The Market Will Likely Overcorrect Before It Improves
The Gazette reports from Colorado. “An analysis by The Gazette of deposit, profit and loan data on local banks and credit unions - which doesn’t include banks outside the area…found that delinquent loans at local banks more than doubled from a year earlier. Loans that were 30-89 days delinquent more than tripled from a year ago. Most delinquent loans in local banks were made on real estate, either for home construction or development. Rising loan delinquencies are ‘a sign of the times’ and the inevitable result of weak local and national real estate markets, said Ed Sauer, president of The Bank at Broadmoor and chairman-elect of the Colorado Bankers Association. He expects delinquencies at local banks to continue growing in coming months.”
“‘Even though these numbers are up, it doesn’t mean that banks made bad loans,’ Sauer said.”
The Aspen Times from Colorado. “The two engines that superheated the economies of Aspen and western Colorado for most of this decade are getting chilled by the national economic meltdown, two experts said Friday. Second-home development has already tumbled and activity will continue to be slow for the foreseeable future, according to Jim Westkott, the senior demographer for the state of Colorado.”
“And the frenetic pace of drilling for natural gas in western Garfield County will likely level off because of the economy and infrastructure limitations, said Ben Alexander, associate director of a nonprofit research group.”
“Meanwhile, Garfield County has done little to diversify its economy, making it susceptible to a bust, according to Alexander. ‘A slowdown on the West Slope wouldn’t necessarily be a bad thing,’ he said. Westkott concurred. ‘This will bring things down to earth and in the long-term it’s probably a good thing,’ he said of the economic climate.”
The Aspen Daily News from Colorado. “Alexander warned that Garfield County’s gas boom days may begin waning soon. Natural gas prices hit a 13-month low on Thursday. The boom has brought housing pressures that has increased an already high cost of living, Headwaters Economics found. ‘For those folks who are working in the broader economy, which is most people, about 94 percent of the people, those folks are struggling to keep up,’ Alexander said.”
“‘I believe many of us have been working in the right direction, it turns out, of how to keep this county sustainable as we experience another boom and try to prepare for the ultimate bust,’ said Garfield County Commissioner Trési Houpt, who also serves on the Colorado Oil and Gas Conservation Commission.”
“‘We have to make sure we continue to appeal to the other economic interests that will make our economy sustainable after the bust,’ she said.”
The Arizona Daily Star. “When Tony Arellano bought property at the foot of the saguaro-dotted Tucson Mountains, he planned on building his dream house and moving his family there. That dream has been on hold for more than four years. The original developer for bankruptcy before putting in the roads and utilities needed to build on the property. That left buyers of the 18 lots, like Arellano, in limbo.”
“Arellano and the other buyers paid between $175,000 and $300,000 for each lot, said their attorney, Joane Hallinan. The 37-acre Enclaves at Gates Pass has 21 lots, and 18 of them have been sold. ‘I can’t believe this happened to us,’ Arellano said. ‘It was not just a piece of cheap land.’”
“Also, the real estate agent pressured buyers, Arellano said, telling them the lots were selling quickly and buyers would lose the opportunity to snap them up.”
The Arizona Republic. “The West Valley saw the area’s sharpest declines in home prices during the past year, with some properties losing more than 30 percent of their value, according to data analyzed by The Arizona Republic. El Mirage topped the list with an overall median home price decline of 32.5 percent, followed by Litchfield Park (28.2 percent), Youngtown (25.9 percent), Buckeye (24.5 percent) and Goodyear (23.7 percent).”
“No city has been hit harder than El Mirage. Of the 382 homes sold, 53 percent had been foreclosed on by mortgage lender. Earlier this week, Lesego Lidge raked up yard trimmings in front of her stucco home in El Mirage. Meanwhile, overgrown bushes claimed the front of what used to be her neighbor’s home. It has sat vacant nearly a year, a telltale ‘code enforcement’ notice plastered on the window.”
“Across the street, a ‘bank-owned’ sign looms in front of another house. Lidge and her husband bought their home in 2005, at the height of the Valley’s housing boom. She said she hopes the market stabilizes before her husband retires from the military next year and they consider moving.”
“Lidge said she harbors no delusions that prices will rebound enough to make a profit on the sale of their home. ‘I just don’t want to be upside-down,’ she said.”
“More than 30,000 Valley homes have been foreclosed on so far this year. That compares to fewer than 1,500 foreclosures in 2006. Now, almost all of the homes are going back to the lenders, which are reselling them for bargain prices. The Valley’s overall median resale price without factoring in foreclosures is $215,000. The overall median resale price of a foreclosed home is $149,000. That foreclosure median pulls down the overall median resale price to $180,000. At the height of the housing boom in 2006, the median was $267,000.”
“No one knows for sure just where the bottom is for the Valley’s home prices because the housing market is in uncharted territory. Never have home prices shot up 50 percent in a year as they did in 2005 or fallen 30 percent in a year as they have this year. During the Valley’s real-estate recession in 1990, home prices fell only about 5 percent.”
“But those home prices didn’t climb significantly for several years after that. Most people who bought homes during the peak in the mid-1980s didn’t break even on the value of their homes until the mid-1990s.”
“Analysts say the market will likely overcorrect before it improves. ‘Phoenix-area homes are more than halfway to where they are likely to fall,’ said Marshall Vest, an economist with the University of Arizona, who in early 2006 predicted housing prices would fall significantly even as they were continuing to climb then.”
“In this maturing real estate slump, median home prices in both Phoenix and Scottsdale fell by double-digit percentages this year for the first time since the local housing market peaked, according to the latest data. In Scottsdale, the overall median price dropped 16.2 percent, from $650,000 to $545,000. That’s compared with a decrease of 1.9 percent a year earlier.”
