The ATM Known As Your House Has Shut Down
The Missoulian reports from Montana. “The Missoula Symphony Orchestra is not in the business of selling houses. But that hasn’t shielded the local orchestra from feeling the effects of a slowdown in the Missoula housing market and the broader economic downturn that is sweeping the nation. Late last summer, the MSO learned that two of its major sponsors - one of them a local real estate company, which John Driscoll, executive director of the orchestra, declined to name - would not be supporting the orchestra with cash donations this year. Driscoll’s sentiment is echoed at other local arts organizations and businesses around the area. Though none says it is panicking, most have begun to see signs of a slowdown in charitable giving. And all are worried that they’ve only seen the tip of the iceberg.”
“‘Fundraising has been a struggle,’ said Tom Bensen, director of the Missoula Cultural Council. ‘There are a lot of longtime funders who are either taking a break this year or are contributing less than in the past, and it’s been hard to get new donors. If you don’t have an established relationship with a potential donor, nobody’s in a state of mind to add more donations and advertising to their budget.’”
“Ram Murphy, operator of Murphy-Jubb Fine Art, hasn’t seen any real signs of a slowdown in sales at his downtown fine art gallery. In fact, he wonders how much the national economic crisis has really hit home in Missoula. ‘Right now, we seem to be doing fine,’ said Murphy. ‘Who knows,’ he added, “by March we may all be on our knees. But not yet.’”
The Hungry Horse News from Montana. “Plum Creek Timber Co. announced last week it would cut 68 jobs from its plywood plants and has also informed its four logging contractors that there’s no work for them. The lumber markets are the worst in almost three decades, notes Shawn Church, editor of a publication that tracks lumber markets for the wood products industry.”
“Church said that some lumber prices are actually lower, even if they’re not adjusted for inflation, than they were in the recession of the early 1980s. ‘The industry as a whole is dealing with a historical downturn,’ he said.”
The Capital Press from Oregon. “Tree seedling nurseries have been hard hit financially on two fronts. The housing market free-fall has sunk lumber and timber prices, reducing logging operations and thus cutting demand for seedlings for reforestation. At the same time, large numbers of Christmas trees have been reaching maturity and tree prices have fallen in recent years, reducing that industry’s demand for seedlings as well.”
“‘We’ve seen a tremendous downturn in orders,’ said Tom Jackman, CEO of IFA Nurseries, which produces seedlings for forestry in numerous locations in Oregon and Washingon.”
“A downturn of this magnitude is probably unprecedented in the industry, Jackman said. ‘Before, we were saying, ‘At least it’s not as bad as the early 1980s,’ he said. ‘Now, the consensus is that it’s much worse than the early 1980s.’”
“According to the Random Lengths information service, the composite price for framing lumber fell to $234 per thousand board feet - a 50 percent drop from the most recent peak in August 2004 and the lowest price in at least the past decade. Tom Jackman of IFA Nurseries said that market conditions have gotten so bad that customers would rather abandon their contracts and lose cash security deposits than buy pre-ordered trees.”
“‘People aren’t harvesting, they’re not logging,’ he said. ‘People are just leaving them with us.’”
The Lake Oswego Review from Oregon. “Struggling homebuilders are looking for a lifeline from local governments, asking for flexibility on rules and fees to help them get back to building. Joe Keizur, interim vice president of government affairs for the Home Builders Association, said builders are essentially calling in favors from governments after being generally cooperative with fee increases while building was lucrative. ‘Right now we need some reciprocity,’ said Keizur.”
“The Oregon Employment Department noted 11,000 construction jobs were lost in the development sector between September 2007 and September 2008. Many small-scale home builders and contractors aren’t counted in those figures, or in the current unemployment rate of 7.3 percent, because they are self-employed. ‘It’s probably as bad a building environment than it’s been since the ’80s and given that, we need jurisdictions to help us out,’ Keizur said.”
“In other communities, larger problems loom. In Happy Valley, Bethany, Sherwood and Wilsonville along with other areas of both Clackamas and Washington counties, stalled construction projects and vacant subdivision plats blight the communities.”
“In Tualatin, Mayor Lou Ogden plans a meeting with the Home Builders Association where he is likely to grant extensions for approvals and permits in that town. Ogden said he was open to talks about any action Tualatin could take to get building back on track there. ‘We’re interested in looking at ways to not pull the rug out from under these builders as they try to wait out the storm,’ he said. ‘We’ll talk about whatever their issues are. We’re all in this together.’”
The Oregonian. “Shoppers throughout the Portland area swarmed the malls as they hunted for gifts and deals. Debbie Jackson and Annie Montgomery always shop together the day after Thanksgiving. Jackson’s just doing less of it this year. Her husband’s heating and air conditioning business has seen things slow down because of the housing downturn.”
“Montgomery, though, plows ahead with her shopping. She’s a real estate broker from Bend, where the housing market is in tatters, but Montgomery remains upbeat. ‘It’s going to turn around,’ she said. ‘People just need to get some confidence in the market.’”
“Ryan Strasshofer is the Bend-based representative of a Eugene company that is Oregon’s leading buyer of homes at foreclosure auctions. It’s his job to sift through the ever-growing number of homes entering the foreclosure process to see which ones his company might buy and rapidly resell. ‘To summarize our business model, we sell them cheap because we buy them cheaper,’ said John Helmick, Strasshofer’s boss.”
“Defaults seem to come from every economic caste, but there are common causes: divorce, layoffs, luxury purchases and too much leveraging of falling equity, said Strasshofer, who operates as a private contractor. ‘It’s amazing how many homes I drive by and see a new boat or motor home in their driveway, and they’re in foreclosure,’ he said.”
“According to company statistics, of 111 homes put up for auction in Deschutes County in October, five sold. The rest reverted to the lenders holding the liens. ‘What’s happening is that the banks have not dropped the price low enough to get interest from buyers,’ Helmick said.”
The Newport News Times from Oregon. “For many, the holiday season means extra spending - on gifts, travel, accommodating guests, etc. And for those who may not have any savings stored away, the weeks prior to the holidays are an ideal time of year to earn a little extra cash with a seasonal part-time job to help out with extra expenses. But this year is different. With the economy in turmoil and the future looking bleak, many Lincoln County businesses have scaled down or outright eliminated their hiring of extra help for the final months of the year.”
