The conditions of the loan markets ,interest rates ,availability of money , hand out programs ,etc. ,directly affect pricing on real estate ,always have ,always will .
I think the first time buyers provision from the housing bill for a 7.5K rebate when you buy a home will be a incentive to buy and its interesting how that might effect pricing on home .
I think La investorgirl was expressing anger at how the housing bill will make sellers be more inclined to hold their price ,even if it doesn’t work . So it will push her desire to buy real estate more into the future . I think a lot of people are trying to time the bottom or get close to it.
I respect the fact that your a housing blog and not a political
blog or a bail-out blog and I know where your coming from with not wanting to get to side-tracked .But ,it’s getting harder and harder not to consider the government moves as they attempt to mess with the housing correction . I never dreamed that the government would take this active a role in this correction ,even if the power peoples moves don’t work in the final analysis .
So, I try to make my posts directly related to what might affect
the housing correction or pricing of homes or availability of credit . If the government is trying to created a easy-money situation again regarding home purchasing ,it’s a interesting twist that could drag the correction of high price real estate
out . I know everybody has different opinions on how these forces will help or hinder the economy and inflation is causing
a lot of stress .
But ,your the man Ben and I can understand how you want the focus of the housing blog to remain on track and not veer to far off the point or into political grandstanding ,etc.
Not everyone who reads and posts here is done working through the anger stage of the housing bubble stages of grief. I am wondering when the rest of the country will go through this stage, and what it will mean for societal health and welfare?
I am so f—king enraged at all “The Bailouts”
Go back and study the 1929 crash and that will make you appreciate the bailout!
Um, if the bailout leads to hyperinflation, go check out Zimbabwe, the Weimer Republic, etc. and get back to me on how well that works out.
I feel certain our role model is Argentina circa 2001-2002.
If i’m correct, the Dollar’s value will contract against rival fiats to the tune of 2/3rds.
This means that a Euro will be worth closer to $5, and a little over 2 RMB to the Dollar in China.
A global repositioning of things in the grand scheme…
I agree about Argentina 2001 being the most likely role model for what will happen in the US, but not today apparently. The euro got whacked, despite this weeks record bailout deal and a record accounts deficit. Looks like the ‘magic’ of Uncle Ben is still working
I would like to see the mechanics of this bailout in action.
1. The lender has to decide whether the FB is worth putting through the bailout or writing the FB off as a loss. That means broke lenders have to essentially do ALL the qualifying that they should have done in the first place. Who’s going to get on the phone to verify all those stated incomes? Temps?
2. Then the lender has to get the house appraised, and reappraised. Doesn’t this bill take effect in October? House values will drop even more by then.
3. Then they have to submit this all to Fannie and Freddie. Hoepfully F&F have their own criteria.
3a. I haven’t read a word about second homes and heloc’s. What’s the critera for them? Will the American Taxpayer (by that, I mean the Chinese factory laboror) be subsidizing Escalades and Love Boat cruises?
4. Then the Lender has to go to the FB with another set of numbers, at which point the FB gets to decide whether to take it or to walk.
This is going to take LONG time, much longer than the FB can afford making payments. The end result is going to be: FB’s staying in their homes all right — mortgage-free.
Oxide …A lot of people feel the housing bill is a waste because it’s to complicated as you point out .
In answer to you question about second-house home owners ,I believe that they do not qualify for any of the programs and I believe the housing bill programs offered only apply to primary residences . One wonders how in touch the government is with how many properties are vacant, in spite of the claim by the borrowers that they were their primary residence .
The FDIC ran a full page ad in today’s paper (The Oregonian), stating how no one has ever lost a penny in an FDIC insured account. There’s a picture of a $100,000 bill, with Wilson as the portrait and a penny below it. The $100K bill said it was back by gold, ha, ha. So, now the FDIC is blowing big bucks on ads.
Now, if that doesn’t get you worried, I don’t know what will.
I would like to see that ad, since fiatscos are most definitely not backed by gold. Irredemable paper is backed by nothing, and it seems the .gov is now lying in full-page color ads.
I saw that very ad in People magazine last month…
In a magazine full of hair coloring ads, it stuck out like a sore thumb.
An FDIC ad in People magazine (People?!) says a lot more about the undercurrent of anxiety percolating around us than just about anything I’ve seen or heard so far.
It’s a mixed message indeed…
Amidst the endless fawning of celebrities, there it was, a message of hope.
Why in People though? Seriously, I wonder how much money the average regular reader of such a trash rag would even have in a bank to worry about.
If they wanted to reach people who actually have money in a bank they should have ran it in the WSJ, or even online here at the HBB.
What a waste of advertising money.
Hey, now. I have money in the bank, yet my guilty pleasure is reading USWeekly.
We can be as elitist as we want, but the truth is in order to reach the widest audience, period, you need to put ads in rags like People or on MSM news programs like Dateline or 60 Minutes. Most people don’t dig for information, but if it smacks them in the face during their usual routine, then they may pay attention.
“Why in People though? Seriously, I wonder how much money the average regular reader of such a trash rag would even have in a bank to worry about.”
The average reader of People magazine tends to be female, (most wish they had $100k to be worried about) and they are easily influenced by advertising, and are the perfect medium to preach the message of how solvent banks are.
And the average American is mesmerized by huge financial numbers, as evidenced by first rush “getting” a $400 million deal. followed by sean “getting” a $100 million deal.
If they are getting paid that much, they must know what they are doing mentality of middle America, which extends coast to coast…
That ad was in the NYTimes a few weeks ago. Full page. Eeerie
Wow. That is a HUGE heads-up. Yes, it gets me very worried. I would love to see a picture of that ad, and of the $100,000 bill “backed by gold.” I have long believed that the best way to understand the scam is to look at how the wording has changed on our currency over the years.
People Magazine is for people who can’t read without moving their lips.
Same ad is in today’s LA Times, section A. I liked the $100k promise to pay the bearer in gold; it underscores the clueless nature of our betters in the Beltway.
When the FDIC runs full page ads its time to start investing in the Cashtropedic mattress.
Has anybody come up with a good way to hide cash in a waterbed?
Poke kruggerands into the fill hole.
If I am not mistaken, the $100K bill was not a generally issued denom, but just for banking purposes and was issued in a time when they were redeemable in gold (by institutions).
The largest issued bill was $10K, both Federal Reserve and gold certificates.
“I am so f—king enraged at all “The Bailouts” that I’m at the point of converting even more cash to precious metals not for possible upside, but just as a vote of no confidence in the INCOMPETENT PARASITE BASTARD THIEVES who run our government and financial systems. Don’t even care if my purchases going forward are overvalued. F- YOU, BERNANKE!”
Congressional ‘bailout’ talk has made me rethink my position on ‘walk away from the mortgage’. While I don’t think it ethical, I think that it is the only way to keep the ball rolling in the right direction so that clearer heads might prevail. Once again it’s politicians promoting ‘Symbolism over Substance’ in an attempt to buy votes without any regard to the homeowners and we all know that any bailout is not going to solve our problem but only create more problems. Washington still thinks that time is on their side and things will slow and turn in the near future. I can only see those three chinese RE monkeys sitting in a row: Hear no fraud, See no fraud, Speak no truth.
I think walking away from a mortgage is a selfish and wussy thing to do. If it isn’t working for you anymore, sell. Take the loss. Oh well. Live and learn. But to just walk? Absolutely no pride whatsoever.
I don’t like the walk-a-way thing because if to many people do
it ,than that very well might create a major crisis of to much loss .Walking away was never a option I ever considered , no matter how many times the property I lived in for 23 years dipped in value . But, I could afford my payments and I wasn’t stressed like so many people are today that decide to walk .
I think that the lenders will not go for no-recourse loans in the future ,if they have to many walk-a-ways ,so indirectly or directly the acts of your fellow-man end up affecting you .
If the insurance companies have to many losses they raise the price and pass it on to everyone .The fact that all these non-qualified buyers were buying property pushed the prices up which priced millions of people out of the market .So, nobody can say that other peoples actions don’t end up affecting innocent people . I think that is one of the reason why people like rules and regulations and law and order .Just who wants to be victimized by “other people’s acts “, not me.
The “acts” of Wall Street ,and all the game-players of the housing boom ,are having such direct influence on the economy and government decisions these days that it’s
scary . You look back on the 1929 stock market crash, and even people who never even invested in stocks on margin
had their lives crushed and ruined financially by that event that triggered bank failures and threw the economy into a major Depression . That is one of the reasons why I feel FDIC should be honored at least, and the government should take a clue from the Great Depression times and look for “job creation” as one of the more productive way to stimulate the economy .IMHO
Mass “Walking Away” is the only way banks will learn. If I held a non-recourse loan on a depreciating asset, I’d seriously consider handing over the asset and waiving adieu. Of course, I refused to buy one of these assets when I thought they were overvalued, so I haven’t walked away. I’ve paid off in full both mortgages I’ve owned over the years when selling the houses.
sfbubblebuyer …..What you say is true about banks learning a lesson ,but the problem is the money-changers want to pass the
loss on to the society as a whole . I wish that the people that made bad loans or borrowers that were liars would be the only ones that would suffer and learn from their stupid and greedy choices ,but they are trying to make everybody pay a % of the loss. How are the gamblers going to learn if they get bailed-out in any form ,and that has been a long -standing question and cause for anger on this blog ?
Society as a whole will pay the price regardless. It doesn’t matter if the banks fail and society has to pay to rebuild the banking structure or if society has to pay to bail out the existing banking structure, society is still paying.
But making the banks eat it too is the only way to discourage it from happening again.
If your kid breaks a window, you’re paying for it regardless of whether or not you make him pay it back from his allowance or not. It’s all your money. But if you make him pay for it out of his allowance, he’s much more likely to be careful about not breaking windows in the future.
“If your kid breaks a window, you’re paying for it regardless of whether or not you make him pay it back from his allowance or not. It’s all your money. But if you make him pay for it out of his allowance, he’s much more likely to be careful about not breaking windows in the future.”
Funny, when I was a kid playing ball and sent a baseball through a neighbor’s window, my parents sent me over to the neighbors house to do work FOR THEM to pay off the damage. I remember cutting their lawn 3 times, washing their cars and cleaning some of their windows!
No wonder there’s so many entitled younsters out there. Parents paying for their kids errors.
Dumb ass parents.
Yep. I remember getting marched back to multiple “scenes of the crime” so my dad and the aggrieved party could agree on the penalties for acts of carelessness or youthful mischief. We rarely got off easy. Corporal punishment and rehabilitative labor didn’t always mend our ways, but we never questioned the basic justice of it.
That’s exactly correct, Sammy, and it’s by far the best way to handle the situation. A direct cause-and-effect result for your infractions as a youth are best remembered by that youth. A great life lesson that’s driven predominately by ethics and placing responsibility exactly where it belongs: On the kid.
