Bits Bucket For August 26, 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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I had to spend Monday moving my house around to expand the home office. I should be able to put us a couple of posts today.
When I move my house around, I call it taking a cruise.
Hey it’s August. Only us paycheck guys work in August.
Regarding paychecks, I did some investigation regarding how much cubicle dwellers earn in Mexico. As some of you know I lived in Mexico City in the 70’s and early 80’s as a teen and young adult. I have some relatives there, so the goings on down there are of interest to me.
What I have found is that white collar job salaries are currently hovering around $1000 US a month. Lower level managers and engineers (chemical, civil, electrical) are getting around $1500 a month. I have cousins who are mid level managers and they are making $3000 a month. They would probably make $10,000 a month in the US.
Apparently the only way to have an American middle class lifestyle down there is to be self employed, and that is not easy.
What is particularly interesting about this is that even though salaries are so low, they have California prices for housing (when comparing apples to apples). Of course most of the middle class lives in tiny, unheated apartments (and it gets cold in Mexico City in the winter).
I can only wonder if this is what the future holds for us?
Mix in later-day Al Capones buying off entire police departments piecemeal down under, vying for power in the overall scheme of things…
Correct. The break down in law and order is approaching failed state levels. The rich are sending their families to safety in the US and Europe, especially after the high profile kidnapping and murder of a teenage boy from the very wealthy Marti family. The kid was transported in an armored car and even that did not protect him from being kidnapped.
The kidnappings have gotten so out of control that President Calderon is personally overseeing restoring law and order, but few in Mexico believe that he will succeed, even though the US is providing over $1 billion dollars of hardware to the Mexican armed forces. Will “advisors” and “peacekeepers” be soon to follow?
Hey here’s an idea
Let’s legalize it.
Tax it,
and use the procedes to throw those that commit crimes while taking it in jail for a long time.
Mix in the fact that word on the calle is that work is hard to come by, and lack of opportunity knocks hard.
There are probably more people slipping back over the border, than coming in…
MEaston has it sooo correct, leagalize it and let people be responsible for the choices that they make, no more effective way to neuter criminals then take away the obvious revenue flow….somehow this suggestion never floats in a country where people seems to so much love to tell other people how to live…too bad…
Most likely that is the future for us. That is what the kleptocrats want. After all, if you have heat, that means you have something they don’t have, and there is nothing a kleptocrat likes more than to take the last bit of food, energy, etc. from some poor person and then squander it on something they don’t need.
FWIW, per capita taxation is quite low in Mexico. The Feds down there have been using PEMEX as the piggy bank to fund Federal Spending.
What is interesting is that as Mexico’s elites have prospered, the middle class down there has taken a beating. The only justice is that the super wealthy are terrified of being kidnapped and murdered and are getting their families out of Dodge. Of course the middle class suffers from this as well.
How hard is it for these people to understand that if they share the wealth things can be so much better? During my time in Mexico it was perfectly safe to walk the streets, even at night. I didn’t know anyone who had been mugged or carjacked. From what my relatives and friends tell me about how things are now I wouldn’t dare set foot in Mexico City today. Everyone tells me that they have been mugged or burglarized and they know someone who has fared far worse.
It annoys me that these uber-elites pack up and move to the USA for protection, after they have screwed up their own countries.
Of course, our uber-elites plan on doing the same thing.
The killings were believed to be part of a drug feud as gangs fight over smuggling routes into the United States.
Drug hitmen killed 13 people including a baby at a family party in the tourist town of Creel in Chihuahua state this month.
In another attack on a drug rehabilitation center in Chihuahua’s border city of Ciudad Juarez, hooded gunmen killed eight patients during a prayer session.
More than 2,300 people have died this year in Mexico’s drug war, mostly between rival gangs, in a fight for control of smuggling corridors into California, Arizona and Texas.
Drug violence is intensifying and gangs are ever more brazen despite the deployment of 25,000 troops and federal police across Mexico by President Felipe Calderon.
Mexico’s most-wanted man, Joaquin “Shorty” Guzman, is fighting local drug baron Vicente Carrillo Fuentes, boss of the Juarez cartel, for control of Chihuahua state and its smuggling routes.
Shaky Economy Challenges
Ambitious Obama Agenda…
[See image.]
Sen. Barack Obama, whom the party will nominate for president this week, addressed one of the key issues, the parlous state of the government-sponsored buyers of mortgages. “I don’t think we can allow Fannie Mae and Freddie Mac to collapse,” he said at a town-hall meeting in Davenport, Iowa, adding that their shareholders “shouldn’t be protected.”
Against this backdrop, Sen. Obama is proposing to use the government to remake economic policies in a way that hasn’t been seen in Washington in decades.
The last two Democratic presidents, Jimmy Carter and Bill Clinton, were hamstrung by rising deficits, feuds with Democrats in Congress and antigovernment sentiment in Washington. Sen. Obama’s advisers argue that he would be largely free from those constraints, easing the way for him to put in place big government programs, tax increases on the wealthy and trade restraints.
http://online.wsj.com/article/SB121970803923071113.html?mod=rss_whats_news_us
Oh great. Protectionist agenda.
And the magic tax rate that will make everything well.
The alternative appears to be to continue borrowing and spending.
The American people just won’t vote for someone who will reduce government spending. So our choice becomes:
1) Pay for it now
2) Make our kids pay for it
RE: Make our kids pay for it
Hell, that’s already baked in the cake-$57 trillion worth.
Mere Trillions?
Please don’t bore me with trifles and get back to me, when it’s Quadrillions.
At the moment the Social Security tributary is taking some of the edge off those service payments.
Just wait until they have to redivert SS to Boomers in the next couple of years.
Just wait until they have to redivert SS to Boomers ??
Why wait ?? Its a obvious train wreck…There is going to be some reaction to the action…Whats it gonna be Hoz ??
“Hell, that’s already baked in the cake-$57 trillion worth.
I believe that cake will turn out to be soufle. It will collapse as soon as someone puts a knife in it to cut the first slice.
More like a balloon coated wit frosting.
More like one of those brown paper bags that kids throw on porches….you cut it open and well you know whats in it!
I vote the kids pay for it as I don’t have any children.
RE: I vote the kids pay for it as I don’t have any children.
I have already advised my 24YO son that he might think about establishing residency in Austraila or Singapore.
Have you had him sufficiently trained in black helicopter spotting?
I guess there isn’t a choice like cutting spending anywhere.
The other dingleberry thinks we should bailout GM/Ford to the tune of 50 billion dollars.
That is no “bailout”. It’s a low-interest loan. You remember anything about Chrysler getting one of those. Turned out to be a very good thing. But many of us tend to dwell on “failure” stories rather than success stories.
I love my 2008 Plymouth. Oh, wait….
That’s a bailout if GM/Ford can’t get the loan from the private sector.
Because tax payers foot the bill in the short-term (when their solvency is in question) and then make a terrible premium for the EXTREME RISK they are taking by providing 2 sinking companies with capital.
If they can’t raise their own capital then tough crap.
Corporate Welfare needs to stop.
Remember that “wealthy” means “anyone who isn’t living on government handouts” when it comes to tax increases.
And, no, I am not fond of either party, so don’t start the partisan silliness with me.
CRUNCH TIME: Set the crash-alert flags at half-mast.
Sharp contractions in the money supply and recession are two spokes on the same wheel. When the money supply shrinks, there’s less economic activity, and the economy slows; it’s as simple as that. An article in this week’s UK Telegraph by Ambrose Evans-Pritchard shows that the country is sliding inexorably into the jaws of a deep recession.
From the UK Telegraph:
“The US money supply has experienced the sharpest contraction in modern history, heightening the risk of a Wall Street crunch and a severe economic slowdown in coming months. Data compiled by Lombard Street Research shows that the M3 ”broad money” aggregates fell by almost $50bn in July, the biggest one-month fall since modern records began in 1959.
“Monthly data for July show that the broad money growth has almost collapsed,” said Gabriel Stein, the group’s leading monetary economist.” (Ambrose Evans-Pritchard,”Sharp US Money Supply contraction points to a Wall Street crunch ahead”, UK Telegraph)
http://www.smirkingchimp.com/thread/16643
“‘The US money supply has experienced the sharpest contraction in modern history …”
Yep, otherwise known as deflation. The disappearance of money from the economic system makes the remaining money scarce and thus more valuable.
That’s why cash is king.
Somehow I don’t get the feeling anyone is paying homage to my cash, with negative inflation-adjusted returns across the board.
Patience.
Yep…..
Rates are very low, too low, I bought a GNMA mutual Fund to try and at least stay even with inflation. yield 4.5%
bank CD’s are not paying enough and I never know what bank will crash.
WaMu wants your moolah…
They’re offering 5% on 12 month cd’s, and I hear they are solid as a rock.
And now it’s solid
Solid as a rock
That’s what this loan is
That’s what we’ve got, oh, mmm…
Solid (Oh)
Solid as a rock
And nothing’s changed it (Ooh)
The thrill is still hot, hot, hot, hot, hot, hot, hot, hot
Oh…oh…oh…ah…
And for loan’s sake, each mistake, ah, you forgave
And soon both of us learned to trust
Not run away, it was no time to play
We build it up and build it up and build it up
I bought a GNMA mutual Fund to try and at least stay even with inflation. yield 4.5%
yeah I got back in the Vanguard GNMA too. Embarrassed to say because I heard Bob Brinker talk about it..gotta do something, this is ridiculous. It’ll lose asset value for sure now. I always get in at the wrong end.
What’s with GNMA anyway? That’s in mortgages too isn’t it? Seems to be sailing along just fine. Wish I’d stayed in before.
My bad…
that was meant to be:
Solid as Iraq
GNMAs are government-back mortgage bonds for all practical purposes. Back by the Feds printing presses and 200 million taxpayers - and therefore MUCH safer than other mortgage-holding investments.
What to heed in GNMAs is what is referred to as the Average Duration. The average duration of the fund you invested in currently is 4.6%.
Average duration works in opposition to the rise and fall of interest rates.
What you need to know at this point is that for every 1% change in interest rates, the share price (or net asset value) of the fund you are in will change by 4.6%.
The share prices go up or down - in the inverse- of interest rates. So, if interest rates increase by 1%, the share price of your GMNA fund wil drop by 4.6%. The flip also is true. If interest rates decrease by 1%, the share price of the GMNA fund will increase by 4.6%.
No matter if interest rates are rising or falling, the fund will spin off some sort of monthly dividend payoff, which will be added to your account provided you reinvest your dividends.
I still think it is possible to have both deflation (reduction in money supply and collapsing prices in assets) and inflation (government spewing money all over the place, most of it ending up in the hands of crooks at failed banking firms and runaway price increases in needs.)
Does it really matter if a house costs 1/2 as much today as it did a year ago when everything else costs twice as much… oh, and you’re unemployed?
Don’t worry, they will fire up the helicopters to bail out all the investors.
So why does Shadowstats.com have M3 projected as growing at 13% year over year?
Since the Federal Reserve stopped reporting M3, obviously either these guys or the guys at shadowstats.com are closer to reality.
Here’s a question, though: Would the Federal Reserve be more likely to stop reporting M3 before a massive inflation or deflation?
Ambrose is nothing more than a stopped clock, arguing for lower rates every time again. He will distort any economic fact to fit his reality and his request for more bailouts. Everything I see in the real world fits with a huge expansion of the money supply, like the 15% or so a year for both US and Eurozone M3.
Maybe bank balance sheets are contracting, but in Europe even some housing markets are still inflating (although not as quick as they used to). Deflation? in your dreams … and even a few years of deflation would be nothing compared to the damage done to savers by inflation over the past 10-20 years.
If the contraction in the money supply continues, individuals and all levels of gvernment will be forced to default on their debt on a massive scale. That can’t be good for the $, can it?
This is exactly the point that deflationists ignore… sure the cash becomes more valuable as everyone attempts to sell goods to raise cash to pay off debt… but they almost universally ignore the fact that the government will hyper-inflate before they “default” on their debt.
So, a decrease in the money supply today is the cocking of the hyper-inflationary gun. Lets assume a modest 3% deflation rate, that is like adding 3% to the interest rate on the national debt. This would almost double the interest payments as a percentage of tax revenue. The problem is that deflation happens much quicker than inflation (when it is the result of a credit collapse). This means that we will see a sharp decrease in tax revenue as FDIC fails forcing a sharp increase in government spending.
If government spending doesn’t decrease with the money supply contraction then the debt will spiral out of control toward hyperinflation.
I didn’t see any links to the original Telegraph article at your link. I doubt money supply has dropped at all; money supply data for the EU and Britain is still publicly available and rising sharply, and it seems unlikely the US is doing the reverse. Also, shadowstats and others have been tracking ‘real’ M3 for some time and consider it to be still rising.
Testify!
“I doubt money supply has dropped at all;”
OK, hold on, step back and think about it a second…
Look here:
http://biz.yahoo.com/ap/080826/home_prices.html
“The monthly indices also clocked in record declines. The 20-city index fell by 15.9 percent in June compared with a year ago, the largest drop since its inception in 2000. The 10-city index plunged 17 percent, its biggest decline in its 21-year history.”
