‘We’ve Outsourced The Speculation’: NAHB
Bloomberg looks at the exposure banks have to risky financing. “Every time the subject of banks making risky home loans to bad credit risks, no money down, no questions asked, the usual retort is that banks sell the mortgages. That’s not exactly true. Mortgages accounted for 32 percent of commercial banks’ financial assets. Throw in agency- and mortgage-backed securities, and the exposure to outright and securitized mortgage loans is 44 percent.”
“If enough of these loans go bad, as they did in the late 1980s and early 1990s, it could impair the banking system’s ability to extend credit, with all that implies for the economy. If history is any guide, if this time isn’t different, when the banking system is broken, the economy doesn’t work.”
” In the 1980s housing boom, the villain was speculative building. After the bust, regulators clipped builders’ wings. This time around, it’s been speculative buyers who have provided the tailwind to the housing boom. ‘We’ve outsourced the speculation,’ says economist Michael Carliner of the National Association of Home Builders in Washington. ‘The non-owner-occupied share of mortgages has been rising since the mid 1990s.’”
“When prices stop appreciating, the speculative tailwind behind the housing market will abate. At that point, the true measure of outright speculation versus good old-fashioned home ownership should become apparent. The Office of the Comptroller of the Currency, the Fed and the other financial regulatory agencies issued ‘guidance’ on ‘non-traditional mortgage products.’”
“It would certainly be a first if regulators got into the act before any fallout occurred.”
“Delinquency rates have started to rise. Instead of cutting back on the exotic mortgages they’ve leaned on throughout the boom, many lenders are charging ahead on such high-risk loans full tilt. ‘Mortgage lending standards show little sign of tightening,’ says Frederick Cannon, bank analyst. ‘[Lenders] should have dialed back the aggressive loans by now.’”
“The much-feared troubles may finally be arriving. Delinquency rates jumped more than 7%, to 4.7% in the fourth quarter of 2005. Home buyers are becoming over-extended. In California, where seven of the 10 most expensive U.S. cities are located, one in five buyers already spends more than half of pretax household income on housing.”
“It has happened before. In the mid-’90s some banks were so desperate to issue mortgages that they were lending as much as 125% of a home’s appraised value. When the economy weakened, several filed for Chapter 11 bankruptcy.”
“Rhonda is in a panic. The two-year introductory rate on her adjustable mortgage is about to expire and send her payments soaring. She thought she could refinance to a more-affordable loan, but the rates she’s being quoted are just as high.”
“‘So I then decided I would just sell the house and get out of it,’ Rhonda wrote. ‘WRONG! The houses in my area are selling for around $20,000 less than what I owe!’”
“Nearly one in 10 households with a mortgage had zero or negative equity in their homes as of September 2005. The study of 26 million homes in 36 states and the District of Columbia found that one in 20 home borrowers was upside-down by 10% or more. The situation is even grimmer for recent borrowers. Of those who bought or refinanced homes in 2005, 29% had zero or negative equity, and 15.2% were underwater by 10% or more.”
“Homeowners with no equity and adjustable-rate mortgages face additional risks from the loans themselves, since their payments could rise 50% or more in coming years as interest rates reset to higher levels.”
‘Instead of cutting back on the exotic mortgages they’ve leaned on throughout the boom, many lenders are charging ahead on such high-risk loans full tilt. ‘Mortgage lending standards show little sign of tightening,’ says Frederick Cannon, bank analyst. ‘[Lenders] should have dialed back the aggressive loans by now.’
I guess we can be glad that this has been widely reported on, so those responsible won’t be able to dodge the outcome.
Looks like Rhonda is going to live in a Honda!
Hey, Ive got an Element, and they sell the “Tent Attachment” for the tail gate. I wonder if having a bed, and a bath (POTTY) counts for home ownership? That way she would still be a home owner….
I do too! I think an Element is a “must-have” for all housing bears. You can live in the damn thing if necessary
Hey, Rhonda. Life’s a beeyatch, ain’t it, when the greater fool doesn’t show up and the bank won’t bail you out.
The bank wants the Honda & Her Shirt, sorry that wont work
Since this is tax filing season, she can write off the interest on her permanent residence (the Honda) but not the interest on her credit cards.
Can’t wait for all the candy-ass “investors” to start heading for the exits at same time. This is one fire drill I will truly enjoy. The interviews will be side-splittingly funny!