“The number of seasonal or temporary job postings by local businesses are at an historic low, said Sandy Mies-Grantham, business representative for Newport’s Worksource Oregon. She said that retail industry employers are those that typically hire the most seasonal or temporary help. ‘I’ve never seen numbers this low,’ she said. ‘It’s just not happening.’”
“‘The easiest place for any business to save money is by limiting its workforce costs by cutting back as much as possible on hiring, especially during the holiday season,’ Rob Abbott, work force analyst for the Oregon Department of Employment, wrote in a statewide September report.”
“He continued, ‘If the holiday hiring pattern of previous years holds true, look to see fewer holiday-related jobs this year than we have enjoyed in recent years, with the December peak in holiday-related retail trade possibly dropping to 2005 levels. We are wrestling with the uncertainty of an election year, high energy prices, a housing downturn, and a credit crunch in the banking sector of our economy. With all of these things coming to bear on our economy, the outlook is less than stellar for holiday employment in Oregon. Many stockings won’t be brimming with the plenty of recent years.’”
The Seattle Times from Washington. “Real-estate agent Jonette McGrew is willing to do what it takes to make a property competitive in the market. Sometimes, that means weeding flower beds, washing windows and painting interior walls. McGrew recently began offering free staging services for her clients. ‘In this market it is a must, no question,’ she said.”
“‘The days of just taking the listing and putting it into the [Multiple Listing Service] and letting the MLS sell the property are gone,’ said Brigitte Pascutoi, managing broker at John L. Scott Real Estate’s Bellevue North office.”
“Bill MacDonald, (a) 20-year real-estate veteran recently broke out the toolbox to add double-crown molding to kitchen cabinets, replace light fixtures and install oil-rubbed bronze hardware in a client’s home in Woodinville. MacDonald picked up the listing in July, after it had been on the market a year. He worked with the owners to modernize it with new carpet, paint, landscaping and other changes. He also got them to drop the price $70,000 to $839,000. Now, he’s scheduled multiple Sunday afternoon open houses at the property to entice potential buyers through the door.”
“‘It’s vacant. It’s staged. It’s absolutely perfect inside,’ MacDonald said. ‘And yet it’s impossible to get somebody in to look at it.’”
“For some real-estate professionals, the change in the market is a reminder of why they got into the business in the first place. ‘I didn’t really like the frenzied market,’ said Dennis Brown, president-elect of the Seattle King County Association of Realtors. ‘People had the conception that Realtors were foaming at the mouth. We were so busy. But our business is all about relationships, and when the market is that busy, you don’t have time to build long-lasting relationships.’”
“Seattle architecture firm Weber Thompson had 82 employees when it moved into its new headquarters building in South Lake Union this spring. Now? 54.”
“Seattle-area architects are feeling the chill as the local and global economies cool. The development pipeline on which they depend is drying up. Several firms have laid off employees because there simply is less work. The Architectural Billings Index, a national measure of industry health devised by the American Institute of Architects, declined more steeply in October than in any previous month in its 13-year history.”
“Part of the problem is many larger projects with plans and permits in hand are stalled, often because developers can’t get financing. Weber Thompson’s Web site, for instance, shows eight high-rise projects the firm has designed in downtown Seattle. Two are built. One is almost finished. The other five are on hold.”
“‘When you look at financing and equity requirements, the landscape has changed completely,’ said Mark Woerman, a principal with Seattle firm CollinsWoerman. ‘People just truly don’t know what to do.’”
The Spokane Journal of Business from Washington. “Including transactions involving new and older dwellings, single-family home sales in the first 10 months of the year in Spokane County totaled 4,359 units, down 28 percent from 6,042 sales in the year-earlier period. Meanwhile, the median price here for home sales closed in October was $177,000, down 4.3 percent from $185,000 in the year-earlier month, says Rob Higgins, executive vice president of the Spokane Association of Realtors. ‘We’re having a modest reduction in prices,’ Higgins says.”
“It’s more common for the number of homes on the market to decline around the holidays, when fewer sellers choose to list their homes, says Ken Lewis, the broker at Prudential Spokane Real Estate, which has offices in Spokane and Spokane Valley. He believes, however, that the reduction in inventory between the end of August and Oct. 31 is more than just a normal seasonal adjustment, and says he’s encouraged by that.”
“‘Maybe we will get inventory down to a manageable level,’ he says. ‘The market here isn’t terrible, it’s just that buyers have a lot of choices.’”
The Columbian from Washington. “Higher-end retailers are showing signs of a struggle this year, said Mike Merrill, co-owner of Pro Golf, a shop that offers golf equipment, clothing and custom golf services. ‘In the Portland-Vancouver area, eight independently owned golfing stores have recently gone out of business,’ he said.”
“Merrill blamed the uncertain economy for a 20 percent drop in his store’s sales in recent months.’Golfers are going to buy from you anyway because it’s their passion,’ Merrill said, although he blamed his store’s slipping sales, in part, on Clark County’s plummeting home-building industry. ‘Our bigger customers have been the Realtors and home builders. Now we can’t count on them,’ Merrill said.”
“Local home sales that were down by 33 percent through October have also affected furniture stores, said Keith Koplan, owner of Koplan’s Home Furnishings in downtown Vancouver. ‘Our sales are down significantly,” said Koplan.”
“Koplan predicted big-ticket sales would continue to slide into 2009, primarily because cash-strapped homeowners can no longer secure the home equity loans that helped finance those purchases. Slowing home sales and declining values limited the ability to obtain loans, which homeowners routinely borrowed against.’
“‘The ATM known as your house has shut down,’ Koplan said.”
‘There is a house in Rawlins, Wyo., that won’t sell. It’s a bargain, too, at $135,000. In fact, there are 43 houses in Rawlins selling for under $150,000. This is a booming energy town with a housing shortage. People in Rawlins have money. Wyoming has, in fact, the fastest growing median household income of any state. So why does this house remain on the market?’
‘The mortgage crisis created far from Wyoming has changed the rules on borrowing money. No more nothing or 3 percent down. It’s 10 percent up front, and not that many people have $13,500 lying around.’
‘This shifting dynamic is one more blow to the concept of Western exceptionalism. We’re heard it all our lives: In the West, we’re different. But whether it’s ranchette, ranch-style or ranch, it doesn’t matter…This region is just as liable as any other to feel the splintering jar of the cue ball caroming in from New York, London or Shanghai.’