Does that point to an expansion of M3 or a contraction?
Sure price inflation due to the massive commodity bubble is still in full swing, but we are starting to work through this as gas prices have declined for several weeks in a row now. This will work itself through to a lowering of prices all around.
Bottom line is, if no one is getting loans there is no way for the Fed/Gov to pump money into M3. As for ‘Firing up the Printing Presses’ that’s just baloney. How does that money (M0) get into the economy?
It’s deflation.
You addressed none of my points, changed the subject to housing numbers, and made questionable assumptions about getting loans translating into money supply.
I suggest you review M2 numbers, MZM, money velocity numbers, money supply in Europe, etc. All these numbers are available and all point to high money supply. Or you could not do your homework and just say ‘deflation’ again.
My comment did not show up so sorry if this is a repeat:
“You addressed none of my points, changed the subject to housing numbers, and made questionable assumptions about getting loans translating into money supply.”
Housing numbers (price declines in the article): are indicative of shrinking money supply. Sure it can be argued that they aren’t a measure of money supply, but the reality is that the effect of house prices on money supply is huge.
Shadowstats: Look at the chart for M3 from beginning of 2008… looks like M3 is shrinking to me?!?
http://www.shadowstats.com/alternate_data
M2 is growing because people are spending less and saving more. Just because M2 is growing it does not mean M3 cannot shrink. Same goes for MZM.
As for the EU, look at the growth rates of M3-M2. What do you see? Looks like growth rate is on the decline. M2 as mentioned above is growing therefore propping up M3.
https://stats.ecb.europa.eu/stats/download/bsi_tab02_03/bsi_tab02_03/bsi_tab02_03.pdf
So I’ve done my homework and I’ll say it again. Deflation.
Also:
Is 300 billion in writedowns deflaionary or inflationary? Like I said, and I meant no disrespect, just take a step back and think about it for a second.
Housing numbers (price declines in the article): are indicative of shrinking money supply. Sure it can be argued that they aren’t a part of money supply, but the reality is that the effect of house prices on money supply is huge.
Shadowstats: Look at the chart for M3 from beginning of 2008… looks like M3 is shrinking to me?!?
M2 is growing because people are spending less and saving more. Just because M2 is growing it does not mean M3 cannot shrink. Same goes for MZM.
As for the EU, look at the growth rates of M3-M2. What do you see? Looks like growth rate is on the decline. M2 as mentioned above is growing therefore propping up M3.
So I’ve done my homework and I’ll say it again. Deflation.
Also, is 300 billion in writedowns deflationary or inflationary?
Deflation again.
The other side of this coin is inflation. Its the red queen race trying to keep up. Eventually high inflation would kill economic activity as well.
All things being equal, repudiation of debt, deflation is a better choice than an inflationary collapse.
As the banks fail, the government gets the homes from the banks. They will get redistributed to everyone.
Nice post wmbz….
NY Times article today:
http://www.nytimes.com/2008/08/26/business/26home.html
BOSTON — As a wave of home foreclosures courses through the United States, some of the nation’s hardest hit cities think they have found a way to ease the blight left on their communities by the crisis.
Using taxpayer and private money, Boston, Minneapolis, San Diego and a handful of other places are buying foreclosed properties to refurbish and resell them to developers and homeowners in an effort to prevent troubled neighborhoods from sliding into urban decay.
So now Taxpayers have to buy up failed speculative investments? OUTRAGEOUS! Maybe taxpayers should be forced to buy my Ford stock!
If there’s really a danger with a particular abandoned home, and it’s behind on the taxes, bulldoze it and send the owner a bill. (And put a lien on the property for the cost.) But to buy the homes? It’s sickening.
I know if the chips were down, i’d sure want to have the City Government of San Diego making important financial decisions for me…
NOT!
“I know if the chips were down, i’d sure want to have the City Government of San Diego making important financial decisions for me…”
They make the typical toddler look financially astute. Corruption and stupidity are a lethal combination.
If the government gets the property for free is it OK? In a lot of places the taxes are not being paid.
I think we are better off having the government repo the houses and resell them at market price. Its better than tearing down houses.
Yeah, I realize their will be corruption in this.
Market price? If the house has been empty, then market price is $0! Why is the government paying anything more than $0 for them?
Actually, if there are back taxes, the market price is (negative) -$(back taxes + interest)
RE: So now Taxpayers have to buy up failed speculative investments?
Yeah, in Boston it’s a boat-load of run-down tri-deckers in Dorchester and Roxbury.
More tax money shoveled into a pair of drug and crime infested welfare ratholes.
Bring on the Mazzland income tax repeal.
Hear ya… Make sure that I vote for the repeal… If anybody has any doubt of what Obama would be like for president, take a good look at what Mr. Patrick is doing in MA. They both are cut from the same cloth, with the same scisors.
I’m really hoping that Mass initiative will pass! Then maybe the CA voters will get the idea! (This year they’re too busy worrying about outlawing same-sex marriage to address real issues on the ballot)
This year they’re too busy worrying about outlawing same-sex marriage to address real issues on the ballot
Didn’t that recently become legal in CA?
They should just do away with the legal concept of marriage all together. But then govt doens’t like to relinquish control of anything once they have it.
That is the classical aissez-faire economics in action isn’t it?
RE: I’m really hoping that Mass initiative will pass!
Hey Reven,
Yeah, the rest of the country is getting laid off, and Patrick is puttin’ another 1900 on the state pay-roll to be paid with borrowed money.
You really want to get pizzed?
Go dial up the BostonHearld website and take a gander at what these public employee stiffs are earnin’…$200k for a state cop-$500k for a UMass Vice-Chancelor. Plus lavish health care and retirement benefits.
The income tax vote will be the “put-up or shut-up” referendum on allowing these pigs to continue feeding at the public taxpayer trough.
I hope Boston can save the day and eventually line up h-o-o-o-omebuyers to purchase the h-o-o-o-mes. And at least break even. But, there’s no more demand for them now than there was before the City purchased them. So, their values unfortunately will continue to decline. And first-time buyers who would have considered Medford or Quincy or eastie or Allston will instead wait for prices in Dorchester to fall further. And wait and wait. And then the prices northward will start to slide because the prices in Dor. keep… .
I think this is a valid point. There’s not much that any city can do to stem the inevitable is there? It’s infuriating that taxpayer money is being used for this ultimately futile attempt at preventing slums. They’ll just be nice slums.
No on 1.
D@mn!
Yes on 1! Yes on 1!
I lived there too long (No on 1 was a prior initiative).
Yes on 1!
And you just know that the only people to get a “deal” from the local government will be those who “know the right people” and grease palms with bribes.
Nice that the end result of this may be a warped form of socialism where the local government decides who is “deserving” of owning a house or not!
I’m re-posting this from last night, enjoy the musical interlude
http://valleywag.com/5036162/cerns-large-hadron-collider-explained-in-rhythm-and-rhyme
New home sales continue to slide in July…the eighth time in nine months…according to Forbes.
http://www.forbes.com/feeds/ap/2008/08/26/ap5357234.html
(Why is this even news? It’ll be news if they go UP!)
Reuven, you’re reading the wrong source - AP reports that it’s good news!
New-home sales post unexpected gain in July
By JEANNINE AVERSA (AP Economics Writer)
From Associated Press
August 26, 2008 9:07 AM EDT
WASHINGTON - Sales of new homes posted an unexpected gain in July as heavily discounted properties enticed cautious house hunters to become home buyers.
Yeah!!!! (At the end of the news brief, there’s an item about June numbers actually being lower than previously reported, but who cares? The numbers are going up!!! UP!!!)
“If the Party could thrust its hand into the past and say this or that even, it never happened—that, surely, was more terrifying than mere torture and death.”
G.O.
1984 wasn’t 24 years ago…
Here’s an interesting article accusing the FED of using derivatives (via JP Morgan) to manipulate a few key markets.
http://www.financialsense.com/Market/wrapup.htm
That was a great article, and the numbers don’t lie, but the liars days are numbered~
Imagine the explosion that occurs, when the precious metals market is based not upon the whims of Corporate Chicanery, but simple supply and demand setting the price?
That day isn’t far off…
That day is now. Physical prices are decoupled from paper/spot/London fix/whatever. Who needs a futures market that bears no semblance of reality? Coal and steel and many other markets get along just fine without bankster meddling. So will PMs.
Before that day comes, there is more shaking out of leveraged speculators to see.
From the chart I’ve seen, it seems that if there is FED manipulation, it is to break a strong upward trend line. If that was the goal, they seem to have strongly succeeded. I could see them unwinding their positions gradually now. The limiting factors being broken trend line, and the previous top(s).
Not content with just holding up the stock market, the PPT are now supporting the $. These guys are pretty good. If they can control equity and FX markets we may not have too much to worry about.
Reports have it that China is in buy mode when it comes to the dollar right now.
They will have their hands full today, with the news that the Case-Shiller twenty-city index is down by 15.9 pct YOY.
with the news that the Case-Shiller twenty-city index is down by 15.9 pct YOY
Yeah, but Boston is up month over month… given the tighter credit standards, higher mortgage interest rates, significantly higher inflation, and foreclosures/REO’s pressuring the market, prices should be lower month over month and year over year.
The Mass housing market vexes me.
I think that the YOY numbers for Boston have broken a record for june according to none other than the Boston Gloge…
Story here:
http://www.boston.com/business/ticker/2008/08/report_mass_hom.html
Pinch,
That article just made my day…
RE: The Mass housing market vexes me.
I’m convinced Mazz has an enormous underground economy with hordes of public employees like firemen with their 2-days on-5 day off work schedules runnin’ cash only landscaping or carpentry for divorcees businesses on the side.
The pubs and pizza joints I patronize take cash only.
Then there’s the dope peddlers, crooked politico’s, embezzlers, bookies and the Mob….ALL CASH!
And throw in some inheritances. Any husband and wife team with Mazzland parents who did anything economically viable with their lifes can easily inherit a million with each side coming into a half.
There’s still money in MA, that’s for sure. I was visiting one of my college buddies who now lives in Framingham and he took the kids, missus and me into downtown a few days for the chef’s tour. The streets and parking garages of BOS might as well be BMW, Lexus and Range Rover showrooms. And houe prices there (remember my frame of reference is rust belt central) still seem like typos with extra zeros inserted by the printer. Someone is still buying them, I guess. The malls seemed crowded too.
My friend has always been frugal with his money because of early life circumstances, but his wife was itching to get in on Cape Cod foreclosures. She was showing me a site that listed some of them, and of course they all look about 5X overpriced, at least to this midwesterner’s eyes. I hope they don’t take the plunge on this, and if it were up to my buddy, he wouldn’t. But to keep wifey happy, who knows what he’ll end up doing.
month-on-month change = white noise
We don’t need no stinkin’ seasonal adjustments!
CAPITOL REPORT
Housing hasn’t bottomed yet
Don’t bother chilling the Champagne
By Greg Robb, MarketWatch
Last update: 1:27 p.m. EDT Aug. 26, 2008
WASHINGTON (MarketWatch) — Economists who are calling the housing bottom are like a baseball team that’s close to clinching a playoff berth but keeps losing, and its clubhouse staff has to keep loading and unloading Champagne across the country.
Every month, these economists say the bottom is close, but really some poor souls are putting the Champagne back on the truck for the next month.
“People want to believe the end is near, but we just don’t think so,” said Josh Shapiro, chief economist at MFR Inc.
The Case-Shiller nationwide index was down a record 15.4% in the second quarter, but the optimists noted that the 20-city index was only down 0.5% in June, the slowest decline since last July. See full story.
Shapiro said that the data isn’t seasonally adjusted, and so the small decline in June came at a time when most of the year’s buyers are out looking for homes. “I wouldn’t get too carried away with the fact that you’ve seen a smaller pace of decline,” he added.
Investors should take comfort simply in the fact that markets are working. Patience is required.
“It is the peak selling season that is being reported, so any downward pressure on prices would tend to be minimized during the period where demand is seasonally the strongest.“
I agree, logically, that non-seasonally adjusted month over month data is probably skewed. The year over year trend of declining prices is still in place.
It’s official, we’re Number 1 (with a bullet) in mortgage fraud. Go, Gatorz!
http://news.yahoo.com/s/ap/20080825/ap_on_bi_ge/mortgage_fraud_report
I’m so proud. I knew FL could show that we were the sleaziest state out there for buying a home… Vegas was making me second guess myself, and CA is just such a monster you never know. But good ol’FL bringing home the bacon to land at the number 1 spot.
I think I’m gonna cry, I’m just so filled with pride.
I expect a Silky Sullivan-like finish from California…
http://www.youtube.com/watch?v=FT_YxcoDhtY&feature=related
And don’t forget, Florida was home to the International Gold Bullion Exchange. Say, laddie, I think IGBE is ripe for a comeback, don’t you?
Back then, IGBE had gold spray-painted 2×4’s in the vault, pinch-hitting for what was supposed to be Gold Bars…
Now, Wall Street has computer-blips, pinch-hitting for what was supposed to be Gold Bars…
I would have picked SLC for-the-win, with central florida a very close second, and vegas in third. Oh well.