Tying in a parent’s wallet either through cash or weekly allowance to the infraction teaches the kid little about consequences for actions. Why? There’s no apples-to-apples implications.
No wonder why so many kids are so screwed up. The parents don’t have a clue how to parent.
I still am going to push you to dial in to Evan Sayet on the ‘net, Sammy. What he says ties in beautifully to what we’re saying here. Strongly recommended. Thought- provoking as hell.
BTW - I just moved to Colorado from Chicago. Don’t you live out this way somewhere? I’m in COS.
Australia has four main banks, and the other three were all sold off by between 5 and 8% in today’s trading (which ended just over an hour ago, our time).
NAB dropped 13% on Friday, and another 3% today.
I think the selloff here was not due to the amount. $800 million is not a huge amount of money for NAB. More likely, there is a concern about why their US loan book has been written down so savagely only one quarter after posting some lesser write-downs and saying at the time that they were taking “a conservative view”.
I believe the NAB has now written their (largely prime) loan book down to about 55% of face.
It isn’t so much the amount of the writeoff, but more the message…
Australia (and NZ, Aussie banks dominate there) are in just as deep water, real estate-wise as we are, albeit in a much smaller market.
It’s a clustermess
–
When the US of A goes down it will take the rest of the world with it. The US-led depression will be truly global in nature and China and India will not fare much better.
It will be all about bad debt. An Indian bank that I was negative on got hit last week. These crooks (Indian banks) make Mafia look good, but people engaged in speculation don’t care about their practices.
Jas
‘When the US of A goes down it will take the rest of the world with it.’
Yeah, run for the bunkers…
“Oh $hit !”….”Incoming !”
–
For better or for worse, the world has copied the US financial system, including bad schemes of pushing debt on households. Therefore, the US of A will take the world economies with it.
I am all for America and India making material progress but not by schemes that hurt the majority and benefit a tiny minority. So much for democracy! People, around tthe globe, have been thoroughly doped by propaganda.
Jas
I’ll wager the FDIC and Fed are watching this blog too.
The world didn’t copy the US financial system, the US adopted the european financial system (central banking) after fighting a revolutionary war to break free of that financial system.
I suggest you watch “Money Masters” to learn the history of central banking.
The US went through three iterations of a central bank (or similar structure) in the 19th century. The first and second USA banks (both led to boom/bust problems), and the Greenbacks of the Civil War (which were badly managed in the post war - trying to get them back to $20/OZ +/- by shrinking the supply and led to a long deflation).
Many were against these efforts and positioned them as unconstitutional - Andrew Jackson and Lincoln’s adversaries amongst them.
The Federal Reserve has fared a bit better, but inflation has ruled the day since about 1933 or 1938 (along with increasing supplies of cheap energy - except in some of the 1970s).
This housing bust is very deflationary and the Fed / Treasury is trying to offset that with money creation….problem is, the money doesn’t go to the people that need it and lending is drying up even for business.
That against a backdrop of increasing energy costs make for a “new” environment not really seen in US history (kind of a combo of the 30s and the 70s). So we get inflation in things we need (energy, food, transport) and deflation in things we enjoy (big cars, big houses, luxuries, etc…). And truly uncharted waters….
Former Google employees start their own search engine
http://www.nytimes.com/2008/07/28/technology/28cool.html?_r=1&ref=business&oref=slogin
I played with it. So far, it’s epic fail.
Elaborate?
Try “automobile dashboard”
If you can even get on it, that is.
I thought it was pretty weak for the couple minutes I searched around with it, too. Both in terms of search results and look-and-feel.
not a chance it will beat Google, it is awful!
An addiction to borrowing…
EVIDENCE THAT American consumers are struggling to cope with their debts - and failing - usually takes the form of statistics, such as the soaring number of mortgages in default. But the problem found more graphic expression Tuesday, when Taunton mother Carlene Balderrama killed herself an hour and a half before her home had been scheduled to go up for foreclosure auction. She left a note, police said, telling her family to use her life insurance money to pay for the house.
Hers is the most extreme version of a story that is unfolding in hundreds of thousands of households across the country. How did so many families borrow so much that any significant setback - a lost job, an illness, an upward adjustment in a mortgage rate - was bound to be ruinous?
http://www.boston.com/bostonglobe/editorial_opinion/editorials/articles/2008/07/27/an_addiction_to_borrowing/
How many? That’s the question. What share of American’s lifestyle is only made possible by going deeper and deeper into debt? It’s one thing to be living paycheck to paycheck. It’s another to be doing worse than living paycheck to paycheck.
I”t’s one thing to be living paycheck to paycheck. It’s another to be doing worse than living paycheck to paycheck.”
And this is a distinction that seldom gets made outside of us nuts who tend to think about such matters.
“Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
– Charles Dickens –
A very large number of people are living credit-card-bill to credit-card-bill these days.
My landlord left papers on our doors “reminding” tennants about the rules of the building, including that rent is late if it arrives on the 2nd of the month. They reminded us that, as per county rules, they start charging interest on the 10th. Then came the kicker - the new policy is that they will start filing law suits on the 7th.
I wonder if I should have kept the notice. Since my rent usually arrives early, I should be able to use that for rent negociations when the time comes….
She left a note, police said, telling her family to use her life insurance money to pay for the house.
The sad reality in this case is that all life insurance policies have a clause in it that will not pay if the death is by suicide.
no.
regards
-evildoc
That is not true.Read your policy as they are all different.I know primerica has a 2 year rule.Once the 2 years is up fire away.
Fire away and se what happens. I see these type of cases all ofthe time and the majority will lose.
Good luck in court against the insurance company!
Defenestration means pushing somebody (paneless) out of a window, usually to their death.
Debtfenestration: Jumping into a window of real estate opportunity, perhaps causing defenestration?
I believe the term “defenestrated” also appeared in the police report for Lorena Bobbitt.
http://www.youtube.com/watch?v=k7kKnKxXjVs
Somebody should have told this lady that you do NOT get any life insurance money when you kill yourself!
I should also note that in Nevada suicide is a rather popular way out of life…NEVER heard on anyone getting insurance money of all the suicides.
People, read your policies. Insurance DOES pay for suicide sometimes. Sometimes it doesn’t.
If it does, usually there’s a requirement that the policy be in place (paid) for one or two years prior to death.
My brother committed suicide years ago and INSURANCE DID PAY!!!
Please don’t make your life insurance decisions based on everything you read here. Do your own homework.
Here endeth the lecture.
Kind of sad that this thread has centered on whether insurance does or doesn’t pay in cases of suicide [correct answer: depends on the policy], rather than on the terrible human tragedy being so deep in despair that taking your own life seems like the only way out.
Then there’s this unstable soul:
This guy snapped on a church full of kids because his foodstamps were being cut off and blames liberals. Huh? I guess he was blaming gays and women for being unable to find a job but found it pretty ironic it was losing his (liberal promoted) foodstamps that pushed him over the edge. Sounds like a real prince that good times only kept under the radar.
http://www.cnn.com/2008/CRIME/07/28/church.shooting/?iref=mpstoryview
“The suspect in a fatal shooting at a Knoxville church Sunday was motivated by frustration over being unable to obtain a job and hatred for the liberal movement, police said Monday…..
Authorities also discovered a letter from the state government telling Adkisson he was having his food stamps reduced or eliminated, police said.”
And what does this have to do with the housing market?
“How did so many families borrow so much that any significant setback - a lost job, an illness, an upward adjustment in a mortgage rate - was bound to be ruinous?”
I truly think a certain portion of our population struggles w/depression and other mental issues. I don’t make this statement with a condescension toward them for their illness as much as a recognition that we are increasingly a culture that eats its own once any sign of weakness becomes apparent.
I’m not speaking of any liberal causes as much as the fact that I talk to way too many people who appear to have a lot of friends and things to do but who admit to feeling very lonely and misunderstood. I never ran into more than 1-2 until the last few years. Now they’re everywhere. Middle age angst perhaps or sign of the times?. In either case, it puts people in a weakened state of mind when things go wrong.
I think about what you are saying a lot CarrieAnn . I have to make choices on a weekly basis of who to help out and who not to help out
regarding people that come into my life . I end up going to the hospital to visit these days a lot .
We live in a world of many people who are in a desperate spot in one way or another . Depressed people are so …well …depressing . When I moved into my new neighborhood I noticed that the people were
kinda not talking to each other .I decided to change that …but now my place is like the grand central station of the neighborhood
sometimes .My doorbell is ringing all the time .
But what was my point . My point was that I wanted a neighborhood that people where friendly to each other
,so I figured in order to obtain my goal ,I had to be neighborly and take the first step. It took a while ,but now the whole darn neighborhood knows each other and they are talking to each other and looking out for each other .I look at it this way ,all the people really wanted it to be a friendly neighborhood ,they just didn’t know that’s what they wanted . It’s really funny also because the neighbors gets pissed off when I’m on the blog .They say ,”turn off that computer .”
Sounds like your neighborhood is a great place to be, Housing Wizard. The good stuff rolls downhill just like the bad stuff. When in a not so hot mood, I try to remember to smile at people even strangers. The feedback is incredible. Sometimes you get the feeling people don’t see a welcoming smile enough.
A few times I’ve called my outdoorish friends when I’m in the car enjoying the day and a song comes on that reminds me of past good times together. Sometimes I’m told that phone message was the best thing that happened to them that day. That kind of feedback is my positive medicine!
And no venting session was even necessary.
This woman had bigger mental problems than just her house! She left behind her family! How utterly selfish can you get?
Ben Bernanke’s Hush Money…
The bailout of IndyMac’s depositors will probably deplete 10% of the FDIC’s reserves.
Congress will back up the FDIC if the FDIC ever (1) runs out of T-bills to sell (2) to raise money (3) to pay off depositors of insolvent banks. But where will Congress get this money? From the Federal Reserve System, if lenders will not fork over the money.
The Federal Reserve System backs up Congress. This is the heart of the threat to the solvency of the dollar.
The $4 billion that the FDIC will pay to a handful of depositors at IndyMac is hush money. It is paid to them to silence every other depositor in the country. “Don’t spread rumors about any insolvent bank.” Why not? “Because, in a fractionally reserved system, all of them are technically insolvent.” They are all borrowed short and lent long.
http://www.lewrockwell.com/north/north642.html
–
“But where will Congress get this money? From the Federal Reserve System, if lenders will not fork over the money.”
This is idiotic. There will be no Federal Reserve left if the US Treasury can’t borrow in the open market. “Congress gets its money” via Treasury auctions, once or more every week, and the demand is usually 2-3 times. If the US Treasury can’t raise money there will be collapse of the whole global finance system and we would have to worry about what happens to the Fed.
Jas
–
Sorry, what I meant too say is that we would NOT have to worry about what happens to the Fed.