‘This shattering of nest-egg wisdom reinforces a lesson the West has learned the hard way. Diversity matters in all forms…In July, oil-and-gas-rich New Mexico was projected to enjoy a $400 million budget surplus. Then it fell to $225 million and now, the projected surplus is around $80 million.’
‘Sarah Palin…told a crowd gathered in Carson City, Nev.: ‘You understand the need to put the pride back into America and into Americans because we can do this again. We are an exceptional nation.’
‘If this continuing crisis has taught us anything, it’s that the West may be exceptional in spirit, but it’s no different from the South or the East when it comes to weathering economic changes in fortune. An emphasis on pride is hardly the point; we need common sense about living within our means. Owning a house now has global implications.’
What’s so exceptional about having $13,500 in the bank?
Sometimes I read stuff like this and wonder if I woke up in an alternate dimension. I must have read too many Bizarro comics as a kid.
The good old fashioned 20% down will soon become the norm, once again. I wonder how many folks in Rawlins have $27k saved up? We still have a long way to go till the bottom.
20% down required of all buyers would be the end of this market. It would immediately fall another 50% from where it is today (like, overnight… immediately).
The only people who can dig us out of this mess are the first time buyers, they are the only people who can actually absorb inventory. Selling a home in NJ and moving to FL does nothing to help the overall housing market; it just shifts the problem from one location to another.
About 40% of this country doesn’t already own a home (and therefore can qualify as first time buyers; they can actually absorb inventory). I would hazard a guess that < 1% of them have a 20% downpayment on the home they would like to buy. That means that we have .4% of the entire population of this country that can possibly absorb inventory? That’s a disaster, it would crater the housing market overnight.
Not that disagree that 20% should be the norm. If it was, I would buy tomorrow; as I would likely be one of about 20 people looking in my area!
The govt just won’t let it get that bad. They will pump the FHA limits to 1M dollars if they need to, and will make those loans as cheap as conforming loans with 3% down. Remember, the housing market is now effectively nationalized (at least the finance portion); they can do whatever they want to do to keep the wheels from falling off this cart.
20% down would = burning and bulldozing 100s of thousands, or millions of homes across the country. There’s simply almost nobody left (except for the couple of 100 of us on this blog!) that can meet the 20% mark, don’t have a home already, have excellent credit, and have the income to support the loan amount.
How many people do you know making 100K with a 800 FICO and 150K in the bank that don’t already own homes? My point exactly..
When FHA foreclosures begin to ramp up to subprime levels they’ll be forced to revert to traditional lending standards as well.
At some price level, most anything will sell. Ever lower prices will eventually clear the market.
How ’bout Cleveland at a dollar?
That is going to be a disaster. Something tells me FHA, Fannie and Freddie are getting uglier by the moment. That really scares me.
“How many people do you know making 100K with a 800 FICO and 150K in the bank that don’t already own homes?”
Actually quite a few here in Cali. But none of them would buy most of what’s on the market today, unless prices fall another 50% in desirable areas. Away from the coastal areas, it just doesn’t make sense to buy anything in places like Palmcaster, Beaumont, Riverside, etc. at any price. Why would anyone pay to subject themselves to California taxes, crime, congestion, and lousy government without the offsetting benefit of living in a desirable area? I guess it was the Kool-Aid.
There are plenty of places here that are great places to live. Unfortunately, that’s not where most of the new housing was built. The misallocation of resources caused by the credit bubble is absolutely astounding.
We just need to hold out for about seven more weeks, until January 20th. With Obama in charge, all will be well again.
/snark
There you go, Bill. You forgot the closing tag, but now you’re good.
“About 40% of this country doesn’t already own a home….”
And from this number, you can subtract:
-People who want a house, but for various reasons (income, a vast number of behavioral and lifestyle issues) wouldn’t qualify under “bubble guidelines”, to say nothing of the new guidelines working their way down the system. (Half of this 40%?)
-People that COULD afford a house, but for various reasons don’t want a house AT ALL, or don’t want one until the price and location make sense to them, either by location, price, or both.
Somebody who has access to the figues can run the numbers on how many vacant houses there are, vs. how many potential buyers are actually “in the market”.
What it amounts to is that a lot of houses (and the financing backing them) are going to be worth essentially ZERO.
“What it amounts to is that a lot of houses (and the financing backing them) are going to be worth essentially ZERO.”
That’s an interesting point, if there is really no way to increase the demand for housing (I would argue there isn’t), and we are already overbuilt, what’s the final outcome here. There’s too much supply; the only way to stimulate real NEW demand is either to have more kids (which has a 25 year lag) or increase immigration dramatically.
About 10% of this country owns right now that shouldn’t own. Is there ANY way to replace this demand (quickly)? If not, I would agree with your thesis, there are lots of homes out there that are indeed, worth 0.
“What it amounts to is that a lot of houses (and the financing backing them) are going to be worth essentially ZERO.”
Zero? That would only be in a very few areas of blight. As house prices drop like a stone, prospective landlords get in and buy them, holding their worth far, far above zero. (That could be half current prices, but still far above zero.)
There are lots of potential landlords out there to take up the slack, people with good credit ratings, money ready to go, and time to make it work — *IF* the price/rent ratio is not all screwed up like it has been over the last several years. Count me in as one of them who balked when the economics of landlording just didn’t pencil out at all.
It might seem as though there won’t be enough people to rent the houses to, but if you get decent houses cheap enough, you can set rents low enough to not only rent them, but to get your choice of tenants.
The rental market is also more flexible than many people think, since lots of renters share accommodation not as a matter of preference but to save money, especially young, single folk. Lower house prices and the subsequent lower rental prices encourage these two- and four-person households to split up and absorb the extra housing.
We have the income, the FICO and substantially more than 20% down for houses in our price range–but we just aren’t interested in buying here in north Jersey until prices fall significantly more. It’s that simple, and even with all the debt and income/wealth loss out there, I bet we aren’t alone . . .
‘Sarah Palin…told a crowd gathered in Carson City, Nev.: ‘You understand the need to put the pride back into America and into Americans because we can do this again. We are an exceptional nation.’
There’s some political mumbo-jumbo for you. Why doesn’t that fool just go back to Alaska and shut her piehole?
If you think of a entire nation of 305 MM as a midget league hockey team…then that quote probably works.