I can hear it now…. “But but But!!!! The bank lied to me!!! The builder ripped me off!!! We need a gov’t bailout!!!”
Here’s a novel idea Mr. Consumption…… start selling your junk.
Boo hoo hoo.
Here’s a novel idea Mr. Consumption…… start selling your junk.
I try to avoid buying a lot of crap.
I was still able to unload a bunch of junk on E-bay after spring cleaning for around $1000.
Hate to say “we told you so”, but “we told you so”. So many of the predictions of the sage commenters of this blog have come true.
We need to unite strongly…let this blog be the gathering point…against any government bailout. They have already been subsidized through the tax system for years.
Can we qualify the no subsidy position to the effect that there should be no subsidy for second homes, investment homes and those with enough assets to cover the mortgage? Hate to see little people burned for buying a house, their only house, they intended to live in.
As long as you include those with HELOC’s, cash out re-fi’s and the like for primary homes. Which should be just about everybody. We ain’t payin’ for someone’s Escalade.
Comment by Rainman18
2006-04-17 08:59:37
We ain’t payin’ for someone’s Escalade.
—————————————————-
How about a SLOBurban? Or a TaWhore? Maybe a Ford Excretion?
Agreed! No cash for trash! Throw out your dead!
LOL Lingus!
I have a SLOburban that sits in the garage until I need it for work and let me tell ya, at three bucks a gallon with a 40 gallan gas tank, they have a loan officer posted at pump #4 where I get gas.
I’m seeing lots of unsightly SLOBurbans parked on front lawns with for sale signs on them. $3/gal gas is a good thing.
Here’s more good things…
http://www.fxstreet.com/nou/noticies/afx/noticia.asp?font=Reuters&pv_noticia=MTFH07632_2006-04-17_04-25-19_T345002
Rhonda’s and her ilk are toast…
If you think those gas prices are bad, I passed the 76 station in Malibu, CA last week and the supreme was $3.68/gallon
Amen to that. It’s the banking system that is so GD greedy. While true there are the spec sharks lurking the waters, this would have never happened if not for these lax lending standards.
The laugher was on Saturday, in the LA Times, page for of the business section, on how Country Wide and BofA are resisting the new lending standards, claiming that ‘people couldn’t buy homes then’. And the week before a story on a local S&L in Santa Monica that specializes in these risky ARM and NA saying, we do a better job of screening the applicants credit and financial strength unlike is larger competitors.
The officers and other executives are getting rich over this so ya, NO GOVT BAILOUT !!
don’t worry , as long as this current administration is in power, no bail out is going to happen.
Are you kidding?
GWBush is the biggest spender ever!
Granted he is a dishonest spender as he is spending your grandkids taxes today.
“Of those who bought or refinanced homes in 2005, 29% had zero or negative equity, and 15.2% were underwater by 10% or more.”
Holy Figures Batman, these are some shocking numbers, even for the people like us who have been watching this unfold.
http://www.AmericanInventorSpot.com
AmericanInventorSpot.com
Batman better hope the Batcave is paid off!
Seriously, 1 in 20 ‘underwater by 10% or more…’! I’m not a math expert, but we’re talking millions of people here.
Also, with transaction costs, 5% or less is underwater for sale purposes, 2% or less is underwater for refinance purposes.
Owch.
“Nearly one in 10 households with a mortgage had zero or negative equity in their homes as of September 2005. The study of 26 million homes in 36 states and the District of Columbia found that one in 20 home borrowers was upside-down by 10% or more. The situation is even grimmer for recent borrowers. Of those who bought or refinanced homes in 2005, 29% had zero or negative equity, and 15.2% were underwater by 10% or more.”
Who is calculating these numbers? It would be nice to have a link to the most up to date info on folks with negative equity.
and is this nation-wide? I’d like to know about so cal…..
Not sure who calculated this 1 in 10 figure, but I am reasonably sure that it is based on very stale appraisals which do not take into account the fact that prices are falling in many markets formerly referred to as “frothy”, as evidenced by many of Ben’s recent posts, not to mention the cautionary tale of hapless Rhonda. Once the falling prices show up in future data releases, the 1 in 10 figure will be revised upwards, and the dimensions of the problem will become harder to ignore…
I think the glaring distinction between this run on housing and that of the 80’s is in fact that much of the risk has been transferred to speculators. This is important in that there lies the possibility that the correction will be even more localized than ever. For instance, region A may get hammered by 50% and right next door in region B may merely go flat.