Jas
The Federal Reserve has a captive buyer of all securities, The captive buyer is social security system. The Soc Sec will not be a purchaser sometime in 2016 according to the CBO. Until then party on dude.
What (allegedly) happens in 2016?
Cold turkey for SSA?
Fully invested as much going out as coming in.
But IMHO the US will sacrifice the dollar thus keeping rates low.
“..The Dornbusch Overshooting Model or Exchange rate overshooting, first established by economist Rudi Dornbusch, aims to explain why exchange rates have a high variance. The key insight of the model is that lags in some parts of the economy can induce compensating volatility in others.
Dornbusch developed this model back when many economists held the view that ideal markets should reach equilibrium and stay there. Volatility, from this perspective, could only be a consequence of imperfect information or market obstacles. Rejecting this view, Dornbusch argued that volatility is in fact a far more fundamental property than that….” Wikipedia
for the IMF view
http://www.imf.org/external/np/speeches/2001/112901.htm
Dornbusch’s Overshooting Model After Twenty-Five Years
What (allegedly) happens in 2016?
I think SS payouts exceed payroll tax deposits.
By 20/20 it will be clear to all, that the money the government was saving for you, isn’t there.
Is the speculation, then, that the bonds SSA received from the Treasury can’t or won’t be cashed out in 2016 when payouts exceed incoming tax revenues? That the US Treasury can’t take that kind of hit?
From what I’ve read, the crisis point is 2016 … or 2025 … or 2038. I don’t feel like I can adequately judge the competing claims in the Countdown To Meltdown, much of which seems to be ideologically tainted.
(Sorry, I feel a little dunderheaded on this one.)
One solution is inducing workers to work into their Seventies and beyond.
I thought the date was 2027 that the major problems were going to surface with Social Security . It seems to me that this is a pressing problem or issue that should be addressed sooner than the year that TSHIF.
Social Security is mere peanuts when compared to what’s looming with Medicare.
Home values at all levels of the market will trend down for years to come. Few U.S. citizens will be able to afford a $350K house 10 years from now. Global economics and falling wages in real terms will make it so.
The tech guys making $219 per hour on this board better save their money. Talk about a bubble!
Industry wage bubbles - THE term of the 2010s. You read it here first.
Given that homeowners are on average quite a bit older and wealthier than renters, this bill has the appearance of a Democratic-sponsored transfer of wealth from poor to rich and from young to old. Or am I missing something?
Housing rescue bill may fall short; who benefits?
By Anna Bahney, USA TODAY
Is it a remedy for the worst housing slump the nation has suffered in decades? Or merely a taxpayer-funded bailout that will fail to reverse the plunge in home prices, the surge in foreclosures and the grave threat that overhangs the economy?
…
Not since the National Housing Act of 1934 has legislation addressed a class as large as homeowners, without restricting the benefits to veterans, urban dwellers or low-income people. The 1934 law created the Federal Housing Administration and authorized the creation of Fannie Mae.
The question now is whether the current measure, sprawling as it is, will do what it’s designed to do and serve those it aims to help. Here’s a look at six groups that are intended to benefit.
$3 trillion loss in CA home values! We’re halfway to the bottom.
I think the time to buy homes (with cash) will be when the mortgage interest rates hit 15% plus (like in the early 1980″s).
“”Comment by Professor Bear
2008-07-26 14:29:06
Hows about a back-o-the-envelope estimate of the loss in CA housing values since the peak:
Current median value (after 38 pct loss) = $368,250
Drop in median value = $368,250*0.38/(1-0.38) = $225,702
Number of CA housing units (circa 2006) = 13,174,378 (not sure if this is SFRs only)
Rough estimate of loss in home equity value for CA =
13,174,378*$225,702 = $2,973,483,463,356 (let’s say $3 trillion).
How does that look compared to the $300 bn Congressional mortgage guarantee? About 10 times bigger? And that’s just for CA…””
“This bill has the appearance of a Democratic-sponsored transfer of wealth from poor to rich and from young to old. Or am I missing something?”
You are missing that the bill is bi-partisan, and failing to note the average age and income of members of Congress.
I was referring to the party affiliation of the loudest and pushiest promoters (Frank and Dodd). Obviously there is bipartisan support, given the large majority that voted for it plus the president’s quick retreat on the veto threat.
Nope - not bi-partisan.
I don’t see any ‘R’s on there.
Not bipartisan? Are you nuts?
There are plenty of R’s who voted for it, even if not the majority…btw, that includes John McCain. Our glorious Republican president will sign it, too.
Failing to note, also, the wide margins in the vote, as it passed in the House 272-152 and Senate 80-13. The MBA President also reversed his veto threat (a threat which may have been moot anyway, as the final tally in the Senate was veto-proof, and the House vote was very nearly so).
So much for that argument.
I should’ve quantified that a little more — in the House, roughly 25% of GOP members voted for the bill. But in the Senate, the GOP voted for the bill by a 2-to-1 margin. A fair number of Senators missed the vote, including both presidential candidates.
(I’ve seen the Senate vote reported variously as 80-13 and 72-13 — not sure why …)
“The bill also provides for $180 million devoted to pre-foreclosure and legal counseling to be distributed in grants by NeighborWorks, a national non-profit.
“We’re very pleased,” says Ken Wade, CEO of NeighborWorks America.”
$180 million for counseling would be rather pleasant. Sources of information and awareness about housing, should help address the huge problems.
Well then, all those realtors can now have a job counseling
Whereas the FHA helps to generate new mortgages and so plays a role in artificially inflating prices– this bill, what I’ve read of it, is mainly focused on already existing mortgages, not mortgage origination. Ideally, people stay in their houses, and banks get the money, and so don’t go under as quickly. One might be outraged because housing prices won’t correct as fast as they ordinarily would because of this bill, however, except in a few areas, they are going down briskly.
These infamous FDIC,Freddy and Fanny Bailouts “Plans”, remind me of the 1972 Pittston Coal Company Buffalo Creek Mine Disaster of coal slurry impoundment dam #3 PLANS on a hillside in Logan County, West Virginia.
It was alledged, some IDIOT in upper management designed the dam on a bar napkin, handed it to engineers and said make it work. When it rained, It FAILED with tragic results…upon the little people in the way. (google it for results)
This ill planned, rushed DAM Gov’t Bailout Plan by Corporate, Gov’t and self interest groups has BAR NAPKIN written all over it.
It LOOKED good and a federal mine inspector gave the Buffalo Creek Dam a “satisfactory” 4 days before it failed due to RAIN.
The US taxpayer better Hope and Pray that their hastily constucted Gov’t dam HOLDS and the bad news Rains stop SOON, because NO amount of Government insurance and reassurance can save them…once the collapses begins.
17 of my problems with the housing bill is as follows :
(1) They didn’t address the fraud in the system ,therefore they are just setting themselves up to receive bum packages again .
(2) They didn’t put any conditions on lenders on how much quality
the loans they pass on have to have ,therefore the lenders will pass the worst junk,that will likely fail later.
(3) Lets face it ,it’s discrimination to bail out some people and not others .
(4) It’s a obstruction of justice to bail out a party that committed perjury ,or cash back fraud ,regarding their loan application .
(5) The housing bill sets the taxpayers up to take on the worst of worst offenders of spending more than they can afford and it writes off the debt they spent .Likely they will just run up credit card debt now that they have a reprieve on the housing debt .
(6) The housing bill is to complex in its future pay-back provisions
for the tax-payers and it sets the stage for complex legal issues and
a resulting potential for game-playing by borrowers on paying back
obligations .
(7) The housing bill could delay much needed housing corrections ,
that would in fact stimulated affording housing and stimulate
the housing sector .
(8) The housing bill rewards lenders for breaching their duty to underwrite loans and the fraud of their agents who gamed the system and passed fraud on to the secondary market .
(9) The housing bill could help first -time home-buyers because of the re-bate on taxes ,but than if the sellers raise the price because of the re-bate than again we have artificial incentives propping up
prices that should be based on incomes and jobs in a given area .
(10) The bail-outs would tend to set the stage for borrowers or lenders expecting more bail-outs if prices go down further ,
rendering prior bail-outs non-effective in keeping people from walking because of equity dropping .
(11) The housing bill obstructs justice regarding the part the REIC
played in the housing debacle ,and it doesn’t even address the foul play that went on in that field .
(12) Housing bill only addressed reverse mortgages ‘fees” ,and ignored other areas of abuse in lending business .
(13) Housing bill could create a situation where other lenders
will not lend ,especially regarding non-recourse loans ,thereby rendering Fred& Fannie the only lender is town that makes stupid loans .
(14) It is not common practice for lenders to make a new loan to a party who is in foreclosure . In fact ,a party in foreclosures is considered “dead meat”, as far as being loan-able by anybody but
hard money equity lenders . A party that is that far under is no doubt a high risk for many reasons . The government is asking
us to bail-out people who in principal are not considered parties that would normally be bailed out .
(15) It is not common practice for lenders to be generous with lending in a declining market ,yet the housing bill ignores any
reference to further decline in market price risk and instead talks about equity-sharing to pay back tax-payers ,as if there is a hopeful belief that property values can only go up .
(16) The housing bill does not make any sense on so many levels so
one has to question the merits of it ,or if it has undisclosed objectives .
(17) The housing bill has no provision for dividing F&F losses prior to the housing bill ,verses after the housing bill ,sitting the stage for the taxpayers to pay for loans loss holdings before the housing bills passing .
I could go on and on ,but that enough because this post is getting to long .
The FBs who apply have to actually qualify - as in reapply for the loan. Since most won’t qualify, not sure what the issue is here.
A financial “Katrina” as it were?
Suppose our politicians had to choose between rescuing the home mortgage lending sector and funding highway repairs. Which would they choose?
PAGE ONE
Funds for Highways Plummet
As Drivers Cut Gasoline Use
By CHRISTOPHER CONKEY
July 28, 2008; Page A1
An unprecedented cutback in driving is slashing the funds available to rebuild the nation’s aging highway system and expand mass-transit options, underscoring the economic impact of high gasoline prices. The resulting financial strain is touching off a political battle over government priorities in a new era of expensive oil.
key word being “available” to rebuild. that money never finds its way to any roads. (or am I just thinking about California?)
Take a ride on the secondary roads in our country and you’ll notice that a good many of them were built in the 1930’s, when there was no defense industry to vacuum away funds to make junk that serves no purpose presently, other than keeping upper-middle class minds occupied.
Curiously, I see roads, even rural county roads, being repaved all the time here in northern Colorado. Even though we keep a lock on spending increases (TABOR).
When I drive around the downtown Chicago area, I often pass or even get stuck in traffic under some of the most frightening bridges I have ever seen. Bridges where the steel supports are no longer even showing flecks of paint - just rusted steel that is flaking apart. These are ACTIVE bridges… The malinvestment in infrastructure in this country is shameful.