‘Sarah Palin…told a crowd gathered in Carson City, Nev.: ‘You understand the need to put the pride back into America and into Americans because we can do this again. We are an exceptional nation.’
Yes, we are all unique and special - like snowflakes.
The thought of this vapid ginch having serious national political aspirations shows the utter leadership void that has overtaken the so-called Republican party.
She is the epitome of their “base”. Angry, shallow, want something for nothing and intellectually deficient. She is the candidate that perfectly reflects her supporters.
I believe the angry and the wants something for nothing crowds describe Obama supporters.
Bereft of the very values they claim to uphold, repuke voters should be angry at their leadership.
Yep. To pretend that the Dem base doesn’t want something for nothing either makes you a liar or insane. The Repubs suck but the victim party isn’t any better. Oh wait, Charlie Rangel is a great Dem. So is Pelosi, Schumer, Dodd, Frank, etc. I’m sure none of them want something for nothing.
Angry, shallow, want something for nothing and intellectually deficient.
That describes the American electorate writ large. Hardly surprising that the Republicrat duopoly put up such opportunistic mediocrities as Obama, McCain, and Palin as “leaders.”
I think all political discussions should be held in the subway. You can’t bulls–t like the stuff we see from the partisans, when the result of all those decisions is walking by. There’s nothing like a liberal spewing their nonsense while tucked away in their gated community. The same can be said of conservatives.
“To pretend that the Dem base doesn’t want something for nothing either makes you a liar or insane.”
Who is pretending? The hypocritical apologist repukes pretend and deny it as it is part of the platform… you know… that old personal responsibility line of crap that they’re never able to achieve. At least the other side doesn’t deny it.
such opportunistic mediocrities as Obama
If you don’t agree with Obama on any or all issues that’s fine, but calling him a mediocrity is just dumb and delusional.
Try adjusting your world view to cope with the reality that the former president of the Harvard Law Review and future first black President of the United States might be a little above average.
I agree. That is silly. He’s definitely way above average. We will have to see if he is a good President. I hope so but I will temper my enthusiasm, having seen what he has chosen so far.
Normally I lurk, but yikes, gotta say that Obama IS a mediocrity and below average. And I didn’t think we could have lower standards than the Shrub in office these last eight years…..but the U.S. has just gone American Idol on us by voting in a new clown.
Who cares if Obama was president of the Harvard Law Review? He didn’t actually do anything in that position, similar to his entire career. Anyone who buys the mainstream media’s bio of Obama is the dumb and delusional one.
“He didn’t actually do anything in that position, similar to his entire career.”
He upheld its standards, and didn’t run it into the ditch (where the country finds itself at the moment). What was he supposed to “do” as president of Harvard Law Review that you find lacking?
It’s the least cited review for ten years on either side of it. How is that upholding its standards? As editor, he was supposed to a) write articles and b) select and recruit high-quality articles. He did neither.
And it also begs a question how he (or anyone) could run it into a ditch and how not doing so is something to brag about. I’m not defending the current President, but being the editor of a law review is not in and of itself a qualification to be President. I was editor of the literary mag at my college. Can I be President? In fact, they’re still publishing it, so I obviously didn’t run it into the ditch. Double qualification!
There is no credibility to defending Obama’s political career based on his being editor of the law review. It’s a silly comparison for a number of different reasons and flat out spurious to compare that to President Bush’s term (or President Clinton’s).
I remain registered in the R party. If there are more than say, fifty, Republicans left in the party in 2012, Ms Palin will not get the presidential nomination.
I might switch over to help you.
Like the oblamiator’s gang has avoided mumbo-jumbo lo these last 6 months. I cant see anything wrong with what she’s said here. Your NYC cynicism nerve is overactive.
I point out the B.S. of both elitist, non-representative parties. And yes, this is mumbo-jumbo. Stop by NYC. I’ll buy you a pint of beer and a gallon of cynicism.
Would love to take you up on that, CB. Never been to NYC. Hopefully more than one pint would be forthcoming.
Stopped for gas in Rawlins yesterday…nothing new there except a soon-to-implode energy bubble. As always, the only thing they will be able to depend on long-term is the penitentiary and the interstate traffic.
Speaking of I-90, I stopped in Laramie about 90 minutes later to eat dinner with a friend who makes his living from interstate traffic there. He’s still doing well, but says that it looks like his gross will fall 17% from last year. So for anyone looking for a hard number for travel in that region, that’s it. And remember, that’s in the best(?) performing state economy in the U.S..
Oh, the horror! People need to have a down payment to buy a house! Next you know, they’ll also need to have an actual job that pays enough to afford the house. How completely “un-amerikan!”
Wasn’t Wyoming one of those places where “there was no Bubble” - I guess not!
There is some bubble in Wyoming mostly drive by people cashing out in California and buying property here where it seemed cheap. That drove prices up but the bubble looks nothing like California and Florida. My house right now is worth probably 50 percent more than it was in 1995 when I built it but it has certialy dropped some since the peak in 2005. The nation wide credit crunch and uncertainty about how far prices will fall, along with some over building is what has caused problems in Wyoming.
“‘The ATM known as your house has shut down,’ Koplan said.”
Very interesting comment. Funny, not only do homeowners have to understand this but so do their offspring.
Talking to a friend of mine who recently got divorced. Her kids(ages 16-21) don’t interact with her much since she can no longer pull money from her house to keep up the luxury lifestyle.
I told her that this is the best thing for the teens and young adults who are a bunch of spoiled brats due to their parents obsession with easy credit. They have placed their kids into thinking that mom and dad are (equity line)rich and are here to KEEP them in a certain lifestyle.
I still believe it was more of a credit card than an ATM. To take money out of an ATM, you first have to put it in a bank. These were credit junkies, not savers.
For yucks, we should all begin quizzing friends, family, and coworkers if they think access to cheap and unlimited credit is in the Bill of Rights.
I wouldn’t want to hear the answers. I have had enough disillusionment for several lifetimes already. Remember the results of the quiz last week?
But in their minds these folks thought of it as “their” money, as if they earned it. Even the banks and the NAR would describe it as money that was yours to “unlock”…
So it was treated differently than credit card money, which most people knew they’d eventually have to pay back (or be serial bankruptcy claimers)
“‘The ATM known as your house has shut down,’ Koplan said.”