“As long as foreclosures continue to dominate the housing market, an increasing number of once-stable neighborhoods will see ever-sharper declines. Jim Belfiore, of Phoenix-based Belfiore Real Estate Consulting, said the same phenomenon has occurred in the East Valley, where desperate discounts offered by homebuilders in the starter-home mecca of northern Pinal County have affected home prices in Mesa and Gilbert.”
“‘Home builders in Queen Creek and Florence already drove a lot of East Valley infill prices down,’ he said. ‘They’ve affected these markets closer in.’”
The East Valley Tribune from Arizona. “An impressive array of major projects is on the drawing boards for the East Valley and Pinal County - ranging from the Gaylord Hotel/convention center in east Mesa to the $250 million Waveyard aquatic park in Mesa and the $600 million Coyote Canyon theme park in Florence to a forest of high-rise condos and hotels in Tempe and Scottsdale.”
“But how many of those visions will actually be built? The people who answer that question tend to line up in two groups. Those who are backing the projects say they will go forward. Just about everyone else is doubtful.”
“‘If you go over the history of large projects proposed in the Valley in the past 30 to 40 years, maybe a third get off the ground,’ said Bob Kammrath, a Phoenix real estate consultant. ‘The safe bet is there is no financing for those projects. If they have cash, those deals will happen. If the project has a creditworthy tenant, that is a done deal. But these others are quite speculative and dependent on people having a lot of disposable income. And that’s shrinking.’”
“Dennis Hoffman, an economics professor at Arizona State University, sees evidence of the development slowdown right outside his office window - the near-standstill on construction of the Centerpoint condominium towers in downtown Tempe. The project has been on a virtual hold since the bankruptcy filing of the Phoenix-based company that provided financing.”
“‘Anyone with financing in these projects who thinks it will be easy to lease space or find customers at those theme parks, the whole of Arizona, needs to recognize that this is not just a slow-growth economy,’ he said. ‘We are in a recession as deep as anything I’ve seen here.’”
The Deseret News from Utah. “One of Utah’s largest real estate brokerage firms closed its doors suddenly Friday, leaving many of its agents angry and unpaid. The downturn in the economy and its impact on the real estate business have been cited as the likely reasons for AllPro Realty Group Inc. going out of business, according to Ryan Kirkham, vice president of the Salt Lake Board of Realtors.”
“Kirkham said AllPro Realty principal broker Douglas Bates and broker agent Jeremy Lyman resigned from the Salt Lake Board recently, prompting suspicion that the company might be in trouble. ‘They were on our board of directors as one of the three largest real estate companies in Utah,’ Kirkham said. ‘When they resigned, we kind of knew this was happening.’”
The BYU Cougars from Utah. “Cougar House VIII, the most recent project in BYU Athletics’ partnership with the Utah Valley Home Builders Association, is now on sale substantially below its appraisal value. Located in Saratoga Springs, the 5,444 sq. ft. home is on the market at $389,900 — more than $155,000 below where this beautiful home appraised for the 2008 Utah Valley Parade of Homes..”
“‘With recent changes in the economy, the Cougar House is an incredible opportunity for anyone in the market,’ said Mitch McCuisition, chairman of Cougar House VIII. ‘This will be a half-million-dollar home when the market rebounds.’”
The Review Journal from Nevada. “The nation’s largest real estate auction company, will auction 80 condominium homes located at Monterey at the Las Vegas Country Club on Sunday. ‘This once-in-a-lifetime event is a great opportunity for buyers to gain ownership in one of Las Vegas’ premier communities,’ said Jeffrey Frieden, chief operating officer of REDC. ‘These luxury condos must be sold at rock-bottom auction prices.’”
“The Monterey condos that will be auctioned range up to 1,600 square feet and have been previously valued up to $539,900. Starting bids will begin as low as $49,000 with financing for qualified buyers as low as 3 percent down.”
“Southern Nevada’s housing market hasn’t found its bottom and could suffer further in coming months, a panel of real estate experts said. ‘The truth as I see it today is that the real estate market in Las Vegas is in the toilet,’ said Larry Murphy, president of SalesTraq. ‘And the sad probability is that it will stay in the toilet a while longer.’”
“Local builders put up many more homes than the market needed, Murphy said. Annual new-home deliveries peaked in 2005 at 38,000, even as Southern Nevada required just 25,000 new homes to meet consumer demand.”
“New-home construction isn’t the only housing indicator that continues to adjust. Housing prices spiked in 2004 and 2005, thanks in part to easy money flooding the market in the form of interest-only mortgages and no-documentation loans. ‘You could get a loan for a dead horse’ at the market’s pinnacle, Murphy said.”
“Some panelists said the city’s real estate professionals must adjust to a new normal. No longer can builders throw up the same floor plans year after year all over the valley and merely wait for buyers to materialize, said Tom McCormick, president of Astoria Homes. ‘During the boom, we all did the same things, and we all made the same money,’ he said. ‘During the bust, we all did the same things, and now we’re all getting creamed.’”
“Panelist Steve Bottfeld, executive VP of Marketing Solutions, went upbeat. ‘There’s never been a better time to buy in Las Vegas,’ Bottfeld said. ‘I’m not going to live to see a better time to buy.’”
In Business Las Vegas from Nevada. “The number of existing homes on the market with Realtors increased by 197 units to 22,543 in the past week. The number of owner-occupied homes declined modestly to 7,404, accounting for nearly 33 percent of all homes listed for sale, according to Applied Analysis. As of Oct. 13, the 13,087 vacant properties account for 58 percent. In mid-July, 11,595 vacant units accounted for 52 percent of the total.”