Please note that in Chicagoland, when they do get around to replacing a viaduct - that the fuss, cost, mess, and time spent seem to exceed that expended on building the entire first transcontinental railroad.
Again, those bridges you mention do not, and should not, inspire anyone to have the confidence to buy overpriced housing in this region. Of course with a big screen searing their eyes and some radioactive granite searing everything else - maybe they don’t notice the crumbling infrastructure?
I’m no Daley defender, but Chicago is one of the better maintained major cities in the country — especially considering the amount of wear and tear we experience through everyday weather and everyday commerce. If you’re scared of Chicago’s infrastructure, take a waltz through DC or Newark or Cleveland or Detroit or St. Louis or …
Bull on the Cleveland comment they have fixed alot of the bridges here already….we just dont have many people left here to use em.
…Pittsburgh
I agree about Chicago, but is it really Daley who decides bridge repair? I thought that was the Dept. of Transportation. Point being, while Chicago is a great city, it’s likely there are unstructurally sound bridges there.
There’s structurally unsound infrastructure in every US city. No surprise there.
My point was that Chicago seems to actively identify and work on infrastructure issues, despite all the corruption and cost overruns and other unsavory activities the city is rightly associated with. After living in or near DC and Indianapolis in my younger years, I’m appreciative of a city that at least appears to be making an effort to use my tax dollars on infrastructure. (And yes, I believe that attitude stems from the top down.)
ET –
I suggest that you spend some time touring some time touring South and West sides of Chicago before heaping too much praise on Daley & crew.
For example, take a drive down Central from say Addison to 47th street. Or 63rd street from say Halsted to Pulaski.
Yes, many streets in Yuppie North Side of Chicago and in Tourist Chicago are in great shape. No surprise there. Not many great streets, bridges, etc., south of Cermak and west of Halsted however.
Incidentally, in 2007, I met a guy who makes a living watching for semis and other trucks that routinely get caught under an old bridge on 31st street and the Dan Ryan right near Comiskey Park. I struck up a conversation with this previously unknown at this/his job site.
This guy - who represents insurance companies - said he makes upwards of $80K a year doing so. Told me that 7-8 trucks get stuck there every week. Any White Sox fan who regularly travels down 31st will attest to the frequency this road is blocked by a truck.
If Chicago streets are so great, why isn’t this fixed? It’s even in Daley’s own neighborhood!
yes but cutting the 18c gas tax, used for infrastructure improvements, is a viable way to reduce prices at the pump. What are you, some kind of un-patriot?
Mexico becomes U.S.
Vladimir Lenin—
“The road to Mexico lies through America”
Ronald Reagan—
“The road to America lies through Mexico”
Why would it reduce prices? Doesn’t such a reduction just go into oil industry coffers?
Why is it necessary to rebuild a highway system that suddenly experiences a drastic drop in use? What’s the urgency? This is a non-issue.
Who says they have to choose? PB, somewhere on here, you wondered about where that $775 B in bailout money might go. Voila! You have your answer.
This so-called “housing bailout” is nothing more than a tax-and-spend maneuver concocted by socialists. I’m rather amazed that so many people don’t recognize it for what it is.
Doesn’t the Constitution protect the sanctity of private contracts? What am I missing here?
REAL ESTATE
Housing Bill Relies on Banks To Take Loan Losses
Lawmakers Pressure Lenders to Pitch In To Curb Foreclosures
By DAMIAN PALETTA
July 28, 2008; Page A3
WASHINGTON — The housing rescue bill passed by the Senate Saturday hasn’t been signed into law, but top Democrats already are putting pressure on regulators and bankers to make sure a major program to prevent foreclosures doesn’t fall flat.
For struggling U.S. homeowners, the success or failure of the program — which would let roughly 400,000 owners refinance into affordable, government-backed loans — depends largely on bankers’ willingness to take a partial loss on the loans and to reduce the amount of money borrowers owe.
The rescue bill says something like the bank must lower the mortgage amount to 10% below the current value of the house. My question is - who determines that value? Obviously the bank would want it to be as high as possible to reduce their losses. Are they going to be able to get away with saying “this Miami condo’s value has decreased 3% since it was purchased 2 years ago”?
11211 Osprey Ln. W.P.B. Fl. 33418
4/3 pool
Mar 06 463,000
Mar 07 540,000
now asking 300,000
11155 Osprey Lake W.P.B. Fl. 33418
4/3
Feb 06 470,000
now asking 294,995
10755 Wharton Way W.P.B. Fl. 33418
4/3
July 02 226,900
May 06 434,000
now asking 298,000
29 Thurston Dr. Palm Beach Gardens Fl. 33418
4/3 pool
Aug. 85 230,000
Nov. 88 249,000
Feb. 98 209,000
May 06 563,000
now asking 369,000
Exactly what I’m saying. Assuming for the sake of argument that the 1st one is “worth” $300K, and the mortgage holder gave someone a 100% loan @ $540K:
$300,000 - .10 = $270,000
Current balance = $540,000
Amount to write off = $270,000
I bet banks will not do it. I bet their policies would favor bankruptcy over a 50% write off.
Or is it possible they can convince the government that the place is really worth $500K, take another 10% loss to get it to $470K, then sell it to the taxpayers who will take a $200K loss on it when it’s foreclosed on in a year?
If they could find an appraiser in Florida willing to fudge the numbers a little.
“Or is it possible they can convince the government that the place is really worth $500K, take another 10% loss to get it to $470K, then sell it to the taxpayers who will take a $200K loss on it when it’s foreclosed on in a year?”
Even if the lenders would like an artificially high appraisal, why would the borrower agree? If the principal’s still too high, the payments will still be too high also even with altered loan terms. Mostly, I don’t see the point of stressing over the few borrowers who might be “helped” by this bill.
What you may have are two broad classes of borrowers that might be helped. Class A didn’t overbuy, but did overpay. What they bought might not be much better than what they were previously renting. Even with altered loan terms, they would still be better off to walk away and rent. Class B bought a better place than they could ever rent (think strawberry picker in $700+K house). They’d like a loan modification, but there’s no way you could ever make this work.
In the end, like the previous voluntary measures, this will likely impact very few people. Lenders will, however, extract another month or two of payments out of some before the borrowers realize this won’t help.
It really depends on how much appraisals are messed with and how they are determined .Like you said ,some forces will want a lower appraisal and some will want a higher appraisal . But that was why I was saying that the flaws in the system have not been addressed ,so how can they come up with a bail out plan that is based on a appraisal .
first three are zip 33412
“My question is - who determines that value?”
That is one of my main questions, too. For example, will the most recent data release from the California Association of Used Home Salespeople, which shows a 38 percent year-on-year drop in the median California home sales price, be roundly ignored in determining eligibility for refinancing into a federally guaranteed loan? If this large recent price decline is properly reflected in appraisals, then I am guessing a vanishingly small share of those who “need” to refinance will be sufficiently above water to qualify, even after a 10 pct writedown of the value of their loans.
The vast majority of those who attempt to access the benefits of the “End Hope Now Bill” will not qualify. Those who are able to perpetuate Fraud again will have limited success.
Get ready for Mortgage Fraud Round 2, only a shadow in quantity of Round 1. But there will be Fraud none the less. The Players will tell you, “what am I suppose to do? I have to make a living.”—-Disgusting
I wonder if they’ll try to use tax assessments to establish value for the program. I just got mine for 2008: according to my county, my house went up in value 22% between Jan 2007 and Jan 2008. Total and complete BS- at the *VERY* best, it maybe held it’s value.
Worried Banks Sharply Reduce Business Loans
http://www.nytimes.com/2008/07/28/business/economy/28credit.html
Banks struggling to recover from multibillion-dollar losses on real estate are curtailing loans to American businesses, depriving even healthy companies of money for expansion and hiring.
The scarcity of credit has intensified the strains on the economy by withholding capital from many companies, just as joblessness grows and consumers pull back from spending in the face of high gas prices, plummeting home values and mounting debt.
Yep. Those with the cash will call the shots.
those who print cash call the shots. It isn’t like the banks “have cash” to lend.
Again, this is just another step in the downward spiral. Tight business credit leads to more jobs lost, which leads to more pressure on homeowners, which leads to more foreclosures, etc. etc.
There it is! And along with this downward spiral will be a growing demand for cash.
Banks aren’t adding money to the system as they usually do, they are taking money out of the system; money that circulates is removed from circulation once it hits the depleted bank’s balance sheets. Thus money becomes scarce.
After all the half measures attempted by the FED that included subterfuge, obfuscation and deceit, you still have unbreakable belief that they wont turn on the printing presses, thus ruining your whole premise, financially?
Yep.
So you approve of Bernanke & Paulson’s actions, so far?
Nope.
What sort of Hors d’ oeuvres does one bring to a blind fete?
Combo is counting on the fact that, given enough time, any prediction will come true.
You’re aware the actual amount of physical cash is printed according to estimated demand?
For example, they always print more around christmas and thanksgiving.
This was obvious! 60% of the NYSE bonds are rated junk (Jan, 2007). The situation has gotten worse. In August a large number of corporate debt comes due. The banks do not have enough cash to rollover the loan and there are few individuals that will invest in corporate bonds at the current risk of default.
This is the second wave of the credit insolvency. To me the amazing thing, people are still buying bank stocks in the belief that these are cheap. Why buy a stock that has little prospect for future earnings?
In the case of next month, I would not be surprised to see the Federal Reserve accept corporate asset based lending from local & regional banks as collateral.
Op-Ed Columnist
Another Temporary Fix
By PAUL KRUGMAN
Published: July 28, 2008
…
The back story to the current crisis is the way traditional banks — banks with federally insured deposits, which are limited in the risks they’re allowed to take and the amount of leverage they can take on — have been pushed aside by unregulated financial players. We were assured by the likes of Alan Greenspan that this was no problem: the market would enforce disciplined risk-taking, and anyway, taxpayer funds weren’t on the line.
And then reality struck.
Far from being disciplined in their risk-taking, lenders went wild. Concerns about the ability of borrowers to repay were waved aside; so were questions about whether soaring house prices made sense.
Lenders ignored the warning signs because they were part of a system built around the principle of heads I win, tails someone else loses. Mortgage originators didn’t worry about the solvency of borrowers, because they quickly sold off the loans they made, generally to investors who had no idea what they were buying. Throughout the financial industry, executives received huge bonuses when they seemed to be earning big profits, but didn’t have to give the money back when those profits turned into even bigger losses.
And as for that business about taxpayers’ money not being at risk? Never mind. Over the past year the Federal Reserve and the U.S. Treasury have put hundreds of billions of taxpayer dollars on the line, propping up financial institutions deemed too big or too strategic to fail. (I’m not blaming them — I don’t think they had any alternative.)