Two comments, kind of unrelated:
1. Two or three years ago I read something about Muslim bankers (in a nation that is friendly to America) who live within civilized law but hope to see the infidel nation America decline from within in a peaceful way. Their view was that living on credit, which is against their faith anyway, will eventually destroy America. They deal in gold instead.
2. The rise in popularity of HELOCs should have been a red flag many years ago in this bubble. Creative financing is a desperate method to wring more credit out of a diminishing asset. It’s a sign of severe economic illness. The Muslims in #1 above have a good practice to live within their means. Hopefully we will return to be a nation of savers before it’s too late.
Reply to #1.
That is why the islamic countries of the middle east, without oil, are basketcases (and have been for their entire history)?
There is a difference to econimic systems that work and by extreme luck having your happy ass suddenly wake up sitting on large oil reserves.
That is why the islamic countries of the middle east, without oil, are basketcases (and have been for their entire history)?
In fairness, the Middle east went through a “golden era” during the same time that Europe was going through the dark ages. A lot of what we know of ancient Greece came through Islamic medieval countries. (They had universities, Europe had castles with which to bash each other silly..) Mathematics and medicine also made great strides during that time in Islamic universities - “algebra” is derived from an Arabic word.
Me thinks sometimes they look at that glorious history and then look at the poverty stricken, backward looking culture they have become (and yes, those without oil are that…) and wonder what the heck happened. I know I would.
Me thinks sometimes they look at that glorious history and then look at the poverty stricken, backward looking culture they have become (and yes, those without oil are that…) and wonder what the heck happened. I know I would.
Actually, in absolute terms, every country in the world is the richest it’s ever been in history. In relative terms - there was a time when the Middle East might have been richer than its neighbors. The reason I say “might” is simple - do you look at the baubles in the imperial palace of a continental-sized empire, or do you look at the existence of ordinary people in the empire? My suspicion is that outside of the aristocracy and other favorites of the imperial courts, ordinary people in the “great” civilizations were no better off than ordinary people in the West. In fact, they might have been worse off.
Well, yeah, living within your means by not using credit is one thing right. The other necessary ingredients are the civil freedom and economic freedom to produce useful things. Japan is the perfect example that you do not have to have natural resources in anything except people and freedom in order to have a rich and varied thriving economy.
I’m not 100% sure about the “freedom” part. Japan is a very complex place with what I understand to be a somewhat rigid culture. On the whole, though, I agree with you. Japan is a wonderful example of what a country can do with just “people” resources.
2banana: There is a difference to econimic systems that work and by extreme luck having your happy ass suddenly wake up sitting on large oil reserves.
They’ve always known they have oil - it’s seeped out of the ground and been used for oil lamps since time immemorial (think Aladdin and the magic lamp). It was only when the West figured out how to refine it, and found significant additional uses for it that oil become immensely valuable.
“The ATM known as your house has shut down”
Yup, that’s why my 72-yo cousin is selling her jewelry and furniture to pay the mortgage. Her monthly mtg payment is larger than her social security check, so even w/ food stamps, the situation is impossible. How did she get to this? Exactly in the House Is ATM mode. And now oops, it is indeed closed. It doesn’t help that three of her four children (in their 40’s-50’s) are also in problematical debt. The one who is not has three kids in private school, so does not have a lot of extra cash lying around to bail out Mom. At least she has finally listed the house for sale. If it could in fact be sold, it would probably take care of the mortgage, the credit card debt, and all the rest of it. Winter is indeed a slow season for New England sales, but the current listing price (about 20% off last January’s appraisal) is still 60% higher than what she owes. I hope her agent has the good sense to get her to lower the price early and often.
I’m sorry to hear that about your cousin.
Man - how do people do that? You’d think 7 decades of living would teach you something.
I don’t know what part of NE your cousin lives in, but Northern VT is completely dead. She will need to cut the price early and often if she’s going to get rid of it. (My sister has been hanging out in her house for sale for 18+ plus - she won’t lower the price because she wants money to buy her next house with.)
I keep telling people at work, “we are all going to be surprised by the people we know that find themselves in trouble.” Some cases will be obvious. Others will shock us. But in the end, it will be sad. The saddest part is that they did it to themselves. They injected the cancer into their own lives.
Sorry in advance for this post in triplicate about my sister.
I have to admit that I was suprised that my “live at her means” sister was caught up in the bubble crossfire. I’m sad for her because she wants to move on but is clinging to the idea that she has to make a profit from the house and so stays put.
I suspect she really hasn’t made the “decision” to move (ie, is willing to make a real sacrifice of lifestyle/money to make it happen). I’ve shut up about the whole deal entirely because I don’t want her or my nephew to move to NC.
Last weekend I spoke with a very good friend I used to know from my days in Chicago. I knew this married couple well before they tied up. Never thought it would happen to them, but it did. Money problems, debt, MEW.
It bothers me to see this, but I have to brace myself for more. I have nephews and nieces who are living high on the hog. Vacations they can’t afford, houses they can’t afford, marriage ceremonies in Hawaii, etc… It will be painful for them, but for these loved ones, there is no other way they can learn.
I stopped telling people how to run their lives. Honestly; it was an intrusion, and they resented it. It does not bother me a bit anymore to say nothing.
18+ plus = 18+ months
Listing a house in the late fall in New England in this market is a death march. You only get one chance to list your house at an attractive price. Marking down “early and often” is a terrible strategy.
She should have held on until early spring, listed her house then at the lowest conceivable price, and/or talked to her lender about amending her terms.
Houses are becoming quite illiquid assets - yet another Great Depression-type lesson to be learned.
Listing a house in the late fall in New England in this market is a death march.
My sister did this and still sits in her unsold house. (And she hasn’t significantly dropped the price.)
She should have held on until early spring, listed her house then at the lowest conceivable price, and/or talked to her lender about amending her terms.
We did close to this, granted, with the tale wind of the boom. It was under deposit in the first week.
“Ram Murphy, operator of Murphy-Jubb Fine Art, hasn’t seen any real signs of a slowdown in sales at his downtown fine art gallery.”
When ever I get a hankering for fine arts I head to Missoula.
Read a bit further:
‘Right now, we seem to be doing fine,’ said Murphy. ‘Who knows,’ he added, “by March we may all be on our knees. But not yet.’
Someone get this man a job at the Fed - stat!