Any market guys or economists want to comment on this distinction?
It’s fun to have infinite leverage when the market is going up. Wonder how it feels when the market is going down.
I wouldn’t know. My bank account is stuffed full of cash/CD’s and I own the dirt my wigwam rests on.
Canned goods? Can opener? Underground shelter?
Ever had a really bad wedgie??
I found that out this morning when I made an execution error and bought 15000 shares of a stock I meant to sell short 1500 of. Cost me a week’s pay.
Didn’t you claim to have made a similar error a month or two ago?
I make execution errors all the time. I have two different softwares and the buy and sell buttons are on opposite sides on each of them. When things get fast, shit happens. I sure wouldn’t blame it on anyone but myself.
could happen to anyone, but maybe put a sticker on each side of your monitor to remind you before you push the wrong button…
get 2 screens for your computer or 2 computers with 2 screens, to be sure. It’ll save you a lot of $$$$.
You all sound like my husband now! He suggested the same thing.
Lemme tell ya, if I’d held that position, I’d be down 45G right now.
Ouch.
If Region A holds California homeowners using bubble equity to snap up houses (and drive up prices) in Regions B, C, and D, you’ll see it ALL go down the tubes as Region A stalls…
>
Really? Negative equity on ARM loans is presents risk to the borrower? That’s shocking. I’m glad they pointed that subtlety out. Otherwise it would never have occurred to me. Apparently it hasn’t occurred to the FED, the regulators or the lenders either…
“Homeowners with no equity and adjustable-rate mortgages face additional risks from the loans themselves, since their payments could rise 50% or more in coming years as interest rates reset to higher levels.” is what I tried to paste the first time…
Don’t worry. Just close your eyes. tap your shoes 3 times and say “I wanna go home”
“Cagan, however, doubts we’ll see a nationwide real-estate rout. If defaults rise to the level he predicts — about $110 billion, or 1% of total homeowner equity, spread over five or six years — economic growth might slow by about 10%, he said. Regions that have strong local economies and that aren’t overbuilt should survive the defaults without falling into real-estate recessions. ”
There are still analysts out there who think there is no national housing bubble, just some local froth.
There’s an interesting article from the LA Times on April 13, referenced on my bubble blog, that says Los Angeles regional economists claim that “this time it’s different” in part because people aren’t being panicked into selling their homes in an obviously slowing market.
So maybe Rhonda hasn’t been panicked enough yet into selling, but with the increasing squeeze from higher mortgage payments, I wonder what people like Rhonda are going to think when they test the market six months from now, or a year from now and find that the house is worth even less than now.
Rhonda and her like will soon be seen running from their over-leveraged sh*t-boxes with their hair on fire.
It may very well be different this time.
The difference stems from the degree to which home prices have broken with fundamental value, the multi-generational lows in interest rates that enabled the bubble and the nutty loans & lending practices.
A rout will be a mild description of what’s coming down the pike for the RE market….
Cagan has been fooled by randomness, as he is oblivious to the sand castle built into the sky out of an oversupply of investor-owned McMansions, high-rise and conversion condos, and vacation homes purchased on the irrational assumption of 10%+ YOY gains forever, plus myriad career plans dependent on an unsustainable surge in RE-industry employment.
Read Burton G. Malkiel’s book on Randomness also Mandelbrot’s treatise on the misbehavior of markets
Don’t listen to economists. If they were that smart, they would be rich themselves. It isn’t different this time.
And yet almost every Real Estate agent and Mortgage Broker still holdfast in their statements that prices are NOT coming down any further. Imagine that…
Like I have said for 3 months, wait until the resets start to hit… OOFA!!! 86% HIGHER payment.
“BRING OUT YOUR DEAD”
“I’m not dead yet!”
“You’re not fooling anyone!”
I really wonder what people are going to do.
In places where they can just foreclose, ok, so you get foreclosed on…but what about those where the lender can look to you for the difference.
If you can’t pay, you can try to declare bankruptcy, but with the new laws, what will happen to these poor people?
This is why I can’t imagine the fed letting prices fall. It would be too devastating. More likely they will just practically hyperinflate so my soda is the price of your house, but your house is up in terms of nominal prices.