“The new bill will, at best, make a modest dent in the rate of foreclosures. And it does nothing at all for those who aren’t in danger of losing their houses but are seeing much if not all of their net worth wiped out — a particularly bitter blow to Americans who are nearing retirement, or thought they were until they discovered that they couldn’t afford to stop working.”
This is a huge blow to boomers, who will not be able to fund their retirements by cashing out at the levels they expected. What do they do? Sell at the reduced prices? Or continue working in hopes the market will rebound?
“What do they do? Sell at the reduced prices? Or continue working in hopes the market will rebound?”
A RE market rebound is right around the corner according to everyone who thinks they’re sitting on a million dollar lottery ticket. I’m wagering they’re going to be waiting a long time for what was. Yeah, “the market” will rebound but not in the way they’re expecting it to. And that rebound is a function of the sellers capitulation…. and I’ve seen little capitulation…. yet. I notice bank and GSE REO slowing building again. I did some back of napkin calculations using 3%/year increases on 1999 prices and the few existing sales transactions are still 30-50% high. I’m amazed that some are still willing to overpay. Probably they just don’t know they overpaid….. yet.
The bailout measure’s passage is likely to rekindle sellers’ hopes, delaying the capitulation out until at least a couple of years into the future when it is obvious the drop in a bucket did not suffice to fill it.
Good. The longer the seller’s hopes are rekindled and capitulation is delayed the more incentive they will have to keep up with their payments.
Keeping up with house payments means keeping banks alive, which means less burden on the taxpayers.
I’ve also seen some are hoping for Obama as a “ray of light” that will fix this housing mess. 2010 is the earliest for a bottom. 2011-12 the likely scenario.
“What do they do? Sell at the reduced prices? Or continue working in hopes the market will rebound?”
For any scenarios that definitely involve selling, they should sell now. For anyone at that age, prices won’t be coming back soon enough to help.
If it’s paid off and they’re unsure whether they want to live there or somewhere else, there are other cost factors that need to be considered beyond what they might be able to get for the house.
Dream On?
Why federal housing policy is due for an overhaul
Sunday, July 27, 2008; Page B06
…
Federal support for housing has spawned a formidable lobby, made up of builders, bankers, real estate agents and homeowners in every congressional district. And that’s not to mention Fannie and Freddie’s influence on the Hill. Taking them on will be no easy task. Yet, sooner or later, it has to be done. Without a more rational, efficient and equitable housing policy, future generations may well find it harder to realize the American dream.
America land that I love…look at our accomplishments in this great Nation:
The worlds greast producer of food
The worlds greatest invention of military “tools”
The worlds greatest achievement in space exploration
The worlds best & finest development of education & medical schools
Yet when we sit down to buy a “home”…35 pages of legal goober’s goo
Escrow signing with only 3 pages?… Beyond anyone’s intellectual abilities.
“Yet when we sit down to buy a “home”…35 pages of legal goober’s goo”
As this all unwinds, it’s not just enough for prices to come down in line with incomes. The way houses are bought and sold needs to fundamentally change. It should be more transparent with lower transaction costs.
“It should be more transparent with lower transaction costs.”
NAR says they have over 2 million yearly fee paying realtors…with talk like that SDGreg…you have 0 (Zero) chance of getting a date with any of them.
“NAR says they have over 2 million yearly fee paying realtors…with talk like that SDGreg…you have 0 (Zero) chance of getting a date with any of them.”
Perfect. Better to be single than have a parasite attached, not that all realtors are parasites. There are some that do earn their pay, or at least some of it.
Such as Jim from San Diego. He’s the man! Great blog, too.
“Such as Jim from San Diego. He’s the man! Great blog, too.”
Those that are good do stand out. Those are the ones I want around at the end. For them, I do hope there is enough business to sustain them in the interim.
This assumes they wanted their borrowers to understand the contract.
They didn’t.
Crisis lines report rise in suicidal callers
Calls up 87 percent over six months
By Nancy L. Othón | South Florida Sun-Sentinel
July 28, 2008
http://www.sun-sentinel.com/news/local/palmbeach/sfl-flpsuicide0728pnjul28,0,5181133.story
In Broward County, the numbers are even more dramatic: a 102 percent increase in calls from people considering killing themselves in the first five months of 2008, compared with the same period last year. The Broward agency received 93 calls from suicidal residents in the first five months of 2007, compared with 188 in the same period this year. Many of the callers discussed financial stressors.
In South Africa: Distress Turns To Despair.
“One estate agent trying to flog an immaculate two-bedroomed flat in a dodgy part of town informed us when we entered that the owners were asking for R650000. As we left without showing any hint of putting in an offer, she brought the price down to R540000. She called me the following day to say the owners might accept R450000.”
Wow! When did the market peak in Cape Town? It seems the decline there is either farther along or the response different than in places in the U.S. that started declining first and have dropped the most. Listing prices here in even the most depressed markets still seem to only grudgingly decline and none too quickly.
Generally we were about 18 months behind the US. However RE here has some of the highest rate of growth in the world over the past 7 years (300% - 400% in some areas) and so the initial drop will be greater initially. List prices are not dropping much but generally now people know those are “wish prices” and 20% off is probably what the seller is actually hoping for.
The economy is also facing rising petrol and food prices, increased emigration of skilled labour and just general pessimism all round (political instability, power cuts etc).
CTB:
What was the initial reaction of people in Cape Town, when you lost electricity for the 1st lengthy time?
Back in Feb 2006 it only affected the Western Cape and was due to a shutdown in our only nuclear plant. But the fact that one plant going down caused havoc in the countries 2nd largest city was a bit of a downer.
Then in 2007 when coal supply problems (South Africa’s power is 95% coal generated and we were down to 3 days of stockpile) caused issues with the rest of the country it got even worse especially after government had to admit they’d made a colossal balls up and we were running out of power generating capacity and would not have extra until 2014 or so.
The 2010 World Cup should be a blast. Hope all youur stadiums have good back systems.
Some properties in the peak bubble areas here appreciated more than 400 percent in 5 or 6 years.
Do any of those sellers offering steep prices cuts have any equity? If so, perhaps they are simply being more realistic than their American counterparts. They can see where the market is headed and are trying to be first out. Perhaps any differences in how sales in negative equity situations are handled might also explain the difference. I just can’t image getting price cuts that large from an agent in that little time, even if the initial asking price was too high. Perhaps there are some differences in negotiating techniques, too.
In older more established areas I’ll bet there’s plenty of equity. In other areas where there has been loads of (shoddy, rushed) development… well probably not so much.
Hard data show strong banks
By Don A. Childears
In an era when people are concerned more about the return of their money than return on their money we’re glad to report that banks provide both the safety of the deposited funds and the earnings on them. Funds are safe at your bank.
Don A. Childears is the President and CEO of the Colorado Bankers Association.
Kind of has a soothing Yun ring to it.
People who are concerned about the return of their money should give it to me. Your money is safe in my hands.
“This is not the bank you are looking for… move along, move along.”
“Kind of has a soothing Yun ring to it.”
Except that he is actually quoting historical and verifiable statistics. So, in other words, it is nothing like the predictions Yun spews forth.
He’s trying to calm the skeptics out there, which he should be doing, by providing good information. The addition of FDIC insurance premiums to the pool is a great example.
What he doesn’t address though is the RE concentrations in Colo. banks. If the downturn is prolonged and spills over even more into CRE, then those fat equity ratios begin to deteriorate.
Colorado has been in a real estate funk for longer than most, and if anything, it’s a state that should produce more bank failures than other states.
It’s like Cleveland or Detroit, albeit in the mountains…
All that and you left out the “operative” word: Snowball!
“It’s like Cleveland or Detroit, albeit in the mountains…”
LOL, alad if you really believe this, IMO your credibility is now roughly equivalent to that of housing in Cleveland or Detroit.
Lets see: weather and humidity - yep same, culture, schools, housing medians, demographics, recreation, jobs - yup identical. Maybe you’re right, the only dif is the mountains. Sarcasm now off.
Full disclosure: no longer live in CO, but would go back in a heartbeat were it not for aging parents. Also, bought in early 2001 and sold in late 2007 with 28% overall gain. Sure, its not bubbly gains, but reasonable compared to historical standards.
I’m only talking about the financial aspects, obviously…
People in Colorado have had much more time to become insolvent than the rest of the country.
Colorado will be screwed between global warming and tourism. Our major population centers are in deserts and the only value of the land in resort-towns is based on second homeowners. this is not the place to be if you want to grow food.
A link may be helpful:
Hard data show strong banks
By Don A. Childears
http://www.denverpost.com/opinion/ci_9998991
Another Temporary Fix
By PAUL KRUGMAN
Published: July 28, 2008
http://www.nytimes.com/2008/07/28/opinion/28krugman.html?bl&ex=1217390400&en=7280f1d67a084de4&ei=5087%0A
Of course, proponents of expanded regulation, no matter how compelling their arguments, will have to contend with very well-financed opposition from the financial industry. And as Upton Sinclair pointed out, it’s hard to get a man to understand something when his salary — or, we might add, his campaign war chest — depends on his not understanding it.
peter schiff:
http://www.safehaven.com/article-10828.htm
How can they inflate their way out of this mess without wage inflation? Propping up house prices will take a back seat to the wider goal of keeping real global wages in check. Over the longer term what gov’t or business would not prefer lower real wages over higher house prices?
All the same he’s got a lively writing style and really knows how to hit a nerve:
“Someone is going to have to pay the piper for all those granite counter tops and plasma TVs.”
“How can they inflate their way out of this mess without wage inflation?”
I think his point is the intent of the inflation is to make housing appear cheaper relative to everything else, wages excepted. Absent wage inflation, we all end up with a lower standard of living. Loosely paraphrasing one of his examples, “what good is a million dollar condo if it takes $10,000 to fill the refrigerator?”
>How can they inflate their way out of this mess without wage inflation?
Use 400 million Chinese and 400 million Indians to compete.
He put his finger on my biggest concern with the bailout bill:
“Ironically, while government is rightly criticizing mortgage lenders for ditching lending standards during the boom (well after the horses had left the barn) the new law will actually encourage lenders to be even more reckless then before. By taking all of the risks out of mortgage lending (provided of course that the loans are conforming), the government is telling lenders not to worry about the loans they make, because if borrowers do not repay, the government will.”
However, I am wondering whether it will be very easy for the U.S. lending industry to obtaining the necessary funding to enable a reversion to the debaucherous lending standards of the first half of this decade, given how badly burned investors in U.S. mortgage debt are feeling about now. Fool me once, shame on you; fool me twice, shame on me.
Further, given how far underwater loanowners are in many places (i.e., CA), I am doubtful that many of them who are in most dire need of refinancing will qualify at 10 pct below their outstanding loan balances, given prices are off maybe 40 pct or more in CA from the 2005 peak.