The collapse of the art bubble is going to make the housing bubble look pedestrian. I know somebody that has been buying and selling millions worth of art in the past 10 years. Most of it Irish. How do you think that is looking?
The prices of so-called classic cars have already tanked.
So glad I used that Chagall lithograph my aunt left me to pay for a 2005 furniture move. At the time it brought $7500 in a Bonham & Butterfield auction; now might be half that IMO.
Does this mean I should unload my Franklin Mint limited edition Precious Moments™ plate collection before the fine art bubble pops?
I have sold all of my dogs playing poker works of art.
Just don’t let go of your blacklight Elvis, NYCityBoy. Gotta maintain some cultural decorum to separate us from the savages.
Are inflatable goats considered art? If so, then I will be just fine.
Hey hey hey, just a dern minute here! Everyone knows Missoula is a MECCA FOR THE FINE ARTS!! Why, the local paper & alt weekly tell us so all the time. And the symphony is the crown jewel! Or so I hear, never went to a concert myself. Shame on me! Maybe I should go au concert at least once before it shuts down.
Maybe he never sells anything, so it can’t get slower. But I don’t know Missoula. It just sounds as if someone could sell handmade saddles, but not art.
“‘It’s amazing how many homes I drive by and see a new boat or motor home in their driveway, and they’re in foreclosure,’ he said.”
==================
Anchor $tores, version 2.008
In the face of all this evidence of many years worth of future demand having been robbed, it is mindboggling that anyone can entertain thoughts of a “V” shaped (read: 2009) recovery.
Maybe folks like this one further up the post need to wake up:
“Annie Montgomery…plows ahead with her shopping. She’s a real estate broker…but Montgomery remains upbeat. ‘It’s going to turn around,’ she said. ‘People just need to get some confidence in the market.’”
Sure Annie, it’s going to turn around all right– Circa 2020.
“Annie Montgomery…plows ahead with her shopping. She’s a real estate broker…but Montgomery remains upbeat. ‘It’s going to turn around,’ she said.”
The only thing that is going to get turned around is Annie Montgomery.
Items by Annie soon to be sold on ebay in 2009..at a severe discount…
I am getting such great buys lately on ebay for my work clothes…
Firmware update=null set.
“Montgomery, though, plows ahead with her shopping. She’s a real estate broker from Bend, where the housing market is in tatters, but Montgomery remains upbeat. ‘It’s going to turn around,’ she said. ‘People just need to get some confidence in the market.’”
Typical deluded happy-talk from yet another “real estate professional,” soon to be a self-described victim and bailout candidate. By springtime, when it becomes obvious that The Messiah and the Clinton Administration retreads he is installing as his administration for “change” (snicker) have no clue of how to contend with the worsening economic crisis, Montgomery’s misplaced optimism will have evaporated - but not her credit card bills.
So true and sad at the same time; but a history lesson is needed for the teenagers (now) and the 20’s and early 30’s to learn.
Since there has not been the type of pain coming ( which is really scaring me for sure) for everyone to learn.
. ‘People just need to get some confidence in the market.’”
I just watched a CNN story about a car salesman. Sales are down 50%. He wants government to do something to give people confidence to buy a new car. The thought of government giving me confidence gives me the willys.
He wants government to do something to give people confidence to buy a new car.
Maybe a voucher good for up to $30,000 on a new car. Otherwise they are just pushing a string, herding cats, etc.
I could buy a lot of bicycles with $30k. But there’s one problem: Slim’s existing fleet of three bikes just keeps rolling right along. And my youngest bike is 13 years old.
“He wants government to do something…”
A Nation of whiners! -Phil Gramm
‘People had the conception that Realtors were foaming at the mouth. We were so busy. But our business is all about relationships, and when the market is that busy, you don’t have time to build long-lasting relationships.’”
Um, yeah. Those renouned realtor ethics and sincere concern for their clients, demonstrated so convincingly during the recent housing bubble, are really condusive to building the trust necessary for long term relationships.
An agent I dealt with ten years ago still sends me a new calendar magnet every year at this time.
Is that what he means by long term relationship?
I had a realtor try to add me to her Facebook “friends.” Honey, I barely know you, and we’re certainly not friends.
Sounds scuzzy alright. Wouldn’t surprise me if she probably has friends that sell everything from cars to life insurance too. They then use the social newtworking sites to pass around potential marks.
And to think that after I bought the Arizona Slim Ranch, the agent sent me nothing. My feelings weren’t hurt — he was a bit of a showboat. Too much for my taste.
“‘It’s vacant. It’s staged. It’s absolutely perfect inside,’ MacDonald said. ‘And yet it’s impossible to get somebody in to look at it.’”
Yes, and it will continue to be impossible until you PRICE IT TO SELL!
Agreed. Kool-Aid seems to have an exceptionally long half-life in some people.
That quote (plus the price of over $800K) caught my eye, too. People will come look at it if it’s not completely out of their price range. He could at least be happy that he’s not getting “looky-loos”.
“Impossible to get somebody in to look at it.” Gee, I wonder why? Perhaps that price tag of nearly $900K has something to do with it.
Let’s see, that means a down payment close to $100K and an annual household income of at LEAST $300K. Wonder how many people in Bum*#^$, WA qualify to purchase this place?
Well, let’s see…nationally, only 1.5% of U.S. households make $250K or more per year…so figure about 1% or less make at least $300K. And something tells me people earning that much are less than inclined to stumble into the housing market just now, especially by purchasing a big ol’ white elephant.
Something tells me that place mysteriously burns down sometime in the not-too-distant future…
Symphonic Disconvergence
“The Missoula Symphony Orchestra is not in the business of selling houses. But that hasn’t shielded the local orchestra from feeling the effects of a slowdown in the Missoula housing market and the broader economic downturn that is sweeping the nation.
“According to company statistics, of 111 homes put up for auction in Deschutes County in October, five sold. The rest reverted to the lenders holding the liens. ‘What’s happening is that the banks have not dropped the price low enough to get interest from buyers,’ Helmick said.”
I can confirm this. Wife and I have been looking in Deschutes Co (her sister is a resident there).
Example;
2000sq ft shack on 1 acre built and sold in 2005, sold for $205k. Bank took it back in 2007. Price today? $220k. Yea I could write a check for it but why should I when it’s not worth anywhere near 2005 price plus $15k. If I were ready to roll, I might harrass the realturd with a 100k offer but my schedule is booked to June 2009. The immediate forecast is vague. Obama may roll out a national public works program in Q1 09 that could change everything fundamentally. Without that, taxpayer funded heavy construction doesn’t look promising, post Q2 2009.