I’d a little schocked The Hub of the Universe didn’t win; then my slowly-gained-over-nine-years-of-living-in-New England superiority kicked in. Massachusetts just does mortgage fraud *better*; and therefore was under counted in the standings.
Go Mazzland!
“I think I’m gonna cry, I’m just so filled with pride.”
I thought Crist was a wimp when he was AG, but honest to God, Bill McCollum takes the ever-lovin’ cake. Every time he appears on the Tee-Vee, he looks like the proverbial deer caught in the headlights. Completely, utterly clueless. He can’t do dick about squat in Florida, except when we have a tropical storm or hurricane, he rails about how he’s going to severly punish the price gougers. Criminals in Florida are having a field day.
Here’s another stat: Hillsborough County is second ONLY to LA in gangs and gang-related crime, and we’re closing the gap fast.
And don’t get me started about grow houses and meth labs. When people tell me Florida has nothing going for it business-wise, I take umbrage and point to our rapidly developing pharmaceutical industry.
Back to the pharm?
I don’t know, Palmetto. Miami may still be the king:
http://www.local10.com/news/17287232/detail.html?rss=mia&psp=news
But…but..but…feeding them thar gatorz is expensive.
RE: It’s official, we’re Number 1 (with a bullet) in mortgage fraud. Go, Gatorz!
Yup, all those penny-stock hucksters and scammers definitely saw the gold mine in pimpin’ fraudulant originated and shoddily underwritten mortgages to stupid Chinamen and assorted other ignorant fools.
“Yup, all those penny-stock hucksters and scammers”
You got it, Big HD. LMAO, Boca Raton is scammer central, home to some of the finest shill companies EVER.
We’re number 2!!! I guess it is safe to assume the fraud premium has not yet deflated out of frothy housing prices?
Mortgage fraud soars in first quarter, report says
From the Associated Press, From the Associated Press
August 26, 2008
NEW YORK — Reported incidents of mortgage fraud in the United States jumped 42% in the first quarter of 2008 from a year earlier, with Florida reporting the highest number of cases, according to industry data released Monday.
Florida properties accounted for nearly a quarter of all mortgage fraud incidents, the Mortgage Asset Research Institute said.
California ranked second, followed in a three-way tie by Illinois, Maryland and Michigan.
The LAT article said there were 100 FBI agents working on mortgage fraud in 2007, now there are 200 — about the same number of security personnel at a Charlie Daniels concert.
So when will prices finally come down here in MD … it’s still land of “it’s different here” with very little price reductions. Waiting … waiting … I’m thinking we’ll start to see a mess in the spring …
From the CNN article - 24% of all mortgage fraud is in Florida, and 1/2 of that is Miami Dade. That’s 12% of the US fraud in one county, even though it has about 1/2% of the US population. So fraud in Miami-Dade is 24X the average. My question is why would any sensible banker take the risk of loaning money in Miami Dade? What’s the chance of default - 25%? 50%? Crazy.
“why would any sensible banker take the risk of loaning money in Miami Dade?”
Uh, money laundering is HUGE business in Mijammy. Has been every since the cocaine cowboys of the 70s and 80s.
They’re probably not stupid enough to launder their money into a system where they only get 50% of it back.
What is the normal cut?
You’d have to be out of your mind (or lending with OTM) to make a loan into that kind of environment. With the coming tax crisis in FL, coupled with the ongoing insurance problem, lending in FL is going to be a “one off” thing. Nobody is going to buy MBS packaged with FL loans in another 2-3 years.
I’m sure they will relabel it with some familiar foreign name and resell it in other parts of the globe, just like they did in Australia.
And I’m sure that in countries like Netherlands you can still sell FL mortgages without any problem, there are still plenty of posh ads here promising 20-25% yearly returns on FL RE investments.
I am just happy to see Maryland (”Bedlam on the Bay”) rank so high up there in corruption and fraud.
Ask any of the sheeple around here, and they will still prattle on about how “Maryland is different” and “everyone here is rich because of DC” as if any of that justifies housing starting at 5x median household income and rapidly rising from there. Gee, maybe fraud - not magical wealth that somehow falls on everyone within 100 miles of DC - might explain it!
Just a brief note of my observations here back in upstate NY and VT…..
The delusion that RE is the hope and savior of everyones economic future still runs deep. Most are completely or mostly unaware of the crumbling structural elements that support RE and proceed as if prices haven’t declined and the current fundamentals are is merely a lull and everything will turn around. RE sales scumsters are still lying through their teeth about the market yet the obvious is revealing itself as the for sale signs continue to grow.
It is very easy to begin to doubt the facts and what I know to be true when you’re surrounded by the insane psychobabble of RE believers and koolaide drinkers. This place is a complete looney bin.
Exeter, That is the precise observation from upstate NH as well! As an aside and one that causes me great consternation, one small town I track has about 75 listings, some longer than 1 year. The past 3 weeks saw 5 listings go pending. 2 listings in the mid 200’s and 3 in the mid 400’s. It’ll be interesting to see how many close. One of the houses did decline 100K over the course of it’s 12 month listing before pending in the mid 400’s.
I recall reading that there is a deadline approaching for loan qualification under old FHA rules or something to that effect and that this was driving some sales, anyone have any intel on this?
Washington Post reported that down payment assistance programs are ending 1 Oct.
FHA downpayment to increase from 3% to 3.5%.
If I am interpreting this correctly, a few “charitable” programs provided the DPA that the SELLER donated. This loophole closes 1 Oct.
LO/MB are screaming on several sites/blogs, encouraging their members to fight Washington. (It’s a done deal).
IIRC, gift letters are still legit for DPA.
This legislation, signed by the President, is what HBBers have been saying for some time now - put some skin in the game!
Leigh
My own sense is that the $7.5k pseudo tax credit is to compensate for the fact that DPA is DOA.
Agree.
Thank you Leigh, that’s what I was thinking of, although I am not sure it’s the actual cause of the spate of pendings.
Are you in the part of that border area where the road from 87 to Rutland / Killington is (in)famously two lanes. Maybe people just don’t want to face the real numbers on their paychecks. I don’t know up there, Vt has cows at least, but the NY side. Is there any work? Has that situation improved with Sen. Hill.Cl.??
I totally agree with you.
I’ve made a number of visits to Rochester this summer and actually found myself at times doubting what I read and see elsewhere about RE in general. There seems to be an awful lot of “we’re different” and “everything is ok” around there. Quickly found out I couldn’t really even voice doubts or bring up points contrary to the “all is fine” crowd even with the gal I’ve been visiting without feeling like there was something wrong with ME. So I just kept my mouth shut.
From reading Craiglist and the local rag it sounds like the flippers are descending en masse on Rochester, and there is the occasional article talking about the rapidly spreading foreclosures. Granted, I thought Rochester was “ok” (remember, I live in Detroit, lol), but it’s nothing special and I don’t see how they can avoid what the rest of the country is going through.
‘There seems to be an awful lot of “we’re different” and “everything is ok” around there.’
Most amazing bit: We are three years into the worst real estate bust since the Great Depression, yet denial still lingers in many quarters. The anger stage of this bust could get frightening, given how long it has taken the collective psyche to work through the denial stage.
We live in our own little world here.
There won’t be much to see now, until after a long cold winter.
I’ve seen how deep these delusions run with family members and friends. I have a relative who has a second home in South Carolina that they can’t sell, they decided to rent it out until “the market comes back”. No one can stop my sister and her husband from buying, no matter how many arguments are made, they always come back, “Yeah, but in the long run it will go up”. I’ve stopped asking how long their long run is.
I have friends who bought in North Carolina two years ago, they have already seen some of their neighbors sell for less than they paid for their houses, yet for some reason they are thinking about moving again without considering the loss they will almost certainly take if they have to sell their house.
For the most part it is just easier to shut up and let people figure this stuff out on their own.
Denial in full bloom here, but the facade is crumbling. At least 4 builder spec homes have gone back to the bank, and another is advertising a short sale price that’s about 23% below the prior wishing price. Yet a nearby couple just put their house on the market for about 12% more than they (over)paid a little over two years ago.
These are the folks who we know are hurting. The mortgage on this house has to be about $2300 a month PITI (public records on the Web), and will adjust next spring. They have another similarly-sized house in the mid-Atlantic region they’re also trying to sell. But by their own admission, the builder up there is offering close-out pricing that’s 15 to 20 percent lower than what they paid 3 or 4 years ago.
And these people are retired!
RE: my observations here back in upstate NY and VT…..
Brutal winter forecasted by the Farmer’s Almanac for the Northeast.
Wait until everybody’s furnaces shut down since there’s no juice to fire the burners because of the electric grid overload from all those electric space heaters the deadbeats are usin’ because the power companies can’t disconnect them during the winter months.
The for Fale Signs will really be sproutin’ like mushrooms come springtime. People will be bailing like lemmings over a cliff.
Wood logs will become scarce or a bubble.
next bubble: wood for heating not building.
When will we see a “Grapes of Wrath” type of emigration from rural New England, where people just load up their car (and maybe a trailer) with everything that will fit, and abandon their properties to the snow and cold?
RE: When will we see a “Grapes of Wrath” type of emigration from rural New England, where people just load up their car (and maybe a trailer) with everything that will fit, and abandon their properties to the snow and cold?
I’m betting spring of ‘09.
However, if Joe Kennedy gets a few boat loads of bunker 6 fuel oil from Hugo Chavez to re-distribute to all the butt-head and lotto ticket purchasing inhabitants of the Peoples Socialist Republic of New England to keep the furnaces runnin and 3rd floor windows open , then all bets are off.
Anecdotal observation:
With early fall frost hitting Wisconsin in late August (!), there have already been sightings of “snowbird” license plates in Phoenix. This is extremely early for them to be here - but here they are.
The farmer’s almanac calls for a “very cold, hard winter” for the northeast in 2008-2009, and heating oil is what - $3.60 a gallon?
Now Chavez might save the day for his idealogical compatriots, but then again he might not.
Could the migration from NE to SW be boosted just a little by an especially cruel Old Man Winter?
We shall see.
Already happening here in NH. Last fall a cord of wood was about $160 dried and $140 green, give or take. Now it’s about 280/250, give or take.
Wood fired boilers are all the rage now with reported backlogs for delivery and lots of plumbers booked up as well.
Wood stoves also doing well I’m told. I don’t know about the grid capacity so I don’t have an opinion on the ability to withstand a widespread switch to electric heat. My family has several electric heaters spread around the house to augment heat during the winter and it works pretty well. I also put in (at my expense but landlord OK) an electric water heater as the old method was off boiler, this precludes us from having to use the oil boiler during summer at all and minimal use during winter. It has already paid for itself at the current oil prices and was installed last March.
“Wood fired boilers are all the rage…….”
Does “green” energy include “green wood”?
The for Fale Signs will really be sproutin’ like mushrooms come springtime. People will be bailing like lemmings over a cliff.
Yah, another six or seven months of paying for a depreciating asset plus utilities (plus the ol’ SUV and food and stuff like that) should increase the fear quotient. Anywhere that gets real snow or appreciable cold is already close to the end of the sales season. These dopes have a small window of opportunity remaining — then it’s hang on tight through the winter to capitulate in the spring.
Rubbish : With all the hot air that those politicians and economists talk, there is a ready supply.
Exeter, Just spent our vacation at our second home in the Warren/Essex region. I think we blogged about that area some time ago. I also still get the MLS notifications for certain areas and price ranges every time a house is listed, changes price or is sold. I too noticed a growth in the for sale signs so I went to the NYSAR site stats page. If it is to be believed, then those folks still have some reason for optimism as the stats aren’t too bad YOY and the 2006 to 2008 stats are worse but nowhere near the rest of the country. Further north and east may indeed be a little worse but with so few sales I don’t trust the numbers (and given the source….)
http://www.nysar.com/consumers/stats.asp
By the way, I just remember now why I thought ‘breath mints’ when Utica was mentioned: Life Saver - Beech Nut in Canajoharie.
This was re employers in upstate.
The Rochester area is starting to take a deep breath, since it can happen here. I’ve been looking at Trulia and places like Pittsford the sales have gone from apr-jun 03 (153) - apr-jun 07 (167) - jan-mar 08 (63) - apr-jun 08 (35). And this is one of the more affluent towns.
http://www.trulia.com/real_estate/Pittsford-New_York/#stats_n_trends (number of sales tab)
A couple of real estate agents I have spoken to say things are challenging this year and for them to say that, you know it’s getting bad. One told me her client had to increase his downpayment amount on a couple of rental properties he was eyeing from 20k to 50k in the span of the last six weeks. It will get worse here, but that can be said for the entire country.
FBI saw threat of mortgage crisis:
http://tinyurl.com/6b8aqh
“Long before the mortgage crisis began rocking Main Street and Wall Street, a top FBI official made a chilling, if little-noticed, prediction: The booming mortgage business, fueled by low interest rates and soaring home values, was starting to attract shady operators and billions in losses were possible.”
“It has the potential to be an epidemic,” Chris Swecker, the FBI official in charge of criminal investigations, told reporters in September 2004. But, he added reassuringly, the FBI was on the case. “We think we can prevent a problem that could have as much impact as the S&L crisis,” he said.”