“Harvard economist Edward Glaeser used the Las Vegas housing market as an example when blogging the government should let housing prices keep falling rather than step in to stop the slide. Although many are arguing a new boom in housing prices would enrich banks and reduce the need for a bailout, the government shouldn’t try to inflate prices artificially by bailing out homeowners and taking steps to make borrowing cheaper.”
“‘The government just doesn’t have the tools to rewrite the laws of supply and demand,’ Glaeser says. ‘If the cost of building a home in Las Vegas is $150,000, and there are no restrictions on building, then all of the credit policies or bailouts in the world aren’t going to permanently keep prices above $150,000.’”
“The price decline, he says, should remind homeowners and buyers that housing should never be seen as a short-term speculation, but rather a place to live over the long run.”
The Lahontan Valley News from Nevada. “Housing Division administrators say Nevada must put together programs that leverage the $72 million the state will get from the federal Neighborhood Stabilization Program if that money is to have any real impact on the foreclosure crisis.”
“Lon DeWeese, chief financial officer for the division, said the plan is to find neighborhoods where there are a cluster of 15-20 homes in foreclosure owned by one financial institution and convince that financial institution to ‘take a haircut’ — lowering the value of those homes to current market value — so that the homes can be put back on the market at a realistic price. And that realistic price may be 30 percent below the amount they originally sold the house for.”
“Beyond that, he said, the federal rules for the program require they cut prices an average of 15 percent below current market value. For those reasons, he said, banks have been unwilling to drop the prices until now because, ‘that loss goes straight to the bank’s bottom line.’”
“He said with federal money flowing into those financial institutions and the market still falling, they may soon be much more willing to make a deal. ‘In high foreclosure areas, the downward spiral is accelerating,’ he said.”
The Pahrump Valley News from Nevada. “Pahrump residents of all ages are dismayed by the turmoil on Wall Street. ‘I lost 50 grand since this started,’ said John Melville, 65. ‘I’ve lost $4,000 in one day. This is the worst we’ve been in history and it’s not one person, it’s all the politicians. They should all be shot,’ Melville said angrily outside the Pahrump Bank of America.”
“He’s employed at a local recreational vehicle business. ‘I was planning on retiring soon. I don’t know what’s going to happen now,’ Melville said.”
“One elderly gentleman, Paul Campion, 73, said that, while the economy has ‘hit us pretty good’ and his ‘IRAs took a dump,’ people shouldn’t panic about their IRAs just yet, especially as anything under $100,000 or so is still protected. To deal with the economic downswing Campion, a retired real estate broker from California, has had to cut back on everything from trips to Vegas to even buying groceries.”
“‘I’m sick and tired of being manipulated,’ John Bundy said, citing as proof a statement on television the day before the $700 billion bailout bill was passed by Congress. Bundy said he watched a stock trader interviewed on CNBC commenting about what would happen if the bill failed to pass. Bundy quoted the trader saying, ‘Our people have that under control. We won’t let it get out of hand.’”
“Some Pahrump residents said they don’t have the luxury of a 401(k) retirement account. ‘I don’t have one. I wish I had that concern,’ said Jerry Winter, 44, who is self-employed.”
“Bruce Reeves, 72, said he’s retired and living solely off Social Security. ‘They’re all crooks from the president on down,’ Reeves said.”
Things are getting worse in LV, not better. From the LVBJ:
‘First American CoreLogic reports the foreclosure rate in August was 3.3 percent, an increase of 1.7 percentage points compared with August 2007 when it was 1.6 percent. The firm noted the mortgage delinquency rate has increased, with 9.9 percent of mortgage loans 90 or more days delinquent for August compared with 4.1 percent for the same period a year ago.’
And one Colorado paper looks back:
‘Want a feel for how bad the local economy was 25 years ago? The following article chronicles events in Pueblo in 1982 and 1983. It originally was published on Oct. 10, 1999.’
‘One of the youth was Pueblo County Clerk Gilbert Ortiz. In 1983, he was 12. ‘I was more aware of what was happening with the Broncos and the girls in class but I do remember complaining a lot to my parents that we’re eating a lot of beans and potatoes,’ Ortiz said.’
‘Ortiz’s father had been laid off from his job as a concrete finisher. It was then that the family started a catering business, but his parents never talked to him about the family finances, he said. Ortiz became only slight more aware of Pueblo’s plight in high school.’
‘I remember hearing from my other friends about the holes in our gym shorts, and there were lots of hand-me-down shoes and how you could eat 30 different style of potatoes. You heard about commodity cheese and how they made good nachos, and we’d laugh about it.’
‘Going forward, Ortiz said he can’t imagine a repeat of the early 1980s, partly, he admits, because at his age he can hardly remember when Pueblo was that poor. “Our parents never told us how bad it was. They didn’t tell us we were in big trouble.”
“Mostly, though, his optimism about Pueblo comes from his belief that the fundamentals of city’s economy are strong, Ortiz said. “Pueblo has a large mix of industry and we’re going to be fine. We have a lot of small businesses and we have stable housing prices . . . I think we’re kind of the model other cities look to,” Ortiz said.’
BTW, the local paper has a story on prices ‘plunging, but it isn’t available on-line. I’ll post some of the info later on the N AZ forum, with reports on Payson and Prescott as well.
Ben, thanks for this one, have been waiting a long time.