Exeter, I wish I could share your confidence about national public works programs. Did the New Deal public works programs end the Great Depression?
How about a more recent example? All the lessons learned and historical analysis that followed the Great Depression were available to Japanese policy makers during their “lost decade.” Like FDR, the Japanese leadership embarked on a program of public works, and it didn’t help there either.
I think the question for the housing market is, what do prices and sales look like if the U.S. loses its AAA credit rating, multiple Treasury auctions fail, and the Dow drops below 5,000? Will overseas vulture funds buy entire subdivisions and rent out the individual homes? Will cities & counties homestead out vacant houses? Will existing single family homes be turned into rooming houses?
Only time will tell, but I’m not planning on living large for at least the next 10 years.
Regarding Oregon:
Medford and surrounds has been near the top of my list for a possible retirement location. I’d love to hear what locals would suggest as far as which towns are good, which should be avoided.
I would be hoping to buy 5-10 acres with a single story house. Thanks in advance for comments.
FWIW, Hawaii county, dry side, and Franklin, TN are my other two top domestic picks.
Save yourself a pile of $$$ and effort and stick with a lot, say 1 acre. Every moron and his brother thinks they “need acreage” when once they got it, realize that it’s about useless.
I grew up on a farm. I know what it takes, conclusion jumper.
5 acres minimum, 40 acres or more if I could get it. Arable land will eventually be the new gold.
“Arable land will eventually be the new gold.”
What makes you think that? We have a massive oversupply of land (IMHO), I’m just not sure what you think will drive a shortage (which would push up the price). Or are you just thinking in terms of economic collapse; at least you can grow food on your land?
You grew up on a farm eh mate? Like next door or down the road from a vegatable stand? You’re the first “farmer” I’ve ever heard call tillable land arable but do tell me how many acres you’ve bailed in your youth. And when you’re done I’ll tell you how I escaped from a lifetime of jerking cows and bailing hay.
The gold comment is so hilarious I don’t know where to start.
Like I also milked cows every evening (my dad had morning shift) from 11 until I went to college.
Did you ever deal with irrigation pipe? That’s a whole new area of pain that farmers east of the Rockies don’t generally deal with.
In regards to better than gold, you can’t eat gold, ’nuff said.
Out here in CO you can till all you want, but without water you’re just making dust.
Sorry, I meant east of the Mississippi, not the Rockies.
Douglas County, the next county up, is in the middle of an employment crash as the timber industry shuts down for the remainder of the business cycle. Unemployment there is already over 10%. Jackson county is less dependent on timber than Douglas, but it’s still a big part.
Thanks for the info Ernst.
I haven’t posted here in nearly two years, although read pretty regularly. Thanks Ben and everyone for taking time to be here. This blog has been so much more informative than the economics classes I took in college.
I live in NW Washington state. Prices are still high but things are changing. I checked a RE website last night and actually saw decent houses with a few acres in the $400k-$420k range. Back in 2005 when we were considering buying it was funky stuff in that price range and not even much of that because it got snapped up quickly. The other thing I’ve noticed in how many houses listed appear to be vacant. It has been discussed on this blog plenty, but seems amazing to me that people were actually hoarding houses.
Rawlins, Wyoming, like most of WY, has another problem. Rawlins is in the middle of one of the largest coalbed methane fields in the US. Bad part is that there are few people that want to get into a 20-30 year mortgage in an area with no economy other than the gas and methane fields likely to be tapped out in ten years. The only redeeming thing about the area is its also one of the most promising wind farm locations.
Methane and wind. Do I hear a “breaking wind” joke coming over the horizon? Come on people, help me out here…
i won’t buy a home until I can put 100% down on the house…forget paying extra to own a house vs renting when the bank owns the deed. i have been looking at houses in phoenix, but i’m in no rush to buy as the bottom in prices isn’t for atleast 1-2 more years or more! renting gives me freedom to move and go other places for long term. I may decide to just rent and do some travelling as the economy tanks more!
One colleague I know at work has been renting a room at $500 per month. Originally from Hong Kong, he tells me that the Chinese-descended Americans love to buy houses for cash and have the patience to wait years for a market bottom.
When the government deems inflation an issue, they will raise the interest rates where you once again have to pay 11% interest on a loan. Cash buyers will be gleeful when that day comes.
B*llocks!
My HK colleague bought a house where he’s paying $10K a month in mortgage.
Rental value = $1K.
That’s $9K of feeding the alligator.
The Chindians are obsessed with real estate. They don’t understand fundamentals because their population growth + money printing covers all mistakes very quickly but we’re in America, dude!
The Chindians are obsessed with real estate.
I don’t know about Indians, but the Chinese I know are big time gamblers, in one form or another. In Chinese eyes, the beauty of American real estate is the leveraged gamble, with an interest deduction and zero capital gains taxes thrown in.
I put 100% down on my place here. You get really good mortgage terms that way!
but but but you miss out on the mortgage interest deduction!
That’s right! Didn’t you know you GET ALL OF THAT MONEY BACK ON YOUR TAXES? When you have a mortgage, Uncle Sam practically buys you your house for you! Spread the word!
And to think, I have been throwing my money away on rent all of these years. Oh well, a standard deduction is better than nothing I guess…
Our charitable gifts exceed the standard deduction by quite a lot. The house interest deduction is still a big consideration for my family.
One unappreciated consequence of putting 100% down is that it also makes your house quite easy to sell, as YOU can offer to be the mortgagee. Of the various properties that I bought and actually lived in, I sold every one of them in exactly that way. In the first case, I had a little trouble collecting (but eventually did collect, with a lawyer’s assistance); after that, i had a better idea of what I was doing, and no further trouble collecting. You can sell to someone whose credit is better than his/her credit “score” — also, you can collect enough of a down payment that you feel you will not MIND if you end up with your house repossessed by you, if it comes to that.
Wow. That’s a great idea. (Or at least very interesting possibility.)