“Most observers have declared the mess a gross failure of regulation. To be sure, in the run-up to the crisis, market-oriented federal regulators bragged about their hands-off treatment of banks and other savings institutions and their executives. But it wasn’t just regulators who were looking the other way. The FBI and its parent agency, the Justice Department, are supposed to act as the cops on the beat for potentially illegal activities by bankers and others. But they were focused on national security and other priorities, and paid scant attention to white-collar crimes that may have contributed to the lending and securities debacle.”
“But the tepid response also reflects a broad realignment of law-enforcement priorities at the Justice Department in which mortgage fraud and other white-collar crimes have been subordinated to other Bush administration priorities. That has reflected, in part, the ramp-up in national security and terrorism investigations after the Sept. 11 attacks. But the administration has also put more support behind efforts against illegal immigration and child pornography.”
Distract and steal. Nice job W. Harding could only have dreamed of being as corrupt.
At least Harding had the decency to go away, whilst serving his term.
And the decency to confine his bumblings (mostly) to the domestic front, instead of creating sh!tstorms all over the world.
And the decency to “leave” in less than one term instead of leaving a colossal mess that will take more than a generation to clean up.
Amazing. Why rob a bank with a gun?
Now you can do it with a pen.
They did manage to bring down the Governors of New York, New Jersey, and Pennsylvania didn’t they? You gotta have your priorities.
So whatever happened to Paladin? I remember his stories of the FBI not being the slightest interested in obvious mortgage frauds.
Paladin had a post or two a couple of months ago if I remember correctly. He’s also working the IRS end of this too. There were potentially big amounts that would allow him to hire people and pursue this more aggressively. I hope he gets the funds he needs soon enough to avoid any statute of limitations issues. The amount of fraud is massive and needs to be exposed and prosecuted.
Mortgage fraud still soaring
A crackdown on underwriting has failed to halt an explosion of fraudulent home loans.
http://money.cnn.com/2008/08/25/real_estate/soaring_mortgage_fraud/?postversion=2008082606
The study found that the number of fraudulent loans issued during the first three months of 2008 skyrocketed 42% compared with the same period in 2007.
Cases of identity theft accounted for 6% of all mortgage fraud in Illinois, for example. In many of these deals, crime rings use phony identities to obtain mortgages on properties they don’t own, then take the cash and vanish.
The regulatory agencies, he said, are overwhelmed. But the FBI did step up its efforts to combat mortgage fraud recently. In June, its Mortgage Fraud Task Force arrested more than 400 mortgage brokers, lenders, appraisers and other industry insiders responsible for more than $1 billion in losses.
One billion a month in fraud and they can’t keep up with the case load. Just the tip of the fraud iceberg.
In many of these deals, crime rings use phony identities to obtain mortgages on properties they don’t own, then take the cash and vanish.
Seems like an easy way to combat this is to have a human being from the bank go visit the property and talk to the people living there before handing out wads of cash.
“Seems like an easy way to combat this is to have a human being from the bank go visit the property and talk to the people living there before handing out wads of cash.”
=======================================
This is az_lender’s approach to doing business, with many of her clients living in manufactured homes. She seems to be doing ok with her loans, for the most part.
The human touch making the difference, I suspect.
But if you did that, you’d see that there is no way a pair of strawberry pickers making $20,000 a year (together) could afford a $750,000 McMansion. No McMansion sale = no repackaged loan = no bonus for the re-litter and bank. So, there’s no incentive to stop fraud since doing so would get in the way of making money.
“….talk to the people living there before handing out wads of cash”
It wouldn’t matter…….as long as they showed a legal ID.
Somebody bought a $40,000 Ford truck in California using my deceased brother-in- law’s I.D., less than six weeks after he was gone. All he had to do was show a Cali Drivers license.
Helpful hint: If someone in your family dies, have someone notify the Credit Ratings Agencies…..they will flag the file.
True. Once a person dies, it is added to the Social Security “Death Master” List. However such update can take up to 3-6 months. Hence the window of opportunity for a lot of mortgage fraud, credit fraud and ID theft.
Home sales slip in Southern cities in July
http://www.forbes.com/feeds/ap/2008/08/25/ap5355267.html
In Houston, where the housing market avoided much of the downturn, ZipRealty (nasdaq: ZIPR - news - people ) agent Peggy Brady said the area’s economy, bolstered by oil and gas industries, has helped demand and pricing.
“You see building all over. You see action everywhere you go in Houston,” Brady said. “Psychologically, that helps people realize we don’t have the doom and gloom here like they do in the rest of the country.”
The median price in Houston rose more than 3 percent to $161,342 in July, while sales were down 18 percent, according to the AP-Re/Max report.
Sales are down 18%, so that means they don’t have “the doom and gloom here like they do in the rest of the country.” ????
I suspect sales are down 18% in Houston, because it’s a life-sucking humid hellwhole in the summer, and exists largely because of air conditioning, the constant running of which, is getting very expensive. (and most electricity bills are going up 20%, in 4 months time)
Drove through Houston crashed out with a friend, many years ago…thank god for the astrodome…and i don’t follow baseball but the seats were cheap….2 double headers and a night game…whew.
We had a temp inversion almost 100 degrees…and the smell, smog, hot smelly humid sea water…..
Home prices should be super cheap there….. like Detroit
Alad: Summer has been pretty cool - 80’s due to the storms. Only now is it up in the 90’s.
I’ve recently moved within Houston and see a lot of townhouses go up. (I rent on of these). I see open days but no traffic. Quite a few bank owned properties.
In the burbs, there has been a lot of overbuilding. A downturn is coming to Houston and I think a lot of people are getting nervous.
There is no shortage of land in Houston.
I guess for location, each to their own. I actually like Houston.
Funny, I wouldn’t like to live in NY. Same with London.
I’m just a native Californian that wilts in humidity…
I used to go to Hong Kong a bunch, and it’s so humid there, i’d jump into an icebox on wheels (red taxi) and have him cruise around for 10 minutes, so I could dry off, before getting out and sweating like a pig again.
I used to go to Hong Kong a bunch, and it’s so humid there, i’d jump into an icebox on wheels (red taxi) and have him cruise around for 10 minutes, so I could dry off, before getting out and sweating like a pig again.
That must have been a while back. These days, Hong Kong stores have ice cold air-conditioning. And that’s with the doors open.
Following up on yesterday, the more I think about it, the more I believe that in the event of a Fannie and Freddie bailout, bondholders should be forced to take a loss. Everyone is assuming only shareholders would lose, and perhaps not even them.
It would be bad enough if the bondholders got a heads I win (through extra yield over treasuries), tails the taxpayer loses (as they get, in effect, treasuries). Insulating the bondholders from losses would mean tails the win AND the taxpayer loses, with extra yield over treasuries for treasuries.
At the very least, bondholders to suffer a capital loss sufficient to reduce their yield to what they would have received if the had purchased U.S. Treasury bonds rather than Fannie and Freddie bonds.
GSE bondholders = foreign central banks and other deep pools of wealth which provide loanable funds to keep the U.S. credit markets afloat
Sorry! We can’t let them take big losses, but we can make them settle for a treasury rate of return for, in effect, treasuries, can’t we?
The government has enough problems without eliminating what little market discipline is left in the credit markets.
What’s wrong with America producing, saving, and paying its own way? Haven’t we gotten into enough trouble with all this super easy credit from FCB?
“What’s wrong with America producing, saving, and paying its own way?”
Your talking about work! It does not fit in with a whiner society.
“I want it all now.”
“I want it all now, and i’m willing to pay $50 extra to get it here overnight.”
Does anyone know whether the Moodys.com estimate of 2.8m additional homes entering supply due to owners facing foreclosure, returning their homes to their lenders or selling short by the end of this year is reasonable? If it were spread over months from September through December, this would amount to an addition of 700,000 in latent used home supply per month, which represents an annual rate of 700,000*12 = 8,400,000, which is 3.4m above the current 5m or so rate of used home sales per year. And we are in the middle of the red-hot summer sales season right now, so the rate of used home sales is likely to fall off its current 5m per year pace going into the holiday season.
How’s it again that home prices are going to bottom out in early 2009?
Unsold-homes inventory hits all-time high
By Alan Zibel
ASSOCIATED PRESS
August 26, 2008
WASHINGTON – Sales of existing homes rose in July, surpassing expectations, as buyers snapped up deeply discounted properties in parts of the nation hit hardest by the housing bust.
However, the number of unsold properties hit an all-time high, the latest indication that the worst housing slump in decades is far from over. Prices nationwide are not expected to hit bottom until early next year.
…
The San Diego Association of Realtors did not report record inventories of active listings, saying the latest count of just over 19,000 homes for sale was about 1,500 less than in August 2007. One key unknown for the U.S. housing market is the future ability of mortgage finance companies Fannie Mae and Freddie Mac to supply money for loans. The two government-sponsored companies have dramatically cut back the availability of mortgages as they cope with mounting losses from foreclosures.
President Bush last month signed sweeping housing legislation that aims to prevent foreclosures by allowing an estimated 400,000 homeowners to swap their mortgages for more affordable loans, but only if their lender agrees to take a loss on the initial loan.
Even with government help, nearly 2.8 million U.S. households will face foreclosure, turn over their homes to their lender or sell the properties for less than their mortgage’s value by the end of next year, predicts Moody’s Economy.com.
A figure I have heard a couple of times in NPR news reports the past couple of days is that foreclosures occurred last month “at over 9000 per day.” I don’t know where this figure comes from, or how accurate it may be, but at that rate, it would take only 45 days for the number of new foreclosures to exceed the 400,000 “deserving homeowners” who are supposed to be helped under the Mortgage Rescue Plan:
45*9000 = 405,000.
Moreover, the annual number of new foreclosures at that rate would equal
365*9000 = 3,285,000, which would equal more than 65 percent of the current inventory of used homes for sale (less than 5m at the moment).
How’s that again that prices are going to bottom out in early 2009?
Keep in mind also that the CBO estimates about 1/3rd of those 400,000 homes that are bailed will ultimately end up in foreclosure anyways.
not that I dispute the general notion, but to be more realistic you should exclude weekend and holidays in your 9000/day foreclosure calculation. Bankers (generally the ones doing, processing, etc…) foreclosures work about 220 days per year.
So 220,000 X 9000 = 1,980,000
so more like representing ~ 35-40% of all sales on an annual basis.
I believe the article said end of next year though, as in Dec 2009. That would make it 2.8 M /16 mo instead of 4, or a slightly more manageable monthly rate of about 175k.
JPMorgan’s Mortgage Losses Rose in Quarter
By REUTERS
Published: August 25, 2008
JPMorgan Chase & Company said the market value of its investments in Fannie Mae and Freddie Mac preferred stock had fallen by half to $600 million this quarter.
In a filing with regulators on Monday, the bank said the decline could affect its earnings. The precise amount of losses for the third quarter was difficult to determine, given the variations the shares’ values, it said.
The warning came after JPMorgan disclosed that it would write off an additional $1.5 billion as it tried to dig out of the subprime mortgage mess. It consistently has been among the first banks to sound the alarm as troubles have spread to home equity loans and mortgages taken out by the most creditworthy mortgage borrowers.
Why doesn’t one of the members of our elite financial media ask JP Morgan how they manage to increase their derivatives book by 7 TRILLION dollars EVERY QUARTER and WHY????? Fracking insanity!
JPM is the garbage man. Financial landfill so to speak. They’ll be like one of those Japanese banks in the 90’s with piles of bad assets that will just sit there being heavily ignored. Everyone needs the garbage man.
How would you like to be rescued, only to discover that your rescuer’s efforts effectively result in feeding you to the sharks?
Fannie-Freddie crisis spreads
By Saskia Scholtes and Francesco Guerrera in New York
Published: August 26 2008 03:00 | Last updated: August 26 2008 03:00
The fallout from the crisis at Fannie Mae and Freddie Mac spread across the financial system yesterday as JPMorgan Chase warned of a possible $600m loss from its holdings of preferred shares in the two mortgage financing groups. It said it would write down the value of its $1.2bn preferred shares in Fannie and Freddie by half.
Banks and insurers own most of the $36bn in preferred stock in Fannie and Freddie, and JPMorgan’s announcement will raise pressure on other holders to make similar writedowns.
Preferred shares are a hybrid of debt and equity and are attractive to investors because they pay interest above equivalent debt instruments.
No other bank has written down the value of its Fannie and Freddie preferred shares, and only a few have revealed their holdings.
Philadelphia-based Sovereign said last week that it held more than $600m in Fannie and Freddie preferred stock.
In a regulatory filing, JPMorgan said that since June, the value of its preferred shares in Fannie and Freddie had “declined in value by approximately an aggregate $600m”.
The bank said that the precise amount of the losses would not be known until the end of the third quarter.
The value of preferred stock in Fannie and Freddie has tumbled to less than 50 cents on the dollar in recent weeks on fears a US Treasury rescue could wipe out holders of preferred as well as common stock.
The Treasury was granted powers late last month to extend its credit lines to Fannie and Freddie and invest in their debt and equity.