“In need of refinancing will qualify at 10 pct below their outstanding loan balances,”
No they will have to re-value the homes worth and set the new loan for that amount. people will just walk if the house is worth less than the loan.
I thought thats what the new law and money was for ? Only 10% below? good luck. I guess I should have read the thing.
Thanks PB I feel better now.
I was just looking over the stock market table in The Economist. Guess what country has just about the best performing stock market in the world this year, in terms of dollar returns?
The U.S. of A, down a mere 12.7%.
So, in terms of dollar returns, the dollar appreciated 12.7% against U.S. stocks, and it appreciated more against foreign stocks?
To be clueless in one’s mind is one thing, to say it in print only confirms it to a much wider audience.
Which means … what? That I’m wrong? That the dollar didn’t increase in value as measured against stocks?
Your street cred has major potholes that need fixing.
If you disagree with him, why not make some arguments instead of cute one-liners?
I’d rather have him explain his position, which seems to be groundless.
My position is simple: It takes less dollars today to buy a share of stock than previously, does it not? Thus the value of the dollar appreciated as measured against the value of the stock, no?
You close proximity to Fantasyland might have you believing that the Dollar has gained against foreign currencies, when just the opposite has happened…
“So, in terms of dollar returns, the dollar appreciated 12.7% against U.S. stocks, and it appreciated more against foreign stocks”
So how is the latter part of your statement true?
I thought it was a joke, and a funny one, too!
Go back to the original post: “Guess what country has just about the best performing stock market in the world this year, in terms of dollar returns?”
“… in terms of dollar returns …”
Zimbabwe’s stock market has by far, been the best performing stock market in the world this year, in terms of Dollar returns.
And …?
You seemed emphatic about this, not so not long ago, before you obfuscated away and did a triple-axel.
“… in terms of dollar returns …”
I have never laughed so hard in my life!!!!! Ok, this year!!! I think my yoghurt bill has been the LEAST OVERperforming position in TERMS of DOLLAR return… bwa ha ha ha ha ha! This for sure cannot be translated in some languages. But it works for me!!! I feel so much better. Thanks!
Why the Economist is no better than Weekly World News:
Bovespa Jul 27, 2007 52,922 Jan 3 62,892 Today 57,843.19
Real Jul 27, 2007 1.8940 Jan 3 1.7805 today 1.5740
S&P 500 Jul 27, 2007 1458.95 Jan 3 1447.16 today 1249.13
My decreased value in the Bovespa is more than made up by the continuing dollar collapse.
Are you out of Vietnam yet? The hottest commodity in the Nam seems to be gold, not stocks.
I am sorta stuck, down about 20% in Vietnam (a tremendous improvement from a few months ago). Hard to get money into Vietnam, harder to get it out. Oh well. Ho Chi Minh Stock Exchange (HOSE) will recover, but when I have no idea.
Too many V.C.* in Saigon nowadays…
Venture Capitalists
HOSEd?
so much for decoupling
where Art Decoupling?
I checked out a library book this weeked, a guide for first-time homebuyers, compiled by some lawyers and real estate advisors.
1. It had a whole chapter on all the great tax breaks.
2. And it was full of little anecdotes like — “The best thing I did was to [get an interest only loan][buy now][buy a duplex]. I didn’t think I could do it…but I did, and my house doubled in value!!!” — (it seemed that all the anecdotes ended with the housing doubling n value.)
3. Half of a chapter was devoted to how to borrow money from relatives (and how to take them to dinner to thank them).
4. For completeness, it did have one little line “oh you better run through a calculator to make sure the payment won’t be too much more than rent…” and then went right on cheerleading.
Copyright, 2007. That says it all.
“I checked out a library book this weeked, a guide for first-time homebuyers, compiled by some lawyers and real estate advisors.”
The most useful part of the book might be the page listing the lawyers and real estate advisers. Never use any of them. Anyone charting a path to financial suicide is not there to help.
I have The Wall Street Journal Guide to Understanding Personal Finace which has a home finance section.
It says, “As a rule, you can afford to buy a home that costs up to 2 1/2 times your annual income.”
Copyright 1992
lol…does that mean in the value of …1992 dollars?
If you had to prove $200,000 income in order to get and 80% loan on a $500,000 house, I might be willing to buy a $500,000 house.
A $500k house would be a mansion in those circumstances, just as it was until 8-10 years ago.
Sitting on a penthouse balcony of one of the new MGM Signature buildings in LV looking at over six 30 plus story high rises under construction. Looks like Brickell in Maimi. If they didnt have access to the data, one would probably believe looking out at all the new buildings that we were in the middle of the boom. The floor plan of the condo unit I am in used to sell for close to 450k on lower floors, now you see foreclosure listings for 320k. It is one of the condotel “deals.” The owner gets 50% of money collected on the room rentals. I got mine on an orbitz special for $100 a night (advertised for over $200 per night), but who has money for vegas flings these days besides scum bag renters. Maybe it’s because Im such a great guy or maybe its the market, but I was reserved for the 7th floor and when I checked in I asked to be moved to the best view possible with no extra charge; and the person at the front desk said she could move me into a penthouse with a balcony overlooking the strip. Assuming 100% occupancy, at the internet rate that I got it would be around $1500 per month. Prices have to fall another 50% for these things to bring in positive cash flow. Looking at the all the new construction and the growing inventory and foreclosure numbers, it may actually happen soon. I want to check out Summerlin this week while I am here, lots of new homes that were advertised as “luxury.” Not that I want to buy, but I have a morbid curiousity. Seems like every other house is in some stage of foreclosure and can find pricing 50% off peak (and that is not even getting a better than average deal). Im sure much better deals are out there. Finally the renter gets to sleep at night and dream about early retirement.
Clearly, the penthouse owners tip better out of their 50%
“Prices have to fall another 50% for these things to bring in positive cash flow.”
And that would be *if* they were rented out 365 days a year.
Took the monorail yesterday from MGM and are you in those golden things behind the MGM. They look completely dead, maybe 5 out of 500 have a plastic chair on the balcony.
Daughter of a friend is in RE: a house in Tuscany development dropped from 750K to 380K. That’s near Lake LV where I dwell until tomorrow. It’s all about fake Italian.
And and but but…when the City Center is built there will not be enough workers in LV …
Why would anyone “speculate” about a companies stock value possibly going in any direction other than …UP?
There ought to be a law against that sort of “free Market” manipulation…oh, wait “they’re” working on it!
Wall St sees SEC extending short-selling limits:
http://www.reuters.com/article/ousiv/idUSN2741777220080728
They are desperate, man. Give them a break. We don’t need anymore short covering rallies.
“But regulators should not forget their history. Outside short-sellers were blamed for the 1929 crash but the Pecora Commission investigation revealed that the main beneficiaries of the practice were banking insiders such as Albert Wiggin, the Chase president.”
FT
I can’t recommend “Since Yesterday” enough…
Frederick Lewis Allen’s chronicle of 1929 to 1939.
Albert Wiggin’s riches to rags story is included in all it’s sordid detail.
“I can’t recommend “Since Yesterday” enough…”
It’s a most excellent read. It’s also available online at:
http://xroads.virginia.edu/~hyper/Allen/Cover.html
“…few men like to assume the responsibility of spreading alarm by making dire predictions, nor is a banker with unsold securities on his hands likely to say anything which will make it more difficult to dispose of them, unquiet as his private mind may be.
Some folks would rather make an “informed decision” rather than an “educated guess” but with the raw, transparent “Information” from Wall Street & Shadow Gov’t Offices…neither is possible, perhaps this is why Stein, Kiyosaki, & Crama$$ are able to offer up such “financial wisdom”
Thanks SDGreg!
Here’s one good for a laugh.
http://blogs.knoxnews.com/knx/flory/2008/07/honest_broker.html
I got this license plate photo in downtown Norfolk, VA over the weekend:
http://www.flickr.com/photos/ethanotoole/2708476888/
I was driving to a friends place, and passed a condo building with an open house. The condos are ~$600K, in a city where the median household income is around $40K or so. For $600K, it better be on the water. I decided I’d check it out. So I followed the signs, and the realtors office is right next to the condo building. Except the doors were locked, and no one was apparently in sight. So I just left, but not after noticing the funny plate on the only vehicle in the lot. Wonder how long they’ve had it?
I noticed that with 3 of the letters you can spell the word: LIE
Kinda like an “embedded” truth?
#14 on the Cheney-Shrub Legacy list: “Fiscal Responsibility is our Republican heritage”
With only 3 & ½ months to go…their “Legacy” promotion may not… make the grade.
Bush administration official: 2008 will set record
http://news.yahoo.com/s/ap/20080728/ap_on_go_ca_st_pe/budget_deficit
The father would not recognize his evil son.
8 yrs, only 5 million jobs created (20MM during Mr. Clinton), payrolls unchanged, inflation up 35%, dollar down 45%, government payroll increase of 60%.
Looking & listening to Shrub lately, you’d think the “young republicans” & “everyone else” have left him “high & dry”… can’t see them rubbing & purring their fanatic Limpbaugh ideologies against McSame’s flesh & bone somehow…he seems kinda allergic to that kind of animal hair.
How much longer before the father diss owns the son?
I heard the father has already diss his own son in favor of Jeb baby.
And the tiresome, non-topic talk from our very own moveon.com adheren drones on and on and on.
“We urge relevant Americans to conform to the basic standard of international relations and realize the fact that the Dalai is trying to split China and undermine the social order of Tibet and the ethnic unity under the cover of religion,” Liu said.
Which is not the same as the “little commies Gov’t leaders” ” use of torture under the cover of …”National Unity”
And to think… we American’s still buy toxic waste from this country.
…not realizing the microphone was still on…McSame used a 5 letter word to collectively describe the Chinese Gov’t leaders.
China criticizes McCain-Dalai Lama meeting:
http://news.yahoo.com/s/ap/20080728/ap_on_re_as/china_tibet
Geritol Johnny meeting with the Dalai Lama would be akin to the Chinese negotiating with Pat Robertson, about the USA.
#86 on the Cheney-Shrub Legacy list: “a new WTO global commerce pact”
“Their actions have thrown the entire Doha round into the gravest jeopardy of its nearly seven-year life,” Shark said”
Shark accused China of trying to carve out cotton, sugar, rice and other commodities from any tariff cuts under a WTO deal. He said Beijing and Delhi were working to protect their own interests by controlling a large group of even poorer nations.
When America was “developing” the “auto” industry, where exactly did we get the “rubber” for those cool Firestone / Goodyear tires with whitewalls?
U.S. issues angry trade rebuke to China, India
http://www.cnn.com/2008/BUSINESS/07/28/wto.trouble.ap/index.html
http://www.msnbc.msn.com/id/25884806/
Bush official: 2008 deficit will set a record
Deficit approaching $490 billion amid sagging economy, stimulus
Now there’s a news flash…Anybody surprised??