“Alexander warned that Garfield County’s gas boom days may begin waning soon. Natural gas prices hit a 13-month low on Thursday. The boom has brought housing pressures that has increased an already high cost of living…”
I remember moving to Garfield County out of college (was in high-tech in Boulder and hating it and left) and hit the place right at the bottom of the energy bust (85). You could buy any house in the county for under 150k, and most were under 100k. These same houses are now in the millions down to mid 500k range. Imagine a small brick house in town, built in the 60s or 70s, for 480k, small lot. I bought a house on an acre for 100k, one of the best neighborhoods around, it would now go for 750k or thereabouts. Sold it for 225k in 95.
Garfield County is the bedroom area for Aspen, just down the road. It has gone absolutely nuts in this boom. And they talk about diversifying the economy, shoots, it hasn’t changed a bit. I got a job when I moved there in the county economic development office and talk about deja vu all over again, exact same issues. Energy and tourism and absolutely nothing else, unless you count the North Face stuff in Carbondale (not in GarCo, but 10 miles away) and they don’t employ many. My cousin’s a driller there and he’s living high on the hog.
Ironically, I’ve been preaching to my friends there about this bubble for the past two years and they thought I was crazy. A number of them lived through the last bust. Man, do we humans learn fast or what? Jeezlouise…
The one thing that could save Pavlovegas, would be one of those “world famous” magicians in their employ.
Heavy-handed prestidigitation is about the only card left…
Nah, Lad, even the best Housedini ain’t gonna escape from this one…
Inside-job bank runs…
———————————-
“An analysis by The Gazette of deposit, profit and loan data on local banks and credit unions - which doesn’t include banks outside the area…found that delinquent loans at local banks more than doubled from a year earlier. Loans that were 30-89 days delinquent more than tripled from a year ago. Most delinquent loans in local banks were made on real estate, either for home construction or development.
Not to worry, do as Wells Fargo does which is wait until 180 days without a payment before declaring a loan uncollectable and thus take a hit against earnings.
“Panelist Steve Bottfeld, executive VP of Marketing Solutions, went upbeat. ‘There’s never been a better time to buy in Las Vegas,’ Bottfeld said. ‘I’m not going to live to see a better time to buy.’”
soon he was pushed out the high rise office window by an angry group of upside down buyers yelling ‘you’re finally right this time Steveo!’
ROTFL
Steveo! Don’t jump. Not until we move the cars parked on the street…
Man… talk about something sounding… morbid. It was Mr. Bottfeld’s quote. LV is doomed for a few more years.
The sheeple are starting to wake up. That is not a pretty sight for Realtors ™ or other commission based businesses… Oh, I don’t mean to imply they’ll wise up. But the stampedes in various random directions will be entertaining for years.
I found it amusing that the first ad was “Protect your retirement” and the 2nd ad was for Caesar’s Palace! ROTFL.
Got Popcorn?
Neil
Few?
You expect the disposable income to fire up because …?
ROTFL
Touche’
I expect eventually it will get cheap enough to retire on a golf course in the heat there won’t be any downside potential.
I expect disposible income to be scary in 2009. Anyone know what ad budgets are looking like? I know dozens of people in that business… and it looks pitch black to me outside of Apple and beer ads. (No, I’m not a fan of buying AAPL, but their ads won’t disapear in 2009.)
Got Popcorn?
Neil
…executive VP of Marketing Solutions, went upbeat
When has someone in that line of occupation ever NOT been ‘upbeat’?
The social-conformist pressure in America to be ‘upbeat’ all the time, is to me one of the major factors behind repeated boom-crash cycles.
The stigma attached to not being ‘positive’ and ‘optimistic’ is something to behold. Utter a negative word about supply/demand for a particular product or service and you’re ‘unAmerican’.
Also, don’t question corporate welfare…
On a Disney board there is a thread about how Disney wants the city of Anaheim to give them a $120M tax break to build a new 900 room hotel, which is about $133K per room.
Its simply amazing to see how many people see nothing wrong with this. We have been utterly brainwashed into accepting “privatize the profits, socialize the costs.” that it makes me sick.
I can’t, for the life of me, understand why anyone would want to live in Las Vegas.
I have a consulting friend that is semi-retired to Vegas. He said he liked the weather, no state income tax, and cheap airfare. He has all of the breakfast/lunch/dinner specials in town memorized now, so he said its really cheaper than cooking for one.
LOL! I used to do that circuit waayyy back in the day. Pick up the free-nickles coupons in the motel lobby, hit the 88 cent steak and eggs, dollar meatloaf, 50 cent clam chowder and all the buffets…you could live on that stuff.
There’s great stuff all around Vegas (Colorado River, Valley of Fire, Zion NP, Charleston Mountains, Red Rocks, etc) if you are an outdoors type, but the idea of living in Vegas itself, seems daunting.
No thanks…
He expects delinquencies at local banks to continue growing in coming months.”
“‘Even though these numbers are up, it doesn’t mean that banks made bad loans,’ Sauer said.”
BWHAHAHAHAHAHAHAHAHAHA, this made my day!
Do it right, boy, do it right.
Don’t be all shy about it. Learn to give back a little to the community.
BWAHAHAAHAHHAHAHHAHAHHAHAHHAHHHHHHHHHHHHHHHHHHHH!!!
“And the frenetic pace of drilling for natural gas in western Garfield County will likely level off because of the economy and infrastructure limitations, said Ben Alexander, associate director of a nonprofit research group.”
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I think the oil bubble was perpetuated by ’ssshrubery & dick & co., as there are a good many wells in our country that were only profitable on the basis of the price staying up in the stratosphere…
So as the dollar hyper-inflates, it’s gold to the moon but all other commodities remain in the toilet?