There’s many a $keleton under the carpet, yet to be discovered…
(i’m aladinsane, and I approve this message)
Is JP Morgan considered a “regional bank”? I am wondering if revelations of GSE preferred shareholdings by the big boys will change the bailout game plan to “wipe out GSE shareholders”?
Associated Press
Some regional banks exposed to Fannie, Freddie
Associated Press 08.25.08, 9:36 AM ET
NEW YORK -
Some regional banks with substantial holdings in Fannie Mae and Freddie Mac preferred stock could suffer from the uncertainty over the mortgage finance giants’ fate and growing speculation that the government will rescue them, an analyst said Monday.
Regional banks with the largest exposure to Fannie and Freddie preferred stock as a proportion of their capital include Sovereign Bancorp, Westamerica Bancorp and Gateway Financial Holdings Inc., Samuel Caldwell at Keefe, Bruyette & Woods wrote in a research note.
A government rescue of the two companies - which have been struggling with billions of dollars in losses from bad mortgages and have seen their stock prices plunge in recent weeks - could be costly for scores of investment, banking and insurance companies that hold billions in their preferred shares.
According to Merriam Webster’s dictionary, a “score” means 20. Thus I guess “scores” refers to 40 or more investment, banking and insurance companies that hold billions in GSE preferred shares. It sounds to me like those shares will not get wiped out in whatever kind of bailout measures are passed.
Politicians are jumping on the bandwagon with the plan to wipe out GSE shareholders. I wonder how GSE shareholders feel about such statements? (BTW, anyone who owns Vanguard’s Total Stock Market Index fund is a GSE shareholder — I checked yesterday…)
PAGE ONE
Shaky Economy Challenges Ambitious Obama Agenda
Stocks and Housing Falter as Democrats’ Convention Opens
By BOB DAVIS and T.W. FARNAM
August 26, 2008; Page A1
…
Sen. Barack Obama, whom the party will nominate for president this week, addressed one of the key issues, the parlous state of the government-sponsored buyers of mortgages. “I don’t think we can allow Fannie Mae and Freddie Mac to collapse,” he said at a town-hall meeting in Davenport, Iowa, adding that their shareholders “shouldn’t be protected.”
Against this backdrop, Sen. Obama is proposing to use the government to remake economic policies in a way that hasn’t been seen in Washington in decades.
The last two Democratic presidents, Jimmy Carter and Bill Clinton, were hamstrung by rising deficits, feuds with Democrats in Congress and antigovernment sentiment in Washington. Sen. Obama’s advisers argue that he would be largely free from those constraints, easing the way for him to put in place big government programs, tax increases on the wealthy and trade restraints.
A Chinese dude who wasn’t afraid of the State
600 years BC …( Before Cheney
)
Chapter: Seventy-Five
Why are the people starving?
Because the rulers eat up the money in taxes.
Therefore the people are starving.
Why are the people rebellious?
Because the rulers interfere too much.
Therefore they are rebellious.
Why do the people think so little of death?
Because the rulers demand too much of life.
Therefore the people take death lightly.
Having little to live on, one knows better than to value life too much.
Tao Te Ching
by LAO TSU
Translation by Gia Fu Feng and Jane English
http://www.daily-tao.com/tao/seventyfive.html
–
Obama would be very unlucky if he were to get elected. He would be handed the worst economic prospects EVER in US history. The economy has been hollowed out by debt-pushers and the financial system is at the brink of collapse, even if the interventions spread the collapse over a 2-3 year period. He would go down with much worse reputation than Herbert Hoover, a great man compared to most presidents.
I wonder what kind of right-wing attacks can we expect in 2012 if Obama is the next President?
Jas
He won’t have the lowly reputation of GW Bush: worst. president. ever. Anything is an improvement over the last 8 years, even possibly McCain.
This might have worked if the PTB had held the ship together before the election……then, they might have had the chance to blame him for causing things to tank, because of the view that “he is unfriendly to business and/or the rich”.
Even here in one of the reddest of Red States, pretty much everybody recognizes that Bush and Co. have not addressed any of the problems we had when they took office, and have added many more problems that they alone created.
McCain and the Republicans are going to get their asses handed to them in November……you heard it here first.
People have short memory. So in four years they will remember only the pain and associated with the administration of the day. Hence, whoever wins is definitely a one-term prez.
A few weeks ago I asked for suggestions for good books to read on the Great Depression. Thank you to everyone who suggested books. I’m currently reading “The Great Crash 1929″ by John Kenneth Galbraith.
My SO just took it from the library yesterday so I’ve only read 30 pages or so but the similarities between then and now are scary. I could go through the entire book and replace the phrase “stock market” with “housing market” and you would think the book was about 2008 not 1928.
Commentators have compared the crash of ‘29 with virtually every financial crisis since but I’m starting to feel like the housing crash might be a little too close for comfort. The irrational purchasing, the rampant speculation, the purchasing of investments for the sole purpose of selling at a later date for capital gain, the amount of risky investments, buying on extreme margin, companies investing in the stock market instead of investing in increased production (Porsche and GM make more money through their investment arms than they do making cars!), the list of similarities are endless.
Even worse, the housing crisis hit me closer to home. I learned over the weekend that my parents are headed into forclosure. They’re only a few days away from the 60 day late mark. My parents don’t have a toxic mortgage or anything but they do live beyond their means. My dad’s almost 62 and he’s been out of a job since Dec. 2007. Like typical boomers they have no savings or retirement plans whatsoever. They have cable tv with all the movie channels, netflix, tivo, spend lots of money on fast food, drive everywhere all the time, etc. They nickel and dime’d themselves into foreclosure.
I’m not in a position to help them out financiallly right now because I use every extra penny I have to pay off my private student loans. If I wanted to reduce my extra prinicipal payments I could easily cover their mortgage every month but I don’t know if I want to. They’ve got 25 years left on their mortgage. Long term, when they live solely off social security, they won’t be able to afford the mortgage anyway. Paying their mortgage today is like throwing good money after bad. They’ll eventually lose the house because keeping it means working until their 80, which isn’t realistic. My parents are extremely upset over the situation. I offered some advice like get rid of cable, tv, internet and use the cell phone only, stop taking their grandchildren to McDonalds 2x a week, walk to the library to use the internet, stop driving every where all the time, make all your meals at home, etc. They couldn’t fathom giving that stuff up - so even though they’re my parents, they have a lot of responsibility for their predicament.
Anyway, I hope the week doesn’t turn out to be too sad and depressing.
‘I could go through the entire book and replace the phrase “stock market” with “housing market” and you would think the book was about 2008 not 1928.’
Long-time readers of this blog know the similarities run even deeper, as the 1929 Wall Street crash was preceded by the bursting of the real estate bubble known as the Florida Land Boom in 1925.
Check out the inauspicious alignment of these dates:
1925 2005
1929 2009?
I sure hope the Fed is on their toes next year so they can avoid a repeat of history!
Depression is baked in the cake, has been for a while now. Cash, gold, no debt plus a couple months of food/water access and a means to defend same just in case of total gov’t ineptitude (which is not yet baked into cake but they are adding the ingredients). Good luck to all.
Average life span = about 75 years.
So that 80-year gap is just long enough for pretty much everyone who remembers the leading days of the GD to die off.
Not a coincidence, methinks.
“They have cable tv with all the movie channels, netflix, tivo, spend lots of money on fast food, drive everywhere all the time, etc. They nickel and dime’d themselves into foreclosure.”
I am firmly convinced that the solutions to our problems, whether housing, energy, or money, are all to be found on the demand side. i.e., learning to be content/happy with about half of what we now consider “normal.”
Be happy on half the salary you make. Be happy using half the energy you use now and be happy living in a smaller house.
If we can do that, we will find that we Americans still have it better than 90% of the planet.
Man you guys are such killjoys. All we really need is some more stimulus checks! C’mon now once you have a taste of consumerist “crack” it’s pretty tough to not whore yourself completely to get your next fix.
And no, I’m not speaking from experience in either way!
It’s funny you should mention crack, because that’s exactly what HELOC and cash-out refis were for the average American: the financial equivalent of smoking crack cocaine. Highly addictive and very damaging to one’s (financial) health.
I’ve got a lot of student loans and some of them are variable rates. Variable interest rates are extremely low right now and I’m not stupid - low rates can’t last forever. I maybe too young to remember the extremely high rates of the 1970’s/80’s but I’m well aware of their existence. So my strategy has been to pay off the variable rate loans in record time. I signed up for the 30 year plan but according to my calculations (thanks Karl’s mortgage calculator!) I’ll have them paid off in about 5 years - which is approximately December 2009. To do so requires strict financial discipline.
In keeping with this financial regimine, I prepared budget in excel detailing every expense I have. I constantly tweak it looking for sources of excess, places to cut back, money I can save, etc. If I really wanted to go on a fiscal fast I could reduce my spending by 20% if I wanted to but somethings I cannot give up (interenet, cell phone primarily, going out). But even those expenses have been tweaked to the bare minimum.
Somehow my parents went through life and never learned how to save or trim expenses. They have all the bells and whistles. They have two cars, use lots of gas, eat lots of fast food, have the most expensive cable package, live in a 3 bd house for 2 people, buy lots and lots of cheap imported trinkets from Wal-Mart; give their grandchildren toys everytime they seen them, tivo, netflix, tru-green lawn service, cell phone, cable internet, internet home phone, and the list goes on and on. if they pared every expenses down to the bare minimum they could ’save’ the house on my mom’s salary but they simply are not prepared to make the sacrifices necessary to do so. And trying to explain this to them makes them vehemently upset. It’s really difficult to watch my parents nickel and dime themselves into foreclosure, but what are they going to do? My dad needs a job TODAY but he’s been looking since December. Trying to get a job doing physical labor at 62 is extremely difficult and he has no other skills. it’s tough. Ok, I’ve got to get back to work, enough dilly dallying for the morning.
Legal,
Sounds like you are where I was about 15 years ago (except for the broke parents, rotten luck on that). Please know that you are doing the right thing. I managed to pay off my law school loans ($70K) in just under 3 years. I still spent a bit on myself - reasonable vacations, the occasional extravagant gift - but rent, clothes, etc were kept to a minimum. Living in a studio is great for self-discipline. When you pay off the loans you buy your freedom. You can keep saving aggressively for a goal of your choice, take a few months off if you need to, take a lower paying job you really love, or just relax the crunch a little and still save almost as much.
I did all of those things. You won’t regret it. Don’t let your parents destroy your financial future. If they can’t save the house anyway, your contribution will be lost. The best thing you may ever be able to do for them is to hold their hands through the process or even through bankruptcy. But you won’t be able to do it, if you let them drag you down into financial ruin with them. You will resent them too much. Keep loving them. And keep your cash.
If I lived on half as much income and used half as much electricity, my animals and I would be living in an unairconditioned slum, but I agree with your statement in general.
I don’t know what happened to the world. My parents never splurged on themselves, and never allowed themselves to go into debt (except for their mortgage, which they paid off as fast as possible); they never bought anything non-essential on credit.
I remember when going out to eat was a treat; now it means absolutely nothing, except a way to avoid washing dishes. Netflix? How many decent movies are there that one would need to watch tons of them every month to justify the expense?
Don’t be hard on your parents. They did their best given their conditioning. And don’t call them typical boomers. I don’t know any boomers like that. The ’80s yuppies are the ones who made extravagant self-indulgence fashionable, and their children, now grown, are a hundred times worse.
“How many decent movies are there that one would need to watch tons of them every month to justify the expense?”
Hold on, hold on. I like how everybody on this blog likes to out-frugal one another, it’s a nice change from the usual buy buy buy message you get in the MSM. But I gotta defend Netflix.
Cable can run between 50 to a hundred bucks a month. To watch all the movies you can in a month from Netflix is between ten and seventeen bucks, depending on the plan you sign up for. Now that is pretty much what it costs to go out to the movies for ONE NIGHT to see a crappy summer blockbuster. Whereas for the same price you can be entertained for a whole month at home, and watch the masters - Kurosawa, Melville, Welles, Kubrick…they have everything.
I don’t have cable, and I don’t watch “TV” (as in network reality show or American Idol b.s.) but I AM a movie buff and I watch a lot of movies, and Netflix is a pretty good deal. I have already picked over all the selection of the local video stores, and they don’t have enough obscure or foreign films for me at this point anyway.
Okay, you can now return to stories of how you are all soooooo content with only some dried beans, a bedroll, and a hobo bindle filled with “mellow yellow”! Personally, I like being able to watch an obscure French flick or Hong Kong martial arts movie whenever I want for a reasonable price.
I don’t have time to watch a lot of movies, but I do have cable, which sucks. Blockbuster offers the same kind of deal as Netflix, but I have no idea which of the two is better. The last time I was in Blockbuster, I couldn’t find anything, since they had stacked all the non-new movies on shelves to make room for video games and video game equipment.
Spending twelve bucks at the I-Max doesn’t bother me; it’s a great entertainment. And no, I don’t grow my own vegetables or loom my own cloth for clothing. But, I’ve spent more than ten thousand dollars on vet bills over the past year, so not buying stuff I don’t need or want isn’t a hardship.
Yeah, Netflix is actually pretty cool. Plus you can watch a lot of stuff on demand on your computer, if you should so choose.