Nothing suprises me went it has anything to do with the borrow and spend GOP hypocrites.
I know some posters here dislike my annualized percentage rate calculations, but I claim that this is a useful procedure for gaging how rapidly a change is playing out. For an example, oil prices peaked on 7/11/08 at $147.20 a barrel, and are currently trading (on 7/28/08) at $123.50 a barrel, a mere 17 days later. How rapid a rate of price decline is this on an annualized basis is tantamount to by what percentage oil prices would fall if the recent rate of decline continued for a full year from 7/11/08. I am not predicting this will happen (in fact, I would argue that it is statistically implausible), but nonetheless the hypothetical answer is interesting:
((123.50/147.20)^(360/(28-11))-1)*100 = 97.5 pct annualized recent rate of oil price decline
Given that oil prices are denominated in dollars, this kind of crash should act to strengthen the value of the dollar.
“I am not predicting this will happen…Given that oil prices are denominated in [s]dollars[/s]… Euro’s” ::)
“All my life…I’ve been a wandering…and just when I get to the end…I wonder, …what’s around the bend?
Mr. Bear, could you please fix this for me…thanks! Got to learn how to do that strike-thru thingy.
\
Like this?\Professor…
We represent just 5% of the world’s population, and there are vast hordes of newly minted drivers in the BRIC countries that not only have Dollars they want to get rid of, but also have gotten a taste of the good life oil has given us.
Because oil is denominated in Dollars in the world market, means that this roller coaster ride might go on indefinitely, and probably not to our advantage.
I would try to explain the oil carry trade - similar to the Yen/Euro carry trade. The US Treasury, by sending hundreds of individuals to chat with oil producing nations since April, appears to have convinced, at least for the short term, these nations not to dump dollars.
Prof,
You and the oil bears have been calling for an oil crash for years on this blog, since oil was $80 or less. While you, Jas, and the deflationistas waited commodities have increased in price 30%, 40%, and more. At the same time the USD has lost value every year.
Maybe your USA-centric model is broken, and no amount of mathematical extrapolation can fix it. You need to go back and look at your premise which, as near as I can tell is: ‘the USA is the sun and the world circles it’. It’s the equivalent of the flat-earth argument of the past, and you know how well that worked out.
Please forgive me for daring to post arithmetic that calls your U.S. dollar collapse world view into question.
Anyone can post fantasy. Sometimes you should check your results to see if fantasy equals reality.
Professor Bear,
Ha Ha Ha! Very Funny!
According to the Wall Street Journal P/Es & Yields on Major Indexes Page, the Dow Trailing 12 months P/E ratio has risen from 17 one year ago to 77 today.
77 / 17 = 4.5 - 1 = 3.5
That’s a 350% rise in the Dow Trailing 12 months P/E ratio in the last year!
Your deflationary depression looks like it’s in the bag!
Wow — it looks like a great dips-buying opportunity may be right around the corner.
It looks to be a great opportunity for dips to buy over-valued stocks?
Well, when they dip
I had Bubblevision on at the gym today (sound off) and they had - get this - a sign twirler on as sort of “guest entertainment”. Unbelievable. CNBC is nothing but entertainment and cheerleading.
Blueprints for a New Global Financial Architecture
Charles W. Calomiris *
October 7, 1998
http://www.house.gov/jec/imf/blueprnt.htm
If they read:
Bagehot, Walter (1826-1877)
Title: Lombard Street: A Description of the Money Market
http://www.econlib.org/library/Bagehot/bagLom0.html
HTML book not pdf and highly reccomended
“…very large loans at very high rates are the best remedy for the worst malady of the money market when a foreign drain is added to a domestic drain….”
Here is why oil prices will rise and why we are all screwed, ultimately. It has to do with the way our brains are wired and the sheer numbers of China/India/Russia/Brazil/etc consumers:
SUV Sales Up 45% in China
“In China, size matters,” says Zhang, the 44-year-old founder of a media and graphic design company. “People want to have a car that shows off their status in society. No one wants to buy small.”
Inventories of unsold new vehicles in China rose to a four-year high at the end of June, as sales growth slowed
n the second half, analysts expected a nearly 20 percent hike in retail fuel prices unveiled late last month would also weigh on demand.
http://news.yahoo.com/s/nm/20080722/bs_nm/autos_china_inve
ntories_dc_1
The world has not decoupled Inflation is running near 10% in many of these countries, given that these people spend most of their income of food and energy at some point there will be a break in consumption just like the one that has occurred here in the USA.
Sky high auto inventories in China was originally released by Bloomberg early last week. Basically, there is no new world economic order like peak oil nuts and RealTards would have you believe.
well…we always used to say- Why can’t the rest of the world be like USA, they’re trying…
“It is curious that physical courage should be so common in the world, and moral courage so rare.”
Mark Twain
The downward rally continues on Wail Street.
ALBANY - Gov. Paterson, convinced the state faces its worst fiscal crisis since the mid-1970s, will deliver the grim news in an unprecedented special address to New Yorkers as soon as tomorrow night, The Post has learned.
The governor’s address - which his aides hope will be televised by public and cable news stations - will say that plunging state revenues will force painful cuts in state services, necessitate a reduction in the state work force, possibly through layoffs, and require other difficult economic measures, source said.
http://www.nypost.com/seven/07282008/news/regionalnews/that_70s_woe_in_rerun_121880.htm
Yeah this news release is a beauty. What took them so long?
“… plunging state revenues will force painful cuts in state services …”
Does this “plunging state revenues” thingy have anything to do with there being a shortage of ready cash needed to pay bills with?
LOL…you don’t stop pushing do you?
I’m not pushing, just pointing out facts.
The facts do all the pushing.
I almost accidentally stepped on a pile of your facts, but luckily I swerved over the keyboard in just the nick of time.
I :heart: combo.
Fannie Freddie fair values???
http://www.bloomberg.com/apps/news?pid=20601039&sid=aryKxwWwjIDQ&refer=home
Off topic, but….
I was listening to an oldies station this weekend, and was thinking about what the fifties and sixties would have sounded like, if some people had their way, and the Big 3 went down the tubes a long time ago.
We would be listening to songs like:
“Hot Rod Vespa”
“Hey Little Prius”
“Little Deuce Tesla”
“Fun Fun Fun (until Daddy takes the Segway)”
“Deadman’s Hybrid” (the sad story of two young men racing to recharge their souped-up batteries)
“Cannondale Sally”
And my personal favorite, from “The Boss”:
“Pink Solar-Powered Abortion (that replaced my girlfirend’s pink Cadillac)”
I must be a Neanderthal……I prefer the originals.
Reuters
Fed’s Mishkin pushes for headline inflation goal
Monday July 28, 1:20 pm ET
…Mishkin said core inflation contains important information for policy-makers, but can be a “biased” measure of long-run inflation.
Biased? I think MIshkin is being…very diplomatic.
Ok, I know this couldn’t be any more off topic, but for those of you (like me) that try to get all their HBB reading done in a very short amount of time at the end of the day, this may be of interest to you. I tested using it on the main articles on the pages, as well as the Bits Bucket. Works pretty well. If you add the shortcut to a toolbar you can bypass the Copy Paste thing:
http://digg.com/software/Read_Faster_Way_Faster_No_really_I_mean_WAY_faster
How much longer before Shamu takes a dive, and starts another run?
http://tulipfleurs.files.wordpress.com/2006/07/shamu.jpg
“In a survey for AARP last month, more than half of respondents ages 50 and over said they had cut back on their grocery expenses. Nearly 40 percent predicted that some food items would need to be rationed within the next year, and most dramatically, 18 percent said they had started eliminating some meals entirely.”
Look at these “nation of whiners”, whining about meals and all while wall street is in danger of reduced bonuses. Don’t they understand free market?
http://www.msnbc.msn.com/id/25804814/
Let them eat mistake.
The .gov is winning the war on savers.
i wonder what kudlow thinks about his goldilocks summer rally today?
He has an act, he won’t change that act no matter how much reality intrudes.
It’s a lot more fun when you understand Kudlow’s show is the Cobert Report of the financial world.
goldilocks = kudlow in a dress
I flipped it on for a few minutes earlier. He’s blaming the bad market day on the housing bill. This guy just doesn’t get tired of being wrong.
Chief Asswipe Paulson is yet again attempting to reignite the housing bubble. New MBS popular in Europe making it’s debut in the US.
http://www.marketwatch.com/news/story/four-big-banks-agree-kick-start/story.aspx?guid=%7B91AC7737%2DBDEC%2D4179%2DB208%2D8345B0F1F741%7D&dist=msr_1
Earlier this month, the Federal Deposit Insurance Corp. published rules that would govern covered bonds in case of a bank failure. And today, Treasury released a series of “best practices” to standardize the market.
I posted below but my comment hasn’t shown up yet. I am still wondering about these best practices. At first I thought they were saying this stuff is FDIC insured, this article is better and states investors have shots at the issuers Balance sheets.
Most interested in the disection of this latest desperate move.
Story from Fortune:
http://money.cnn.com/2008/07/28/news/covered.bonds.fortune/index.htm?postversion=2008072815
For how much longer will the worst be yet to come?
Wall St falls amid gloomy US housing forecasts
By Jeremy Lemer in New York
Published: July 28 2008 14:10 | Last updated: July 28 2008 19:53
Wall Street stocks fell back on Monday as investors digested mixed results, a rise in oil prices and a report from the International Monetary Fund arguing that the US housing crisis could continue for some time.
IMF sees no end in sight to credit crisis
By Krishna Guha in Washington
Published: July 28 2008 15:45 | Last updated: July 28 2008 15:45
Global financial markets are “fragile” and indicators of systemic risk remain “elevated” almost a year into the credit crisis, the International Monetary Fund said on Monday.
The fund warned credit growth in the US could fall further as a result of ongoing financial system stress and warned that emerging markets would be tested as global financing conditions tighten and policymakers grapple with rising inflation.
The IMF also noted that house prices had softened in a number of European economies including the UK, raising the possibility of further problems in those markets.
Paulson says banks ready to issue covered bonds
Monday July 28, 2:48 pm ET
U.S. Treasury Secretary Henry Paulson said the nation’s four biggest banks were ready to kick-start a market for covered bonds that could help significantly expand home mortgage financing.
http://biz.yahoo.com/rb/080728/usa_financial_bonds.html
is this going to jump start the housing market?
Well, if some people want to make a bad decision, and pay too much for a house based on news like this - they should have it.
It would be like prisioners cheering the warden for putting brand new locks on their cell doors.