If that’s the case it would seem to follow that the peak oilers were nothing but tools of the evil conspiracy leaders during the price run-up. Interesting, I would have thought that you would be right at home with their train of thought.
The leader and vice-leader of our country are oilmen, failed or otherwise.
It’s not much of a stretch to think they’d help out fellow oilmen in need of higher prices, to be able to drill, baby drill.
But I thought the US is a spent economic force, no longer able to influence world events, like the global price of petroleum?
So the fact that the price of oil rose and fell largely in synch with most other commodities, including your favorite, was due to BushCo manipulations of the world market. Wasn’t caused by weak fiat currencies. Wasn’t caused by all those global warming-inducing increases in demand, because supply is abundant, always was. Bush was in bed with Hugo, Putin, Iran, etc. all along, huh? I had no idea.
Apparently whatever is left of our military, is now attacking Syria.
p.s.
Maybe we’ll have more luck fighting a 3-front war?
OK, you won’t bother answering my questions, since it’s all clear to the enlightened. Never mind the 180 degree turns, it’s all in my limited understanding of things. That’s what the Pentecostals told me too, way back when. Someday I’ll learn
It’s very odd. I know of no oil industry analyst that maintains oil is an infinite resource. I know of no economist that denies the law of supply and demand. I know of no oil industry analyst that maintains that oil is getting easier or cheaper to find or extract. YET, somehow, magically, in contradiction to declining reserves, rising costs of extraction, and the basic law of supply and demand, we are to expect the long-run price of oil to remain stable or decline. And we are to expect this to happen even as we as a species fail to invest in alternatives to said commodity (or, even, derivatives–most “alternatives” are really derivatives–I mean, we have no nuclear bulldozers and we need bulldozers in mining uranium, and so on, so somehow we’ll need oil or gas to power the extraction equipment; same with solar panels, they are made out of petroleum derivatives).
Yes, it would be magic if oil prices over the next 40 years were to remain stable or decline. And, I understand some people do believe in magic (else we would not have had the housing bubble I suppose). But, suggest oil prices will rise, and somehow you’re part of some vast global-warming conspiracy. Those who think oil prices will remain stable or decline never tell us when they expect to repeal the law of supply and demand, or produce some new dinosaurs to then make oil in time for the economy of the 21st century.
Of course, their mantra is “new energy sources.” Truly, necessity is the mother of invention, but what is necessary is not always what is possible, i.e., some would-be mothers are infertile and never give birth to anything. So, our need for something does not guarantee we will get it, and especially so in the physical world. The laws of physics are even more difficult to repeal than the laws of economics. E=mc^2, not E sorta sometimes maybe equals something like mc^2.
Another important error is in looking at short-term price shocks and seeing in that the long-term trend. Prices at any given moment reflect both the long-term trend and short-term exigencies–a war here, a broken refinery there. Just because in the moment several things break so as to lower the price does not mean the long-term trend does not exist. And, the long-term trend is in up, and, most important, will be up as the inevitable declines continue, extraction difficulties increase, and the law of supply and demand continues to apply.
IAT
I agree with you completely about the long term trends. If you look a little further below you’ll notice that I’m looking for a near term entry point to go long on energy, of all types. My question on timing is when currency weaknesses begin to offset what looks to be multi-year demand destruction caused by the current global recession, and prices halt their declines.
As someone who has spent a good portion of my career designing temperature measurement systems, (including atmospheric) I also have become pursuaded that the well-known extreme claims being made on behalf of global warming theory are rubbish. No, they’re worse than rubbish because we’re taking our sights off of the real problems associated with fossiI fuels. I can give you a dozen or so fundamental reasons why we should reduce our consumption of dirty fossil fuels, and global warming isn’t even on my list. And if we pursued the real problems, global warming problems (to the degree they may be real) would lessen as a direct by-product.
My comments above were pointing out and poking fun at the illogic of trying to pin the large swings in global oil prices on the evil BushCo Rove McCheneyburton. Whatever diabolical genius powers those numbskulls may possess, claiming that they’ve manipulated the world market for a commodity, of which the majority of the world’s supply is controlled by people who refer to us as their avowed enemy, and who detest Bush in particular, is laughable.
Just three observations:
1)So, you still believe Bush and Company are part of America. They are not. They live in a world of billionaires, have no loyalty to any nation, and thus are not the targets of the leaders of the oil-rich nations of the middle east who allegedly “hate us.” They are, of course, enemies of leaders of other oil rich nations (e.g., Venezuela), but those leaders have yet to be bought off or killed. When they are, even that will change. The implication of this for oil prices, however, is negligible in the long-run.
2)If you believe the price is going to go through the roof in your lifetime, why wait to try to find the basement. Yes, it’d be great to get profits on a rise from 1 to 100, but even the profits on a rise from 20 to 100 are substantial. By waiting, you risk having to buy at 23, 24, 28, and so on and also run the risk of having your money someplace that is going the opposite direction. Only you can know where your money is, but I fail to see the wisdom in trying to time a market that, long-term, can only go up (until it crashes because no one has any oil at any price).
3)All your work on temperature gauges has been done during the last 100 years. Thus, I don’t know what relevance it has. You have no direct experience of the possible climates the world could have, for the climate has been stable (if we take the 4.5 billion year history of Earth seriously) during the last 100 years. If you do not have such direct experience, then your understanding has to be weighed against the evidence. I am willing to hear you out, but you have to return the favor. Moreover, the temperature change does not have to be massive to have massive effects. As one who works in temperature I presumed you’d know that. At 1 atmosphere a move from 31.5 degrees fahrenheit to 32.5 degrees fahrenheit is small, but it causes a state-change in water from solid to liquid. This is just one example of hundreds one could multiply to indicate that the natural world is not only operating in a linear fashion, it also operates non-linearly, and this means crossing thresholds by tiny amounts can have large effects. Thus, one need not believe the temperature difference is massive to believe the effects will be massive.