Simmssays…
http://www.AmericanInventorSpot.com
AmericanInventorSpot.com
Comment by simmssays
2006-04-17 08:13:17
” More likely they will just practically hyperinflate so my soda”
Thats already been done. Along with every other marketable item but shhhhhh!!! Quiet…… “The economy is doing just wonderful” says Larry Kudlow.
Well, the difficulty with the “the Fed will inflate us to safety” theory is that they’ve ALREADY doubled the money supply (M3) with little effect on wages. I do agree that it is likely Bernake would chose inflation over deflation, but the fed seems unable to control where all this money goes. Consumers pumping up home prices, going further into mortgage debt, and buying foreign goods has seemd to have a fairly minimal positive effect on the underlying economy.
What do you think has been the biggest growth area of the economy these last few years?
Ink? Printing presses? slave labor?
Tell me if I’m right.
Housing, which we can’t export to help our ballence of trade issues.
More likely they will just practically hyperinflate
They can’t…The foreigner’s will dump all their bonds and MBS’s
and interest rates skyrocket.
COLA’s attached to FED entitlement programs then blow thru the roof.
Oil unhooks from the dollar peg and moves to the Euro.
Then a dirty bomb goes off on Wall Street in NYC.
Government declares martial law and a debt moratorium.
Then comes the “D” word.
I’m hoping you’ve just had a little rum in your coffee and not even close to being on the money. It’s scary how close that scenario could become reality
Mr hd74man has predictions that are cynical, but not crazy. It is likely that we will watch a tremendous tension as the Fed tries to defend the dollar while the bubble collapses. If history is any guide, the Fed will hold on too long and deflation will start. What happens next is unknown. Deflation could continue, but the trade deficit is so large that the dollar cant continue to hold its value indefinitely. Energy and foreign-made goods wont get cheaper, at least in dollars.
Expect gasoline to be $5 per gallon.
Another scenario is being cooked up in the VicePres office. A little war with Iran would take our mind off these troubles at home.
**Another scenario is being cooked up in the VicePres office. A little war with Iran would take our mind off these troubles at home.**
that will accelerate the $5 per gallon gas and the push to US and world recession
Fuel is already headed for $5/gal without that idiot cheney going to war.
I don’t see hyperinflation. People in India and China work for nothng. Hyperinflation will only make it so they work for less than nothing & even more jobs are overseas.
Let me enlighten you, Ms. Karen. Commodity prices are already approaching hyperinflation (copper, nickel, etc. up more than 60% since last Fall — see London Metals Exchange or Kitco Base Metals price charts. And China and India will not indefinitely be willing to trade tangible goods and services for worthless greenbacks.
What ceases to amaize me are these RE agents who say all of this BS to make themselves feel good about price never going down. Most of these RE agents have never been involved in an unwinding of asset prices but they are about to get a real first hand education.
TIME is about to work its slow painful deliverance of adjustments that will sink many unsuspecting mortgage holders. You see most people who took these mortgates new nothing of how they worked and that was great for the RE people because all they wanted was a sales commission.NOW the world is going to wake up and smell the burning feeling of higher monthly payments they cannot afford. DOWN come prices as inventory increases and buyers wait for the true value of these assets to be reached befor they attempt to buy.
Agents will suffer as no deals will be reached until this asset is once again priced to SELL.
“What ceases to amaize me are these RE agents who say all of this BS to make themselves feel good about price never going down.”
Seriously, what do you expect them to say? “Prices are going to drop 30% over the next 24 months, don’t buy till then”? That would be good for business.
We expect them to tell the TRUTH. Why is truth so elusive to everyone? The ugly truth reveals itself eventually but nobody is willing to admit it until it’s forced upon them?
Pretty naive. They’re out to sell you something. That’s all you need to know when it’s time to decide whether to trust what’s coming out of their mouths.
dwr gets it. the Lingus should re-read what he/she posted after a swig of reality juice.
The problem is, and has always been, that Realtors do not fall under any regulatory oversight (i.e. the SEC, NASD) that disallows them from promising future gains of the asset/investment they are selling, which they do quite regularly.
“Seriously, what do you expect them to say? “Prices are going to drop 30% over the next 24 months, don’t buy till then”? That would be good for business.”
No, but I don’t expect them to say “Prices are going to go up forever, buy now or else!” either.