It’s never going to be like it was before anytime soon.
it might could.
it seems that covered bonds would have a lot of the same risks as the existing securitized mortgage products. Declining home prices would reduce the value of the collateral of the bond (in this instance, the houses). Sorta repackaging the same kind of thing in a different way. But perhaps the real differences will be a)no stigma on this product yet, since it’s new, and b)possibly more transparency in what the bonds actually hold (since the mortgage backed securities were apparently incomprehensibly messy). It’ll be interesting to see if this makes any difference at all.
Why can’t you just come out and admit your decoupling theory sucked. BwaHaHaHAHAAAAAAA!!
Insight: Market couplings revisited
By Jim O’Neill
Published: July 28 2008 16:15 | Last updated: July 28 2008 16:15
Amid all the doom that continues to pervade markets, it is interesting to revisit the issue of “decoupling”.
We at Goldman Sachs have been guilty of popularising the notion of both decoupling and recoupling. Initially, for much of late 2006 and all of 2007, we advocated the notion of “decoupling” (from the US) of both the rest of the world’s economy and markets. Then at the end of last year, we raised the prospect of “recoupling” on the basis that some parts of the rest of the world would now find it difficult to ignore the US slowdown, but also that other equity markets were much less attractively valued relative to the US.
Where do things stand now?
This just popped into my mailbox:
“I have a client who wants to know your price per kilo of gold bullion with a halmark stamp.
I am not familiar with this area, but this client wants 5000 metric tons. If you have a
contact in this area, can give a good price, and can produce the product there is about a
100M commission involved. I am very serious. Please get back to me ASAP.
I am looking for someone who is direct to a Hedge fund or an institutional investor that
has access or sells bulk note packages. I am looking to work directly with this individual in
selling CMO, NPN, REO, and MTN’s in bulk. I have buyers for direct bulk packages. Please
email me if you can work direct from any of these platforms to move large instruments.”
Aladinsane? Got anything to sell?
Rule #1 of Gold scams:
If the words “metric ton’ ever are uttered or printed in regards to purchase or sale of, it’s most definitely, a scam.
Damn! I thought we could negotiate a split of the $100M commission!
(PS - this message wasn’t from an address unknown to me. Not sure if this person was just forwarding something to him/her or what…)
Nobody, except con artists and wannabe con artists, will ever send you an email such as the one you got.
There is ZERO need; the hook is greed.
The Nigerian inheritance scams are more believable.
Was it signed G. Brown, or something like Mr. Metsuda, Esq.?
http://biz.yahoo.com/rb/080728/usa_financial_bonds.html
Are these new Bonds issued by Banks to be insured by FDIC also? Is that what they are saying? If so, WOW!
What’s that sound? Printing presses, or the end of Liberty through debt obligation?
Reasons to debauch one’s own currency…
1923 Weimar Republic: War Reparations
2008: Bush-League Republic: Loan Reparations
I don’t believe that the Bond’s are FDIC insured. At least I hope not.
European Goverments issue Strict Guidelines on these types of Bonds. We issue a list of Best Practices.
I hear our bonds come attached with a cordless parachute.
By backing GSE paper with Treasuries, the .gov devalues those Treasuries. Result? Weaker Treasury balance sheet, more printing, higher inflation.
Do people really understand what’s happening in the broader mortgage market and what the recapitilization of F and F really means?
Private label mortgages are not coming back anytime soon. Over the last year, F and F were the only lenders in town. Whilst no one else was brave or dumb enough to lend in a declining collateral market, they loaned with both hands to the brink of insolvency.
Recently celebrated measures only maintain the status quo — the number of dollars heading into and the size of this market will stay arguably the same. F and F will remain the only lenders in town, albeit with a lot more restrictions.
In summary, the recovery cannot begin until home prices stop falling. Only then will other lenders step back into this space and increase the supply of money going to the housing market. Meanwhile, expect the downward rally in home prices to continue.
Heard a “realtor and mortgage broker” on talk radio this morning whining about the new bill, saying it represented the takeover of the entire mortgage market by the government.
Looks like there is a huge great opportunity available for a private company to lend money to a lot of people who want to take it. (I’m not saying it would make a good business to be in, thought, even for a “realtor and mortgage broker”. Just that you could do a lot of business until you ran out of money.)
A reader comment in today’s New York Times that I thought was enlightening (and I hope I’m not offending anyone by re-posting it here):
“The present financial mess is not entirely the fault of President Bush. It is a culmination of the years of the Reagan propaganda. Bush merely implemented the same ruinous tax cuts that his beloved mentor believed in so much. That being said Bush’s own anti-regulatory beliefs contributed to the current financial crisis that now affects our country.”
“I would end it there but the fact is that great Liberal President, you know the one that Obama said was not a transformative president was instrumental in pushing the country towrds its present direction. Remember NAFTA was implemented during his presidency; Glass-Steagal was repealed during his administration, welfore to work fare was enacted during his administration and by the way he was a huge beneficiary of the Cold War peace dividend. A lot has been written about how the overall population actually made income gains during his presidency; while that may be true, this gain did not come into play until the latter part of his administration. Wage adjusted income levels in 1998 was still below 1982 levels. The Boom and Bust Dot.Com era happened during his watch, whatever happened to the New Economy? Clinton was an opportunist without any real core beliefs and he just perpetuated the Republican Brand. Albiet I must add with a little more fiscal prudence, which ironically enough actually began with George H.W. Bush.
In closing with all the talk of Government Debt whatever happened to the belief that Government debt was crowding the debt market which led to higher rates?”
” Paul Volcker was the last great FED Chairman.”
— Posted by Jim Kirk
Wow,
Can you say beam me up Scottie?
It would probably take a doubling of our national debt — solely directed at housing — to get home prices back to 05 levels. Meanwhile, there is war funding and deficit spending required to get the broader economy rolling again.
The money would need to be given directly to people (e.g., end users of housing) and only spendable on houses. Several Trillion $ worth.
All of this banking bailout hanky panky….kind of like mopping the floor and cleaning the tables in the Titanic’s bar.
Whoo-hoo! +20 on SKF since Friday. Sold at today’s peak.
It’s only Paper Money though.
LOL
With a push of the blips, you can convert to anything of value.
Without rules people will take what’s left of their money and go home. This article sums it up well
http://biz.yahoo.com/usnews/080728/28_economic_recession_consumer_depression.html
“Russia has cut its exposure to U.S. mortgage lenders Fannie Mae and Freddie Mac to less than $50 billion by not refinancing matured short-term debt, a senior central bank official told Reuters on Monday.”
“Russia held about $100 billion in U.S. agencies Freddie, Fannie and Federal Home Loan Banks at the start of 2008, as part of its now near-$600 billion reserves, although over 80 percent of the holdings were due to mature within the year. “It’s now less than $50 billion,” central bank first deputy chairman Alexei Ulyukayev said.”
http://www.guardian.co.uk/business/feedarticle/7683793
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The Russians, who seemed so dumb in matters of a financial nature just a generation ago, are catching on quickly to the game of capitalism…
re $7.5k loan. Anyone seen any info on how long these provisions will last for? I thought I read they go into effect Oct 1, 2008 but till when, just 3 mths till the end of the year, the end of ‘09?
OK, I’m getting conflicting info. Another source says its retroactive to homes bought b/w April 8, 2008 thru April 1, 2009. Why Apr 8? Seems odd.
I may be late on this but this video is from a CNBC interview this morning where the talks about the prime resets starting to become a big concern. Again, very eventful day so you guys may be way ahead of me (still have to read through the Bits Bucket) but check it out:
http://www.cnbc.com//id/25883987
McCain’s son resigns from boards of Henderson bank
Silver State Bancorp, the Henderson-based holding company for the similarly named bank, reported that Andrew McCain, son of Republican presidential candidate John McCain, resigned today from the boards of directors of the bank and bank holding company.
The company cited “personal reasons” for McCain’s resignation, and a Silver State spokesman declined further comment.
http://www.lvrj.com/breaking_news/25941494.html
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Paulsonocchio tells us how strong our banking system is, so why would the son of a potential president, vamoose-stage right from one?
Covered bond transaction- straight from the doc on the dep of treasury website
Insolvency procedures: As conservator or receiver for an insured depository institution(IDI), the FDIC has 3 options in responding to a properly structured covered bond transaction of the IDI
***1*** continue to perform on the covered bond transaction under its terms;
2. pay off covered bonds in cash up to pledged collateral
3. allow liquidation of pledged colaterol to pay off covered bonds.
Folks Number 1 is saying FDIC can keep paying off the bonds even if the collateral is non performing ie Govt/taxpayer pays the difference to make cash flow correct and NO forclosure takes place. Taxpayer is on the hook to make bond investor whole. No more forclusore folks, houses are owned by u and me. And by the way the fed has indicated that these bonds will be accepted at the taf trade sytem with the fed. This is an EXPLICIT nationalization of the housing market
http://business.smh.com.au/business/banks-face-trillion-dollar-meltdown-pimco-20080725-3ksi.html?page=1
The government could boost housing prices by buying 1 million new or unoccupied homes, “blow them up, and then start all over again,” Mr Gross wrote, adding that the suggestion comes from “one of the wisest men I know.”
Aside from that solution, the housing legislation “is the best way to begin the long journey back to normalcy,” he said.
Mr Gross’s forecast implies that credit-market losses are less than halfway over. Since the start of 2007, firms including Citigroup, Merrill Lynch and UBS have reported $US467.9 billion in losses and writedowns after the collapse of the US subprime mortgage market roiled credit markets. Firms worldwide have raised $US344.2 billion of capital since the third quarter of 2007.
Amazing.
The “blow them up” theory only holds for homes that have crossed over to the point where it costs more the rehab them than to rebuild them. As bad as some of these homes will get - I seriously doubt any significant portion of homes will reach that point.
Just think about how insane it is to purposefully tear down homes just to prop up prices. Eventually *someone* will use these unused houses. They won’t go to waste. Prices will come down low enough to where a higher percentage of people can afford houses, and some people will then buy them. Natural population increase will also play a factor in catching up and filling the unused homes.
Generally the people who will end up these homes are people who would not otherwise be able to afford a home, causing rent prices to go down, and eventually trickling down to homeless people, who would now be able to afford a place to live (perhaps second hand through a homeless agency) and otherwise would not.
Think of the analogy of food. When so many people in the world die of hunger - is it morally acceptable to destroy food in order to prop up prices, so that those who sell food can be more rich? Of course not. The exact same principle applies to housing. Eventually you get to the bottom of the chain where literally people die due to the effects of artificial price stimulation.
This is why I am so very much against government payments to farmers to not farm, in order to keep prices artificially inflated. To me this is the single worst evil our government commits. It literally directly causes deaths of hunger.
Yet “Natural Population Increase” is good, and not a cause of hunger. Luckily, it is becoming less natural.
Was watching the PBS Newshour, and they had the FDIC chief on, and…
Sheila Bair sure smiles a lot and says nothing, doesn’t she?
So tomorrow when the market is down about 400 points on the DJIA, who is going to buy?