IAT
Be careful with those arguments about timing the bottom in energy. They sound exactly like the now infamous real estate agent talking about why “it’s never been a better time to buy”. Those realtor arguments get mercilessly skewered here, daily, by the regular commenters. Just a word of caution.
I have good reasons for not buying into energy right now. People here have taught me a thing or two about catching falling knifes, and I’ll be forever grateful to them. It’s that old risk/reward thingie. That’s not a concern to you, good luck, hope it works out.
The rest is OT for a real estate/investing related blog. I’m interested in valuation trends as they’re likely to play out, not in the various conspiracy theories and excitements du jour, no matter what agenda they’re in service of.
As for the global warming stuff, I disagree. Global warming, if it happens, will affect housing–where it can be built (e.g., coastlines?), at what cost, and so forth. Still, I observe–I didn’t bring global warming into this conversation, you did, writing:
“Wasn’t caused by all those global warming-inducing increases in demand, because supply is abundant, always was.”
So, now that some clear points have been made suggesting global warming could be happening and is not as simple as suggesting that there will be massive temperature changes, let’s make it appear the global-warming believer is obsessed and brings it up? I’m not saying you are doing this, but I am observing: now you don’t want to talk about it. That’s fine. But, maybe it’s not a good idea to bring something up if one believes it is truly off-topic.
However, I hear you on the investment advice. I invest for the long-term, so I pay little attention to short-term fluctuations. The reason I held off on housing is not that there was a short-term fluctuation, it is that the fundamentals did not justify and could never justify the prices people were paying. But energy is actually really cheap now, unjustifiably cheap, and the question is not whether it will go up, but when. If you wait too long, you’ll buy when it is more expensive than now. Seems a bit risky to me, but perhaps not if you are a short-term investor.
Respectfully (because I appreciate your respectful tone, and respect you as well)
IAT
Is oil production up? Not much, if at all, since 2005, esp conventional oil. Seems more like demand is down…and price is set at the margin. Took a lot of oil to build all these houses around the world and ship all of these consumer goods to the US. We get a reprieve on energy price while we consume less.
The bad news in this price collapse in oil is that many energy projects will be put on hold and alt energy is no longer economic. That will set the stage for when the world economy begins to recover, it will hit an oil supply limitation and drive another price spike up higher than the last one..then economic contraction, etc… wash, rinse, repeat…
They blame energy crisis 2007-08 and recession 2008-09 on Bush. Recovery 2009-10 (driven by stimulus packages and hope for Obama) will be quite weak kind of like recovery 1930 was. They’ll blame energy crisis 2010-12 +/- and depression 2011+ on Obama (both will be worse than this round).
It actually won’t matter who wins the election…neither candidate has a clue or a real plan. Well, Obama will ration gas by coupon so his poorer constituency can still drive their cars (a little). He’ll probably pass out free gas ration coupons to some and charge $2 / gallon to others and we’ll still get to wait in line (we got a preview of what shortages are like here in the SE this year…was quite “fun”). McCain would more likely let it go to $10+ / gallon which at least would force lifestyle changes that will need to occur and make alt energy more attractive.
Better dump that SUV and exurban McMansion now at today’s so-called “giveaway” prices - they’ll look like bubble prices in 3 years.
The non-partisan energy analysts that I follow (most of which are left-leaning) mostly want to see a government tariff-generated floor under oil pricing, say at $70/barrel. That way, longer term investments in renewables would better flourish as the fear of low-oil prices eliminating demand would make have less risk. Kinda makes sense, even though I’m not sure about the unintended consequences.
Demand won’t stay down unless the price stays high. And you’re right, I think that’s where were headed back to, regardless. I’ve been looking for an investment entry point in energy (all types) for about a year now, since I mostly missed the last one. I think we’re getting close, and we’ll be there well before a good buying time in real estate is my guess.
RE: Better dump that SUV and exurban McMansion now at today’s so-called “giveaway” prices -
Maybe the Barney Frank Dog and Pony Show will buy them to redistribute to Section 8 recipients so as to motivate and empower them to “feel rich” and know what a taste of the “good life” is, rather than just have them just sit there
munching their stale food stamp Doritos while engaged in ego deflating endeavors like watching re-run’s of MTV’s “Lookit all my bling-and envy my azz, you stupid fools” shows.
I don’t follow what you are trying to say, if you have anything to say at all except a disjointed rant about things you hate that has no bearing on the discussion.
What a worthless, stupid comment.
“Lidge said she harbors no delusions that prices will rebound enough to make a profit on the sale of their home. ‘I just don’t want to be upside-down,’ she said.”
Yeah, well, ‘if wishes were fishes then we’d all be full of milkshakes’.
I learned that from my German grandma long ago, when she said it to me. It made an impression, although I can’t imagine why, ’cause it makes no sense. Gran is fond of English cliches but they always get her. Interestingly, I’m no good with cliches, either, although I fancy that I happen to speak English rather well. But I retain gran’s doughty German attitude of ‘Vell, ve’ll just try it until ve get it, by gum!’ Then I right away come up with such unlikely jabber as: ‘Can’t get turnips from a stone’, ‘Keep your grapes peeled’ and ‘burn the hatchet at both ends’…it’s just sad. Me’n cliches finally learned to leave each other the hell alone.