Gulp…… understood. It doesn’t mean the rest of us throw truth and integrity to the sidelines is what I meant. Clearly, business is in the game to make money and business=dishonesty. Enuff said.
“No, but I don’t expect them to say “Prices are going to go up forever, buy now or else!” either.”
Well, they do say that, I’ve heard it first-hand, the issue is whether one is stupid enough to believe it. Here’s another flash- used car salesman will also say anything to sell a POS car. Caveat emptor.
“the issue is whether one is stupid enough to believe it”
They problem is they are often quoted in the paper as ‘experts’ when they say it. You can lay some caveat emptor on the consumer (and the newspaper for that matter) but not most of it. IMO
You say a used car salesman will say anything.
I say a stock broker can’t.
What’s the difference?
Virtually everybody knows a car depreciates the moment you sign the papers. Stocks and houses may or may not appreciate, which is where ‘experts’ come in. If you’re selling something that may or may not increase in value, you would better serve your clients by finding a middle ground in your advice to them. Again IMO.
Rainman18-
I actually agree with that go figure. But I would also add that too many people are depending on single family houses for investment purposes instead of shelter. And leaning on their Realtors as financial consultants. That in itself is a no no.
U cant time the market, the best way a realtor to be honest is that you should be buying a house to live in at these times, but who knows for sure. Housing in long, long term history, has not gone down, so they are right to a degree, but if the would be flipper is thinking 10-20% appreciation within 1-2 yrs, thats his opinion to decide if that will happen, even if the #s are against you. Its all a gamble from here, but I bet the house (FEDS) wins this time, the house always wins
Good point Mike
Housing hasn’t gone up historically either. Unless you call 1% real appreciation good performance.
How about: “You overpaid for this asset. It’s value is $X. Price it below $X, and it will sell”. “Prices are now trending down, and failure to price agresssively will only result in further losses”.
If that’s what it takes to end the standoff and make the sale, then yes- that would be good for business. Of course, it’s the sellers, not the buyers, that need to hear this message.
The problem with your strategy is that most people don’t really care about selling their home, they like their home, and realizing losses are exceedingly painful.
The price negotiation will occur when the banks are told by their regulators, “sell this crap REO by the end of the year or we will pull your charter!” until then don’t expect to get any good deals.
You my friend have answered the million dollar question
TIME is about to work its slow painful deliverance…
you shur got a purty mouth…
So, does anyone else think that there might be some ‘house fires’ on homes such as this Rhonda when they find that they can’t sell it, refinance it, and unable to pay the mortgage? What repercussions? And will insurance companies look for signs of arson and refuse to pay the claim? I just see some trying that as a last means desperate measure.
The insurance fraund investigators got a lot of work from this sort of thing in the 80’s. One of the houses in the development above mine went up like this. They caught the guy also.
We call it ‘Jewish Lightning’ when turning in a fire insurance claim.
You meant to post, “We used to call it Jewish lightning…” because you don’t anymore, right?
The thing about the arson is insurance will pay clean up costs plus cost to rebuild minus a co-pay(unless you’re insured to a higher value)….will that be enough to cover that mortgage? Or will you have a burned out home and a balance due?
it’s even worse, many banks lend to hedge funds!
Got that right, and it wil be the same old story. Privatize the profits and socialize the losses.
“Rhonda is in a panic. She thought she could refinance to a more-affordable loan, but the rates she’s being quoted are just as high.”
“‘So I then decided I would just sell the house and get out of it,’ Rhonda wrote. ‘WRONG! The houses in my area are selling for around $20,000 less than what I owe!’”
So I then decided I would just wait until the market got better and sell then.
‘WRONG!’ It just keeps getting worse with no end in sight!
So I then decided to give the keys back to the bank and walk away.
‘WRONG!’ I found out about the new bankruptcy laws and the taxes I would have to pay on the debt!
So then I decided to get in hot bath and drop a toaster in to end it all.
‘WRONG’ They turned off my electricity because I can’t pay my bill anymore!.
Now I’m really panicked, said Rhonda.
lmao
and then congress came in and gave me a loan for the difference between the loan and what I can sell the house for…
What is truly unfortunate is that the likes of Rhonda will never look back at all the bad decisions they have made in life to find out how they themselves contributed to their unfolding. Time after time they will play the victim and whine about how life has been so cruel to them and will neverhold themselves accountable.