I have the expanded cable package at home with the DVR, so I can’t get too high and mighty about not watching TV. But I keep it around mostly for the NFL Channel and Hockey whenever the playoffs hit. My rented house is sort of the hangout for my married friends looking for a bit of peace and quiet. Having the old gang over for some football or hockey, is worth a few bucks to me. But my rent is pretty cheap at $400 bucks a month for a really nice place. I am frugal, but I will be damned if I turn cheap.
Frederick Lewis Allen, “Only Yesterday”: An Informal History of the 1920s
is a good fill in book about the conditions that lead up to the GD. I learned a lot from it.
It sounds like your parents made a lot of mistakes — a 25-year mortgage at age 62? They are the typical mistakes of so many Americans, unfortunately.
The choices are:
your parents suffer a huge decline in their standard of living;
your future is compromised to bail them out;
I (who don’t have cable or debt, bicycle to work, and cook at home) suffer a big increase in taxes to bail them out;
My children’s future is diminished to bail them out.
Multiply that by millions.
Whether personally or socially, no matter how you look at it, those who came of age after the 1960s are screwed by those who came of age before. I had thought that things got worse for my (stagflation) generation and then leveled off. Now I worry your generation, and my kid’s generation, will be worse off still.
That is a tough situation.I guess there is only so much you can do.My dad is 67 and broke too.He lives off of 1000/m from social security.He doesnt have a mortgage so that is good.He built his house himslef from trees he cut down and milled into lumber.His major bills are gas, food , and propane.He also has directv.I help him cut firewood so he doesn’t have a heating bill in the winter.I do what I can to make sure he can survive.He did not save a dime for retirement.His ex wife got his small pension form the operating engineers.
Legal Eagle…
It’s a time-machine kinda book, and because the comparisons are so dead-on, you almost know what’s going to happen next, in today’s foibles.
Sorry to hear about your parents financial misfortune~
In the past week, 2 friends have told me they were maxed out, one is 3 months behind on the mortgage, the other 5 months.
I could help out financially, but thought about it, and if I bailed them out, they’d be in the same predicament 6 months later, no improvement, and a house leaking value all over the place.
A lot of people need to hit bottom, sadly.
the past week, 2 friends have told me they were maxed out, one is 3 months behind on the mortgage, the other 5 months.
Was at the Apple Store across from the Prudential Building in downtown Boston yesterday. My 3yo iPod finally died so I wanted to replace it. While browsing through the rows of gadgets, I hear a salesperson say to a customer (both twentysomethings), “I’m sorry, your card was declined”. The customer promptly got on the phone… to do what, I have no idea.
The crunch is coming. People are still out spending more than their income, never mind actually repaying existing debt.
I suppose you can help them find an Apartment
I will. Capitulation has to occur first.
RE: My parents are extremely upset over the situation.
Exactly what are they upset about?
Seems they made rational adult decisions to spend themselves into finanical oblivion.
From your story, it’s not like they didn’t know what they were doing.
Yeah!! Try and tell your parents in nice words that “it’s their own fault!”
I’m sorry to hear it, Leagle. Being in a position to help, but knowing it won’t really help, because they are how they are, and they aren’t going to change. It’s a difficult situation. I used to loan my sister money quite a bit, when things would get hard for her, because hey, I had it—I was in college and was working 3 jobs, but I still had a bit to spare– and I love her, and she’s my sister, right? Well, things just kept ‘getting hard’, over and over and over…I finally realized, I’m not ‘helping’. Enabling is not ‘help’. She wasn’t even in school and wore WAY cuter clothes than I did, and drove a nicer car. Thinking back on it, I can’t imagine why I was so utterly retarded. I think it’s because I always try to fix things. Fix. Yeah.
Anyway, I stopped loaning her money. I told her, I love you, but I’m done. I don’t care if your car needs work, you’ll just have to take the bus, etc etc… (And as an added benefit, without giving her anymore money I got to….ta da! Eat something besides ramen noodles!* Or, and this is just as exciting, sometimes add peas and carrots to my ramen! Huh? Huh? Luxury, man!)
Boy, you should have heard her. All the howling and crying, all the dramatic flailing around, the desperation; but you know what? To my great surprise she finally stopped it, got up off the floor, started taking care of her financial life! Sort of. I mean, she’s still a dingle, but she’s a lot better. Still, a happy ending. She never would have, I am sure, if I had kept on trying to help.
I’m not trying to hand out advice about tough love or anything. Your instincts appear to be sound on what your parents are like, and what will happen. I guess I’m just saying, you have my sympathy, and I hope things go good for you.
*I’m not dissin ramen. I still love ramen.
Thanks everyone for your advice and opinions. I cannot tell people at work or in my extended family but an anonymous nationwide internet board makes it a little easier to get a different perspective.
Sorry to hear about your parents, Legal Eagle.
One approach might be to explain to them why the foreclosure is in their best interests (which you’ve done quite well in your post).
After that, maybe you could help them find a low-cost apartment (maybe they qualify for a “low income” situation?), and help them set up a budget and show them where they might shop in their town (day-old bread stores, etc.).
It can’t be easy, and you are in a rotten position, but this would be the best kind of “help” you could give them — giving them money would end up costing everyone more, IMO, and would just prolong the agony.
Best of luck to you and your family!!!
“Well, things just kept ‘getting hard’, over and over and over…I finally realized, I’m not ‘helping’. Enabling is not ‘help’.”
Ugh! Sounds just like my ex-girlfriend. While I won’t go so far as to accuse her of using me, she really didn’t take any steps to correct the problem.
I’ve used the word “enable” to describe what I was doing as well. In general, she was a good person and it’s tough to break the cycle for someone you care for, but it took a break-up to get her to understand that she was, at the very least, sub-consciously using me.
I like my schadenfreude served up syrupy, and this decade has been an exciting one, irony overkill.
We seem to be at the point where the Majordomos of Money are about to lose their heads (not in guillotine way) and do something rash, yet another cockeyed plan, scribbled out in the heat of the moment, on the back of an envelope, with not more than 15 minutes of thought given to the repercussions of their actions…
Private housing index shows home prices tumbling by record amount nationwide in June
http://biz.yahoo.com/ap/080826/home_prices.html
“While there is no national turnaround in residential real estate prices, it is possible that we are seeing some regions struggling to come back, which has resulted in some moderation in price declines at the national level” said David M. Blitzer, chairman of the index committee at S&P.
Does this guy work for Yun? Possible, struggling, moderation. How about “this is bad news and is likely to get worse.”
“it is possible that we are seeing…” He certainly sounds like he knows what he’s talking about.
Uncle Buck is looking healthier by the day.
Gold falls for third day as dollar rallies
By Moming Zhou
Last update: 8:20 a.m. EDT Aug. 26, 2008
NEW YORK (MarketWatch) - Gold futures fell Tuesday for a third session as the U.S. dollar strengthened, reducing gold’s appeal as an investment alternative. Gold for December delivery fell $8.7, or 1.1%, to $817 an ounce in early electronic trading.
“Uncle Buck is looking healthier by the day.”
Yeah, but I still wouldn’t let him play with the kids.
pssssstt…
I hear he’s a loan molester
I hear he’s found a way to clone himself!
“…I’ll emphasize again that at the point we do observe sufficient evidence for investors to concede recession, the potential downside could be abrupt, leaving little opportunity to make defensive changes after the fact. As I’ve often said, the best time to panic is before everybody else does….
In short, the markets are presently trading on a theme that largely overlooks the potential (and in my view, the reality) of a significant U.S. recession. At the point of recognition, we may very well observe abrupt weakness in both stock prices and the U.S. dollar. …”
John Hussman
“abrupt weakness in both stock prices and the U.S. dollar…”
that’s certainly a nicer way to say “crash”, I like it!
gold falls for a third day? not anymore, it’s up now.
What happened earlier today smells like central bank intervention, again. Keep in mind the EU central banks still have more than 100 tons of gold to dump until end of September, and all of them would love to trash their currency a bit more (even though the euro’s recent plunge against the dollar is already in record territory). So there is probably more action like this in the pipeline over the next weeks, without a doubt in close cooperation with the banksters from the FED (so Big Ben can reload the ratecut gun).
A most interesting contrast: Yesterday the NAR reported a 7 pct year-over-year decline in the national U.S. median used home sales price, compared to this morning’s report of a 15.9 pct year-over-year drop in the Case-Shiller 20-city index.
The median sales price change confounds changes in the prices of individual homes with the mix of homes that are currently selling. One possible explanation for the divergence between the median used home sales price and the Case-Shiller index changes is that as quality-adjusted prices fall, the average home which is selling is of higher quality than what was selling one year ago.
BTW, at a YOY rate of decline of 15.9 percent, the “rule of 72″ suggests the time for homes to lose half their value is approximately given by
72/15.9 = 4.5 years.
The exact calculation is log(0.5)/log(1-0.159) = 4.0 years.
Conclusion: The “rule of 72″ does not deliver accurate results at high rates of decline.
latest news
U.S. June Case-Shiller 20-city index has record decline
ECONOMIC REPORT
Home prices fall a record 15.9% year over year
By Greg Robb, MarketWatch
Last update: 9:31 a.m. EDT Aug. 26, 2008
WASHINGTON (MarketWatch) — U.S. home prices fell at a record rate in June, putting more pressure on an already-fragile financial system.
The Case-Shiller index of 20 major metropolitan areas for the month fell by 15.9% from June 2007, Standard & Poor’s reported Tuesday.
What really surprised was that the report claims that prices rose about 1.5% in Denver, which I find very hard to believe:
http://money.cnn.com/2008/08/26/real_estate/Case_Shiller_home_price_report/index.htm?postversion=2008082609
“Denver and Boston were winners for the month, with home prices climbing 1.5% and 1.2%, respectively. Both of these markets have had three consecutive months of higher prices. Charlotte and Dallas, both up 1%, have recorded four straight months of gains.”,/i>
Month-on-month price changes amount to white noise. Ignore them.
What’s worse, month-to-month changes are not seasonally adjusted, which makes them entirely misleading during the red-hot summer sales season.
Does a seasonally-adjusted M-O-M number really just approach a Y-O-Y number?
In a stable market, yes, the numbers should be equal. In a changing market, the numbers can be (very) different. Month to month adjusted for seasonal variation can show you recent trends that year to year can miss. It’s best to look at both numbers, then draw your conclusions after you’ve reviewed historical averages thrown in to boot.
not surprising, I see the same in my country on the way up (in reverse direction of course, but I’m sure when our bubble pops we will see the same on the way down as now in the US - individual prices will be dropping long before the gross statistics see it).
Invididual home prices in Netherlands (comparable to the Case-Shiller index) increased about 10x from about 1990, and for homes of the Herengracht in Amsterdam (where much of Shillers original work was based on) the increase was probably more like 15-20x from around 1988.
But despite these staggering increases, the biggest realtor organisation claims that Dutch homeprices are up only 200% or so, and the Kadaster (official ex-gov. registry) says up 400% from 1993. We also have the discussions about ‘quality change’ etc. etc. Pick your choice … for every lie there are some statistics to back it.
Here is the S&P press release on the June 2008 Case-Shiller index values.
Highlights include the following one-year changes in the prices of typical single family homes in leading California cities:
Los Angeles -25.3%
San Diego -24.2%
San Francisco -23.7%
Looks like a Quarterback sack, for the city of angles…
The $1Billion in Freddie 6 months notes auctioned yesterday that caused the Freddie rally went off at 90bps over 6 month US Ts. The previous 6 month auction was 65bps over.
What happens as Freddie/Fannie have to rollover $220B in the next 6 weeks?
Is anyone watching the price action for the ones who had caskets measured and built?
ABK
MBIA
FRE
FNM
even Thornburg Mortgage….TMA
current working theory: Fundamentals dont matter, only price action. Fed backstop on paper swaps never obfuscated the truth as well as this…you cant make this shit up.
So will the viewing for the late departed economy be open or closed casket?
Private Equity prefers closed caskets for Preferred.
Photostat it, underline it in red….
Into the Jaws of Death rode the equity buyers.
(Not being a tech trader, I cannot confirm that it is a Jaws of Death formation; it sure looks similar.)
the quant boys are making sure the shorts are natural buyers.
whats the trade of the day hozzie?
Just the same old stock that I have been looking at for a week. FDIC data is due today last time there were 90 banks on the list. This time, ???
my estimate = 800 banks at risk
FDIC (if smart) will keep it at 90
FDIC Says Banks on `Problem List’ Rose 30% in Second Quarter
By Alison Vekshin
Aug. 26 (Bloomberg) — The U.S. Federal Deposit Insurance Corp. said its “problem list” of banks increased 30 percent in the second quarter to the highest total in five years.
The list had 117 “problem” banks as of June 30, up from 90 in the first quarter and the highest since mid 2003, the agency said today in its quarterly report released in Washington. FDIC-insured lenders reported net income of $4.96 billion, down from $36.8 billion in the same quarter a year ago.
“current working theory: Fundamentals dont matter, only price action.”
Fundamentals matter in the long run. Price action is why I wouldn’t dare to short everything out there in the short run.
you’ve been mis-informed.
longterm is the new short, just ask the SKF’s at 150.