Oh, yeah, but my point was, this Lesego Lidge woman is a dum-dum. I bet she ends up with neither fishes nor milkshakes.
I’ll bet her squeaky wheel will be gathering moss.
It’s all good until the milkshake hits the fan.
Pennsylvania Dutch would tell her “Ach, don’t talk so dumb!”
Yeah, well that’s how the cookie bounces sometimes.
Seriously, why is this couple even considering moving after the husband retires? Can’t they just stay put and enjoy the home they’re paying too much for?
Just like in the early 1990s, it seemed that as soon as people heard it was a TERRIBLE time to sell their house, all they wanted to do was sell their house! They’re like whiny, willful children.
“…buyers would lose the opportunity to snap them up.”
Savvy real estate investors, indeed!
Located in Saratoga Springs, the 5,444 sq. ft. home is on the market at $389,900 — more than $155,000 below where this beautiful home appraised for the 2008 Utah Valley Parade of Homes..”
I believe I mentioned this Saratoga Springs thingie a month or so ago. In fact, I think I delivered a rather exciting and ringing denunciation of all things pertaining thereunto. I can’t duplicate that glorious tirade, so I will content myself with telling you that Saratoga Springs is verrrrrry far away from civilization. How far awayyyyy?
Well, it’s so far out in the wilderness that nutty prophets continually wander by, with bones in their beards, talking earnestly to Sweet Baby Jeebus and taking notes on big stone notepads, with their trained ravens hopping along behind croacking and grakking and wondering what they did to deserve this sort of stupid life. I mean, there isn’t even a MacDonald’s out there! That’s how far out. No wonder the crazy prophets need trained ravens.
Jeezlouise, sound like where I’m at right now!! But the ravens could work on that training…
Thought I saw Everett Reuss out there wandering around, he’d be pretty old by now…probly have a beard
You haven’t been to SS for a while Oly, I think you’re referring to Eagle Mountain. It’s the new Springs, only now with 10x more local government corruption!
Oh, well then. Thank you for the update and correction, shoe. I like to direct my tirades at the appropriate target.
It’s true I haven’t seen Saratoga Springs in person for a while.
Ah, Utarr, my Utarr…’Absence makes the heart wish it was back in the torso and correctly hooked up to all those pulsing valve thingies’, as the saying goes.
Or something like that.
The Deseret News from Utah. “One of Utah’s largest real estate brokerage firms closed its doors suddenly Friday, leaving many of its agents angry and unpaid.
Ok… like they were selling enough to get paid.
Angry? Did they drink the Koolaid? There is a reason we’re not at a bottom. The most over-employed sectors of the economy were sales. Yet… they still haven’t let the surplus go and freed up the office space. We’ve never had more bedrooms per capita. We’ve speculated before how many would move back in with mom and dad (or vice versa).
Ugly times ahead. The IMF is bailing out nation after nation. Ukraine is the country of the hour.
Got Popcorn?
Neil
The IMF is going to run out of do re mi long before they run out of bankrupt countries…
F.O.F.I. like Iceland, is where you want to be positioned.
Newman!
http://www.youtube.com/watch?v=I5ePEZCOdnA
To deal with the economic downswing Campion, a retired real estate broker from California, has had to cut back on everything from trips to Vegas to even buying groceries.”
Huh? I thought these were the master’s of the universe. Retiring near broke?!? My dad is ‘retired’ yet still consults (having a Ph.D. pays off in later years). He also has planned to have any one investment go to zero:
1. Pension (ok, in stable funds out of company control now)
2. 401k has done very well (He rode up Glod)
3. 2nd home. Oops… at near zero
4. Other savings are doing ok
Why… what’s keeping that Realtor ™ from going back and selling homes?
(Ok, I’ll stop being mean.)
Got Popcorn?
Neil
In Europe, reacting to crisis by buying gold and literally burying assets
http://iht.com/articles/2008/10/26/business/bury.php
“I haven’t forgotten history,” says Gert Heinz, a tax adviser in Munich. “If you depend on paper money you can lose everything. We’ve learned that the hard way after two world wars.”
“I’ve never seen anything like this. We’re basically sold out until the end of the year,” said Robert Hartmann, co-founder of ProAurum, a gold vendor based in Munich. Despite the shortages, about 200 customers line up at his counter every day, he said, asking for coins and bars, not certificates. According to his estimates, “only about 5 percent of German investors” are interested in converting a small part of their savings to gold “but it’s enough to put suppliers under strain.”
–
““Bruce Reeves, 72, said he’s retired and living solely off Social Security. ‘They’re all crooks from the president on down,’ Reeves said.”
I have been saying this for almost six years. More and more Americans, every day, are coming to that conclusion. McCain/Obama have no chance to get public support for their policies like FDR had. Obama’s $5Tr Fair Deal program would be highly unpopular, but would be enacted for the benefit of business.
Jas
George Carlin had it right all along - RIP.
http://www.youtube.com/watch?v=kJ4SSvVbhLw
Bruce said after getting a free trip on the Social Security gravy train…
Precisely my reaction, FPSS. Classic case of calling the kettle black. I wonder if Reeves can do a good Nixon imitation? “I am not a crook!”
“No city has been hit harder than El Mirage. Of the 382 homes sold, 53 percent had been foreclosed on by mortgage lender.”
Irony writes it own stories, on occasion…
…before putting in the roads and utilities needed to build on the property.
…buyers paid between $175,000 and $300,000 for each lot…‘I can’t believe this happened to us,’…
Some really clueless folks out there.
“I can’t believe this happened to us.”