They’ll never learn to researchbreforehand, read the fine print or asked an un-biased authority their take. They’ll watch a soap opera before reading a “Mortgages For Dummies” book.
They’ll always listen to their borother/mother/next door neighbor who are all experts in nothing particular to help them make the important decisions. Why? Because it’s convenient and takes no effort.
These are the same people who wonder why the rich (informed) get/stay rich while those of her kind (who couldn’t figure out that, maybe because she was soooooooo subprime maybe she shouldn’t own a home anyway…… just in case things get worse, which they obviously have) repeatedly fall flat on their faces.
Pathetic.
Some will learn, some won’t. Experience is a great teacher, but even hindsight isn’t 20/20. I’m convinced that children don’t have that little voice telling them “This is a bad idea.” Adolescents don’t listen to it. A sign of adulthood is actually changing your plans when that voice of caution starts whispering in your ear. If your REALLY gifted, you can learn from the mistakes of others, instead of having to make them all yourself.
(Sigh). Yep, you’re right. I’m just one of those who got my ass kicked early in life (racked up a lot of cc debt in my mid-20s while making good money, always delayed paying it off, then got downsized). I swore I would:
1) Do everything in my power to avoid being so foolish with money/my fanincial wellbeing ever again.
2) Always thoroughly weigh the pros and cons of any finacial endeavor before making a move. more importantly, if everything went to $h!t I wasnumber 1 on the blame list because no one had held a gun to my head.
It doesn’t mean I’m immune to an “f” up here and there but I refuse to lay down and whine if things don’t turn out the way I had planned.
“If your REALLY gifted, you can learn from the mistakes of others, instead of having to make them all yourself.”
Loonofficer, don’t know if you read old posts. Your above quote just made me think that the above only requires humility which too many supposedly intelligent people don’t seem to have. I just see a lot of puffery instead of the willingness to understand that that particular person might not know it all. When you’re not open, you can’t learn.
Sorry Jim A that was you I thought was so wise!
I subscribe wholeheartedly. Wise words indeed.
I agree, your words are wise.
Bubblefucius say:
Young homebuyer need to do homework before housework.
Another classic. You’re too much. You really need to keep these for a book.
Thanks AZ
She can’t read because she’s a prduct of our government education bureaucracy (public schools).
Well said, Loonofficer.
then Rhonda decided to turn on the car engine and sit in the garage
WRONG! She’s out of gas and at $3/gallon, she can’t afford any more!
LOL txchick!
LOL txchick! good one!
Help me Rhonda, help help me Rhonda..
Help me Rhonda, bleah! Guess you aren’t all that smart.
Isn’t it true that EVEN IF she walks away from the home, she may still receive a 1099 for the balance between what is owed and what the firesale price is as “goodwill” or an some type of “gift’?
I remember in the 90″s something similar happening and people got screwed by not only losing their houses but also by HUGE IRS bills.
navigate to this page from today:
http://thehousingbubbleblog.com/?p=504#comments
and then read cereal’s post @ 06:55:44….all will be answered.
And wait until the economy that is the most envied in the world is suddenly not so rosy. Will the oft maligned “immigrants” find welcoming refuge in their homelands when the US is in recession and their mortagages and BK laws give them no other out? They could be debtors or unemployed here but live like royalty in their developing homelands. This is already transpiring in India and China. Mexico nextico? How will this impact housing demand? And on and on…
“one in five buyers already spends more than half of pretax household income on housing”
I think this figure is derived / based on what is reported on the 1003, which appears in many cases (especially in California) to be a liars loan. The 1:5 is probably 1:3
“In California, where seven of the 10 most expensive U.S. cities are located, one in five buyers already spends more than half of pretax household income on housing.”
And of course the paycheck’s net is what is deposited into the FB’s account. Why do they even discuss pretax earnings when the topic is the family budget? Talk about smoke -n- mirrors!
Can someone tell me what these people do for a living? In So Cal, 3bd/2ba go for 550,000 or more. How do they do it? Even before the teaser rates go up it’s ridiculous.
They flip condos! I’m 32 and most of my OC friends have retired because they bought a house between 1998-2003. The worst part is, I’m older than ALL of them. I try not to think about it too much, lest I go nuts.
How many of your friends have sold said house?
The others will be “unretiring” shortly.