That would certainly make closing have a very different feel.
i was thinking of writing the local toyota dealer who i checked in a new car a couple years back.. the sticker was 15,500 and they quoted me a total cost of $17,500 for an all cash deal. i was so insulted that they wanted more than sticker and would not bargain at all! they wanted me to finance so they could make extra on the finance side. i walked and bought a used car. i was thinking of writing them to say i am glad to hear sales are down 20% for toyota too and laugh at all the smugness they had toward a cash buyer! this attitude was not just in housing…it was everywhere. if things had to be paid in cash…well everything would be 1/2 off!
“if things had to be paid in cash … well everything would be 1/2 off!”
We’re well on our way to getting there.
Cash will be 1/2 off also…
“if things had to be paid in cash…well everything would be 1/2 off!”
And a pair of Nikes would fall from $125 to $25. Credit for consumption is evil.
I’m not sure I agree with the “move back to cash only” as the right solution to this problem. We’ve had credit in this country for 100 years, and only recently has it totally blown up in our faces. I think that the real problems here are the failings of the models. How on EARTH could MTG paper that is 10X the person’s income wind up in a AAA bond? That’s a total and complete breakdown of the system.
Credit, however, does play a very vital role in our society, and it is not (IMHO) inherently evil. Lot’s of people use credit the “right” way and make out very well from the experience. The bank makes money, and the person pays a reasonable rate to enjoy a product/service today that they could not necessarily buy with cash.
However, what has happened in the past 15 years is that people decided that you could give ANYONE credit with a high enough interest rate. That’s horses**t! A 10X income loan isn’t a credit product, it’s an extremely expensive call option on the housing market. Lending to people with 400 FICOs is like going to Vegas and putting it all on black, maybe you hit it big, maybe you lose it all and the government bails out you (that happens in Vegas, right?).
I am very happy that I have strong credit, it’s a great asset to me in my everyday life. I would be most unhappy to go back to “cash only” for everything. Not that I couldn’t, but it would make my life more difficult, and in NO way make it better.
Credit, in itself, is not evil. However, what we have seen in the past decade is a total distortion of the credit market; we went from closely looking at every aspect of a persons employment and personal life (as well as credit score) before writing a loan; to a situation where dead people and illegal alien farm workers were getting million dollar loans. Again, that’s not credit/lending, that’s playing craps.
“How on EARTH could MTG paper that is 10X the person’s income wind up in a AAA bond? That’s a total and complete breakdown of the system.”
State of shocked disbelief?
“Smug” doesn’t begin to cover the typical Toyota/Honda dealer’s sales staff.
Went to a Toyota dealer for the first time 3-4 years ago, to see what was so great about them. Everything on the lot either marked up $2-3000 over MSRP, or had 1500 bucks worth of “dealer-installed options”…..take it or leave it, if you don’t buy it, some sucker will come along that will.
Makes you wonder if their “resale value” is due to the inflated price over sticker that people are paying for their cars.
Get prepared for a real Joshua Tree treatment from Japan and Germany, if the Big 3 go down the tubes.
You would be smug too if your competition was as lame as the Big 3.
BTW, Toyota is getting hammered on sales along with everyone else. They just happen to be healthy enough to avoid immediate BK. And if the Big 3 get the expected bailout, Toyota will be in deep trouble unless they get matching subsidies from the Japanese government.
I think the Toyota dealers will get an attitude adjustment at the wrong end of a frozen trout, if they haven’t already.
When I was ready to get my truck…I went into the dealer to deal:
1)First I told him what I wanted..of course they didn’t have the complete package so I told him I would order it the way I wanted it not with a bunch of useless overprice features. He said it would take 4 months I said fine.
2)Then I let him give me his “best price.” After he was done I whipped out the “friends and family super discount” code I got from a buddy of ours who is SVP..the guy flipped. He told us I can’t give it to you for that price. I said I don’t care give us the discount and that’s it. The salesmen was so pissed. He called over his manager,who realized he was stuck.
Got the truck that I wanted for a serious discount and paid cash! Sorry guys you are not going to make money from me on the financing. It felt good…
Until you need warranty work done………
Get prepared for a real Joshua Tree treatment from Japan and Germany, if the Big 3 go down the tubes.
In that case Kia and Hyundai will clean up.
‘The mortgage crisis created far from Wyoming has changed the rules on borrowing money. No more nothing or 3 percent down. It’s 10 percent up front, and not that many people have $13,500 lying around.’
This is exactly why the entitlement crowd has no business buying a house on a whim. Once 10% or 20% down payments become the norm again, with no exceptions, people will learn to value a home purchase as something to be earned, not just handed out.
Under conventional standards, it can absolutely take a few years to save for a down payment, pay off CC debt and perhaps a car loan also, have 6 months cash in the bank, etc. But what a feeling of accomplishment when you’re handed the keys to the house you’ve EARNED. I remember that well.
We bought a condo after renting for a year. We lucked out as we cashed in as much as we could on the bubble. I think, on the whole, we would have been better off renting for a few years and actually having cash in the bank before we bought.
We’re paying cash for our residence next year. I emailed the County Assessor’s Office (So Ca) to see if we could prepay the property taxes a few years in advance, just in case thing got really bad. They are on the cash basis. No advance payment allowed. You’d think with their budget issues, they would jump on it. I plan for the worse, and hope for the best.
We have paid five months in advance on our mortgage, and my entire year-end bonus was just mailed out last week as a principal pay-down. Our kid’s Christmas shopping is already done, and paid for too. No revolving debt here!
Symphony and Opera are making the news here in Norfolk, VA as well. They claim less affluent are donating and they are having to cut some staff. I didn’t know the symphony had such a large staff.
Not seeing any deals on euphoniums on craigslist yet….
The Tucson Symphony’s HQ is within walking distance of the Arizona Slim Ranch. But I seldom go to the symphony, and neither do my friends and neighbors.
Seems that our local symphony has contented itself with a small cadre of wealthy patrons, and guess what? They’re dying off. And the TSO hasn’t taken a clue that it’s time to reach out to new people.
‘People had the conception that Realtors were foaming at the mouth. We were so busy. But our business is all about relationships, and when the market is that busy, you don’t have time to build long-lasting relationships.’
Conception? Conception? Don’t you me perception? Maybe not since your business is all about relationships and who is @#$@#$ing who for a commission.
it’ll be a mystery to me how the bubble nature of this was so obvious and yet so ignored. What a mania we lived through. And our supposed press, on which we lavish extraordinary freedom, was useless. It lay in bed with its advertisers and kept running wide-eyed articles all but endorsing the ‘boom.’