What a knob. Did he think it couldn’t happen to him because of an over-inflated sense of ego? That he was somehow superior to all the little people he looks at from on high?
This is the worst we’ve been in history and it’s not one person, it’s all the politicians. They should all be shot,’ Melville said angrily outside the Pahrump Bank of America.”
Yet on November 4 Melville, along with millions of other sheeple, will lurch into the voting booth and vote just as they always have, then wonder why nothing changes, except for the worse.
Soapbox time:
Maybe you’d like Saudi Arabia or North Korea better?…over there your vote truly doesn’t matter, and neither does anyone else’s. At least they’re honest about it.
I didn’t know apathy and armchair quarterbacking were the best ways to reform this country. Wow, what an outstanding role model you must be for your children!
Strangely, I feel no remorse about voting for Gore in 2000 for instance…only remorse that I did not live in Florida. The founding fathers would be appalled by the cynical abuses perpetrated by a fearmongering, tyrannical, corrupt and increasingly out-of-control government (over the last 8 years in particular).
I’m convinced the future of our Nation is being poisoned not by those who actually vote, but by our majority of cowed, apathetic, bought-off and willfully ignorant Americans who abdicate their basic responsibility as Citizens (with a capital “C”)and fail to fulfill their civic duties: to remain educated and involved in the current issues of our democracy, to pay their fair share of taxes, to respect each other’s individual rights, and yes, to vote.
Money and creature comforts are like an addictive opioid…the discussions we have on this blog reminds me of that everyday. Greed, ignorance and apathy are the greatest threats to our fragile democracy. Why should it just be only our naturalized citizens and elected officials who are required to take an oath to defend ourselves against enemies both foreign and domestic?
It’s our home-grown domestic enemies who are more of a threat to us than terrorists, communists, or even natural disasters.
Like ancient Athens, maybe we need to relegate those who do not fulfull ALL their solemn responsibilities as citizens that their ancestors fought and died for to the same legal status as children, the mentally ill and resident aliens. I guarantee that people would be lining up to vote then…and that we truly would have a government of the people, for the people, and by the people.
/rant off
You can certainly make the case for voting at the local level, but we are awfully close to the stage of having only Nero and Caligula for the major party candidates. Do you prefer the charm and audacity of Caligula or the solid hands of Nero? It goes without saying that all major party candidates are more-or-less in need of psychiatric or religious counseling.
And, after nothing changes, Melville and the other sheeple will continue to blame the government and still have no ambition to take responsibility for their own lives.
“‘Even though these numbers are up, it doesn’t mean that banks made bad loans,’ Sauer said.”
There are no bad loans, just bad borrowers.
“Wall Street workers leaving NYC for fresh start By VALERIE BAUMAN, AP
posted: 3 HOURS 22 MINUTES AGOcomments: 55PrintShare
Text SizeAAAALBANY, N.Y. -Bankers and brokers looking to escape the financial meltdown are scrambling to relocate their families, possessions and rarified talent far from Wall Street to places such as Florida, Chicago, Milwaukee, Virginia and Asia.”
Oh, YAH, that’s JUST what we need in Florida, another crop of scamming boneheads, as if we don’t have enuf of our own. I got news fer ya, streeties, JPM Chase just off-shored 300 jobs from Tampa Bay to India and the Phillipines.
“rarified talent”?
This, to describe boneheads who imploded their own firms along with the US economy?
Suicide note?
“Panelist Steve Bottfeld, executive VP of Marketing Solutions, went upbeat. ‘There’s never been a better time to buy in Las Vegas,’ Bottfeld said. ‘I’m not going to live to see a better time to buy.’”
May suffer a heart attack when he reads next month’s sales price.
This an Arizona thread, so:
Arizona, like many states, has some major post-bubble deficit problems at both the state and municipal levels. I have looked at the City of Phoenix’s budget issues (a deficit of $250-million plus), and the city will inevitably have to cut police positions. It looks like police, fire, and city courts take up about 70% of the budget. Barring 100% layoffs in the remaining departments, those “uncuttable” PD and FD positions will have to be cut when the new budget is prepared in early ‘09.
Mesa, the third largest Arizona city after Phoenix and Tucson is in a similar state:
“Mesa, PD face ‘unprecedented’ budget cuts
Mesa is facing significant budget cuts in the months ahead and city officials are starting to prepare their departments for what Mayor Scott Smith says could be a “paradigm shift” in the way the city operates.”
http://www.eastvalleytribune.com/story/128090
my county has a dept of wymins affairs
look deeper they have sht you never dreamed of
“Mayor Scott Smith says could be a “paradigm shift” in the way the city operates.”
Wow-I haven’t heard that term(“paradigm shift”) since the internet bubble. That’s sooo 90’s management buzz-speak.
Correct me if I’m wrong, but I think that the current buzz-speak terminology invoking mass quantities of pink slips is “rationalization”.
As in, I’ll take the category “Unemployment” for $200, Alex.
Bruce Reeves, 72, said he’s retired and living solely off Social Security. ‘They’re all crooks from the president on down,’ Reeves said.”
Bruce you are right on!
So, what does it say if you’re living solely off of Social Security? At 72 couldn’t he still be working? My father in law is 78 and working he has a pension and savings as well as SS.
Why Obama could be bad for Ireland
In this section »
Barack Obama’s plans to penalise US companies moving jobs overseas could affect us severely, writes Michael Casey
http://www.irishtimes.com/newspaper/opinion/2008/1027/1225061091137.html
It would appear that the Celtic tiger was not so much a creation of European grants as of US Multinationals, oh and inflating house prices.