The banks are in this up to their eyeballs. They have financed the projects that are in trouble (the sellers), and the flippers that are in trouble (the buyers). And they are determined to keep it up. Fannie and Freddie are in this way beyond their eyeballs. It is assumed that the government will bail them out, but frankly, their potential liabilities are too large for a government with $400 billion of annual deficits to bail. This is much more than a housing bubble that is popping. Don’t expect a quick bottom.
OT, but what the hell is happening with the stock market? No kidding, I sold my house,put the money in some mutual funds. There are some very smart people on this blog (Txchic for example), and I’m wondering what you think? Any ideas where to stash my money?
Sell in May and go away.
I’ll give ya one. I am slowly picking up Natgas stocks here. Seasonality is favorable.
thanks for the tip…..my broker isn’t really any help. He doesn’t like individual stocks.
Broker? He doesn’t want you doing anything without doing it through him who do you think pays for his living?
Here’s my advise start reading and learn how to pick your own stocks or your alway going to pay a percentage In his fees, not including the Company he works for fees, brokering the deal cost the broker fees, any gains Taxes?
So you might be making money 10% gains, but owe 5% In fees.
Cd could of done the same 5% gain without all the extra fee’s Is my point, something you need to do is sit down and see if this is the case. Brokers are like Realitors If your not Investing in something they have there money In, why would he help you Invest it in another Company he or the Company he works for has no Investment In?
Just trying to Explains why there no help. I’m sure there’s other Broker who might get mad at this but if you read investing books they say the same about Brokers!
Your broker’s a retard. Watch CAU and RANGY.PK (gold & uranium plays).
If you need the money in the next 6 months to a year do NOTHING but put it into SAFE things such as momey markets, CD’s, T bils, etc.
If you have 2-5 years, short term Inflation ajusted T bills or ladder some short term munis or cd’s. You could sprinkle some RISK money in the market into an S&P 500 fund, some foreign funds, and some hard asset funds. If your time frame is over 5 years then you can put more money ‘at risk”. IMHO, the domestic stock market is very vulnerable to the dowsnside. Asian markets look more favorable but are more volatile and are often illiquid.
Whatever you do. limit your downside to no more than 20% and do not commit more than 10-15% to any one ‘at risk” investment. Remember,as rates continue to rise, that will make “safe ” investments more attractice vs.” at risk” investments such as stocks and bonds. Do NOT reach for yield or go for lower quality now. When the tide goes out as it is now with rates and the markets, you will see everyone that is “naked”, unlike when the tide is in it raises all ships, ( junk investments.)
If you are not comfortable doing it yourself, CASH IS KING right now. You can get almost 5% in SAFE money markets. Then go see a FEE based financial planner and do not give anyone any money upfront. I woul dnot pay more than 1% per year.
Hope this helps.
Thank you so much. I am going to start reading up on this stuff, I am new to it, as you can tell. I had it in CD’s, but BofA went down to 1%, because of Hurricane Katrina. I have no idea what the relavance was, but that was the excuse. CD’s are back up now. Thanks again….
Try Treasuries. You can get 4.7% on a 4-week T-Bill:
http://wwws.publicdebt.treas.gov/AI/OFBills
Addendum - here’s the place to open an account:
https://www.treasurydirect.gov/indiv/indiv_open.htm
The option you want is TreasuryDirect.
Also, BofA is full of it if they said that. You may want to check this list of financially sound banks and see if one does business in your area:
http://weissratings.com/HL_Bank.asp
Saw promo for BofA 1 year CD at 4%, you can get over 4% in Vanguard money-market funds (they have 4 to choose from). Vanguard is great for low cost self-directed investing and their money market funds beat CDs.
Good post.
Another long term option is Berkshire Hathaway stock. Reasonably priced, conservatively financed, diversified, and managed by the best in the business (Warren Buffett). Almost as safe as cash but with more upside, IMO.
The mattress.
I just found a methodological problem in counting tracking inventory from Realtor.com.
If a development goes in that has say 50 homes, it may be listed only once, with the ad referencing 50 homes. Yet the 50 homes only get counted as one when Realtor.com’s serach results for you say something like “9 of 185 properties in the area match your criteria”.
Up until now I was thinking that the ineventory count is 9. Now I realize it’s at least 9 + the 49 not counted.
Great way for brokerages to suppress real inventory I suppose.