10:00 a.m. U.S. June home sales 503,000 was lowest since Sept. ‘91
10:00 a.m. U.S June new-home sales revised to new cycle-low
10:00 a.m. U.S. July new-home sales weaker than 521,000 pace expected
10:00 a.m. U.S. July new-home sales up 2.4% to 515,000 pace
Hummmmm…
In celebration of that terrific news, I’ll munch on my extra chocolate ration and hoist a Victory Gin.
Sometime the Ministry of Truth just can’t get their facts together. I don’t think this one warrants a trip to the Ministry of Love though.
I love the smell of prestidigitation, in the morning.
Hey, who gave the Prole an Oldspeak dictionary!
I thoughtcrimes didn’t pay?
I’m at a loss for a blackwhite reponse.
Arghh. Response!
I facecrime on a daily basis.
Its all double plus good!
“The ideal set up by the Party was something huge, terrible, and glittering—a world of steel and concrete, of monstrous machines and terrifying weapons—a nation of warriors and fanatics, marching forward in perfect unity, all thinking the same thoughts and shouting the same slogans, perpetually working, fighting, triumphing, persecuting—three hundred million people all with the same face.”
“If your own credit spread widening counts as revenue…
and you pay compensation as a percent of revenue …
the most profitable and lucrative day in the history of your firm will be…
THE DAY YOU GO BANKRUPT!”
David Einhorn
“FAS 159: Profiting From Your Own Demise”
your boy Bronte Cap is long one of the casket crew mentioned above.
He makes mistakes, he is also among the best financial analysts in the world. That’s why he is fun to read.
He admits his mistakes and asks for assistance. Most financial mopes never admit they were wrong. Few ever ask for help.
If I were to follow an analyst, It would be this young lad.
Ego bloated analysts aren’t worth the time to read. (possibly why 95% of all analysts are wrong.)
I dig the Bronte site. Balsey trade swingin at a dollar stock in what looks to be death throws….
I really appreciate you opening my eyes to the world where these people opine. But, for whatever reason….I always seem to start and end here. I just cant give up the HBB. Its just too much fun.
So, a firm can elect to revalue a bond (say coupon is 1000/10%) from the original 1000 it sold at to (lets assume the fv of that bond decreased by 200) 800 and offset the change in liability with an increase in revenue? Really?
f— a duck
I would think that would violate other principles, like that of conservatism. Does anyone actually do that?
Yes banks do it, financial firms do it. Just another part of the dark matter looming.
Thanks hoz. I love the education I get here sometimes…
Now that I think about it more though, that would make sense if they actually purchased back the bond at that price. I’m shocked at the idea that anyone would just revalue it without buying it though.
I thought TNX was the ticker symbol for the CBOE 10-year T-bond yield option, not the Tanzanian Royalty Exploration Corporation…
http://www.marketwatch.com/tools/quotes/intchart.asp?submitted=true&intflavor=advanced&symb=TNX&origurl=%2Ftools%2Fquotes%2Fintchart.asp&time=1&freq=9&startdate=&enddate=&hiddenTrue=&comp=tyx&compidx=aaaaa%7E0&compind=aaaaa%7E0&uf=0&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=1&optstyle=1013
You stumbled upon Jim Sinclair’s company, perhaps an omen?
What’s up with the St. Louis housing market’s 50 pct YOY drop in sales?
Associated Press
Home sales, prices drop in Midwest
By ALAN ZIBEL 08.25.08, 3:20 PM ET
Existing home sales in the Midwest tumbled 17 percent last month from July 2007, while the median price in the region inched up to more than $175,000, the National Association of Realtors said Monday.
…
While prices in St. Louis were down only 6 percent to a median of $150,000, sales were still down by nearly 50 percent from last year’s levels - the largest sales drop among the 55 cities surveyed in the AP-Re/Max report.
Good morning America. Allow me first to apologize for this interruption. I do, like many of you, appreciate the comforts of every day routine- the security of the familiar, the tranquility of repetition. I enjoy them as much as any bloke. But in the spirit of commemoration, thereby those important events of the past usually associated with someone’s death or the end of some awful bloody struggle, a celebration of a nice holiday, I thought we could mark this upcoming November the 5th, a day that is sadly no longer remembered, by taking some time out of our daily lives to sit down and have a little chat. There are of course those who do not want us to speak. I suspect even now, orders are being shouted into telephones, and men with guns will soon be on their way. Why? Because while the truncheon may be used in lieu of conversation, words will always retain their power. Words offer the means to meaning, and for those who will listen, the enunciation of truth. And the truth is, there is something terribly wrong with this country, isn’t there? Cruelty and injustice, intolerance and oppression. And where once you had the freedom to object, to think and speak as you saw fit, you now have censors and systems of surveillance coercing your conformity and soliciting your submission. How did this happen? Who’s to blame? Well certainly there are those more responsible than others, and they will be held accountable, but again truth be told, if you’re looking for the guilty, you need only look into a mirror.
V
Consumer confidence shows better-than-expected improvement in August amid declining gas prices
http://biz.yahoo.com/ap/080826/consumer_confidence.html
“Consumer confidence readings suggest that the economy remains stuck in neutral, but may be showing signs of improvement by early next year,” Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement.
Falling gas prices helped boost consumers’ gloomy mood, she said.
I think this reading should now be called the Are You Happier with Gas Prices Index, since nothing else seems to move it as quickly both up and down than the price of gas. Foreclosures skyrocket, more layoffs, inflation increases, wars in Iraq/Afghanistan, bank failures, federal bailouts of freddie/fannie - it don’t mean a thing, price of gas is everything, doo-wop, doo-wop.
Just in time for hurricane Gustav.
Someone quick…start an after-markets armor plating add-ons accessory store…those “citizen” Hummers are going to need all the added protection they can get in those Middle East cities.
“…Modeled on U.S. military vehicles widely deployed in the Gulf War in 1991, the Hummer sports utility vehicle (SUV) made its debut shortly afterwards,”
Gulf Arab investors eye GM’s Hummer unit:
http://www.reuters.com/article/newsOne/idUSLQ55652620080826
Why buy A Hummer?
“Changfeng’s own Leopard SUV sells to China’s army for just $29,120, and it would be impossible to offer Hummer vehicles at a similar price.”
Motortrend
LOL
Made in China = Toxic warning label
I bet they run ads with the driver using the optional cigarette lighter to glow a Marlboro Red
Name a Japanese teenage girl that does not have a “name brand” somethingy…Hardley Davidson / Land Rover / Gucci / Tiffany / Tide
House behind me just listed for sale 2100 square feet 300K, house next to me for sale 8 months now 1500 square feet 300K……
hahaha
And what do the credit markets scream?
“…The spread between LIBOR and predicted average federal funds rate over the coming three months (LIBOR-OIS spread) is used to judge how easy or tight credit is. Over the decade before Aug 08 the spread was .11%. It is thought that .25% would indicate a postive trend back to normal. Right now it is .77% and forward markets suggest it will increase to .85% by January and not drop to the .25% level until mid-2010. Another 18 months to 2 years of tight credit isn’t going to do the world’s economies much good….”
C K Michaelson
Aug 26
some Dutch bubble tidbits:
a Spanish friend just showed me a catalogue with homes for sale from Germany (100 km or so from the Dutch border). Unbelievable, their prices are 3-5x lower than over here (even bigger difference than I thought). On the other side, I think many Spanish homes look pretty expensive currently compared to Netherlands, if you consider that they have no mortgage deduction like we have.
In another attempt to prop up home prices and developer incomes, the Dutch government is working on new laws that will make squatting illegal again everywhere in the country. Up to now squatting was allowed in some areas (e.g. where there is a severe home shortage, and only under strict conditions like when a home is unoccupied for at least a year). They did the same around the top of the previous housing bubble, in 1979. Maybe in a year we will have tanks roaming the streets of Amsterdam again, to protect the developer mob from the citizens?
And our government is now working on the problem that - due to global warming and increased flooding risk - potentially a large part of Dutch homes will be literally underwater in 50 (or 25?) years. In Dutch fashion, the problem is cured with a new mandatory flood insurance system. Insurance companies will collect about 100 euros yearly from every home for flood insurance. In case of a real flood, the government will pay out because the damage will be in the trillions so you can’t expect the insurance companies to pay. Nice eh, that as long as there is no flooding they can collect the insurance premiums without ever having to do something for it? And if there is a flood, their flood fund will be underwater right away and the bandits will keep their loot (I think they should store it in a non-Dutch bank …). I’m sure this brilliant plan will keep the floods away forever
The global consensus on trade is unravelling
By Lawrence Summers
“…The current distribution of regional economic power is unlike anything that was predicted even a decade ago. The rise of the developing world, its growing share in global output and far greater share of global growth, is perhaps a quantitative but not a qualitative surprise. The qualitative surprise is this: with almost all the industrial world in or near recession, much of the momentum in the global economy is coming from countries with authoritarian governments that are pursuing economic strategies directed towards wealth accumulation and building up geopolitical strength rather than improving living standards for their populations. China, where household consumption has now fallen below 40 per cent of its gross domestic product – which must be some kind of peacetime record – is the most extreme example. Similar tendencies, however, can be seen in other parts of Asia, Russia and other oil exporting countries….”
http://blogs.ft.com/wolfforum/2008/08/the-global-consensus-on-trade-is-unravelling/#more-176
“…much of the momentum in the global economy is coming from countries with authoritarian governments that are pursuing economic strategies directed towards wealth accumulation …”
Hard to beat a dirigisme.
yeah, what happened to good old fashioned capitalism? Maybe these ‘authoritarian’ economies have understood capitalism better than the ‘free world’.
The rules of capitalism apply to authoritarian governments like they do to individuals. Each authoritarian government attempts to invest its time and resources to grow its strength/power/wealth. The difference is that capitalism is voluntary and governments are use theft/force to increase wealth. You decide which is more moral.
The “free world” is just Orwellian speak because we live in an authoritarian society otherwise there could be no bailouts or money printing!
Can you think of ANY LIMITS on what the president could order or the congress could pass? 100% income tax, rationing of anything they choose, confiscation of private property for any reason, military slavery (draft), outlawing of private behaviors, printing all the money they could ever spend to buy whatever they wish to buy.
The only limits on our government today are the militia… err “domestic terrorists” who are willing to defend the constitution. Is it any coincidence that this is the #1 enemy of our government today?
The willing militia are outnumbered by millions of ignorant americans willing to support the status quo and so their hands are tied. By the time these millions of people wake up there will not be an opportunity to vote the corruption out of office.
Unfortunately, to defend freedom against those who desire to take freedom requires the active and forceful defense of those freedoms by all.
“…authoritarian governments that are pursuing economic strategies directed towards wealth accumulation and building up geopolitical strength rather than improving living standards for their populations.”
I have only one word to utter: Revolution!
I know it’s old fashioned…but some phenomena of Human Nature…just never gets completely eradicated.
“Hard to beat a dirigisme.”
If you can’t beat ‘em, join ‘em.
Housing Dirigible?
Lead Zeppelin?
Stairway to Hell
Don’t forget to add “buying” in front of “Stairway”.
Bring on the financial gladiators…
S.P.Q.A.
http://www.youtube.com/watch?v=_B0CyOAO8y0
CAPITOL REPORT
Might the Fed prick asset bubbles in future?
Bernanke Jackson Hole speech floats idea
By Greg Robb, MarketWatch
Last update: 5:32 p.m. EDT Aug. 22, 2008
JACKSON HOLE, Wyo. (MarketWatch) - Federal Reserve Chairman Ben Bernanke suggested Friday a possible future regulatory blueprint under which the Fed might consider pricking asset bubbles.
This would be a profound shift for U.S. banking regulators.
For years Fed and other government officials have stuck to the line that asset bubbles are hard to recognize and attempting to jump on them would cause more harm than good.
The Fed has always said it would be easier to clean up burst bubbles.
But in the wake of the housing market bubble that morphed into a housing market downturn and protracted financial market stress, this stance is clearly under review.
In his Jackson Hole speech, Bernanke spoke in terms of a new concept called “macroprudential oversight.”
“macroprudential oversight.” lol
The Gov’t creates a new one eyed monster. Form a committee, it needs a Czar.
It’s obvious Ben Bernanke did not learn everything he ever needed to know in kindergarten.
Here is another Bloomberg rant on how the housing bottom is in.
http://www.bloomberg.com/index.html?Intro=intro3
You will need to click on the Case video in the Watch Videos section.
Ok, I can understand what Chip Case is saying: this aggregate analysis of the Case-Schiller index is only part of the story and you must look at the individual indices that comprise the whole index. What bothers me is that he doesn’t seem to realize that credit issues and “deleveraging” are continuing. Also, he goes on about rural house prices. This doesn’t make sense. Most people do not live in rural areas nor do they have the skill set to make a decent living in a rural setting. The arguments just don’t hang together very well.
We have not yet been hit with the foreclosure storm that is coming. Not there yet.
Roidy
Did Chip get into a discussion of how their data is not seasonally adjusted?
When Citigroup sold its NY headquarters last December to raise cash, I wrote something on the order of “they may stay in business but they are doing strange things that suggest severe problems.”
This is just to bizarre and strange to save money.
Citigroup strives to cut costs
By Jonathan Sibun
“Citigroup is outlawing colour photocopying from internal meetings and banning expense claims for more than one mobile device in a desperate effort to crack down on costs.
New BlackBerries and flashy client parties will soon be history after the US investment bank warned staff they should be “challenging every dollar” spent.
In a wide-ranging memo that puts cost-cutting centre stage, the bank instructs staff to ensure “presentations should be printed double-sided to reduce unnecessary paper usage”. It adds: “Over time, we will be removing color copiers and printers from the locations where they are not essential.”
The edict also applies to recruitment. “We can be successful in satisfying the vast majority of our hiring needs through the use of low- and no-fee sources - for example job boards, employee referrals,” the bank said.
“Managing our expenses is not only a critical aspect of our strategy, it is also an important part of our jobs. Each of us must do our part to manage our expenses by challenging every dollar we spend.”
Citigroup has been hit hard by the global credit crisis, having written off more than $40bn (£21.6bn) and laid off 12,000 staff worldwide.”
Telegraph also covered with full memo in NYT and FT and just about everywhere.
I believe they have lost it in corporate.
It’s an Atrociti what has happened to them…
They are keeping track of stupid stuff like how many staples an employee uses, but not the bottom line.
sweet jeebus…only one wireless device on expense reports? How are they ever gonna survive….OH the humanity….
“At the end of June, 2.04% of all the banking industry’s loans and leases were noncurrent, the highest level for the industry since 1993.”
From the FDIC data today reported by the WSJ
The net effect of a 51 pct increase in Japanese home prices followed by a 40 pct decrease is an overall decrease in prices from pre-bubble levels of 9.4 percent:
((1+0.51)*(1-0.4)-1)*100 = -9.4.
The percentage decline in prices needed for the U.S. get back to this same pre-bubble price level after a 90 pct price increase can be obtained by solving the following equation for x:
((1+0.90)*(1-x/100)-1)*100 = -9.4.
the solution is x = 52.3 — i.e., a 52.3 pct decline off the peak is needed to overshoot from a 90 pct increase back to the overall post-bubble decline experienced in Japan.
By contrast, the 20 pct plus 10 pct decline “expected” by economists would amount to a total U.S. decline off peak of
(1-(1-0.2)*(1-0.1))*100 = 28 pct.
I guess it is different in the U.S. than in Japan?
Finance & Economics
Economics focus
Lessons from a “lost decade”
Aug 21st 2008
From The Economist print edition
Will America follow Japan into a decade of stagnation?
AS FALLING house prices and tightening credit squeeze America’s economy, some worry that the country may suffer a decade of stagnation, as Japan did after its bubble burst in the early 1990s. Japan’s property bubble was also fuelled by cheap money and financial liberalisation and—just as in America—most people assumed that property prices could not fall nationally. When they did, borrowers defaulted and banks cut their lending. The result was a decade with average growth of less than 1%.
Most dismiss the idea that America could suffer the same fate as Japan, but some of the differences are overstated. For example, some claim that Japan’s bubble was much bigger than America’s. Yet average house prices nationwide rose by 90% in America between 2000 and 2006, compared with a gain of 51% in Japan between 1985 and early 1991, when Japanese home prices peaked (see left-hand chart). Prices in Japan’s biggest cities rose faster, but nationwide figures matter more when gauging the impact on the economy. Japanese home prices have since fallen by just over 40%. American prices are already down by 20%, and many economists reckon they could fall by another 10% or more.
“Japanese home prices have since fallen by just over 40%.”
And that 40% decline is national. Extending the parallel (with regard to the comment of bigger gains in the big city), some of you may have the 60-70% decline you’ve predicted/hoped for.
stealing from widows and orphans? priceless.
NEW YORK (AP) — Citigroup Inc. will pay nearly $18 million in refunds and settlement charges for taking $14 million from customers’ credit card accounts, California’s attorney general said Tuesday.
“The company knowingly stole from its customers, mostly poor people and the recently deceased, when it designed and implemented the sweeps,” said Brown in a statement. “When a whistleblower uncovered the scam and brought it to his superiors, they buried the information and continued the illegal practice.”
http://biz.yahoo.com/ap/080826/citigroup_settlement.html
FDIC: US banking profits dropped by 86 percent in second quarter; 117 banks on troubled list
http://biz.yahoo.com/ap/080826/troubled_banks.html
Federal Deposit Insurance Corp. data released Tuesday show federally-insured banks and savings institutions earned $5 billion in the April-June period, down from $36.8 billion a year earlier. The roughly 8,500 banks and thrifts also set aside a record $50.2 billion to cover losses from soured mortgages and other loans in the second quarter.
The FDIC said 117 banks and thrifts were considered to be in trouble in the second quarter, up from 90 in the prior quarter and the biggest tally since mid-2003.
This of course put the market in rally mode at 3 pm….. Was this good news???
Sheila’s List now has 117 known submersives, nearly a 1/3rd more than before…
VANCOUVER, B.C. – The U.S. financial crisis has cut so deep – and the government has taken on so much debt in misguided attempts to bail out such companies as Fannie Mae (FNM) and Freddie Mac (FRE) – that even larger financial shocks are still to come, global investing guru Jim Rogers said in an exclusive interview with Money Morning.
http://www.moneymorning.com/2008/08/19/jim-rogers/
that was interesting, especially the regulation of currency in the UK. I wish he had talked about Vancouver, though. Everyone here knows *you’re* in trouble, however, we don’t feel that we are. Because…we’re different…and everyone wants to live here. Bet you’ve forgotten what it’s like to hear that said with a straight face. But it happened to me just yesterday
Hey, I don’t know about everyone, but *I* want to live there.
Ah…one day.
Sign of inflation, or just a sign of tackiness? You decide:
“Mario Correa hosts a TV pilot, “PowerHouse.” Think “Lifestyles of the Rich and Famous” set in Washington. It features homes like Surrey Hill owned by Republican lobbyists Ed and Edwina Rogers…and it has a gift-wrapping room where she likes to gift wrap gifts in money.That’s right, money. Edwina Rogers, a former advisor to the president, buys sheets of cash from the Bureau of Engraving and Printing, cuts them up and uses them for wrapping paper.”
http://marketplace.publicradio.org/display/web/2008/08/22/houses/
Talk about “new money”…
It’s a sign the printing press is working.
No worries, winter is coming…I hear greenbacks burn nicely.
Over 600 immigrants were raided from one single company in Mississippi.
Interesting article.
http://news.yahoo.com/s/ap/20080826/ap_on_bi_ge/immigration_raid
one for the bottom up regulars:
this is what I took away from it.
—
“Still, intrinsically motivated work could be the work of rank amateurs and amateurs naturally outnumber professionals. My belief is that when the number of amateurs increases sufficiently, the top of end of the quality of their work compares very favorably with the best efforts of the professionals.”
http://www.deeshaa.org/
http://www.msnbc.msn.com/id/26408431/?gt1=43001
For feisty friend in Kern Co recovering from bear attack..
Feisty puppy scares away bear attack.
this is how I am trying to help my world, find black boxes of wrong.
from overcoming bias.
“Artificial Intelligence is fundamentally about reducing the mental to the non-mental.
You might want to contemplate that sentence for a while. It’s important.
Living inside a human mind doesn’t teach you the art of reductionism, because nearly all of the work is carried out beneath your sight, by the opaque black boxes of the brain. So far beneath your sight that there is no introspective sense that the black box is there - no internal sensory event marking that the work has been delegated.”
—–
I am trying to find the black boxes that are wrong.
San Diego home prices still dropping
By Roger Showley
UNION-TRIBUNE STAFF WRITER
11:40 a.m. August 26, 2008
The downturn in home prices in key cities across the country slowed a bit in June, but not in San Diego, according to the widely watched Standard & Poor’s/Case Shiller Home Price Index released Tuesday.
Prices of single-family resale homes in 20 cities dropped 0.5 percent from May to June, compared to a 0.9 percent decline from April to May.
But San Diego’s decline was bigger in June than May and dropped a record 24.2 percent from year-ago levels.
The index, based on paired sales of the same properties over time and set at 100 for January 2000 for all cities, stood at 175.37 for San Diego in June, down 29.9 percent from the all-time peak of 250.34 in November 2005.
In other words, the median home price rose 2½ times its January 2000 level before falling back to its present level, which is still 75 percent higher than 8½ years ago.
I assume this discussion pertains to the average income of workers who have not lost their jobs?
Household income stagnating in county
By Dean Calbreath
UNION-TRIBUNE STAFF WRITER
3:31 p.m. August 26, 2008
Income levels stagnated in San Diego County last year, mirroring the state and nation and barely outpacing the official level of inflation, according to data released Tuesday by the U.S. Census Bureau.
A number of economists said that after adjusting for inflation, the median salary was lower last year than it was in 2000, before the recession of 2001.
“2007 was probably as good as it’s going to get for a while, and these numbers show it wasn’t very good,” said Jean Ross, director of the California Budget Project in Sacramento.
His proposal aims to stop a foreclosure tsunami in progress — most likely not feasible. The time to stabilise U.S. home prices was before they rose 90 pct above long term trend. Now that the horses have fled the barn, shutting the door will have little effect.
How to shore up America’s crumbling housing market
By Martin Feldstein
Published: August 26 2008 19:11 | Last updated: August 26 2008 19:11
T he risk of a downward spiral of house prices is the primary danger facing the American economy. Because of the structure of securitised mortgage finance, this risk has the potential to cause a global financial crisis. Both of these problems will remain until a new policy brings stability to house prices.
…
The recently enacted housing legislation is expected to help 400,000 negative equity homeowners, less than 5 per cent of the 10m who have negative equity, and does nothing to stop the defaults among the millions more who will be pushed into negative equity if prices continue to fall.
This is a difficult problem and there are no easy solutions. I have proposed a programme of “mortgage replacement loans” that I believe would stop the downward spiral of house prices. The basic idea is to provide an incentive to stop defaults among those who now have positive equity but are vulnerable to a further price decline. The federal government would offer every homeowner with a mortgage the opportunity to replace 20 per cent of that mortgage with a low interest government loan – up to a loan limit of $80,000 (€55,000, £44,000) – that reflects the government’s lower borrowing rate. Creditors would be required to accept this partial mortgage pay-down and to reduce the monthly interest and principal by the same 20 per cent. That mortgage replacement loan would not be collateralised by the house but would be a loan that the government could enforce by lodging a claim on an individual who does not pay.
With the mortgage replacement loan, people who now have a mortgage equal to 90 per cent of their house value would see that mortgage fall to just 72 per cent of the house value, implying that it would take a very unlikely price fall of more than 28 per cent to push those individuals into negative equity.
By stopping the downward overshooting of house prices, the mortgage replacement programme would help all homeowners, including those who now have negative equity. Limiting the destruction of homeowners’ wealth would help to maintain consumer spending, boosting production and employment. Renters as well as homeowners would benefit. And stabilising the values of mortgage-backed securities would strengthen financial institutions, increasing credit flows that would further stimulate the economy.
There may be better ideas for stopping the downward spiral of house prices, but I have not heard them. The proposal to rewrite the bankruptcy law to allow individuals to persuade a judge to let them keep their homes while declaring bankruptcy would abrogate existing contracts. By making mortgages less secure, it would also raise mortgage rates for future borrowers. The proposal to revive the Great Depression-era programme of government mortgage lending would burden taxpayers and involve delays while millions of homes are appraised. Neither idea is appealing.
The US economy is sliding into recession. Employment, industrial production and real incomes are declining. Monetary policy has little traction because of the dysfunctional credit markets and the collapse of housing. The fiscal policy of tax rebates failed to achieve a significant impact on consumer spending. The economy will continue to decline and the financial markets to deteriorate unless a policy is adopted to stop the downward spiral of house prices.
The man has lost his mind!!!
Do the experts realize the Case-Shiller index is not seasonally adjusted? Or that record price declines are likely to lead to “higher-than-expected” future foreclosures?
Record drops in U.S. home prices continue
Carolyn Said, Chronicle Staff Writer
Tuesday, August 26, 2008
(08-26) 10:02 PDT SAN FRANCISCO — Although U.S. home prices fell faster than ever in the second quarter, the rate of acceleration slowed in June, according to a closely watched index released Tuesday. Experts hailed the slight deceleration as a harbinger of an eventual recovery in the dismal real estate market.
Apparently, Barack Obama has something against affordable housing! Today he said:
“Over the last eight years, you’ve been falling behind, over the last eight years, your lives are less secure, over the last eight years, you are more likely to have lost your health insurance, over the last eight years you are more likely to not be able to save, over the last eight years your home values have started to drop”
I am so sickened that I’m going to be taxed so people can recover their imaginary money they “lost” because bubbled house prices are settling back down!
In fact, Obama lied. Median house price today is still higher than it was 8 years ago, in fact it has risen more from 2000-2008 than wages have. A true liberal would welcome the fact that houses are once again becoming affordable. I, for one, welcome it! (And I’m a 100% paid up homeowner).
Maybe those stories you hear about him taking favors from the R-E industry aren’t some right-wing smear.